8-K: My City Builders Acquires Land, Exits Shell Status

My City Builders, Inc. acquired 4 acres of land in Glencoe, Alabama for $350,000 via a secured promissory note, shedding its shell company status and planning multi-family development.

Summary

• Acquired 4 acres of land in Glencoe, Alabama, for $350,000 through an Asset Purchase Agreement with RAC Gadsden, LLC.
• The acquisition was financed by a secured promissory note to RAC Gadsden, LLC for $350,000, with a 3-year term and a 9.5% annual interest rate.
• Principal and interest on the note are due at the conclusion of the 3-year term on October 30, 2028.
• The company intends to construct up to 25 multi-family units in three phases, starting with an 8-unit multi-family duplex development as Phase One.
• Failure to begin Phase 1 construction within one year of the Closing Date (October 31, 2025) will be considered an Event of Default.
• Upon an Event of Default, the entire principal balance, accrued interest, and costs would become immediately due, or the company would be required to return ownership of the property to RAC Gadsden, LLC.
• As a result of this acquisition, the company is no longer classified as a shell company under Rule 12b-2 of the Exchange Act.
• The transaction is a related-party dealing, as RAC Gadsden, LLC is wholly owned by entities that collectively own 98.5% of My City Builders, Inc., and key management hold positions in both entities.

Sentiment

Score: 6

Explanation: The acquisition and exit from shell status are positive steps towards operationalizing the business. However, the related-party nature of the transaction, the high interest rate, and the strict construction deadline introduce notable risks and financial obligations that temper overall sentiment.

Positives

• The company is no longer a shell company, which can improve its market perception and access to capital.
• Acquisition of tangible real estate assets provides a clear operational focus and a foundation for future development.
• A defined plan for multi-family unit construction (up to 25 units) outlines a strategic direction.
• The acquisition was financed through a promissory note, deferring immediate cash outlay for the land purchase.
• The promissory note allows for prepayment of all or any portion of the outstanding principal without penalty.

Negatives

• The transaction is a significant related-party dealing, which may raise concerns about arm's-length terms and potential conflicts of interest.
• The company incurred a $350,000 debt with a relatively high annual interest rate of 9.5%.
• A strict one-year deadline to commence Phase 1 construction imposes significant pressure and risk, with severe penalties for non-compliance.
• The company is taking on development risk in a specific geographic market (Glencoe, Alabama) without immediate revenue generation from this transaction.

Risks

• Construction Delay Risk: Failure to begin Phase 1 construction by October 31, 2026, will trigger an Event of Default, potentially leading to immediate repayment of the $350,000 note or forfeiture of the acquired property.
• Market Risk: The success and profitability of the planned multi-family development are subject to the real estate market conditions in Glencoe, Alabama.
• Financing Risk: Additional capital will be required for the actual construction of the multi-family units, which is not detailed in this filing.
• Interest Rate Risk: The 9.5% interest rate on the promissory note represents a fixed financial obligation that must be serviced.
• Operational Risk: The company's ability to effectively manage and execute the multi-phase development project within budget and schedule.
• Related Party Risk: The transaction's nature with a major shareholder and common management could lead to perceived or actual conflicts of interest and may not reflect optimal market terms.

Future Outlook

The company intends to construct up to 25 multi-family units in three phases on the acquired property, beginning with an 8-unit multi-family duplex development as Phase One. This marks a strategic shift from its previous shell company status to active real estate development, focusing on a specific regional market.

Management Comments

• My City Builders, Inc. entered into an Asset Purchase Agreement with RAC Gadsden, LLC.
• The Company intends to construct up to 25 multi-family units in three phases starting with an 8-unit multi-family duplex development on the Property as phase one.
• As a result of the Agreement, the Company is no longer a shell company as the term is defined in Rule 12b-2 under the Exchange Act.

Industry Context

This strategic move by My City Builders, Inc. to acquire land for multi-family housing aligns with broader industry trends driven by demand for housing, particularly in growing regional markets. The focus on Glencoe, Alabama, suggests a strategy to capitalize on specific local development opportunities, potentially in areas with lower land costs and favorable market dynamics for residential expansion.

Comparison to Industry Standards

• The 9.5% interest rate on the secured promissory note is on the higher end for land acquisition financing, especially from a related party, and should be compared to typical commercial real estate loan rates for similar projects and risk profiles, which often range from 5-8% for established developers.
• The one-year deadline to commence construction to avoid default is a relatively aggressive timeline, potentially shorter than standard land banking or pre-development periods in the industry, which can sometimes extend to 18-24 months depending on permitting and market conditions.
• The acquisition cost of approximately $87,500 per acre for the 4 acres in Glencoe, Alabama, would require benchmarking against recent comparable land sales in that specific market for similar zoning and development potential to assess its valuation against industry norms.

Corporate Governance

Related Party Transactions

• My City Builders, Inc. entered into an Asset Purchase Agreement with RAC Gadsden, LLC.
• RAC Gadsden, LLC is wholly owned by RAC Real Estate Acquisition, Corp., which is wholly owned by RAC Merger LLC.
• RAC Merger LLC owns 98.5% of the current issued and outstanding shares of My City Builders, Inc.
• Yolanda Goodell, interim CEO and director of My City Builders, is also vice president and director of RAC Real Estate Acquisition, Corp.
• Francis Pettilloni, interim CFO and director of My City Builders, is also chief operating officer and director of RAC Real Estate Acquisition, Corp.
• Frank Gillen, president and director of RAC Real Estate Acquisition, Corp., is also involved in the management of the related entities and is the manager of RAC Gadsden LLC.
• The $350,000 secured promissory note was issued by My City Builders, Inc. to RAC Gadsden, LLC.

Stakeholder Impact

• Shareholders: The company's transition from a shell company to an operating entity with a clear development plan could be seen as positive, potentially increasing shareholder value. However, the related-party nature of the transaction and the associated debt and risks could also be a concern.
• Creditors: RAC Gadsden, LLC, as the lender, is a secured creditor with a first-priority lien on the acquired property, providing a strong position in case of default. Other potential future creditors would assess this existing debt and security.
• Management: The transaction solidifies the strategic direction and operational focus for the current management team, aligning their roles across the related entities.

Next Steps

• Begin Phase 1 construction of an 8-unit multi-family duplex development on the acquired property by October 31, 2026.
• Continue with Phase 2 and Phase 3 development to reach up to 25 multi-family units.
• Manage the secured promissory note, with principal and interest due by October 30, 2028.

Key Dates

Recommendation

While the acquisition and exit from shell status provide a clear business direction and tangible assets, the transaction's related-party nature, the high 9.5% interest rate on the debt, and the stringent one-year construction deadline introduce considerable risks. Investors should hold to observe the company's execution of its development plan and its ability to manage the associated financial obligations and potential conflicts of interest before making further investment decisions.

Keywords

My City Builders, Real Estate Development, SEC 8-K, Asset Acquisition, Shell Company, Promissory Note, Multi-family Housing, Glencoe Alabama, Corporate Governance, Related Party Transaction