The Parking REIT Inc., a publicly registered non-traded real estate investment trust formed by the December 2017 merger of MVP REIT and MVP REIT II, has agreed to sell a majority stake in the company to an affiliate of Bombe Asset Management LLC, a Cincinnati-based alternative asset management firm.
Bombe has agreed to invest more than $125 million. The agreement provides for Bombe’s investment of $35 million in cash plus the contribution of parking assets and other property valued at more than $90 million in exchange for operating partnership units valued at $11.75 per unit and warrants to purchase The Parking REIT common stock.
The company’s most recent net asset value per share was $25.10, as of May 15, 2019. In late December 2020, the REIT informed the Securities and Exchange Commission that it will further delay calculating its NAV per share, citing impacts of the global COVID-19 pandemic. Shares were originally sold for $25.00 each.
The agreement also provides that Bombe will commence a tender offer to purchase approximately 15 percent of The Parking REIT’s outstanding shares of common stock for $11.75 per share in cash.
Bombe expects to launch the tender offer “promptly upon closing” and will distribute offering materials to The Parking REIT’s stockholders describing the offer’s terms and conditions.
As part of the transaction, Bombe has agreed to purchase approximately 1.55 million shares of the REIT’s common stock for $11.75 per share from the REIT’s advisor and its affiliates, and CEO Michael Shustek.
In addition, at closing, the advisor will surrender its claim to 400,000 shares of common stock due to the advisor from The Parking REIT on December 31, 2021 and contribute 175,000 shares of common stock to a settlement fund. Bombe has agreed to purchase the shares from the settlement fund for $11.75 per share.
The settlement fund is being created as part of an agreement in principle to settle, subject to court approval, three pending class action lawsuits in which The Parking REIT is named as a defendant. Following the transaction and the tender offer, Bombe will own a majority of the company’s common equity on a fully diluted basis.
Once the transaction is complete, Shustek will resign as a director and officer of The Parking REIT. Manuel Chavez of Bombe will become the CEO, and Stephanie Hogue of Bombe will become the president. The board is expected to have seven directors, consisting of five directors appointed by Bombe, one new independent director appointed by the independent directors of The Parking REIT, and Shawn Nelson, a current independent director of The Parking REIT.
The Parking REIT board and a special committee of independent directors unanimously approved the agreement and the related transactions. Shustek recused himself from the vote.
In mid-2019, the REIT engaged financial and legal advisors and began to explore a range of potential strategic alternatives to provide liquidity to stockholders. A special committee led by Nelson was formed after Bombe first approached the REIT in 2020 with an interest in purchasing the shares of common stock owned by the advisor.
“After a thorough strategic review process, we have decided to enter into this agreement with Bombe, which we believe will create significant value for the stockholders of The Parking REIT and better position The Parking REIT to pursue a liquidity event,” said Shawn Nelson, chairman of the special committee. “I believe this transaction will open an exciting new chapter for The Parking REIT and its stockholders.”
The completion of the transaction is expected to occur in the second quarter of 2021 and is subject to several closing conditions.
The Parking REIT invests primarily in parking lots and garages in the United States and oversees a $279.4 million property portfolio of 37 parking facilities located in 16 states. The company commenced operations in December 2015 and raised approximately $61.3 million in the initial public offering until closing in March 2017.