Non publicly traded REIT buyback offer

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Kelly
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Non publicly traded REIT buyback offer

Post by Kelly » Sun Nov 13, 2016 3:21 pm

I relative is asking whether she should take Inventrust up on their offer to buyback shares of their non publicly traded REIT. She bought them after crossing paths with a broker at Lincoln Financial.

The statement shows a share price of $4. I've read that starting in 2016 they had to report the "real" share price. But, who knows. The buyback off is between $2.94 and $2.45 in $0.07 increments. You check the price you want.

I don't understand the buyback offer available here http://www.inventrustproperties.com/sit ... .24.16.pdf

It states..

Promptly after the Expiration Date, assuming the conditions to the Offer have been satisfied or waived, we will determine the purchase price for tendered Shares, which will be the lowest price per Share (in increments of $0.07), which will not exceed $2.94 or be less than $2.45 per Share (the “Purchase Price”),

and...

All Shares properly tendered pursuant to the Offer will be purchased at the same Purchase Price, even Shares tendered at a lower price. If you tender Shares for a price that is more than the price ultimately determined to be the Purchase Price, none of those Shares tendered at the higher price will be purchased. Consequently, selecting a higher price for a tendered Share will increase the possibility that the Share may not be purchased in the Offer

So. it appears that selecting too high a price will leave her stuck with the shares.

My view is to get out of this thing ASAP. Am I missing anything??

All thoughts are welcome.

Many thanks!

Kelly

DSInvestor
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Re: Non publicly traded REIT buyback offer

Post by DSInvestor » Sun Nov 13, 2016 3:31 pm

Here's a link to a recent thread about non-traded REIT - Inland American Dutch Auction Advice:
viewtopic.php?f=1&t=202710
Wiki

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White Coat Investor
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Re: Non publicly traded REIT buyback offer

Post by White Coat Investor » Sun Nov 13, 2016 4:43 pm

These are investments made to be sold, not bought. I would get out at the best possible price I could get as soon as possible. I see little reason to hold on to these sorts of investments. If you want to invest in REITs, buy Vanguard's REIT Index Fund and own all the publicly traded ones in an investment that can be liquidated any time without difficulty.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

CJC000
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Re: Non publicly traded REIT buyback offer

Post by CJC000 » Sun Nov 13, 2016 5:30 pm

Checked with Central Trade & Transfer, a secondary market auction site I used in the past. Inventrust Properties sold for $1.70 - $2.06 over the last two months. I would say take the offer and be done with it...

Valuethinker
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Re: Non publicly traded REIT buyback offer

Post by Valuethinker » Mon Nov 14, 2016 4:55 am

Kelly wrote:I relative is asking whether she should take Inventrust up on their offer to buyback shares of their non publicly traded REIT. She bought them after crossing paths with a broker at Lincoln Financial.

The statement shows a share price of $4. I've read that starting in 2016 they had to report the "real" share price. But, who knows. The buyback off is between $2.94 and $2.45 in $0.07 increments. You check the price you want.

I don't understand the buyback offer available here http://www.inventrustproperties.com/sit ... .24.16.pdf

It states..

Promptly after the Expiration Date, assuming the conditions to the Offer have been satisfied or waived, we will determine the purchase price for tendered Shares, which will be the lowest price per Share (in increments of $0.07), which will not exceed $2.94 or be less than $2.45 per Share (the “Purchase Price”),





and...

All Shares properly tendered pursuant to the Offer will be purchased at the same Purchase Price, even Shares tendered at a lower price. If you tender Shares for a price that is more than the price ultimately determined to be the Purchase Price, none of those Shares tendered at the higher price will be purchased. Consequently, selecting a higher price for a tendered Share will increase the possibility that the Share may not be purchased in the Offer

So. it appears that selecting too high a price will leave her stuck with the shares.

My view is to get out of this thing ASAP. Am I missing anything??

All thoughts are welcome.

Many thanks!

Kelly
I read this as you bid the lowest price allowed $2.45. Then hope you manage to sell.

