CIM Board Asks Shareholders to Reject Mackenzie Mini-Tender Purchase Offer (NASDAQ: AFIN)

CIM Board Asks Shareholders to Reject Mackenzie Mini-Tender Purchase Offer

CIM Real Estate Finance Trust is a publicly registered non-traded real estate investment trust. Mackenzie Capital Management LP has made an unsolicited mini-tender offer to its shareholders to purchase up to 1.25 million shares of the company. It already holds 11,118 shares.

In the offer letter to shareholders, MacKenzie highlighted the redemption record of the REIT and pointed out that of the shares submitted for redemption till 30th September 2021, 59 million were still to be redeemed. From 30th September onwards, only 1.3 million shares had been redeemed at the $7.20 NAV. Of all the requests received during the quarter that ended on 30th September 2021, 27.7 million were not fulfilled.

The price offered was $3.15 per share and the offer is open till the 7th of March. This price is 56.3 percent lower than the last announced net asset value per share which was $7.20 as of the 31st of March, 2021.

CIM Board Asks Shareholders to Reject Mackenzie Mini-Tender Purchase Offer
CIM Board Asks Shareholders to Reject Mackenzie Mini-Tender Purchase Offer

The CIM board of directors has sent its shareholders a letter recommending that they reject this offer of MacKenzie Capital Management LP. The letter explained the reason thus: “The board believes the offer price is significantly below the current and potential long-term value of the shares and is an opportunistic attempt by MacKenzie to purchase your shares at a deeply discounted price.”

A merger with CIM Income NAV Inc. had recently been completed by CIM Real Estate Finance Trust. The merger resulted in the creation of a REIT that was focused on credit and had an enterprise value of $6.1 billion and an equity value of over $3.1 billion. A public listing is anticipated in 2022.

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An agreement to sell all its shopping centers to AR Global managed publicly traded REIT American Finance Trust Inc. (NASDAQ: AFIN), had been finalized in December 2021 and is expected to close in Q1 of 2022. The agreed price was $1.32 billion and included 79 grocery, anchored, and power centers along with two single-tenant properties.

CIM Real Estate Finance Trust, primarily an owner and operator of core commercial real estate that consists of commercial mortgage loans as well as net leased properties, had launched the offering in January 2012. Before closing in April 2014, the REIT had raised over $3 billion.

Non-Traded REITs explained

REITs can be traded publicly on a financial exchange, just like stocks. However, there are some REITs that are not publicly listed. The REITs cannot be traded on a secondary marketplace, making them less liquid than their publicly-listed counterparts. Investors are also charged higher fees and expect greater returns. Non-traded REITs offer a better investment opportunity for REIT managers because the capital is kept for a longer time.

Characteristics of non-Traded REITs

Non-traded REITs work in the same way as traded REITs, with favorable tax treatment, the same business model, and the obligation to return high amounts of income to REIT owners in the form of dividends.

Even though they are not publicly traded, non-traded REITs must be registered with SEC. They must also file regulatory filings, including financial reports for quarterly and annual periods.

Non-traded REITs have a fixed maturity date. There are two options once they reach maturity.

  1. A public exchange must list the non-traded REIT.
  2. The REIT that is not traded must be liquidated.

Negatives of non-Traded REITs

There are some drawbacks to investing in non-traded REITs:

  • In general, fees are higher
  • Illiquid – it is difficult to redeem funds
  • The value may be much lower than stated by the managers
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