Highlands REIT Board Recommends Rejection of MacKenzie Realty $0.05 Mini-Tender
April 9, 2020 | James Sprow | Blue Vault
In a letter to shareholders on April 8, 2020, the Board of Directors of Highlands REIT unanimously recommended that shareholders reject the unsolicited offer by MacKenzie Realty Capital, Inc. to purchases common shares for $0.05 each. In the letter, the Board also stated that the Offeror would charge a $60.00 transfer fee that could be material in relation to the number of shares the shareholder chooses to tender.
From the letter to stockholders:
Rationales the Board Considered in Recommending Rejection of the Unsolicited Tender Offer (the “Offer”) from the Offeror
– The Board believes that the offer price is less than the current and potential long-term value of the shares.
– The Offeror will charge a transfer fee of $60 per transaction to each stockholder who chooses to participate in the tender offer. The amount of the transfer fee may be material in relation to the value of shares a stockholder tenders and will in any event diminish the economic benefit of the tender offer for each tendering stockholder.
– The Offer is structured as a first-come, first-buy offer without withdrawal rights and prorationing. This structure may be designed into pressuring you into tendering quickly. Once you have tendered, you will be locked into your decision.
– The Offeror acknowledges that in establishing the purchase price of $0.05 per share, it is establishing a price which is (i) at the low end of recent trading prices and (ii) designed to result in a profit for the Offeror.
– The Offeror has structured the offer without using an independent receiving agent. Accordingly, tendered shares will be routed to the Offeror or one of its affiliates prior to the Offeror’s making payment, which may increase the risk of your tendering shares without receiving payment.
– The Offeror states that it has applied a discount to the estimated per share value with the intention of making a profit.
– The terms of the Offer purport to be governed by an arbitration clause. This may make it more difficult for you to seek legal remedies in the event of a dispute with the Offeror. Moreover, the Offer does not disclose the fact that certain aspects of the arbitration clause may be unenforceable as a matter of law.
– None of Highlands’ directors, executive officers, subsidiaries or other affiliates intends to tender shares of stock to the Offeror.
Highlands encourages you to follow the Board’s recommendation and not tender your shares to the Offeror. Each stockholder must individually evaluate whether to tender his, her or its shares and may decide to tender based on, among other things, individual liquidity needs. The Board suggests stockholders carefully consider all the factors discussed in the Offer to Purchase before deciding to participate. The Board acknowledges that because the shares are not listed on an exchange and there is not otherwise an established public trading market for the shares, stockholders have few alternatives available to sell their shares. Highlands has filed this postcard as an exhibit to a Form 8-K with the Securities and Exchange Commission (the “SEC”). The Form 8-K is available on the Highlands website and the SEC’s website at www.sec.gov.
Highlands REIT’s latest financial statements report that on January 8, 2020, the Board’s Audit Committee met to review and discuss a report by Real Globe Advisors LLC, an independent third-party real estate advisory firm, to estimate the per share value of common stock on a fully diluted basis as of December 31, 2019. Following this review, and considering management’s support of Real Globe’s analysis, the Audit Committee unanimously adopted a resolution accepting the Real Globe analysis. The Audit Committee also unanimously adopted a resolution recommending an estimate of per share value as of December 31, 2019 equal to $0.36 per share on a fully diluted basis. (The Real Globe report gave a range of net asset values per share from a low of $0.37 to a high of $0.44. In order to estimate the final range of values, Real Globe deducted $0.03 of certain estimated corporate-level transaction costs that were provided by the Company from the range of values.) The resulting final range of values from a low of $0.34 to a high of $0.41 per share were net of certain estimated corporate-level transaction costs that the Company would expect to incur in connection with a future potential liquidity event.
At a full meeting of the Board held on January 8, 2020, the Audit Committee made a recommendation to the Board that the Board adopt and the Company publish an estimate of per share value as of December 31, 2019 equal to $0.36 per share on a fully diluted basis. The Board unanimously adopted this recommendation of estimated per share value, which falls within the range of per share net asset values for the Company’s common stock that Real Globe provided in its report.
Using the REIT’s estimated net asset value per share as of December 31, 2019, the $0.05 per share tender offer represents an 86% discount from $0.36, before the $60 transfer fee.
Source: SEC, Blue Vault
