Boston Pizza Income Fund(Symbol-BPF.UN)

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iluvnascar
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Post by iluvnascar »

Don't forget that the 30% tax on the restauarant trusts is apparently going to be 26% by 2011 because of cuts in the corporate tax. Also remember that the payouts in 2011 will be "eligible dividends" meaning that the lower yield (because of corporate tax) will be partially offset by dividend tax credits.
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Post by twocentsworth »

Been following Boston Pizza since a nice article on their Quebec invasion appeared in the Globe & Mail back in November. (Think the share price was around 14 bucks at the time.) At under $11.40, decided to pick a few pieces up for takeout (yeah, I was waiting for sub-$11.20, too, but enough is enough).

Why do I like it...other than the generous 12% yield?
Because these guys seem to be doing everything right:
1) For starters, they got rid of Howie Mandel and Louie the Sasquatch
2) They're Canada's #1 Casual Dining Brand
3) Their SSSG is great -- although it might be affected by a recession
4) Even so they rake in the 4% fee off the gross top, not the net profits
5) They have plans to spread all over the planet -- and if their tricky invasion of Quebec is any example to go by, they'll likely succeed (folks said they'd never crack Quebec but they're on track to add 50 restaurants by 2010...for a Canadian grand total of more than 300 restaurants)
6) They dumped trans fat from the menu and have a load of Health Check items to chow down on now i.e. it ain't all greasy pizza
7) They have a Team Incentive Plan System in place to help grow same store sales (compensation for results)
8 ) Boston Pizza is on the Canadian top 10 corporate culture list (3rd place after Westjet and Four Seasons Hotels)
9) They are aligning themselves with communities (and getting publicitiy) via sports groups such as the Boston Pizza Cup (Alberta curling championship), ditto Brantford ON Minor Hockey League Assoc, Burlington Women's Soccer, baseball, Boston Pizza WHL Player of the Week etc
10) Mad cow disease is not as big an issue as with the KEG

Anyone think of anything else?

As Nas says, even after the tax hit, BPF should still be steaming along.

Bon appetit!

[If you're interested in the slick way they invaded Quebec, Google "Mark Pacinda: How do you say 'Boston Pizza' in French?"]
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Post by Nortel'd »

twocentsworth wrote: (yeah, I was waiting for sub-$11.20, too, but enough is enough).
I to was waiting for exactly $11.20 and yes enough is enough. I just picked up half of my 1000 for $11.27. With the Ex-dividend date of July 18, I figure I'll be getting a $0.115 distribution for each one July 31 to cushion my impatience.

Warning...Now that I have picked up a slice, the price will have to drop so that my record stays intact.
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twocentsworth
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Post by twocentsworth »

Let it drop...I've kept some cash back for a few more slices if the opportunity arises. :)

BTW The Quebec Franchise Council named Boston Pizza Quebec's Franchisor of the Year in 2007. Not bad for a Western based company. Two other good articles for background on BP (Google to find 'em): "A bigger slice of the pie" by Robert Colman and "Building the Perfect Franchise" by Eve Lazarus.
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Post by twocentsworth »

Or let it rise?? Now up to $11.94!! (Kind of like rising pizza dough :D )
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Post by Nortel'd »

twocentsworth wrote:Or let it rise?? Now up to $11.94!! (Kind of like rising pizza dough :D )
Ya but ... better check the underside of the dough for dirt. At 10:45 I found it on the floor at $11.04. :wink:
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Post by twocentsworth »

I'll wait until it cracks the $11.00 barrier before getting interested again. But that $11.04 this morning was a good catch.
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Post by Rickdl »

I got some at 11.15 this morning, and then was happily surprised to see it rise up to 11.94 later in the afternoon..Not sure why it swung so far down and then back up. I also scooped up some more ylo.un at 8.50

I seem to be fairly heavy in trust funds in my RRSP now..outside core holding in XIC/XSP/XIN that is.... But until 2011 seems like this is the best place to have trust funds since you really get the full advantage on the no-tax stuff.
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Post by twocentsworth »

Nortel'd wrote:
Every time we go, the place is full of contented and :D people.
Did a field visit today and found the food fine, the service exceptional and the place packed with happy folks. I even watched one of the waitresses take back a standard salad to customize it exactly to the customer's wishes. Can't beat that!
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Post by Nortel'd »

Decided to spend rather than save/hoard my monthly BPF.UN distribution.

