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| 8-K - 8-K - Strategic Realty Trust, Inc. | shareholdernewsletter8-k_3.htm |
66 Bovet Road
Suite 100
San Mateo, CA 94402
650‐343‐9300
SRTREIT.com
SHAREHOLDER NEWSLETTER March 30, 2018
1
Dear Fellow Shareholder,
We continue to pursue 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, our near‐term goal is to complete the
recycling of the portfolio by selling the remaining legacy
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 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, which reduced
over time.
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. During the fourth quarter of 2017, time had
reduced the yield maintenance costs to an actionable level and
the legacy portfolio was 95.6% leased with some of the key
leases renewed, so we began the process of selling 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.
Fulton Street Shops – San Francisco, CA
Important Dates
Most Recent 10K Filing 3/23/2018
Next 10Q Filing Deadline 5/15/2018
Next Shareholder Newsletter 5/15/2018
Last Distribution Payment 1/31/2018
Next Distribution Payment 4/30/2018
As you may recall, earlier last 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.
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 had been recently renewed and extended which aided us in
the sale, but the tenant’s credit ratings had already been lowered
earlier last year, and subsequent to the closing, the parent
company filed Chapter 11. 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 prices
for these two properties were in line with the third‐party appraisals
obtained in connection with the Company’s most recent NAV
calculation.
388 Fulton Street – San Francisco 450 Hayes – San Francisco
3701‐3713 Sunset Blvd. – Los Angeles
SHAREHOLDER NEWSLETTER March 30, 2018
2
We recently completed major lease extensions at Ensenada in
Arlington, TX and Turkey Creek in Knoxville, TN allowing those
properties along with Florissant in St. Louis, MO to be listed
for sale. To date the sales process has been slow and we have
seen a less robust market than the recent past with fewer
buyers. Increased interest rates have raised borrowing costs
for buyers and grocery anchored shopping center investors
seem to be concerned about the Amazon purchase of Whole
Foods and what it means to the industry.
At Topaz in Hesperia, CA we have completed a lot split and we
believe the subdivision of the center may provide better
pricing to us, and allow us to take a single tenant medical
building with a new ten‐year lease to market for sale while we
wait for a major tenant to take occupancy in their space in
part of the balance of the center before we 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 will
hopefully allow us the opportunity to look at various strategic
options for the future.
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,
2017 and subsequent periodic reports, as filed with the SEC. Actual events may differ materially from the anticipated events discussed
above.
We encourage you to explore our
renovated Company website:
SRTreit.com
The site houses a tremendous amount of information
about your investment in Strategic Realty Trust
Read our quarterly shareholder newsletter for updates about
the company
Take a look at our evolving property portfolio and learn about
our urban street retail tenants
Take advantage of links to all our Company’s public filings
with the SEC
Access Investor and transfer agent forms and instructions
Find contact information for the Company
Sawyer
3709 Sunset Blvd. – Los Angeles
Kettle Black
3705 Sunset Blvd. – Los Angeles