ATLANTA, Nov. 19, 2014 /PRNewswire/ -- Roberts Realty
Investors, Inc. (NYSE MKT: RPI) (the "Company") today announced
that it has signed a definitive stock purchase agreement with A-III
Investment Partners LLC (A-III), a joint venture between affiliates
of Avenue Capital Group and C-III Capital Partners LLC, which is
controlled by Island Capital Group LLC. Under the agreement,
A-III has agreed to purchase $12.0
million of the Company's common stock at a purchase price
per share to be determined based on an estimate of the Company's
closing date net asset value, which is currently expected to be
approximately $1.40 per share.
At the closing, the Company also would issue to A-III warrants to
purchase up to an additional $38.0
million of the Company's common stock at an exercise price
equal to the same purchase price per share. The
actual purchase price for the shares, number of shares to be issued
and exercise price of the warrants will be determined immediately
before closing and will be subject to a post-closing adjustment
upon the sale of the Company's four existing properties as
discussed further below.
The transaction, which has been unanimously approved by the
Company's board of directors, is subject to receipt of shareholder
approval at a special meeting of the Company's shareholders,
expected to be held by mid-February of 2015, and other customary
closing conditions. Upon the closing, a change in control of
the Company would result, with A-III becoming the largest single
shareholder of the Company, owning approximately 46% of the
Company's outstanding shares of common stock, or approximately 41%
on a diluted basis assuming conversion of the outstanding units of
limited partnership interest of the Company's operating partnership
into Company common stock.
Avenue Capital Group is a global investment firm with
approximately $14.1 billion under
management. Island Capital Group is a leading real estate
merchant banking firm that controls portfolio companies and
investment funds – including C-III Capital Partners – that
collectively own, manage and/or are the servicer for approximately
$135 billion of commercial real
estate related assets.
Mr. Charles S. Roberts, Roberts
Realty's President, Chief Executive Officer, and Chairman of the
Board of Directors, stated: "Since June 2011, we have evaluated a range of strategic
alternatives with the goal of maximizing long-term shareholder
value, including a potential sale, merger, other business
combination, or recapitalization of the Company. We are
pleased to have reached this agreement with Island Capital Group
and Avenue Capital Group, two global investment managers. If
the transaction closes as we expect, the Company will repay all of
its debt, will have approximately $1.75
million in working capital, and will be under new leadership
with access to a wide array of new potential sources of capital and
investment opportunities to fuel the future growth of the
Company."
Mr. Edward Gellert, Senior
Portfolio Manager - Avenue Real Estate Strategy, noted: "We
are pleased to join with C-III Capital Partners in this investment
and look forward to using our combined network of industry
relationships to identify new opportunities to create value for
shareholders."
Mr. Robert Lieber, Executive
Managing Director of Island Capital Group and C-III Capital
Partners, added: "We are eager to partner with the principals of
Avenue and their team of seasoned professionals. This
investment in the Company presents us with a unique opportunity to
continue enhancing our portfolio of strategic real estate
assets."
Immediately after the closing, the Company's board would be
composed of seven directors: two directors affiliated with
A-III, four new independent directors, and Mr. Roberts, who will
continue to serve as a director of the Company for one year after
the closing. The Company's current management would be
replaced by A-III Manager LLC, an external management company owned
by A-III, pursuant to a management agreement between the Company
and A-III Manager. Key personnel of A-III Manager or its
affiliates will be appointed as officers of the Company. The
Company's headquarters would be moved to New York City and the name of the Company
would be changed.
The post-closing company is expected to pursue a flexible real
estate investment strategy and does not currently anticipate
focusing on developing and constructing Atlanta multifamily apartment
communities. Given the change in focus of the Company's
business, it is expected that the Company would sell its four land
parcels, all of which are under development and are located in
metropolitan Atlanta. If the actual net sales proceeds of the
four properties are less than the estimated amount used to
calculate the closing date net asset value, the Company will issue
to A-III, as a purchase price adjustment, an additional number of
shares of common stock, and the exercise price of the warrants will
be reduced to be equal to the adjusted purchase price per
share.
After the closing, Mr. Roberts will be an Executive Vice
President of the Company until one year from the closing
date. He will be responsible for the marketing process for
the properties, including positioning the properties for sale,
identifying buyers, and negotiating the terms of sale. All
sales will be subject to approval by the Company's board of
directors.
During the due diligence phase of the transaction, an error was
discovered in the calculation of the 95% gross income test for
purposes of the Company's qualification as a REIT under the
Internal Revenue Code in the tax year ending December 31, 2009. As a result, the
Company's board of directors, including its audit committee,
concluded on November 17, 2014 that
the Company has failed to qualify to be taxed as a REIT for federal
income tax purposes for the tax year ending December 31, 2009 and for the periods since that
date, and, accordingly, the Company's previously issued financial
statements included in its SEC filings after December 31, 2008 should no longer be relied
upon. With the assistance of its independent accountants, the
Company is in the process of determining the effect of its failure
to qualify as a REIT during those periods on the Company's
previously filed historical financial statements and on its interim
financial statements for the three and nine month periods ended
September 30, 2014. When the
Company completes that determination, it will disclose it publicly
and make any required SEC filings. The Company expects to be
able to elect REIT status again in 2015 or 2016.
The Company's articles of incorporation presently limit
ownership by any one shareholder to 3.7% of the outstanding shares
of its common stock, except that Mr. Roberts can beneficially own
up to 35% of the outstanding shares. To permit A-III to
invest $12.0 million, the Company
agreed in the stock purchase agreement to amend its articles of
incorporation to eliminate the ownership restrictions as a
condition to closing.
