Star Holdings (STHO) was formed in 2023 to manage the liquidation of the assets of iStar mortgage REIT following the spinoff of its successful ground lease business (Safehold – SAFE).
Excellent work here. I would love to hear some updated thoughts on the assets.
Shortly after the spin, I put some capital to work at around $13/s. Management has (in my mind) severely mismanaged the opportunity by choosing to PIK to loan rather than exchange SAFE shares and go debt-free...
I got IR on the horn in July to review progress and voice my opinion that they should close out the loan on the recent stock price rebound. Deaf ears. IR told me that the management is interested in gambling on interest rate cuts and has dragged their feet on liquidating properties due to poor real estate conditions.
Despite Sugarman being the worst and the asset liquidations going as slow as molasses, it still FEELS like there's so much potential here. I just don't quite know how to think about it.
While disclosures have been minimal, STHO has not been idle.
4Q24 financials showed:
- zero new Magnolia Green lot sales
- $21.5mm California property sale financed by $17,75mm VTB mortgage at 11.8% due Oct26
Magnolia Green zoning changes
- in Feb25 received Planning Commission approval to change the 1322 unit senior living community to a 900 unit 55+ Active Adult community. STHO explained that it had been unable to find a development partner for the senior community. STHO worked with B2K Development on the revised plan which hopefully will be easier to execute. Next step is a Board of Supervisors hearing in March and there should be no issues since the new plan is lower overall density and impact.
- Applying for modification to the Marketplace zoning to enable phased development of larger commercial buildings (Retail + Office). Expected review time of about 9 months.
Asbury Park has so much vacant land that it makes sense to develop the lots step by step. Each completed project increases the appeal of the next one. The pace of development will depend on market conditions and end-user demand.
- The Lido condo development on land sold by STHO in Dec23 has not yet begun marketing.
- The Surfhouse rental apartments owned by a STHO-managed JV should be completed this year, but has not yet begun marketing. Stabilization of this property should enable sale, recovery of the $11mm mezz loan, and release of the $80mm construction loan guarantee.
- The Delta townhouse development by STHO received zoning approval in October, but has not yet begun marketing.
- The Beach Club received a 2 year extension of its zoning approval and must begin construction by Jun26.
Overall, Magnolia Green has a clearer path to completion of the community and realization of value within the next 2 years. Asbury will take more time, but hopefully it will reach a critical mass where excitement accelerates demand.
Several special situations funds were significant buyers in 4Q24 (e.g. Saba).
Excellent work here. I would love to hear some updated thoughts on the assets.
Shortly after the spin, I put some capital to work at around $13/s. Management has (in my mind) severely mismanaged the opportunity by choosing to PIK to loan rather than exchange SAFE shares and go debt-free...
I got IR on the horn in July to review progress and voice my opinion that they should close out the loan on the recent stock price rebound. Deaf ears. IR told me that the management is interested in gambling on interest rate cuts and has dragged their feet on liquidating properties due to poor real estate conditions.
Despite Sugarman being the worst and the asset liquidations going as slow as molasses, it still FEELS like there's so much potential here. I just don't quite know how to think about it.
While disclosures have been minimal, STHO has not been idle.
4Q24 financials showed:
- zero new Magnolia Green lot sales
- $21.5mm California property sale financed by $17,75mm VTB mortgage at 11.8% due Oct26
Magnolia Green zoning changes
- in Feb25 received Planning Commission approval to change the 1322 unit senior living community to a 900 unit 55+ Active Adult community. STHO explained that it had been unable to find a development partner for the senior community. STHO worked with B2K Development on the revised plan which hopefully will be easier to execute. Next step is a Board of Supervisors hearing in March and there should be no issues since the new plan is lower overall density and impact.
- Applying for modification to the Marketplace zoning to enable phased development of larger commercial buildings (Retail + Office). Expected review time of about 9 months.
Asbury Park has so much vacant land that it makes sense to develop the lots step by step. Each completed project increases the appeal of the next one. The pace of development will depend on market conditions and end-user demand.
- The Lido condo development on land sold by STHO in Dec23 has not yet begun marketing.
- The Surfhouse rental apartments owned by a STHO-managed JV should be completed this year, but has not yet begun marketing. Stabilization of this property should enable sale, recovery of the $11mm mezz loan, and release of the $80mm construction loan guarantee.
- The Delta townhouse development by STHO received zoning approval in October, but has not yet begun marketing.
- The Beach Club received a 2 year extension of its zoning approval and must begin construction by Jun26.
Overall, Magnolia Green has a clearer path to completion of the community and realization of value within the next 2 years. Asbury will take more time, but hopefully it will reach a critical mass where excitement accelerates demand.
Several special situations funds were significant buyers in 4Q24 (e.g. Saba).
Great in depth research! a joy to read!
The Stone Pony*