Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
January 12, 2017
Steadfast Apartment REIT III, Inc. | |||||||||
(Exact Name of Registrant as Specified in Its Charter) | |||||||||
Maryland | 333-207952 | 47-4871012 | |||||||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | |||||||
18100 Von Karman Avenue, Suite 500 Irvine, California 92612 (Address of principal executive offices) | |||||||||
(949) 852-0700 | |||||||||
(Registrant’s telephone number, including area code) | |||||||||
Not applicable | |||||||||
(Former name or former address, if changed since last report) | |||||||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||
Item 1.01 | Entry into a Material Definitive Agreement. |
The information set forth under Items 2.01 and 2.03 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 1.01.
Item 2.01 | Completion of Acquisition or Disposition of Assets. |
Acquisition of Reflections on Sweetwater Apartments
On January 12, 2017 (the “Closing Date”), Steadfast Apartment REIT III, Inc. (the “Company”), through STAR III Sweetwater, LLC (“STAR III Sweetwater”), an indirect wholly-owned subsidiary of the Company, acquired from an unaffiliated third-party seller a fee simple interest in a 280-unit multifamily residential community located in Lawrenceville, Georgia, commonly known as Reflections on Sweetwater Apartments (the “Sweetwater Property”). On the Closing Date, Steadfast Asset Holdings, Inc., an affiliate of the Advisor (as defined below), assigned to STAR III Sweetwater the Purchase and Sale Agreement and Joint Escrow Instructions, dated December 2, 2016, as amended, for the purchase of the Sweetwater Property.
STAR III Sweetwater acquired the Sweetwater Property for an aggregate purchase price of $32,400,000, exclusive of closing costs. STAR III Sweetwater financed the acquisition of the Sweetwater Property with a combination of (1) proceeds from the Company’s ongoing public offering and (2) a loan in the aggregate principal amount of $23,000,000 (the “Sweetwater Loan”) from Berkeley Point Capital LLC (the “Lender”), pursuant to the requirements of the Fannie Mae delegated underwriting and servicing program, as evidenced by the Multifamily Loan and Security Agreement (the “Loan Agreement”) and the Multifamily Note (the “Note” and, together with the Loan Agreement, the Mortgage, the Environmental Indemnity and the Guaranty, each described in Item 2.03 below, the “Loan Documents”). For additional information on the terms of the Sweetwater Loan, see Item 2.03 below.
The Sweetwater Property was constructed in 1996 and consists of 11 three- and four-story apartment buildings and is situated on an approximately 18-acre site. The Sweetwater Property is comprised of 142 one-bedroom, 118 two-bedroom and 20 three-bedroom apartment homes that average 933 square feet with an average monthly rent of $965. Apartment amenities at the Sweetwater Property include 9-foot ceilings, washer/dryer connections, faux granite countertops, crown molding, built-in bookshelves, breakfast bars, ceiling fans and private balconies or patios. Property amenities at the Sweetwater Property include a resort-style pool with a spacious sundeck, a 24-hour fitness center, a playground, a clubhouse with resident lounge, outdoor BBQ grills, a business center, a lighted tennis court, a walking trail, an on-site lake, a car-washing station and detached garage parking. As of January 10, 2017, the Sweetwater Property was approximately 95.7% occupied.
An acquisition fee of approximately $699,000 was earned by Steadfast Apartment Advisor III, LLC (the “Advisor”) in connection with the acquisition of the Sweetwater Property.
The material terms of the agreements described above are qualified in their entirety by the agreements attached as Exhibits 10.1, 10.2 and 10.3 to this Current Report on Form 8-K and incorporated herein by reference.
Management of the Sweetwater Property
On the Closing Date, STAR III Sweetwater and Steadfast Management Company, Inc. (“Steadfast Management”), an affiliate of the Advisor, entered into a Property Management Agreement (the “Management Agreement”) under which Steadfast Management serves as the exclusive manager and leasing agent of the Sweetwater Property. Pursuant to the Management Agreement, STAR III Sweetwater pays Steadfast Management a monthly management fee in an amount equal to 3% of the Sweetwater Property’s gross collections at the property for such month. In addition, the property manager may earn an incentive management fee equal to 1% of gross collections based on performance metrics as described in the Management Agreement.
