It only makes sense to treat operating leases as debt if it’s a liquidation play. It is overly punitive to treat leasing w/ a healthy, growing business as debt (e.g. $SFM). Leases are much more akin to an operating expense, why most people don’t see that is beyond me.https://twitter.com/LAForeverHall/status/1205984606672998401 …
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Replying to @JondanVC
Well, real estate leases can definitely be liabilities, they’re just contingent ones. But the full “present value” being equal to debt? Only very rarely. Agreed re: operating expenses. Check this out! https://www.kirkland.com/siteFiles/kirkexp/publications/2381/Document1/Friedland_Bankruptcy%20Issues%20for%20Landlords.pdf …
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Replying to @LAForeverHall
They’re clearly liabilities. I just don’t see how capitalizing them and equating them to debt helps one ascertain the underlying economic reality of a going-concern. Thanks for the link, interesting read!
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