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Jennifer Gowetski
Senior Counsel
Office of Real Estate ana Commoaities
Division of Corporation Finance
Securities ana Exchange Commission
Washington, DC 20549
November 9, 2018
Dear Ms. Gowetski:
We acknowleage receipt of comments in your letter of October 4, 2018 regaraing
Amenament No. 2 to the araft Offering Statement ofStewara Realty Trust,
Inc. (the "Company"), which we have set out below, together with our responses.
l. We note your response to comment 2 of our letter aatea September 5, 2018 ana
the revise aisclosure regaraing the provisions in your subscription
agreement aesignating New York as the sole ana exclusive forum for certain
claims against you ana waiving the right to trial by jury. We further note
Section
8.06 of your bylaws aesignates the Circuit Court for Baltimore City, Marylana,
or, if that court aoes not have jurisaiction, the Unitea States District Court
for
the District of Marylana, Baltimore Division, as the sole ana exclusive forum
for certain types of actions ana proceeaings that may be initiates by your
stockholaers. Please revise to clarify ana aiscuss how the exclusive forum
provisions are intenaea to operate given the two aifferent exclusive forum
provisions. In aaaition, please revise your subscription agreement to clarify
that, by agreeing to the waiver of trial by jury provision, investors will not
be
aeemea to waive the company's compliance with the feaeral securities laws ana
the rules ana regulations promulgate thereunaer. Also, please revise the
subscription agreement to state that the waiver oftrial by jury provision
applies to feaeral securities laws claims.
(j
crowdcheck law
Re: Steward Realty Trust
Amendment No. 3 to Draft Offering Statement on Form 1-A
Submitted September 10, 2018
CIK No. 0001735770
The Comp ny h s revised the subscription greement to be governed
by M 1yl nd l w, the Comp ny's jurisdiction of inco,por tion, nd the
choice of forum provision to M 1yl nd courts, nd, s result, h s not
included comp r tive discussion in the offering circul r. The Comp ny h s
lso
revised the subscription greement s re,uested by the St JJ nd h s filed the
revised version s n exhibit to the offering st tement.
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2. We note your response to comment 3 of our letter aatea September 5, 2018
that you are investing in loans on the same terms as are offere to lenaers by
the
borrowers on the platform www.gostewara.com. We further note your aescription
of"Stewara" anti its business on www.gostewara.com anti the aisclosure in
the offering circular. Please revise for consistency.
3. We note your revise. iisclosure on page 42 that the company currently
compensates only one of its officers, Mr. Wooas. Please revise to quantify the
compensation that you have pai to Mr. Wooas.
We also attach to this letter, as Appenaix A, a copy of the email
corresponaence that was submittea supplementally to the Staff on October 19,
2018.
If you have aaaitional comments or questions, please contact me at
jeanne@crowachecklaw.com.
Sincerely,
/s/ Jeanne Campanelli
Jeanne Campanelli
Partner
Crow4Check Law LLP
cc: Daniel Miller
Stewara Realty Trust, Inc.
The Comp ny h s revised the disclosure on the pl tform www.gostew
rd.com nd cl rified on the cover nd elsewhere in the Offering Circul r
th t the pl tform is owned nd oper ted by the Comp ny 's ffili te Stew rd
Technologies Ltd.
The Comp ny h s revised the disclosure s re,uested by the St ff
2
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AppenaixA
3
Steward Realty Trust -- submission of draft pages
1 message
Jeanne Campanelli <jeanne@.crowdchecklaw.com>
Fri, Oct 19, 2018 at
4:56 PM
To:
Cc: John Woods <john@gosteward.com>, Dan Miller <dan@gosteward.com>
Dear
We appreciate the opportunity to have you review certain proposed changes to
the offering statement of Steward Realty Trust prior to filing an amendment in
the
interest of resolving your questions raised in our telephone conversation on
October 18, 2018. I am attaching for your review pages from the Company's draft
offering statement marked to show the changes that the company proposes to
make on the cover and in the Summary (pages 2 5), The Company's Business (page
31) and Plan of Operations (page 35) sections of the offering circular.
We appreciate your effort to find a means to move forward on the disclosure.
Please contact me if you have additional questions or comments.
