SWRG <<little ltd>>Unless you count Op leases: From Q 'As of July 1, 2002, our future minimum lease payments of our headquarters and restaurants are as follows: 2002--$2.5 million; 2003--$5.2 million; 2004--$5.3 million; and thereafter--$66.7 million' This ~80mm is over 2x the 32mm market cap.
None of the above should be construed as a negative take on SWRG, just food for thought when investing in restaurants and other businesses with lot's of buildings.
I'm frankly not sure just how to incorporate off balance sheet obligations, like Op leases, but I'm pretty sure it's a mistake to ignore them. So far, I'm incorporating them in EV multiples as if they were LTD, but either putting lease payments in the denominator or discounting the Op lease total by 33% to adjust for interest. From a strictly balance sheet perspective, it may be improper to just plug them in as debt since they are a form of financing...If the buildings were conventionally owned and financed, the buildings would be shown as assets offset by the mortgage debt liabilities. So if the Op leases are considered a liability, some sort of offsetting 'asset plug' would seem appropriate so it approximated the owned asset/mortgage approach. Not sure what to use for this, but just dropping the op lease total in without some sort of balancing adjustment doesn't sound right. |
