SIR Royalty Income Fund Announces Filing of SIR Corp. Fiscal 2020 Fourth Quarter and Year-End Results

BURLINGTON, ON, Nov. 30, 2020 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today announced that SIR Corp. ("SIR" or the "Company"), the operating entity from which the Fund earns equity income, has filed its financial results for the 17-week and 53-week periods ended August 30, 2020 ("Q4 2020" and "Fiscal 2020", respectively). SIR's audited consolidated financial statements and management's discussion & analysis for Q4 2020 and Fiscal 2020 can be accessed via the Fund's profile on the SEDAR website at www.sedar.com under "Other", or the SIR website at www.sircorp.com/sir-royalty-income-fund/financial-reports.

Business Update

• Since the date of SIR's last financial report, which was filed on July 30, 2020, the COVID-19 pandemic has continued to significantly impact the operations of the Company.
• The hospitality industry has faced, and continues to face, significant challenges related to continuing updates to restrictions imposed by federal, provincial and municipal governments. Restaurants have incurred significant costs to implement strict safety protocols for both patio and indoor dining, including the installation of plexiglass barriers in dining rooms, expansion of patios, adding heaters to extend patio dining season, swift changes to operations to increase take-out and delivery offerings when restaurants were 100% reliant on take-out and delivery during the months of May and June 2020.
• Beginning March 16, 2020, SIR suspended dine-in operations at all of its restaurants and bars in accordance with the directives of public health authorities. SIR continued to offer takeout and delivery services at certain of its Jack Astor's^® and Scaddabush Italian Kitchen & Bar^® ("Scaddabush") restaurants, while all Canyon Creek^® and Signature Restaurants were completely closed as of March 16, 2020.
• Beginning on June 9, 2020, restaurant re-openings commenced in western Canada and the Maritime provinces. On June 12, 2020, certain regions in the province of Ontario began re-opening for outdoor patio dining. On June 15, 2020, restaurants in Quebec, outside of the Greater Montreal Area, were permitted to re-open for limited capacity in-restaurant dining, with Greater Montreal Area restaurants following on June 22, 2020.
• On July 17, 2020, the province of Ontario permitted the staggered re-opening of limited capacity in-restaurant dining in most public health regions of the province. On July 31, 2020, restaurants in the Toronto and Peel public health regions, where SIR has 25 restaurants, were permitted to re-open on a similar basis to other regions in the province. Accordingly, all of SIR's Jack Astor's and Scaddabush restaurants, and certain of its Canyon Creek and Signature restaurants were re-opened for limited capacity in-restaurant and outdoor-patio dining, adhering to strict operating procedures and sanitary guidelines to prioritize the safety of its guests and staff.
• On September 28, 2020, the Quebec government announced that effective October 1, 2020, all restaurants and bars in three regions of the province with high rates of new COVID-19 cases would be closed for at least 28 days other than for takeout and delivery. This affected four Jack Astor's locations. Prior to the end of October, the closures were extended another 28 days to November 23, 2020. On November 19, 2020, the Quebec government announced that these closures would remain in place until January 11, 2021.
• Effective October 10, 2020, the Toronto, Ottawa and Peel regions returned to modified Stage 2 restrictions, resulting in the temporary closure of indoor dining rooms and bars in these regions for 28 days. SIR has 28 restaurants in these regions. Effective October 19, 2020, the York region, where SIR has five restaurants, was also returned to modified Stage 2 restrictions for 28 days. As of November 7, 2020, dining rooms in the Toronto, Ottawa, Peel, and York regions were permitted to re-open. Effective November 9, 2020, additional regions were moved into various zones within the Ontario government's COVID-19 framework, which restricts the capacity of indoor dining guests, as follows:

*The number of SIR restaurants does not include three Canyon Creek restaurants and one Jack Astor's restaurant that were not previously re-opened.

• Effective November 23, 2020, the Ontario government announced additional movement of various regions within its COVID-19 framework as follows:

*The number of SIR restaurants does not include three Canyon Creek restaurants and one Jack Astor's restaurant that were not previously re-opened.

• Effective November 26, 2020, the provincial government in Nova Scotia, where SIR has two locations, announced the closure of all restaurant dining rooms.
• Reduced services, restaurant closures and capacity restrictions have resulted in material declines to sales at SIR restaurants. Limited capacity re-openings of in-restaurant and patio dining are expected to continue to result in material year-over-year declines to sales at SIR restaurants.
• SIR was deemed eligible for the Canada Emergency Wage Subsidy ("CEWS") program. As a result, SIR has received a subsidy from the federal government to partially offset certain of its wage costs starting in mid-March 2020. SIR currently expects to continue to be eligible for CEWS through to at least its current expected end date of June 2021.
• SIR is expected to be eligible for the new Canadian Emergency Rent Subsidy ("CERS"). However, the program, as passed, appears to limit SIR's claims under the base program to a maximum of 65% of $0.3 million in eligible expenses. As SIR owns all of its restaurants, it appears to be deemed to be considered an "affiliated group" and, as such, the size of the available subsidy is limited. The maximum claim of $0.2 million per month represents approximately 10% of SIR's eligible rent expenses. During periods where indoor dining is mandated to be fully closed, SIR may also be eligible to apply for the 25% lock-down support top-up.

