The redemption clause in a contract specifies the terms and conditions under which one party can reclaim or repurchase assets or securities, often at a predetermined price or within a specific timeframe. This clause is commonly found in financial agreements and bonds, providing structured guidelines for exiting or altering investments.
Revisions to the Redemption Plan Effective as of October 1, 2022, we have adopted revisions to our Redemption Plan to reflect the following change: · Reduce the redemption price per share by the aggregate sum of distributions that reduce our net asset value (“NAV”) per share each quarter, as determined by our Manager in its sole discretion.
Redemption Plan Our common shares are currently not listed on a national securities exchange or included for quotation on a national securities market, and currently there is no intention to list our common shares. In order to provide our shareholders with some limited liquidity, we have adopted a redemption plan to enable shareholders to redeem their common shares in limited circumstances. We will not solicit redemptions under this redemption plan, other than through our offering circular and any supplements or amendments thereto disclosing our NAV per share. Shareholders desiring to request redemption of their common shares must do so of their own volition and not at our behest, invitation or encouragement. Our role in effectuating redemptions under the redemption plan will solely be ministerial. While shareholders should view this investment as long-term, we have adopted a redemption plan whereby, on a quarterly basis, an investor has the opportunity to obtain liquidity. Our Manager has designed our redemption plan with a view towards providing investors with an initial period with which to decide whether a long-term investment in our Company is right for them. In addition, despite the illiquid nature of the assets expected to be held by our Company, our Manager believes it is best to provide the opportunity for quarterly liquidity in the event shareholders need it. The terms under which we may redeem shares may differ between redemption requests upon the death or “qualifying disability” of a shareholder (“exceptional redemptions”), as further discussed below, and all other redemption requests. Investors should note, however, that even during exceptional redemption events, the redemption plan may not be available due to our Manager’s ability to amend, suspend, or terminate the redemption plan at any time.
Pursuant to our redemption plan, a shareholder may only (a) have one outstanding redemption request at any given time and (b) request that we redeem up to the lesser of 5,000 common shares or $50,000 worth of common shares per redemption request. However, we reserve the right to waive these limitations for any reason. In addition, the redemption plan is subject to certain liquidity limitations, which may fluctuate depending on the liquidity of the real estate assets held by us.
Except in the case of exceptional redemptions, the effective redemption price will be calculated based on a declining penalty to the redemption price in effect at the time of the redemption request, rounded down to the nearest cent. The redemption price will be equal to (i) the NAV per share for our common shares in effect at the beginning of the quarter in which the redemption request is made, reduced by (ii) the aggregate sum of NAV Distributions, if any, declared (whether paid or unpaid) for such quarter. “NAV Distributions” are distributions that, in the sole discretion of the Manager, reduce the Company’s NAV (including, for example, distributions arising from the proceeds of the sale of one or more of our properties where such proceeds are not reinvested in other properties). The redemption price will not, however, be reduced by the aggregate sum of other distributions, if any, that are not-NAV Distributions that have been (i) paid with respect to such shares prior to the date of the redemption request or (ii) declared but unpaid on such shares with record dates during the period between the redemption request date and the redemption date (i.e., the last day of the applicable quarter).
The Effective Redemption Price will be the per share NAV for our common shares as of the beginning of the quarter in which the redemption request is made and (i) reduced by any NAV Distributions during such quarter and (ii) rounded down to the nearest $0.01.
SUMMARY OF REDEMPTION PLAN Redemption Price 99-100% of NAV, depending on hold time and type of redemption request (reduced by NAV Distributions, if any). Timing to submit request On or before the last day of the applicable quarter. Last Date to Withdraw Request The last day of the applicable quarter. Date of Redemption Payment Within twenty-one (21) days following the end of the applicable quarter. Frequency Quarterly.
As noted above, the effective redemption price will not include any penalty to the per share price for our common shares in effect at the time of the redemption request in respect of redemptions of shares resulting from the death of a shareholder who is a natural person, including shares held by such shareholder through a revocable grantor trust or an IRA or other retirement or profit-sharing plan, after receiving written notice from the estate of the shareholder, the recipient of the shares through bequest or inheritance, or, in the case of a revocable grantor trust, the trustee of such trust, who shall have the sole ability to request redemption on behalf of the trust. We must receive the written redemption request within 12 months after the death of the shareholder in order for the requesting party to rely on any of the special treatment described above that may be afforded in the event of the death of a shareholder. Such a written request must be accompanied by a certified copy of the official death certificate of the shareholder. If spouses are joint registered holders of shares, the request to have the shares redeemed may be made if either of the registered holders dies. If the shareholder is not a natural person, such as certain trusts or a partnership, corporation or other similar entity, the right of redemption upon death does not apply.
