1-U 1 tm2232743d1_1u.htm FORM 1-U

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 1-U

 

CURRENT REPORT

Pursuant Regulation A of the Securities Act of 1933

 

December 12, 2022

(Date of Report (Date of earliest event reported))

 

1st stREIT Office Inc.

(Exact name of issuer as specified in its charter)

 

Maryland 81-4602947
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)
   
11601 Wilshire Boulevard, Ste. 1690 Los Angeles, CA 90025
(Address of principal executive offices) (ZIP Code)

 

(310) 421-1030

(Issuer’s telephone number, including area code)

 

Common Stock

(Title of each class of securities issued pursuant to Regulation A)

 

 

 

 

 

 

Item 9. Other Events

 

Declaration of Dividend 

 

On December 12, 2022, the board of directors of 1st stREIT Office Inc. (the “Company”) declared a regular quarterly cash dividend of $0.13 per share of common stock of the Company (“Common Stock”) for the period from October 1, 2022 to December 31, 2022. The dividend will be payable on January 10, 2023 to stockholders of record as of the close of business on December 27, 2022. The Company, as general partner of 1st stREIT Office Operating Partnership LP (the “Operating Partnership”), concurrently declared the same distribution per common unit of the Operating Partnership.

 

The quarterly cash dividend equates to 5.20% on an annualized basis calculated at the current rate, assuming a $10.00 per share of Common Stock purchase price (5.63% annualized dividend on the new $9.23 purchase price described below).

 

Establishment of Purchase Price

 

Effective December 14, 2022, the purchase price per share of Common Stock will be $9.23 per share based on the net asset value (“NAV”) per share of the Company as of September 30, 2022 as calculated by the Company’s manager, SW Manager, LLC (the “Manager”). This price per share will be effective until the next announcement of the price per share by the Company, which is expected to happen on or within a commercially reasonable time after March 31, 2023, unless updated by the Company prior to that time. Redemptions of shares of Common Stock will be made pursuant to the Company’s redemption plan based on the then-current NAV per share.

 

 

 

 

Net Asset Value as of September 30, 2022

 

The Manager calculates the Company’s NAV on a quarterly basis as of the end of each prior fiscal quarter on a fully diluted basis. As of September 30, 2022, NAV per share of Common Stock was $9.23. This NAV is effective until updated by the Company on March 31, 2023 (or as soon as commercially reasonable thereafter), unless updated by the Company prior to that time.

 

Components of NAV

 

The following sets forth the calculation of NAV as of September 30, 2022:

 

   September 30, 2022 (1) 
Assets     
Real estate:     
Land  $7,230,647 
Buildings and improvements   71,569,353 
Total real estate, net, at fair value   78,800,000 
      
Cash   3,737,533 
Restricted cash   1,469,611 
Rents and other receivables, net   50,190 
Other assets, net   162,868 
Due from affiliate   9,974 
Total assets  $84,230,176 
      
Liabilities and stockholders’ equity     
Liabilities:     
Secured notes payable, net  $40,258,999 
Accounts payable, accrued and other liabilities   1,985,352 
Unearned tenant rents   516,770 
Security and investor deposits   441,617 
Due to affiliate   191,348 
Total liabilities   43,394,086 
      
Stockholders’ equity:     
Common stock; 900,000,000 shares authorized; 1,830,543 shares issued and outstanding at September 30, 2022   18,305 
Additional paid-in capital   18,146,702 
Cumulative distributions and net gain   (1,272,981)
Noncontrolling interests   23,944,064 
Total stockholders' equity   40,836,090 
Total liabilities and stockholders' equity  $84,230,176 
Net asset value per share on 1,830,543 shares issued and outstanding at September 30, 2022(2)  $9.23 

 

(1)   Unaudited consolidated balance sheet data as of September 30, 2022.
     
(2) The total amount of shares of Common Stock issued and outstanding used in the computation of NAV per share is the amount of shares outstanding as of September 30, 2022.  NAV per share computation excludes noncontrolling interests.

 

 

 

 

NAV per share was calculated by the Manager on a fully dilutive basis using a process that reflects several components, including (1) estimated values of the Company’s commercial real estate assets and investments, including related liabilities, based upon (a) market capitalization rates, comparable sales information, interest rates, discount rates, net operating income, and (b) in certain instances, individual appraisal reports of the underlying real estate provided by an independent valuation expert, (2) the price of liquid assets for which third party market quotes are available, (3) accruals of the Company’s periodic dividends and (4) estimated accruals of the Company’s operating revenues and expenses.

 

As described in the section titled “Valuation Policies” of the Company’s offering circular filed with the Securities and Exchange Commission (“SEC”), the Company’s goal is to provide a reasonable estimate of NAV per share of Common Stock on a quarterly basis. However, the majority of the Company’s assets consist of commercial office investments and, as with any commercial real estate valuation protocol, the conclusion reached by the Company or, solely in the case that there is a conflict, the conclusion reached by the Company’s independent valuation expert, will be based on a number of judgments, assumptions and opinions about future events that may or may not prove to be correct. In instances where the Company determines that an independent appraisal of its real estate assets is necessary, including, but not limited to, instances where the Manager is unsure of its ability to accurately determine the estimated values of the Company’s commercial real estate assets and investments, or instances where third party market values for comparable properties are either nonexistent or extremely inconsistent, the Company may engage an appraiser that has expertise in appraising commercial real estate assets to act as its independent valuation expert. The independent valuation expert will not be responsible for, or prepare, the calculation of NAV per share. However, the Company may hire a third party to calculate, or assist with calculating, the NAV per share. The use of different judgments, assumptions or opinions would likely result in different estimates of the value of the Company’s commercial real estate assets and investments.

