Employees of the First Capital companies, which include a small non-traded real estate investment trust and business development company, were told over the Memorial Day weekend in a memo that there would be layoffs and a reorganization of the companies.
"We have to make some extremely difficult decisions this past week as not all of us to this point will continue on the journey," according to the memo, which was signed by Suneet Singal, First Capital's CEO. "For our friends that will no longer be with us, thank you for your efforts and we wish you the very best in the future.
About a dozen out of several hundred employees will be cut as part of the reorganization of the First Capital companies and the layoffs had been previously discussed, said Mr. Singal, in an interview Thursday morning. First Capital also has construction and development companies under its umbrella.
Mr. Singal acquired the REIT, First Capital Real Estate Trust Inc., which was formerly named United Realty Capital Trust Inc., in 2015. The company's prior owner and CEO, Jacob Frydman, sold the company to First Capital Real Estate Investments.
It's been an uphill battle ever since, Mr. Singal said. "We have been cleaning up legacy issues," he said.
The REIT, First Capital Real Estate Trust, in November was having problems paying its employees on time. And the REIT has not has not issued a financial statement with the Securities and Exchange Commission since June 2015, drawing criticism from at least one observer.
"It's not reasonable for a public company to go so long without financial statements," said Kevin Gannon, president and managing director of Robert A. Stanger & Co. Inc. "It doesn't appear there's any corporate governance here. If there was there would be financial statements and responsibility and reporting. It just seems out of control, and it's hard to say what they're doing."
Mr. Singal said that the REIT's filings with the SEC, including quarterly and annual reports, will be current in the next several weeks and blamed a technical accounting procedure as the reason for the delay. "We plan to have all filings current in short order," he said.
In June 2015, the REIT reported that it had $63.2 million in total assets. As part of the acquisition, First Capital put assets into the company, and the REIT now has over a couple of hundred million in assets, Mr. Singal said.
And part of the company's realignment is focused on the retail investors of the REIT, he said. In the third quarter, the company intends to return investors' principal plus a gain on the investment, he said. "Retail investors are being taken out at 100%," Mr. Singal said.