Bill Chen 关于 REITs 和 $ALX 的后续解读

All right. Hello and welcome to the Yet Another Value podcast. I'm your host Andrew Walker. Today we have back on my friend Bill Chen. Bill is coming on for the fastest repeat visit in Yet Another Value podcast history. For those of you who listen to the last podcast, it was Bill on and I had a really good time. We were just rocking and rolling through different things, talking about all things REITs and real estate and everything. And then we got to my hard stop at the end and I said, “All right, I got a hard stop.” And Bill said, “Oh, I had seven other things I want to talk about.” So, Bill came on and we mainly talked about Alexander's group. The ticker there is ALX. See the full disclaimer, not investing advice, at the end of the podcast. Mainly talked about that, but bounced around a couple other things in real estate investing as well. And if you enjoyed the last one, I think and expect you will enjoy this one as well. So, we'll get there in one second. But first, a word from the sponsors. This podcast is sponsored by AlphaSense. One of the hardest parts of investing is seeing what's shifting before everyone else. For decades, only the largest hedge funds could afford extensive channel research programs to spot inflection points before earnings and stay ahead of consensus. Meanwhile, smaller funds had been forced to cobble together ad hoc channel intelligence or rely on stale reports from sellside shops. But channel checks are no longer a luxury. They're becoming table stakes for the industry. The challenge has always been scale, speed, and consistency. That's where AlphaSense comes in. AlphaSense is redefining channel research. Instead of static point in-time research, AlphaSense Channel checks delivers a continuously refreshed view of demand, pricing, and competitive dynamics powered by interviews with real operators, suppliers, distributors, and channel partners across the value chain. Thousands of consistent channel conversations every month deliver comparable signals, helping investors spot inflection points weeks before they show up in earnings or consensus estimate. The best part is that these proprietary channel checks integrate directly into AlphaSense's research platform, which is trusted by 75% of the world's top hedge funds with access to over 500 million premium sources. From company filings and broker research to news, trade journals, and more than 240,000 expert call transcripts, that context turns raw signal into conviction. The first to see wins, the rest follow. Check it out for yourself at alphasense.comyavp. That's alpha-sense.comyavvp.

All right. Hello and welcome to the yet another value podcast. I'm your host Andrew Walker and with me today I'm happy to have on for the quickest return trip in yet another value podcast history. My friend Bill Chen. Bill, how’s it going?

Good. Yeah, this is the fastest turnaround—2 days, right? The snow hasn’t even melted outside.

That’s really funny. Let me give a quick disclaimer and remind everyone: nothing on this podcast is investing advice. Please see the full disclaimer at the end of the podcast, and there's a legal disclaimer link in the show notes.

Bill, I had a really good time. We did a podcast on Tuesday, ran right into my hard stop, and still had a lot of things to talk about. I think you wanted to talk about a few single stocks, and this is generally a single-stock-focused podcast, so we set up a 30- to 45-minute follow-up podcast for today. It’s Thursday, January 29, so I figured we’d do that. With that out of the way, I’ll toss it over to you: What additional stuff did you want to give the people?

Yeah, I really want to talk about Alexander’s. We tried last year at some point to talk about Alexander’s, and then Trump’s Liberation Day got in the way, and we never got around to doing that podcast. What’s really interesting about Alexander’s is that there was this debt restructuring that occurred on December 29, I believe. I pinged you right on New Year’s Eve. I’m like, “Andrew, we’ve got to talk about this.”

In essence, for those who don’t know, Alexander’s is a publicly traded REIT. It’s got a long, colorful history. It was a department store that went bankrupt in the early ’90s, and the most famous asset is the Bloomberg Global Headquarters, which has a triple-net lease that won’t expire until 2040. In essence, that office asset—which is a trophy-class A office asset with that kind of lease duration—is essentially a Bloomberg bond.

At this moment, it’s got almost $200 million of excess cash after the recent debt restructuring and some debt paydowns. It owns a shopping center out in Queens, a Class A apartment building out in Queens, and a development site that is being marketed for sale. So it’s a sum-of-the-parts, and what makes Alexander’s really interesting is that there was a $300 million loan.