 

In addition, for any given quarter, the Company’s published NAV per share may not fully reflect certain material events, to the extent that the financial impact of such events on the Company’s portfolio is not immediately quantifiable. As a result, the quarterly calculation of NAV per share may not reflect the precise amount that might be paid for the shares of Common Stock in a market transaction, and any potential disparity in NAV per share may be in favor of either stockholders who redeem their shares, or stockholders who buy new shares, or existing stockholders. However, to the extent quantifiable, if a material event occurs in between quarterly updates of NAV that would cause NAV per share to change by 5% or more from the last disclosed NAV, the Company will disclose the updated NAV per share and the reason for the change in an offering circular supplement as promptly as reasonably practicable.

 

Historical NAV Information

 

Below is the NAV per share of Common Stock, as determined in accordance with the Company’s valuation policies, for the fiscal quarter ended September 30, 2022, and the four prior quarters thereof.

 

Date  NAV Per Share 
September 30, 2021  $10.19 
December 31, 2021  $10.15 
March 31, 2022  $10.11 
June 30, 2022  $9.67 
September 30, 2022  $9.23 

 

See our 253(g)(2) supplement filed with the SEC on September 20, 2022 for a discussion of the impact of the Panera non-renewal and other factors affecting NAV/purchase price.

 

Operating Partnership Distribution Deferral 

 

On December 12, 2022, the board of directors of 1st stREIT Office Inc. (the “Company”) announced that certain limited partners (the “Deferring Limited Partners”) of 1st stREIT Office Operating Partnership LP (the “Operating Partnership”) have agreed to defer receipt of cash distributions from the Operating Partnership (“Deferred Distribution Amount”) until further notice. The Limited Partnership Agreement of the Operating Partnership has been amended (the “Amendment”) to reflect the terms of the deferral program related to the Deferred Distribution Amount. The description of the deferral program set forth below does not purport to be complete and is subject to and qualified in its entirety by reference to the Amendment, a copy of which is an exhibit to this Form 1-U.

 

 

 

 

The annualized Deferred Distribution Amount is expected to be approximately $1.3 million. We expect that the Operating Partnership will use these amounts (i) to pay dividends to the Company and the other limited partners of the Operating Partnership and (ii) as discussed below, fund capital improvements in our Laumeier Property in St. Louis, MO until the property is fully re-tenanted.

 

We expect that the Deferred Distribution Amount will be deferred until at least June 2024, or when the space being vacated by Panera is fully re-tenanted. The Deferring Limited Partners will be entitled to receive the Deferred Distribution Amount without interest upon a notice of request by the Deferring Limited Partner (“Notice”), and future dividends from the Company may be reduced in order to repay the Deferred Distribution Amount, although dividends will not be reduced below the level required to maintain our status as a REIT. The deferral will not otherwise affect the rights of any of the limited partners.

 

Any such Deferred Distribution Amount will be paid to a Deferring Limited Partner from available cash as determined by the Company, as general partner of the Operating Partnership, after giving consideration to the operating expenses and other obligations of the Operating Partnership at the time of the distribution (“Available Cash”).  In the event that there is insufficient Available Cash to pay the entire Deferred Distribution Amount after receipt of the Notice, the Deferring Limited Partner will receive quarterly payments to the extent of Available Cash as determined by the Company until the Deferred Distribution Amount is paid in full. 

 

New Transfer Agent

 

Effective January 1, 2023, our new vendor Securitize will take over technology, anti-money laundering (AML), and know your customer (KYC) services from FundAmerica, and will replace Computershare as our transfer agent and administrator. Securitize is not participating as an underwriter of our offering and they will not solicit any investment in the Company, recommend the Company’s securities or provide investment advice to any prospective investor, or distribute this offering circular or other offering materials to investors. All share purchases for new investors of the Company will be processed by Securitize. Existing investors will have their current Computershare accounts transferred to Securitize on or about January 20, 2023. Computershare will process the January 10, 2023 dividend. After this date, existing investors will be unable to add more funds until the transition to Securitize is completed.

 

Safe Harbor Statement

 

This Current Report on Form 1-U contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled “Risk Factors” in the Company’s Offering Statement on Form 1-A dated October 22, 2020, filed with the SEC, as such factors may be updated from time to time in the Company’s subsequent filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in the Company’s filings with the SEC. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

 

 

 

 

EXHIBITS

 

The following exhibits are filed herewith:

 

Exhibit No.   Description
6.1   Amendment to Second Amended and Restated Limited Partnership Agreement of 1st stREIT Office Operating Partnership LP

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  1st stREIT OFFICE INC.
   
  By: SW Manager, LLC
  Its: Manager
     
  By: /s/ Jeffrey Karsh
  Name:   Jeffrey Karsh
  Title: Chief Executive Officer

 

Date: December 14, 2022