Main Street Capital (NYSE:MAIN) operates out of the eighth floor of an otherwise nondescript building in Houston, Texas. As a small-business financier that provides debt and equity financing to companies in the surrounding areas, many of its portfolio companies are in its own backyard.
I calculate that approximately $89 million of its investments, which amount to 7.2% of the company's last reported book value, are in companies with headquarters or operations in Houston and the surrounding areas that have been hard hit by Harvey.
Fair Value (in Thousands of Dollars)
|American Shooting Centers||Houston, TX||$4,320|
|BBB Tank Services||Baytown, TX||$5,591|
|GMI Group||Humble, TX||$11,247|
|Gulf Publishing Company||Houston, TX||$17,022|
|Harrison Hydra-Gen||Houston, TX||$2,800|
|Hawthorne Global||Houston, TX||$2,320|
|Houston Plating & Coatings||Houston, TX||$7,980|
|PPL RVs||Houston, TX||$29,780|
|River Aggregates||Conroe, TX||$7,586|
|Rocaceia Energy Services||Victoria, TX||$250|
BBB Tank Services, which provides "maintenance, repair, and construction services to the above-ground storage tank market" is likely to be particularly busy as Houston recovers from Harvey. On the other hand, a trip to American Shooting Centers' gun range is an unlikely priority for people dealing with flooding in their homes and workplaces.
IMAGE SOURCE: MAIN STREET CAPITAL.
Descriptions of each company appear in Main Street Capital's quarterly filings and are reproduced below.
|American Shooting Centers||Recreational and educational shooting facility|
|BBB Tank Services||Maintenance, repair and construction services to the above-ground storage tank market|
|GMI Group||Manufacturer of specialty fabricated industrial piping products|
|Gulf Publishing Company||Energy industry-focused media and publishing|
|Harrison Hydra-Gen||Manufacturer of hydraulic generators|
|Hawthorne Global||Facilitator of import logistics, brokerage, and warehousing|
|Houston Plating & Coatings||Provider of plating and industrial coating services|
|PPL RVs||Recreational vehicle dealer|
|River Aggregates||Processor of construction aggregates|
|Rocaceia Energy Services||Provider of rigsite accommodation unit rentals and related services|
DATA SOURCE: MAIN STREET CAPITAL'S MOST RECENT 10-Q FILING. CHART BY AUTHOR.
PPL RVs -- by far Main Street Capital's biggest exposure -- notified its customers via Facebookthat there is "no damage at PPL to the building or any of the units. However, there is also no way to get onto the lot. It's an island. We will know more [Monday] morning about opening and keep everyone updated." The company was closed on Monday because of Hurricane Harvey, according to its website. PPL RVs is a recreational vehicle dealer that sells RVs on consignment, which is at least 50% owned by Main Street Capital, according to a presentation at its annual meeting.
Quantifying the impact
The Dallas Morning News summed up the potential losses from Harvey succinctly. Southeast Texas has at least $400 billion of residential property at risk from flood waters. The publication wrote the following in a blog post:
Harvey is likely to be one of the most expensive storms ever. Based on Census 2015 data (most recent available), the value of residential property in the eight counties of the Houston metro area exceeds $353 billion. The coastal counties from Beaumont to Corpus Christi add an additional $39 billion in residential value. This brings the value of residential property alone that is at risk from this storm to nearly $400 billion. The number grows when you consider the property within those structures, commercial property, and vehicles.
Disasters have knock-on effects that go far beyond damaged property -- from job losses to displaced people who choose to pack up their lives and move far away from the coasts after devastating losses.
It's likely that Main Street Capital will have a number of opportunities to put money to work locally when the floods die down, as businesses seek out capital to rebuild after the storm.
Of course, we wish the best for Houston and the fine people who call it home. But given Main Street Capital's outsize exposure to the area, investors who rely on its monthly dividends for income should be cognizant of its outsize exposure to investments in and around the Gulf Coast of Texas.
Newly released! 10 stocks we like better than Main Street Capital
On August 11, investing geniuses David and Tom Gardner revealed what they believe are the ten best stocks for investors to buy right now… and Main Street Capital wasn't one of them! That's right -- they think these 10 stocks are even better buys.
And when the Gardner brothers have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*