The Bloomberg Tower is—you know, in New York City they’ll do this where they’ll split it into an office condo, which has this lease that runs to 2040, and on the bottom of the Bloomberg building there’s a retail condo. There was a $300 million loan that came due late last year, and it’s something that I was tracking all throughout last year. Alexander’s had about $400 million of cash and a half-billion dollars of debt maturities coming due. I kept tracking how they were going to deal with those two maturities.

On December 29, this press release—this 8-K—went out, and they said that on this $300 million deal, it’s one of the most complex debt restructurings that I’ve seen. They split the $300 million piece into 3 new tranches. There’s an A tranche, which essentially became $132.5 million, or 44 cents on the dollar. Then there’s a so-called new B tranche, which doesn’t have any capital in it right now, and then there’s a C tranche that becomes subordinated and is payment-in-kind.

Subsequent to that, the lender sold the A tranche back to Alexander’s, so Alexander’s owns that right now. The C tranche gets subordinated. It’s like 4.5% interest, payment-in-kind, but it’s got some very unique features. The A tranche will have a 7% interest rate, and the B tranche will have a 13.5% interest rate. The B tranche is to finance tenant improvements and leasing costs for this piece of property. Then the C tranche is payment-in-kind, so there’s no cash interest on it, and the maturity is extended out for 10 years.

I was thinking, I’ve read the 8-K probably 5 times. I’ve seen your chart. Bill has a visual chart he sent me explaining it. I’ve now had you walk me through it on the podcast, and I’m still not sure. I feel like I do complicated transactions all the time, and I’m still not quite sure what the heck is going on here.

Okay. But on an effective basis, the lender basically took a 56% haircut, right? But I think they essentially retain a hope piece of the debt. They didn’t want to completely write it down, right? They want to be able to retain some sort of hope debt piece.

Insurance in Carl Icahn’s terminology.

Yeah, yeah, some insurance. There you go.

I’ve basically spent all New Year’s Eve thinking about this deal. I think this just again demonstrates how shrewd Steven Roth, the CEO of Alexander’s, really is. Steven Roth is also the CEO of Vornado. When you look at this transaction, first, this mortgage was nonrecourse. The only recourse the lender had was to the retail condo portion of this, which is about 130,000 square feet at the bottom of the Bloomberg building.

If you’re the lender, you kind of don’t want to be in the real estate business. You want to be a lender, right? This retail portion does have some challenges. There used to be a Home Depot on the bottom, and they vacated. Bloomberg actually has some office space in the retail portion because when you come into Bloomberg on the bottom, as you’re coming into their courtyard, they tape some of the TV shows in that lower portion.

So what actually happened is Steven Roth was basically sitting there with, at this point, almost $300 million of cash on the balance sheet, basically telling the lender, “Hey, take this piece of property back. Foreclose on it.” This is what I imagine happened at the negotiation table: Steven is like, “Hey, take this piece of property back. Why don’t you go put in another $60 million and try to find the right tenant and lease it?”

I think the lender eventually capitulated and basically said, “Pay us 44 cents on the dollar. Give us that back. Let’s retain a hope piece,” right? Which is $167.5 million.

We'll keep that out there. It has to exist for 10 years, but if you refinance and the refinance value is below the par value, it could be forgiven. It has this very friendly feature for the landlord, which is us—the shareholders of Alexander's.

I'm looking at Andrew's facial expression, and you're still kind of confused.

No. Let me push back in 2 places here. First, in my history, I've seen some companies—and I won't say their names because they're very small—where...

You know, it's a $300 million EV company with $200 million of debt, and the lender settles the debt for 50 cents on the dollar and shareholders rejoice.

Maybe that's the right move, but to me, I look at them and think, "Oh my God, the lender just settled for 50 cents on the dollar. They don't think that loan was getting made whole. I don't know if the stock is worth anything."

I think that would be number 1: I understand true negotiations. You've got a loan, but you've got a lender who lent to this as a sole real estate play and is saying, "Get me out of this for 44 cents on the dollar, plus maybe a little bit of upside insurance."

The second piece, which I'll throw out while I'm rambling, is: How much does Alexander's—a $1.2 billion market-cap REIT—really matter? It's got debt on it, obviously, but I'm just saying $1.2 billion. It's got that whole office tower for Bloomberg, and that's where the majority of the value is. It's cool to do a cleverly structured transaction here, but how much does it really move the needle?

