Yr Finish 2025 Portfolio Assessment

Present Positions (alphabetical order):

• Braemar Motels (BHR) is an externally managed (Ashford Inc) lodging REIT centered on luxurious inns and resorts, again in August, BHR introduced the initiation of a gross sales course of.  In line with the “Ok-shaped economic system” theme, BHR’s excessive finish luxurious resorts have carried out nicely on a person foundation, however the REIT’s abusive exterior administration settlement and conflicts of curiosity have saved the inventory from performing.  Ashford is incentivized to promote BHR as a result of they’re due a 12x termination payment, however not essentially incentivized to promote at an advantageous worth for the fairness (aside from getting an inexpensive sufficient deal to safe the vote).  @somehotelguy posted on Twitter again on the finish of October, “Braemar name for presents tomorrow.  Any guesses?” and the CEO Richard Stockton wrote in his annual letter that “additional bulletins needs to be coming in 2026.”  I am hoping for a very good end result in Q1.  Apparently, Ashford’s different lodging REIT, Ashford Hospitality Belief (AHT), initiated an analogous gross sales course of in December, including legitimacy to each, looks like Monty Bennett is critical about one final grift and leaving public markets.
• Brightstar Lottery (BRSL) is a pure play lottery operator following the sale of their IGT gaming terminal enterprise to Apollo (APO).  Brightstar trades low-cost at simply ~6x EBITDA for a reasonably prime quality enterprise with clear income line of sight.  Brightstar is returning money to shareholders by way of a big buyback plan and an above common dividend yield.
• Franklin Avenue Properties (FSP) is an workplace REIT within the midst of a gross sales course of, shares have traded down considerably since my unique publish.  FSP’s debt (mixture of two time period loans and senior notes) is probably going the rationale, their debt matures on 4/1/26, the corporate issued a press launch on 11/21, “FSP is at the moment in energetic negotiations with a possible lender to refinance all of its present indebtness.”  At a present worth of $0.90/share, I’ve the implied cap charge at 14-15%.  There’s a variety of discuss 2026 being the yr when business actual property transaction exercise returns as bid-ask spreads shrink with sellers accepting the brand new actuality; a sale of FSP ought to occur early in Q1.
• Ahead Air (FWRD) is primarily an asset-lite less-than-truckload transportation providers supplier that traditionally had a pleasant area of interest in airport-to-airport routes.  They’re virtually a yr right into a strategic evaluation that has had a couple of twists and turns.  There’s a variety of debt right here, however FWRD insists the method is ongoing, with potential proxy struggle / director nominations across the nook, the corporate would possibly find yourself taking the most effective provide on the desk earlier than later.
• Golden Leisure (GDEN) is a regional on line casino proprietor operator give attention to the Nevada market, they introduced a transaction with VICI shopping for the true property and Chairman/CEO Blake Sartini taking the working firm personal.  The implied a number of on the working firm is round 1x EBITDA leaving open the likelihood for a bump to safe shareholder approval.

I left the VICI aspect of the commerce unhedged which seems to be a mistake, shares are at the moment buying and selling beneath the merger consideration and relying on when the shut occurs, GDEN might get one other $0.25 dividend or two that I did not account for within the above.

