Digirad Corporation Creates Real Estate Division
04 April 2019 - 7:01AM
Purchases Three Manufacturing Plants and Enters
into Lease Agreements Closes new Bank Facility
Digirad Corporation (NASDAQ: DRAD) (“Digirad” or “the Company”)
previously announced its plan to convert into a diversified holding
company structure (“HoldCo”). As part of its HoldCo strategy,
Digirad has formed a real estate subsidiary named Star Real Estate
Holdings USA, Inc. (“SRE”). Digirad believes future acquisition
opportunities could have underappreciated real estate asset value
and the Company anticipates placing any significant real estate
assets into its new SRE subsidiary. SRE expects to be substantially
self-funded over time by raising its own capital in the form of
commercial mortgages on the properties it owns and it could
potentially raise other forms of external capital.
As an initial transaction to create the real
estate division and launch this aspect of the HoldCo strategy,
Digirad is purchasing three manufacturing plants in Maine. These
three plants were all built to construct modular buildings for
residential, multi-family, and commercial real estate development
products and are all within 15 miles of each other. The Company
believes owning these three facilities serving the same industry
within close proximity to each other creates significant strategic
value for its SRE division and Digirad’s stockholders. The Company
also believes these are the only three plants doing modular real
estate construction projects within a radius of more than a hundred
miles. Two of the facilities were owned by KBS Builders, Inc.
(“KBS”), a division of ATRM Holdings, Inc. (“ATRM”), and the third
facility was owned by a private company that leased it to a
competitor of KBS. The purchase price for the three plants and
associated equipment is approximately $5.1 million and is based on
independent appraisal values. All three plants will be leased to
KBS on a triple-net basis and are expected to generate, on an
annualized basis, annual rental income to Digirad of $0.5 to $0.6
million. The Company believes the return on investment for Digirad
in the form of rental income and future asset value appreciation
significantly exceeds its cost of funds under its new bank
agreement.
On Friday, March 29, 2019, Digirad entered into
a new credit facility with Sterling National Bank (“SNB Facility”)
replacing its previous credit facility with Comerica Bank
(“Comerica Facility”). The financial terms of the SNB Facility are
substantially similar to the Comerica Facility in terms of size at
$20 million and cost. The SNB Facility, however, creates
significantly greater flexibility in terms of cash flowing between
corporate entities and financial covenants. The Company believes
the SNB Facility will be very helpful in executing on its HoldCo
strategy going forward.
About Digirad
Digirad delivers convenient, effective, and
efficient healthcare solutions on an as needed, when needed, and
where needed basis. Digirad’s diverse portfolio of mobile
healthcare solutions and diagnostic imaging equipment and services,
provides hospitals, physician practices, and imaging centers
through the United States access to technology and services
necessary to provide exceptional patient care in the rapidly
changing healthcare environment. For more information, please visit
www.digirad.com.
Forward-Looking Statements & Use of
Non-GAAP Measures
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. All statements in this press release that are
not statements of historical fact are hereby identified as
“forward-looking statements” for the purpose of the safe harbor
provided by Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking Statements include, without limitation, statements
regarding (i) the plans and objectives of management for future
operations, including plans or objectives relating to acquisitions
and related integration, development of commercially viable
products, novel technologies, and modern applicable services, (ii)
projections of income (including income/loss), EBITDA, earnings
(including earnings/loss) per share, free cash flow (FCF), capital
expenditures, cost reductions, capital structure or other financial
items, (iii) the future financial performance of Digirad (referred
to herein as the “Company”) or acquisition targets and (iv) the
assumptions underlying or relating to any statement described
above. Such forward-looking statements are not meant to predict or
guarantee actual results, performance, events or circumstances and
may not be realized because they are based upon the Company's
current projections, plans, objectives, beliefs, expectations,
estimates and assumptions and are subject to a number of risks and
uncertainties and other influences, many of which the Company has
no control over. Actual results and the timing of certain events
and circumstances may differ materially from those described above
as a result of these risks and uncertainties. Factors that may
influence or contribute to the inaccuracy of forward-looking
statements or cause actual results to differ materially from
expected or desired results may include, without limitation, the
Company's inability to obtain adequate financing, the length of
time associated with servicing customers, accounts receivable
turnover, insufficient cash flows and resulting illiquidity, the
Company's inability to expand the Company's business, government
regulation, the underlying condition of the technology support
industry, the lack of product diversification, existing or
increased competition, stock volatility and illiquidity, the
Company's failure to implement the Company's business plans or
strategies, changes in macro or industry specific business
conditions, failure to keep pace with evolving technologies and
difficulties integrating technologies, unfavorable changes in
reimbursement practices, negative economic outlooks, the Company’s
inability to consummate successful acquisitions and execute related
integration, the Company’s ability to execute on its business
strategy (including any cost reduction plans), the Company’s
failure to realize expected benefits of restructuring and
cost-cutting actions, the Company’s ability to preserve and
monetize its net operating losses, the continued demand for and
market acceptance of its services. For a detailed discussion of
cautionary statements and risks that may affect the Company’s
future results of operations and financial results, please refer to
the Company’s filings with the Securities and Exchange Commission,
including, but not limited to, the risk factors in the Company’s
most recent Annual Report on Form 10-K. This press release reflects
management’s views as of the date presented.
All forward-looking statements are necessarily
only estimates of future results, and there can be no assurance
that actual results will not differ materially from expectations,
and, therefore, you are cautioned not to place undue reliance on
such statements. Further, any forward-looking statement speaks only
as of the date on which it is made, and we undertake no obligation
to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to
reflect the occurrence of unanticipated events.
For more
information contact: |
Jeffrey E.
Eberwein |
Chairman of the Board
of Directors |
203-489-9501 |
ir@digirad.com |
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