BURLINGTON, ON, Jan. 21 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN)
("the Fund") today announced that, as of January 1, 2011, one new Jack
Astor's® restaurant has been added to the Royalty Pooled Restaurants
(the "Royalty Pool") from which the Fund earns distribution income. The
Fund announced details of the Initial Adjustment related to this
opening during 2010.
Effective January 1, 2011, the Royalty Pool is expected to receive an
estimated annualized net increase in restaurant Royalties of $0.3
million. This amount is based on the addition of the 6% Royalty on the
$4.3 million in estimated annual net revenue from the one new opening
in 2010. The Fund, through the SIR Royalty Limited Partnership (the
"Partnership") pays SIR Corp. ("SIR") for the net additional royalties
through the conversion of 137,190 Class B GP Units, held by SIR, into
Class A GP Units. The payment formula as set out in the license and
royalty agreement between SIR and the Partnership (as amended the
"License and Royalty Agreement") is designed to be accretive to Fund
The one Royalty Pool restaurant, which was opened on October 25, 2010, was the Jack Astor's in Boisbriand, Quebec. With the addition of this
new restaurant Royalty stream, the Fund will indirectly receive Royalty
payments from 46 restaurants effective January 1, 2011.
"The addition of our new Jack Astor's restaurant in Boisbriand, Quebec,
to the Royalty Pool will contribute to the Fund's distributable cash in
2011, and is expected to continue to help us to deliver stable and
growing levels of distribution income for our unitholders." said Peter
Fowler, Chief Executive Officer of SIR.
The Royalty Pool is adjusted in January of each year to include sales
from any new SIR restaurants that have opened on or before November 1
of the prior year, net of sales of any Royalty Pooled Restaurants that
have closed. The Fund (through the Partnership) pays SIR for the
additional Royalty stream from new restaurants, based upon a formula
set out in the License and Royalty Agreement between SIR and the
Partnership (the "License and Royalty Agreement"). The payment formula,
which is designed to be accretive to Fund unitholders, is based on the
6% Royalty from the estimated annualized revenue from the new
restaurants divided by the tax-adjusted current yield on the units of
the Fund. The accretion to Fund unitholders is achieved by discounting
the payment to SIR by 7.5%. The payment to SIR is in the form of
additional Class A GP Units of the Partnership. These units are the
economic equivalent of units of the Fund.
These transactions were approved by the Partnership on or about January
21, 2011, with effect on January 1, 2011.
2011 Initial Adjustment
The estimated annualized revenue of the one new restaurants added to the
Royalty Pool in 2011 is anticipated to be $4.3 million, translating
into an estimated addition of $0.3 million to the Royalty Pool. The
amount initially paid by the Fund, through the Partnership, to SIR for
this additional Royalty stream is $1.4 million through the conversion of 137,190 Class B GP Units into Class A
GP Units of the Partnership on a one-for-one basis. These Class A GP
Units are valued at $10.35 per Unit, representing the volume weighted
average price of the units of the Fund for the 20 trading days ending
December 22, 2010 ("Current Fund Unit Price"). The 137,190 Class A GP Units
represent 80% of the estimated Class A GP Units that SIR is estimated
to receive. The remaining amount will be issued in the Second
Incremental Adjustment based on the actual annual revenue for the new
restaurants in 2011. The date of such Second Incremental Adjustment is
January 1, 2012. The actual payment from the Partnership to SIR for the
additional Royalty stream is calculated as follows:
$0.3 million (the estimated annual addition to the Royalty Pool based on
6% of the $4.3 million in estimated revenue from the new additional
restaurants) multiplied by 92.5% (the accretive adjustment) multiplied by 80% (the Initial Adjustment) divided by Current Yield* on the Fund units of 13.33% (equal to the aggregate cash
distribution paid per Fund unit during the immediately preceding 12
calendar months of $1.38 divided by the Current Fund Unit Price of $10.35).
2011 Adjustment for Reduction
In 2010, there were no restaurant closures within the SIR portfolio.
