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| 8-K - 8-K - Strategic Realty Trust, Inc. | shareholdernewsletter8-k_1.htm |
66 Bovet Road
Suite 100
San Mateo, CA 94402
650‐343‐9300
SRTREIT.com
SHAREHOLDER NEWSLETTER November 15, 2017
1
Dear Fellow Shareholder,
We continue to execute on the Company’s strategic plan to build
a core portfolio of high‐quality west coast urban retail properties
with solid growth prospects, strong predictable cash flows and
with visible value appreciation characteristics. As we discussed in
the last newsletter, over the next year our goal is to complete
the recycling of the portfolio by selling the remaining legacy
properties and reinvesting the proceeds into new urban retail
properties.
We had been waiting for the right time to sell these assets based
on several competing factors, which created quite a balancing
act. As you may recall five of the six properties served as
collateral for a long‐term loan that would have matured in July
of 2019. Selling these properties required paying off the loan
and paying off the loan required a yield maintenance payment,
which was quite sizeable when we began to evaluate these sales,
but has reduced over time.
Fulton Street Shops – San Francisco, CA
Important Dates
Most Recent 10Q Filing 11/13/2017
Next 10K Filing Deadline 3/30/2018
Next Shareholder Newsletter 3/30/2018
Last Distribution Payment 10/31/2017
Next Distribution Payment 1/31/2018*
* If declared by the Board of Directors
On the other hand, had we waited too long in an effort to minimize
or eliminate the yield maintenance payment, that would have put
us too close to the end of the anchor tenant leases and reduced the
value of the properties. Some properties also needed higher
occupancies and leases renewed to sell at better prices. Now time
has reduced the yield maintenance costs to an actionable level and
the legacy portfolio is now 95.6% leased with some of the key
leases renewed, so we have begun the process to sell these
properties.
On October 31, 2017, we paid off the legacy property loan to begin
the sales process and incurred prepayment costs of $1.4 million.
The sales process was kicked off with the sale of two assets and the
refinance of the balance of the loan using the Company’s line of
credit. As you may recall, earlier this year we obtained a new
three‐year revolving line of credit for $60 million replacing our
expiring $30 million line. We kept our attractive pricing, relaxed
some of the borrowing covenants in our favor and added another
bank to our lender group. The new line gave us the capacity to
refinance the remainder of the debt on the legacy assets at a lower
floating rate while we complete the sales program.
SHAREHOLDER NEWSLETTER November 15, 2017
2
The first sale on October 31, 2017 was the single tenant BI‐LO
supermarket property in Chester, SC, followed a day later by
the sale of Morningside Marketplace in Fontana, CA. These
sales were very good executions for two challenging
properties. The BI‐LO lease was recently renewed and
extended which aided us in the sale, but the tenant’s credit
ratings had already been lowered earlier this year, and
subsequent to the closing, the company’s debt was further
downgraded. At Morningside, which is 100% leased, the
anchor tenant Ralph’s (whose lease expires in 2021) closed
their store in 2012 and continued paying rent. A dark anchor
with a short‐term lease made for a challenging sale. The gross
sales price for these two properties were in line with the third
party appraisals obtained in connection with the Company’s
most recent NAV calculation.
.
Florissant in St. Louis, MO is listed for sale. We recently
completed major lease extensions at Ensenada in Arlington,
TX and Turkey Creek in Knoxville, TN. and will be soon listing
those properties for sale. We are waiting for a new major
tenant under a signed lease to take occupancy at Topaz in
Hesperia, CA and then we intend to list it for sale.
As we complete the sales we continue to look for opportunities to
reinvest in our core urban retail markets. Since the beginning of
2016, we have invested in eight new urban retail properties in our
core markets of San Francisco and Los Angeles. The properties are
high quality and clearly fit our strategic vision; they are extremely
well located in high density urban settings with strong
demographics and with high pedestrian and vehicle traffic.
We continue to be very excited about the future of our Company
and its strategic direction. A fully recycled and focused high‐
quality west coast urban retail portfolio should allow us the
opportunity to look at various strategic options, investor liquidity
such as a public listing or attracting institutional capital, or some
type of liquidity event for investors.
Sincerely,
Strategic Realty Trust, Inc.
Andrew Batinovich
CEO
Strategic Realty Trust is a non‐traded real estate investment trust and is focused on building a
portfolio of high quality urban and street retail properties in major west coast markets. For
more information please visit the Company’s website at www.srtreit.com. The Company is
advised by SRT Advisors, LLC an affiliate of Glenborough, LLC. Glenborough also acts as the
Company’s property manager. For more information please visit Glenborough’s website at
www.glenborough.com
The foregoing includes forward‐looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995.
The Company intends that such forward‐looking statements be subject to the safe harbors created by Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include statements
regarding the intent, belief or current expectations of the Company and members of its management team, as well as the
assumptions on which such statements are based, and generally are identified by the use of words such as “hope”, “hopeful”, “may,”
“will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Readers are
cautioned not to place undue reliance on these forward‐looking statements, which speak only as of the date they are made. The
Company undertakes no obligation to update or revise forward‐looking statements to reflect changed assumptions, the occurrence of
unanticipated events or changes to future operating results over time, unless required by law. Such statements are subject to known
and unknown risks and uncertainties which could cause actual results to differ materially from those contemplated by such forward‐
looking statements. The Company makes no representation or warranty (express or implied) about the accuracy of any such forward‐
looking statements. These statements are based on a number of assumptions involving the judgment of management. The Company
can provide no assurances as to its ability to acquire properties that are consistent with its strategic plan, sell properties in its current
portfolio, successfully manage the existing properties in its portfolio, successfully develop its redevelopment projects and execute
potential strategic alternatives. These statements also depend on factors such as future economic, competitive and market
conditions and other risks identified in Part I, Item IA of the Company’s Annual Report on Form 10‐K for the year ended December 31,
2016 and subsequent periodic reports, as filed with the SEC. Actual events may differ materially from the anticipated events discussed
above.