Liquidity pressures plaguing a Hartford-based real estate investment trust are driving it into the arms of a Norwalk investor.
Realty Finance Corp., headquartered in downtown’s CityPlace I, said today it recently signed a letter of intent to hand over a controlling interest to Stoneleigh Partners Acquisition Corp. of South Norwalk, in exchange for $25 million in cash.
Realty Finance, formerly CBRE Realty Finance, said today its need for capital has risen as cash flow has fallen at one of its trusts, erasing more than $800,000 in payments that it was due in early April. RFC primarily owns commercial properties and real estate-related debt in the form of collateralized debt obligations, or CDOs.
In return for the $25 million investment, Stoneleigh will receive 31 million shares of new RFC common stock and a $31.25 million senior secured note, bearing 8 percent interest, from RFC.
In addition, Stoneleigh has the option to adjust its investment to any amount between $20 million and $150 million. Once the transaction closes, Stoneleigh can appoint three directors to RFC’s six-member board.
Daniel Farr, RFC’s chief financial officer, said the company faces a class-action lawsuit from investors and has at least six nonperforming loans totaling $128.4 million in its portfolio. Another $75 million in loans are on RFC’s “watch list,” the company said.
“We continue to manage our portfolio and we continue to explore opportunities,” Farr said.