Sincerely,
Jeanne Campanelli
Partner
CrowdCheck Law LLP
Admitted in NY and DC
This message is intended to be confidential and may be legally privileged. It
is intended solely for the addressee. If you are not the intended recipient,
please
delete this message from your system and notify us immediately. Any
disclosure, copying, distribution or action taken or omitted to be taken by an
unintended
recipient in reliance on this message is prohibited and may be unlawful.
t:J dos2017a3 stewardrealtyEDGAR6 (changed pages only for SEC 101918).pdf
232K
Ill
AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION
CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR
AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS
QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF SUCH
STATE. THE COMPANY MAY ELECT TO SATISFY ITS OBLIGATION TO DELIVER A FINAL
OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE
COMPLETION OF THE COMPANY'S SALE TO YOU THAT CONTAINS THE URL WHERE THE
FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL
OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.
PRELIMINARY OFFERING CIRCULAR DATED OCTOBER XX. 2018
- -( Deleted: SEPTEc\,IBER 10
Stewanl Realty Trust, Inc.
*
Steward
9679 Myrtle Grove Lane.
Deleted: 900 Camp Street, 3rtl
Floor
.Easton, !\ID 21601
Deleted: l\"ew Orleans, LA 70130
(541) 444-0700
- Q>eleted: (504) 608-0600'i_1
__________.)
www.gostewartl.com
UP TO 5,000,000 SHARES OF CLASS A COMMON STOCK
Sl0.00 PER SHARE, MINIMUM INVESTMENT $500
SEE "SECURITIE BEING OFFERED" AT PAGE 47
Steward Realty Trust, Inc. is a development stage company formed to be the
world's first CrowdfarmingTM REIT.
The company provides a vehicle to invest in a pool of small-scale agricultural,
aquacultural, and forestry loans,
backed by land and farm assets, with the potential to provide an attractive
risk-adjusted return with current income
while supporting farmers using sustainable and ecologically-sound agricultural
practices. The company will invest
primarily in the United States, though over time the company may expand its
operations to foreign markets. We
intend to qualify as a real estate investment trust beginning with the taxable
year ending December 31, 2018, which
may be extended to the taxable year ending December 31, 2019, in our board of
director's discretion.
We are offering up to $50,000,000 in shares ofour Class A Common Stock to the
public at $10.00 per share. The
minimum subscription amount is 50 shares, or $500. The per-share price for our
Class A Common Stock was
arbitrarily detennined by the company's board of directors and will apply until
December 31, 2018, or such later
date as announced by the company. After that date, the per share purchase price
in this offering will be adjusted
annually, as ofDecember 31, and will equal the quotient ofour Net Asset Value,
or "NAV," divided by the number
of shares of our Class A Common Stock outstanding as ofthat date (''NAV per
share"). There is no public market
for the company's shares and we currently have no plans to list the company's
shares on a stock exchange or other
trading market, nor does the company intend to offer investors liquidity
through a redemption plan. Because ofthe
illiquid nature ofour shares, you should purchase the company's shares only as
a Jong-term investment and be
prepared to hold them for an indefinite period of time.
$
10.00 $ 0.00 $ 10.00
$50,000,000.00 $ 0.00 $50,000,000.00
The initial price per share shown was arbitrarily determined by company
management and will apply until
December 31, 2018. After that date, our price per share will be adjusted
on December 31 ofeach year based on
the Net Asset Value (NAV) on that date, commencing on December 31, 2019.
We do not intend to use commissioned sales agents or underwriters. The
company, its officers and its
associated persons intend to conduct the offering in accordance with an
exemption from registration contained
in Rule 3a4-I under the Securities Exchange Act of I 934, as amended (the
"Exchange Act"), and, therefore,
none ofthem is required to register as a broker-dealer.
Does not include expenses ofthe offering, including costs oflegal and
accounting service providers and blue
sky compliance. See "Plan ofDistribution."
We intend to distribute the company's shares exclusively through the website
www.gosteward.com. owned by our
affiliate Steward Technologies Ltd. (the "Steward Platform"). The Steward
Platform is an online investment
platfotm that allows investors to invest in the company's shares and accredited
investors to invest in crowdfarming
first-mortgage secured lending opportunities,.where investors can.create a11
acco\lllt, revie_w offering materials, sig11 _ -{Deleted:
.....,___________________)
investment a! eements, and initiate payment via ACH or wire transfer. After
making an investment, investors can
review ongoing updates through their account dashboard. See "Plan
ofDistribution."
Underwriting
Price to discount and Proceeds to
Public* commissions** issuer***
Per share
Total Maximum
The offering is being conducted on a best-efforts basis without any minimum
target. Because there is no
minimum target, the company may close on any amounts invested, even if those
amounts are insufficient for
the intended use of proceeds, or do not cover the costs of this offering.
