Sunday, March 4, 2012

Scut-Scut-Scuttlebutt...

This is what happens when you drive over 7 hours to central Virginia (and then back an hour or so to Roanoke) to do some scuttlebutt for a few days on one of your favorite nano-caps... An inch thick stack of deeds and real estate fliers on top of your kitchen table... That, plus a whole lot of pictures of the real estate that is (or was) owned by the company, as well as some that are owned by the CEO. I will be honest- I am impressed with the situation out there.




More to come...

Disclosure/Disclaimer: I am long shares of Sitestar... This is not advice of any kind. Always do a ton of your own research before contemplating doing anything that I say, do, write, or so much as think about.

8 comments:

Anonymous said...

there are some pretty serious red flags...

1) seems like they (historically) blew a lot of money on the bad acquisitions on the internet site of the biz

2) insider notes payable at 10%? That doesn't make any sense - one would imagine they could get a revolver, or longterm mortgage financing at MUCH cheaper rates

3) company leases the headquarters from the CEO - there is so much commercial RE out there...

4) You said the CEO's wife (on board of directors, really?) is a real estate agent? If she's the agent for company transactions, then she's skimming another 3%+ off the top?? (At this point, would that really surprise anyone?)

This thing is certainly cheap. But is it cheap enough to offset this completely whacky management team? Curious on your thoughts...

BTW - I think the company purchased their RE for (much) less than what you stated in your previous posts

jeff said...

Anon,

1) Fair point, but, the recent ones have not been that bad. They are re-directing funds, so, it seems those days are over.

2) I have no real issue with the note, as long as they continue buying real estate at the prices they have been... They can do quite well borrowing at 10%, actually. While I wish that they would pay less in interest, I think that would be hard for them to, as these are distressed properties. It is really hard to buy these with conventional loans for a host of reasons. It is much easier to just have a loan like this. If people are looking for hard money lenders, they often pay in excess of 10% for money on these properties. The only hard money lender in my home town is lending money left and right and is charging 13%; he takes back almost no houses, and the people borrowing money from him are doing quite well.

3) Correct, but, moving the HQ would be a nightmare (after going in and seeing all the wires going all over the place), I couldn't imagine how much it would cost... plus the service disruption!? The rent seems a touch high, but, I can get past it.

4) She is (in both instances), but I am under the impression that she has not sold the properties. When I was there, she had none that were listed. Regardless, the expense that you cite is an expense that would have to be paid if they listed with any realtor, so, why would one care who the money went to? I don't mind that she is on the board either; she gets no BOD fees, and makes 13K for being a secretary (per the last 10K)... Hardly going to break the bank.

I am very long the stock and felt it worthwhile to drive out there to verify this stuff. Implicitly, I think that the stock is cheap.

You are correct, the company does seem to have purchased the property for much less than the PVA data I posted. I will be updating this in a new post in the future.

Billy Merchant said...

Aw dude, you should take advantage of your blog: I live in Noke, I could have done much of that work for you (or at least bought you a beer when you we're in town!).

Let a guy know if you ever need more info from this part of Appalachia.

Billy Merchant said...

All that said, awesome work and thanks!

jeff said...

Billy: If SYTE ever has an annual meeting, I'll likely be there. Beer (or bourbon) should ensue!

Gopinath said...

Jeff, Great work!

Billy Merchant said...

You got a deal Jeff; now I just need to pick up some shares.

Anonymous said...

Looks like the 10k came out, and the company sold some real estate.