I've had situations where I've gotten obsessed with something about a company, and then it's gone down in flames. I was right about one thing, but I kind of missed the forest for the trees. I was right that this one individual tree was great, but guess what? Every other tree was on fire. Here, should we really be paying attention to this one tiny piece?

Great feedback and great pushback. I think the key takeaway is that by buying this debt piece back, the immediate effect of the transaction is that they save $17.2 million in interest expense a year, and that directly impacts FFO.

Andrew, you could argue, "Well, Bill, if they just gave the whole thing back, they would have saved $17.2 million. They wouldn't have had to put in $132.5 million." So let me walk through the whole piece.

I think there is some strategic value in this because Bloomberg does lease a portion of that space. Even though it's called the retail condo, Bloomberg, the tenant, does lease a portion of the space, and Bloomberg probably pays $5 million to $6 million to that retail condo.

I think there is strategic value in retaining that space so that you have one single relationship: Bloomberg is a single tenant, and Alexander's is a single landlord. It's a one-to-one relationship, so Bloomberg isn't dealing with 2 separate tenants and 2 separate landlords down the road. I think there's strategic value in that.

By paying $132 million, if you do the math, that's an effective yield of 13% to 14% on $17.2 million over $132 million. The question is what they could do with that. At $300 million, Alexander's could have spent the money to try to attract a tenant, and maybe they just felt that the net operating income on that retail portion was $20 million.

You spend a ton of money and all this effort to try to lease it up, and maybe there's $3 million of incremental net cash flow, while paying $17 million a year in interest expense to the lender. By doing this deal, I think Alexander's could spend an incremental $65 million on leasing commissions and tenant improvements and potentially effect a $30 million swing. Now they control this piece, so they could essentially create $30 million of incremental FFO on $200 million of spend.

In the real estate space, if you could earn that kind of 15% unlevered return, that's a tremendous use of capital. Now you also control the retail portion. You're a single landlord to Bloomberg. I think that would be really good. I know 2040 is a long way out, but if you have as good a tenant as Bloomberg, you want to be a single landlord to Bloomberg down the road.

As you and I are talking, Alexander's stock is at $240 to $250 per share. Why don't we do a quick sum-of-the-parts analysis? There are 5 assets here, so let's do a quick sum of the parts so people understand how you're thinking about this and why you're so excited.

One of the interesting things is that, as you'll see during the sum of the parts, the majority is this single-tenant office building: a great location and a great tenant in New York City. Hopefully, by 2040, New York City is fully recovered from the pandemic and from whatever is happening right now. Why don't we talk about that piece as well?

Sure, absolutely. There are only a few assets. Let's talk about the Bloomberg office tower. Today, in 2026, it pays $78.7 million in triple-net lease rent. As a landlord, Alexander's isn't on the hook for any increases. That's truly a pass-through, and there are really nice escalators.

In 2028, that will step up to $88.3 million. We're in this interim period, so on today's rent, if you say this is Bloomberg—almost as good as a U.S. Treasury from a credit perspective—with a 6% cap rate, that may sound like a low cap rate. But if you factor in the credit and the duration, and the fact that the lease runs to 2040, I get to $1.311 billion. That's just for the office portion.

Since they bought the debt on this space, let's say the Bloomberg retail portion is worth $132 million. It's what people pay, and it's what Alexander's paid to buy the debt. It's worth what the debt value is today.

Then there's an apartment building out in Queens called The Alexander. Alexander's doesn't break down a lot of the NOI for assets outside of the Bloomberg office. The Bloomberg office has a very long lease that they file publicly, and you can go look at it, so we're a lot more certain about the NOI of the Bloomberg office.

My estimate is that The Alexander does $8 million in NOI. At a 5% cap rate, that's a fairly new Class A apartment building worth $160 million.

Then there's Rego Park II, which is a pretty large shopping center in Queens. There's Rego Park I and Rego Park II, and Rego Park II is over 600,000 square feet.

What's interesting is that Rego Park I has always had an old Sears box. They brought in IKEA, and it looked like Rego Park I was going to do well. Then IKEA decided not to break that lease and pay them.

What Alexander's did in the last year or 2 was decide that Rego Park I doesn't make sense as a retail asset. They decided to vacate all of Rego Park I and move all the tenants over to Rego Park II.

