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STRC RLTY

(SGIC)
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STRATEGIC REALTY TRUST, INC. : Regulation FD Disclosure, Other Events, Financial Statements and Exhibits (form 8-K)

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09/15/2020 | 02:45pm EDT
Item 7.01. Regulation FD Disclosure.
On September 15, 2020, Strategic Realty Trust, Inc. posted a shareholder
newsletter to its website. A copy of this newsletter is provided at Exhibit 99.1
to this Current Report on Form 8-K.
The information in this report, including Exhibit 99.1, is being furnished
pursuant to item 7.01 of Form 8-K and shall not be deemed "filed" for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liabilities of that section, nor shall such information be deemed
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.

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Item 8.01. Other Events.
Estimated Value Per Share
On September 2nd, 2020, the Company's board of directors approved an estimated
value per share of the Company's common stock of $5.25 per share based on the
estimated value of the Company's real estate assets and the estimated value of
the Company's tangible other assets less the estimated value of the Company's
liabilities divided by the number of shares and operating partnership units
outstanding, as of April 30, 2020. The Company is providing this estimated value
per share to assist broker-dealers that participated in the Company's initial
public offering in meeting their customer account statement reporting
obligations under National Association of Securities Dealers Conduct Rule 2340
as required by the Financial Industry Regulatory Authority ("FINRA"). The
valuation with an effective date of April 30, 2020 was performed in accordance
with the provisions of Practice Guideline 2013-01, Valuations of Publicly
Registered Non-Listed REITs, issued by the Investment Program Association
("IPA") in April 2013.
The Company's independent directors are responsible for the oversight of the
valuation process, including the review and approval of the valuation process
and methodology used to determine the Company's estimated value per share, the
consistency of the valuation and appraisal methodologies with real estate
industry standards and practices and the reasonableness of the assumptions used
in the valuations and appraisals. The estimated value per share was determined
after consultation with SRT Advisor, LLC (the "Advisor") and Robert A. Stanger &
Co, Inc. ("Stanger"), an independent third-party valuation firm. The engagement
of Stanger was approved by the board of directors, including all of its
independent members. Stanger prepared individual appraisal reports (individually
an "Appraisal Report"; collectively the "Appraisal Reports"), summarizing key
inputs and assumptions, on 8 of the 10 properties in which the Company wholly
owned or owned an interest in as of June 30, 2020 (the "Appraised Properties").
Stanger also prepared a net asset value report (the "NAV Report") which
estimates the net asset value per share of the Company's stock as of April 30,
2020. The NAV Report relied upon: (i) the Appraisal Reports for the Appraised
Properties; (ii) the book value as of April 30, 2020 for Sunset & Gardner and
Wilshire properties (the "Development Properties"); (iii) Stanger's estimated
value of the Company's mortgage loans payable and other debt; and (iv) the
Advisor's estimate of the value of the Company's other assets and liabilities as
of April 30, 2020, to calculate an estimated net asset value per share of the
Company's common stock.
Upon the board of directors' receipt and review of Stanger's Appraisal Reports
and NAV Report, and in light of other factors considered, the board of
directors, including the independent directors, approved $5.25 per share as the
estimated value of the Company's common stock as of April 30, 2020, which
determination is ultimately and solely the responsibility of the board of
directors.


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The table below sets forth the calculation of the Company's estimated value per share as of April 30, 2020:

                           Estimated Value Per Share
                    (Dollars in Thousands, Except Per Share)
        Assets
        Investments in real estate, net                       $     39,150
        Properties under development and development costs          50,278
        Cash and cash equivalents                                    5,611
        Prepaid expenses                                               158
        Accounts receivables, net                                      338
        Deferred costs and intangibles, net                            455
        Total assets                                                95,990

        Liabilities
        Notes payable                                               36,265
        Accounts payable and accrued expenses                        2,003
        Other liabilities                                              177
        Total Liabilities                                           38,445

        Stockholders' equity                                        57,545

        Shares and OP units outstanding                         10,957,289

        Estimated value per share                             $       5.25

Methodology and Key Assumptions The Company's goal in calculating an estimated value per share is to arrive at a value that is reasonable and supportable using what the Company deems to be appropriate valuation methodologies and assumptions and a process that is in compliance with the valuation guidelines established by the IPA. FINRA's current rules provide no guidance on the methodology an issuer must use to determine its estimated value per share. As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share, and these differences could be significant. The estimated value per share is not audited and does not represent the fair value of the Company's assets less its liabilities according to U.S. generally accepted accounting principles ("GAAP"), nor does it represent a liquidation value of the Company's assets and liabilities or the amount the Company's shares of common stock would trade at on a national securities exchange. The estimated value per share does not reflect a discount for the fact that the Company is externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties that are not held for sale, debt prepayment penalties that could apply upon the prepayment of certain of the Company's debt obligations or the impact of restrictions on the assumption of debt.