Investing in the company's Class A Common Stock is speculative and involves
substantial risks. You should
purchase these securities only if you can afford a complete loss of your
investment. See ''Risk Factors"
beginning on page 11 to read about the more significant risks you should
consider before buying our Class A
Common Stock. These risks include the following:
The comp11ny h11s II limited oper11ting history.
Bec11use this is II blind pool a.Dering, investors will not hllVe the
opportunity to ev11lu11te investments before
the comp11ny m11kes them.
There 11re conflicts of interest between the comp11ny 11nd its
11ffili11tes.
F11i/ure to ,u11lifj, 11s II REIT would c11use us to be t11Xed 11s II
regul11r corpor11tion, which would
subst11nti11/ly reduce funds 11v11i/11ble for distributions to our
stockholders.
We m y lloc te the net proceeds from this offering to investments with
which you m y not gree.
The comp ny is controlled by its CEO; stockholders will not h ve control
over ch nges in our policies nd
oper lions, which incre ses the uncert inty nd risks th t our
stockholders f ce.
THE UNITED STATES SECURITIES AND EXCHANGE COl\-11\USSION DOES NOT PASS UPON THE
MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR IBE TERMS OF IBE
OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING
CIRCULAR OR OIBER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED
PURSUANT TO AN EXEMPTION FROM REGISTRATION WIIB THE COMJ\USSION; HOWEVER
THE COMJ\USSION HAS NOT MADE AN INDEPENDENT DETERMINATION IBAT THE
SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.
GENERALLY NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE
PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME
OR NET WORIB. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL
PERSONS. BEFORE MAKING ANY REPRESENTATION IBAT YOUR INVESTMENT DOES NOT
EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(tl)(2)(i)(C)
OF
REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO
REFER TO www.investor.gov.
Sales of these securities will commence on approximately
[tlate].
This Offering Circular follows the Form S-11 tlisclosure
format.
Table of Contents
Steward Realty Trust, Inc. is the world's first CrowdfarmingTM REIT, allowing
individuals to invest in and support
sustainable agriculture. The company provides financing to farmers and ranchers
to purchase agricultural land and
make investments in their farm business, with a focus on sustainable
agriculture, aquaculture, and forestry (the
"Properties" or "Property''). The company will invest primarily in the United
States, though over time the company
may expand its operations to foreign markets. The company is a development
stage company with a limited history
of operations. As ofthe date ofthis Offering Circular, we have financed four
Properties.
The company intends to apply to the Internal Revenue Service (the "IRS") to be
treated as a Real Estate Investment
Trust ("REIT") for federal income tax purposes, beginning in the tax year
ending December 31, 2018, which may be
extended by our board ofdirectors until the taxable year ending December 3 I,
2019. To qualify as a REIT, an
organization makes an "election" to do so by filing a Form I 120-REIT with the
IRS, and by meeting certain other
requirements. The purpose ofthis designation is to reduce or eliminate
corporate tax, thus avoiding double taxation.
In return, RE!Ts are required to distribute at least 90% oftheir taxable income
into the hands of stockholders. The
U.S. Congress enacted the law providing for RE!Ts in 1960 as part of the
Internal Revenue Code (the "Code"). The
law was intended to provide a real estate investment structure similar to the
structure mutual funds provide for
investment in stocks. RE!Ts were designed to be attractive income vehicles
because, to avoid incurring liability for
U.S. federal income tax, RE!Ts generally must pay out an amount equal to at
least 90% oftheir taxable income to
stockholders in the form of dividends to stockholders, which the REIT is
entitled to deduct. We can give no
assurance, however, regarding the amount of income, if any, that the company
will generate for its stockholders. See
"U.S. Federal Income Tax Considerations Requirements for Qualification as a
REIT."
Although we cannot assure you that the IRS will not successfully challenge the
classification ofthe company as a
REIT, we are not currently aware of any reasons why the company would not
qualify as a REIT.
To qualify as a REIT and to maintain REIT status, a company must:
Invest at least 75% ofits total assets in real estate
Derive at least 75% ofits !J'OSS income from rents from real
property, interest on mortgages financing real
property or from sales ofreal estate
SUMMARY
Our Business
General
Table of Contents
Pay at least 90% ofits taxable income in the form ofstockholder
dividends each year
Be an entity that is taxable as a corporation
Be managetl by a boartl of directors or trustees
Have a minimum of 100 stockholders
Have no more than 50% ofits shares helli by five or fewer
intlivitluals
The company provides investors an opportunity to invest in a REIT without
paying the high upfront fees and selling
commissions typical in non-traded REITs, with the result that a higher
percentage of your investment will be used to
finance Properties anti thereby increase the company's total return.