Consequently, there is no Adjustment for reduction effective January 1,
2011 Second Incremental Adjustment
In 2009, there were no restaurant openings within the SIR portfolio.
Consequently, there is no Second Incremental Adjustment effective
January 1, 2011.
Priority Special Conversion Distribution
In 2009, there were no restaurant openings within the SIR portfolio.
Consequently, there is no Priority Special Conversion Distribution
effective January 1, 2011.
2012 Second Incremental Adjustment
Assuming the one additional new restaurant added to the Royalty Pool
effective January 1, 2011 achieves its estimated revenue for the
52-weeks ended December 31, 2011, SIR would have the right to convert
an additional 34,298 Class B GP Units to Class A GP Units effective
January 1, 2012 as the Second Incremental Adjustment for the January 1,
2011 additional new restaurants. This would increase SIR's share of the
Fund on a fully diluted basis on January 1, 2012 to 37.0% assuming no
other changes in the number of outstanding Class A GP Units or Fund
units occurred before that date. Further, again assuming the one
additional new restaurant added to the Royalty Pool effective January
1, 2011 achieves its estimated revenue for the 52-weeks ended December
31, 2011, a Conversion Distribution as of December 31, 2011 would be
declared on the 34,298 Class B GP Units that would be converted into
Class A GP Units as a result of the Second Incremental Adjustment on
January 1, 2012. Assuming the monthly distributions per Fund unit,
adjusted for the impact of the SIFT tax, remained at the current level
throughout 2011, the amount of the December 31, 2011 Conversion
Distribution would be estimated to be $47,331.
Following the: i) 2011 Initial Adjustment, ii) 2011 Adjustment for
Reduction, and iii) 2011 Second Incremental Adjustment, all effective
January 1, 2011, SIR will own, control and hold 3,106,514 Class A GP
Units, representing the equivalent of 36.7% of the units of the Fund on
a fully diluted basis. This 36.7% consists of:
2,969,324 Class A GP Units held by SIR as at January 1, 2010, and
137,190 in additional Class A GP Units received for the adjustments
described above for the 2011 Initial Adjustment minus zero for the 2010 Adjustment for Reduction plus zero for the 2010 Second Incremental Adjustment.
SIR's Class A GP Units currently represent 100% of the issued and
outstanding Class A GP Units.
Subsequent to the aforementioned exchanges, SIR owns, controls and holds
97,488,671 Class B GP Units, which are convertible in certain
circumstances (based on the addition of further new restaurants to
Royalty Pooled Restaurants) into Class A GP Units. Other than as
described herein, none are currently convertible. If converted, the
resulting Class A GP Units would, subject to the Partnership's right to
re-convert them back into Class B GP Units in certain circumstances
(based on the new restaurants' performance being below 80% of the
original expectations), also be exchangeable (without being subject to
any subordination provisions) on a one-for-one basis into units of the
Fund. The 97,488,671 Class B GP Units currently represent 100% of the issued and
outstanding Class B GP Units.
The Offeror and Peter Fowler (who beneficially owns 31,500 units of the
Fund apart from the Offeror's holdings), who are affiliated, may be
considered under applicable securities laws to be acting jointly or in
concert. This news release is not an admission of same, and the 36.7%
percentage above would be 37.1% taking into account such additional
units of the Fund. Except for the foregoing, SIR is not acting in
concert with any other person, including any of its shareholders,
directors or officers, in connection with its holdings of the Fund or
the Partnership, and thus any holdings that they may have in the Fund
are not included in this report.
The transactions noted herein took place privately.
SIR holds its interests in the Partnership for investment purposes and in connection with its operation of its
restaurant business, which produces the revenues from which the
Partnership and the Fund derive their revenues via a trade-mark license
and royalty agreement entered into in connection with the Fund's IPO.
SIR may, depending on market and other conditions, increase or decrease
its beneficial ownership control or direction over units of the Fund,
or securities of the Partnership, through market transactions, private
agreements, treasury issuances, exercise of options, convertible or
exchangeable securities or otherwise.