What's really nice is that you've taken out the competition. You had about 1 million square feet of retail space in this area on Junction Boulevard in Queens, and you essentially removed over 330,000 square feet of retail space at Rego Park I. That competition immediately went away, and they moved over a couple of tenants, Marshalls, Burlington, and DW.

I suspect that Rego Park II is doing about $26 million of NOI with the new tenants that moved over. At a 6% cap rate, I think that's worth $433 million. This is probably some of the highest rent per square foot for these big-box spaces.

There's a Costco downstairs, and it's a fistfight on the weekends. I've never been, but I'm pretty sure that when I Instacart from Costco and get the rotisserie chicken—and my wife has been really into the Costco cheesecakes, the little mini cheesecakes. They're very good if you want to try them. I'm contributing to that NOI in a very, very small way.

Rego Park I, as a development site, I think is worth between $100 million and $200 million.

What's really interesting is that it's 5 acres. It sits directly above a subway station. The easiest comp is a few years ago, when they sold a site called Rego Park III, which is probably about 4.5 miles away from Rego Park I. It's farther away from the subway station, next to a big, busy interstate, I-495, and it's an irregular shape. It's 3 acres that sold for $71 million.

So, on the low end, if you just compare 3 acres versus 5 acres, you get $100 million. But Rego Park I is in a better location, directly on top of the subway station. It's also more of a square or rectangle, so it's easier to build.

I estimate that they could build 1 million to 1.7 million. If you look at the density around the area and what you could build on Queens Boulevard, this is an area where we have a lot of experience. There's a history of small, single-story retail being knocked down and converted into 12- to 15-story residential buildings that are built directly to the curb line.

That's the walkthrough. If you add everything up and use the midpoint for Rego Park I of about $150 million, you get about $2.2 billion. Then, for the debt, you have to make some adjustment because they used the cash to pay down $132 million of debt. They also paid off $25 million of debt on that shopping center. So, there's $669 million of debt and still $195 million of cash, and the equity value is about $1.74 billion to $1.75 billion. With 5.13 million shares, that gets you about $339 to $340 today.

Yeah. How much of that? So, let's just round it up to $400, right? It's $240 right now—$400 a share. How much of that is Bloomberg Tower versus everything else?

If you just take Bloomberg—the office portion—and the cash, that's essentially your market cap.

But I can't remember because I haven't looked at it. There's no debt against Bloomberg Tower. You're not—

No, no. That would be net of the debt.

Net of the debt against it. So, your contention would be that with Alexander's, you get Bloomberg Tower, this great building, great credit, great tenant, and the cash. You're paying for that at today's share price, and then you get everything else—the retail piece of the Bloomberg space that they did some interesting things with, Rego Park I, Rego Park II, all of this—you get everything else for free.

Yeah. Yeah.

Cool. Let me go to the other interesting thing about Alexander's. If you want, at the end—I know you've sent me some stories, and I know you've done some on-the-ground work with Rego and seen tenants opening. That might be a little outdated at this point, but you can hit that in a second.

I do just want to ask: I think when a lot of people look at Alexander's, the first thing that jumps out at them is, hey, you mentioned Steve Roth.

Vornado owns a third of the stock, right? Yeah.

So, I think a lot of people look at this and say, "Hey, I'm buying into a controlled, basically a controlled, publicly traded subsidiary of Vornado."

I think the history of REITs that are controlled or externally managed is that the capital allocation isn't great, right? The most obvious pushback, aside from the "death of New York" argument, would be, "Hey, yes, it looks cheap, but you need to slap some type of corporate governance discount on this because Vornado is going to take them under, or Vornado is not going to do great things with that cash. Basically, Vornado is going to do something that benefits them versus Alexander's minority shareholders."

How would you think about the whole Vornado aspect of it?

I think that's something we thought about immediately, and we actually dug into it. Two main things: ownership. If you look at Steven Roth, Russell B. Wight, and David Mandelbaum, they own way more—they own almost 46% of Alexander's versus about 10.3% of Vornado. Those same 3 individuals own about 10.3% of Vornado, right? Totally different ownership.

Show me the incentives and they'll show you the results. I would say that you're more aligned being a shareholder of Alexander's than you are being a shareholder of Vornado.

