Item 1.01 Entry into a Material Definitive Agreement.
Preferred Equity Investment Agreement
On November 22, 2022, Broad Street Operating Partnership, LP (the "Operating
Partnership"), the operating partnership of Broad Street Realty, Inc. (the
"Company"), and Broad Street Eagles JV LLC, a newly formed subsidiary of the
Operating Partnership (the "Eagles Sub-OP"), entered into a Preferred Equity
Investment Agreement (the "Investment Agreement") with CF Flyer PE Investor LLC
(the "Fortress Member"), an affiliate of Fortress Investment Group LLC
("Fortress"), pursuant to which the Fortress Member invested $80.0 million in
the Eagles Sub-OP in exchange for a preferred membership interest (such
interest, the "Preferred Interest" and such investment, the "Preferred Equity
Investment"). The terms, rights, obligations and preferences of the Preferred
Interest are set forth in the Operating Agreement (as defined below). The
Company's board of directors (the "Board") unanimously approved the Investment
Agreement, the Preferred Equity Investment and the related agreements and
transactions contemplated thereby. The closing under the Investment Agreement
occurred on November 23, 2022.
In connection with the Preferred Equity Investment, (i) the Fortress Member was
admitted as a member of the Eagles Sub-OP, (ii) the Operating Partnership, the
Fortress Member and the Independent Manager (as defined in the Operating
Agreement) entered into an Amended and Restated Limited Liability Company
Agreement of the Eagles Sub-OP (the "Operating Agreement"), (iii) the Operating
Partnership contributed to the Eagles Sub-OP its subsidiaries that, directly or
indirectly, own the properties known as Brookhill Azalea Shopping Center, Vista
Shops, Hollinswood Shopping Center, Avondale Shops, Greenwood Village Shopping
Center and Lamar Station Plaza East, (iv) the Company's subsidiary, Broad Street
BIG First OP LLC (the "Basis Sub-OP"), redeemed 100% of the preferred membership
interests in the Basis Sub-OP held by a subsidiary of Basis Management Group,
LLC for $8.5 million ("Basis Redemption"), (v) the previously announced LSP
Merger (as defined below) was consummated, (vi) the previously announced Midtown
Row Acquisition (as defined below) was consummated, (vii) the previously
announced acquisition of a land parcel adjacent to Lamar Station Plaza for a
purchase price of $2.3 million was completed by a subsidiary of the Eagles
Sub-OP, (viii) the Company's term loans and credit facility with MVB Bank, Inc.
(the "MVB Loans") were paid in full, (ix) the loan secured by the property known
as Lamar Station Plaza East was paid in full and (x) the Company exercised its
option to extend the maturity date of the senior secured term loan (the "Basis
Term Loan") with Big Real Estate Finance I, LLC to January 1, 2024. The proceeds
from the Preferred Equity Investment were used to fund all or a portion of the
foregoing transactions, to pay transaction costs and for working capital.
The Investment Agreement contains customary representations and warranties made
by the Operating Partnership and the Fortress Member, and certain of the
Operating Partnership's representations and warranties are qualified by
information included in schedules to the Investment Agreement.
In connection with the Preferred Equity Investment, the Company, the Operating
Partnership and the Eagles Sub-OP, as applicable, entered into the following
agreements, which are described below (such documents, the "Transaction
Documents"):
•
the Operating Agreement;
•
Governance Agreement, dated November 22, 2022, by and between the Company, the
Fortress Member and the other parties named therein (the "Governance
Agreement");
•
Warrant to Purchase Common Stock, dated November 22, 2022, by and between the
Company and the Fortress Member (the "Fortress Warrant");
•
Cash Flow Pledge Agreement, dated November 22, 2022, by the Operating
Partnership in favor of the Fortress Member (the "Cash Flow Pledge");
•
Guaranty of Recourse Obligations, dated November 22, 2022, by the Company for
the benefit of the Fortress Member (the "Company Guaranty"); and
•
Registration Rights Agreement, dated November 22, 2022, by and between the
Company and the Fortress Member (the "Registration Rights Agreement").
The foregoing description of the Investment Agreement does not purport to be
complete and is qualified in its entirety by reference to the Investment
Agreement, which is filed as Exhibit 10.1 hereto and incorporated herein by
reference.
Operating Agreement
Management Rights
The Operating Partnership serves as the managing member of the Eagles Sub-OP.
