Regency Affiliates, Inc. has announced the buyout of its self-storage minority partner. In 2016, Regency purchased five stand-alone self-storage facilities via a joint venture with SSCP Management LLC (SSCP) in the Harrisburg, Pa., area. The portfolio was acquired for a total purchase price of $35 million, of which $25.3 million was financed via a non-recourse, 10-year debt financing, with a four-year, interest-only period that ended in May 2020 and thereafter a 30-year amortization schedule. The debt financing, which is secured by the self-storage facilities, has a fixed interest rate of 5 percent per annum and matures on May 6, 2026.
Pursuant to the terms of the joint venture, Regency owned 97 percent of the common equity and SSCP owned 3 percent of the common equity. Shareholders earned a 7.5 percent per annum preferred distribution on their capital contributions. Surplus cash flow after the preferred distribution was allocated 80 percent to Regency and 20 percent to SSCP.
On Oct. 8, 2024, a subsidiary of Regency borrowed $5 million from an unrelated third-party, the proceeds of which were used to fund the acquisition of the 3 percent SSCP membership interests for $3 million and to pay-related expenses. The remaining funds are available for general corporate purposes. The $5 million loan accrues interest, payable monthly, at the rate of 10 percent per annum, and is payable in full on May 7, 2026, or sooner under certain circumstances, including upon repayment in full of the $25.3 million 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 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 we 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. They are currently invested in two assets: