Filed Pursuant to Rule 253(g)(2)
File No. 024-10563
HC GOVERNMENT REALTY TRUST, INC.
SUPPLEMENT NO. 2 DATED APRIL 5, 2017
TO THE OFFERING CIRCULAR DATED NOVEMBER 7, 2016
This
document supplements, and should be read in conjunction with, the
offering circular of HC Government Realty Trust, Inc.
(“we,” “our” or “us”), dated
November 7, 2016 and filed by us with the Securities and Exchange
Commission, or the Commission, on November 8, 2016, or the Offering
Circular. Unless otherwise defined in this supplement, capitalized
terms used in this supplement shall have the same meanings as set
forth in the Offering Circular.
The
purpose of this supplement is to disclose our acquisition and
financing of the Norfolk Property.
Acquisition of the Norfolk Property
On
March 31, 2017, HC Government Realty Trust, Inc., a Maryland
corporation, or the REIT, through GOV Norfolk, LLC, a Delaware
limited liability company, or GOV Norfolk, a special purpose
entity, wholly-owned by the REIT’s operating partnership, HC
Government Realty Holdings, L.P., a Delaware limited partnership,
or the OP, acquired land and improvements, located at 5850 Lake
Herbert Drive, Norfolk, Virginia, or the Norfolk Property. The
Norfolk Property is a three-story, Class A office building with
53,917 rentable square feet. 100% of the Norfolk Property is leased
to the United States of America, pursuant to a newly signed,
10-year lease that, among other things, cannot be cancelled by the
tenant through June 2027. The Norfolk Property was built in 2007 to
suit, and has been occupied solely by, the Social Security
Administration.
The
Norfolk Property was acquired from USAA Real Estate Company, a
Delaware corporation, or the Seller, for approximately $14,500,000.
A portion of the cost of acquiring the Norfolk Property was
financed with a first mortgage loan, or the Mortgage Loan, from
Park Sterling Bank, or the Lender, in the original principal amount
of $10,875,000, which Mortgage Loan is secured by the Norfolk
Property and will mature on October 2, 2017, unless, subject to
certain conditions, among which is that there is no default under
the Mortgage Loan, the maturity date is extended by GOV Norfolk to
March 31, 2020. The Mortgage Loan requires monthly payments in
arrears of principal and interest with the first payment being due
and payable May 1, 2017. The Mortgage Loan bears interest at a per
annum rate equal to one-month LIBOR, plus 2.20%, adjusted monthly,
but with a minimum rate of 5.75%. Principal payments for the
Mortgage Loan are based on a 25-year amortization schedule with the
remining balance being due and payable in full at maturity. The
Mortgage Loan may be prepaid in whole or in part at any time prior
to the initial maturity date without penalty.
At the
closing of the Norfolk Property, an Unconditional Guaranty in favor
of the Lender was signed by the OP, Baker Hill Holding LLC, a New
York limited liability company, or Baker Hill, Stanton Holdings,
LLC, a Delaware limited liability company, Holmwood Capital, LLC, a
Delaware limited liability company, Edwin Stanton, Philip
Kurlander, Robert R. Kaplan, and Robert R. Kaplan, Jr., or
collectively, the Guarantors. The Guarantors’ aggregate
liability for the repayment of the Mortgage Loan is limited to 50%
of the outstanding principal amount of the Mortgage Loan; however,
the Guarantors shall have 100% joint and several liability for any
and all losses, damages, liabilities, claims, actions, judgments,
court costs and legal and other expenses which the bank may incur
as a direct or indirect consequence of or attributable to so-called
“bad acts,” including but not limited to fraud or
willful misrepresentation, physical waste and breach of covenants
relating to hazardous materials, or the Guaranties. At the closing
of the Norfolk Property, the Guarantors also delivered to Lender an
Environmental Certificate and Indemnification Agreement, making
representations, warranties and providing indemnifications relative
to certain environmental matters affecting the Norfolk
Property.
The
remainder of the acquisition price for the Norfolk Property was
financed with advances provided by affiliates, or the Advances, and
with unsecured indebtedness of the OP, or the OP Notes. The
Advances were made in the approximate aggregate amount of $225,000
to the OP. The OP Notes were made in the approximate aggregate
amount of $3,400,000 and bear interest, payable monthly, at the per
annum rate of 12.0%. The OP Notes mature, and are payable as to
principal, on March 28, 2018. The OP Notes are subordinated to the
Mortgage Loan. Robert R. Kaplan, the Secretary and a Director of
the REIT, holds an OP Note in the original principal amount of
$300,000, which is prepayable in whole or in part at any time prior
to maturity without penalty. The OP also received an Advance of
$30,000 from Robert R. Kaplan. Baker Hill, an affiliate, holds an
OP Note in the original principal amount of $2,770,000, which is
prepayable in whole or in part without penalty at any time on or
after September 30, 2017. The OP also received an Advance of
$75,000 from Baker Hill. Philip Kurlander, the Treasurer and a
Director of the REIT, is a member and manager of Baker
Hill.