Leon's Furniture ($LNF:CA)
Asset play inside a 115 year old retail business
[PSA - Good ideas are rare. And when they do occur, I get very excited to write up. I think this one is a good idea. The post will be for paid subscribers. If you are interested, feel free to DM on X for a copy. I am using this post as a way to connect with other investors! It is a bit underhanded way but this author is not above such methods to make new investor friends]
Leon’s furniture is a well run 115 year old furniture retailer, who have announced that they will be monetizing their real estate holdings. However the stock is thinly traded (<30% of outstanding shares in float) and likely why it is hard for institutions to take sizeable positions. The owners do not do analyst calls or investor days either (but do have very well written detailed annual reports).
Leon sells appliances, mattresses all across Canada through their 303 stores. In 2013, the acquired their competitor - The Brick borrowing ~$570M which was rapidly paid back over next 9 years. Over the years, they have accumulated 5.6M sq ft of retail foot print that they now plan to spin-off via a REIT ( this land is currently held at historical cost). Additionally, they have close to 300 acres of undeveloped land in prime-urban properties, of which 40 acres will be going for development. This will be a mixed-use development with 4000 houses, a new flagship store, warehouse and HQ office based in Toronto. The company is owned by Leon family (67%) stake with only 20M shares float and thinly traded.
This is pretty much the opportunity - A well run legacy retailer with a catalyst (REIT) to realize retail-land value and potential upside with further RE development. Everything below are just commentary and details.
To unpack this opportunity, there are 3 key-questions:
Is Leon’s Furniture business well-run & endurable? How much is it worth?
How much is land under Leon’s stores worth?
How much is undeveloped land worth?