The approval of the Fortress Member, however, is required for certain Major
Actions (as defined in the Operating Agreement), including, but not limited to:
(i) the adoption and approval of annual corporate and property budgets; (ii) the
. . .
Item 2.01 Completion of Acquisition or Disposition of Assets.
Midtown Row
On November 23, 2022, a wholly owned subsidiary of the Eagles Sub-OP completed
the previously announced acquisition of the mixed-use property in Williamsburg,
Virginia known as Midtown Row (such property, "Midtown Row" and such
acquisition, the "Midtown Row Acquisition"), for $118.7 million in cash, 448,180
Common OP Units and 1,851,820 Preferred OP Units. The Midtown Row Acquisition
was completed pursuant to the previously announced purchase and sale agreement,
dated December 21, 2021, by and between the Company and BBL Current Owner, LLC
("BBL Current"). The cash portion of the purchase price was funded with proceeds
from the Midtown Row Mortgage (as defined below), the Fortress Mezzanine Loan
and the Preferred Equity Investment.
Midtown Row is a recently completed development, located adjacent to the College
of William and Mary and comprised of 240 student housing units with 620 beds,
which is 100% leased, and a retail component consisting of 63,573 square feet of
gross leasable area, which was 32% leased with annualized base rent ("ABR") per
square foot of $25.72 as of October 30, 2022. Retail tenants include California
Tortilla, Super Chix, Mezeh Grill, Pedego Electric Bikes and Shear Magic Salon.
As consideration in the Midtown Row Acquisition as a result of their direct or
indirect interests in BBL Current, (i) Mr. Jacoby received 97,086 Common OP
Units, (ii) Daniel J.W. Neal, a director of the Company, indirectly received
202,861 Common OP Units, (iii) Jeffrey H. Foster, a director of the Company,
received 33,810 Common OP Units, (iv) Mr. Yockey received 97,086 Common OP Units
and (v) Alexander Topchy, the Company's chief financial officer, received 17,337
Common OP Units. As previously disclosed, Mr. Jacoby serves as the chief
executive officer and a director of BBL Current, and the Company served as the
development manager for Midtown Row and serves as the property manager and the
leasing broker for the retail portion of Midtown Row. The Midtown Row
acquisition was unanimously approved by the Board, including its disinterested
directors.
Lamar Station Plaza Merger
On November 23, 2022, a wholly owned subsidiary ("LSP Merger Sub") of the Eagles
Sub-OP merged with and into BSV Lamont Investors LLC ("BSV Lamont") with BSV
Lamont surviving as a subsidiary of the Eagles Sub-OP (the "LSP Merger"). The
LSP Merger was completed pursuant to the previously announced agreement and plan
of merger, dated as of May 28, 2019 (as amended, the "LSP Merger Agreement"), by
and among the Company, Broad Street Operating Partnership, LP (the "Operating
Partnership"), LSP Merger Sub and BSV Lamont. Pursuant to the LSP Merger
Agreement, the Company issued an aggregate of 573,529 Common OP Units to the
prior investors in BSV Lamont as consideration in the LSP Merger. In addition,
the Company repaid approximately $7.8 million of bonds and loans held by Lamont
Street Partners, LLC ("Lamont Street") in connection with the LSP Merger.
As a result of the LSP Merger, the Eagles Sub-OP acquired Lamar Station Plaza, a
retail shopping center located in Lakewood, Colorado with approximately 187,000
square feet of gross leasable area that was 98% leased with ABR per square foot
of $11.06 as of November 22, 2022. Notable tenants include Casa Bonita, Ross
Dress for Less, Planet Fitness, Dollar Tree, Westfax Brewing Company and Dutch
Bros. Coffee.
In connection with the LSP Merger, the Company assumed a $15.5 million mortgage
loan secured by Lamar Station Plaza, which bears interest at one-month SOFR plus
a margin of 2.75% and matures on December 4, 2023.
As consideration in the LSP Merger as a result of their interests in BSV Lamont,
(i) Mr. Jacoby received 136,213 Common OP Units, (ii) Mr. Yockey received
136,213 Common OP Units and (iii) Mr. Topchy received 14,338 Common OP Units.
The consideration in the LSP Merger was negotiated between BSV Lamont and the
prior management team and Board of the Company prior to entering into the LSP
Merger Agreement on May 28, 2019.