If we agree to honor redemption requests, such redemption of our common shares will be made quarterly upon written request to us prior to the end of the applicable quarter. Shareholders may withdraw their redemption request at any time prior to the end of the applicable quarter. If we agree to honor redemption requests, such redemption requests will be effective as of the last day of the applicable quarter, and funds shall be remitted within twenty-one (21) days following the end of the applicable quarter. If we agree to honor a redemption request, the common shares to be redeemed will cease to accrue distributions or have voting rights as of the last day of the applicable quarter. We reserve the right to redeem shares pursuant to an exceptional redemption request outside of our quarterly redemption process.
We cannot guarantee that the funds set aside for the redemption plan will be sufficient to accommodate all requests made in any given time period. In the event our Manager determines, in its sole discretion, that we do not have sufficient funds available to redeem all of the common shares for which redemption requests have been submitted during any given quarter, such pending requests will be honored on a pro-rata basis, if at all, and priority will be given to exceptional redemptions. In the event that not all redemptions are being honored in a given quarter, the redemption requests not fully honored will have the remaining amount of such redemption requests considered on the next quarter in which redemptions are being honored. Accordingly, all unsatisfied redemption requests will be treated as requests for redemption on the next date on which redemptions are being honored, with redemptions processed pro-rata, if at all, and priority will be given to exceptional redemptions. If funds available for the redemption plan are not sufficient to accommodate all redemption requests, common shares will be redeemed on a pro-rata basis, if at all, and priority will be given to exceptional redemptions.
(c) “Aggregate Series B Liquidation Preference” means, as of any date, an amount equal to the sum of (A) the Deferred Scheduled Redemption Amount (plus any unpaid Deferred Interest Amount which has accrued in accordance with Section 8, Section 10(b) or Section 11(b)) plus (B) the Present Value.
(f) “Automatic Early Redemption Event” means any of the following events: (i) a Change of Control occurs, (ii) the Corporation or the Board of Directors asserts in writing that any portion of the Series B or any of the Corporation’s obligations under this Certificate of Designations is invalid or unenforceable, (iii) the indebtedness under the Credit Agreement is accelerated (and such acceleration is not rescinded prior to the Automatic Early Redemption Date), or (iv) the Corporation or any of its material Subsidiaries (defined for this purpose as any “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X) files for bankruptcy, reorganization, receivership, liquidation or similar proceedings affecting creditors’ or equity holders’ rights.
(zz) “Qualifying Partial First Early Redemption” means a redemption of Partial Early Redemption Shares pursuant to Section 9(a) such that the Present Value of all of the remaining outstanding shares of Series B shall be $400,000,000 immediately following such redemption; provided, further, that as illustrated in Part II of Annex B (which illustrates the remaining scheduled redemption dates and remaining scheduled redemption amounts after giving effect to a Qualifying Partial First Early Redemption and a Qualifying Partial Second Early Redemption), such redemption shall be applied to the shares to be redeemed on the latest Scheduled Redemption Dates (i.e., beginning with the Series B shares to be redeemed on April 30, 2030 until all Series B shares scheduled for redemption on that date are redeemed, then with respect to the Series B shares to be redeemed on April 30, 2029 until all Series B shares scheduled for redemption on that date are redeemed, and continuing in that manner), with the Scheduled Redemption Dates nearest in time (and the number of Series B shares to be redeemed on such dates) being preserved.
(aaa) “Qualifying Partial Second Early Redemption” means a redemption of Partial Early Redemption Shares pursuant to Section 9(a) such that the Present Value of all of the remaining outstanding shares of Series B shall be $207,139,982 (rounded down to the nearest dollar) immediately following such redemption; provided, further, that as illustrated in Part II of Annex B (which illustrates the remaining scheduled redemption dates and remaining scheduled redemption amounts after giving effect to a Qualifying Partial First Early Redemption and a Qualifying Partial Second Early Redemption), such redemption shall be applied to the shares to be redeemed on the earliest Scheduled Redemption Dates (i.e., beginning with the Series B shares to be redeemed on April 30, 2022 until all Series B shares scheduled for redemption on that date are redeemed, then with respect to the Series B shares to be redeemed on April 30, 2023 until all Series B shares scheduled for redemption on that date are redeemed, and continuing in that manner), with the Scheduled Redemption Dates most distant in time (and the number of Series B shares to be redeemed on such dates) being preserved (after giving effect to the Planned Partial First Early Redemption); provided, further, that a redemption of Partial Early Redemption Shares shall only constitute a Qualifying Partial Second Early Redemption if, at the time of such redemption, a Planned Partial First Early Redemption has been completed in accordance with the terms hereof.
