UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR l5(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
January 11, 2019
Rich Uncles Real Estate Investment Trust I
(Exact name of registrant as specified in its charter)
| California | 000-55623 | 37-6511147 |
| (State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
3090 Bristol Street, Suite 550, Costa Mesa, CA 92626
(Address of principal executive offices)
(Zip Code)
855-742-4862
(Registrant's telephone number, including area code)
None
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240. l4d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Mr. Jeffrey Randolph has resigned as a member of the board of trust managers (the “Board”) of Rich Uncles Real Estate Investment Trust I (the “Company”) effective January 11, 2019. Mr. Randolph resigned voluntarily and his decision was not the result of any disagreement with the Company on any matter relating to the Company's operations, policies or practices.
Mr. Randolph’s resignation was in connection with the strategic alternatives review described in Item 8.01 below and, in addition, the Company’s three (3) remaining independent Board members, who are also independent directors of RW Holdings NNN REIT, Inc. (“NNN”) have resigned from the NNN Board effective upon appointment of their successors. As a result of these resignations, there will no longer be an overlap of independent board members of the Company and NNN.
Item 8.01 Other Events.
On January 14, 2019, the registrant issued a press release announcing that its Board of Trust Managers had approved the engagement of Cushman & Wakefield as real estate financial advisor to a Special Committee of the Board in connection with the commencement of an analysis of strategic alternatives for the registrant’s entire real estate portfolio, during which analysis the registrant’s share repurchase program will be suspended. The registrant also provided certain Questions and Answers in connection with the Press Release.
A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference, and a copy of the related Questions and Answers is attached hereto as Exhibit 99.2 and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| 99.1 | Press Release dated January 14, 2019, regarding strategic alternatives process for registrant’s real estate portfolio and interim suspension of share repurchase program. |
| 99.2 | Questions and Answers regarding strategic alternatives process for registrant’s real estate portfolio and interim suspension of share repurchase program. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: January 14, 2019 | RICH UNCLES REAL ESTATE INVESTMENT TRUST I | |
| By: | /s/ Raymond J. Pacini | |
| Raymond J. Pacini | ||
| Chief Financial Officer | ||
Exhibit 99.1
FOR IMMEDIATE RELEASE
RICH UNCLES REAL ESTATE INVESTMENT TRUST I
TO EVALUATE STRATEGIC ALTERNATIVES
January 14, 2019, Costa Mesa, CA. Rich Uncles Real Estate Investment Trust I (the “Company”) announced today that its Board of Trust Managers has engaged Cushman & Wakefield (“Cushman”) as its real estate financial advisor to evaluate strategic alternatives which will include marketing its entire real estate properties portfolio (the “Portfolio”) for disposition by sale, merger or other transaction structure. The Company reported total investments in real estate properties of $140 million as of September 30, 2018 in its Quarterly Report on Form 10-Q filed with the SEC on November 13, 2018. Earlier today, the Company announced that its Net Asset Value (“NAV”) per share as of December 31, 2018 is $10.57 compared with its prior NAV per share of $10.66.
The Company believes that now is an opportune time to explore a disposition of the Portfolio. If an acceptable acquiror and price are identified, any Portfolio sale or other transaction would initially be subject to approval of the Company’s Board, including a majority of its independent Board members who are serving as the Special Committee of the Board in connection with the Portfolio marketing and negotiation of a potential transaction. If the Special Committee and the Board approve a sale or other disposition of the Company or its Portfolio, it will then be subject to the approval of shareholders owning a majority of the Company’s outstanding common stock, which the Board would seek to obtain at a meeting of shareholders. Depending on the results of the Portfolio marketing process, the Company believes a shareholders’ meeting to approve a Portfolio transaction could occur as early as the second calendar quarter of 2019. There can be no assurance that the Company’s marketing efforts will result in a disposition of the Portfolio on the timing set forth herein or at all.
The Company’s Portfolio includes 21 properties, with four office properties representing 34% of the Portfolio’s net operating income, 11 retail properties representing 33% of the Portfolio’s net operating income and six industrial properties representing 33% of the Portfolio’s net operating income. The Company’s Portfolio is concentrated in California, with 18 properties generating approximately 90% of its net operating income. The Company also has two retail properties in Texas and one retail property in Georgia. Investment grade tenants represent 70% of the Portfolio’s net operating income.
Cushman is a global commercial real estate company with 400 offices in 70 countries employing 48,000 people and 28 offices in California. Aaron Halfacre, the Company’s CEO, commented “We selected Cushman due to their deep local knowledge of the Company’s real estate properties, top-flight team of professionals, and experience in marketing real estate portfolios and providing strategic advice to commercial real estate companies. We believe they have the expertise required to assist the Company in assessing its Portfolio and maximizing value for our shareholders.”
In connection with the strategic alternatives review, one (1) of the independent members of the Company’s Board has resigned and the three (3) remaining independent Board members, who are also independent directors of RW Holdings NNN REIT, Inc. (“NNN”) have resigned from the NNN Board effective upon appointment of their successors. As a result of these resignations, there will no longer be an overlap of independent board members of the Company and NNN.
Finally, the Company announced that it has suspended the redemptions of common stock under its Share Repurchase Program during the strategic alternatives review process.
