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): May 7, 2020

RW Holdings NNN REIT, Inc.
(Exact Name of Registrant as Specified in Its Charter)


Maryland
000-55776
47-4156046
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer
Identification No.)


3090 Bristol Street, Suite 550, Costa Mesa, California
92626
(Address of principal executive offices)
(Zip Code)

(855) 742-4862
(Registrant’s telephone number, including area code)

None
(Former name or former address, if changed since last report)

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
 
None
 
None

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 8.01 Other Events.

Plan to Update Estimated Net Asset Value Per Share and Temporary Suspension of Primary Offerings
On May 8, 2020, RW Holdings NNN REIT, Inc. (the “Registrant”) announced that due to the impacts of the novel coronavirus (COVID-19) pandemic on the Registrant’s real estate properties, the board of directors of the Registrant (the “Board”) has authorized the engagement of Cushman & Wakefield Western, Inc., an independent third-party real estate advisory and consulting firm, to perform an independent valuation of the Registrant’s real estate assets and real estate related liabilities associated with the Registrant’s properties for the purpose of assisting the Board in updating the Registrant’s estimated net asset value (“NAV”) per share to reflect the impact of the COVID-19 pandemic. The Board plans to announce the new NAV per share later this month.

In connection with its plan to update the estimated NAV per share, the Board approved the temporary suspension of the primary offering portion of the Registrant’s public offering of shares of Class C common stock (the “Registered Primary Offering”), which is registered with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), and the primary offering portion of the Registrant’s offering of shares of Class S common stock, which it offers exclusively to non-U.S. Persons pursuant to an exemption from the registration requirements of the Securities Act under and in accordance with Regulation S promulgated thereunder (the “Regulation S Primary Offering” and, together with the Registered Primary Offering, the “Primary Offerings”), effective as of the close of business on May 7, 2020. The Primary Offerings will remain suspended until such time as the Board, in its discretion, may approve resuming the Primary Offerings.
The Registrant’s distribution reinvestment plans and share repurchase programs for the Class C common stock and Class S common stock remain open at this time, subject to the Board’s discretion. Commencing with the Registrant’s next distributions and any share repurchases, the per share purchase price pursuant to the distribution reinvestment plans and the repurchase price for any repurchases pursuant to the share repurchase programs will be based on the new NAV per share, which the Registrant expects will be lower than the current NAV per share due to the impact of the COVID-19 pandemic.
Additional information regarding the plan to update the Registrant’s estimated NAV per share and the temporary suspension of the Primary Offerings is contained in the letter to investors which is included as Exhibit 99.1 to this Form 8-K and incorporated in this Item 8.01 by reference.
Delay in filing Quarterly Report on Form 10-Q for the quarter ended March 31, 2020

The Registrant makes the following disclosure pursuant to the SEC order on March 4, 2020 set forth in SEC Release No. 34-88318, as modified and superseded by a new SEC order issued on March 25, 2020 set forth in SEC Release No 34-88465, providing conditional relief to public companies that are unable to timely comply with their filing obligations as a result of the COVID-19 outbreak (the “Order”). The current outbreak of COVID-19 has posed a significant impact on the Registrant’s ability to file on a timely basis its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Quarterly Report”) that is due May 15, 2020 (the “Original Due Date”), and therefore the Registrant has elected to rely on the conditional filing relief provided under the Order.

The current COVID-19 outbreak has caused severe disruptions and has required the Registrant’s accounting staff and the staff of the Registrant’s independent registered public accounting firm to work from home, resulting in limited access to the Registrant’s facilities, which has caused a delay in the Registrant’s ability to prepare and analyze its financial statements for inclusion in the Quarterly Report.  The Registrant therefore has decided to rely on the conditional relief provided in the Order and expects to file the Quarterly Report no later than June 29, 2020, which is 45 days after the Original Due Date.

In light of the COVID-19 outbreak, the Registrant will be including the following risk factor in the Quarterly Report:
 
The recent outbreak of COVID-19 has and may continue to adversely affect the Registrant’s business and/or operations, the tenants’ financial condition and the profitability of the Registrant’s retail properties.
 
The Registrant’s business and/or operations and the businesses of its tenants have been, and may continue to be, materially and adversely affected by the risks, or the public perception of the risks, related to the recent outbreak of COVID-19. The profitability of the Registrant’s retail properties depends, in part, on the willingness of customers to visit the tenants’ businesses. The risk, or public perception of the risk, of COVID-19 has caused, and could continue to cause, employees or customers to avoid the Registrant’s properties, which adversely affects foot traffic to the tenants’ businesses and the tenants’ ability to adequately staff their businesses. Most of the states where the Registrant operates have issued orders to close fitness centers and other retail establishments. Such events have adversely impacted tenants’ sales and/or caused the temporary closure or slowdown of the tenants’ businesses, which has severely disrupted their operations and could have a material adverse effect on the Registrant’s business, financial condition and results of operations. Similarly, the potential effects of quarantined employees of office tenants may adversely impact their businesses and affect their ability to pay rent on a timely basis.

