Procaccianti Hotel REIT, Inc. Public Nontraded REIT Offering Declared Effective by SEC
August 20, 2018 | James Sprow | Blue Vault
Procaccianti Hotel REIT, Inc. was formed on August 24, 2016, to acquire and own a diverse portfolio of hospitality properties consisting primarily of existing select-service, extended-stay, and compact full-service hotel properties throughout the United States. It is externally managed by Procaccianti Hotel Advisors, LLC, which is its advisor. The advisor is an affiliate of Procaccianti Companies, Inc., its sponsor.
The offering is for up to $550,000,000 in shares of common stock, including $500,000,000 in shares of common stock pursuant to its primary offering, consisting of the following three share classes: Class K-I common stock at an initial offering price of $9.50 per share (up to $125,000,000 in shares), Class K common stock at an initial offering price of $10.00 per share (up to $125,000,000 in shares), and Class K-T common stock at an initial offering price of $10.00 per share (up to $250,000,000 in shares), which reflect the estimated net asset value per share of each of the K-I Shares, K Shares, and K-T Shares as of February 28, 2018. The offering also includes $50,000,000 in shares of common stock pursuant to its distribution reinvestment plan, or DRIP. The shares of common stock are being offered on a “best efforts” basis through S2K Financial LLC, the dealer manager.
The sale of K shares includes a selling commission of up to 5% and K-T shares have selling commissions of up to 3% of the gross offering proceeds. K-I shares do not have a selling commission. Dealer manager fees are up to 3% of the gross offering proceeds on all share classes. Class K-T shares have stockholder servicing fees of 1.0% annualized based upon the estimated NAV.
During 2017 the REIT entered into an option agreement with the right to purchase up to a 51% interest in the Procaccianti Convertible Fund, LLC, or PCF, an affiliated entity that owned two select service hotel properties. On March 29, 2018, the REIT purchased a 51% membership interest in PCF for $8.3 million.
Back on September 30, 2016, Procaccianti Hotel REIT had commenced a private offering of K Shares and units, which are comprised of four K Shares and one A Share, or Units, with a targeted maximum offering of $150,000,000 in K Shares (including K Shares sold as part of a Unit) to accredited investors only pursuant to a confidential private placement memorandum. At the termination of the private offering, the REIT had sold approximately $15,382,755 in K Shares and A Shares. It terminated the private offering prior to commencing the public offering. Due to the proceeds raised in their private offering and its existing operations, there is no minimum number of shares it must sell before accepting subscriptions in the public offering.
The private offering provided the REIT with the funds sufficient to pay the selling commissions, dealer manager fees, stockholder servicing fees, the difference between $10.00 per share and the $9.50 per share initial purchase price of K-I shares purchased in the primary offering, the difference between any discounted purchase price and the initial offering prices of K, K-I and K-T shares, and other organization and offering expenses related to the offering.
On May 29, 2018, the Company’s board of directors authorized the payment of $102,690 in distributions to the holders of K shares, which had accrued on a daily basis since January 2018. The daily rate equates to a 6.0% annualized distribution rate based upon a $10.00 share price.
Procaccianti Companies was founded in 1958 and has made over $10 billion in transactions in diversified real estate investments. Over the past thirty years, the company has grown to become one of the largest privately held owner/operators of hotels in the United States, including the industry’s top brands like InterContinental, Hilton, Hyatt, Marriott, Starwood, and others. Within the Procaccianti Companies are operating companies that span hotels and resorts, property management, asset management, construction, restaurant management, parking and even a vineyard. TPG Hotels & Resorts, Inc., an affiliate of the REIT’s sponsor and advisor, may manage all or substantially all of the REIT’s hotel properties. As of August 15, 2018, TPG Hotel REIT Investor, LLC, owned approximately $2,954,095 in A shares, which were issued in the private placement.
Colony S2K Holdings LLC owns S2K Financial LLC, the dealer manager for the public offering. Colony S2K Servicing LLC owns 125,000 B shares issued in the private placement. The B shares were issued pursuant to the services agreement in exchange for the services it will provide the REIT and its advisor. The B shares may be entitled to receive special distributions with respect to excess cash and remaining liquidation cash equal to 12.5% of such excess cash and 12.5% of such remaining liquidation cash.
Colony S2K, through its wholly-owned broker-dealers, S2K Financial and NorthStar Securities, is a distributor of institutional-based investment programs.
Sources: SEC, www.procaccianti.com, Blue Vault
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