HMG Courtland Properties (HMG, Financial) is a publicly traded Real Estate Investment Trust (REIT) engaged in the business of owning and managementing income-producing commercial properties. The firms owns over 95% of its only subsidiary Courtland Properties, which is registered as a separate REIT. HMG other investments consist of primarily marketable securities in various publicly traded REITs. The firm has high operating expenses that exceed current operating income. HMG has a new joint venture project in Orlando Florida. that it invested $1.8 million for a one-third interest in. The firm has little to no earnings, but has $6.5 million in cash and $11.6 million in marketable securities and little to no debt. After taking out it debt the firm has a net asset value of a over $14.00 per share.
Company overview
The firm doesn't have very much in the way of earnings except for a very small stream of revenues from an office building the firm owns. HMG's other source of income consist of gains from marketable securities, dividends from those securities, and from other real estate ventures. The company pays an adviser to manage its investments.
Office buildings ownership
The company owns a direct ownership interest in an office building worth $797 thousand that generates $85,000 in rental income a year for the company. HMG also has owns stakes in various partnerships.
Investment in marketable securities
HMG marketable securities consist of publicly traded REIT stocks and REIT preferred shares. No single investment in REIT commons and preferred shares are more than $400k for each position. The firm's portfolio owns 70 individual positions ranging from common and preferred shares. During the third quarter HMG purchased about $3.5 million of preferred equity of REIT, consisting of 20 preferred stock positions with no one position exceeding $400,000 in value at the end of September 30, 2014. The firm also during the third quarter purchased $3.5 million of marketable securities consisting of 50 common stocks in REITs. No one position exceeded $400,000 in value. For the nine months ending September 30 net gains from the sale of marketable securities was $336,000 which consist of $393,000 of gross gains net of $57,000 of gross losses.
Investment in real estate partnership
In September 2014, the firm through an newly created wholly-own subsidiary HMG Orlando LLC commit $1.8 million for a one-third interest in a new joint venture. The joint partnership venture plans to build and develop 250 condos on 9.3 acres in Orlando Florida area. Each partner in the project will commit $1.8 million each and they plan on raising additional capital through $27 million in financing to finish the project. When the project is completed either HMG will receive dividends from the rental income or sell its stake.
Successful past project
HMG has in the past been successful at developing properties and then selling them. In 2013, the firm sold of its interest in Grove Isle Yacht Club for $24.4 million for an gain of $19 million.
Management
Board Of Director
- Chairman & CEO - Maurice A. Wiener
Chairman and & Chief Executive Officer (CEO) - Maurice A. Wiener
- Independent Director - Richard N. Wiener
Independent Director - Richard N. Wiener
- Independent Director - Walter G. Arader
Independent Director - Walter G. Arader
- Independent Director - Harvey Comita
Independent Director - Harvey Comita
- Director - Lawrence Rothstein
Director - Lawrence Rothstein
Board Of DirectorCompensation
| Director | Annual Fee | Board Meeting Fee | Committee Meeting Fee | Total Compensation |
| Maurice A. Wiener | $17,000 | $3,750 | $ - | $20,750 |
| Lawrence Rothstein | $17,000 | $3,750 | $2,250 | $23,000 |
| Walter G. Arader | $12,000 | $3,000 | $2,250 | $17,250 |
| Harvey Comita | $12,000 | $3,000 | $2,250 | $17,250 |
| Richard N. Wiener | $12,000 | $3,750 | - | $15,750 |
| Totals | $70,000 | $17,250 | $6,750 | $94,000 |
The annual director's fees are paid at the beginning of each quarter. For each board and committee meeting directors come to receive fees for each meeting they attends. HMG annual fee for outside directors is $12,000 per year plus meeting fee of $750 per meeting. Both Maurice Wiener and Lawrence Rothstein each receive $5,000 in director fees per year from Courtland Investment Inc. These fees are included in the amounts above.
Outstanding Options To Executive Officers
| Executive Officer | Number Of Options | Exercise Price | Expiration Date |
| Maurice Weiner | 9,500 | $17.84 per share | August 25, 2016 |
| Maurice Weiner | 700 | $18.50 per share | August 25, 2016 |
| Lawrence Rothstein | 7,500 | $18.89 per share | August 25, 2016 |
Financials
For the nine months ending in September 30, 2014, HMG revenues increased 26% to $61 thousand and net income totaled $99,000 vs losses $871,000. Net income for HMG represents an increase from $164,000 to $672,000. HMG has little to no debt; its only liabilities are the $2.4 million that it owes to an affiliate and $200,000 in accounts payable. The problem is that the company's operating expenses exceed its operating income. HMG is heavily reliant on gains from marketable securities, dividends from joint ventures to meet its operating expenses. The company pays directors lavishly and have other real estate relative operating expenses as well.
Advisory firm HMGA Inc.
The advisory agreement between HMGA Inc. and HMG Courtland agrees to pay a monthly compensation of $55,000 or annually $660,000 a year.
Valuation
HMG is a classic Walter Schloss stock, sells for about 50 cents on the dollar, little to no debt, has a dividend yield of 4.0%, and the bulk of its assets are tangible and can be easily sold off. The firm sell for 0.55 times its book value, little to no earnings, cash and marketable securities exceed market value. Now the market is valuing HMG for $3 million less than net cash and investment. At this current value investors are getting an office building and HMG's investments in private real estate developments for free. HMG has a net asset value of over $14.00 per share exceeding market value. Investing in HMG you are betting on the firms ability to turn their real estate investment interest into profitable gains. If the firm can't, an investor is protected by the cash and marketable securities on the balance sheet.