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Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
MTR Loan
On November 22, 2022, in connection with the Midtown Row Acquisition, BSR
Midtown Current LLC, an indirect subsidiary of the Eagles Sub-OP ("Midtown
Current"), and American General Life Insurance Company and The Variable Annuity
Life Insurance Company (collectively, the "Mortgage Lender") entered into a loan
agreement (the "MTR Loan Agreement") pursuant to which the Mortgage Lender made
a senior secured term loan of $76.0 million (the "MTR Loan") to Midtown Current.
Pursuant to the MTR Loan Agreement, the MTR Loan is secured by a mortgage on
Midtown Row. The MTR Loan matures on December 1, 2027. The MTR Loan bears
interest at a rate equal to 6.48% per annum. Until December 1, 2025, payments
made on the MTR Loan will be interest-only. Midtown Current's obligations under
the MTR Loan Agreement are guaranteed by the Company.
The Company used the proceeds from the MTR Loan to pay part of the cash portion
of the purchase price for the Midtown Row Acquisition.
The MTR Loan Agreement contains certain customary representations and warranties
and affirmative negative and restrictive covenants, including certain property
related covenants for Midtown Row, including related to repairs, maintenance and
alterations. The Mortgage Lender has certain approval rights over renewals,
extensions or amendments of Material Leases (as defined in the MTR Loan
Agreement) and property management agreements for Midtown Row. The MTR Loan
Agreement includes a debt service coverage calculation based on Net Operating
Income (as defined in the MTR Loan Agreement) and the amounts due under the MTR
Loan Agreement for the period. A debt service coverage ratio below 1.15x gives
the Mortgage Lender the right to commence a Cash Management Period (as defined
in the MTR Loan Agreement). Under the MTR Loan Agreement, the Cash Management
Period would continue until the debt service coverage ratio has been met for two
consecutive quarters.
The MTR Loan Agreement provides for customary events of default, including
nonpayment of principal and other amounts when due, non-performance of covenants
(subject to notice and cure periods), breach of representations and warranties,
certain bankruptcy or insolvency events and sales, transfers or changes of
control not in accordance with the provisions of the MTR Loan Agreement. If an
event of default occurs and is continuing under the MTR Loan Agreement, the
Mortgage Lender may, among other things, require the immediate payment of all
amounts owed thereunder.
The foregoing description of the MTR Loan Agreement does not purport to be
complete and is qualified in its entirety by reference to the MTR Loan
Agreement, which is filed as Exhibit 10.10 hereto and incorporated herein by
reference.
Fortress Mezzanine Loan
On November 22, 2022, in connection with the Midtown Row Acquisition, Midtown
Parent and CF Flyer Mezz Lender LLC, an affiliate of Fortress (the "Mezzanine
Lender"), entered into a mezzanine loan agreement (the "Fortress Mezzanine Loan
Agreement") pursuant to which the Mezzanine Lender made a $15.0 million
mezzanine loan (the "Fortress Mezzanine Loan") to Midtown Parent. Pursuant to
the Fortress Mezzanine Loan Agreement, the Fortress Mezzanine Loan is secured by
100% of the membership interests in Midtown Current. The Fortress Mezzanine Loan
matures on December 1, 2027. Pursuant to the Fortress Mezzanine Loan Agreement,
a portion of the interest on the Fortress Mezzanine Loan will be paid in cash
(the "Current Interest") and a portion of the interest will be capitalized and
added to the principal amount of the Fortress Mezzanine Loan each month (the
"Capitalized Interest" and, together with the Current Interest, the "Mezzanine
Loan Interest"). The initial Mezzanine Loan Interest rate is 12% per annum,
comprised of a 5% Current Interest rate and a 7% Capitalized Interest rate. The
Capitalized Interest rate increases each year by 1%. Midtown Parent's
obligations under the Fortress Mezzanine Loan Agreement are guaranteed by the
Company.
The Company used the proceeds from the Fortress Mezzanine Loan to pay part of
the cash portion of the purchase price for the Midtown Row Acquisition.
The Fortress Mezzanine Loan Agreement contains certain customary representations
and warranties and affirmative negative and restrictive covenants, including
certain property related covenants for Midtown Row, including related to
repairs, maintenance and alterations. The Mezzanine Lender has certain approval
rights over renewals, extensions or amendments of Material Leases and property
management agreements for Midtown Row.
