The Real Deal Miami

Investors eye restaurant chains for commercial real estate

September 12, 2011 12:47PM

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Ruby Tuesday at 7 Times Square
Lower-end nationwide restaurants such as Ruby Tuesday and Cracker Barrel Old County Store are attracting activist investors like Biglari Holdings, Carlson Capital and Becker Drapkin Management who claim the companies could make more money by selling their real estate than their food, Bloomberg News reported.

Investment firms, Bloomberg said, are angling for seats on the boards of restaurant chains with assets worth at least 53 percent more than the companies themselves. By encouraging managers to sell real estate as demand for commercial mortgage-backed bonds increases, they have a lot to gain.

Selling property “certainly is an avenue to do something to benefit shareholders,” said Josh Zamir, managing principal at Capstone Equities, a New York-based private equity firm specializing in real estate. “When a company’s stock is trading at or about or below the real estate value, it means the market is not recognizing the value of their real estate.”

Even when a restaurant is struggling, “there is residual asset value that the shareholders would have a claim on — that’s the land,” Bryan Elliott, an analyst at Florida-based Raymond James Financial, told Bloomberg. That’s why activist investors “push for property sales.” [Bloomberg]