With my retired hubby on a holiday somewhere in New Brunswick with the dog, I decided to treat my manager from work to lunch at Boston Pizza.

The place was more than ¾ full of people and in a little over an hour and a half we stuffed ourselves to over-flow for $45 including the tip.

BTW, I still have money left over to pay for groceries, heating bills and medicine.
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pitz
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Post by pitz »

Boston Pizza Royalties Income Fund Announces Intention to Complete Normal Course Issuer Bid and Additional Credit Facility

To fund purchases under the Normal Course Issuer Bid, a subsidiary of the Fund, Boston Pizza Royalties Limited Partnership (the "Partnership"), has entered into an agreement with a Canadian Chartered Bank (the "Lender") whereby the Lender will provide to the Partnership a credit facility in the amount of up to $20 million available in loans at variable and fixed interest rates, as selected by the Partnership (the "Credit Facilities").
So they're going to use some leverage to juice the distribution here and prepare for the conversion to a corporation from an income trust.

Good? Bad? I think its positive...but just keep in mind that future dividend increases might very well be the result of leverage, and not of improved business performance.
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Post by scomac »

pitz wrote:
So they're going to use some leverage to juice the distribution here and prepare for the conversion to a corporation from an income trust.

Good? Bad?
Idiots!! Let's replace equity with debt to make the numbers look better.

This is not the sort of business that can survive the mess we're in "more or less in tact".
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Rickdl
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Post by Rickdl »

scomac wrote:Idiots!! Let's replace equity with debt to make the numbers look better.

This is not the sort of business that can survive the mess we're in "more or less in tact".
Wait.. it doesn't say what interest rate the debt would be payable at. Since their distribution's at around 13% right now, wouldn't this only be a bad thing if the interest rate they're paying is higher than the distribution rate they'd be saving by buying back shares?

i.e. if they take on debt that is say payable at 10% interest to buy back shares that has a 13% distribution payable, isn't that a good thing? They'd be net-saving money each month then? They'd have more cash each month to which they could use to retire that debt then?
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scomac
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Post by scomac »

Rickdl wrote:Wait.. it doesn't say what interest rate the debt would be payable at. Since their distribution's at around 13% right now, wouldn't this only be a bad thing if the interest rate they're paying is higher than the distribution rate they'd be saving by buying back shares?

i.e. if they take on debt that is say payable at 10% interest to buy back shares that has a 13% distribution payable, isn't that a good thing? They'd be net-saving money each month then? They'd have more cash each month to which they could use to retire that debt then?
Oh, I'm sure it all looks perfectly logical on paper. A helluva deal I'd wager, but that assumes everything comes to pass the way they plan. Is that a bet that you want to be part of when we're entering into a recessionary period? Myself, I'm not interested. I don't know what the interest rate is for the duration of the loan. I don't know how this pending economic environment is going to affect revenues, both from same stores and expansion. So, I have an unknown on the income side and an unknown on the expense side. What have I gained from assuming this risk? Not much. An artificially boosted distribution. Business didn't improve or grow, it's simply window dressing. :evil:
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pitz
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Post by pitz »

Rickdl wrote:Wait.. it doesn't say what interest rate the debt would be payable at. Since their distribution's at around 13% right now, wouldn't this only be a bad thing if the interest rate they're paying is higher than the distribution rate they'd be saving by buying back shares?
Well one way of thinking about this change is that it is forcing people into leverage. People who may not want leverage.

My margin account charges 4% interest right now. Will BPF.UN be able to obtain a better rate? That's the question.

