Boston Pizza Income Fund(Symbol-BPF.UN)

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brad911
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Post by brad911 »

From the margin article in today's G&M via Rob Carrick:

"TD, for example, charges the prime rate plus a markup of 1 per cent, with better deals available for top customers But the potential for borrowed money - that's leverage in financial lingo - to magnify gains can clearly be seen."

I have never used margin in my TDW accounts, but have in my IB
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Post by adrian2 »

pitz wrote:adrian2, ever asked for a lower rate?
I did ask and got a lower than posted rate for my former mortgage. For margin, AFAIK, TD Waterhouse rates are non-negotiable. As I pointed upthread, I do get a lower rate by qualifying for President's Account. Did you try asking for a lower rate at Interactive Brokers?
pitz wrote: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.
For securities, there is a potential to go to zero, or to lose more than the initial outlay with options and shorts. The house doesn't go to zero. Anyway, I don't make the rules, we get to live by them. You wrote: "Any joe can borrow on a margin account for Prime or less" and I just corrected you that's not the case, outside IB.
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Post by pitz »

adrian2 wrote:
pitz wrote:adrian2, ever asked for a lower rate?
I did ask and got a lower than posted rate for my former mortgage. For margin, AFAIK, TD Waterhouse rates are non-negotiable. As I pointed upthread, I do get a lower rate by qualifying for President's Account. Did you try asking for a lower rate at Interactive Brokers?
No. But then again, IB's rate is industry-leading. The only other lender that even comes close is Fidelity, and you have to borrow at least US$500k to qualify for that rate, which is basically identical to that of IB.

As for TD being 'non-negotiable', if you don't try, you'll never know for certain :).
For securities, there is a potential to go to zero, or to lose more than the initial outlay with options and shorts. The house doesn't go to zero.
Well, meth labs, grow ops, etc. can make that happen. On a mortgage, the lender typically can't even seize collateral unless there's been an actual default. So even if the bank knows about a meth lab.

Whereas with margin lending, the lender can (and often does) decide on a whim to stop lending against a stock. Its happened with Nortel for most of this decade. The lender takes possession of all of the income from the securities and applies such income against the outstanding debt. There should be no doubt that if mortgage and HELOC securitization dissappeared, that margin loans against securities would be less expensive.
Anyway, I don't make the rules, we get to live by them. You wrote: "Any joe can borrow on a margin account for Prime or less" and I just corrected you that's not the case, outside IB.
Well any joe with a President's Account can borrow at Prime at TD :). And we still haven't resolved the issue of negotiating better than posted rates, something that seems quite routine for mortgages -- so why not margin loans?
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Post by adrian2 »

pitz wrote:But then again, IB's rate is industry-leading.
Industry leading also in cheap commissions and inaccurate tax info? No, thanks, I'm not that cheap.
pitz wrote:Well any joe with a President's Account can borrow at Prime at TD :).
FYI, to qualify for a President's Account you have to be more than an ordinary Joe. Also, prime is only for C$ borrowings of at least $100k - a bit more than what an ordinary Joe would borrow.

You wrote: "any Joe can borrow on a margin account for Prime or less". For the third time, that is not possible, outside IB.
pitz wrote:And we still haven't resolved the issue of negotiating better than posted rates, something that seems quite routine for mortgages -- so why not margin loans?
Why is the sky blue? Once again, big-bank discount brokerages margin rates are, AFAIK, non-negotiable. If you know better, by all means post anecdotes. If you haven't heard of anybody, it might be time to concede.
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Post by pitz »

adrian2 wrote: You wrote: "any Joe can borrow on a margin account for Prime or less". For the third time, that is not possible, outside IB.
Before I decided to go with IB, I had arranged a secured loan from TD Bank (not TD WH, but with an actual in-branch bank), pledging the Shoppers Drug Mart stock I got at the IPO, for a Prime loan. The amount then was well under $100k.