• GCI Liberty (GLIBA/Ok) is an Alaskan telecom that lately accomplished a $300MM rights providing backstopped by John Malone (the backstop wasn’t wanted).  The rights providing labored out properly for many who participated with fairness being raised at $27.20/share in comparison with the present worth of $36.09/share.  Now we look ahead to Malone to place these funds to work with an acquisition to show GLIBA right into a “new Liberty Media”.  I hope we see a real arms size transaction and never one thing like GLIBA shopping for distressed Liberty Puerto Rico from Liberty Latin America (LILA).  Within the meantime, GCI Liberty stays fairly low-cost at simply 5.7x LTM EBITDA, however competitors from satellite tv for pc suppliers like Starlink is a priority.
• Inexperienced Brick Companions (GRBK) is primarily a Texas homebuilder, largely centered on Dallas, however they’ve lately branched out to the Austin and Houston markets.  The corporate has carried out exceptionally nicely, however behind my head I’m wondering what is absolutely their aggressive benefit?  They’d let you know land sourcing and growth, they like to speak about infill communities, however its questionable.  GRBK trades for 10x earnings and 1.5x guide, each fairly affordable for this enterprise, I’ve espresso canned this place in the interim.
• Revenue Alternative Realty Traders (IOR) is a money-market like funding with virtually all of its belongings consisting of a money sweep account receivable with its exterior supervisor that owns virtually the entire shares.  The play right here is to attend till they squeeze out the remaining shares.  The controlling household possession group, by way of TCI, continues to purchase no matter shares can be found beneath $18 per share, guide worth is $30.72 per share.
• Mechanics Bancorp (MCHB) is a California based mostly regional financial institution with branches up and down the west coast that swallowed up distressed HomeStreet (HMST) this previous yr.  The financial institution is majority owned by Ford Monetary Fund, their technique is fairly easy, chip away on the expense ratio and pay out the overwhelming majority of internet revenue as a dividend.  The crew at Ford Monetary has run this playbook a couple of instances previously earlier than promoting out, the identical will possible occur right here at somepoint.  I plan on promoting down my place someday in 2026 as my unique thesis with HMST has performed out.
• Mount Logan Capital (MLCI) is a subscale, lower-quality personal credit score asset supervisor that lately accomplished a reverse merger with 180 Diploma Capital (TURN), offering MLCI with a U.S. itemizing and a few money/securities on its stability sheet.  Quite a lot of digital ink is being spilled concerning the dangers of personal credit score, I typically assume the systemic danger fears are overblown and far of the “cockroaches” which have been uncovered are unrelated to non-public credit score.  However, I am underneath no impression that Mount Logan is a long run winner on this area, the corporate has an odd administration construction that does not scream alignment and the administration crew has some previous missteps with credit score selecting of their prior seats.  This week, MLCI formally launched their beforehand introduced tender provide for roughly 12% of the shares excellent at a worth that displays the merger date guide worth of $9.43 per share.  The tender is about to shut on February 2, 2026, doing a bit of work on what potential outcomes might seem like I get the beneath:

The mathematics will find yourself a bit of higher as a result of I am assuming 100% of shares tendered within the above, administration has pledged to not tender and there might be some legacy shareholders asleep on the wheel or that simply overlook to tender.  The IRR swings fairly wildly relying on what discount-to-book you imagine the supervisor will commerce at publish merger.  In the long term, the hope is that MLCI will decouple from being valued off of its stability sheet and somewhat be valued based mostly off an incomes stream, however that bridge is fairly shaky and complicated in the mean time.

• Internet Lease Workplace Properties (NLOP) is an workplace REIT with an express liquidation marketing strategy, it was spun from W.P. Carey (WPC) with company degree debt, however that is all been paid off and the REIT is now distributing asset gross sales proceeds to traders.  NLOP is a reasonably secure approach of taking part in the return to workplace theme.
• NSTS Bancorp (NSTS) is a small thrift conversion situated within the far northern suburbs of Chicago.  The thesis is pretty easy however requires endurance, NSTS handed its three yr mark following the conversion making it eligible to be acquired by one other financial institution or credit score union.  NSTS trades for 0.80x tangible guide worth, stopped repurchasing inventory and is dealing with shareholder stress to promote.  Tim Melvin was on Worth After Hours a couple of weeks again and gave a fast pitch for NSTS.
• Sotherly Motels (SOHOO) is a small lodging REIT that’s being taken personal by Kemmons Wilson Hospitality Companions and Ascendant Capital for $2.25/share.  SOHO has a 3 courses of most popular inventory, every of those courses incorporates a conversion choice to frequent within the case of a change of management, however the variety of shares has a cap.  Beneath is what I present because the spreads and IRR based mostly on a 3/31 shut for the frequent (the merger is focused to shut in Q1) and a 5/15 shut for the popular inventory (the conversion occurs publish merger closing).

