Free and Clear Equity, Inc. (FACE) recently filed an S-11 registration statement with the Securities and Exchange Commission for an all-cash real estate investment trust (REIT). The Indianapolis-based company intends to invest in triple net lease properties and mortgages backed by triple net lease buildings in the United States.
According to the SEC filing, FACE plans to register 3,041,778 common stock purchase warrants together with 122,400,000 common shares which may be received upon exercise of the warrants at an exercise price of $2.50 per share for a maximum of $306 million; providing for only 122,400 of the warrants available to be exercised.
FACE also plans to register 9,572,350 common shares, primarily on behalf of selling shareholders. Of those shares, 1,402,750 shares and most of the warrants will be issued and sold to Monogenesis Corporation at a price of $0.01 per share and $0.001 per warrant. 746,600 of those shares and all of the warrants will be distributed as a dividend to their primarily institutional shareholders.
Monogenesis is a Walker, W.V.-based, closed-end investment company and a statutory underwriter.
The remaining 55,778 warrants were received by consultants for providing valuation services.
The registration statement reveals that FACE intends to invest in real estate and mortgages secured by office, warehouse/distribution and retail commercial buildings. The intended targets are existing buildings that are under lease to single or less than five tenants. FACE plans to purchase all investments with cash and remain free of long-term debt.
Properties targeted for purchase are expected to have triple net (NNN) long-term leases which will require a minimum of ongoing management activity. NNN leases typically require the tenant to pay substantially all of the costs associated with operating and maintaining the property such as insurance, taxes, maintenance, structural repairs and similar capital expenses.
FACE intends to elect and qualify as a REIT with the taxable year ending December 31, 2011.