EDIT-- since you get the price decided, even if lower, why not tender at say $2.00? If they'll let you tender at below the given range.

EDIT: I should add-- tender *all* your stock, you might not be able to sell all of it, unfortunately.

Your overall view is correct. Exit ASAP.
Last edited by Valuethinker on Tue Nov 15, 2016 4:38 am, edited 2 times in total.

Valuethinker
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Re: Non publicly traded REIT buyback offer

Post by Valuethinker » Mon Nov 14, 2016 5:01 am

CJC000 wrote:Checked with Central Trade & Transfer, a secondary market auction site I used in the past. Inventrust Properties sold for $1.70 - $2.06 over the last two months. I would say take the offer and be done with it...
+1

Sasha59
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Re: Non publicly traded REIT buyback offer

Post by Sasha59 » Tue Nov 15, 2016 11:31 am

I am having trouble, too like Kelly above. The buyback offer is between $2.94 and $2.45 in $0.07 increments. You check the price you want to tender your shares. My statement reflects a current market price of $3.14/share. When I called Inventrust, they said their Board was given a secondary market price of $1.65 to $2.24/share. Given this, what is a viable price to select to sell all shares? $2.45, $2.52, $2.59, $2.66, $2.73, $2.80, $2.87 or $2.94 per share?

bberris
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Re: Non publicly traded REIT buyback offer

Post by bberris » Wed Nov 16, 2016 9:20 am

Sasha59 wrote:I am having trouble, too like Kelly above. The buyback offer is between $2.94 and $2.45 in $0.07 increments. You check the price you want to tender your shares. My statement reflects a current market price of $3.14/share. When I called Inventrust, they said their Board was given a secondary market price of $1.65 to $2.24/share. Given this, what is a viable price to select to sell all shares? $2.45, $2.52, $2.59, $2.66, $2.73, $2.80, $2.87 or $2.94 per share?
The statement value is obviously nonsense.
I haven't read the offer, but I think they are using a Dutch auction. You can look it up, but you bid the lowest price you will accept. They pay the lowest price necessary to fill the offer, but pay the same price for all the shares they buy. So if you bid 2.45, but the 2.52 bid is needed to fill the offer, you get 2.52.

It's very likely that the offer is oversubscribed and they will pay the lowest price. To maximize your chance of getting out, bid 2.45.

bberris
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Re: Non publicly traded REIT buyback offer

Post by bberris » Wed Nov 16, 2016 9:34 am

When these questions appear, it confirms that we need the fiduciary rule. These were obviously sold to people who didn't understand what they were buying, and there were much better alternatives available.

Valuethinker
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Re: Non publicly traded REIT buyback offer

Post by Valuethinker » Wed Nov 16, 2016 9:51 am

bberris wrote:
Sasha59 wrote:I am having trouble, too like Kelly above. The buyback offer is between $2.94 and $2.45 in $0.07 increments. You check the price you want to tender your shares. My statement reflects a current market price of $3.14/share. When I called Inventrust, they said their Board was given a secondary market price of $1.65 to $2.24/share. Given this, what is a viable price to select to sell all shares? $2.45, $2.52, $2.59, $2.66, $2.73, $2.80, $2.87 or $2.94 per share?
The statement value is obviously nonsense.
I haven't read the offer, but I think they are using a Dutch auction. You can look it up, but you bid the lowest price you will accept. They pay the lowest price necessary to fill the offer, but pay the same price for all the shares they buy. So if you bid 2.45, but Get 2.52 bid is needed to fill the offer, you get 2.52.

It's very likely that the offer is oversubscribed and they will pay the lowest price. To maximize your chance of getting out, bid 2.45.
+1 +1 +1 ten thousand times

Very good advice. Get out whilst you can. US commercial property is probably not undervalued (ie is fully valued, more or less) and these opportunities occur infrequently at best. Sell, take pain, if one feels a need to invest in real estate, a quoted REIT fund like the Vanguard one will do fine (in a tax exempt location).

