This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Activist Pushes Pantry To Consider REIT Creation

Stocks in this article: PTRY CASY SUSS GTY

NEW YORK (The Deal) -- The activist investor group that is pushing for a turnaround at convenience store operator Pantry  (PTRY - Get Report) said it believes all options should be on the table, but one member is especially keen on exploring the possibility of creating a REIT.

That member of the group, Lone Star Value Management's founder and CEO Jeffrey Eberwein, expanded on a Feb. 3 proxy statement filed by activist group Concerned Pantry Shareholders, saying by phone, "We think there's a lot of real estate value here."

Lone Star and JCP Investment Management formed Concerned Pantry Shareholders on Jan. 23 with the goal of electing new board members who would be more proactive in improving what they believe is the company's underperformance. The group wants to put forth three board nominees.

Eberwein cites Cary, N.C.-based Pantry's main competitors, Casey's General Stores  (CASY - Get Report) and Susser Holdings (SUSS), as examples of what a better-performing convenience store chains can achieve in the southeastern U.S. "[Susser and Casey's have] massively outperformed the Pantry, and they trade at much higher multiples," he asserted. "It's dramatic."

Eberwein has several initiatives in mind that he believes Pantry should pursue, but the company would need more financing firepower, so he thinks it should explore a range of options to improve its finances.

"Our team is the type where every option is on the table," he said. "Maybe someone would want to buy or combine with them."

Eberwein said he believes Pantry could use its real estate more effectively. He points to its 1,537 convenience stores that operate primarily under its Kangaroo Express brand in the southeastern U.S., to create value for shareholders and generate capital for operational improvements.

Getty Petroleum Marketing's REIT, Getty Realty (GTY) a publicly traded vehicle that holds Getty's gas station and convenience store properties, is an example of the strategy Eberwein is considering.

"Our team would look into creating a REIT to create value for shareholders," he said, explaining that an initial public offering of a trust containing Pantry's real estate assets could provide a better valuation of the company's assets. Once the IPO established a market value, Pantry could either spin the REIT off for shareholders or continue selling shares and use the proceeds to pay down debt.

Paying down debt is also high on Eberwein's to-do list.

"One knock on Pantry is that it has too much debt," Eberwein said. "We think that if they paid down debt, the company's [trading] multiple would go up."

Eberwein singled out the company's $250 million in 8.375% notes as one expensive class of debt, even though those notes are trading above par.

He also said Pantry's bank debt is pricey. "The way this company is financed is a hodgepodge," he continued. "[It has] some capital leases, some operating leases, and some expensive debt. In an ideal world, [Pantry] wouldn't have any capital leases. When a capital lease comes up for maturity, we'd retire it or replace it with cheaper debt."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,678.70 +6.10 0.03%
S&P 500 2,057.09 +5.27 0.26%
NASDAQ 4,771.7630 +13.8840 0.29%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs