Ned GoodmanYvonne Berg
Dundee Corp.'s decision to spin out its real estate businesses into a separate company should create big upside for the stock.
Already, Dundee is up more than 10 per cent as investors factor in the value that will be unlocked when the real estate assets are allowed to float on their own. Dundee's plan is to give investors in Dundee a 50 per cent stake in the real estate businesses.
The knock on Dundee (or the hidden value, if you prefer) has always been that investors who wanted to put money into the company's portfolio of real estate assets had to also take a stake in a holding company with a big presence in mining, capital markets and other assets. Dundee founder Ned Goodman has created a lot of value but the mix of assets isn't for everyone.
Real estate isn't the only hidden asset that will be front and centre with the real estate business set free in a separate company. Real estate investor Michael Cooper will run the company, and being in charge will enable him to get out and start selling the stock's attributes. Mr. Cooper is viewed as one of the most shareholder friendly bosses in real estate, and the betting is that just having him out on his own will help crank up the multiple.
There are some big winners as Dundee Corp. shares take off. Fund manager Gerry Coleman has a huge stake in Dundee on behalf of the funds he runs for CI.
It's also a big gainer for Toronto-based hedge fund Waratah Advisors, which made Dundee its biggest holding on the expectation that the real estate business's value would one day soon be revealed.
"As a stand-alone entity, Dundee Realty Corp will continue to have upside," the managers at Waratah said Friday. " This is a great example of a pro-active CEO, Ned Goodman. He sponsored a huge value creator like Michael Cooper and then when the asset grew to such a massive scale and was not being appropriately valued in the market – he unlocked the value through today's reorganization."