Cole Credit Property Trust IV Inc.’s Board Urges Stockholders to Reject Tender Offer
May 2, 2017 | by James Sprow | Blue Vault
Cole Credit Property Trust IV Inc.’s board of directors in a letter on April 24, recommended to its shareholders that they reject a mini-tender from Mackenzie Realty Capital to buy up to 1,000,000 shares of its common stock at $5.62 per share.
The Board’s recommendation is based on several factors, including:
- The Offer price of $5.62 per share is $4.46 less than $10.08, which was the most recent estimated per share net asset value (“NAV”) established by the Board, as of December 31, 2016. This translates to a discount of 44% to the current NAV.
- In establishing the current estimated per share NAV, the Board took into consideration appraisals of the Company’s real estate assets performed by Duff & Phelps LLC, an independent valuation firm, in accordance with the valuation guidelines previously established by the Board. MacKenzie states that it has not made an independent appraisal of the Company’s shares or its properties, and is not qualified to appraise real estate.
- As recently disclosed in the Company’s Annual Report on Form 10-K, during the year ended December 31, 2016, 75% of all shares subject to investor redemption requests were repurchased by the Company pursuant to its share redemption program, with requests honored on a pro rata basis up to the limits provided for under the terms of the program. No fees or commissions are charged in connection with repurchases made under the share redemption program, and shares are repurchased at the most recent estimated per share NAV, currently $10.08.
- According to MacKenzie’s website, its “core strategy” is to purchase securities “at significant discounts to estimated net asset value” and “invest at prices we estimate to be significantly below current market value of the underlying asset.” MacKenzie has acknowledged that, in establishing the purchase price of $5.62 per share, it is motivated to establish the lowest price which might be acceptable to stockholders, consistent with MacKenzie’s objectives.
- MacKenzie states that it has applied a discount to the estimated per share NAV with the intention of making a profit.
- The Company currently pays monthly distributions at an annualized rate of $0.625 per share, which equates to an annualized yield equal to 6.20% per share based on the most recent estimated per share NAV. Although the Board cannot provide a guarantee that the Company will maintain its rate of distributions in the future, if sold, shareholders will no longer receive monthly distributions or otherwise have any rights with respect to the shares sold, including any appreciation in the value of the common stock.
- None of the Company’s directors, executive officers, subsidiaries or other affiliates who hold shares intend to tender shares of stock to MacKenzie.
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