TRADE ALERT - Core Portfolio July 2025

Dear Landlords,

I want to extend a warm welcome to all our new members!

As a reminder, our most recent "Portfolio Review" was shared with the members of High Yield Landlord on July 7th, 2025. You can read it by clicking here.

You can also access our three portfolios on Google Sheets:

New members can start researching positions marked as Strong Buy and Buy while considering the corresponding risk ratings.

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TRADE ALERT - Core Portfolio July 2025

RCI Hospitality (RICK) is back on a roll.

It just announced its third club acquisition of the year, marking a clear difference from last year when it failed to acquire a single club.

In January, it closed on Flight Club in Detroit, acquiring it for $11 million, with only $6 million paid upfront in cash and the rest financed by the seller.

Then, in April, it acquired the Platinum West Gentlemen's Club in West Columbia for $8 million, consisting of $5.5 million in cash and $2.5 million of seller financing.

And just recently, it announced the acquisition of the Platinum Plus Gentleman's Club in Allentown for another $2.0 million, consisting of $1.5 million cash and $0.5 million seller financing. This one was a lot cheaper because it is a smaller club and the property is leased.

Those numbers may not seem like much, but they add up, given that RICK is targeting a 25-33% cash flow yield on its investments.

Assuming that they only earn a 25% return on these acquisitions, that would add about $5 million of free cash flow to the bottom line.

That's very significant, considering that the company is today generating about $50 million of annual free cash flow and has a $340 million market cap.

They essentially grew their bottom line by about 10% by just closing those three deals, and they can keep closing a lot of such deals in the coming quarters.

They are sitting on a historically large amount of cash with $33 million ready to be deployed, and another million or so gets added to the pile each week from retained earnings.

Given that they typically finance 30-50% of their acquisitions with seller financing, they could buy up to $70 million worth of clubs with this cash and significantly grow their free cash flow.