I am considering an entry here at $4 as a deep value investment. Current book is just a shade under $15 according to the just-filed Q, so on paper its a nice margin of safety.

The Goulds have a good long term track record with BRT if you include the dividends they paid over the years. I am concerned about all of their conflicts of interest with their other investment vehicles. Any one have any thoughts on this?

The balance sheet is wonderful, although in the new environment the cost of capital may be relatively high, given what equity investors are going to be looking for and the 9% on the debentures (I believe they are debentures). I think that in the coming years some real estate operators, particularly those with government connections or backing, will have a much lower cost of capital than BRT.

The income statement is unlikely to generate much in the way of profit in the next year or two. In fact, with 30% of the portfolio owned and difficult to dispose of operating expenses are likely to rise. With few or no real loans I think operating losses of up to a $1 a share are possible the next few years.

So three or four years out, with a bit more depreciation in the portfolio and maybe $2.50 in operating losses dialed in you have a NAV of $10. If BRT trades up to book over four years you have a 25% gain annualized from here.

A big risk might be a take-private once the RE markets are showing signs of improvement, maybe a year from now. I could see the Gould's offering $7 a share and alot of people rushing for the exits.

Any thoughts out there?

John