Steven Roth is the CEO of both REITs. His total compensation in the last 3 years is almost $40 million at Vornado, while his total compensation is about $1 million at Alexander's over 3 years. But you say, "You have to adjust it for size," because Vornado is much bigger. If you do it on a market-cap-weighted basis, it's still a factor: he's still getting paid 10 times as much at Vornado after you adjust for the difference in market cap.

Well, I think the other thing is—and I haven't looked at his Vornado contract—but you basically mentioned it. Let's say he's making $15 million a year at Vornado. He owns directly, what, $150 million to $200 million of Alexander's stock, right?

So, his ownership here is not only 150 to 200 times whatever he's getting paid at Alexander's; it also significantly dwarfs his salary at Vornado. I don't know. It's always tough because a salary is 100% to you, and even if you have a lot of ownership, everything is kind of diluted down to you. But he owns a heck of a lot of stock, and I think he might own as much Alexander's stock as he does Vornado stock. I think he's quite equity-aligned here, but you can tell me if I'm wrong.

No, I think you're thinking about this the right way. Let me just say this—it's staggering. Alexander's pays $18 per share in dividends, and this is a $240 stock. He owns about 669,000 shares. So, just on Alexander's dividend, he's getting $12 million a year versus hundreds of thousands in annual compensation at Alexander's.

I would just say that there's clear evidence that Steven Roth and the 2 other major shareholders are much more aligned with maximizing shareholder interest at Alexander's than at Vornado. What makes this REIT under the radar is that they don't host their own earnings calls, they don't actually give you supplemental information, and they don't break down all this detail.

I'm able to arrive at all of this because, first, I'm a local. I've seen all these assets in person, and I can triangulate a lot of the stats. You really have to do some work here. You have to go to the Vornado earnings call to actually hear him occasionally get a couple of questions about Alexander's.

What's really interesting is that in 2025—last year—people asked, "Are you going to fold Alexander's into Vornado?" And they said, "Look, we're never going to make both sides happy. The Vornado shareholders are probably not going to be happy, and the Alexander's shareholders are probably not going to be happy, because you're going to have to ask: What is the right intrinsic value? What's the right NAV?"

Steven Roth has floated the idea that he's going to sell every single asset aside from Bloomberg Tower. If you think about this, he's actually come out and told you the plan. There's a history of asset sales. It's a department store that went bankrupt in 1992. They owned this whole city block in New York City on Lexington and 60th, and they built Bloomberg Tower.

But since then, they sold a shopping center to Macerich in 2012 or 2013 for $750 million and paid out a huge $122 million special dividend back then. They sold Rego III, and Rego I is out in the market. There's a little footnote that says they're in advanced negotiations to sell that asset to a buyer.

What's really interesting about Alexander's is that it's one of those REITs where, if you're paying very close attention, you can actually read the tea leaves. There's been a ton of back-and-forth on the Vornado earnings call about what they're going to do, and I think they've said loud and clear that they're not going to do a take-under. Based on the ownership and how Steve is compensated at Vornado versus Alexander's, I would say any action is more likely to favor Alexander's rather than Vornado.

No, that's great. Last question. I know you've talked about this, and we can talk about it. The tough thing about Alexander's is that there are 5 properties here.

Yeah, one of them dwarfs the value of the other ones.

You do hope they sell one of the Regos—big dividends, everything. I want to talk about this as a stock with a pretty decent short interest, right? I'm just looking at Bloomberg.

It says—I don’t even know if this is right—42% of the float is short, which might be because so much is owned by Vornado and the Roths and stuff. If 42% is short, we’re getting into squeeze territory at that point. So what do the shorts seem to see? When you pitch this, aside from my very obvious, dumb pushback on corporate governance, what do people say—or what do you hear when people are talking about a downside scenario here? What are the shorts seeing?

Yeah, I mean, that’s something I’ve been spending a lot of time on, particularly in the last month, but also over the past year, trying to understand, and I can’t really find a good answer. I would say that, at the beginning of last year, you probably had more of a valid argument for a short thesis. One is that they don’t fully cover the dividend right now, and with this recent debt restructuring, they could probably cover about 90% of the dividend right now.

But we’ve done an analysis where, in 2028, there’s a big $10 million step-up in the Bloomberg lease. It will go to $88.3 million, and if they could get any lease-up benefits—we estimate that if they lease up Bloomberg Retail, they could add $12 million of NOI. Even if they’re not successful with Bloomberg Retail, just getting that $10 million step-up in the lease gets you very close to 100% coverage.

