A small nontraded real estate investment trust that has missed filing financial statements with the Securities and Exchange Commission for more than a year and recently cut its dividend to investors is now facing another hurdle: failing to pay employees on time.
The REIT,
First Capital Real Estate Trust Inc., reported in June 2015 that it had $63.2 million in total assets, according to the company's quarterly report at the time. Since then, it has not issued another financial statement with the SEC, although it could have almost four times as many assets under its roof based on a transaction reported last year.
In an email to employees last Friday, Paschal Ferreira, chief accounting officer of the REIT's adviser, First Capital Real Estate Investments, discussed changes affecting employees of the REIT's adviser and then outlined the problems with paying employees promptly.
“With that said, the goal is to fund this past due payroll by Tuesday of next week and we are hopefully back on track going forward,” according to Mr. Ferreira's email. “I realize this has not been an easy transition period for anyone, and we truly appreciate your continued hard work and dedication throughout this process.”
It was not clear from the email if the payroll was funded Tuesday or how many pay periods had been delayed at First Capital. When asked about the email and the REIT failing to pay employees on time, along with the lack of any financial statements in more than a year, Mr. Ferreira said he had no comment.
When a nontraded REIT is in the process of raising money from investors, it typically has no employees. Rather, the REIT's adviser, which charges an advisory fee to the REIT, employs the managers and analysts whose job it is to acquire properties for the REIT.
First Capital Real Estate Trust was formerly named United Realty Capital Trust Inc. until 14 months ago when the company's former CEO and owner, Jacob Frydman, sold the company to First Capital Real Estate Investments.
According to a filing with the SEC from September 2015, First Capital contributed $175 million in real estate assets to the REIT as part of the transaction.
Replacing Mr. Frydman as the REIT's CEO and chairman was First Capital chief Suneet Singal, who did not return a call on Wednesday morning to comment.
Last month, the REIT's board approved the suspension of the company's monthly dividend, known as a distribution in the REIT industry, to investors in order to increase its cash reserves, according to a filing with the SEC. The REIT said it intended to make the October distribution to the holders of common stock no later than the end of November.
First Capital Real Estate Trust has also engaged Ladenburg Thalmann Financial Services Inc. as adviser to review strategic alternatives available to the company, according to the filing.
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