Starwood Property Trust,Inc. (NYSE:STWD) Files An 8-K Unregistered Sales of Equity SecuritiesItem 3.02. Unregistered Sale of Equity Securities.
On December28, 2017, certain parties (the “Contributors”) contributed eight properties with 1,740 units to SPT Dolphin Intermediate LLC (“SPT Dolphin”), a newly-formed subsidiary of Starwood Property Trust,Inc. (the “Company”), as the first phase of its acquisition of a portfolio of institutional-quality affordable multifamily properties located in Florida, comprised of an aggregate of 28 properties with 6,185 units (collectively, the “Portfolio”), as described further under Item 8.01 below. The Portfolio is being acquired for approximately $600 million with a combination of the issuance of ClassA Units (as defined below) by SPT Dolphin, cash and debt financing.
In connection with the closing of the first phase of the transaction, on December28, 2017, among other consideration, the Contributors and certain direct and indirect owners of the Contributors (the “ClassA Unitholders”) received 3,278,695 ClassA units of limited liability company interests in SPT Dolphin (the “ClassA Units”), subject to adjustment to the terms of SPT Dolphin’s operating agreement, with an agreed value of $21.7045 per ClassA Unit. The value (and number) of ClassA Units to be issued in connection with the closings of the second and third phases of the transaction (as described further under Item 8.01 below) will be determined based on the average of the daily closing prices of the Company’s common stock over the 20 trading days prior to the fifth business day before the applicable closing date.
The ClassA Unitholders will have the right, commencing after six months from the date of issuance of any ClassA Units, to cause SPT Dolphin to redeem such ClassA Units for cash or, in the sole discretion of SPT Dolphin’s managing member (which is a wholly-owned subsidiary of the Company), shares of the Company’s common stock on a one-for-one basis, subject to certain anti-dilution adjustments. In connection with the issuance of the ClassA Units, the ClassA Unitholders (and their permissible assignees and transferees) received certain registration rights with respect to the shares of the Company’s common stock, if any, issued upon the redemption of ClassA Units.
The ClassA Units issued in connection with the closing of the first phase of the transaction were issued (and the ClassA Units to be issued in connection with the closings of the second and third phases of the transaction will be issued) in reliance on the exemption from registration provided by Section4(a)(2)of the Securities Act of 1933.
Item 8.01. Other Events.
On January4, 2018, the Company announced that it has signed a definitive agreement to acquire a portfolio of institutional-quality affordable multifamily properties located in Florida, comprised of 28 properties with 6,185 units, for approximately $600 million. The Portfolio is 99% leased and is predominately located in Orlando, with smaller concentrations in the West Palm Beach, Tampa and Miami metropolitan statistical areas.
The Portfolio is being acquired with a combination of the issuance of ClassA Units by SPT Dolphin, cash and debt financing. The first phase of the transaction, consisting of the acquisition of eight properties with 1,740 units, closed on December28, 2017. The acquisition of the remaining 20 properties in the Portfolio is expected to close in two additional phases due to the timing of regulatory approvals and the assumption of in-place financing, which closings will also be subject to customary closing conditions. The Company expects to complete the remaining phases of the transaction by the end of the second quarter of 2018; however, there can be no assurance that the remaining phases will close within the contemplated timeframe or at all.
In connection with the transaction, the ClassA Unitholders (and certain entities through which the ClassA Unitholders directly or indirectly held (or hold) their interests in the properties acquired (or to be acquired) in the transaction) (collectively, the “Protected Partners”) received certain tax protection rights, including (i)a covenant by SPT Dolphin not to transfer any applicable Portfolio property generally prior to September30, 2027 (the “Tax Protection Period”) and (ii)a right to indemnification against certain tax liabilities incurred by a Protected Partner resulting from certain events (including a transfer made in breach of clause (i)above and the failure of SPT Dolphin to maintain a specified level of nonrecourse debt on the applicable properties during the Tax Protection Period).