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Stockholders’ Equity
12 Months Ended
Dec. 31, 2023
Equity [Abstract]  
Stockholders’ Equity Stockholders’ Equity
As of December 31, 2023 and 2022, the Company had approximately 2.3 million and 1.9 million shares of common stock outstanding, respectively, including unvested restricted shares, after giving effect to the Reverse Stock Split (see Note 1 — Organization for additional details). As of December 31, 2023, all of the Company’s shares of common stock outstanding was Class A common stock, including unvested restricted shares.
Rights Offering
In February 2023, the Company raised gross proceeds of $5.0 million ($4.1 million of net proceeds) from its Rights Offering, which entitled holders of rights to purchase 0.20130805 of a share of its Class A common stock for every right held at a subscription price of $12.95 per whole share. As a result, the Company issued 386,100 shares of its Class A common stock subscribed for in the Rights Offering on February 27, 2023. In connection with the Rights Offering, Bellevue and its affiliates acquired approximately 367,956 shares. As of December 31, 2023 Bellevue owned approximately 1,059,546 shares of the Company’s Class A common stock (see Note 9 — Related Party Transactions and Arrangements).
Class A Common Stock Issued to the Advisor - Side Letter and In Lieu of Cash for the Management Fee
During the year ended December 31, 2022, in accordance with the Side Letter (as defined in Note 9 — Related Party Transactions and Arrangements), the Advisor reinvested base management fees, aggregating approximately $3.0 million, in shares of the Company’s Class A common stock respectively. The number of shares purchased was based on a 10-day trading average price subject to a “Minimum Price” as defined in Section 312.04(h) of the New York Stock Exchange Listed Company Manual (the “Listed Company Manual”) computed upon executing the Side Letter to be $84.40 per share (adjusted for the Reverse Stock Split). Upon the expiration of the Side Letter in July of 2022, the Company subsequently entered into a management agreement, in which the Advisor can elect to receive shares of Class A common stock in lieu of cash in respect to its management fee at the Company’s discretion using a 10-day average price (adjusted for the Reverse Stock Split) that was required to be greater than the minimum price under NYSE rules.
. The following table shows the shares issued in relation to the Side Letter and management agreement for the years ended December 31, 2023 and 2022:
Period of IssuanceRecipientAgreement
Shares Issued (1)
Issued Share Price (1)
February 2022The AdvisorSide Letter5,672 $88.16 
March 2022The AdvisorSide Letter5,439 $91.94 
April 2022The AdvisorSide Letter4,848 $103.13 
May 2022The AdvisorSide Letter5,031 $99.39 
June 2022The AdvisorSide Letter5,924 $84.40 
July 2022The AdvisorSide Letter5,924 $84.40 
August 2022The AdvisorManagement Agreement15,586 $32.08 
September 2022The AdvisorManagement Agreement18,899 $26.24 
October 2022The AdvisorManagement Agreement18,285 $27.36 
November 2022The AdvisorManagement Agreement19,320 $25.92 
December 2022The AdvisorManagement Agreement24,744 $20.24 
January 2023The AdvisorManagement Agreement31,407 $15.92 
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(1)Retroactively adjusted for the effects of the Reverse Stock Split (see Note 1 for additional information).
Subsequent to December 31, 2023, the Company paid the Advisor in cash for January 2024 and February 2024 base asset management fees. However, on March 1, 2024, the Company issued 70,607 shares of its Class A common stock to the Advisor as a result of the Advisor’s decision to accept shares of the Company’s stock in lieu of cash with respect to the base asset management fee paid to the Advisor for services rendered in March. These shares were issued using the 10-day average price of $7.08, which was the higher value per share between the minimum price required by the New York Stock Exchange regulations and the price set forth in the terms of the Second Amended and Restated Advisory Agreement. The 10-day average price is calculated as the average of the daily market price of such security for the ten consecutive Trading Days immediately preceding the date of such valuation. For additional information Note 14 — Subsequent Events to the Company’s 2023 Financial Statements.
Additionally, on April 1, 2024, the Company issued 91,165 shares of its Class A common stock to the Advisor as a result of the Advisor’s decision to accept shares of the Company’s stock in lieu of cash with respect to the March property management fees and February general and administrative expense reimbursements. These shares were issued using the 10-day average price of $6.64, which was the higher value per share between the minimum price required by the New York Stock Exchange regulations and the price set forth in the terms of the Second Amended and Restated Advisory Agreement and the Third Amendment to the Property Management and Leasing Agreement (details below). The 10-day average price is calculated as the average of the daily market price of such security for the ten consecutive Trading Days immediately preceding the date of such valuation. For additional information Note 14 — Subsequent Events to the Company’s 2023 Financial Statements.
