Inland Residential Properties Trust Recommends Rejection of $11.39 Tender Offer
February 27, 2019 | James Sprow | Blue Vault
On February 25, 2019, the Board of Directors of Inland Residential Properties Trust, Inc. unanimously recommended that shareholders reject the tender offer by MacKenzie1 to purchase up to 200,000 shares of the REIT’s Class A common shares for $11.39 per share.
In the letter to shareholders, the REIT’s Board gave the following reasons:
• The MacKenzie offer of $11.39 per Class A share is approximately 29% less than the most recent $16.06 estimate of net proceeds under our plan of liquidation, which we also used to estimate net asset value (NAV) per Class A share and which Inland Residential’s Board of Directors approved on February 5, 2019. This estimate and an explanation of the factors considered are contained in the Current Report on Form 8-K filed with the SEC on February 5, 2019.
• MacKenzie determined its offer price on its own and conceded that it did not make an independent appraisal of the shares or Inland Residential’s properties and that it is not qualified to appraise real estate.
• The stockholder-approved liquidity event is in progress. In January 2019, stockholders received an initial liquidating distribution of $4.53 per share from the sale of The Commons at Town Center, which sold at a price 6.3 percent greater than the original acquisition price.
• MacKenzie states that it is “making the offer for investment purposes and with the intention of making a profit from the ownership of the shares” it buys from you.
• MacKenzie applied a liquidity discount to the company’s NAV “with the intention of making a profit by holding on to the shares until the REIT is liquidated.
The letter to shareholders also gave an update on the liquidity event that is underway2:
On December 18, 2018, stockholders approved a liquidity event providing for the sale of all assets of Inland Residential and the distribution of the net proceeds to stockholders.
All the properties in Inland Residential’s portfolio have been sold or are currently under contract for sale. The first property sold, “Commons at Town Center,” an 85-unit multifamily property located in Vernon Hills, Illinois, was acquired in May 2017 for a purchase price of $23 million and was sold on December 20, 2018 at a sales price of $24.6 million. At the time of the sale, the property was 95.55 percent leased.
A second property, “Verandas at Mitylene,” was acquired in July 2017 for a purchase price of $36.6 million and is currently under contract to be sold for a sales price of $40.5 million, representing a sale price 10.7 percent greater than the original acquisition price. The sale of this property is subject to conditions contained in the agreement, including the lender’s approval of the buyer’s assumption of the mortgage loan secured by this property.
“The Retreat at Market Square,” the third property and last of Inland Residential’s assets, is currently under contract to be sold for approximately $47.0 million, which is a sale price 2.6 percent greater than the original acquisition price of $45.8 million. The sale is expected to close by March 29, 2019, subject to the closing conditions set forth in the Agreement.
Due to the plan of liquidation that is already underway, the Board unanimously concluded that the MacKenzie offer is not in the best interests of stockholders. We recommend you consult your financial, tax and legal advisors and encourage you to carefully read the offer documents sent to you by MacKenzie and our publicly available annual, quarterly and other reports, before making a decision to sell your shares.
The Board acknowledges that each stockholder must evaluate whether to sell his or her shares and that, because, among other things, there is no public trading market for our shares, stockholders might consider accepting the MacKenzie offer based on their individual liquidity needs and financial situation.
1The purchasers consist of MPF Blue Ridge Fund II, LLC, MacKenzie Blue Ridge Fund III, LP, MacKenzie Badger Acquisition Co. 4, LLC, MacKenzie Northstar Fund 3, LP; SCM Special Fund 3, LP; and MacKenzie Capital Management, LP (collectively, MacKenzie).
2The Board can provide no assurance with respect to the amount or timing of any additional liquidating distributions, despite approval of the plan of liquidation by the stockholders. The Board can provide no assurance that the sales of “Verandas at Mitylene” and “The Retreat at Market Square” will close. In addition, the Board may terminate, amend or modify the plan of liquidation without further action by the stockholders to the extent permitted under then current law.