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements include any statements in this press release that are not historical or current facts and include, but are not limited to, statements relating to the Company’s strategic alternatives review process. These forward-looking statements represent management’s current expectations and assumptions based on information available as of the date of this report and involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those that are expressed or implied by the forward-looking statements, including but not limited to: the risks and uncertainties set forth above in this press release; disruptions in the financial markets and uncertain economic conditions affecting the Company or its tenants or the geographies or industries in which the Company’s properties are concentrated; and other risks and uncertainties as described under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, and in other periodic reports and filings submitted to the Securities and Exchange Commission. The Company does not intend, and undertakes no obligation, to update any forward-looking information to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events, unless required by law to do so.
Contact:
Jennifer Barber
Chief of Staff
(949)537-2421
jbarber@richuncles.com
Exhibit 99.2
Questions and answers regarding strategic alternatives review for registrant’s real estate portfolio and interim suspension of share repurchase program.
The questions set forth below are not intended to be a complete catalog of questions a REIT I shareholder might have. You should consult your financial, tax and other advisors with regard to any further questions you might have generally and relative to your individual situation.
Why did the NAV go down?
The decrease in the NAV to $10.57 compared with the prior share value of $10.66, is primarily due to the decrease in our cash balance related to the funding of share repurchases and the other cash needs.
What is the timing of the strategic review?
The independent members of the REIT I Board have decided to pursue a process of exploring strategic alternatives, which could include a potential portfolio sale, merger or other transaction. Although the Board has not set a deadline for completion of the strategic review, processes such as these are generally expected to take at least 4-6 months. The independent members of the REIT I Board have engaged a third-party real estate financial advisor (Cushman & Wakefield) to pursue a sale of REIT I’s real estate portfolio. At this point, we cannot provide any assurance that the strategic review will result in a transaction being announced or consummated.
When can I expect to hear more about developments in the strategic alternatives process?
There is no schedule for future communications, and REIT I does not intend to discuss or disclose further developments during the strategic review process unless and until the REIT I Board approves a specific transaction, determines to discontinue the strategic alternatives review process or otherwise determines that further disclosure is appropriate.
Why are you running a strategic alternatives review process now?
Given current market conditions and the relative attractiveness of the portfolio, the Advisor and the Board believe that now is an opportune time to explore potential interest in the REIT I real estate portfolio.
If the strategic review results in a portfolio sale, how will the pricing be determined?
If the strategic review results in a portfolio sale, we anticipate that pricing would be determined by market demand and investor desire for the REIT I portfolio. Factors that would affect value include attractiveness of the properties in the portfolio, interest rate environment and buyer appetite. There can be no assurance that a price or other transaction terms will be offered that is acceptable to the Board or that any portfolio sale will occur.
If the strategic review results in a portfolio sale or similar transaction, does the company hope to achieve a price equal to current NAV of $10.57?
The price at which we may be able to sell the REIT I portfolio depends on the market response to the portfolio marketing process and there can be no assurance that current market demand for the portfolio will equal NAV.
Could I lose money?
As with any investment, there is always the possibility of a loss; however, if the strategic review results in a proposed sale of the REIT I portfolio, our charter would require a stockholder vote on any such transaction.
If sold, how long until I receive my proceeds?
Right now, the independent members of our Board have decided to pursue a process to explore strategic alternatives, which could include a potential portfolio sale, merger or other transaction. At this point, we cannot provide any assurance that the strategic review will result in any transaction being announced or consummated. REIT I does not intend to discuss or disclose further developments during the strategic review process unless and until the REIT I Board approves a specific transaction, determines to discontinue the strategic alternatives review process or otherwise determines that further disclosure is appropriate.
Is there a chance that the NNN REIT might bid for and acquire the REIT I portfolio?
We are not able to comment on whether NNN REIT would explore a potential bid for REIT I since that will be a decision for the board of directors of NNN REIT.
What happens to my cash distributions during this strategic alternatives review period?
The Board will continue to routinely review and declare quarterly distributions. As was the case before the strategic process began, there is no set level for distributions and the amount is dependent upon portfolio income and our operating and other expenses during any distribution period and other factors as our REIT I Board deems relevant.
Why will the Share Repurchase Program be suspended?
Consistent with the approach adopted by other REITs, we believe it is appropriate to suspend the share repurchase program during the pendency of the strategic review.
What if I have already submitted for share repurchase?
Consistent with the terms of our current Share Repurchase Program, you will have until March 15, 2019 to rescind your share repurchase request if you want to do so. If you do not rescind, your share repurchase will be honored (subject to terms and limitations as set forth in the Prospectus) at the current NAV of $10.57 on or around April 15, 2019.
What are the tax implications due to a sale of REIT assets in a portfolio sale?
We will disclose any applicable tax implications relating to a potential transaction involving REIT I at an appropriate time after REIT I’s Board authorizes and approves a potential transaction. You are encouraged to consult with your tax advisor if you have any questions.
Will I have a vote?
If the independent members of the REIT I Board, who are serving as a special strategic alternatives committee, recommend a sale of the Company’s portfolio that is approved by the entire Board, REIT I’s charter requires that the recommended transaction would be submitted to our shareholders for their approval by a majority vote.
Is this strategic process common in the industry?
Yes, public, non-traded REITs routinely engage in a strategic alternatives review process when it is determined that it is an opportune time to explore potential shareholder liquidity transactions such as a portfolio sale. Specific to REIT I, as stated in the Prospectus, “No later than the 10th anniversary of the Termination Date, we intend to create a liquidity event for our Share owners, which liquidity event may include the sale of all of our Properties and the dissolution and winding up of our REIT, the listing of our Shares on a national exchange, or the merger of our REIT with another entity …”.