We also calculate what the shortfall is. I think part of the short thesis is that there’s a big bet that they’re going to cut the dividend imminently. This is something that I could never understand. I did the math: the shortfall right now is probably about $10 million a year.

And this is where there’s only 1 sell-side analyst who covers this name. Interestingly enough, after the debt restructuring, I looked at the sell-side report, and he still has $47 million in annual cash interest expense in calculating FFO. You’re only going to use cash interest expense, but in reality, they just saved $17 million. There’s a $15 million delta in the sell-side report’s interest expense versus what I calculated, which would be $32 million. So there’s a delta of $47 million to $32 million in interest expense going forward.

I think whoever is shorting this is probably shorting it based on an imminent dividend cut, which Steven Roth has basically said he’s not going to do. He’s got asset sales—potentially $150 million, or $100 million to $120 million of asset sales—which they’ll pay out the bulk of in special dividends, but they’ll probably still retain $60 million to $65 million of that. So that will actually add to the cash pile that they currently have.

The second part is that I think last year there were half a billion dollars of debt that matured in the second half of the year. I think that made for a better short thesis. Both of the 2 loans that combined for half a billion have been restructured and refinanced. On the other property, they paid down $25 million in debt, and it’s been extended for another 5 years.

So the next debt maturity is 2 or 3 years out, on the apartment building. They could easily finance that. Debt financing for an apartment building is very easy. What I don’t get is: is there just no logical, good short thesis anymore?

That’s why I was so aggressively buying on New Year’s Eve. We bought this allocation up to 13% of the portfolio, and I think a lot of us were just recognizing that they extracted a ton of value from the lenders. The shorts are wrong.

My best understanding, based on Goldman Sachs Marquee, is that this is one of those stocks that’s heavily recommended as a short candidate. Andrew, maybe you’ve been noticing this, too: I think the market is becoming a bit of a thematic long-short trade. This is probably being lumped into, “You want to short office, you want to short malls, you want to short New York City.”

It’s been a running theme for people who pay attention to factors for, I would say, the past 2 or 3 years. So I guess what you’re saying is, look, this got put into an office-bucket factor.

Office bucket. Sure. Let me ask one more question.

Here, just to step back a bit: the Bloomberg lease runs through 2040, and the reason it runs through 2040 is that, I think, in March 2024—I was just trying to go back through my notes—they extended it for another 11 years. It was going to end in 2029, and they extended it to 2040. I don’t remember seeing what the pricing on the extension was or anything. Do you know anything about the pricing on the extension?

Yeah, so the pricing is very interesting. They essentially created—I don’t know the right term; it’s a collar structure—but there’s a low end and a high end. It’s pegged to Class A New York City rent, because I think at the time they wanted to get that extension, but they couldn’t agree on the rent that they would pay.

In 2030, when that lease resets, let’s just benchmark it. You’re getting $78.7 million of triple-net rent today. In 2030, the minimum—the lowest that rent could be—is $85.7 million. The highest it could be is actually $104 million.

What I really like about this is that someone may say, “Well, Bill, it’s worth, like, $340. I collect almost $18 of dividends, but it’s $240. It could potentially be almost $360, and I’m buying at $240. Why is that interesting?” I think that if you look at the automatic escalators in the Bloomberg lease, that’s what makes it really interesting.

There is a scenario in 2030 where, if Class A rent in New York City office is robust, the NOI on Bloomberg could be as high as $104 million. It will definitely be higher—it will be at least $7 million higher than it is today. It would be at least 10% higher; that would be the absolute minimum. But it could actually be, call it, $25 million to $26 million higher than it is today.

And then there’s another escalator in 2035. I think the market truly undervalues this contractual triple-net lease with Bloomberg.

Perfect. Let’s see. I think we’ve covered a good bit of Alexander’s. Again, it’s a pretty simple idea.

If people like it, they can reach out to you, and I don’t think it’s crazy hard to diligence to start thinking about.

We’ve got about 5 minutes. I know when we hung up yesterday or 2 days ago, there were a bunch of things you wanted to talk about, and you and I were catching up before this call, rolling through 1 thing after the other. So I just want to toss it over to you. Anything else we should be thinking about, or anything else you wanted to chat about in the last few minutes?

