RW Holdings Inc., a publicly-traded, unlisted real estate investment trust (“RW”) formerly known as Rich Uncles NNN REIT Inc.. (the “Company” or “RWH”) plans to resume a primary offering for Class C shares on or about June 30, 2017, with subscriptions completed by that date and benefiting from a new price of $7 per share. The company revised its net asset value per share to $6.00, compared with $10.27 at the end of the first quarter of 2017. Due to the new share valuation, the company has reduced its dividend ratio from $0.7 shares per ordinary share to $0.35 shares, representing a reduction of around 20%!
Non-trade REITs are generally very risky investments for investors in a good economic environment. Many investors suing their financial advisors and broker-dealers for misrepresenting the risk. Often investors get paid pennies on the dollars for these types of investments. A recent example is NorthStar REIT where investors are being offered less than 30% of the value on the secondary market.
The RW also provided information on the status of its existing properties in New York City. The property was bought more than two years ago for $12.7 million and now has a lease of less than ten years. In early 2018, 24 Hour Fitness negotiated a 12-year extension to the lease after purchasing the property. This property has approximately 1,500 square feet of retail space and an average annual rent of $2.5 million.
“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,” RW stated 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.”
Rich Uncles states that they have no reason to believe that the Las Vegas market will be without 24-hour fitness in the near future. The company said it had entered into negotiations with other gym operators to take over the lease. They will see the successful results of a possible bankruptcy procedure combined with the current market situation and the potential for a successful outcome of the possible bankruptcy procedure.
In addition, the property’s lender has agreed to temporarily reduce the monthly mortgage payment by $8,000 over the next few years. The NNN reit real estate portfolio includes 45 properties, including office and retail properties in Las Vegas and several residential properties in New York City, Los Angeles, New Jersey, and California.