The Fortress Mezzanine Loan Agreement provides for customary events of default,
including nonpayment of principal and other amounts when due, non-performance of
covenants (subject to notice and cure periods), breach of representations and
warranties, certain bankruptcy or insolvency events and sales, transfers or
. . .
Item 3.02 Unregistered Sales of Equity Securities.
The information under Item 1.01 under the heading "Fortress Warrant" and under
Item 2.01 above regarding the issuance of OP Units as consideration in the
Midtown Row Acquisition and the LSP Merger is incorporated into this Item 3.02
by reference. The Fortress Warrant and the OP Units were issued pursuant to
exemptions from registration under Section 4(a)(2) of the Securities Act and/or
Rule 506 of Regulation D thereunder. Issuances of the Fortress Warrant and OP
Units were made only to persons who qualify as "accredited investors" as defined
under the Securities Act.
On November 23, 2022, in connection with the LSP Merger, the Company issued to
Lamont Street warrants to purchase 500,000 shares of Common Stock at an exercise
price of $0.01 per share (the "Lamont Street Warrants"). The Lamont Street
Warrants were issued pursuant to exemptions from registration under Section
4(a)(2) of the Securities Act and/or Rule 506 of Regulation D thereunder. Lamont
Street qualifies as an "accredited investor" as defined under the Securities
Act.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
In connection with the closing of the Preferred Equity Investment and pursuant
to the Governance Agreement, on November 22, 2022, the Board increased the size
of the board to eight directors and appointed Noah Shore as a member of the
Board, effective upon the closing. Mr. Shore will serve until the Company's 2023
annual meeting of stockholders or until his successor is duly elected and
qualifies. Mr. Shore has not been appointed to any Board committees at this
time.
Mr. Shore, age 49, currently serves as Managing Director and Head of Real Estate
Special Situations at Fortress, where he has worked since April 2007. Mr. Shore
has over 20 years of experience in real estate investment and development. For
the last 12 years, Mr. Shore has focused on debt and equity investments for the
Fortress Real Estate and Credit Funds and overseeing the fund's retail
investments. From December 1999 to April 2007, Mr. Shore served as Vice
President at The Taubman Company and focused on leasing and development of
shopping centers. Mr. Shore has a Bachelor of Science in Finance from the
University of Colorado at Boulder.
Pursuant to the Governance Agreement, Mr. Shore will not receive any
compensation from the Company or its affiliates in his capacity as a director.
Mr. Shore has entered into an indemnification agreement with the Company
substantially in the form attached as Exhibit 10.3 to the Company's Annual
Report on Form 10-K, filed on April 15, 2022.
The information under Item 1.01 above regarding the arrangements pursuant to
which Mr. Shore was selected to selected as a director is incorporated into this
Item 5.02 by reference.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
The required financial statements of the acquired properties will be filed in
accordance with Rule 8-06 of Regulation S-X under cover of Form 8-K/A as soon as
practicable, but in no event later than 71 days after the date on which this
initial Current Report was required to be filed.
(b) Unaudited Pro Forma Financial Information.
The required pro forma financial statements of the Company will be filed in
accordance with Rule 8-05 of Regulation S-X under cover of Form 8-K/A as soon as
practicable, but in no event later than 71 days after the date on which this
Current Report was required to be filed.
(d) Exhibits
Exhibit
No. Description
2.1* Agreement and Plan of Merger, dated May 28, 2019, by and among BSV
Lamont Investors LLC, MedAmerica Properties Inc., Broad Street Operating
Partnership, LP and BSV Lamont Merger Sub LLC. (Incorporated by
reference to Exhibit 2.13 to the Company's Current Report on Form 8-K,
filed on May 31, 2019).
2.2* First Amendment to Agreement and Plan of Merger, dated as of November
27, 2019, by and among BSV Lamont Investors LLC, MedAmerica Properties
Inc., Broad Street Operating Partnership, LP and BSV Lamont Merger Sub
LLC. (Incorporated by reference to Exhibit 2.13 to the Company's Current
Report on Form 8-K, filed on December 3, 2019).
2.3* Second Amendment to the Agreement and Plan of Merger, dated as of May
28, 2019, by and among BSV Lamont Investors LLC, Broad Street Operating
Partnership, LP, MedAmerica Properties Inc. and BSV Lamont Merger Sub
LLC.