Section 8. Scheduled Redemptions. On each Scheduled Redemption Date set forth on Annex A (or, if such day is not a Business Day, on the next succeeding Business Day) on which any shares of Series B remain outstanding, the Corporation shall redeem, pro rata from each Holder based on the total number of shares of Series B held by such Holder, an aggregate number of shares of Series B equal to the scheduled redemption amount set forth on Annex A hereto (the “Scheduled Redemption Amount”) with respect to such Scheduled Redemption Date divided by the Stated Amount thereof, for a per share price equal to the Stated Amount; provided, that the Corporation shall not be obligated to redeem the shares of Series B on a Scheduled Redemption Date if, as of such date, (i) the Consolidated EBITDA measured as of the end of the most recently completed fiscal year is less than $425,000,000 (the “EBITDA Threshold Requirement”) or (ii) the Corporation does not have sufficient funds legally available to pay the applicable Scheduled Redemption Amount when due. Any shares of Series B which the Corporation has not redeemed on a Scheduled Redemption Date pursuant to the proviso of the foregoing sentence or the following sentence (“Deferred Shares”) shall, subject to the terms of this Section 8, be redeemed in equal installments on the subsequent two Scheduled Redemption Dates following the Scheduled Redemption Date on which such shares were scheduled to be redeemed in accordance with Annex A for a per share price equal to the Stated Amount (such delayed redemption, a “Deferral”, and such initial deferred payment schedule, the “Initial Deferral Payment Schedule”). Notwithstanding anything else herein to the contrary: (i) all Deferred Shares outstanding as of April 30, 2030 shall be redeemed on April 30, 2030 (and shall not be subject to any further deferral at that time); (ii) if (x) as of any Scheduled Redemption Date the Corporation does not have sufficient funds legally available to redeem all Deferred Shares in accordance with the Initial Deferral Payment Schedule or (y) the difference between the Consolidated EBITDA measured as of the end of the most recent completed fiscal year prior to the applicable payment date for such Deferred Shares and $425,000,000 (the “EBITDA Margin”) is less than the amount of redemption payments that would otherwise be payable by the Corporation with respect to such Deferred Shares, the Corporation shall redeem a number of Deferred Shares equal to the lesser of (A) the maximum amount of Deferred Shares for which it has sufficient funds legally available to do so and (B) the EBITDA Margin divided by the Stated Amount, and any remaining additional Deferred Shares shall be redeemable on the next Scheduled Redemption Date subject to continued application of this clause (ii) (and, for the avoidance of doubt, the Deferred Interest Amount (as defined below)
Section 9. Early Redemption at the Option of the Corporation. (a) From the effective date of this Certificate of Designations to and including March 31, 2022, and no more than twice during such period, and subject to the terms of this Section 9, the Corporation may redeem, pro rata from each Holder based on the total number of shares of Series B of such Holder, the number of outstanding shares of Series B specified in an Early Redemption Notice to be redeemed pursuant to a Planned Partial First Early Redemption or a Planned Partial Second Early Redemption (in each case, “Partial Early Redemption Shares”), for an aggregate purchase price equal to the Aggregate Partial Early Redemption Price; provided, that the Corporation may not effect more than one of each of a Planned Partial First Early Redemption or a Planned Partial Second Early Redemption; provided, further, that (i) immediately following the redemption of Partial Early Redemption Shares pursuant to a Planned Partial First Early Redemption, the Present Value of all of the remaining outstanding shares of Series B shall be at least $400,000,000, (ii) immediately following the redemption of Partial Early Redemption Shares pursuant to a Planned Partial Second Early Redemption (and assuming the Planned Partial First Early Redemption was effected in full), the Present Value of all of the remaining outstanding shares of Series B shall be at least $207,139,982 and (iii) the Corporation shall not redeem any shares of Series B pursuant to this Section 9(a) unless the Corporation has sufficient funds legally available to pay the applicable Aggregate Partial Early Redemption Price. As used in this Certificate of Designations, “Aggregate Partial Early Redemption Price” means the difference of (A) the Present Value as of the applicable redemption date, calculated without giving effect to the redemption of any Partial Early Redemption Shares pursuant to this Section 9(a) (and, for the avoidance of doubt, when calculating such amount in respect of a Planned Partial Second Early Redemption, any Partial Early Redemption Shares redeemed in connection with a Planned Partial First Early Redemption shall not be included in the calculation of Present Value), minus (B) the Present Value as of the applicable redemption date, calculated as of immediately following the redemption of all of the Partial Early Redemption Shares pursuant to this Section 9(a) (and, for the avoidance of doubt, when calculating such amount in respect of a Planned Partial First Early Redemption, any Partial Early Redemption Shares contemplated to be redeemed in connection with a Planned Partial Second Early Redemption shall be included in the calculation of Present Value).
