Sir Royalty Income Fund SIRZF

Closure of 3 Restaurants...

[BlueJay2020]

All at Yonge and Gerrard - another of those 'favourable opportunities' to exit. One is a Scaddabush, one is a Reds, and the other a Duke's (not part of the Royalty pool).
I guess to the extent that it reduces leverage it's a good thing, although the pool is getting smaller and smaller....

No mention of anything offer-related in the press release.  And I have had no response from IR to my enquiries.  No surprise!

[babedinkleman]

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[logicandinertia]

Shrinking the pool is not great, especially in high throughput locations like this.   As unit holders, there is the adjustment (reduction in class a units) in Jan 2022 to account for this, but that is a one time adjustment, whereas thriving restaurants help to pay dividends for years to come.   If Fowler elects to rebrand and not vend in new brands to the pool, it isn't

[BlueJay2020]

The timing of this announcement is also interesting - pushing the adjustment to units back a year, as well as just 2 days before Jane's offer deadline.  Will this announcement push more people to accept Jane's offer - if so, that wouldn't seem to be good for Sir Corp. As has been said, this is a very messy situation and all kinds of levers that Sir Corp can pull.  We're

[jcw604]

This should turn out to be good. See: The COVID-19 pandemic has drastically altered SIR's operating environment and put a great deal of stress on many businesses, including SIR. SIR's landlord presented the Company with an unexpected but mutually beneficial opportunity to vacate these properties as the landlord had a unique opportunity to lease the space to another tenant for a non

[babedinkleman]

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[flamingogold]

These businesses were mandated to close, I would not be surprised to hear of additional federal funds to help bail out both parties, restuarants owners and landlords. While it is sad to see closures, it should be no surprise that these are all in the downtown core, the hardest hit areas for all cities around the globe. The royalty pool will shrink, but in the end even a small distribution 

[jcw604]

How can you not know about the unpaid rents? They are all in the financial report? Even if they managed to negotiate with their landlord to defer their rent, it will still show up as liability in their report. If the have a positive ebitda, that means that they are not really losing money, but their older loan interests and the marking down of assets value is troubling them. They probably have

[Robsopinion]

The rents in downtown locations are for sure over 100k per month.  I have also reached out to contacts at Sir. No response from the exec level. 

[babedinkleman]

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[tkirk62]

Does nobody check the financial statements around here? Rent expense for SIR Corp is $16 millionish a year, or $1.4 millionish a month. Divide that by 54 locations and you have the average rent expense as about $26,000 per location. Sure the downtown Toronto locations will be higher than that, but of course they aren't $100,000/mth. 

[babedinkleman]

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[tkirk62]

It actually is fairly clear how much rent SIR has paid. When looking at SIR Corp's financias (not Sir Royalty's), just Ctrl f for the term "cash outflow" to see how much SIR has been paying for its lease expenses. You'll see the deferred rent is not a huge amount. 

[jcw604]

Deferred rent are liability. They must report it in their financial statement, until they are pardon, or in this case their lease is being buy back by the landlord.

[jcw604]

They probably just lump them all to their liability, if you don't see a separate category for it.

[logicandinertia]

Agreed.  And you can see the actual rent paid thru the cash flow statement from sir Corp in financing activities.   They paid $4.4 million last quarter, and adjustments for lease abatements is just $65k in the notes.   to qualify for the govt rent subsidy, they have to pay the rent .   Which gets to the point that not being franchised has been an enormous disadvantage for

[logicandinertia]

So if I wasn't clear, it looks like much of the rent is being paid by sir corp. 

[Robsopinion]

I'm not sure if anyone has experience with commercial leases, and more specifically restaurant leases, but my numbers are not a random guess.  How were they profitable? Volume. Those front street locations simply did massive volume.  not looking for an argument, just adding info from my personal experience. 

[tkirk62]

The lease numbers are reported. I'm not saying that you were guessing, but your estimate was way off. Like I said, SIR pays $1.4 million a month in rent for 54 restaurants. Even if we assumed $0 rent for every restaurant outside of Toronto, SIR's Toronto (19) locations would only be paying on average $73,700/month in rent. So your estimate that the downtown locations are "for sure