Business Context and Reporting Period
This Form 8-K Current Report was filed by BlueLinx Holdings Inc. on October 6, 2011, regarding an event dated September 30, 2011. The filing details a Seventh Amendment to a Lease Agreement between BlueLinx Corporation (a wholly owned subsidiary) and Wells REIT II – Wildwood Properties concerning the company's corporate headquarters in Atlanta, Georgia.
Key Financial Metrics and Obligations
The filing discloses specific financial obligations arising from the lease amendment rather than standard operating metrics like revenue or profit.
- Space Remittance Fee: $5,000,000 payable on or before January 31, 2012.
- Contingent Payment: $1,200,000 payable on or before December 31, 2013. This amount may be reduced by 50% if the landlord re-leases the vacated property prior to that date.
- Letter of Credit Adjustment: BlueLinx must deliver a new irrevocable letter of credit for $900,000 to receive the return of a previous $1,500,000 letter of credit.
- Lease Term: The remaining term for the retained portion of the headquarters (4300 Wildwood Parkway) ends on January 31, 2019.
Material Changes
The primary material change is the release of BlueLinx from lease obligations for the building located at 4100 Wildwood Parkway. The company is obligated to surrender this building by January 31, 2012. The lease obligations for the building at 4300 Wildwood Parkway remain in effect under the amended agreement.
Outlook, Risks, and Contingencies
The filing outlines specific risks associated with the lease agreement:
- Default Consequences: Events of default include failure to pay rent or uncured breaches of obligations. Upon default, the landlord may terminate the agreement and accelerate all remaining rent.
- Acceleration Calculation: Accelerated rent is calculated by discounting the remaining rent to present value using an 8% discount factor, less the fair market value of the premises.
- Contingent Liability: The $1,200,000 payment is contingent on the landlord's ability to re-lease the vacated 4100 Building. If re-leased, BlueLinx owes 50% of this sum immediately upon invoice.
Investor Verification Checklist
- Verify the company's liquidity position to ensure the $5,000,000 payment due in January 2012 can be met.
- Confirm the status of the $1,500,000 letter of credit return and the issuance of the new $900,000 letter of credit.
- Monitor the landlord's progress in re-leasing the 4100 Building to determine if the contingent $1,200,000 liability will be reduced.
- Review the company's cash flow projections to account for the accelerated rent risk in the event of a lease default.