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Acquisitions and Disposition

3 Months Ended

Dec. 31, 2018

Business Combinations [Abstract]

Acquisitions and Disposition

14. Acquisitions and Disposition

In October 2018, the Company sold its nightclub in Philadelphia for a total sales price of $1.0 million, payable $375,000 in cash at closing and a $625,000 9% note payable over a 10-year period. The note is payable interest-only for twelve months at the conclusion of which time a balloon payment of $250,000 is due, and then the remainder of the principal and interest is payable in 108 equal installments of $5,078 per month until October 2028. The buyer will lease the property from the Company’s real estate subsidiary under the following terms: $36,000 per month lease payments for ten years; renewal option for a succeeding ten years at a minimum of $48,000 per month; lessee has option to purchase the property for $6.0 million during a term beginning November 2023 and expiring in October 2028. The Company recorded a gain on the sale transaction of approximately $879,000, which is included in other charges (gains), net in our consolidated statement of income during the quarter ended December 31, 2018.

On November 1, 2018, a club in Chicago was acquired for a total consideration of $10.5 million with $6.0 million cash paid at closing, including acquisition-related costs, and the $4.5 million in a 6-year seller financed note with interest at 7%. The Company paid approximately $37,000 in acquisition-related costs for this transaction, which is included in selling, general and administrative expenses in our consolidated statement of income. The club generated revenue of approximately $742,000 since acquisition date.

The following information summarizes the preliminary allocation of fair values assigned to the assets at acquisition date (in thousands):

Land and building		$	4,325
Inventory			57
Furniture and equipment			50
Noncompete			100
SOB license			5,968
Goodwill			1,463
Deferred tax liability			(1,463	)
Net assets		$	10,500

On November 5, 2018, a Pittsburgh club was acquired for a total consideration of $15.1 million, with $7.6 million cash paid at closing, including acquisition-related costs, and two seller notes payable. The first note is 2-year 7% note for $2.0 million, and the second is a 10-year 8% note for $5.5 million. The Company paid approximately $134,000 in acquisition-related costs for this transaction, which is included in selling, general and administrative expenses in our consolidated statement of income. The club generated revenue of approximately $892,000 since acquisition date.

The following information summarizes the preliminary allocation of fair values assigned to the assets at acquisition date (in thousands):

Land and building		$	5,000
Inventory			23
Furniture and equipment			200
Noncompete			100
Goodwill			9,677
Net assets		$	15,000

It is management’s expectation that the purchase price of these acquisitions will be allocated to assets, including land, buildings, inventory, noncompetes, SOB license, and goodwill; however, the final purchase price allocation of the two clubs remains subject to post-closing adjustments until the Company has completed final valuation and accounting for the transactions.

Subsequent to the quarter ended December 31, 2018, the Company sold a held-for-sale property in Dallas, Texas for a total sales price of $1.4 million, payable $163,000 in cash at closing, net of closing costs and property taxes of $87,000, and a $1.15 million 8% note payable over a three-year period. The note is payable $9,619 per month, principal and interest, for the first 35 months with the remaining balance payable at maturity. The buyer has the option to extend the maturity date by one year at least 60 days prior to maturity, as long as the buyer is not in default. The Company recorded a preliminary gain on the sale transaction of approximately $383,000.