Amendment to Credit Agreement and Waivers

• On May 27, 2020, effective April 1, 2020, SIR received a covenant waiver under its credit agreement (the "Credit Agreement") with a Schedule I Canadian chartered bank (the "Lender") until June 30, 2020.
• On June 30, 2020, SIR and its Lender entered into a fourth amending agreement to its Credit Facility, including the addition of a new $6.25 million Export Development Canada-guaranteed BCAP facility (the "EDC-Guaranteed Facility"), to the Credit Agreement.
• On June 30, 2020, the Fund and the Partnership entered into an acknowledgement and consent agreement with the Lender, and the Fund, the Partnership, and SIR entered into a waiver and extension agreement.
• On September 30, 2020, SIR and its Lender entered into a fifth amending agreement to its Credit Agreement which, among other things, extended certain waivers from August 31, 2020 to December 31, 2020.
• On September 30, 2020, the Fund and the Partnership entered into an acknowledgement and consent agreement with the Lender, and the Fund, the Partnership, and SIR entered into a waiver and extension agreement. The current expiration date of certain deferrals in these agreements is December 31, 2020.

Liquidity and Capital Resources

As at August 30, 2020, SIR had cash and equivalents of $1.6 million, compared to $3.6 million as at August 25, 2019, SIR's Fiscal 2019 year-end. As at August 30, 2020, SIR's liquidity was comprised of $1.6 million in cash on hand, $3.3 million available to borrow under the Company's credit facility, and $6.25 million under an Economic Development Canada (EDC) guaranteed Business Credit Availability Program (BCAP).

Prior to the COVID-19 outbreak, SIR was a viable going concern and was in compliance with financial and non-financial covenants as outlined in its Credit Agreement and the SIR Loan Agreement.

SIR has advised the Fund that its ability to meet its obligations for the next 12 to 18 months is dependent on its ability to obtain increased and extended financing through further amendments to its Credit Agreement and the availability of credit under the current Credit Agreement or other financing sources and/or additional government assistance to aid businesses.

SIR's ability to meet its obligations for the next 12 to 18 months also depends on, among other factors, the duration of restaurant capacity restrictions due to COVID-19, SIR's ability to return to increased or full operating capacity in the near future, Canadian economic conditions after bars and restaurants are able to fully reopen, the type and impact of any new government mandated pandemic-related operating regulations, and SIR's ability to negotiate longer term extended credit terms from its suppliers, including negotiating deferrals of rent obligations over the terms of its leases. SIR's insurer has denied any business interruption claims due to COVID-19 closures. However, SIR continues to pursue its claim through legal avenues. There can be no assurance this action will be successful.

About SIR Corp.

SIR Corp. ("SIR") is a privately held Canadian corporation that owns a portfolio of 59 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 37 locations; Scaddabush Italian Kitchen & Bar® with 10 locations; and Canyon Creek®, with five locations. SIR also operates one-of-a-kind "Signature" brands including Reds® Wine Tavern, Reds® Midtown Tavern, Reds® Square One and The Loose Moose®. All trademarks related to the Concept and Signature brands noted above are used by SIR under a License and Royalty Agreement with SIR Royalty Limited Partnership. SIR also owns two Duke's Refresher® & Bar locations in downtown Toronto, and one seasonal Signature restaurant, Abbey's Bakehouse®, which are currently not in consideration to be part of the Royalty Pool. For more information on SIR Corp. or the SIR Royalty Income Fund, please visit www.sircorp.com .

About SIR Royalty Income Fund

The Fund is a trust governed by the laws of the province of Ontario that indirectly has interests in the trademarks used by SIR.

Caution concerning forward-looking statements

Certain statements contained in this report, or incorporated herein by reference, including the information set forth as to the future financial or operating performance of the Fund or SIR, that are not current or historical factual statements may constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Statements concerning the objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of the Fund, the SIR Holdings Trust (the "Trust"), the Partnership, SIR, the SIR Restaurants or industry results, are forward-looking statements. The words "may", "will", "would", "should", "expect", "believe", "plan", "anticipate", "intend", "estimate" and other similar terminology and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Fund, the Trust, the Partnership, SIR, the SIR Restaurants or industry results, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. These statements reflect Management's current expectations, estimates and projections regarding future events and operating performance and speak only as of the date of this document. Readers should not place undue importance on forward-looking statements and should not rely upon this information as of any other date. Risks related to forward-looking statements include, among other things, challenges presented by a number of factors, including: the impact of the COVID-19 pandemic; market conditions at the time of this filing; competition; changes in demographic trends; weather; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; pandemics or other material outbreaks of disease or safety issues affecting humans or animals or food products; changes in tariffs and international trade; changes in foreign exchange; changes in availability of credit; legal proceedings and challenges to intellectual property rights; dependence of the Fund on the financial condition of SIR; legislation and governmental regulation, including the cost and/or availability of labour as it relates to changes in minimum wage rates or other changes to labour legislation and forced closures of restaurants and bars; laws affecting the sale and use of alcohol (including availability and enforcement); changes in cannabis laws; accounting policies and practices; and the results of operations and financial condition of SIR. The foregoing list of factors is not exhaustive. Many of these issues can affect the Fund's or SIR's actual results and could cause their actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Fund or SIR.  Given these uncertainties, readers are cautioned that forward-looking statements are not guarantees of future performance, and should not place undue reliance on them. The Fund and SIR expressly disclaim any obligation or undertaking to publicly disclose or release any updates or revisions to any forward-looking statements. Forward-looking statements are based on Management's current plans, estimates, projections, beliefs and opinions, and the Fund and SIR do not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change, except as expressly required by applicable securities laws.

In formulating the forward-looking statements contained herein, Management has assumed that it will be successful in dealing with the effects of the COVID-19 pandemic and that business and economic conditions affecting SIR's restaurants and the Fund will return to normalcy within the medium term. For more information concerning the Fund's risks and uncertainties, please refer to the March 12, 2020 Annual Information Form, for the year ended December 31, 2019, and the Fund's most recent interim filings, which are available under the Fund's profile at www.sedar.com.

All of the forward-looking statements made in this report are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Fund or SIR.

SOURCE SIR Royalty Income Fund