RW Holdings NNN REIT Inc., a publicly registered non-traded real estate investment trust formerly known as Rich Uncles NNN REIT Inc., plans to reopen its primary offering for Class C shares on June 1, 2020, and all subscriptions processed on or after that date will utilize the new $7.00 per share offering price.
Last week, the company revised its net asset value per share to $7.00 as of April 30, 2020, a decrease from its previous NAV per share of $10.27 as of December 31, 2019. Additionally, the company lowered its distribution rate from $0.70 per share to $0.35 per share per year, which is equal to 5.0 percent annually based on the new share valuation.
The company also provided additional information relating to one of its existing properties, a 45,000-square-foot gym located in Las Vegas, Nevada. The property was purchased more than two years ago for $12.7 million and has a $6.3 million mortgage that includes a $3.1 million mortgage repayment guarantee. In early 2018, before it purchased the property, 24 Hour Fitness negotiated a 12-year lease extension, so now the lease has less than 10 years remaining.
From the date of purchase until March 2020, the REIT collected nearly $76,000 per month in rent, and at the end of March 2020, 24 Hour Fitness sent a letter stating that they would not be paying rent due to government-mandated shutdowns as a result of the COVID-19 pandemic.
RW Holdings NNN REIT said that around that time, Wall Street analysts began speculating that 24 Hour Fitness would likely file for bankruptcy protection given their looming debt maturities and immediate loss of revenue. More recently, 24 Hour Fitness engaged a third-party restructuring agent to handle negotiations with landlords and creditors.
“We began active negotiations with this restructuring agent in hopes that we might be able to retain 24 Hour Fitness as our tenant; however, we have very recently been informed that 24 Hour Fitness will likely seek a rejection of our lease should they enter into bankruptcy proceedings,” the company said in a filing with the SEC. “Further, we have reason to believe that they could be leaving the Las Vegas market altogether, in addition to closing over half of their 400 nationwide locations. When coupled with their now weaker balance sheet and insufficient cash holdings, we do not believe we will see any successful outcome from any potential bankruptcy proceedings.”
The company indicated that it has started active negotiations with two smaller, private gym operators, although rental rates for the Las Vegas market have decreased. In addition, the lender on the property agreed to temporarily reduce the $32,000 monthly mortgage payment by $8,000 for the next few payments.
“If we cannot retain 24 Hour Fitness as our tenant on acceptable terms or find a replacement tenant, then the lender may foreclose on the property and take possession,” the REIT noted.
RW Holdings NNN REIT recently merged with an affiliated non-traded REIT, Rich Uncles Real Estate Investment Trust I. The company’s real estate portfolio totals 2.4 million square feet and consists of 45 properties (comprising 19 retail properties, 14 office properties and 12 industrial properties) located in 14 states. The portfolio also includes one parcel of land, which currently serves as an easement to one of the company’s office properties; and an approximate 72.7 percent tenant-in-common interest in an office property in Santa Clara, California.