Being cheap as I am, I backed out when TD wanted to hit me with a $250 in legal fees -- and ended up just moving most of my stuff to IB. Yes the tax stuff is dissappointing, but T-slips aren't guaranteed to be accurate from TD either, so it is incumbent on a taxpayer to double-check anyways.

What I find peculiar is that you have no problem asking your TD banker for a discount rate off the posted rate on a mortgage -- but, correct me if I am wrong, you've never asked for a discount off the posted margin rates at TD WH.

Why is that? TD WH clearly has competition, they have no problem competing on mortgages. Rely on anecdotes all you want, but you could be saving some serious money if you asked them to give you a more competitive rate. Guys do it on GICs all the time too -- no shame in trying to drive the best deal for yourself if its not initially offered to you.
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Post by parvus »

pitz wrote:
adrian2 wrote:
For securities, there is a potential to go to zero, or to lose more than the initial outlay with options and shorts. The house doesn't go to zero.
Well, meth labs, grow ops, etc. can make that happen. On a mortgage, the lender typically can't even seize collateral unless there's been an actual default. So even if the bank knows about a meth lab.
Aren't you ignoring the land value upon which such meth labs and grow ops are situated?
Whereas with margin lending, the lender can (and often does) decide on a whim to stop lending against a stock. Its happened with Nortel for most of this decade. The lender takes possession of all of the income from the securities and applies such income against the outstanding debt. There should be no doubt that if mortgage and HELOC securitization dissappeared, that margin loans against securities would be less expensive.
Are mortgages more risky than the market-traded companies (available to purchase on margin) that make them?

I'm not trying to stir the pot here, Pitz, but you've long advocated a tax-advantageous margin strategy. Are your accounts being marked to model, or marked to market these days? Just curious about how your srategy is holding up.
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adrian2
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Post by adrian2 »

pitz wrote:Before I decided to go with IB, I had arranged a secured loan from TD Bank (not TD WH, but with an actual in-branch bank), pledging the Shoppers Drug Mart stock I got at the IPO, for a Prime loan. The amount then was well under $100k.
Maybe you are/were more creditworthy than an ordinary Joe.
pitz wrote:Being cheap as I am, I backed out when TD wanted to hit me with a $250 in legal fees
So even for you, it wasn't prime or less, it was prime + $250 legal fees.
pitz wrote:What I find peculiar is that you have no problem asking your TD banker for a discount rate off the posted rate on a mortgage -- but, correct me if I am wrong, you've never asked for a discount off the posted margin rates at TD WH.
Mortgage rates are negotiable at major banks; margin rates at banks' discount brokerages are not, AFAIK.
ING Direct's mortgage rates are also non-negotiable.

You could also go to Loblaws and ask for a special price on groceries because you give them a lot of business, you could be saving some serious money, good luck with that.

In any case, for the 4th time, your statement was about an ordinary Joe borrowing on margin at prime or less. Is it that hard to admit that's not the case outside IB? That was my point all along.
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Post by pitz »

parvus wrote:Aren't you ignoring the land value upon which such meth labs and grow ops are situated?
In an extreme case, the environmental liability of cleaning up a defunct meth lab (or oil spill) is greater than the value of the land.

On CBC Radio a few months back, there was a news article where in Dartmouth, NS, a problem had emerged where thieves absconding with the copper tubing of outdoor heating oil tanks, leaving, in the case of an appartment block, hundreds of gallons of heating oil to leak onto the ground.

The building had to be demolished to access the soil, and the cost of the cleanup was easily a multiple of the land's value.

I know we're severely off-topic here, but contaminated land is often worth *less* than zero.

Are mortgages more risky than the market-traded companies (available to purchase on margin) that make them?
Depends upon what's on the books of the lender. You can certainly make the argument that a house is what it is -- a house, whereas, there is a significant amount of uncertainty as to the collateral of a stock.
I'm not trying to stir the pot here, Pitz, but you've long advocated a tax-advantageous margin strategy. Are your accounts being marked to model, or marked to market these days?
Market. And yes, they've seen some stress, but the low stock prices has both reduced the cost of dividend re-investment, as well as the cost of share buybacks within the firms themselves, which should result in a higher ROE over the long term. Especially with the resource firms, shorters are resource firms' best friends right now because truckloads of stock is being bought back on the cheap by firms that are generating oodles of cash. Even if the shorters aren't directly shorting resource stocks, if they are shorting bank stocks, they are reducing the ability of banks to finance projects that compete with existing commodities-producing infrastructure, and the ability of banks to finance hedge funds that would take long positions in commodity equities.

