AMREP Corp. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by AMREP Corporation (NYSE: AXR) on June 15, 2020. The filing discloses the acquisition of approximately 28 acres in Bernalillo County, New Mexico, by its subsidiary Lavender Fields, LLC ("LF"). The property, known as the Meso AM subdivision, is planned for development into 82 residential lots.
Key Financial Metrics and Obligations
The filing details two primary financing arrangements related to the acquisition and development of the Meso AM property:
- Acquisition Financing: A deferred purchase price of $1,838,333 was incurred. This is evidenced by a non-interest-bearing Promissory Note secured by a mortgage on the property.
- Development Financing: A non-revolving line of credit up to $3,750,000 was secured from BOKF, NA dba Bank of Albuquerque. This loan is guaranteed by AMREP Southwest Inc. ("ASW").
The filing does not provide consolidated revenue, profit, cash flow, or margin data for the reporting period, as this is a current report focused on specific material agreements rather than periodic financial results.
Material Changes and Financing Terms
The material change reported is the entry into definitive agreements for land acquisition and development financing. Key terms include:
- Deferred Purchase Price Repayment: $919,167 is due on or before June 15, 2021, and the remaining $919,166 is due on or before June 15, 2022. Prepayments are credited to the next due payment.
- Development Loan Repayment Schedule: Principal repayments are scheduled from March 2022 through March 2024, totaling the $3,750,000 principal. The final maturity date is June 2024.
- Interest Rate: The development loan bears interest at the 30-day LIBOR plus 3.0%, with a minimum rate of 3.75%.
- Collateral and Guarantees: Both loans are secured by mortgages on the acquired property. The development loan is further guaranteed by ASW.
Management Commentary, Risks, and Covenants
The loan agreements contain customary covenants and events of default. Specific risks and contingencies identified in the filing include:
- Financial Covenants: ASW must maintain a tangible net worth of at least $32 million to avoid an event of default under the development loan.
- Events of Default: Include failure to make payments, breach of covenants, false representations, or insolvency/bankruptcy of LF or ASW. Upon default, the lender may declare the entire outstanding principal and obligations immediately due and payable.
- Lien Releases: Mortgages on specific portions of the property or individual lots may be released upon payment of specific principal amounts (e.g., $65,750 per lot for the development loan).
Investor Verification Checklist
- Verify the current tangible net worth of AMREP Southwest Inc. to ensure compliance with the $32 million covenant.
- Confirm the status of the 82 residential lots in the Meso AM subdivision and the timeline for development.
- Review the company's liquidity position to ensure it can meet the deferred purchase price payments due in 2021 and 2022.
- Monitor LIBOR fluctuations, as the development loan interest rate is variable (LIBOR + 3.0%) with a 3.75% floor.
- Check for any subsequent filings regarding the release of liens on the property as development progresses.