Any capital loss realized can be used to offset gains somewhere else ;-). Upside ;-).

Valuethinker
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Re: Non publicly traded REIT buyback offer

Post by Valuethinker » Wed Nov 16, 2016 9:52 am

bberris wrote:When these questions appear, it confirms that we need the fiduciary rule. These were obviously sold to people who didn't understand what they were buying, and there were much better alternatives available.
This discussion could quickly get into politics and hypotheticals under a new administration. There has been some talk on the web, so leave it there that it can be looked up.

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investorguy1
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Re: Non publicly traded REIT buyback offer

Post by investorguy1 » Wed Nov 16, 2016 10:33 am

White Coat Investor wrote:These are investments made to be sold, not bought. I would get out at the best possible price I could get as soon as possible. I see little reason to hold on to these sorts of investments. If you want to invest in REITs, buy Vanguard's REIT Index Fund and own all the publicly traded ones in an investment that can be liquidated any time without difficulty.

I've seen some cases where the REIT goes public and then increases in value compared to the pretty low ball offers that people get before the REIT is public. Is it ever worth waiting it out?

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White Coat Investor
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Re: Non publicly traded REIT buyback offer

Post by White Coat Investor » Wed Nov 16, 2016 11:13 am

investorguy1 wrote:
White Coat Investor wrote:These are investments made to be sold, not bought. I would get out at the best possible price I could get as soon as possible. I see little reason to hold on to these sorts of investments. If you want to invest in REITs, buy Vanguard's REIT Index Fund and own all the publicly traded ones in an investment that can be liquidated any time without difficulty.

I've seen some cases where the REIT goes public and then increases in value compared to the pretty low ball offers that people get before the REIT is public. Is it ever worth waiting it out?
Obviously it is, just look at the cases you have seen. Is yours one of those? I would submit the answer to that question is, "Probably not, and you and I can't tell in advance anyway."
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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investorguy1
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Re: Non publicly traded REIT buyback offer

Post by investorguy1 » Wed Nov 16, 2016 11:25 am

White Coat Investor wrote:
investorguy1 wrote:
White Coat Investor wrote:These are investments made to be sold, not bought. I would get out at the best possible price I could get as soon as possible. I see little reason to hold on to these sorts of investments. If you want to invest in REITs, buy Vanguard's REIT Index Fund and own all the publicly traded ones in an investment that can be liquidated any time without difficulty.

I've seen some cases where the REIT goes public and then increases in value compared to the pretty low ball offers that people get before the REIT is public. Is it ever worth waiting it out?
Obviously it is, just look at the cases you have seen. Is yours one of those? I would submit the answer to that question is, "Probably not, and you and I can't tell in advance anyway."
I haven't dealt with that many. Most of the ones I've come across were from COLE and Griffin. One ended up worth a lot less due to some accounting fudging of numbers and some ended up increasing in value after they went public. I just haven't seen a big enough sample to know. I agree it isn't worth buying them in the first place. I just wonder if once you have it are you better off selling at a discount or waiting for it to go public in hope for a boost in value (the liquidity premium). My gut tells me that whoever is mailing you an offer to buy your REIT probably knows better than you what it is worth and is looking to make a profit. Why would they make an offer for more than it is worth?

bberris
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Re: Non publicly traded REIT buyback offer

Post by bberris » Wed Nov 16, 2016 4:34 pm

When a Reit issues a tender offer, they are probably paying less than it is worth. Valuing a non-traded reit is not an exact science. Commercial properties are often unique.

On the other hand the buyer is not the operator of the reit, it is the reit itself. They are using funds in the trust (or borrowing) to buy back shares. The downside for the operator is not paying too much, but buying back assets at all. The operator of the reit takes a percentage of assets each quarter as a management fee. After the buyout the assets will be less, so the operator will make less money.

So should you wait to go public? If it happens yes, but how do you know? The operator of the reit will do what is best for themselves, not the shareholders.

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