I’ve been following the Maguire Properties (MPG) story for a while but didn’t have the time to devote full analysis needed for an investment. I thought the market opportunity had gone away but recently read an updated post that said otherwise. Rather than regurgitate what others have already written, I’ll point you to some good background material written by PlanMaestro (click through to his older blog posts on this stock as well).
My Analysis
The company has done a great job eliminating its recourse obligations, so it lends itself to a bottoms-up valuation based on the sum of the individual parts. You have to love non-recourse debt structures - only the valuable parts count.
My first step in simplifying the analysis was to summarize and adjust the current balance sheet:
Based on the (hopefully) conservative adjustment explained above, the balance sheet can be simplified by separating out the defaulted properties and their debt from the core, wholly owned portfolio. The overview of the property portfolio is as follows:
In order to carve up the balance sheet to focus just on the owned properties, we first need to separate out the defaulted properties:
Using this information, combined with the balance sheet adjustment discussed above, I arrive at the following simplified context for a balance sheet valuation:
(Click to enlarge)
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