"Adjusted Cash Flow/ Adjusted Enterprise Value = 37.12% ?!Adjusted Operations Cash Flow yield as % of Adjusted Enterprise Value = 37%?!
This is further to my previous posts concerning sale and lease back of SXP's 2 owned real estate properties.
Analysis:
Assume the Etobicoke and Lasalle real estate properties are worth just $52m, not the possible $56m noted in my post of early this morning (ie just enough to pay down the LT and ST debt of $52m).
Also assume after sale, the 2 properties are leased back at an annual rent equal to annual interest paid, which seems to be reasonable, given proximity of real estate cap rates and interest rates.
Thus, annualized Q3 loan interest costs will be eliminated, but they will offset by additional rent.
So assume the cash flow from operations remains the same – Q3 was $6,694,995 – annualized that’s $26,779,980.
Using 26,714,067 shares per Q3 MDA and SP of $2.70, Market Cap is $72,127,980.
No debt, so Adjusted Enterprise Value is the same $72,127,980.
Adjusted CF / Adjusted Enterprise value = $26,779,980/ $72,127,980 = 37.12%
Put another way, that is about 2.7 times.
Note: One assumption is that in a Private Equity or Strategic Buyer leveraged buyout, interest charges on new debt financing would offset the income tax arising from the sale and lease back transaction. There are some other implied assumptions as well.