New England Realty Associates Update

A few months ago I wrote about New England Realty Associates (NEN), an apartment building operator in Boston. I want to update the situation a bit.

The stock has recovered from 67 to about 78 dollars. Since they initiated a stock buyback program they have bought back 325,000 shares, representing almost 20% of outstanding shares. NEN still has the ability to buy back 175,000 shares but are limited by volume restrictions.

The company also successfully refinanced a large part of their portfolio with significantly lower rates and still won't exceed a 55% loan to value.

On the decreased share count, if their apartments are worth $110k per unit, the company has a NAV of $112 by my calculations. The other positive here is that if the company distributes the same amount of cash the dividend would rise to I believe 3.54% per share from 2.8 currently.

All in all, NEN is still a very undervalued situation even in a negative environment for real estate investments.

Disclosure: Long NEN

Comments

[lorddarley:]

What better deal for an investor than to buy into a company owned by a saavy local family and not managed by "professional management" that looks for tricks to goose earnings?

2008 Apr 19 10:48 AM

[kj:]

Thanks for the update Jonathan. I've done a fair amount of work on the company as well. They're recently sold 2 of their non-strategic buildings for about $96,000 and $117,000 per apartment. I think that many of the strategic assets are worth well in excess of $110,000 per apartment. I'm guessing that your numbers are conservative by design. The article below states that NEN has been offered $60,000,000 for 1 building in Boston. The company currently carries that building (Boylston Downtown) on their books at $17,000,000. At $200,000 per apartment the building is worth about $53,000,000. When attempting a back-of-the-envelope valuation for the various buildings and the recent stock repurchases, I get a valuation of about $140/share for NEN.

www.bostonmagazine.com.../

2008 Apr 20 12:23 PM

[Jonathan Bl...:]

correction - the dividend would go to 3.54 per share not the yield...

2008 Apr 25 12:28 PM