Yuanxi Zhang
Long/short equity, value, special situations

NTS Realty Holdings: Merger Termination Leads To Significant Downside Risks

NTS Realty Holdings: Merger Termination Leads to Significant Downside Risks

Recommendation: Reduce long position / sell short NTS Realty Holdings Limited Partnership (NYSE MKT: NLP)

New Target Price: $2.50


On October 18, 2013, after market close, NTS Realty Holdings (NYSEMKT:NLP) announced the termination of the go-private agreement after failing to extend the financing commitment. Using straightforward valuation methodologies such as unaffected price, dividend discount model (DDM), trading comparables, and discounted cash flow (DCF), I conclude that the fair value of NLP as a stand-alone company ranges from $2.14 to $3.15. In addition, it appears that NLP's financial advisor (Centerboard Securities) used inappropriate assumptions in the valuation process, which led to a gross exaggeration of NLP's fundamental value....

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