frankhkii

Not Danish, but just back from a great 10 days in CPH. Although it has become a trendy spot, I would recommend stopping by la banchina for a swim and book the sauna if looking to relax and enjoy the short summer like the Danes (albeit with tourists around you). Two restaurants I enjoyed a lot are restobar and il buco. And for a classic Smorrebrod try Det Lille Apotek (touristy but a classic that locals took me to). I would skip the little mermaid statue.

Is that 4x EBITDA, 4x FCF? I'm backing into the numbers and I just don't see the 4x valuation. Apologies for the delay I'm not always on here...It was from thumbing through Value Line which has "Cash Flow" per share for 2018 of $25.70, the current trading price is ~$106. Valueline's same "Cash Flow" calculation for 2017 was $23.65. The VL line seems to be calculated on cash from operations. On the management guidance from Q2 (https://investors.whirlpoolcorp.com/static-files/44e22a7a-dc79-4f42-9075-3018178adabb) the projected $850M in FCF is closer to 8x which I do believe is cheap.

WHR looks very cheap on cash flow - almost at 4x...

After today's fall, BNED looks to be trading at about 6x FCF...

Ted started this month (January) so that purchase was Todd's. Either way, I'd be surprised if there isn't continued buying in DTV considering it was a top position of Peninsula and larger dollar-wise than the current BRK position. Looks like a good entry point at its current price. The buybacks have been powerful and the growth vs competition is impressive...

By no means am I investing based on Eddie knowing the company better than me. My investment is focused on a valuation of the "bankruptcy remote subsidiaries" (Craftsman, Kenmore, Diehard and the real estate), and a belief that they justify a multiple of the current share price.

This is obviously not good news but something Eddie doesn't seem too concerned about and he has more information/perspective than all of us. It might be worth noting that Sears Hometown stores, the part of the business that is rapidly growing, don't carry the items (apparel and home goods) that are longer receiving factoring from CIT. As stated in todays article, brands like Whirlpool (SHLD produced 8% of their Revenue in 2010 2nd only to Lowe's) and Electrolux (Sears produced 5.8% of 2010 revenue making Sears their largest customer for appliances) can't afford to not sell through Sears. And these are the type of products being sold in the Hometown stores and not the type of products using factoring.

http://www.sec.gov/Archives/edgar/data/860585/000120919112003365/xslF345X03/doc4.xml Notes: 4.5mm was bought from ESL. 8. This price represents the price per Share of private purchases from Investors. 570K shares was transferred in lieu of management fee. 3. RBS Partners, L.P. ("RBS"), the managing member of ESL Investors, L.L.C. ("Investors"), acquired these Shares in a distribution from Investors in lieu of a cash payment for management fees. 5. RBS distributed these Shares, which were received in lieu of a cash payment for management fees from Investors, on a pro rata basis to its partners. 480K shares were bought in the open market. It will be interesting to see if/how much more he buys. 10. This price represents the approximate weighted average price per Share of purchases that were executed at prices ranging from $29.13 to $29.65 per Share. The Reporting Persons undertake to provide, upon request by the Securities and Exchange Commission staff, the Issuer or a security holder of the Issuer, full information regarding the number of Shares sold at each price. 11. This price represents the approximate weighted average price per Share of purchases that were executed at prices ranging from $30.15 to $30.50 per Share. The Reporting Persons undertake to provide, upon request by the Securities and Exchange Commission staff, the Issuer or a security holder of the Issuer, full information regarding the number of Shares sold at each price.

Since you heard this 5 years ago we have gone through the worst economic times since the great depression. This undoubtedly slowed down the real estate plans. Commercial real estate has been in a terrible place with incredibly low rents and almost no demand. Its plausible that Eddie thought rates may improve in the next few years so he continued to run the unprofitable stores as a way to hold the real estate until rates improved...On "big box" spaces such as theirs, typical leases run for 20years+ with options. A minimum lease would probably run for 10 years with options. It is prudent to not sign a lease of this length while the market rents are at all time lows. The reason they wouldn't want to get out the unprofitable stores is because of the underlying RE value...See paragraph above.

I disagree with your perspective towards keeping stores open just to cover part of the lease costs. It makes more sense that Eddie is holding the real estate/leases because of its underlying value. Some of these stores have flat rents for the next 40 years @$2-4psf which leaves a lot of room for profitability... As an anchor tenant, Sears and Kmart have a lot of leverage with the landlords. Landlords make their money by leasing off of the Anchor tenants. I.E. Anchor tenant (Sears/Kmart) pays approx $3-5psf while the small shop space pays approx $15-30psf+. The small shop space is where the landlord generates their profit. If the Anchor tenant is "letting their store go" by not reinvesting in it, it hurts the attractiveness of the small shop space and the rate that can be charged. If the anchor tenant goes dark (closes completely) the small space is virtually un-leasable. In fact, most small shops have language in their lease that allows them to cancel their lease if the Anchor tenant goes dark. For these reasons, I believe that Sears would be able to shrewdly negotiate its way out of leases on most unprofitable stores if they wanted too..

Just valuing the OWNED real estate using $3psf in rent @ a 10% cap rate you come to $27/share in owned real estate value. I think this is well below the true value of the real estate but was trying to show a conservative and easy approach to get some type of valuation. Interesting that shares are now trading at $45+/- when the owned real estate alone achieves a $45 valuation with a fairly conservative estimates of $4psf in rent sold at 8% cap rate. It is also important to remember that this assigns no value to the leased stores which I think hold a positive value. Examples of this are the sublets to Whole Foods in North Carolina, Forever 21 in California and the various sublets to Edwin Watts Golf (link: http://blog.icsc.org/?p=50 ). Anchor tenants, such as Sears and Kmart, hold a lot of power in lease negotiations with landlords. This is because all of the small shop space is made leasable (and valuable) by the traffic the Anchors generate. Thus, if Sears is unable to sublet their underperforming locations at a profitable rate, I am confident that they wouldn't have much trouble exiting leases early. As a landlord I would rather go find a new anchor tenant that will "try" than have a Sears that is falling apart and not driving traffic to the center due to a lack of reinvestment.

Thanks for the help. A simple way I look at the owned real estate is to take a low rental rate ($3-$4psf) and capitalize it at a competitive rate for similar properties (8-10%). This gives you a conservative RE value between $27 ($3psf @ 10%cap) and $45 ($4psf @ 8%cap) per share.

I'm planning to start with valuing the owned stores in the highest income zipcodes, I imagine a majority of the RE value is in these sites. Thanks for the response.

Can anyone help me with some Real Estate info on SHLD? I am working on valuing individual stores and would love any lists of owned stores etc. that would help. Thanks.