Long-term investors should be very pleased with the current market conditions. I know, I certainly am. And the destruction of the financial sector is also a very good thing for long-term investors as well. Most Canadian investors with high exposure to commodity stocks really should owe short sellers a debt of gratitude.
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Post by adrian2 »

pitz wrote:What I find peculiar is that you have no problem asking your TD banker for a discount rate off the posted rate on a mortgage -- but, correct me if I am wrong, you've never asked for a discount off the posted margin rates at TD WH.

Why is that? TD WH clearly has competition, they have no problem competing on mortgages. Rely on anecdotes all you want, but you could be saving some serious money if you asked them to give you a more competitive rate. Guys do it on GICs all the time too -- no shame in trying to drive the best deal for yourself if its not initially offered to you.
One more comment:
FYI, I have a President's Account and do borrow currently more than C$100k on margin; thus I pay prime, so I do have the best deal for myself initially offered to me.

But thanks for caring about my financial well-being.
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Post by pitz »

adrian2 wrote:But thanks for caring about my financial well-being.
I see the point you're trying to make, and perhaps, it is a little more difficult than merely fogging a mirror to get a Prime (or less) margin loan from a Canadian broker.

..but back to the topic of this trust, a Prime + 50bp loan inside the trust is essentially robbing me of 125bp/annum of return, for the same overall risk taken. I won't sell the trust, unless it gets a good bounce (back to $15 perhaps), then such a time probably would be as good as any to unload.
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Post by pitz »

Results seem to remain good. Not even anything resembling a blip in Same Store Sales, or SSSG in the past year, despite all of the stuff happening in the Canadian economy. A complete divergence from what is happening south of the border with similar casual dining outfits.

The normal-course issuer bid looks amazing now. When it was announced, the stock seemed a little high. They were able to complete the entirety of it for well under $9/unit, and interest rates dropped dramatically. The credit facility was good for $20M, and they only drew a fraction of that, so they could easily do another one if the units remain so depressed in price.

I'm impressed. This is the only trust (that's not a BGI/Vanguard ETF) that I own. My only dissappointment is that the distributions have not risen as fast as menu prices, making it an imperfect hedge.
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Post by Spidey »

I bought some units of this during the crash and have been happy with the performance and cash flow. One peculiar thing I've noticed lately is that the units often seem to move in the opposite direction of the market. Often the only gainer on my stock list when the market is down and the only decliner when the market is up. Doesn't bother me but I'm just scratching my head with that one - anyone know why that would be?
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Post by AltaRed »

Spidey wrote:Doesn't bother me but I'm just scratching my head with that one - anyone know why that would be?
Movement between sectors as a result of program trading maybe?
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Boston Pizza Income Fund (Symbol-BPF.UN)

Post by grant »

Hi, I'd like to open the discussion on BPF.UN. What are people's opinions of it as an investment? It closed friday at $11.38 and pays a $0.115/mo distribution.

I have my own ideas but as a new member I'll let others go first.
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Re: Boston Pizza Income Fund (Symbol-BPF.UN)

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Re: Boston Pizza Income Fund (Symbol-BPF.UN)

Post by grant »

my fault, sorry, my search didn't show up that topic for whatever reason. I apologize.
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Post by grant »

twocentsworth wrote:3) Their SSSG is great -- although it might be affected by a recession
[..]
5) They have plans to spread all over the planet -- [..]
Hi, i wanted to clarify some things from my own research:

