REGENCY AFFILIATES ANNOUNCES QUARTERLY DIVIDEND

Rhea-AI Summary

Regency Affiliates, Inc. (RAFI) announces a fourth-quarter dividend of 7.5 cents per common share, reflecting a 3.4% increase over the previous quarter. The company owns self-storage facilities and has a joint venture with SSCP Management LLC. They received a distribution of $210,576 in the fourth quarter of 2023. However, they face uncertainty due to the termination of a lease with the United States General Services Administration.

Positive

• None.

Negative

• The termination of the lease with the United States General Services Administration creates uncertainty for Regency.

Insights

Financial Analyst

The announcement of Regency Affiliates, Inc.'s quarterly dividend increase to 7.5 cents per common share represents a positive signal to shareholders, indicating a modest growth in the company's distributable profits. The 3.4% increase over the previous year's dividend suggests a stable financial position, especially considering the cash flows generated by the company's self-storage asset portfolio. It is crucial to assess the company's payout ratio and compare it with industry standards to gauge sustainability.

Furthermore, the details provided about the joint venture with SSCP Management LLC and the subsequent distributions to Regency highlight the company's strategic investment choices and their resulting financial benefits. The fixed interest rate of 5% on the non-recourse debt financing is relatively favorable given current market conditions, assuming a stable interest rate environment. Investors should consider the impact of the interest-only period ending and the shift to a thirty-year amortization schedule on the company's cash flow.

Real Estate Investment Analyst

Regency's real estate investment strategy, particularly in the self-storage facilities around Harrisburg, Pennsylvania, appears to be yielding positive results. The preferred distribution of 7.5% per annum on Regency's capital contribution and the 80% allocation of surplus cash flow to Regency are indicative of a profitable venture. The retention of surplus cash exceeding $3MM, invested in short-term US Treasuries, shows a conservative approach to cash management, which may appeal to risk-averse investors.

The termination of the GSA lease introduces a level of risk and uncertainty into Regency's investment portfolio. The future utilization of the real estate previously occupied under the lease could significantly impact the company's revenue streams and should be monitored closely by stakeholders. The real estate's location, potential for repurposing and market demand will play critical roles in determining its future financial contribution to Regency.

Risk Management Specialist

From a risk management perspective, the lease termination by the United States General Services Administration (GSA) presents a potential challenge to Regency's revenue stability. The impact of this termination will depend on the company's ability to find alternative tenants or to repurpose the property effectively. The loss of a government tenant, typically considered a stable source of revenue, may require a reassessment of the company's risk profile.

However, the company's diversified portfolio, particularly in self-storage assets and the prudent investment of surplus cash in low-risk US Treasuries, may mitigate the potential negative impact of the lease termination. Stakeholders should seek clarity on the company's strategic plans to address the vacancy and evaluate the potential effects on the company's long-term financial health.

Fourth Quarter Dividend Set At 7.5 Cents Per Common Share

NEW YORK, Dec. 20, 2023 /PRNewswire/ -- Regency Affiliates, Inc. (OTC Pink: RAFI) ("Regency") today announced that it will pay a quarterly dividend of 7.5 cents per common share on January 5, 2024, to shareholders of record at the close of trading on December 29, 2023.

Management Comments

"We are pleased to declare a quarterly dividend of 7.5 cents per common share reflecting a 3.4% increase over the quarterly dividend declared in December 2022," commented Laurence Levy, Chairman, CEO and CFO of Regency. "We continue to be comfortable with this dividend level particularly as we benefit from the cash flows generated by the portfolio of self-storage assets in and around Harrisburg, Pennsylvania, and our cash resources."