--------------------------------------------------------------------------------
(Incorporated by reference to Exhibit 10.11 to the Company's Current
Report on Form 8-K, filed on December 27, 2019).
10.1 Preferred Equity Investment Agreement, dated November 22, 2022, by and
between Broad Street Operating Partnership, LP, Broad Street Eagles JV
LLC and CF Flyer PE Investor LLC.
10.2 Amended and Restated Limited Liability Company Agreement of Broad
Street Eagles JV LLC, dated November 22, 2022, by and between Broad
Street Operating Partnership, LP, CF Flyer PE Investor LLC and the
Independent Manager (as defined therein).
10.3 Governance Agreement, dated November 22, 2022, by and between Broad
Street Realty, Inc., CF Flyer PE Investor LLC and the other parties
named therein.
10.4 Warrant to Purchase Common Stock, dated November 22, 2022, by and
between Broad Street Realty, Inc. and CF Flyer PE Investor LLC.
10.5 Cash Flow Pledge Agreement, dated November 22, 2022, by Broad Street
Operating Partnership, LP in favor of CF Flyer PE Investor LLC.
10.6 Registration Rights Agreement, dated November 22, 2022, by and between
Broad Street Realty, Inc. and CF Flyer PE Investor LLC.
10.7 Amendment No.1 to the Agreement of Limited Partnership of Broad Street
Operating Partnership, LP, dated November 22, 2022.
10.8* Purchase and Sale Agreement, dated December 21, 2021, by and among
Broad Street Realty, Inc. and BBL Current Owner, LLC (Incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K,
filed on December 27, 2021).
10.9* Third Amendment and Reinstatement of Purchase and Sale Agreement dated
September 1, 2022, by and among Broad Street Realty, Inc. and BBL
Current Owner LLC (Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K, filed on September 6, 2022).
10.10 Loan Agreement, dated November 22, 2022, by and between American
General Life Insurance Company and The Variable Annuity Life Insurance
Company, as lender, and BSR Midtown Current LLC, as borrower.
10.11 Mezzanine Loan Agreement, dated November 22, 2022, by and between CF
Flyer Mezz Lender LLC, as lender, and BSR Midtown Current Parent LLC, as
borrower.
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* Previously filed
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the
meaning of the U.S. federal securities laws. These statements are based on
current expectations of the Company's management with respect to the
transactions and other matters described in this Current Report on Form 8-K (the
"Transactions"). While the Company's management believes the assumptions
underlying its forward-looking statements and information are reasonable, such
information is necessarily subject to uncertainties and may involve certain
risks, many of which are difficult to predict and are beyond the control of the
Company's management. These risks include, but are not limited to: the ability
to recognize the benefits of the Transactions; the amount of the costs, fees,
expenses and charges related to the Transactions; the Company's substantial
leverage as a result of indebtedness incurred and preferred equity issued in
connection with the Transactions, which could adversely affect the Company's
ability to pay cash dividends and meet other cash needs; the Company's ability
to repay, refinance, restructure and/or extend its indebtedness as it comes due,
including in connection with the contribution of the Excluded Properties to the
Eagles Sub-OP; the occurrence of a Trigger Event under the Operating Agreement,
including as a result of the failure to contribute the Excluded Properties to
the Eagles Sub-OP by the applicable outside date; the availability of financing
and capital to the Company; the Company's ability to identify, finance,
consummate and integrate additional acquisitions or investments; adverse
economic or real estate developments, either nationally or in the markets in
which the Company's properties are located; adverse changes in financial markets
or interest rates; the nature and extent of competition for tenants and
acquisitions; other factors affecting the retail industry or the real estate
industry generally; and other risks that are set forth under "Risk Factors" in
the Company's Annual Report on Form 10-K for the year ended December 31, 2021
and other documents filed by the Company with the SEC from time to time. All
forward-looking statements speak only as of the date of this Current Report on
Form 8-K. All subsequent written and oral forward-looking statements
attributable to us or any person acting on our behalf are qualified by the
cautionary statements in this section. Except as otherwise may be required by
law, the Company undertakes no obligation to update or publicly release any
revisions to forward-looking statements to reflect events, circumstances or
changes in expectations after the date of this Current Report on Form 8-K.
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