1) as you've seen SSSG *was* great for many years in a row which was a mixed blessing, as it gave the stores further to fall when people cut back on discretionary spending.
2) BP's expansion plans are not really a positive for fundholders. Every new restaurant gives BPI warrants that dilute the pool. In fact it can hurt current holders. Imagine:
- a new restaurant opens and does $3m in sales (like pitt meadows did) ... BPI gets $3m worth of warrants.
- BPI smells opportunity, so they sell a new location 5km away in Maple Ridge. (don't think they won't, they're willing to go right up against the 1mile protected radius)
- The new store opens up and does $2m in sales... but it also steals business from the old store, which drops to $2m in sales
- BPI gets $2m worth of warrants for the new store opening
- Net result: BPI's got $5m in warrants even though the 2 stores it opened only do combined $4m in sales.
3) BPF only gives royalties from canadian restaurants. so their (so far difficult) plans to grow the USA don't affect investors even if there wasn't the dilution issue.
As Nas says, even after the tax hit, BPF should still be steaming along.
BPF has communicated pretty clearly that distributions will be cut to match the tax increase. My calculations indicate they will put it at 8.33 or 8.5 c/mo. Maybe 9c if there is amazing SSSG in the next year.

It's true that after tax it will be nearly a wash for canadian investors, there's lots of investors who don't benefit from dividend eligibility, or don't understand what that means, so it's my worry there will be (like with most converted trusts) a drop in price as soon as conversion is announced.
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Re: Re:

Post by pitz »

grant wrote:
As Nas says, even after the tax hit, BPF should still be steaming along.
BPF has communicated pretty clearly that distributions will be cut to match the tax increase. My calculations indicate they will put it at 8.33 or 8.5 c/mo. Maybe 9c if there is amazing SSSG in the next year.
11.5 cents was a pre-tax dividend, prior to the share buybacks, which have taken ~20% of the shares off the market, cumulatively. Holding the SSSG neutral (which isn't the case), the distribution is across 20% less units, hence, 14.4 cents/unit/month.

Now, put a 32% combined tax rate, and, of course, amortized capital is not taxed, and that only takes the distribution down to 10 cents/unit after-tax.

Even throwing on negative SSSG, and you're only down to 9.5 cents/unit, at worse. At some point, they'll have to repay the loans used to buy the units, but there's no reason why they probably can't be rolled indefinitely considering the very low debt ratio inherent in this trust.

It's true that after tax it will be nearly a wash for canadian investors, there's lots of investors who don't benefit from dividend eligibility, or don't understand what that means, so it's my worry there will be (like with most converted trusts) a drop in price as soon as conversion is announced.
That event already happened, hence, we're at 11 and change, not the $18 of a few years ago. I do agree that the price is being suppressed by the uncertainty concerning their future plans, but similar concerns exist across the entire spectra of businesses these days.
BPF only gives royalties from canadian restaurants. so their (so far difficult) plans to grow the USA don't affect investors even if there wasn't the dilution issue.
Trying to grow in the USA, IMHO, would be a liability to everyone involved. There are enough TGI Fridays, Cheesecake Factories, Applebees, etc., etc. there.
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Re: Boston Pizza Income Fund (Symbol-BPF.UN)

Post by augustabound »

grant wrote:my fault, sorry, my search didn't show up that topic for whatever reason. I apologize.
Because someone named the other thread, "Boston Fudge". :wink:
[I have renamed the "Boston Fudge" thread "Boston Pizza Income Fund" and merged into it the posts from Grant's thread (which was properly named). Please continue your discussion. It's been a slice! Moderator M]
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Re: Re:

Post by grant »

pitz wrote:11.5 cents was a pre-tax dividend, prior to the share buybacks, which have taken ~20% of the shares off the market, cumulatively. Holding the SSSG neutral (which isn't the case), the distribution is across 20% less units, hence, 14.4 cents/unit/month.
Sorry Pitz but I think you misunderstand how the buybacks have/will affect(ed) the distributions. Saying that a 2 x 10% buybacks will automatically results in a 25% distribution increase is oversimplifying things to the point of missing essential details.

