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RCI Hospitality Holdings, Inc. Message Board

  • heisenberg_blue heisenberg_blue Mar 16, 2014 9:59 PM Flag

    Question on the "terrible management" article by Seeking Alpha


    Where is he getting his info on the REIT proposal? RICK would keep 9.9% on the REIT shares? Will the other 90.1% of the shares go to new investors and current shareholders just get 9.9% of the real estate included with their RICK shares? Does any of the proceeds go to RICK shareholders, or will what little cash (after real estate debt) generated go on the REIT balance sheet?

    This is more confusing than Father's Day in Texas.

    This topic is deleted.
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    • I think he's getting it from the CC, where the 9.9% was mentioned. We had that figured out last year. That 9.9% comes from the IRS rules, as there can't be a 10%+ ownership overlap between the landlord REIT and tenant RICK. It sounds like what they want to do is this:

      * Outside investors form REIT - RICK would probably contribute some real estate for 9.9% ownership.
      * RICK sells most of its remaining real estate to REIT for cash.
      * RICK then rents the real estate back.

      Result: REIT would have the real estate; RICK would have the cash. Shareholders have zilch.
      He makes a good point in the article - RICK is just converting its mortgage obligations to rent payments due. It makes the corporate balance sheet look better (more cash/less debt), but at the end of the month, the same dollars are paid out ... and RICK no longer has the real estate; plus RICK would have taxable gain on the RE sales.

      • 3 Replies to barkingdog78
      • I think that misses the point in starting the REIT. Granted, it starts out being 100% Rick's real estate, but in time......it creates a funding vehicle to other adult clubs/businesses that apparently can't get loans from banks and such forth. Other club's owners would be very hesitant to sell real estate to RIck's since they are also a competitor, while a separate entity would not have that conflict. Rick's would have an incentive to raise rates, just as any other land owner knowing they can't transfer the license. As a REIT that doesn't manage clubs, without the owner the REIT risks losing the license. Down the road, the REIT becomes a greater percentage of other clubs.....the 9.9% investment brings in additional funds from third party real estate. If the REIT is 100% Rick's 10 years down the road, then the REIT was a horrible idea long term.

      • BTW people are starting to learn from what we post; then write their own articles. I will probably retire from this board soon ... let them figure it out!

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