Salt On The Wound

Retail Properties of America (RPAI) investors are being hit with a mini-tender offer, where a third party investment fund is offering to purchase up to 200,000 shares of all four classes of RPAI stock for $6.50 per share.  Remember, investors now own four classes of RPAI stock, the trading and liquid Class A shares, which closed today at $9.15 per share, and the three non-traded classes:  B-1, B-2 and B-3.  The three B classes will convert to Class A shares at six, twelve and eighteen months intervals from when RPAI first listed its stock.  At the end of eighteen months, investors will own just the fully liquid Class A shares. 

The mini-tender is offering to purchase the shares for a split-adjusted $6.50 per share, a sizable discount to today's closing price of $9.15.  (Based on RPAI's original offer price, the tender offer is worth $2.60 per share.)  The investment firm is providing liquidity, at a discounted price, for investors that don't want to wait up to eighteen months for full liquidity.  I know non-traded REIT sponsors hate the investment funds that offer the mini-tender offers, but with RPAI's listed price, investors are better informed about their pricing options than if RPAI was estimating its net asset value.   I'm not sure why an investor would tender the Class A shares when the shares are fully liquid, but stranger things have happened, and if you need the cash, the discount may not be so steep.  RPAI could have stopped the mini-tenders by simply listing all its shares at once, so look for continued mini-tenders over the next eighteen months.