Yeah, I think we were a little time-constrained last time when we were talking. I just want to add that I think last year, when I was on the podcast, I mentioned grocery-anchored shopping-center REITs as a theme. We’ve been very, very bullish.

Anytime you see Blackstone start buying an asset class in which it historically has not been very active, it’s worth paying attention to. I noticed this about a decade ago, when Blackstone started buying up warehouses. They were just going around the country buying any 4-million-square-foot warehouse portfolios.

In our portfolio, Blackstone bought Retail Opportunity Investments Corp. in late 2024. Last year, they bought Alexander & Baldwin. They’re both grocery-anchored shopping centers. So, 2 years in a row.

I think the third one—the last remaining, kind of sub-$3 billion enterprise-value grocery-anchored shopping-center REIT—is Whitestone REIT. People should pay attention. It trades around $14 today, and there’s a $15.20 private-equity bid on that portfolio, which is just way too low relative to the actual value.

If you use the cap rate that they paid for Retail Opportunity Investments and Alexander & Baldwin, it gets you to probably somewhere between $20 and $21 a share. Whitestone recently got over $50 million from litigation assets, which was a hidden asset. That got converted into cash and allowed them to delever their balance sheet by roughly half a turn of EBITDA.

They’ve been very, very steadily growing their NOI by about 4% a year. If you go read about it, there have been a couple of activists targeting it, and there’s a really colorful history. But if you look at the actual performance from 2022, when they ousted the former CEO, until now, they’ve taken leverage down from 10 times net debt to EBITDA to probably the mid-6s, by my best guess.

They've cleaned up a lot of these litigation assets. They've done a pretty good job of capital recycling, but if you read all the activist reports, they're super negative. The last thing I want to say is that this portfolio actually has one of the highest household incomes within a 1-mile radius of all the publicly traded REITs out there. That's not a well-known fact.

I think this makes it a very ideal takeout candidate for either Blackstone or KKR, or any of the big grocery shopping center REITs like Regency or Kimco, and another Sun Belt-focused, grocery-anchor shopping center REIT called InvenTrust. That would make it a great target because it's both Sun Belt-focused. They'll probably buy an entire portfolio, and then immediately InvenTrust becomes a $5 billion grocery-anchor shopping-center REIT, et cetera.

I think if we wind up getting 3 years in a row with a grocery shopping center REIT getting acquired, that would be hilarious, right? Once they bought out this one, there really aren't any sub-$3 billion grocery shopping center REITs left anymore, and I think this is the last remaining one. It's extremely high quality. That was something I wish we had talked about last time, but I think the other thing is the share buyback.

Andrew, one other lasting thought from last time is that, in a moment, you said, “Okay, the lack of share buyback at Camden,” and I went back and thought about it. What I couldn't really figure out at the moment was that early in the first half of 2025, they weren't trading at the cap rate or the valuation that they traded at in the back half. In the back half, they traded a lot cheaper, and that's when they bought back $50 million in Q3.

It would be really interesting to pay attention to how much Camden buys back in the 4th quarter, and we should be able to see that in the coming weeks. It would be really interesting if they upped that to $100 million or $150 million. I'd love to see a $150 million buyback in Q4, because we were buying Camden shares aggressively in Q4. At one point, it kind of got up to almost a 7% cap rate.

I'm glad you mentioned share buybacks because I did have one thing I left on the cutting-room floor from the first episode. Putting Camden aside, I noticed a lot of companies that, as we mentioned, over the past 2 or 3 years, whatever you call it, were generally not kind to the REIT sector. REITs stumbled, and one that pops to mind, which I've looked at several times before but don't have a position in, so there's your full disclosure, is Park Hotels.

Park Hotels spun off from Hilton 10 years ago at this point. They've always argued, “We are undervalued. Look at what our hotels are worth on the private market. We are undervalued.” In 2022, 2023, and 2024—I could be slightly mixing up the dates—they were leaning into share repurchases. They were saying, “Hey, we think our NAV is $25. We trade for $10. We're going to destroy the share count.” They bought back a lot of shares.

Today, their shares are at pretty much all-time lows. That's not facetious. At the depths of COVID, on March 31, 2020, the stock traded for $8 per share. Today, it trades for $10.93 per share, so we're not far off the literal COVID lows, where people were saying no.