There are 3 main issues here:
1) The buybacks are not actually 20% of the units
2) Unit cancellations will directly affect EPU (earnings per unit), but distributions only indirectly
3) Most of the buyback is already baked into EPU

buybacks are not actually 20% of the units

At the start of 2008 there were approx. 1,7836,600 diluted units. (close estimate based on their feb 2008 bought deal announcement, as i cannot access their 2007 annual report). Diluted units include: Issued and outstanding units, as well as entitlements. EPU is directly dependent on the diluted units, because the entitlements result in an expense that reduces earnings.

The 2 buybacks were for: 1,336,154 + 1,201,783, a total of 2,537,937. That means only 14.2% of the diluted units could possibly cancelled.

So although it's true that 19% of the float was authorized to be repurchased (10% x 100% + 10% x 90%), that is not the relevant figure for determining its effect on accretive earnings.

how buybacks affect the EPU

It's true that a 14.2% reduction in outstanding units would result in a 16.5% increase in EPU. But distributions are arbitrarily set to be CLOSE to the EPU, not to match it exactly. I.e., in the last Q the diluted EPU was 0.338, but the fund made 0.345 in distributions. They are currently distributing more than they earn. EPU would have to rise 2.1% for them to even be break even. So if EPU rose 16.5%, do you think they would raise distributions by exactly 16.5%, and remain in a 2.1% deficit situation? Not necessarily. They might raise distributions 14.4% (so there is no deficit), or maybe only 13% so they have a 1.4% cushion to repay loans & prepare against future declines.

Effects of most the buybacks are already reflected in the financials

Your comment suggests you think think there will be a sudden 20% drop in the # of the units outstanding, and therefore, a corresponding jump in EPU. This will not happen.

As with any typical NCIB program, the units are repurchased over a long period of time, not in 1 big block. The # of outstanding units will change from day to day as they are repurchased & cancelled. Correspondingly, the number of units that MAY be repurchased for cancellation diminishes on a daily basis. So to understand the potential accretive earnings from a NCIB first requires a bit of math to determine how many units could possibly still be cancelled. Skip the italicized parts to go right to the answer:

- The first buyback was announced on Sep 2008, and was completed on Feb 2009. At the completion of the buyback they said they had reduced the outstanding units from 15,696,168 -> 14,360,014. (these figures are all un-diluted) So this first NCIB is already reflected in all financial results from Q1'09 onwards.

- The 2nd buyback was announced on Sep 09 and will expire in Sep 10. At the start of the buyback they announced 14,360,014 units were outstanding, and up to 1,201,783 could be repurchased.

- In Feb 2010 a bought deal was announced, which would increase the # of units by 1,350,000.

- Assuming the NCIB is fully completed, the resulting # of units at the end of the 2nd NCIB (Sep 2010) will be: 14,360,014 - 1,201,783 + 1,350,000 = 14,508,231.

(Unfortuantely the latest (Q1-2010) report does not tell us how many non-diluted units were outstanding. So to figure that out we have to do more math to guess:)

- We know from the annual report that 568,370 units have been acquired. 14,360,014 (sept 2009) - 568,370 (repurchased) + 1,350,000 (bought deal) = 15,141,644 on Jan 1st 2010.

- The number of units that can be repurchased as of Jan 1, 2010 is 1,201,783 - 568,370 = 633,413.

- The units outstanding as of May 10, 2010 is 14,805,744. That implies that purchases for the first 4 months have been 15,141,644 (jan total) - 14,805,744 (may total) =335,900

- The Q1 report accounts for the first 3 of those 4 months, which means repurchases up to that point were probably about 335,900 x (3/4) = 251,925

- Thus the total units outstanding as of Q1 report was 15,141,644 (Jan 2010) - 251,925 (1st 3 months buyback) = 14,889,719

- The fully diluted units as of Q1 report was 17,319,185 (may 10 2010 total) + 335,900-251,925 (amount of april's buyback) = 17,907,010

- Conversely, the remainder of the NCIB as of Mar 31, 2010 would be 14,889,719 (march total) - 14,508,231 (completed NCIB) = 381,488

- Thus, the # of diluted units will reduce from 17,907,010 - 381,488 to 17,525,522, or a decrease of 2.1%


What's that mean?