Stewartl Realty Trust, Inc. is a commercial mortgage REIT that provitles
financing, backetl by land anti farm assets,
to farmers using sustainable and ecologically-sountl agricultural practices. As
such, the company may invest, alone
or with others, in loans to farming and ranching businesses to finance
commercial real estate usetl for agriculture,
aquaculture, or forestry. These financings will be primarily in the form
offirst-mortgage loans and majority interests
in first-mortgage loans, but may eventually inclutle a small number of
mezzanine-subortlinate loans, leaseholli
transactions, anti britlge loans. As further explainetl below, loans will be
structuretl as construction, mini-permanent
("mini-perm"), anti stabilized financings.
The company will engage in both short-term anti long-term (permanent)
financings. The short-term financing, or
construction loan, funtls the acquisition ofthe Prop erty, the preparation and
tlevelopment ofthe Property (which
may or may not be vacant) for proliuction, cultivation, anti processing. After
a project achieves "stabilization," the
construction loan is replacetl by longer-term financing. The company may elect
to combine the two loans into one in
the form ofa construction and mini-perm loan. Mini-perm is financing that
"takes out," or replaces, the construction
loan, but is shorter in duration than traditional permanent financing. The
purpose ofthe mini-perm is to pay off the
construction loan anti provilie the project with an operating history prior to
refinancing in the permanent market.
The company will offer long-term (permanent) financing to farmers and ranchers
with an operating history on a
property. The company expects its proportion oflong-term financing to increase
over time as it tlevelops
relationships with farmers and ranchers who have successfully utilizetl the
company's construction anti mini-perm
loans.
Our Business
2
3
Table of Contents
An afliliate of the company may apply to the Feiieral Agricultural Mortgage
Corporation ("Fanner Mac") for
approval to offer long-term, fixeii-rate financing at favorable rates through a
system regulated by the Farm Credit
Administration. If an afliliate obtains such an approval, the company expects
Farmer Mac loans to be the iiominant
source of''take-out financing" to replace short-term loans with long-term
loans. Farmer Mac is a U.S. govennnent
sponsoreii enterprise with the mission of proviiiing a seconiiary market for
agricultural real estate mortgage loans,
rural housing mortgage loans, anii rural utility cooperative loans. Its goal is
to increase the availability of
competitively priceii mortgage financing to farmers, ranchers, anii rural
homeowners anii to provide greater liquiiiity
anii lending capacity to agricultural leniiers.
Our boarii of iiirectors has control over the strategy and investment
guiiielines of the company. The board of
directors currently consists of two iiirectors, Daniel S. Miller, who is also
the company's Chief Executive Oflicer,
anii Marc D. Maltz, an independent iiirector.
REITs are permitteii to iieduct from their corporate taxable income every
iiollar they pay out, while stockholiiers pay
tax on the iiiviiiend income they receive, generally at oriiinary income tax
rates, although iniiividuals may qualify for
lower rates in many cases. As is characteristic of mortgage REITs, the company
inteniis to hold commercial
mortgages and other loans on its balance sheet, anii funii these investments
with equity capital. The company may
rely on a variety of funding sources, incluiiing common anii preferreii equity,
repurchase agreements, structureii
financing, convertible anii long-term iiebt, anii other creiiit facilities,
anii will attempt to use less borrowing anii
more equity capital to finance its acquisitions of mortgages than do other
large mortgage investors, though we
cannot assure you that we will succeeii in iioing so. And, like other
mortgageREITs, the company may attempt to
raise both equity anii iiebt in the registereii or exempt public capital
markets, though no iiecision has yet been maiie
as to whether any of the company's securities will be publicly tradeii on a
national stock exchange or quotation
system, or whether the company will register with the Commission but not traiie
on major securities exchanges (a
public, non-IisteiiREIT). Investors subscribing to this offering shoulii assume
that no market for the company's
securities will ever iievelop.
Stewarii Realty Trust, Inc. is a development stage company that was formeii on
March 7,2017, as a Maryland
corporation and does business under the name "Stewarii Fann Trust". We
maintain our principal executive offices at
:!679 Myrtle Grove Lane, Easton, MD 21601. Our mailing aiidress is 9450 SW
Gemini Dr., Beaverton, OR 9700&.
Our email adiiress is supoort@gostewarii.com anii telephone number is (541)
444-070Cl.
Deleted: 911 Camp S1reet, 3
Floor, New Orleans,
Louisiana ?el 30
Deleted: 3el4 Dauphine Slreet,
Suite A #83098, New
Orleans, Louisiana 70117
Deleted: 5'4) 608-e600
Table of Contents
The company is focused on financing small Properties, generally fewer than one
hundred acres, for agricultural use.
