The Dixie Group, Inc. reported the sale of its Susan Street facility, and approximately 10 acres of surrounding property located in Santa Ana, Ca. to the CenterPoint Properties Trust for a net purchase price of approximately $37.2 million. The sale will result in reducing debt under the company’s Revolving Credit Facility by over 35 percent and increasing equity by over 50 percent.
As previously disclosed, completion of the sale was a condition to the implementation of the company’s stock repurchase program, pursuant to which the company is authorized to purchase up to $5.9 million of its shares between completion of the sale and March 2020.
TDG Operations, LLC, a Georgia limited liability company and a wholly-owned subsidiary of The Dixie Group, Inc., completed the sale of its Susan Street facility. Concurrent with the sale of the property, The Dixie Group and the CenterPoint entered into a 10-year lease agreement, whereby Dixie Group will lease back the property at an annual rental rate of $2.1 million, subject to annual rent increases of 2.0 percent. Under the lease, The Dixie Group has two consecutive options to extend the term of the lease by five years for each such option.
As finally negotiated by the parties, and under the terms of the sale agreement and the Susan Street Lease Agreement, certain anticipated costs, including, among others, the full cost of roof repair, repaving of the facility’s parking lot, replacement of HVAC equipment and repair of the facility’s interior upon termination of the lease, are to be borne by the purchaser, instead of by the tenant, and, in exchange, the purchase price was set at the level described above, and the annual rental and escalator were adjusted to the levels described herein.
Simultaneously with the sale, the registrant paid down its credit facility by approximately $36.3 million. Prior to completing the Purchase and Sale Agreement, Dixie Group entered into that certain Consent and Thirteenth Amendment to Credit Agreement dated Oct. 22, pursuant to which the company’s lender consented to the sale of the Santa Ana property. This amendment also adjusted the size of the credit facility to $120 million as well as other terms relative to the sale of the Santa Ana property.
The company expects to incur an after-tax gain of approximately $25 million. As of the date hereof, net accessible availability under the company’s Revolving Credit Facility is approximately $22.0 million, leaving an outstanding debt balance of $57.2 million under that Credit Facility.
As previously disclosed The Dixie Group entered into a 10b5-1 Plan to facilitate repurchase of up to $5.9 million of its common shares contingent upon the now completed sale of the Santa Ana Susan Street facility and continuing until March 2020. Any purchases made under the plan will be structured to come within Rule 10b-18 and will be managed by Raymond James & Associates.