OLD GREENWICH, Conn. - Star Equity Holdings, Inc. (NASDAQ:STRR; STRRP), a diversified holding company, has finalized the sale of two real estate properties in a move to bolster its investment strategy, the company announced today. The transactions, structured as sale-leaseback deals, have generated approximately $8.3 million in net proceeds before capital gains taxes.
The properties sold include a manufacturing facility in South Paris, Maine, operated by KBS Builders, Inc., and a supply center and lumber yard in Big Lake, Minnesota, operated by Glenbrook Building Supply, Inc. The South Paris location, part of Star's modular manufacturing business, was sold for about $5.6 million, while the Big Lake facility, part of the building supplies distribution business, brought in roughly $2.7 million.
As part of the agreement, KBS Builders has entered into a 20-year lease for the South Paris facility with an option to extend for an additional 20 years. Similarly, Glenbrook Building Supply, alongside EdgeBuilder, Inc., has secured a 15-year lease for the Big Lake location with a 10-year extension option. Both businesses will continue operations at these sites without interruption.
David Noble, CFO of Star Equity Holdings, expressed enthusiasm for the transactions, stating that they align with the company's focus on strategic capital allocation and the prioritization of assets that generate earnings before interest, taxes, depreciation, and amortization (EBITDA). Noble highlighted that the proceeds will support Star's long-term growth strategy, which includes potential acquisitions to bolster its existing divisions or to add new business segments.
The sale-leaseback deals follow Star Equity Holdings' recent acquisition of Timber Technologies in May 2024, a move that increased the company's cash flow and diversified its revenue sources. Star Equity Holdings remains the owner of two additional facilities, including a 60,000 sq. ft. glulam manufacturing facility in Colfax (NYSE:ENOV), Wisconsin, and a 90,000 sq. ft. manufacturing facility in Oxford, Maine, which is currently idle.
The company's Building Solutions division encompasses modular building manufacturing, structural wall panel and wood foundation manufacturing, and glue-laminated timber manufacturing. Its Investments division manages the company's real estate assets and investment positions in private and public companies.
This news is based on a press release statement from Star Equity Holdings, Inc.
In other recent news, Star Equity Holdings has experienced significant changes. The company announced a 1-for-5 reverse stock split, reducing the number of outstanding shares from approximately 15.8 million to around 3.2 million. This move was approved by shareholders and the Board of Directors, aiming to elevate the per-share trading price to comply with Nasdaq's minimum bid price requirement.
In the first quarter of 2024, Star Equity Holdings faced financial challenges, with revenues declining by 26.1% to $9.1 million and gross profit dropping by 63.1% due to delayed customer financing for key commercial projects. Despite these setbacks, the company remains confident in its sales pipeline and backlog.
Furthermore, Star Equity Holdings has strategically acquired Timber Technologies, a manufacturer of engineered wood products. This move, expected to close in June 2024, was funded by a $7 million term loan from Bridgewater Bank at a 7.85% interest rate. The acquisition is expected to enhance the company's Building Solutions Division, signaling potential avenues for future growth despite current industry-wide challenges.
InvestingPro Insights
Star Equity Holdings, Inc. (NASDAQ:STRR; STRRP) has recently made strategic moves in its real estate portfolio, which may influence investor perspectives on the company's financial health and future prospects. According to InvestingPro data, Star Equity Holdings holds a market capitalization of $15.56 million USD, underscoring its position as a smaller player in the investment landscape. Despite a challenging revenue environment with a decline of 26.45% over the last twelve months as of Q1 2024, the company boasts a notable gross profit margin of 21.7%.
Investors may find the company's financial resilience noteworthy, as Star Equity Holdings maintains more cash than debt on its balance sheet, an InvestingPro Tip that suggests a stable financial position. Additionally, while the company has not been profitable over the last twelve months, it has achieved a strong return over the last month, as indicated by a 33.79% one-month price total return. This could be indicative of growing investor confidence or a reaction to recent strategic decisions.
With a price/book ratio of 0.36 as of Q1 2024, the company is trading at a low valuation relative to its equity, which is another InvestingPro Tip that value-oriented investors might find appealing. For those interested in exploring more about Star Equity Holdings, InvestingPro offers additional tips that could guide investment decisions. There are 5 more InvestingPro Tips available for Star Equity Holdings, which can be accessed by visiting InvestingPro. Furthermore, interested readers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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