8/01/2011

Real Estate, Coffee

FARM: Farmer
Market Cap : 123.98M
Enterprise Value: 126.35M

I purchased FARM for several reasons but my conviction was low.Horrible management and worsening financial position;the situation has similarities to SYMS but at the right price it may belong in some portfolios.

Their real estate portfolio has tremedous untapped market value relative to the 126M enterprise value.

Head Quarters
Owner: FARMER BROS CO
Total land value: $2,983,868
Total building value: $17,907,840
Total value for property: $20,891,708
Recording date: 09/02/1981
Assessment for fiscal year: 2008/2009

Read more:
http://www.city-data.com/los-angeles-county/N/Normandie-Avenue-175.html#ixzz1Ti1oTEu1

Additional owned real estate are listed below:

20333 South Normandie Avenue, Torrance, California*
Executive Offices
20333 South Normandie Avenue, Torrance, California*
Plants
235 N Norwood Ave., Houston, Texas*
Plants
13131 Broadway Ext., Oklahoma City, Oklahoma*
Plants
20333 South Normandie Avenue, Torrance, California*
Distribution Center
13131 Broadway Ext., Oklahoma City, Oklahoma*
Distribution Center
235 N Norwood Ave., Houston, Texas*
Distribution Center
Warehouses owned by FARM
Arizona
FLAGSTAFF*
2385 N. Walgreen Street
Arizona
TUCSON*
3818 South Evans Blvd.
California
CASTROVILLE*
11460 Commercial Parkway
California
LOS ANGELES SF VALLEY*
9373 Remick Ave.
Arleta
California
SACRAMENTO*
2450 Boatman Ave.
California
SAN LUIS OBISPO*
3450 Broad St.
California
SANTA ROSA*
470 E. Todd Rd.
California
VENTURA*
1350 Stellar Dr.
Oxnard
Colorado
DENVER*
5595 Joliet Street
Idaho
IDAHO FALLS*
805 S. Saturn Ave.
Indiana
INDIANAPOLIS*
1417 Southeastern Ave.
Iowa
OMAHA*
3217 Nebraska Ave.
Council Bluffs
Missouri
KANSAS CITY*
9 N.E. Skyline Dr.
Lee's Summit
Montana
BILLINGS*
2625 Enterprise Ave.
Nevada
LAS VEGAS*
4612 Industry Center Dr.
Texas
McALLEN*
1312 E. Laurel
Washington
SPOKANE*
E. 10915 Montgomery Dr.
Wyoming
CASPER*
2170 N. Old Salt Creek Hwy.
Arizona
LAKE HAVASU*
1880 Commander Dr. Ste C
California
BAKERSFIELD*
8802 Swigert Ct.
California
CHICO*
480 Ryan Ave., Ste 100
California
FRESNO*
4576 N. Bendel
California
OAKLAND*
9845 Kitty Lane
California
SAN DIEGO*
7855 Ostrow St., B
California
SANTA ANA*
3921 W. Segerstrom Ave.
California
STOCKTON*
4243 Arch Road
California
VICTORVILLE*
17190 Yuma St.
Colorado
FORT COLLINS*
4500 Innovation Drive

5 comments:

Chris said...

Any idea which locations are owned versus leased? How did you assemble this list?

ShadowStock said...

Hi Chris

all the properties listed are owned. I removed all leased properties.

John

Anonymous said...

Thanks for the post. I have been looking at this Company very closely, initially as a short. However, the unencumbered tangible asset value makes the short too risky. With the price so depressed, I have recently begun to assess the stock's merits for a long.

My question for you is how does the Company monetize this real estate value, or more specifically, return this value to equity holders. In my view, the best case scenario is that the Company is purchased by a strategic buyer that needs extra roasting capacity and scale. If this were to happen, the price would almost certainly be well above the current share price based on Net Asset Value alone (LIFO accounting also understated the value of the coffee inventories). But, this presumes that FARM's board, which receives a proverbial "F" for corporate governance for the past 12 years, will realize the futility of their current business model (i.e. bloated distribution platform, commodity pricing pressure it cannot absorb) and do the right thing for the equity holders. Given the Company abysmal track record, I am skeptical that the Board actual takes shareholder interests into account (of course the Farmer family controls enough common stock that the interests should theoretically be aligned). My worry would be that the Company refuses to admit defeat, sells off real estate piece-meal or engages in sale-leaseback transactions, and continues to operate this business as a going-concern (which is value destructive for the equity). In other words, unless the Company either a) goes bankrupt or b) gets bought out, then it is possible that the tangible asset value will remain tied up in low-returning real estate properties that the Company needs to operate its dying business. Do you have any thought? Also, do you have any idea what the collective real estate portfolio may be worth? Thanks so much.

ShadowStock said...

Yes it was an asset play on real estate and the coffee inventories were below fair market value. Michael Price did mention the coffee inventory during a Bloomberg interview.

Warren Buffett said ... <>

So having said that i agree management is hopelessly incompetent and reminds me of SYMS.

My thought was the company's diversified 451 million in TTM revenues, 97 million enterprise value,high insider ownership, multiple owned locations, one property with an assessed total value of 20.8 million and recent acquisitions ...although risky and has attracted shorts it looked like something that was worth adding to my "farm team":)

Sorry, I don't have an amount for the entire real estate portfolio. And I agree there is a risk they sell or use as collateral pieces of the real estate for future working capital needs. With management suspending the dividend, and pension contributions they must realize they must act quickly.

Good luck
John

ShadowStock said...

Sorry the Warren Buffett quote was not posted correctly

Yes it was an asset play on real estate and the coffee inventories were below fair market value. Michael Price did mention the coffee inventory during a Bloomberg interview.

Warren Buffett said ... "Whenever I read about some company undertaking a cost-cutting program, I know it's not a company that really knows what costs are about. The really good manager does not wake up in the morning and say "This is the day I'm going to cut costs", any more than he wakes up and decides to practice breathing."

So having said that i agree management is hopelessly incompetent and reminds me of SYMS.

My thought was the company's diversified 451 million in TTM revenues, 97 million enterprise value,high insider ownership, multiple owned locations, one property with an assessed total value of 20.8 million and recent acquisitions ...although risky and has attracted shorts it looked like something that was worth adding to my "farm team":)

Sorry, I don't have an amount for the entire real estate portfolio. And I agree there is a risk they sell or use as collateral pieces of the real estate for future working capital needs. With management suspending the dividend, and pension contributions they must realize they must act quickly.

Good luck
John