Once NCIB is complete you can expect the EPU to increase only 2.1% from the Q1 report, assuming flat SSSG.

And what a concidence... a 2.1% increase of SSSG would raise it from $0.338/u to $0.345/u ... which is exactly what distributions currently are!! This acretion will wipe out the current distribution deficit.
Now, put a 32% combined tax rate,
Corporate tax rate in BC in 2010 will be 29.5%, where do you get 32% from? I cannot determine for sure which province BPF-UN is taxed in.
amortized capital is not taxed,
There is no amortization or depreciation listed anywhere in BPF-UN reports. Their net earnings of $0.338/q/unit ($0.345 after buyback acretion) ought to be taxed at prevailing rates.
and that only takes the distribution down to 10 cents/unit after-tax.
I'll let BPF-UN address this claim by quoting directly from their Q1-2010 report:

"the Fund will be subject to a tax at the prevailing corporate rate beginning on January 1, 2011. This tax will reduce net earnings and will affect cash distributions to unitholders by approximately the same amount."

They'd need 24% SSSG in the next year to be able to afford a 10c distribution. that's not happening.
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Re: Re:

Post by pitz »

grant wrote: ..
I think i recognize you from the Yahoo boards.

Until you recognize that a portion of the distribution is "return of capital", which is amortized depreciation, there's no point in continuing the discussion there, and replicated here.

Where do you think ROC comes from anyways? Its untaxed depreciation of the capital that constitutes the trust; the millions paid in by the beneficiaries ("shareholders", "unitholders", etc.). Its in the accounting somewhere, and if you can't find it, then you're not looking hard enough.

The distributions have been below the available cashflow for the past couple of years, hence, there is a buffer that will allow the trust to not require such deep distribution cuts, until (hopefully) inflation in menu item prices picks up the slack.
This acretion will wipe out the current distribution deficit.
There is no 'current distribution deficit', because they are distributing against cashflow, not earnings. Earnings = cashflow - depreciation - expenses. Distribution = earnings + depreciation. If they were distributing as a deficit against cashflow, then where is the debt attributable to distributions? The only debt incurred is debt for the NCIB.

Why can they do this? Because the trust has no physical assets to maintain, and we recognize that the trust will be completely worthless at the expiration of the trademark agreement (some 95 years from now..IIRC). The goal of the trust is to deplete the trademarks, not invest money to build new ones, and new sources of revenue against those trademarks.

If BP's is a going concern 95 years from now, the trademarks and the royalties will have reverted to someone else (ie: BPI, or its successors), not this trust, and the licensing fees will flow to them. Hypothetically, a year before the trust's assets are to expire, the trust should be worth precisely the next years' distribution, discounted by the current cash rate and a small risk premium. Assuming that the business remains viable, and your great grandchildren have no problem eating at the same restaurant chain their grandmas enjoyed, that distribution should be fairly sizable, and not impaired by the fact that the BPF trust is going to fall off the face of the the earth the next year.
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Re: Re:

Post by grant »

pitz wrote:Until you recognize that a portion of the distribution is "return of capital", which is amortized depreciation, there's no point in continuing the discussion there, and replicated here.
your discription is only 1 of multiple reasons ROC may be included on a T3. It does not necessarily mean the trust is depreciating assets.

There is no "depreciation" nor "amortization" listed in any of the many BPF statements i've read, including the latest annual report.

So until you or someone else provides evidence depreciation is happening, why would I or any rational person "recognize" it?
Its in the accounting somewhere, and if you can't find it, then you're not looking hard enough.
My diligence has had me carefully read many annual and quarterly reports, speak to to executive at head office and with franchisees & investors who have owned the fund since day 1. IMHO that's looking plenty hard.