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The following is a summary of the valuation and appraisal methodologies used to
value the Company's assets and liabilities:
Real Estate
Independent Valuation Firm
Stanger was selected by the Advisor and approved by the Company's independent
directors and board of directors to appraise the 8 Appraised Properties in which
the Company wholly owns or owns an interest in with a valuation date of June 30,
2020. Stanger is engaged in the business of appraising commercial real estate
properties and is not affiliated with the Company or the Advisor. The
compensation the Company paid to Stanger was based on the scope of work and not
on the appraised values of the Appraised Properties. The Appraisal Reports were
performed in accordance with the Code of Ethics and the Uniform Standards of
Professional Appraisal Practice, or USPAP, the real estate appraisal industry
standards created by The Appraisal Foundation. Each Appraisal Report was
reviewed, approved and signed by an individual with the professional designation
of MAI licensed in the state where each real property is located. The use of the
Appraisal Reports are subject to the requirements of the Appraisal Institute
relating to review by its duly authorized representatives. In preparing the
Appraisal Reports, Stanger did not, and was not requested to, solicit
third-party indications of interest for the Company's common stock in connection
with possible purchases thereof or the acquisition of all or any part of the
Company.
Stanger collected reasonably available material information that it deemed
relevant in appraising the Appraised Properties. Stanger relied in part on
property-level information provided by the Advisor, including (i) property
historical and projected operating revenues and expenses; (ii) property lease
agreements and/or lease abstracts; and (iii) information regarding recent or
planned capital expenditures.
In conducting their investigation and analyses, Stanger took into account
customary and accepted financial and commercial procedures and considerations as
they deemed relevant. Although Stanger reviewed information supplied or
otherwise made available by the Company or the Advisor for reasonableness, they
assumed and relied upon the accuracy and completeness of all such information
and of all information supplied or otherwise made available to them by any other
party and did not independently verify any such information. Stanger has assumed
that any operating or financial forecasts and other information and data
provided to or otherwise reviewed by or discussed with Stanger were reasonably
prepared in good faith on bases reflecting the best currently available
estimates and judgments of the Company's management, board of directors and/or
the Advisor. Stanger relied on the Company to advise them promptly if any
information previously provided became inaccurate or was required to be updated
during the period of their review.
In performing its analyses, Stanger made numerous other assumptions as of
various points in time with respect to industry performance, general business,
economic and regulatory conditions and other matters, many of which are beyond
their control and the Company's control. Stanger also made assumptions with
respect to certain factual matters. For example, unless specifically informed to
the contrary, Stanger assumed that the Company has clear and marketable title to
each Appraised Property, that no title defects exist, that any improvements were
made in accordance with law, that no hazardous materials are present or were
present previously, that no significant deed restrictions exist, and that no
changes to zoning ordinances or regulations governing use, density or shape are
pending or being considered. Furthermore, Stanger's analyses, opinions and
conclusions were necessarily based upon market, economic, financial and other
circumstances and conditions existing as of or prior to the date of the
Appraisal Reports, and any material change in such circumstances and conditions
may affect Stanger's analyses and conclusions. The Appraisal Reports contain
other assumptions, qualifications and limitations that qualify the analyses,
opinions and conclusions set forth therein. Furthermore, the prices at which the
Company's real estate properties may actually be sold could differ from
Stanger's analyses.
Stanger is actively engaged in the business of appraising commercial real estate
properties similar to those owned by the Company in connection with public
security offerings, private placements, business combinations and similar
transactions. The Company engaged Stanger to deliver the Appraisal Reports and
assist in the net asset value calculation and Stanger received compensation for
those efforts. In addition, the Company has agreed to indemnify Stanger against
certain liabilities arising out of this engagement. In the two years prior to
the date of this filing, Stanger has provided appraisal, valuation and financial
advisory services for the Company and has received usual and customary fees in
connection with those services. Stanger may from time to time in the future
perform other

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services for the Company, so long as such other services do not adversely affect
the independence of Stanger as certified in the applicable appraisal report.
Although Stanger considered any comments received from the Company or the
Advisor regarding the Appraisal Reports, the final appraised values of the
Appraised Properties were determined by Stanger. The Appraisal Reports are
addressed solely to the Company to assist it in calculating an updated estimated
value per share of the Company's common stock. The Appraisal Reports are not
addressed to the public and may not be relied upon by any other person to
establish an estimated value per share of the Company's common stock and do not
constitute a recommendation to any person to purchase or sell any shares of the
Company's common stock.
The foregoing is a summary of the standard assumptions, qualifications and
limitations that generally apply to the Appraisal Reports. All of the Appraisal
Reports, including the analysis, opinions and conclusions set forth in such
reports, are qualified by the assumptions, qualifications and limitations set
forth in each respective Appraisal Report.
Real Estate Valuation
As described above, the Company engaged Stanger to provide an appraisal of the
Appraised Properties consisting of 8 of the 10 properties in the Company's
portfolio (including properties owned in joint ventures), as of June 30, 2020.
In preparing the Appraisal Reports, Stanger, among other things:
•interviewed the Company's officers or the Advisor's personnel to obtain
information relating to the physical condition of each Appraised Property,
including known environmental conditions, status of ongoing or planned property
additions and reconfigurations, and other factors for such leased properties;
•reviewed lease agreements for those properties subject to a long-term lease and
discussed with the Company or Advisor certain lease provisions and factors on
each property; and
•reviewed the acquisition criteria and parameters used by real estate investors
for properties similar to the subject properties, including a search of real
estate data sources and publications concerning real estate buyer's criteria,
discussions with sources deemed appropriate, and a review of transaction data
for similar properties.
Stanger appraised each of the Appraised Properties, using various methodologies
including a direct capitalization analysis, discounted cash flow analyses and
sales comparison approach, as appropriate, and relied primarily on the
discounted cash flow analyses for the final valuations of each of the Appraised
Properties. Stanger calculated the discounted cash flow value of the Appraised
Properties using property-level cash flow estimates, terminal capitalization
rates and discount rates that fall within ranges they believe would be used by
. . .


Item 9.01. Financial Statements and Exhibits.

Exhibit Number       Description
  99.1               Shareholder Newsletter, dated September 15, 2020

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© Edgar Online, source Glimpses


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