"Regency owns five stand-alone self-storage facilities in the Harrisburg, Pennsylvania vicinity acquired for a total purchase price of $35MM of which $25.3MM was financed via a non-recourse ten-year debt financing, with a four-year interest only period that ended in May 2020 and thereafter a thirty-year amortization schedule. The debt financing has a fixed interest rate of 5% per annum. The facilities were purchased via a joint venture with SSCP Management LLC ("SSCP"). Pursuant to the terms of the joint venture, Regency earns a 7.5% per annum preferred distribution on its $11.2MM capital contribution. Surplus cash flow after the preferred distribution is allocated 80% to Regency and 20% to SSCP. Regency received a distribution from the joint venture in the fourth quarter of 2023 in the amount of $210,576 reflecting the 7.5% per annum preferred distribution driven by the strong ongoing operating performance of the investment. Surplus cash over and above the 7.5% per annum preferred distribution is currently retained within the venture. Such surplus cash exceeds $3MM and is invested in short-term US Treasuries. We remain pleased with the continued strong occupancy and related cash flows at our self-storage facilities."

"Our Security West investment represents a 50% limited partnership interest in real estate previously occupied under a lease with the United States General Services Administration ("GSA"). On September 30, 2021, Security Land and Development Company Limited Partnership received a notice under GSA's lease to terminate the lease and vacate the building effective November 1, 2023."

"While the lease termination by GSA creates uncertainty about Regency's investment in Security West, we have several reasons to be optimistic about this investment. Management is currently working with a team of professional real estate advisors to evaluate alternative uses for the facility and real estate. At the lease termination date on November 1, 2023, the partnership was debt free and held cash in excess of $7.5MM which provides significant financial flexibility. Security West's manager has expressed confidence that, based on current markets conditions and other factors, there should be demand for Security West's space or real estate from private sector tenants or investors. We are also considering repurposing the facility and pursuing a tenant from a different sector. We will keep our shareholders updated about future developments at Security West."

 "We are continuing to review and evaluate further investment and cost reduction opportunities for Regency and intend to grow the company by acquiring or otherwise investing in other attractive long-term businesses that meet our investment characteristics and valuation criteria."

In order to facilitate efficient processing of the dividend, management strongly suggests all shareholders with shares held in certificate form contact our transfer agent, Transfer Online, Inc. at (503) 227-2950 and confirm that the registration information is correct.

About Regency Affiliates

Regency Affiliates, Inc. invests in businesses that generate attractive, predictable and sustainable returns on capital. We are currently invested in two assets:

1. A majority joint-venture interest in a portfolio of five stand-alone self-storage facilities in the Harrisburg, Pennsylvania vicinity comprising approximately 337,000 square feet of net rentable space in excess of 2,500 climate and non-climate-controlled storage units; and
2. A 50% limited partnership interest in the Security West Complex located on 34.3 acres in Woodlawn, Maryland. The facility was occupied under a lease with the United States General Services Administration which vacated the building effective November 1, 2023.

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements are statements that are predictive in nature or depend on or refer to future events and can be identified by the words "may," "might," "will," "should," "anticipate," "believe," "expect," "intend," "estimate," "hope," or similar expressions. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy or are otherwise beyond our control and some of which might not even be anticipated. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Future events and actual results affecting our strategic plan as well as our financial position, results of operations and cash flows, could differ materially from those described in or contemplated by the forward-looking statements. Important factors that contribute to such risks include, but are not limited to, a default or catastrophe involving the properties in which we invest, the extent to which we are able to raise additional capital, and competition for additional investment opportunities. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. For a more detailed description of these uncertainties and other factors, please see our website at www.regencyaffiliates.com.

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SOURCE Regency Affiliates, Inc.

FAQ

What is the fourth-quarter dividend declared by Regency Affiliates, Inc.?

Regency Affiliates, Inc. declared a quarterly dividend of 7.5 cents per common share, which reflects a 3.4% increase over the previous quarter.

What assets does Regency own?

Regency owns five stand-alone self-storage facilities in the Harrisburg, Pennsylvania vicinity, acquired for a total purchase price of $35MM.

What is the joint venture Regency has with SSCP Management LLC?

Regency has a joint venture with SSCP Management LLC, where Regency earns a 7.5% per annum preferred distribution on its $11.2MM capital contribution.

How much distribution did Regency receive from the joint venture in the fourth quarter of 2023?

Regency received a distribution of $210,576 from the joint venture in the fourth quarter of 2023.

What creates uncertainty for Regency?

The termination of a lease with the United States General Services Administration creates uncertainty for Regency.