"We own all the real estate that the company's clubs are located on, except the new location, which we leased," said Eric Langan, president and CEO. The deal for the new location had been completed once all licenses and permits had been issued, although Rick's management has been operating the club since May, pending completion of the details.
The purchase price for the business calls for the issuance of 160,000 restricted shares of Rick's common stock to WMF Investments Inc. and a 10-year lease agreement that grants Rick's an additional 10-year option for the property and the building. Langan, president and CEO, said "we have been able to operate the new location at a profit during the latest fiscal quarter and anticipate continued earnings from this location. With the new location on Houston's south side, we will have greater leverage of our advertising dollars."
Langan told GlobeSt.com "we are currently looking to expand in several new cities and we always try to purchase the real estate or at least get an option to purchase it." Ft. Worth is the current target. Rick's has entered into a three-year lease with an option to purchase, provided all permits and licenses are issued. A hearing on the permit is set for Dec. 4.
"We try to buy our locations based on high visibility and easy access from major freeways," Langan says "we must also meet strict zoning requirements. I believe that meeting these requirements increases the value of our real estate by making it easily sellable to other adult entertainment operators should we ever decide to not use the location ourselves."
Lanagan says all of Rick's real estate "is booked at the purchase price when we purchased it and then depreciated." Most of it, he says, had been bought in the early 1990s and is now worth far more then when it had been purchased.
The first "Rick's Cabaret" had opened in Houston in 1983, with corporation going public in 1995. Rick's Cabaret has three locations in Houston and one in Minneapolis. Rick's also owns and operates two XTC Cabarets in San Antonio and Austin, through a 93%-owned subsidiary, Taurus Entertainment Cos. Inc.
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