| Small & Micro Cap project
East 72: An Australian closed-end fund explains its investment in an obscure “dark” US company
East 72 is a publicly traded closed-end fund in Australia. Its latest quarterly update mentions two sub-$200 million companies –Vulcan International and PICO Holding.
Vulcan International is a “dark” company – East 72 explains the process of getting hold of the financials, saying, “To acquire financials requires a letter, proof of shareholding and non-disclosure agreement to be lodged with Thomas Gettler, a lawyer based in New York”.
Well, the crux of the story is this – Vulcan International announced its decision to liquidate the company, which it will do “at its own pace”. East 72 argues that the company’s assets are worth (gross asset value – pre-tax) ~US$205/share, and states that, “for the first time, there is a hint in the 18 September 2019 release that “the Company intends to commence stockholder distributions.”
The stock portfolio is highly liquid, but two of the illiquid assets – forestry and the Clarksville factory land – are now up for sale14 15. Bids for the timberland are about to close, and we can gain some insight as to potential values by reference to another well-known “Pink Sheets” asset play, Keweenaw Land Association (KEWL). KEWL has an annual land appraisal, the most recent of which valued their 184,000 acres at $809/acre16; imputing this onto VULC would suggest a value of around $11.6million. Cincinnati office vacancy rates are at their lowest (18%!!) in many years despite negative net absorption for over a year; asking CBD rents are ~$20/sq foot ($215/sq. m) but sale transactions have high yields in the 8% area. The buildings are quite specialist which may keep their values down say around a very conservative $5-$7million for the two. The Clarksville factory is assessed by the relevant county assessor at $3.9million Piecing together these assets suggests a gross asset value (pre tax) of ~US$205/share and ~$166/share net of reduced tax liabilities, versus our entry price of ~US$115/share over the past twelve months. Like any “asset play”, the time value of money is a relevant consideration as to the expense and time involved in a realisation.
Moreover, Nate Tobik has covered this stock on his blog.
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