Our goal is to finance approximately one Property per month over the next
twelve months. We currently have
financed four Properties that are illustrative ofthe Properties that are likely
to be attractive to the company.
In addition to being the sole lender with respect to some Properties, the
company contemplates that it may invest as
part ofa syndicate or other participatory arrangement with other sources
ofcapital, such as via crowdfunding, in
connection with the financing ofother Properties. The company will invest in
Property loans on such terms as the
board of directors may deem appropriate.
Two of the Properties the company has financed to date are located in Detroit,
Michigan, one Property is located in
Kinzers, Pennsylvania, and one Property is located in Cave Junction, Oregon.
Each ofthe Detroit Properties consists
of less than one acre, vacant at purchase and now converted to agricultural use
for fruits and vegetables, with each
borrower planning to purchase additional acreage over time. The Kinzers
Property is an existing 50 acre diversified
grain and dairy farm. The Cave Junction Property is a 25 acre hemp farm.
The mortgages on the two Detroit Properties financed by the company were
initially held by Steward Lending LLC
("Steward Lending''), an alliliate of the company, for reasons of expediency,
but have been assigned to the
company. In the future, we intend to have Steward Lending sign all closing
documents and act as Administrative
Agent for the lenders, as has been done with the Kinzers and Cave Junction
Property loans.
The company targets making monthly dividend payments and the distribution of I
00% ofannual net income. The
company seeks to target a loan-to-cost ratio of65-85% for each project, but
does not intend to use leverage at the
portfolio level for the foreseeable future. We financed the two Detroit
Properties in the form of a first-mortgage
construction loan. The first loan was 85% loan-to-cost with a maximum principal
balance of $75,000 at an interest
rate of 10.0%, per annum. The second loan was 82.5% loan-to-cost with a maximum
principal balance of$120,000
at an interest rate of9.5% per annum. We closed on the loans on June 20, 2017
and August 23, 2017, respectively.
We financed the Kinzers Property in the form ofa bridge loan, winch is expected
to be converted into a first
mortgage loan by the end of2018. The loan has a maximum principal balance
of$150,000 at an interest rate of
8.0% per annum. We closed on the loan on June 15, 2018. We financed the Cave
Junction Property in the form ofa
first-mortgage construction loan, at 800/4 loan-to-cost with a maximum
principal balance of$640,000 at an interest
rate of9.5% per annum. We closed on the loan on July 12, 2018. The company is a
minority investor in the 2018
loans. They are not indicative ofthe twe ofco-lending, first-mortgage secured
arrangements that the company
normally intends to be making. We extended a bridge loan to the borrower ofthe
Kinzers Property, and took a
minority position on that loan and the first-mortgage loan on the Cave Junction
Property, in order to place loan
proceeds at the disposal ofthe borrowers to satisfy their immediate funding
needs. When the company realizes
sullicient net proceeds from this offerinSz it intends to take majority
positions in both loans and convert the bridge
loan to a first-mortgage loan. In the event that the proceeds received in this
offering are insullicient to finance the
expansion ofexisting Properties or the acquisition and development of future
Properties, aftiliates of the company
may purchase Class A and/or Class B Common Stock in the company to provide the
funds necessary to consummate
the transactions on commercially reasonable terms. The company anticipates that
a number of its farmer-borrowers
will purchase land aajacent to the parcel initially financed and make
additional investments over time. The company
expects to have a long-term relationship with its borrowers pursuant to which
it provides initial
acquisition/construction financing, followed by expansion financing and then
long-term stabilized financing.
Steward Realty Trust, Inc. provides financing to farmers and ranchers to buy
land and operate their farm businesses.
Many such projects convert vacant or underutilized land into agricultural use.
Steward targets farmers seeking to
operate on one hundred acres or less, which the company believes to be an
underserved segment of the agricultural
market often considered too small by traditional agricultural lenders. In
addition, many ofthe farmers qualify as
"beginning farmers", defined by the United States Department ofAgriculture
("USDA") as an individual or entity
Finance,/ Properties
The Business Plan
who "has not operated a farm or ranch, or who has operated a farm or ranch for
not more than IO consecutive
years". 1 TI1ese farmers are often overlooked by traditional lenders, but have
tested their business model, desire to
commit themselves to a life of fanning, and are ready to make the significant
capital investments in land, facilities,
and equipment necessary to operate a successful farm business.
