UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 8-K
______________________
CURRENT REPORT
Pursuant to section 13 or 15(d)
of the Securities Exchange Act of 1934
______________________
Date of Report (Date of Earliest Event Reported): December 15, 2022
CNL STRATEGIC CAPITAL, LLC
(Exact name of registrant as specified in its charter)
______________________
| delaware | 000-56162 | 32-0503849 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (Commission File Number) | (IRS Employer Identification Number) |
CNL Center at City Commons
450 South Orange Avenue
Orlando, Florida 32801
(Address of Principal Executive Offices; Zip Code)
Registrant’s telephone number, including area code: (407) 650-1000
______________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
| Item 1.01 | Entry into a Material Definitive Agreement. |
Selected Dealer Agreement and Cost Reimbursement Agreement
On December 15, 2022, CNL Strategic Capital, LLC (referred to herein as “we”, “us”, “our” or the “Company”), CNL Securities Corp. (the “Managing Dealer”), CNL Financial Group, LLC, (the “Sponsor”) and Ameriprise Financial Services, LLC (“Ameriprise”) entered into a Selected Dealer Agreement (the “Selected Dealer Agreement”) pursuant to which Ameriprise will serve as a distribution participant to solicit subscriptions for sales of Company’s limited liability company interests (“shares”) in the Company’s public offering of shares (the “Offering”). The Selected Dealer Agreement contains customary representations, warranties, and agreements of Ameriprise, the Company, the Sponsor, and the Managing Dealer, customary indemnification rights and obligations of the parties, and certain termination provisions. As compensation for the services rendered under the Selected Dealer Agreement, the Managing Dealer will receive from the Company, and reallow to Ameriprise, a selling commission of up to 2.0% of the sale price for shares sold by Ameriprise.
On December 15, 2022, the Company, the Managing Dealer, and American Enterprise Investment Services Inc. (“AEIS”) entered into a Cost Reimbursement Agreement (the “Cost Reimbursement Agreement”) pursuant to which AEIS will receive reimbursement for certain other fees and expenses including start-up, operational, technology, due diligence, reporting, and audit cost arising from the Offering. Under the Selected Dealer Agreement and the Cost Reimbursement Agreement, the Managing Dealer or an affiliate, from its own resources, has agreed to pay Ameriprise and AEIS certain additional ongoing compensation for distribution and other services provided with respect to shares sold by Ameriprise.
The foregoing summaries are qualified in their entirety by reference to the full text of the Selected Dealer Agreement and Cost Reimbursement Agreement, which are attached hereto as Exhibit 1.1 and Exhibit 1.2, respectively, and incorporated herein by reference.
| Item 8.01 | Other Events. |
Determination of Net Asset Value for Outstanding Shares for the month ended November 30, 2022
On December 15, 2022, the board of directors (the “Board”) determined the Company’s net asset value per share for each share class in a manner consistent with the Company’s valuation policy, as described under “Determination of Net Asset Value” in this Prospectus. Additionally, pursuant to our share repurchase program, we conduct quarterly share repurchases to allow our shareholders to sell all or a portion of their shares back to us at a price equal to the net asset value per share as of the last date of the month immediately prior to the repurchase date. The repurchase date for our next quarterly repurchase will be December 31, 2022. This table provides the Company’s aggregate net asset value and net asset value per share for its Class FA, Class A, Class T, Class D, Class I, and Class S shares as of November 30, 2022 (in thousands, except per share data):
| Month Ended November 30, 2022 | Class FA | Class A |
Class T |
Class D | Class I |
Class S | Total | |||||||||||||||||||||
| Net Asset Value | $ | 146,866 | $ | 68,486 | $ | 73,311 | $ | 57,429 | $ | 272,838 | $ | 61,705 | $ | 680,635 | ||||||||||||||
| Number of Outstanding Shares | 4,263 | 2,133 | 2,283 | 1,807 | 8,371 | 1,765 | 20,622 | |||||||||||||||||||||
| Net Asset Value, Per Share | $ | 34.45 | $ | 32.10 | $ | 32.11 | $ | 31.77 | $ | 32.59 | $ | 34.96 | ||||||||||||||||
| Net Asset Value, Per Share Prior Month | $ | 34.20 | $ | 31.92 | $ | 31.93 | $ | 31.59 | $ | 32.35 | $ | 34.70 | ||||||||||||||||
| Increase in Net Asset Value, Per Share from Prior Month | $ | 0.25 | $ | 0.18 | $ | 0.18 | $ | 0.18 | $ | 0.24 | $ | 0.26 | ||||||||||||||||
The increase in the Company’s net asset value per share for each applicable share class for the month ended November 30, 2022 was primarily driven by the increases in the fair value of six out of eleven of the Company’s portfolio company investments. The fair value of five of the Company’s portfolio company investments decreased.