The Management Agreement has an initial term that expires on January 12, 2018, and will continue thereafter on a month-to-month basis unless either party gives 60-days prior written notice of its desire to terminate the Management Agreement. STAR III Sweetwater may terminate the Management Agreement at any time upon 30-days prior written notice to Steadfast Management in the event of the gross negligence, willful misconduct or bad acts of Steadfast Management or any of Steadfast Management’s employees. Either party may terminate the Management Agreement due to a material breach of the other party’s obligations under the Management Agreement that remains uncured for 30 days after notification of such breach. In the event of a termination of the Management Agreement by STAR III Sweetwater without cause, STAR III Sweetwater will pay a termination fee to Steadfast Management equal to three months of the monthly management fee based on the average gross collections for the three months preceding the date of termination; provided, however, the Lender may request termination of the Management Agreement without payment of any penalty or termination fee.
On the Closing Date, STAR III Sweetwater also entered into a Construction Management Services Agreement (the “Construction Services Agreement”) with Pacific Coast Land & Construction, Inc. (“PCL”), an affiliate of the Advisor. Pursuant to the Construction Services Agreement, PCL will provide construction management services with respect to capital improvements and renovations to be undertaken from time to time at the Sweetwater Property, for which it will be paid a construction management fee in an amount equal to 6% of the total cost of the improvements and renovations (as defined in the Construction Services Agreement). In addition to the construction management fee, if PCL provides additional staffing for an improvement or renovations, STAR III Sweetwater will reimburse PCL for all costs associated with such staffing. The Construction Services Agreement may be terminated by either party with 30-days prior written notice to the other party.
The material terms of the agreements described above are qualified in their entirety by the agreements attached as Exhibits 10.4 and 10.5 to this Current Report on Form 8-K and incorporated herein by reference.
Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
In connection with the acquisition of the Sweetwater Property, STAR III Sweetwater borrowed $23,000,000 from the Lender pursuant to the Loan Documents. The Sweetwater Loan has a 120-month term with a maturity date of February 1, 2027 (the “Maturity Date”). STAR III Sweetwater paid a loan origination fee of $160,000 to the Lender in connection with the Sweetwater Loan.
Interest on the outstanding principal balance of the Sweetwater Loan accrues at an initial rate of 3.225%, and an initial monthly debt service payment of $57,692 is due and payable on March 1, 2017. Beginning March 1, 2017, and continuing until the Maturity Date, monthly interest on the outstanding principal balance of the Sweetwater Loan accrues at the one-month London Interbank Offered Rate (LIBOR) plus 2.46%, and is due and payable on the first day of each month, as further described in the Loan Agreement. Beginning March 1, 2022 and continuing until the Maturity Date, in addition to the monthly interest payment, a monthly payment of principal in the amount of $33,084 is due and payable on the first day of each month, as further described in the Note. The entire outstanding principal balance and any accrued and unpaid interest on the Sweetwater Loan is due and payable in full on the Maturity Date.
STAR III Sweetwater may voluntarily prepay the Sweetwater Loan and related sums due to the Lender following the first year of the Sweetwater Loan, provided that STAR III Sweetwater provides the Lender with prior notice of such prepayment and pays a prepayment fee, all in accordance with the terms of the Loan Agreement.
The performance of the obligations of STAR III Sweetwater under the Sweetwater Loan is secured by a Multifamily Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing with respect to the Sweetwater Property (the “Mortgage”). Additionally, pursuant to an Assignment of Management Agreement, STAR III Sweetwater assigned all of its rights under the Management Agreement to the Lender upon an event of default under any of the Loan Documents.