"Limited Resource Farmer/Rancher - Beginning Fanner Definition." Limited
Resource Fanner/Rancher - Self
Determination Tool. USDA Natural Resources Conservation Service, 01 Nov. 2010.
Web. 05 Mar. 2017.
<https://lrftool.sc.egov.usda.gov/BFRP Definition.aspx>.
1
4
Table of Contents
In addition, Steward Realty Trust, Inc. targetsfarmers and ranchers practicing
sustainable, ecologically-sound
agriculture. Such fanning is often labeled, among others, as organic, non-GMO,
biodynamic, or regenerative. Key
characteristics of this type offanning include:
limited use of external inputs such as chemical fertilizers and
pesticides,
limited use of large scale machinery and a focus on skilled human
labor and hand/small tools for efficient,
high-density cultivation,
diversity of crops and livestock, also referred to as polyculture, and
alignment with ecosystems and enhancement of natural resources,
including soil, water, and carbon.
Many suchfarm operations sell their products directly to consumers and
restaurants regionally and at a premium,
given the consumer demand for high-quality, sustainable agricultural products.
A direct business model reduces the
number of intermediaries that take a percentage of thefarmers' income and thus
increases-cash flow.
By financingfarms operating at the intersection of these three key drivers
small-scale, using sustainable,
ecologically-sound practices, and operated by "beginningfarmers" we address an
underserved yet critical part of
the agricultural sector that is !J"eatly in need of financing. Younger farmers
are needed to replace aging agriculture
owners, who represent a majority offann owners in the United States. For
example, during the period from 1981-
2111, the average age of U.S. farmers increased by nearly eight years, from
51.5 years to 58.3 years.2 Such trends
show the need for capital to bring "beginningfarmers" into agriculture and the
importance of thesefarmers to the
health of agricultural and food systems.
Borrowers will apply for loans through the Steward PJatf0!11j, owned by
affiliate Steward Technologies Ltd. Each of
the company and individual _investors will be able to lend some portion of the
aggregate amount of the
loan soughto the borrower using the_technology provided by the platfonn.J:he
company intends to lend at least
51% of the loan amount sought by each borrower and the other investors will be
co-lenders for the remaining
amount of the loans. Borrowers on the Steward Platform will enter into a loan
agreement in which Steward Lending
LLC. an affiliate of the company. acts as administrative agent on behalf of all
of the co-lenders. including the
company. The relationship between the company and the other investors will be
governed by a participation
agreement defining the rights of the co-lender . All investments in shares_of
Steward Realty Trust, Inc._ or_ in_ an_ ...
individual loan will be made on the Steward PJatfonn, with no intermediaries or
upfront fees for investors in the
company's shares or for investors lending via the platform. In the event that
other investors do not;Iect to ____... ... ....
participate in making 'l,loa9rto a borrower via the Steward PJatform, the
company will lend the full amount sought .....
by a borrower.
\
The company believes each type of investment available on the Steward Platform
shares of Steward Realty Trust, \\
Inc. or a.direct interest in. individual loan!i, will have a different appeal
for potential investors. Steward Realty
Trust, Inc. provides an investor with a diversified investment spread across a
portfolio offann loans. This
potentially provides more stability for cash flow and principal protection,
since any potential losses on a single loan
would only represent a portion of the overall portfolio. While an investment in
an individual loan could carry higher
risks, given the performance of the investment depends on the performance of a
single borrower, investment via the
Steward Platfom1 in an indi_vidualloan allo"'s a direct c011nection ben.veen
the inyestor an thefanner:b"rro,.,er and
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is well suited for investors who want to invest in afarm they know or in a
region or product type they arefamiliar ( Deleted:
with. The company expects investors to invest in both investment products,
shares of Steward Realty Trust, Inc. and 1
individual loans, but believes that investors will invest a higher average
investment amount in the company. The
company solely offers investors shares of Class A Common Stock.
----------------
Like some REITs, the company does not currently have any employees and relies
on affiliates to provide the
services necessary to operate the company. The company's executive officers are
employed by or independent
contractors of the company's affiliate, Steward Agricultural Funding Portal LLC
("SAFP"), whose employees and
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tlirectly
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Each such portion of the aggregate amount sought
will be a
direct Joan rom the company or the investor to the
borrower.
- Deleted: will
seek to make a loan for a portion of the
aggregate amount
sought, alongside investors who can make
their own loans
on the same terms as the company
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Invesmients in intlivitlual loans will be evitlencetl
l by a
borrower's promissory note which will be part of the
loan
documentation
independent contractors devote a portion of their time to the affairs of the
company and other affiliates. The
company and its corporate affiliates are parties to an Intercompany Seivices
and Cost Allocation Agreement. Under
that agreement, SAFP is the sole provider of the personnel staffing the service
departments or performing the
functions described in the agreement that are being shared by its affiliates.