SIR has entered into a number of material agreements with the Fund
and/or the Partnership, which are described in the final prospectus of
the Fund dated October 1, 2004. In addition to the royalty generated by
any new SIR restaurants added to Royalty Pooled Restaurants, the
consideration paid by SIR for its Class A GP Units and Class B GP Units
was the transfer of certain trade-marks, as described in the final
prospectus of the Fund. Certain amendments to the Declaration of Trust
and other material agreements were approved at a Special Meeting of
Unitholders held on December 20, 2010. They are filed on SEDAR.
* Current Yield as defined in Amendment No. 2 to the Limited Partnership
Agreement of the Partnership dated December 20, 2010.
About SIR Corp.
SIR is a privately held Canadian corporation that owns and operates a
portfolio of 46 restaurants in Canada. SIR's concept brands include:
Jack Astor's Bar and Grill®, with 30 locations; Alice Fazooli's®, with
five locations; and Canyon Creek Chop House®, with eight locations. SIR
also operates one-of-a-kind "signature" brands in downtown Toronto,
which comprise the upscale reds®, Far Niente®/FOURTM/Petit FourTM, and the Loose Moose Tap & Grill®. All trademarks related to the
concept and signature brands noted above are used by SIR under a
license agreement with SIR Royalty Limited Partnership in consideration
for a Royalty, payable by SIR to the Partnership, equal to six percent
of the revenue of the 46 restaurants currently included in Royalty
Pooled Restaurants. For more information on SIR Corp. or the SIR
Royalty Income Fund, please visit www.sircorp.com.
About SIR Royalty Income Fund
The Fund is a trust governed by the laws of the province of Ontario that
receives distribution income from its investment in the SIR Royalty
Limited Partnership and interest income from the SIR Loan. The Fund
intends to pay distributions to unitholders on a monthly basis.
Caution concerning forward-looking statements
Certain statements in this news release may constitute "forward-looking"
statements which involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or
achievements of the Fund to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. When used in this document, such
statements are such words as "may", "will", "expect", "believe",
"plan", "anticipate", "intend", "estimate" and other similar
terminology. These statements reflect SIR Management's current
expectations regarding future events and operating performance and
speak only as of the date of this document. The Fund and SIR expressly
disclaim any obligation or undertaking to publicly release any updates
or revisions to any forward-looking statements contained herein to
reflect any change in expectations with regard thereto or any changes
in events, conditions or circumstances on which any statement is based,
except as expressly required by law.
In formulating the forward-looking statements contained herein,
Management has assumed that business and economic conditions affecting
SIR's restaurants and the Fund will continue substantially in the
ordinary course, including without limitation with respect to general
industry conditions, general levels of economic activity (including in
downtown Toronto), regulations (including those regarding employees,
food safety, tobacco and alcohol), weather, taxes, foreign exchange
rates and interest rates, that there will be no pandemics or other
material outbreaks of disease or safety issues affecting humans or
animals or food products, and that there will be no unplanned material
changes in its facilities, equipment, customer and employee relations,
or credit arrangements. These assumptions, although considered
reasonable by Management at the time of preparation, may prove to be
incorrect. In particular, in estimating the revenues for the new Jack
Astor's restaurant, added to Royalty Pooled Restaurants on January 1,
2011, Management has assumed that it will operate consistent with other
Jack Astor's restaurants. For more information concerning the Fund's
risks and uncertainties, please refer to the Fund's periodic interim
filings, and/or its March 31, 2010 Annual Information Form.
SOURCE SIR Royalty Income Fund
For further information:
|Jeff Good || || || ||Lawrence Chamberlain|
|Chief Financial Officer || || || ||Investor Relations|
|SIR Corp. || || || ||Tel: 416-815-0700 ext. 257|
|5360 South Service Road, Suite 200 || || || ||Email: firstname.lastname@example.org|
|Burlington, Ontario, Canada L7L 5L1 || || || || |