Section 10. Early Automatic Redemption. (a) In General. Subject to the other terms of this Section 10, on the Automatic Early Redemption Date, the Corporation shall redeem all outstanding shares of Series B (the “Automatic Early Redemption”) for an aggregate cash purchase price equal to the Aggregate Series B Liquidation Preference as of the applicable redemption date, calculated without giving effect to the redemption of the shares of Series B pursuant to this Section 10.
(c) Automatic Early Redemption Date. The “Automatic Early Redemption Date” will be (1) in the event of an Automatic Early Redemption Event pursuant to clause (i) of the definition thereof that is authorized, approved or otherwise recommended by the Board of Directors (or a committee thereof), a Business Day of the Corporation’s choosing which is on or prior to the date of such Automatic Early Redemption Event, (2) in the event of an Automatic Early Redemption Event pursuant to clause (iv) (solely if such event occurs with respect to the Corporation) of the definition thereof, on the date thereof, provided that the timing for the payment of the Aggregate Series B Liquidation Preference will be in accordance with the law applicable to such bankruptcy reorganization, receivership, insolvency, liquidation or similar proceedings affecting creditors’ or equity holders’ rights and (3) in the event of any Automatic Early Redemption Event other than as set forth in the preceding clauses (1) and (2) of this Section 10(c), a Business Day of the Corporation’s choosing that is no more than thirty (30) calendar days after the date the Corporation sends the related Automatic Early Redemption Notice (provided, that in the event of an Automatic Early Redemption Event pursuant to clause (ii) of the definition thereof, such Automatic Early Redemption Event shall be deemed to be the Automatic Early Redemption Notice). For the avoidance of doubt, in the event of an Automatic Early Redemption Event pursuant to clause (iv) of the definition thereof (solely if such event occurs with respect to the Corporation), the amount due to the Holders pursuant to this Section 10(c) shall be the Aggregate Series B Liquidation Preference, solely to the extent that any such amounts remain legally available for distribution following payment of any liquidation preferences otherwise payable to holders of any Senior Stock. It is understood and agreed that, in the event of an Automatic Early Redemption Event pursuant to clause (iv) of the definition thereof (solely if such event occurs with respect to the Corporation), the Aggregate Series B Liquidation Preference shall be deemed not to include any unmatured interest prohibited by section 502(b)(2) of the Bankruptcy Code. The Corporation shall not assert that the Aggregate Series B Liquidation Preference includes any unmatured interest prohibited by section 502(b)(2) of the Bankruptcy Code.
Section 11. Early Redemption at the Option of the Holder. (a) In General. Subject to the other terms of this Section 11, each Holder will have the right (the “Holder Put Right”), at its election, following the occurrence of a Holder Put Event, to require the Corporation to redeem all, but not less than all, of such Holder’s shares of Series B on the Holder Put Redemption Date (the “Holder Put Redemption”), for an aggregate cash purchase price equal to the Per Share Early Redemption Price multiplied by the number of shares of Series B held by such Holder (the “Holder Put Redemption Price”); provided, that the Corporation shall not be obligated to effect the Holder Put Redemption unless a Majority in Interest elect to exercise the Holder Put Right in accordance with this Section 11. As soon as reasonably practicable (and in any event within five (5) Business Days) after a Holder Put Event has occurred, the Corporation shall send to each Holder a notice of such Holder Put Event (a “Holder Put Event Notice”). Notwithstanding anything to the contrary contained herein, (i) if the Planned Partial First Early Redemption occurs in full on or prior to December 30, 2021, then a Holder shall not be entitled to exercise the Holder Put Right prior to December 30, 2022 and (ii) if the Planned Partial First Early Redemption does not occur in full on or prior to December 30, 2021, then a Holder shall be entitled to exercise the Holder Put Right (subject to the occurrence of a Holder Put Event) on or after December 30, 2021. (b) Funds Legally Available for Payment of the Holder Put Redemption Price. Notwithstanding anything to the contrary in this Section 11 in connection with a Holder Put Redemption, (1) the Corporation will pay the maximum amount of such Holder Put Redemption Price permitted by Law, which payment will be made pro rata to each Holder based on the total number of shares of Series B of such Holder that were otherwise to be redeemed pursuant to such Holder Put Redemption, as the case may be; and (2) the Corporation will cause all such shares as to which the Holder Put Redemption Price was not paid in full to be returned to the Holder(s) thereof, and such shares will be deemed to remain outstanding and shall accrue interest at the Deferred Interest Amount from and after the date of such Holder Put Event and shall be redeemed in full as soon as the Corporation has funds legally available to do so.