The stock purchase agreement includes customary representations
and warranties, and the closing is subject to standard closing
conditions. Each party has the right to terminate the stock
purchase agreement for the reasons described in the stock purchase
agreement.
A-III's financial advisor was The CenterCap Group, LLC.
A-III was represented by Hunton & Williams LLP. Roberts
Realty was represented by Nelson Mullins
Riley & Scarborough LLP and Alston & Bird
LLP.
The above description of the proposed transaction is only a
summary, and you are encouraged to read the Company's Current
Report on Form 8-K, which the Company intends to file shortly after
this press release is issued and which will be available free of
charge at the SEC's website at www.sec.gov. The stock
purchase agreement will be filed as an exhibit to that Form
8-K.
About Roberts Realty
Roberts Realty Investors, Inc. is a real estate company located
in Atlanta, Georgia that owns
(a) three tracts of land totaling 71 acres, zoned for 584
multifamily apartment units, that are in various phases of
development; and (b) a 10-acre transit-oriented site that is zoned
for a mixed-use development consisting of 236 multifamily units,
120 condominium units, 210,000 square feet of office space, and
56,000 square feet of street-level retail space. All four
properties are located in the north Atlanta metropolitan area.
About A-III Investment Partners LLC
A-III is a 50/50 joint venture between Infinity REIT Partners
LLC and C-III REIT Manager LLC.
The sole member of Infinity REIT Partners LLC is Avenue Real
Estate Management LLC, an affiliate of Avenue Capital Group, a
global investment firm that manages approximately $14.1 billion in assets and is headquartered in
New York, with offices in
London, Luxembourg, Madrid, Munich, and four offices throughout
Asia. The firm was founded in 1995 by Marc Lasry and Sonia
Gardner. Avenue draws on the skills and experience of
approximately 200 employees and its two founders.
The sole member of C-III REIT Manager LLC is C-III Capital
Partners LLC, a leading commercial real estate services company
engaged in a broad range of activities, including primary and
special loan servicing (it is one of the largest special servicers
in the U.S.), loan origination, fund management, CDO management,
principal investment, online capital markets, title services and
commercial and multifamily property management. C-III's
principal place of business is located in Irving, TX, with additional offices in
New York, NY (C-III corporate and
Island Capital headquarters), Greenville,
SC and Nashville, TN.
C-III Capital Partners is controlled by Island Capital Group LLC, a
leading international real estate merchant banking firm
specializing in real estate investing, real estate operating
businesses and real estate securities. Island Capital was
founded by Andrew Farkas in 2003
immediately following the merger of Insignia Financial Group Inc.
(which he founded in 1990) with CB Richard Ellis.
A-III is the sole member of A-III Manager LLC, which will be the
external manager for the Company upon the closing of the
transaction. The Company expects that A-III Manager LLC will
use resources provided to it by A-III and its affiliates, as
necessary.
Forward Looking Statements
This press release contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as
amended. Some of the forward-looking statements relate to our
intent, belief, or expectations regarding the Company's future
prospects and strategy, the determination of the effects of the
Company's failure to qualify as a REIT on its financial statements,
the closing of the stock purchase agreement, the timing of such
closing, the estimated purchase price per share and warrant
exercise price, obtaining the required shareholder approval for the
stock purchase agreement and related matters and for the amendment
to the Company's articles of incorporation, and the Company's
election to become a REIT again. These statements involve
risks and uncertainties that include: the timing, expense, and
effects of the Company's failure to qualify as a REIT; the
satisfaction of conditions to closing, including obtaining the
requisite approval of the Company's shareholders; the date of the
special meeting of shareholders; the timing of the closing of the
transaction; the actual net proceeds from the sale of the Company's
properties; the final purchase price per share and the final
exercise price of the warrants as adjusted post-closing according
to the stock purchase agreement; and whether the Company will be
able in the future to satisfy the IRS' requirements to become a
REIT again. For these forward-looking statements, we claim
the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of
1995. For more information about other risks and
uncertainties we face, please see the sections in our most recent
annual report on Form 10-K and our most recent quarterly report on
Form 10-Q entitled "Risk Factors."
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in
respect of the approval of the proposed issuance of securities to
A-III by the Company, the proposed amendment to the Company's
articles of incorporation, and related matters. The Company
intends to file relevant materials with the SEC, including the
Company's proxy statement in preliminary and definitive form.
Shareholders of the Company are strongly advised to read all
relevant documents filed with the SEC, including the Company's
definitive proxy information statement when it is filed with the
SEC and mailed, because these documents will contain important
information about the proposed transaction. These
documents will be available at no charge on the SEC's website at
www.sec.gov. In addition, the Company will also provide
copies of these documents for free to investors who direct their
requests to Roberts Realty Investors, Inc., c/o Secretary, 375
Northridge Road, Suite 330, Atlanta,
Georgia 30350.
Participants in Solicitation
The Company and its directors and executive officers may be
deemed to be participants in the solicitation of proxies from the
holders of the Company's common stock in respect of the proposed
transaction. Information about the directors and executive
officers of the Company is set forth in the Company's Annual Report
on Form 10-K, which was filed with the SEC on March 6, 2014. Investors may obtain
additional information regarding the interest of those participants
by reading the definitive proxy statement regarding the proposed
transaction when it becomes available.
SOURCE Roberts Realty Investors, Inc.