What diligence have you done? Can YOU find it? if so, please show us.
There is no 'current distribution deficit', because they are distributing against cashflow, not earnings. Earnings = cashflow - depreciation - expenses. Distribution = earnings + depreciation.
The annual report is quite clear that the fund earned $1.347 "before non-cash items" per unit, and distributed $1.38 in 2009. By any sane definition, that's a cash deficit.
If they were distributing as a deficit against cashflow, then where is the debt attributable to distributions? The only debt incurred is debt for the NCIB.
Running a deficit doesn't necessarily mean they have taken on debt. A 2.4% deficit on annual distributions of $20m is only $480,000. I cannot find detailed balance sheets but i would expect the fund had more cash-on-hand than that prior to the deficit.
Why can they do this? Because the trust has no physical assets to maintain, and we recognize that the trust will be completely worthless at the expiration of the trademark agreement (some 95 years from now..IIRC).
Why do you assume the trademarks will be worthless at the expiration of the license agreement? If the same Boston Pizza franchises are operating at that time as are now, the trademarks will have similar value as they have today.
The goal of the trust is to deplete the trademarks,
?? that makes no sense. Trademarks have infinite use, they cannot be "depleted".
If BP's is a going concern 95 years from now, the trademarks and the royalties will have reverted to someone else (ie: BPI, or its successors),
To quote their annual report: "On July 17, 2002, Boston Pizza International Inc. sold the BP Rights to the Fund."

You understand the meaning of "sold", yes? Assuming they have value, the trademarks will be sold or relicensed to BPI in 2101.
Hypothetically, a year before the trust's assets are to expire, the trust should be worth precisely the next years' distribution, discounted by the current cash rate and a small risk premium.

It seems you have several fundamental misunderstandings about this fund, e.g., the terms of its licensing agreement, or the amount of NCIB yet to be fulfilled.

It's my respectful suggestion that before you offer any more advice, you read at least read the lastest annual report to learn the basics.
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adrian2
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Re: Boston Pizza Income Fund(Symbol-BPF.UN)

Post by adrian2 »

Similar story from Pizza Pizza (PZA.UN)
The Fund's trustees have decided to retain the Fund's current income trust structure through the end of 2010 and into 2011. As an initial step, beginning with the distribution for the month of January 2011, the Fund's trustees expect to adopt a new distribution policy, with a reduced monthly distribution that reflects the Fund's obligation to make SIFT tax payments. In determining the level of distributions, the Trustees will consider factors related to the Company's operations, the cash reserve fund, their assessment of economic conditions in the Company's principal markets, and the discretionary tax deductions that are available as a result of the Fund's past tax planning strategy.

Based on current considerations, and assuming that economic and business conditions do not deteriorate in 2011 and beyond, the Fund's trustees currently expect that the new distribution policy will provide for monthly distributions in a range from $0.68 to $0.71 annually per unit. At this level, the distribution, combined with the return of capital component of the Fund's distributions would provide taxable Canadian individuals with an effective after-tax yield comparable to current levels.

As shown in the table below, the impact of the Fund's potential distribution policy would result in an increase to after-tax cash retained by an Ontario taxable individual assuming an annual distribution of $0.93 per unit in 2010 and a middle-range annual distribution of $0.70 per unit in 2011.
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Re: Boston Pizza Income Fund(Symbol-BPF.UN)

Post by pitz »

So to clarify things, does this new structure result in the paying of 'eligible' dividends?

If so, then even with the SSSG negative growth, my original estimate of a 30% tax rate on earnings was (obviously) on the high side, and the 9.5c-10.0c/share/month scenario seems even more plausible.


Grant, a BPF press release states:
The trade-marks are licensed to BPI for 99 years for which BPI pays a royalty to the Fund equal to 4% of
franchise revenues of royalty pooled restaurants.
I guess, if BPI and its restaurants remain viable, why wouldn't they, upon expiration of the license agreement, simply re-brand the operations? 4% is quite an overhead for franchisees, many of whom, on Yahoo, you allege, aren't making money.
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