Item 9.01          Financial Statements and Exhibits.
(d)          Exhibits.
Exhibit No.
 
Description
     
 
Letter to Investors dated May 8, 2020
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
RW HOLDINGS NNN REIT, INC.
 
(Registrant)
   
Dated:  May 7, 2020
By:
/s/ Raymond J. Pacini
 
Name:
Raymond J. Pacini
 
Title:
Chief Financial Officer

Exhibit 99.1
May 8, 2020

Dear Fellow NNN Investors,

I write this email at a time when all of us are managing our way through this national emergency. Even beyond the real risk of loss of life and the detriment of health, the country is experiencing true emotional and financial hardships. Though it may be a global pandemic, the impact is very localized and very personal, and I sincerely hope that each of you, and each of your loved ones, is healthy and safe.

Historical Reflection

The impact of COVID-19 has brought near-term havoc and chaos to the public and private financial markets as we all try to navigate these unprecedented times and uncharted territory. The Global Financial Crisis of 2007-09, which is the most recent proxy we have to compare, saw public REITs fall 67.5% from peak to trough as measured by the NAREIT All Equity Index. Private real estate, as measured by the NCREIF Property Index, fell 24.5%. Fortunately, both indices recovered by 2011, and went on to achieve even more gains in the years after. We can only hope that we will see similar positive results following our current crisis.

Real Estate Performance During the Global Financial Crisis
Data sourced from NAREIT; Past performance does not necessarily predict future performance.

Current Perspective

Since the COVID-19 crisis began, we have seen publicly traded REITs fall as much as 40-50% from their late February price levels. Further, we have witnessed over 200 public companies, over 40 in the S&P 500, and over 20 publicly-traded REITs, cut or fully suspend their dividends – including multi-billion dollar stalwarts like Shell Oil and Disney. COVID-19, and our national response to it, is causing a major short-term market disruption. This market disruption, where traditional fundamental measures are overpowered by unprecedented events, cannot be ignored. Professionally, we have found a general consensus among market experts in their belief that our economy will eventually recover from the COVID-19 crisis. However, the exact timing and shape of a recovery presently remains unknown.

NNN REIT Actions

Our long-term portfolio approach of “mission-critical” real estate is holding up reasonably well during this period of economic uncertainty. We recently have shared with you the encouraging news on 3M, Earthbound Farms, and Dollar General. The net lease industry, according to publicly available information, experienced average April rent collections of 74%, while many expect May collections to be worse. I am pleased to report that our rent collections have thus far fared better – exceeding the average rent collections seen by other net lease REITs. That said, some of our tenants have been negatively impacted by the shelter-in-place rules and are experiencing financial hardship. As a result, we are unable to collect 100% of the contractual rents due to us. We are doing better than many, but we are not immune.

Knowing that we cannot, in good conscience, ignore the extraordinary market disruption, our board of directors has engaged Cushman & Wakefield to provide a new, independent valuation of our real estate portfolio. This valuation will result in a new net asset value (“NAV”) per share, which we anticipate will be, at least in the short-term, meaningfully lower than our most recent pre-COVID-19 NAV. Should a post-COVID-19 recovery be swift, then our NAV could potentially rise sooner. If the recovery is slow, then each of us will at least know where our portfolio stands.

Further, given our inability to collect 100% of contractual rents, we are re-evaluating our current distribution rate. As many of you know, we have been paying a distribution well-above market average. However, at a time when even the largest companies are suffering economically, we know that we need to establish a sustainable distribution policy for what clearly has become the “new normal”. We intend to declare a new distribution rate later this month when we publish our revised NAV per share.

The decision to proactively seek clarity and transparency in the face of market uncertainty is not made lightly. Tough decisions are seldom easy. Making the right choice, the thoughtful choice, is paramount for long-term success. We strongly believe that by proactively making these near-term adjustments, we are positioning your investment for longer-term opportunities.

In the weeks ahead, we will provide more information as it becomes known. Like each of you, we too look forward to the day when the impact of this crisis subsides and opportunity for the future emerges. We are in this together and we will persevere together. I, alongside the whole RW Holdings team, will continue to work tirelessly to do the very best to steer your investment to a brighter future.

With the deepest respect and sincerity,

/s/ Aaron S. Halfacre

Aaron S. Halfacre
Chief Executive Officer
RW Holdings NNN REIT, Inc.