American Spectrum Realty, Dunham & Associates Reach Settlement Agreement on Properties, Loan

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Investment firm Dunham & Associates Holdings Inc. has entered a settlement agreement to repurchase 14 properties from American Spectrum Realty Inc., a real estate investment-management company that operates self-storage facilities under the 1st American Storage brand. American Spectrum had filed suit against Dunham in district court in Harris County, Texas.

The properties were originally transferred to American Spectrum under a contribution agreement. The companies valued the properties at $55.5 million, and Dunham agreed to have its business entities assume debt of $8.1 million, according a press release issued by American Spectrum.

“In consideration for the transfer of the properties, the Dunham entities surrendered to American Spectrum shares of American Spectrum 8 Percent Cumulative Preferred Stock, Series B, with an aggregate liquidation preference of $47,411,201, which amount is equal to the net contribution value at which the properties were originally contributed to American Spectrum,” according to the release.

The companies also agreed to amend American Spectrum charter documents to modify the rights, preferences and privileges of the Series B preferred stock retained by Dunham. In addition, the firms modified a loan arrangement to eliminate Dunham’s obligation to make or arrange additional loans to American Spectrum.

Under the original loan agreement signed in January, Dunham advanced $3 million to American Spectrum Dunham Properties LLC, a wholly owned subsidiary of American Spectrum, and was supposed to advance another $3 million within 90 days. As compensation for arranging the loan, American Spectrum issued Dunham five-year warrants exercisable for 600,000 shares of its common stock at a price per share of $2.

Headquartered in Houston, American Spectrum is a real estate investment, management and leasing company that owns self-storage, office, retail and multi-family interests across the United States through an operating partnership. The company has been publicly traded since 2001.

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