The Parking REIT Announces Increased Expenses in 2019, Suspension of Preferred Distributions
April 13, 2020
In the following letter to shareholders, Michael V. Shustek, Chairman and CEO of the Parking REIT nontraded REIT, described results for 2019. Notably, 2019 revenues of $22.8 million, an increase of $0.7 million from 2018, were heavily impacted by increases in professional fees to $8.5 million in 2019 compared to $3.6 million in 2018, and an increase in directors & officers liability insurance premiums of approximately $2.0 million. Those two line items alone constituted a drain of roughly 46% of the REIT’s revenues. Coupled with the impact of COVID-19 on parking utilization, the REIT’s board acted on March 24 to suspend distributions on the REIT’s Series A and Series 1 preferred stock. Those distributions will continue to accrue until they are declared by the Board or are paid at the time of a liquidity event.
April 13, 2020
Dear Shareholder,
I’m writing to bring your attention to the work of The Parking REIT management and Board of Directors over the recent months. We continue to focus on managing our portfolio of parking assets, exploring options to provide liquidity to our shareholders, and preparing for the fallout from the COVID-19 pandemic.
2019 Results
In 2019, we saw strong operating performance across our portfolio of parking investments, while costs weighed on the company’s performance. Revenues were $22.8 million in 2019, compared to $22.1 million in 2018. Increases in general and administrative expenses and professional fees are a drag on the company’s operating results. The company faces significant legal expenses related to pending lawsuits, an SEC investigation, and legal and consulting fees in connection with our exploration of potential strategic alternatives to provide liquidity to stockholders. As a result, professional fees were $8.5 million in 2019, compared to $3.6 million in 2018. Increases in directors & officers liability insurance premiums added approximately $2.0 million to our general and administrative expenses in 2019. The increasing expenses and general economic conditions are expected to prohibit The Parking REIT management and board of directors from considering a reinstatement of common stock and preferred stock distributions for the foreseeable future.
1099s
The company paid no common stock distributions in 2019, therefore no 1099s were sent to our common shareholders. Preferred stockholders did receive 1099s for 2019.
Liquidity Event
Management and the board understand that many shareholders are eager for the company to complete a liquidity event. In the past, management and the board pursued listing the company’s common shares on a national stock exchange. That option for providing liquidity is not currently viable. In mid-2019, the company engaged financial and legal advisors and began to explore a broad range of potential strategic alternatives, including potential sales of assets, a potential sale of the company or a portion thereof, a potential strategic business combination or a potential liquidation. The full exploration of liquidity options can take considerable time to complete. The work toward a liquidity event continues, however there can be no assurance that the company will cause a liquidity event to occur in the near future or at all. If terms on a liquidity transaction are reached, we will make an announcement, and our shareholders will have an opportunity to vote on the transaction, depending on how the transaction is structured.
COVID-19
We are monitoring the COVID-19 pandemic very closely, and are taking measures to shore up the business in response. Many state and local governments are currently restricting public gatherings or requiring people to shelter in place, which has in some cases eliminated or severely reduced the demand for parking. We are in preliminary discussions with some of our tenants and currently expect to grant relief to some of our tenants to defer rent payments as a result of their estimated lost revenues from the current COVID-19 pandemic; however, there can be no assurance we will reach an agreement with any tenant or if an agreement is reached, that any such tenant will be able to repay any such deferred rent in the future. We also expect that the amount of percentage rents that we collect will be significantly reduced in the near- to medium-term as a result of the pandemic.
Preferred Distributions
The board convened on Tuesday, March 24th to take certain actions to address the current and future economic disruption. Effective immediately, the Board suspended distributions paid on Series A and Series 1 Preferred Stock until further notice. These unpaid preferred distributions will continue to accrue until such time as they are declared by our Board or otherwise become payable upon a liquidity event. There can be no assurance as to if or when such distributions will be declared or that a liquidity event will occur.
Share Repurchase Plan
Our share repurchase program was suspended in May 2018, other than with respect to hardship repurchases in connection with a shareholder’s death. Due to the Company’s need to reserve cash in preparation for fallout from the COVID-19 pandemic, among other factors, the Board voted on Tuesday, March 24th to also suspend hardship repurchases in connection with a shareholder’s death.
For more information about The Parking REIT, including our published financial results and other public filings, please visit www.TheParkingREIT.com and click Recent Filings. We will continue to update you as the situation develops.
Sincerely,
Michael V. Shustek
Chairman & CEO
Source: SEC
