Regency Affiliates Inc. recently announced the buyout of a self-storage minority partner. In 2016, Regency purchased five stand-alone self-storage facilities via a joint venture with SSCP Management LLC in the area of Harrisburg, Pa. The portfolio was acquired for a total purchase price of $35MM of which $25.3MM was financed via a non-recourse ten-year debt financing, with a four-year interest-only period that ended in May 2020 and thereafter a thirty-year amortization schedule. The debt financing, which is secured by the self-storage facilities, has a fixed interest rate of 5% per annum and matures on May 6, 2026. Pursuant to the terms of the joint venture, Regency owned 97% of the common equity and SSCP owned 3% of the common equity. Shareholders earned a 7.5% per annum preferred distribution on their capital contributions. Surplus cash flow after the preferred distribution was allocated 80% to Regency and 20% to SSCP.
On October 8, 2024, a subsidiary of Regency borrowed $5MM from an unrelated third party, the proceeds of which were used to fund the acquisition of the 3% SSCP membership interests for $3MM and to pay related expenses. The remaining funds are available for general corporate purposes. The $5MM loan accrues interest, payable monthly, at the rate of 10% per annum, and is payable in full on May 7, 2026, or sooner under certain circumstances, including upon repayment in full of the $25.3MM loan secured by the self-storage facilities. The loan is prepayable at any time without premium or penalty, is secured by a pledge of Regency’s membership interests in the self-storage facility, and includes certain customary covenants, representations and events of default. In addition, while the loan remains outstanding, the lender is afforded the opportunity to purchase the self-storage facilities in the event that the Regency elects to sell the properties. As a result of the SSCP membership interest acquisition, Regency now owns 100% of the equity interests in the five self-storage facilities.
Laurence Levy, CEO and CFO of Regency commented: “We are excited about this acquisition for Regency and believe the transaction terms are favorable. Regency will also benefit from the additional liquidity and flexibility of the loan proceeds remaining post-acquisition.”
Regency Affiliates Inc. invests in businesses that generate attractive, predictable and sustainable returns on capital. The company has a portfolio of five stand-alone self-storage facilities in the area of Harrisburg, Pa., and a 50% limited partnership interest in the Security West Complex located on 34.3 acres in Woodlawn, Maryland. The facility was occupied under a lease with the United States General Services Administration until November 1, 2023, since which the facility has been vacant.
