SRZ : Material Definitive agreement for Greystone

SRZ has files an 8k Report for the material definitive agreement it has entered for Greystone properties.




Let me start with a statement made by SRZ in their Year ending Annual 2008 report (link)
"As previously announced, the Company has determined that it will not fund any new seed capital projects of its Greystone subsidiary. Sunrise has also informed the management of Greystone that it is exploring strategic options for the subsidiary, and is currently working with financial advisors to assist in this matter. The carrying value of Greystone at December 31, 2008 is $(9.3) million, which includes $43.6 million of goodwill and intangible assets, $2.6 million of working capital and $62.4 million of deferred revenue. Since the carrying value of Greystone is negative, there is no impairment as a result of the Company's decision to sell this business."

So basically on its books the greystone subsidiary has a negative networth of -ve 9.3 million. Now lets look at the current 8k filing data.
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SRZ has 2 subsidiaries "Sunrise Development Inc" (SDI) and "Sunrise Senior Living Investment Inc"(SSLII)
SRZ and its 2 subsidiaries have agreed to sell their stake in Greystone to "Greystone Partners II LP" (buyers) with following transactions.

Sunrise Development Inc(SDI):
1. 1.5 million USD in Cash to be paid to SDI.
2. 2.0 million USD in 30 days notes (ie. after 30 days SDI will receive 2.0 million)
3. 6.0 million USD in 7 year notes with interest rates: (First 5 years 10% & next 2 years 12%)
4. 2.5 million USD which will be paid whenever any cash withdraw is done by Buyers ..Maximum limit is March 2029 which is a hardstop for the 2.5 million payment.
Total payment rough estimate is 12 million with 3.5 million within 30 days.

Sunrise Senior Living Investment Inc (SSLII):
1. 0.5 million USD in cash to SSLII
2. 3.7 million USD within 45 days to SSLII
3. 3.05 million USD to be paid into Seed capital by the buyers on behalf of SRZ-SSLII
(SSLII will receive 35% share of the Seed capital in the future)
Total payment rough estimate is 7.25 million to SSLII over the lifetime of the contract with 4.2 million within 45 days

Conclusion: Greystone had a networth in SRZ books of negative 9 million but this sale will result in 7.7 million +ve cash flows within 45 days into SRZ and its subsidiaries. and total value of the Greystone will be more than 19.25+ million USD in the lifetime of the agreement. As I had mentioned in the previous post.. the house has been cleared and all this money is going to go directly into the bottomline (profits). Now we know why Richard (CFO) is getting the 1 million compensation package!!