For accounting purposes, the shares of the Company’s Class A common stock issued in accordance with the Side Letter and the shares issued in lieu of cash for the management fee to the Advisor, as elected by the Advisor, are treated as issued using the closing price on date of issue and the related expense for the year are reflected as $0.5 million for the year ended December 31, 2023 as part of general and administrative expenses on the consolidated statement of operations.
Class A Common Stock Issued to the Company’s Independent Board of Directors
During the three months ended March 31, 2022, the Company’s independent board of directors made an election to receive stock in lieu of cash for board services rendered during the fourth quarter 2021 and accordingly, the expense was recorded in the fourth quarter of 2021. Also, during the three months ended June 30, 2022, the Company’s independent board of directors made an election to receive stock in lieu of cash for board services rendered during the first quarter of 2022, and accordingly, the expense was recorded in the first quarter of 2022. As a result of these elections, the Company issued:
649 shares of its Class A common stock (adjusted for the Reverse Stock Split) to the Company’s independent board of directors in the first quarter of 2022 (for services rendered in the fourth quarter 2021), and
606 shares of its Class A common stock (adjusted for the Reverse Stock Split) to the Company’s independent board of directors in the second quarter of 2022 (for services rendered in the first quarter of 2022).
The Company paid all directors fees in cash during the second quarter, third quarter and fourth quarter of 2022 as well as for the year ended December 31, 2023.
Equity Offerings
Class A Common Stock
On October 1, 2020, the Company entered into an Equity Distribution Agreement, under which the Company may, from time to time, offer, issue and sell to the public, through its sales agents, shares of Class A Common Stock having an aggregate offering price of up to $250.0 million in an “at the market” equity offering program (the “Common Stock ATM Program”).
To potentially enhance the Company’s cash resources to fund operating and capital needs, in August 2022, Bellevue Capital Partners, LLC, which is an entity that controls the Advisor (“Bellevue”) expressed a desire to invest additional capital in the Company. Although no agreement exists, Company’s board of directors authorized the issuance of up to 125,000 shares of the Company’s Class A Common Stock (adjusted for the Reverse Stock Split) for these purposes. During the three months ended September 30, 2022, the Company sold 79,114 shares of Class A common stock (adjusted for the Reverse Stock Split) to Bellevue, for gross proceeds of $2.0 million, before nominal commissions paid that were purchased by Bellevue. These shares were issued to the Bellevue through these block trades executed under the Company’s Common Stock ATM Program. Bellevue may, from time to time at its discretion, purchase additional shares of Class A common stock from the Company through additional block trades although there is no assurance as to the number of shares of the Company’s Class A common stock, if any, that Bellevue may seek to purchase.
During the year ended December 31, 2021, the Company sold 58,331 shares of Class A common stock (adjusted for the Reverse Stock Split) through the Common Stock ATM Program, for gross proceeds of $5.3 million, before commissions paid of $53,000 and issuance costs of $0.8 million.
In total, the Company had incurred $1.0 million in costs related to the establishment of the Common Stock ATM Program which were initially recorded in prepaid expenses and other assets on the Company’s consolidated balance sheet as of December 31, 2020. Upon receiving proceeds under the Common Stock ATM Program, in the second, third and fourth quarters of 2021, Company reclassified the entire $1.0 million prepaid balance to additional paid in capital in the Company’s consolidated statement of changes equity as a reduction of the gross proceeds received under the Common Stock ATM Program.
Stockholder Rights Plan
In May 2020, the Company announced that its board of directors had approved a stockholder rights plan, but did not take actions to declare a dividend for the plan to become effective. In August 2020, in connection with the Listing and the related bifurcation of common stock into Class A and Class B common stock, the Company entered into an amended and restated rights agreement, which amended and restated the stockholders rights plan approved in May 2020 and declared a dividend payable in August 2020, of one Class A right for and on each share of Class A common stock and one Class B right for and on each share of Class B common stock, in each case, outstanding on the close of business on August 28, 2020 to the stockholders of record on that date. Each right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Preferred Stock, par value $0.01 per share (“Series A Preferred Stock”), of the Company at a price of $55.00 per one one-thousandth of a share of Series A Preferred Stock, represented by a right, subject to adjustment. On August 12, 2021 the expiration date of these rights was extended from August 16, 2021 to August 16, 2022. On August 9, 2022 the expiration date of these rights was extended again from August 16, 2022 to August 18, 2025.
