Item 1.01 Entry into a Material Definitive Agreement.
On June 12, 2014, Reven Housing Texas, LLC ("Borrower"), a Delaware limited
liability company and a wholly owned subsidiary of Reven Housing REIT, Inc., a
Maryland corporation (the "Registrant"), issued a Promissory Note Secured by
Deeds of Trust (the "Note") to Silvergate Bank, a California corporation
("Lender"), in the principal amount of up to $7,570,000 (the "Aggregate
Principal Amount"). The entire balance of principal and accrued interest and
other amounts then outstanding on the Note (the "Loan") are due and payable on
July 5, 2019 (the "Maturity Date"). Interest accrues and is payable monthly on
the Loan at the rate equal to one percent (1.00%) points over the "PRIME RATE"
as published in The Wall Street Journal. Commencing on August 5, 2014 and
continuing on the fifth day of each calendar month through and including July 5,
2015, Borrower shall pay interest in arrears for the prior calendar month.
Commencing on August 5, 2015 and continuing on the fifth day of each of the next
calendar months thereafter through and including June 5, 2019, Borrower shall
pay to Lender monthly payments of principal and interest in an amount equal to
the amount which would be sufficient to amortize the outstanding principal
balance under the Note as the then effective interest rate over the then
remaining portion of an amortization period commencing July 5, 2016 and ending
on July 4, 2041. The Note is secured by those certain Deeds of Trust,
Assignments of Leases and Rents, Security Agreements and Fixture Filings dated
June 12, 2014, executed by Borrower for the benefit of Lender (the "Deeds of
Borrower has no right to prepay any principal of the Note except that, so long
as no event of default exists under the Note or any of the Deeds of Trust at the
time of prepayment, Borrower has the right to prepay the principal of the Note,
in whole only and not in part, upon at least 30 days but not more than 60 days
advance written notice, provided that Borrower pays, concurrently with such
prepayment, all accrued and unpaid interest under the Note and a prepayment
premium equal to three percent (3%) of the amount prepaid for a prepayment on or
before July 5, 2016; with no prepayment premium thereafter. The Note and the
Deeds of Trust contain customary terms and conditions, including, without
limitation, customary events of default and acceleration upon default, including
defaults in the payment of principal or interest, defaults in compliance with
the covenants and bankruptcy or other insolvency events.
The foregoing description of the Note and the Deeds of Trust is qualified in its
entirety by reference to the full texts of the Note and the Deeds of Trust,
which are attached hereto as Exhibits 10.1 and 10.2, respectively, and are
incorporated herein by reference.
As of June 12, 2014, only $1,227,100 of the Aggregate Principal Amount has been
drawn on the Note by Borrower, and the balance of $6,342,900 has been retained
and not funded by Lender as holdback for the Loan pursuant a Holdback Agreement
dated June 12, 2014, by and between Borrower and Lender (the "Holdback
Agreement"). The foregoing description of the Holdback Agreement is qualified in
its entirety by reference to the full text of the Holdback Agreement, which is
attached hereto as Exhibit 10.3 and is incorporated herein by reference.
Additionally, in connection with the Loan, Borrower entered into that certain
Unsecured Environmental Indemnity, dated June 12, 2014, with Lender (the
"Environmental Indemnity"). The Environmental Indemnity provides that if
Borrower were to default under the Loan and as a consequence Lender were to
acquire title to any of the properties subject to the Deeds of Trust, Borrower
would indemnify Lender for any liability, to the extent there are any such
liability, that it would incur as the owner of the applicable property for
claims arising out of any hazardous materials or toxic substances present on
such property on or before the date of the conveyance of such property to
Lender. As a condition to the Loan, Lender required that Borrower indemnify
Lender against such liability. The foregoing description of the Environmental
Indemnity is qualified in its entirety by reference to the full text of the
Environmental Indemnity, which is attached hereto as Exhibit 10.4 and is
incorporated herein by reference.
On June 12, 2014, Borrower, Lender and Red Door Housing, LLC, a Texas limited
liability company ("Property Manager"), entered into that certain Subordination
of Management Agreement (the "Subordination Agreement"). Property Manager is the
property manager retained by Borrower to provide certain management and leasing
services with respect to the properties owned by Borrower in Houston, Texas,
metropolitan area. As a condition to the Loan, Lender required that Borrower and
Property Manager enter into the Subordination Agreement to provide for the
subordination of the rights of Property Manager to any management fees from
Borrower with respect to those properties it manages in all respects to the
payment of the Loan. The foregoing description of the Subordination Agreement is
qualified in its entirety by reference to the full text of the Subordination
Agreement, which is attached hereto as Exhibit 10.5 and is incorporated herein
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information reported under Item 1.01 of this Current Report on Form 8-K
regarding the description of the Loan and the material terms and conditions
related thereto is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
The following exhibits are filed with this report:
Exhibit 10.1 Promissory Note, dated as of June 12, 2014
, by Reven Housing Texas, LLC
for the benefit of Silvergate Bank, for the principal amount of
Exhibit 10.2 Deeds of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, dated as of June 12, 2014, by Reven Housing Texas, LLC
for the benefit of Silvergate Bank (recorded with Brazoria, Chambers,
Fort Bend, Galveston and Harris Counties, Texas).
Exhibit 10.3 Holdback Agreement, dated June 12, 2104
, by and between Reven Housing
Texas, LLC and Silvergate Bank.
Exhibit 10.4 Unsecured Environmental Indemnity Agreement, dated as of June 12, 2014
by Reven Housing Texas, LLC for the benefit of Silvergate Bank.
Exhibit 10.5 Subordination of Management Agreement, dated as June 12, 2014
, by and
between Reven Housing Texas, LLC, Silvergate Bank and Red Door Housing,
LLC, as property manager.