|After two PIPEs, Aethlon links Granite City with United Properties|
After two PIPEs, Aethlon links Granite City with United Properties
by Beth Ewen
"A 22-site development agreement with United Properties will fund the next stage of development at Granite City Food and Brewery, the locally based restaurant chain that brews its own beer onsite.
It costs an average of $3 million to build one restaurant for Granite City, and United Properties will build 22 of them over the next four years and own the buildings, then Granite City will lease the properties back for an annual rate of 9.5 percent.
Sima Griffith, managing principal of Aethlon Capital in Minneapolis that arranged the financing, says the arrangement was the correct next step for Granite City, allowing it to end its “stop-and-go” growth phase and concentrate on operating the restaurants rather than on selecting sites and building locations.
Granite City is publicly held, and Aethlon helped the company do two PIPEs, which stands for private investment in a public entity. They raised $6 million in 2003, which allowed them to get to eight restaurants, and $8.5 million in 2005, both via PIPEs.
“That’s an expensive way to fund your growth because you’re issuing shares,” Griffith says, adding, “in Granite City’s case there was a lot of stop and go,” because they’d get money, build restaurants, get them operating, wait to get more money to build again, and so on.
Earlier, a secondary public offering wasn’t an option for Granite City, says Griffith, because investment bankers aren’t interested unless it’s for at least $25 million, “and there’s so many costs involved. “So a PIPE was a quicker, easier way to raise capital” for Granite City.
This time around, the debt financing raised via the United Properties arrangement was the way to go, according to Griffith. “The reason is, the stock is at a low point, like all restaurant stocks. Look at the entire stock market,” Griffith says. “So it would have been very expensive to raise $66 million in an equity offering.”
Actually, that would have been impossible, “because right now the market capitalization for Granite City is $36 million,” Griffith says.