STAR III Sweetwater also entered into an Environmental Indemnity Agreement (the “Environmental Indemnity”), pursuant to which STAR III Sweetwater agreed to indemnify, defend and hold harmless the Lender and certain other parties identified in the Environmental Indemnity, from and against any actions, damages, claims or other liabilities that the Lender or such other parties may suffer or incur as a result of, among other things, (1) the actual or alleged presence of certain hazardous substances on or under the Sweetwater Property or any other property from which hazardous materials derived or allegedly derived from the Sweetwater Property, (2) any actual or alleged violation of any environmental laws applicable to the Sweetwater Property, (3) any breach of any representation or warranty made in the Environmental Indemnity by STAR III Sweetwater, (4) any failure by STAR III Sweetwater to perform any of its obligations under the Environmental Indemnity, (5) any remedial work as defined in the Environmental Indemnity or (6) the existence or alleged existence of any prohibited activity or condition as defined in the Environmental Indemnity.
The Company entered into a Guaranty of Non-Recourse Obligations (the “Guaranty”) in connection with the Sweetwater Loan. The Company absolutely, unconditionally and irrevocably guarantees to the Lender the full and prompt payment and performance when due of all amounts for which STAR III Sweetwater is personally liable under the Loan Documents, in addition to all costs and expenses incurred by the Lender in enforcing such Guaranty.
The material terms of the agreements described above are qualified in their entirety by the agreements attached as Exhibits 10.6, 10.7, 10.8, 10.9, 10.10 and 10.11 to this Current Report on Form 8-K and incorporated herein by reference.
Item 7.01 | Regulation FD Disclosure. |
On January 18, 2017, the Company distributed a press release announcing the acquisition of the Sweetwater Property. The full text of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference into this Item 7.01.
The information furnished under Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Because it is impracticable to provide the required financial statements for the acquisition of the real property described in this Current Report on Form 8-K at the time of this filing, and no financial statements (audited or unaudited) are available at this time, the Company hereby confirms that the required financial statements will be filed as an amendment to this Current Report on Form 8-K no later than 71 days after the deadline for filing this Current Report on Form 8-K.
(b) Pro Forma Financial Information.
See Paragraph (a) above.
(d) Exhibits.
Exhibit | Description | |||
10.1 | Purchase and Sale Agreement and Joint Escrow Instructions, made and entered into as of December 2, 2016, by and between Steadfast Asset Holdings, Inc. and VR Sweetwater Limited Partnership, with First American Title Insurance Company, Inc. as the title company | |||
10.2 | First Amendment to Purchase and Sale Agreement and Joint Escrow Instructions, made and entered into as of January 5, 2017, by and between Steadfast Asset Holdings, Inc. and VR Sweetwater Limited Partnership | |||
10.3 | Assignment and Assumption of Purchase Agreement, dated as of January 12, 2017, by and between Steadfast Asset Holdings, Inc. and STAR III Sweetwater, LLC | |||
10.4 | Property Management Agreement, entered into as of January 12, 2017, by and between Steadfast Management Company, Inc. and STAR III Sweetwater, LLC | |||
10.5 | Construction Management Services Agreement, entered into as of January 12, 2017, by and between STAR III Sweetwater, LLC and Pacific Coast Land & Construction, Inc. | |||
10.6 | Multifamily Note, made as of January 12, 2017, by STAR III Sweetwater, LLC, in favor of Berkeley Point Capital LLC | |||
10.7 | Multifamily Loan and Security Agreement, made as of January 12, 2017, by and between STAR III Sweetwater, LLC and Berkeley Point Capital LLC | |||
10.8 | Multifamily Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of January 12, 2017, by STAR III Sweetwater, LLC for the benefit of Berkeley Point Capital LLC | |||
10.9 | Environmental Indemnity Agreement, dated as of January 12, 2017, by STAR III Sweetwater, LLC to and for the benefit of Berkeley Point Capital LLC | |||
10.10 | Guaranty of Non-Recourse Obligations, dated as of January 12, 2017, by Steadfast Apartment REIT III, Inc. to and for the benefit of Berkeley Point Capital LLC | |||
10.11 | Assignment of Management Agreement, dated as of January 12, 2017, by and among STAR III Sweetwater, LLC, Berkeley Point Capital LLC and Steadfast Management Company, Inc. | |||
99.1 | Press release, dated January 18, 2017 | |||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
STEADFAST APARTMENT REIT III, INC. | |||
Date: | January 18, 2017 | By: | /s/ Kevin J. Keating______________ |
Kevin J. Keating | |||
Treasurer | |||