$20 million in debt isn't even a years worth of distributions, so its not a huge amount of leverage. But is it the role of management to introduce the additional complexity of the debt markets, or not? Will this leverage lead to a slippery slope where additional leverage is piled on at later dates? If there's a food scare in Canada, ie: of the nature that happened at Jack-in-the-Box in the United States a few years ago with E.coli, will this trust experience cashflow that is insufficient to cover its debt payments, thus meaning a fire-sale of the company?

i.e. if they take on debt that is say payable at 10% interest to buy back shares that has a 13% distribution payable, isn't that a good thing? They'd be net-saving money each month then? They'd have more cash each month to which they could use to retire that debt then?
Theoretically it makes sense, but where's the harm in letting individual investors make those leverage decisions for themselves, based on their own risk tolerance? That's my philosophical 'issue' with companies piling on leverage. I think that an investor can borrow less expensively against a diversified portfolio of assets, than an individual trust can borrow against a single asset.
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Post by brad911 »

scomac wrote:I don't know what the interest rate is for the duration of the loan.
I don't need to know. I sold it Monday at a loss (not including distributions) and will use the tax-loss against some hefty CG's in that portfolio. I'm not interested in debt in this environment and I'll revisit the trust once the lending environment improves or more specific details are released.
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scomac
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Post by scomac »

brad911 wrote:I sold it Monday at a loss (not including distributions)
I'm out now too! :x
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Post by parvus »

pitz wrote:My margin account charges 4% interest right now.
So is the gapping out of TED spreads affecting your LIBOR margin rate?
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Post by pitz »

parvus wrote:
pitz wrote:My margin account charges 4% interest right now.
So is the gapping out of TED spreads affecting your LIBOR margin rate?
No. Not at all. My USD$ borrowing is based on Fed Funds, and not LIBOR. And the Canadian market has not been subject to the same stresses.

I'm not sure that LIBOR really is a good indicator of domestic (ie: USA) borrowing conditions, since its an offshore measurement of the cost of funding to institutions that do not have access to the discount window. Since every bank in the US can take assets to the discount window, and since the Fed routinely defends its policy rates through secured lending to domestic financial institutions, much of the hysteria over TED spreads is rather illogical and not reflective of the true domestic funding market.
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Post by Pobre »

I don't know what the interest rate is for the duration of the loan.
From BPF.UN
The interest rate applicable for the NCIB credit facility is currently floating at bank prime plus 50 basis points. We do have the option to lock in a fixed rate at any time.
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Post by pitz »

Pobre wrote:
I don't know what the interest rate is for the duration of the loan.
From BPF.UN
The interest rate applicable for the NCIB credit facility is currently floating at bank prime plus 50 basis points. We do have the option to lock in a fixed rate at any time.
As I suspected, not even competitive. Any joe can borrow on a margin account for Prime or less, so why would anyone want the more expensive leverage of this NCIB credit facility?
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Post by adrian2 »

pitz wrote:Any joe can borrow on a margin account for Prime or less
That's only if you want to deal with Interactive Brokers. Not everybody is comfortable with their level of service (e.g. completely screwed-up tax info etc).
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Post by pitz »

adrian2 wrote:
pitz wrote:Any joe can borrow on a margin account for Prime or less
That's only if you want to deal with Interactive Brokers. Not everybody is comfortable with their level of service (e.g. completely screwed-up tax info etc).
Don't the major bank-affiliated brokers offer Prime as a posted rate for margin? Aren't posted rates at banks usually discounted if you talk nicely with a banker or account manager?
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Post by adrian2 »

pitz wrote:Don't the major bank-affiliated brokers offer Prime as a posted rate for margin?
Nope - prime is usually given for HELOC's.
My President's account at TDW has prime for margin when borrowing CAD 100k or more and P+0.5% for USD 100k and above.
pitz wrote:Aren't posted rates at banks usually discounted if you talk nicely with a banker or account manager?
I've heard of very few cases of HELOC's under prime and none for margin accounts.
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Post by pitz »

adrian2, ever asked for a lower rate?

Seems to me that its somewhat bizarre that they'd charge more to borrow against highly liquid collateral (ie: securities), than they would against a house.
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