See "Certain Relationships and Related
Party Transactions." We anticipate that company affiliate Steward Lending will
originate(, and act as administrative
agent for,) each mortgage that Steward Realty Trust, Inc. will invest in, and
that company affiliate Steward
Servicing LLC ("Steward Seivicing") will service all loans. Myrtle Grove
Ventures LLC ("MGV'') is currently the
sole owner of the company. SAFP and its affiliates, Steward Lending and Steward
Servicing, are wholly owned
subsidiaries of MGV. Daniel S. Miller, the company's CEO, is the 99% owner of
Myrtle Grove Ventures LLC and
Myrtle Grove Ventures Manager, Inc. ("MGVM") is a 1% owner. MGVM is in turn
100% owned by Daniel S.
Miller.
2 Kurtzleben, Danielle. "The Rapidly Aging U.S. Farmer."
Https://www.usnews.com/news/blogs/data
mine/2014/02/24/us-fanners-are-old-and-getting-much-older, 24 Feb. 2014. Web.
05 Mar. 2017.
<https:/
/www.usn
ews.com/
news/blogs/data-mine/2014/02/24/us-farmers-are-old-and-getting-much-older>.
5
Table ofContents
Overview
The company is a corporation formed in Maryland. The primary purpose ofthe
company is to provide financing to
farmers and ranchers to purchase agricultural land and make investments in
their farm business. The company
focuses on sustainable agriculture, aquaculture, and forestry.
The company will consider other vehicles, such as crowdfunding, for investing
along with other individuals or
entities in connection with the financing ofa particular Property. The company
may, at the discretion ofthe board of
directors, invest in any ofthe mortgages relating to such financings on such
terms as the board ofdirectors may
deem appropriate.
The company targets lending to small-scale farmers and ranchers operating on
less than one hundred acres. The
company focuses on lending to farmers using sustainable and ecologically sound
farming practices.
The Properties are expected to be located across the United States, though over
time the company may expand its
operations to forei gn markets. Key factors in determining the viability ofa
project are the experience of a farmer or
rancher, cost and availability ofland, and the size ofthe local market for
high-quality, sustainable agricultural
products. The company seeks to preserve capital and produce attractive short to
mid-term returns. To achieve this
goal, the company will seek to finance farmers outside the focus ofthe
traditional agricultural lending market,
targeting borrowers with existing farming experience, sustainable practices,
defined products offerings, and direct
sales channels who are ready to invest for the long term.
The company believes that while local agriculture has grown significantly over
the last decade, there exists a gap for
local, small-scale operators focused on non-commoditized farm products, mainly
due to a lack oftraditional
financing. The company believes that these inefficiencies in the market provide
opportunities for investors with a
detailed understanding ofand connection to local real estate and agricultural
markets.
The company targets making monthly dividend payments and the distribution
of100% ofannual net income. The
company targets a loan-to-cost ratio (also referred to as "LTC") of65-85% for
each project, but does not intend to
use leverage at the portfolio level for the foreseeable future. The LTC ratio
is a metric used in commercial real estate
construction to compare the financing ofa project as offered by a loan to the
cost of building the project. The LTC
ratio allows commercial real estate lenders to determine the risk of offering a
construction loan. 1
The Properties the company has already financed, consisting ofreal estate
located in Detroit, Michigan, Kinzers,
Pennsylvania, and Cave Junction, Oregon are illustrative ofthe Properties that
the company seeks to finance. Each
of the Detroit Properties consists ofless than one acre, vacant at purchase and
now converted to agricultural use for
fruits and vegetables, with each borrower planning to purchase additional
acreage over time. The Kinzers Property is
a 50 acre diversified grain and dairy farm. The Cave Junction Property is a 25
acre hemp farm.
We financed the two Detroit Properties in the form ofa first-mortgage
construction loan. The first loan was 85%
LTC with a maximum principal balance of$75,000 at an interest rate of10.0% per
annum. The second loan was
82.5% LTC with a maximum principal balance of$120,000 at an interest rate
of9.5% per annum. We closed on the
loans on June 20, 2017 and August 23, 2017, respectively. We financed the
Kinzers Property in the form ofa bridge
loan, which is expected to be converted into a first-mortgage loan by the end
of2018. The loan has a maximum
principal balance of$150,000 at an interest rate of8.0% per annum. We closed on
the loan on June 15, 2018. We
financed the Cave Junction Property in the form ofa first-mortgage construction
loan, at 80% loan-to-cost with a
maximum principal balance of$640,000 at an interest rate of9.5% per annum. We
closed on the loan on July 12,
2018. The company is a minority investor in the 2018 loans. They are not
indicative ofthe type ofco-lending, first
mortgage secured arrangements that the company normally intends to be making.