Share Redemption Program We expect that there will be no regular secondary trading market for shares of our common stock. While you should view your investment as long term with limited liquidity, we have adopted this share redemption program, whereby stockholders may receive the benefit of limited liquidity by presenting for redemption to us all or any portion of those shares in accordance with the procedures and subject to certain conditions and limitations described below. This share redemption program applies to all shares of our common stock. All references herein to classes of shares of our common stock do not include the OP Units issued by the Operating Partnership, unless the context otherwise requires. Due to the illiquid nature of investments in real property, we may not have sufficient liquid resources to fund redemption requests. In addition, we have established limitations on the amount of funds we may use for redemptions and the amount of shares that may be redeemed. See “—Redemption Limitations” below. A stockholder’s request for redemption in accordance with any of the special treatment described below in the event of the death or qualifying disability of a stockholder must be submitted within 18 months of the death of the stockholder or the initial determination of the stockholder’s disability (which we define as such term is defined in Section 72(m)(7) of the Code), as further described below. There is no fee in connection with a redemption of shares of our common stock.
Sources of Funds for Redemptions We may, in the Advisor’s discretion, after taking the interests of our company as a whole and the interests of our remaining stockholders into consideration, use proceeds from any available sources at our disposal to satisfy redemption requests, subject to the limitation on the amount of funds we may use described below under “—Redemption Limitations.” Potential sources of funding redemptions include, but are not limited to, cash on hand, cash available from borrowings, cash from the sale of shares of our common stock and cash from liquidations of investments, to the extent that such funds are not otherwise dedicated to a particular use, such as working capital, cash distributions to stockholders, purchases of real property, debt-related or other investments or redemption of OP Units. Although the vast majority of our assets consist of properties that cannot generally be readily liquidated on short notice without impacting our ability to realize full value upon their disposition, we intend to maintain a number of sources of liquidity including (i) cash equivalents (e.g. money market funds), other short-term investments, U.S. government securities, agency securities and liquid real estate-related securities and (ii) one or more borrowing facilities. We may fund redemptions from any available source of funds, including operating cash flows, borrowings, proceeds from the Offering and/or sales of our assets.
Redemption is a financial term that refers to the process of repaying or buying back a financial instrument, such as bonds, shares, or even a property, before its maturity or an agreed time. It involves the issuer returning the principal amount and any accrued interest to the investor, effectively closing the financial arrangement. In some contexts, it also applies to redeeming vouchers or coupons.
You should use redemption when you want to:
Redemption is typically considered when there are favorable market conditions, such as lower interest rates, which allow refinancing at a lower cost or when investors need liquidity.
When drafting a redemption, it’s crucial to include:
A sample redemption clause might look like this:
“Upon maturity of the XYZ Bond on [Date], the issuer shall repay the principal sum of $X,XXX,XXX plus accrued interest to the holder’s account [Account Details] under the terms outlined in this agreement.”
Redemption is commonly found in several types of financial contracts, including but not limited to:
Understanding the specifics of when and how redemption applies is vital, as the terms can significantly impact the financial returns and obligations of the parties involved.
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Dive deeper into the world of clauses and learn more about these other clauses that are used in real contracts.
A refundable deposit clause requires a party to provide an upfront payment that is held as security for the duration of the contract. Upon fulfillment of the contract terms or conditions specified, this deposit is returned to the depositor, ensuring protection against non-compliance or potential damages.
The reimbursement of expenses clause outlines the conditions under which one party will repay the other for costs incurred while performing contractual obligations, typically requiring the expenses to be deemed reasonable and necessary. This clause often specifies the process for submitting expense claims, documentation requirements, and any limits or exclusions regarding which expenses are eligible for reimbursement.
The "Release of Obligations" clause frees one or both parties from certain duties or liabilities defined in the contract once specific conditions are met or after a certain event occurs. This clause ensures that obligations are concluded, allowing the parties to move forward without further responsibilities under those specific terms.
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