InvenTrust Board Recommends Rejection of MacKenzie $1.46 tender offer

March 26, 2019 | James Sprow | Blue Vault

The executive committee board of directors of InvenTrust Properties Corp. (the “Company”) unanimously recommends that the Company’s stockholders reject the tender offer by MacKenzie Realty Capital, Inc. and not tender their shares of common stock for purchase for $1.46 per share.

The committee cautions that each stockholder must individually evaluate whether to tender his, her or its shares of common stock to the offeror pursuant to the offer to purchase and that an individual stockholder may determine whether to tender based on, among other things, his, her or its individual liquidity needs. The committee acknowledges that, because the common stock is not listed on an exchange and there is not otherwise an established public trading market for the common stock, stockholders currently have few alternatives available to sell some of or all their common stock.

Related: MacKenzie Capital Launches $11.39 Tender Offer for Inland Residential Shares

The committee suggests stockholders carefully consider all the factors discussed below and in the offer to purchase before deciding to participate in the tender offer.

Reasons for the Recommendation

In reaching the conclusions and in making the recommendation described above, the committee considered the following factors based on its review of the offer to purchase in evaluating the merits of the tender offer and in support of its recommendation that stockholders reject the tender offer and not tender their shares in the tender offer:

• On May 9, 2018, the Company announced an estimated value per share of the common stock equal to $3.14 per share as of May 1, 2018, $1.68 per share (or approximately 115%) above the offer price. As previously disclosed to stockholders, the estimate is based on certain assumptions and subject to certain limitations all discussed in the Company’s Current Report on Form 8-K filed with the SEC on May 9, 2018. The Company anticipates the next estimated share value to be announced in May 2019. Any updated estimate may be higher or lower than $3.14 per share.
• The Company’s annual distribution rate was $0.0716 per share of common stock as of the last quarterly distribution on January 8, 2019 payable to all stockholders of record as of December 28, 2018. On November 7, 2018, the Company announced an approximately three percent increase in the annual distribution rate, to $0.0737 per share of common stock, effective January 2019 and payable on the April 2019 quarterly distribution. Although the committee cannot provide any guarantee that the Company will maintain distributions at any rate in the future, stockholders who choose to participate in the tender offer by selling their shares to the offeror will lose all rights attendant to the shares including the right to receive all future distributions, including any distributions made or declared after the expiration date of the tender offer.
• According to an independent secondary market auction provider and our transfer agent, sale prices of the shares of common stock on such provider’s platform have ranged from $1.70 to $1.87 per share during the last five months. The foregoing information does not constitute the comprehensive transaction reporting of a securities exchange. Accordingly, the Company does not know whether the foregoing information is accurate or complete.
• The offeror states that it has not made an independent appraisal of the shares or the Company’s properties, and is not qualified to appraise real estate.
• The offeror acknowledges that in establishing the purchase price of $1.46 per share, it intends to make a profit and is motivated to establish the lowest price which might be acceptable to stockholders consistent with that profit-seeking intention.
• There is no guarantee that the tender offer can or will be completed as soon as the offeror implies. The tender offer does not expire until April 30, 2019 at the earliest. This date may be extended by the offeror in its sole discretion. In addition, if more than 3,000,000 shares of common stock are validly tendered in the tender offer and not withdrawn, the offeror will accept shares of common stock from tendering stockholders on a pro rata basis.
• The offeror attempts to force any dispute that may arise between a stockholder and any other party relating to the tender offer into binding arbitration in Denver, Colorado. This attempt to enforce binding arbitration, if not successfully challenged in a court of competent jurisdiction, may deprive a stockholder of its right to a jury trial in a forum convenient to the stockholder.
• The offeror expressly reserves the right to amend the terms of the tender offer, including by increasing or decreasing the offer price or by changing the number of shares being sought or the type of consideration, at any time before it expires. Although any amendment will be followed by a public announcement, the offeror does not have an obligation to otherwise communicate that amendment to stockholders.