We extended a bridge loan to the
borrower ofthe Kinzers Property, and took a minority position on that loan and
the first-mortgage loan on the Cave
Junction Property, in order to place loan proceeds at the disposal ofthe
borrowers to satisfy their immediate funding
THE COMPANY'S BUSINESS
In the event that the proceeds received in this offering are insufficient to
finance the purchase and development of
Class B Common Stock in the company for the funds necessary to consummate the
transactions on commercially
31
needs. When the company realizes sufficient net proceeds from this offering it
intends to take majority positions in
both loans and convert the bridge loan to a first-mortgage loan.
any existing Properties or other Properties yet to be selected, affiliates of
the company may purchase Class A aml/or
reasonable terms.
1
https://www.investopedia.com/terms/Vloan-to-cost-ratio-ltc.asp
Table of Contents.
The following discussion of our financial condition and results
ofoperations-5)1ould be read in conjunction with our - -- Delete,!: for
the periool lrom inception to December 31, 2117
financial statements and the related notes included in this Offering Circular.
The following discussion contains
forward-looking statements that reflect our plans, estimates, and beliefs. Our
actual results could differ materially
from those discussed in the forward-looking statements.
Overview
The primary purpose of the company is to provide financing to farmers and
ranchers to purchase agricultural land
and make investments in their farm business, with a focus on sustainable
agriculture, aquaculture, and forestry. We
have financed three Properties in the form ofa first-mortgage construction loan
and one in the form of a bridge loan,
which we expect to convert to a first-mortgage loan by the end of 2018. The
first loan was 85% LTC, with a
maximum principal balance of$75,000, at an interest rate of 10.0% per annum.
The second loan was 82.5% LTC,
with a maximum principal balance of$120,000, at an interest rate of9.5% per
annum. The third loan is for a
maximum principal balance of$ 150,000, at an interest rate of8.0% per annum.
The fourth loan is for a maximum
principal balance of$640,000, at an interest rate of9.5% per annum. We closed
on the loans on June 20, 2017,
August 23, 2017, June 15, 2018, and July 12, 2018 respectively.
To date, the company has been the sole lender in its first two loan
financings, following the assi!!IUJlent to it ofthose
loans by Steward Lending, and a co-lender in the third and fourth loan
financing. The company intends to be the
..sole or majority lender in each loan that it makes, however, it is a minority
investor in the third and fourth loan
financings, initially funding only $12 312 and $510001 respectively, of such
loans. They are not indicative ofthe
type of co-lending, first-mortgage secured arrangements that the company
normally intends to be making. We
extended a bridge loan to the borrower of the Kinzers Property and took a
minority position on that loan and the
first-mortgage loan on the Cave Junction Property, in order to place loan
proceeds at the disposal of the borrowers to
satisfy their immediate funding needs. When the company realizes sufficient
net proceeds from this offering, it
intends to take majority positions in both loans and convert the bridge loan
to a first-mortgage loan. In the future, it
is intended that Steward Lending, as Administrative Agent to the lender , will
sign all closing documents for the
lenders, including the company. The company may invest as part ofa syndicate or
other participatory arrangement
with co-investors in connection with the financing ofsome Properties, such as
via crowdfunding. The company may,
at the discretion of the board of directors, invest in any ofthe mortgages on
those Properties on such terms as the
board of directors may deem appropriate.
Daniel S. Miller is the principal executive officer ofthe company. Through
entities he controls, he intends to enter
into related party agreements in the future where significant conflicts of
interest may exist. The interests ofour
management and their afftliates could result in decisions adverse to the
company's stockholders and their decisions
may negatively impact the value ofyour investment. Our management may earn a
profit from related party
transactions while our investors may lose their entire investment. See "Risks
Related to Certain Conflicts of
Interest" and "Certain Relationships And Related Party Transactions."
The company intends to qualify as a REIT beginning with the taxable year ending
December 31, 2018, which may
be extended to the taxable year ending December 31, 2019, in our board of
director's discretion. Net proceeds from
this offering will be used by the company (i) to finance one or more
Properties, (ii) to create a reserve fund to
finance additional Properties, anti/or (iii) for working capital.
35
PLAN OF OPERATION