First Capital Real Estate Trust Incorporated, a publicly registered non-traded real estate investment trust, has entered into an agreement with Presidential Realty Corporation (OTC: PDNLA/PDNLB) and its newly formed operating partnership.
First Capital will contribute its ownership interests in two properties in exchange for 37.3 million Presidential OP units, convertible into a like number of newly issued shares of Presidential class B common stock. Presidential will assume its percentage interest in a mortgage loan on one of the properties. The transactions are based upon a purchase price of $37.3 million and a valuation of $1.00 per share.
The agreement states that Presidential may enter into a consulting agreement with Palisades Capital Realty Advisors, which was founded by Joaquin de Monet, the former president and chief executive officer of Arden Realty Inc. Arden, a publicly-traded office landlord in Southern California, was later acquired by GE Real Estate and then sold to Blackstone in 2015.
“With this transaction, we are affording our shareholders the opportunity to participate in the value-add potential of a publicly-traded REIT,” said Suneet Singal, chief executive officer of First Capital. “Presidential will be well-positioned for sustained growth and success with the assistance of Joaquin and his team, who bring deep institutional knowledge and success along with long-standing industry relationships.”
For the agreement to become effective, the boards of First Capital and Presidential must approve by Friday, December 23rd.
First Capital Real Estate Trust was formerly known as United Realty Trust Inc., a non-traded REIT founded by controversial New York real estate developer Jacob Frydman. Singal, the founding principal of Sacramento-based First Capital Real Estate Investments, took control of the REIT last year.
Presidential Realty is a real estate investment trust which trades over the counter and currently owns one property in Massachusetts. In the company’s last quarterly filing with the Securities and Exchange Commission, it noted that it has experienced “a history of operating losses and working capital deficiency…that could potentially affect [its] ability to meet [its] obligations.”
It is impossible at this time to report on the financial health of First Capital Real Estate Trust as the company has not filed any quarterly or year-end financials with the SEC since August 2015. The company’s most recent CFO, Malik Franklin, was hired in January 2016 and resigned in April. In July, the board approved an estimated $16.03 net asset value per share, and in August, First Capital Real Estate Advisors hired Paschal Ferreira as its chief accounting officer to oversee the company’s accounting team.
First Capital recently announced that it would suspend monthly distributions to investors beginning in November 2016 in order to increase its cash reserves. The REIT also engaged Ladenburg Thalmann Financial Services as advisor to review strategic alternatives available to the firm, with the goal of maximizing liquidity and long term shareholder value.
More recently, two independent directors, Michael McCook and Javier Vande Steeg, resigned from the board, as “both felt there were difficulties in being able to effectively carry out their duties as independent directors due to the fact that they are located in California and the company’s principal business office is in New York.” Singal, the sole director of the board, subsequently appointed Frank Grant and Richard Leider to fill the empty seats.
First Capital dismissed Marcum LLP as its independent registered public accounting firm in November, and hired MaloneBailey LLP as the new accounting firm. Earlier this month, First Capital engaged Palisades Capital Realty Advisors to provide advisory services in connection with potential strategic transactions and asset development.
First Capital’s portfolio consists of 27 assets including land development, multifamily development, a gas station, hotels, medical offices, transitional housing, and business offices.