It seems to me that the company has stopped share buybacks. I chose Park because they're an extreme example, and one that I followed. I do think they're right: Luxury hotels, I think the private market bids a lot higher than where the public market is. But one way you attack that private-market bid is you buy back, buy back, buy back, buy back, then you sell assets and buy back more, and then you sell the whole company. They stopped, and I think there's a lot of others that stopped.

I just wanted to get your thoughts on the overall share-buyback environment right now.

Yeah, I think SL Green did something similar, where they were buying back a ton of shares.

Roth, I remember in 2018, when SL Green was doing this, Steve Roth published a letter and he was like, “Look, do the math on what we can make on one good development, and we're better off investing in one good development versus share repurchases.”

I would counter his argument with, “Hey, you're assuming that the development is good. Let me refer you to X, Y, and Z—overspent developments that have poor IRRs.” But yes, please—I'm sorry to interrupt.

No, but Andrew, I think maybe the better signal is that, from a signal perspective, it's very difficult for a lot of these REITs to do share buybacks because what they care about is managing their cost of debt—the cost of debt, right? If you look at what a lot of these larger REITs issue debt at, it's below 5%.

That's because there's such low leverage, and I think the debt-rating agencies see them do a lot of share buybacks. They'll put them on a negative watch or issue a negative rating, and that's something that they're very conscious about. I think the best way to look at it is that when you do see a lot of these REITs buy back shares, treat that as a signal.

The hurdle for them to do buybacks is pretty high. When you do see them actually engage in it, that's a signal telling you, “Hey, this is conservative management buying back shares, telling you that now they're willing to stick their neck out and do the buyback.”

It's interesting you say that because I generally agree with you, and especially a few years ago, I would have agreed with you. But now I've seen several of them go through the share-repurchase exercise to no result. Look at PK. They were buying back at $15, and now the stock is $11, and they've stopped the buyback.

I look at that and I'm like, “Hey, why didn't it work, or are they leaning back now? Have things changed?” I've seen it through a few of them.

Yeah. I think this is basically what happened to Piedmont. Piedmont was very aggressive with its share buyback, and they kept buying back shares and reduced the count. Piedmont had to issue a lot of shares because of COVID, and then they subsequently bought them back. I remember the delta between the issuance price and the share-buyback price.

They did a ton of buybacks after COVID, and it didn't really improve anything. Eventually, they just said, “Hey, we're going to sell the whole thing.” By that point, every shareholder had been burned and had a miserable experience. They were like, “Okay, we don't trust you anymore.” That's when you should get out.

I think it's easy sometimes, when it trades at a 10% or 15% discount, to say, “Hey, buy back shares.” But when it truly trades at a discount—when it gets so cheap that even the REIT management team is like, “We can't sit on our hands and not buy back shares. We have to buy back some shares”—I think that truly becomes a real signal.

I'll be watching Camden, Mid-America, and all these guys to see what price they paid and the amount of capital that they deploy.

Makes total sense. All right, Bill, this has been great. I actually had about 4 follow-up questions we could get to, but we talked on Tuesday, so we can talk now. I've got to follow up with you on one thing after we hang up. This has been great, man.

Yeah, we'll chat soon. Maybe, Andrew, before we log off, for anyone who's looking to track Alexander's, I would just say that the next thing to watch out for would be any news on the sale of Rego 1, because that would be a very definitive catalyst.

And then they dividend it out, right?

They have to, because the REIT rules require them to dividend out 90% of the profit. The cost basis on that property is about $50 million, and if they sell it for $150 million, they're going to have to pay out roughly $90 million in a special dividend.

That's 7% or 8% of the market cap.

I just don't know why anyone would want to short this company.

It’s truly one of those very, very bizarre setups. And by the way, Andrew, the short interest is about 10% or 11% of the float. I don’t think a 50% number is correct, but this is a very wide bid-ask spread. It’s not the most liquid stock.

So it’s just a very weird setup to have a not-the-most-liquid stock, a wide bid-ask spread, 11% of the float, and this potential special dividend on the way. I just haven’t done a lot of event-driven special situations. This is one that really got my brain working. [Laughter]

Yep. Well, the retail loan broke my brain, so it got my brain working as well. Hey, this has been great. Bill Chen, wrap it up here, and we will talk soon.

Yep. We’ll do a quick disclaimer. Nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial adviser. Thanks.