Intent to Tender

The Company’s directors and executive officers are entitled to participate in the tender offer on the same basis as other stockholders. However, after reasonable inquiry and to the best knowledge of the Company, none of the directors or executive officers of the Company intends to tender or sell shares of common stock held of record or beneficially by such person for purchase pursuant to the tender offer. Further, after reasonable inquiry and to the best knowledge of the Company, none of the Company’s subsidiaries or other affiliates intends to tender or sell shares of common stock held of record or beneficially by such person or entity for purchase pursuant to the tender offer.

Person/Assets, Retained, Employed, Compensated or Used

Neither the Company nor any person acting on its behalf has employed, retained or agreed to compensate any person to make solicitations or recommendations to stockholders concerning the tender offer.

Interest in Securities of the Subject Company

Based on the Company’s records and on information provided to the Company by its directors, executive officers, affiliates and subsidiaries, during the past 60 days, no transactions with respect to the common stock have been effected by the Company, its executive officers, directors, affiliates or subsidiaries.

Purposes of the Transaction and Plans or Proposals

The Company has not undertaken and is not engaged in any negotiations in response to the tender offer that relate to: (i) a tender offer or other acquisition of the Company’s securities by the Company, any of its subsidiaries or any other person; (ii) an extraordinary transaction, such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries; (iii) a purchase, sale or transfer of a material amount of assets of the Company or any of its subsidiaries; or (iv) any material change in the present distribution rate or policy, or indebtedness or capitalization of the Company.

Additionally, there is no transaction, board resolution, agreement in principle, or signed contract in response to the tender offer which relates to or would result in one or more of the foregoing matters.

Golden Parachute Compensation

There are no agreements or understandings, whether written or unwritten, between any named executive officer of the Company and the Company or the offeror concerning any type of compensation, whether present, deferred or contingent, that is based upon or otherwise relates to the offer to purchase.

Blue Vault’s Report on InvenTrust as of Q4 2018

On August 15, 2018, the Company announced and commenced a modified “Dutch Auction” tender offer (the “2018 Offer”) to purchase for cash up to $75.0 million in value of shares of the Company’s common stock, par value $0.001 per share, subject to the Company’s ability to increase the number of shares accepted for payment in the 2018 Offer by up to 2% of the Company’s outstanding shares, without amending or extending the 2018 Offer in accordance with the rules promulgated by the SEC. The Company exercised that option and increased the 2018 Offer by 10,706,774 shares, or $22.5 million, to avoid any proration for the stockholders tendering shares. The 2018 Offer expired on September 13, 2018.

As a result of the 2018 Offer, the Company accepted for purchase 46,559,289 shares of its common stock (which represented approximately 6.0% of the shares of common stock outstanding at the time) at a purchase price of $2.10 per share, for a cost of approximately $97.8 million, excluding fees and expenses as of December 31, 2018. Aggregate costs of $98.5 million were recorded as reductions to common stock and additional paid-in capital on the consolidated statement of equity for the year ended December 31, 2018.

As of December 31, 2018, the Company managed 71 retail properties, with a gross leasable area of approximately 12.1 million square feet, which includes one retail property classified as a consolidated variable interest entity, with a GLA of approximately 125,000 square feet, and 13 retail properties with a GLA of approximately 2.6 million square feet owned through an interest in one of its joint ventures.

During 2018, the Company disposed of 17 properties consisting of 3,481,000 square feet for a total gross disposition price of $466.2 million.
On May 9, 2018, the Company announced an estimated per share value of common stock equal to $3.14 as of May 1, 2018.  This represents a decrease from the previous estimated per share value of common stock of $3.29 as of May 1, 2017.

On November 7, 2018, the board approved an increase to the annual distribution rate effective for the quarterly distribution payable in April 2019, from $0.0716 per share to $0.0737, on an annualized basis. The new distribution rate results in an annualized yield of 1.84% based upon the original offering price of $10.00 per share reduced by partially liquidating distributions paid to date of $6.00 per share.

Sources: SEC, Blue Vault