VCG Holding Corp. Announces the Purchase of Classic Affairs Inc. in Minneapolis, Minnesota
May 31 2007 - 7:00AM
Business Wire
VCG Holding Corp. (AMEX: PTT), a nationwide owner/operator of adult
nightclubs, announced today that it has completed the purchase of
all of the stock of Classic Affairs Inc. in Minneapolis, Minnesota.
The 23,000 square foot club operates under the name Scheiks Palace
Royale, and is located in a prime downtown location, blocks away
from the Metrodome Stadium. The building was originally a federal
reserve bank in the 1920's, and retains status as a registered
historic landmark. The total purchase price for the club and its
underlying real estate was $10 million in cash. However, to
maximize its financial flexibility, VCG entered into a
sale-leaseback transaction for the real estate which generated $3
million of proceeds and reduced the company�s effective purchase
price of the club to $7 million. In 2006, the club generated
revenue of approximately $5 million and pro-forma net income
(adjusted for the sale-leaseback and taxes) of approximately $1.3
million. Troy Lowrie, CEO and Chairman of VCG, stated, �We are very
excited about this acquisition. While we paid slightly in excess of
5 times pro forma net income for the club, we believe we can
significantly increase its profitability. We intend to open the
club during the daytime, which typically increases a club�s revenue
by 15%. We also intend to open the club on Sundays. Since the club
is only two blocks away from the Metrodome, we believe it can
capitalize on the attendance at Vikings football games, Twins
baseball games, and other events at this venue. Our experience in
Denver has taught us that operating a club on a sports Sunday can
meaningfully increase a club�s profitability. The Minneapolis club
also has a top floor which we can use as a disco or for other
purposes as we have successfully done at some of our other clubs.
Finally, we intend to expand the Minneapolis club�s kitchen and
utilize other portions of the unused space. In total, the changes
we intend to make at the club are relatively easy to implement and
should generate significant increases in net income and cash flow.�
�This acquisition is highly accretive,� Mr. Lowrie continued, �and
adds what we believe is the best facility in the country that
houses an adult nightclub. In addition, this acquisition further
validates our strategy of using our extensive industry contacts to
help us identify and acquire clubs at attraction valuations. VCG is
rapidly becoming the buyer of choice to the many adult night club
owners who are interested in selling their clubs. VCG�s acquisition
pipeline remains robust and we will continue to use our disciplined
acquisition criteria to capitalize on these opportunities. 2007 has
been a busy year for VCG. We have acquired 8 clubs so far and
expect to acquire additional clubs during the remainder of the
year. We remain very comfortable with our previously announced
earnings guidance and are enthusiastic about the company�s future.�
Under the terms of the sale-leaseback mentioned above, a newly
formed limited partnership acquired the club�s real estate for $3
million and then agreed to lease the property to VCG for 20 years.
VCG will be the 1% general partner and third party investors will
be the 99% limited partners. VCG maintains first rights to buyout
the 99% limited partnership interests. Mr. Lowrie said, �The
sale-leaseback is a wonderful transaction since it enables VCG to
essentially control the club�s real estate while enabling the
company to invest its capital in future acquisitions of clubs which
will be even more accretive to shareholders.� Please visit our
website at www.vcgh.com to view pictures of this amazing building
and business. About VCG Holding Corp. VCG Holding Corp. is an owner
and operator of adult nightclubs throughout the United States. The
Company currently owns thirteen adult nightclubs and one upscale
dance lounge. The night clubs are located in Raleigh, Indianapolis,
St. Louis, Denver, Colorado Springs, and Louisville.
Forward-Looking Statements Statements contained in this press
release concerning future results, performance or expectations are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements
include statements regarding the intent, belief or current
expectations of the Company and members of its management team, as
well as assumptions on which such statements are based. All
forward-looking statements in this press release are based upon
information available to the Company on the date of this press
release. Forward-looking statements involve a number of risks and
uncertainties, and other factors, that could cause actual results,
performance or developments to differ materially from those
expressed or implied by those forward-looking statements including
the following: failure of facts to conform to necessary management
estimates and assumptions; the Company�s ability to identify and
secure suitable locations for new nightclubs on acceptable terms,
open the anticipated number of new nightclubs on time and within
budget, achieve anticipated rates of same-store sales, hire and
train additional nightclub personnel and integrate new nightclubs
into its operations; the continued implementation of the Company�s
business discipline over a large nightclub base; unexpected
increases in cost of sales or employee, pre-opening or other
expenses; the economic conditions in the new markets into which the
Company expands and possible uncertainties in the customer base in
these areas; fluctuations in quarterly operating results;
seasonality; changes in customer spending patterns; the impact of
any negative publicity or public attitudes; competitive pressures
from other national and regional nightclub chains; business
conditions, such as inflation or a recession, or other negative
effect on nightclub patterns, or some other negative effect on the
economy, in general, including (without limitation) growth in the
nightclub industry and the general economy; changes in monetary and
fiscal policies, laws and regulations; war, insurrection and/or
terrorist attacks on United States soil; and other risks identified
from time to time in the Company�s SEC reports, including the
Annual Report on Form 10-KSB for 2006, Quarterly Reports on Form
10-QSB and Current Reports on Form 8-K, registration statements,
press releases and other communications. The Company undertakes no
obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events
or changes to future operating results over time.
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