What do you estimate the market value of PBY's real estate portfolio, consisting of a 300K sf Philidelphia headquarters campus, four distribution centers comprising of over 1.5 million sq ft (located in Texas, Ind, NY and Georgia) and 231 store locations ( the other 356 stores are leased)?
2 years ago value was supposedly $1 Billion+/- and if you use industry norms today they are probably still worth $700-$800 million. However, many think the next shoe to fall will be commercial real estate market. Occupancy rates are the lowest in more years than I can remember. But, if PBY could get their operating margins to a respectable number, at least double what they are now......buyers would be lined up to do sale-leasebacks with a company they feel would be around a while. I believe this is where PBY management doesn't have a clue. Let's say they were able to get EPS to $1 a share or say 50 cents more than expect in 2010. That's roughly $25 million more in profit......but I suspect the value of their real estate would jump by at least $200 million......more than 8 times the benefit of EPS improvement. Instead of focusing on core operations, they are opening new outlets that are too close to existing stores that will initially and LT take sales from older stores. Declining sales in their stores they own are doing nothing but dropping real estate value as well. If you were a commercial real estate buyer would you want to do business with a company losing 2-5% in sales at that location each year. I would be scared to death I would be stuck with a bankrupt company unable to pay lease..........2-3 years from now, the market will look at PBY and their 100+ new stores and the analysts will be asking why they still struggle with sales in core stores. Stock will go up and down and we will be back to where we started again......DaninFW
Not sure I follow this entirely. Even in a sales leaseback, PBY serves as a corporate guarantor...i.e.their name is on the new lease....not the individual store, itself. It's not the individual store performance that is looked at. When the new Landlord takes the new lease to the bank, he can borrow based on what the Moody's Credit Rating of PBY will be at the time.