Public Offering Price Adjustment
On December 15, 2022, the Board approved the new per share public offering price for each share class in the Company’s offering. The new public offering prices will be effective as of December 20, 2022 and will be used for the Company’s next monthly closing for subscriptions on December 29, 2022. The purchase price for Class A, Class T, Class D, and Class I shares purchased under our distribution reinvestment plan will be equal to the net asset value per share for each share class as of November 30, 2022. The following table provides the new public offering prices and applicable upfront selling commissions and dealer manager fees for each share class available in this offering:
| Class A | Class T | Class D | Class I | |||||||||||||||
| Public Offering Price, Per Share | $ | 35.08 | $ | 33.71 | $ | 31.77 | $ | 32.59 | ||||||||||
| Selling Commissions, Per Share | $ | 2.10 | $ | 1.01 | ||||||||||||||
| Dealer Manager Fees, Per Share | $ | 0.88 | $ | 0.59 | ||||||||||||||
We have also posted this information on our website at www.cnlstrategiccapital.com. A subscriber may also obtain this information by calling us by telephone at (866) 650-0650.
Declaration of Distributions
On December 15, 2022, the Board declared cash distributions on the outstanding shares of all classes of our common shares based on a monthly record date, as set forth below:
| Distribution Record Date | Distribution | Declared Distribution Per Share for Each Share Class | |||||||||||||||||||||||
| Class FA | Class A | Class T | Class D | Class I | Class S | ||||||||||||||||||||
| January 26, 2023 | January 27, 2023 | $ | 0.104167 | $ | 0.104167 | $ | 0.083333 | $ | 0.093750 | $ | 0.104167 | $ | 0.104167 | ||||||||||||
Return Information
The following table illustrates year-to-date (“YTD”), trailing 12 months (“1-Year Return”), 3-Year Return, Average Annual Return (“AAR”) Since Inception, and cumulative total returns through November 30, 2022 (“Cumulative Total Return”), with and without upfront sales load, as applicable:
| YTD Return(1) | 1-Year Return(2) | 3-Year Return(3) | AAR Since Inception(4) | Cumulative Total Return(4) | Cumulative Return Period | |||||||||||||||||||
| Class FA (no sales load) | 9.1 | % | 9.3 | % | 40.7 | % | 14.0 | % | 67.6 | % | February 7, 2018 – November 30, 2022 | |||||||||||||
| Class FA (with sales load) | 2.0 | % | 2.2 | % | 31.5 | % | 11.8 | % | 56.7 | % | February 7, 2018 – November 30, 2022 | |||||||||||||
| Class A (no sales load) | 8.2 | % | 7.9 | % | 36.1 | % | 12.4 | % | 57.7 | % | April 10, 2018 – November 30, 2022 | |||||||||||||
| Class A (with sales load) | -1.0 | % | -1.2 | % | 24.5 | % | 9.5 | % | 44.3 | % | April 10, 2018 – November 30, 2022 | |||||||||||||
| Class I | 8.3 | % | 8.2 | % | 36.8 | % | 12.9 | % | 59.7 | % | April 10, 2018 – November 30, 2022 | |||||||||||||
| Class T (no sales load) | 7.8 | % | 8.1 | % | 32.3 | % | 11.0 | % | 49.7 | % | May 25, 2018 – November 30, 2022 | |||||||||||||
| Class T (with sales load) | 2.7 | % | 3.0 | % | 26.0 | % | 9.4 | % | 42.6 | % | May 25, 2018 – November 30, 2022 | |||||||||||||
| Class D | 8.2 | % | 8.6 | % | 35.0 | % | 11.3 | % | 50.3 | % | June 26, 2018 – November 30, 2022 | |||||||||||||
| Class S (no sales load) | 10.1 | % | 10.4 | % | N/A | 15.4 | % | 41.0 | % | March 31, 2020 – November 30, 2022 | ||||||||||||||
| Class S (with sales load) | 6.3 | % | 6.6 | % | N/A | 13.5 | % | 36.1 | % | March 31, 2020 – November 30, 2022 | ||||||||||||||
(1) For the period from January 1, 2022 through November 30, 2022.
(2) For the period from December 1, 2021 through November 30, 2022.
(3) For the period from December 1, 2019 through November 30, 2022.
(4) For the period from the date the first share was issued for each respective share class through November 30, 2022. The AAR Since Inception is calculated by taking the Cumulative Total Return and dividing it by the return period.
