LAACO: Underlevered Real Estate Firm With Hard-to-Replace Self-Storage Assets

Bill Chen of Rhizome Partners presented his in-depth investment thesis on LAACO (OTC: LAACZ) at Best Ideas 2018.

LAACO is an undervalued and under-levered real estate holding company that owns a portfolio of hard-to-replace self-storage assets in Los Angeles, San Diego, Las Vegas, Phoenix, and Houston. Adjusting for the Downtown L.A. buildings and parking lots, investors are buying the high-quality self-storage assets at a 9+% cap rate. At the recent price of $2,175 per share, Bill’s sum-of-the parts value estimate of $3,560 per share implies 64% upside. Investors receive a 3.7% dividend yield, and a roughly equal amount is re-invested to grow the business. Management is shareholder-friendly, albeit a “tad too conservative sometimes”, according to Bill. The same controlling family once paid a special dividend that was equal to twice the stock price at the time. Bill considers it little wonder that Ben Stein calls Laaco his second-best investment after Berkshire Hathaway.

About the instructor:

Bill Chen is the founder and managing partner of Rhizome Partners. Prior to forming Rhizome in March 2013, Mr. Chen traded and invested his own assets, utilizing strategies that focused on deep value investments and event-driven strategies. From August 2009 until January 2011, he was the Director of Research at New York Global Group, a private equity firm that invested in growth companies in mainland China. From October 2006 to March 2009, Mr. Chen was an Analyst in Citigroup’s real estate investment banking group, a group that focused on M&A transactions of up to $1 billion. From October 2005 until October 2006, Mr. Chen was a mechanical engineer for Bladykas Engineering. Mr. Chen received his B.S. in Mechanical and Aerospace Engineering from Cornell University in 2004. In addition to his professional activities, Mr. Chen volunteers his time as the director of the Epsilon Association which is the alumni association for Sigma Phi Society at Cornell University.

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