Actually, they do own real estate. First, as management stated in the conference call, they own outright, free and clear, seventeen units. We don't know what they are worth, but we can extrapolate. First, they paid $4 million, a piece, for the last eight. Then they put $2.5 million of capital improvements into each of them. Add those numbers and you get a cumulative value of $110 million for their 17 units. Discount that by 20% to account for illiquidity, add $100 million of the $130 million of cash on the balance sheet and you get $188 million of value, owned outright by the shareholders or $6.75 per share. Do they own real estate? Yes. Is it of great value? Yes. Is the stock cheap? Most probably.
Of course, they own the retail business, with the tax loss carry forward and considerable capital improvements, also. As I have proposed, this is a very interesting stock in a difficult business.
Your valuation on the units is grossly off....just because you get a 2011 car from an auction for a $1 doesn't means its worth a dollar. The spin off number for each unit was $15M in 2007 on the average. Give a 10% haircut for recent real estate slump, although not so much for such prime locations, then you get $13.5M. I would argue that their 17 operational location worth $230M at least and that does not include the $75M in raw land located again in prime locations by the interstates around the country. You have count that such sites with their permits are very valuable as their rare to find and expansive to develop including zoning and permitting.
That is one way to look at it. But that is COST of acquisition which probably is NOT value. If management did their due diligence, the real value should be more than the cost of acquisition. So what you have presented is most likely much lower than the market value. So that would mean the stock is significantly under valued. All the discussion of balance sheet has it's place in valuing a business, but it hardly ever reflects the contribution of real estate and leasehold's because how assets are carried on the balance sheet. Many investors see those discrepancies and buy under valued assets based on market vs cost models. I tend to think that TA is trading about 1/3 of its value, now.
Not if making a mortgage payment is cheaper than paying rent. And property values WILL recover over time. Especially the way the Fed has been creating money. TA will lose all that capital appreciation. Meanwhile they're paying triple net on all their leases. Ain't saying TA is a bad investment, but not owning the travel centers is a definite negative in my opinion.
OK then I suppose you will grace another board with your knowledge then? Or is there something that attracts you to TA? Is that the argument you make about other retailers? Not owning real estate is a negative? Just want to know, so you will think consistently!