Distribution Reinvestment Plan
Until August 28, 2020, the Company had a distribution reinvestment plan (“DRIP”), pursuant to which, stockholders may elect to reinvest distributions paid in cash in additional shares of common stock. The Company had the right to amend any aspect of the DRIP or terminate the DRIP with ten days’ notice to participants.
An amendment and restatement of the DRIP (the “A&R DRIP”) in connection with the Listing became effective on August 28, 2020. The A&R DRIP allows stockholders who have elected to participate to have dividends paid with respect to all or a portion of their shares of Class A common stock and Class B common stock reinvested in additional shares of Class A common stock. Shares received by participants in the A&R DRIP will represent shares that are, at the election of the Company, either (i) acquired directly from the Company, which would issue new shares, at a price based on the average of the high and low sales prices of Class A common stock on the NYSE on the date of reinvestment, or (ii) acquired through open market purchases by the plan administrator at a price based on the weighted-average of the actual prices paid for all of the shares of Class A common stock purchased by the plan administrator with proceeds from reinvested dividends to participants for the related quarter, less a per share processing fee.
Shares issued by the Company pursuant to the DRIP or the A&R DRIP were or are recorded within stockholders’ equity in the consolidated balance sheets in the period dividends or other distributions are declared. During the year ended December 31, 2023, 2022 and 2021 any DRIP transactions were settled through open market transactions and no shares were issued by the Company.
Dividends
In connection with the Listing, the Company reinstated distributions to the Company’s common stockholders in the amount of $3.20 per share ($0.80 per share, per quarter) (adjusted for the Reverse Stock Split) of common stock per year, payable to holders of record on a single quarterly record date.
During the six months ended June 30, 2022 the Company paid dividends to common stockholders in the amount of $1.60 per share ($0.80 per share, per quarter) (adjusted for the Reverse Stock Split) of common stock per year, payable to holders of record on a single quarterly record date. On July 1, 2022, the Company announced that it suspended paying dividends and has not declared or paid dividends, beginning with the dividend that would have been payable for the quarter ended June 30, 2022.
During the year ended December 31, 2021 the Company paid dividends to common stockholders in the amount of $3.20 per share ($0.80 per share, per quarter) (adjusted for the Reverse Stock Split).
Tax Characteristics of Distributions
For the years ended December 31, 2022 and 2021, from a U.S. federal income tax perspective, 100% of distributions, or $1.60 and $3.20 per share (adjusted for the Reverse Stock Split) , respectively, represented a return of capital and no part constituted a taxable dividend. The Company did not make any distributions in the year ended December 31, 2023.
Other Equity Activity
2023 Tender Offer by an Affiliate of the Advisor
On September 27, 2023, Bellevue announced a tender offer to purchase up to 350,000 shares of the Company’s Class A common stock at a purchase price equal to $10.25 per share. The tender offer expired on October 26, 2023 and, 223,460 shares were tendered and accepted by Bellevue for a purchase price of approximately $2.3 million, less any fees, expenses, or taxes withheld. As of December 31, 2023 Bellevue owned approximately 1,059,546 shares of the Company’s Class A common stock or approximately 45.4% of outstanding shares of the Company, which did not result in a change of control event. The tender offer announced by Bellevue had no impact on the Company’s financial statements as no new shares were issued or cash received by the Company as a result.
2021 Tender Offer by the Company
On December 28, 2020, in response to an unsolicited offer to the Company’s stockholders, the Company commenced a tender offer, (as amended, the “December Offer”) to purchase up to 8,125 shares of Class B common stock (adjusted for the Reverse Stock Split) for cash at a purchase price equal to $56.00 per share (adjusted for the Reverse Stock Split). The Company made the December Offer in order to deter an unsolicited bidder and other potential future bidders that may try to exploit the illiquidity of the Company’s s Class B common stock and acquire it from stockholders at prices substantially less than the price at which the Company’s Class A common stock had been trading on the NYSE. The December Offer expired on January 27, 2021. In accordance with the terms of the December offer, the Company purchased 3,279 shares of Class B common stock (adjusted for the Reverse Stock Split) for a total cost of approximately $0.2 million, including fees and expenses relating to the tender offer, with cash on hand in February 2021.