Total return is calculated for each share class as the change in the net asset value for such share class during the period and assuming all distributions are reinvested. Amounts are not annualized. The Company’s performance changes over time and currently may be different than that shown above. Past performance is no guarantee of future results. For details regarding applicable sales load, please see the “Plan of Distribution” section in the Company’s Prospectus. Class I and Class D shares have no upfront sales load.
For the eleven months ended November 30, 2022, sources of declared distributions on a GAAP basis were as follows:
| Eleven Months Ended November 30, 2022 | ||||||||
| Amount (in 000s) | % of Total Distributions Declared | |||||||
| Net investment income1 | $ | 13,868 | 69.9 | % | ||||
| Distributions in excess of net investment income2 | 5,959 | 30.1 | % | |||||
| Total distributions declared | $ | 19,827 | 100.0 | % | ||||
Cash distributions net of distributions reinvested during the period presented were funded from the following sources:
| Eleven Months Ended November 30, 2022 | ||||||||
| Amount (in 000s) | % of Cash Distributions Net of Distributions Reinvested | |||||||
| Net investment income before expense support reimbursement | $ | 15,764 | 122.9 | % | ||||
| Expense support (reimbursement) | (1,896 | ) | (14.8 | )% | ||||
| Net investment income | 13,868 | 108.1 | % | |||||
| Cash distributions net of distributions reinvested in excess of net investment income2 | — | — | ||||||
Cash distributions net of distributions reinvested3 | $ | 12,828 | 100.0 | % | ||||
1 There was no expense support due from the Manager and Sub-Manager for the eleven months ended November 30, 2022.
2 Consists of distributions made from offering proceeds for the period presented.
3 For the eleven months ended November 30, 2022, excludes $6,999 of distributions reinvested pursuant to our distribution reinvestment plan.
For the years ended December 31, 2021, 2020, 2019, and 2018 distributions were paid from multiple sources and these sources included net investment income before expense support of 65.2%, 42.3%, 61.7%, and 85.2%, reimbursable expense support of 0.0%, 33.2%, 23.5% and 11.1%, and offering proceeds of 34.8%, 24.5%, 14.8% and 3.7%, respectively. The Company will be required to repay expense support to the Manager and Sub-Manager in future periods which may reduce future income available for distributions, however, as of the date of this current report, management believes that reimbursement of all expense support is not probable under the terms of the Expense Support and Conditional Reimbursement Agreement. For additional information regarding sources of distributions, please see the annual and quarterly reports the Company files with the Securities and Exchange Commission.
We have also posted this information on our website at www.cnlstrategiccapital.com. A subscriber may also obtain this information by calling us by telephone at (866) 650-0650. The calculation of the Company’s net asset value is a calculation of fair value of the Company’s assets less the Company’s outstanding liabilities. For a discussion of how the fair values of the Company's investments have been impacted by the COVID-19 pandemic, please see “Risk Factors—Risks Related to Our Business—The outbreak of highly infectious or contagious diseases, including the current outbreak of the novel coronavirus (“COVID-19”), could materially and adversely impact our business, our operating businesses, our financial condition, results of operations and cash flows. Further, the spread of COVID-19 pandemic has caused severe disruptions in the U.S. and global economy and financial markets and could potentially create widespread business continuity issues of an as yet unknown magnitude and duration.”
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits |
Exhibit | Description | |
| 1.1 | Selected Dealer Agreement dated December 12, 2022 by and among the Company, the Managing Dealer, the Sponsor and Ameriprise. | |
| 1.2 | Cost Reimbursement Agreement dated December 12, 2022 by and among the Company, the Managing Dealer and AEIS | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
Cautionary Note Regarding Forward-Looking Statements
Statements in this Current Report on Form 8-K, including intentions, beliefs, expectations or projections relating to the items described herein, are forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on the beliefs and assumptions of the Company’s management and on the information currently available to management at the time of such statements. Forward-looking statements generally can be identified by the words “believes,” “expects,” “intends,” “plans,” “will,” “estimates” or similar expressions that indicate future events. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company’s control. Any forward-looking statement made by us in this Current Report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. Important risks, uncertainties and factors that could cause actual results to differ materially from those in the forward-looking statements include the risks associated with the Company’s ability to pay distributions and the sources of such distribution payments, the Company’s ability to locate and make suitable investments, the ongoing and potential impact of the COVID-19 pandemic on the economy and the broader financial markets, which may have a significant negative impact on the Company's (and its businesses) financial condition, results of operations, cash flows and net asset value per share and other risks described in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and the other documents filed by the Company with the Securities and Exchange Commission.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: December 16, 2022 | CNL Strategic Capital, LLC a Delaware limited liability company | ||
| By: | /s/ Chirag J. Bhavsar | ||
Chirag J. Bhavsar Chief Executive Officer |