The take-private transaction seems to be on monitor: the definitive proxy is out, shareholder vote is about for 1/22/26, insiders personal 17.73% of the shares and have signed on to vote sure, Apollo (Marc Rowan has lately mentioned the agency is in a defensive posture) is main the financing of the transaction.  Sotherly Motels is my largest place heading into 2026.

Closed Positions:

• Mereo BioPharma Group (MREO) earlier this week introduced their two part 3 trials for Setrusumab with accomplice Ultragenyx (RARE) didn’t meet their major endpoints.  That information despatched the inventory down 90%.  I had espresso canned this place for a number of years, absolutely conscious that it was a science based mostly biotech which is usually in opposition to my guidelines when turning over rocks within the sector.  Taking this one on the chin stings fairly a bit.
• Seaport Leisure (SEG) is an proprietor of actual property and leisure belongings in Decrease Manhattan that was a by-product of Howard Hughes (HHH) in 2024.  I bought as a result of do not need to be within the Ackman enterprise anymore and dropping their CEO was a blow to my thesis.  Money burning actual property performs counting on a low cap charges (the Seaport was initially constructed to a 4% money yield) do not usually carry out nicely in public markets.  The present market worth is at the moment valuing the fairness at a fraction of substitute price, however given the therapy of minority shareholders over at HHH, I am skeptical SEG shareholders will benefit from the fruits of any eventual turnaround.  The {discount} might be used in opposition to them when Ackman finally acquires SEG again.
• The damaged biotech basket is at the moment empty, over the last six months I bought or transactions closed for: Athira Phrama (ATHA) sadly earlier than the current nice information on an asset sale, CARGO Therapeutics (CRGX), ESSA Pharma (EPIX), HilleVax (HLVX), Ikena Oncology (IKNA), Mural Oncology (MURA), Repare Therapeutics (RPTX) and Third Harmonic Bio (THRD).
• Par Pacific Holdings (PARR) was additionally a long run holding of mine, it had an excellent yr as crack spreads widened once more.  I just like the administration crew, they’re rational allocators of capital, I’d re-enter PARR the subsequent time crack spreads tighten or another shock hits the refining trade.
• I wrote some lined calls on two of my “catching knives” shares in Jefferies Monetary Group (JEF) and Fiserv (FISV), each ended up rallying and my quick calls had been exercised.
• I additionally closed out CKX Lands (CKX), Enhabit (EHAB), Soho Home (SHCO), Inventive Media & Group Belief (CMCT) and Mild & Marvel (LNW) over the last six months.

Odds & Ends:

• I participated within the Verve Therapeutics (VERV) tender provide for the CVR.  In June, Eli Lilly introduced the acquisition of VERV, a gene enhancing biotechnology firm focusing on heart problems, for $10.50/share plus a CVR for as much as $3/share.  The CVR is tied to VERV’s lead asset VERVE-102 starting a Section 3 trial.  Eli Lilly is VERV’s growth accomplice on this asset, will need to have seen what they preferred, shares traded round $11.10/share heading into the tender valuing the CVR at roughly $0.60. 
• In July, I attempted to placed on a full place in Synlogic (SYBX), a damaged biotech that counts Cable Automotive Capital as a lead investor (Jacob Ma-Weaver printed a letter outlining his course of for busted biotech reverse mergers), however the inventory ran away from me as rumors swirled that SYBX might merge with a crypto treasury firm.  I might now not justify proudly owning it in my biotech basket, by no means wrote it up as a result of I by no means crammed sufficient to personal greater than a monitoring place.
• I purchased Solstice Superior Supplies (SOLS) shortly after its spin from dad or mum Honeywell (HON), largely due to this Fast Worth publish.  I flipped it every week or two later for a fast revenue.

Efficiency Attribution:

Watchlist:

Present Portfolio:

As at all times, thanks for studying and commenting, please be at liberty to share any concepts within the remark part.  Blissful New Yr, regardless of my poor efficiency, I’m optimistic about 2026.

Disclosure: Desk above is my taxable account, I do not handle outdoors cash and this solely a small portion of my total belongings.  Consequently, using margin debt, choices or focus doesn’t absolutely symbolize my danger tolerance.