Elliott Associates launched bids for four different Italian REIFs two months ago, and so far they haven’t been very successful in acquiring shares. They managed to acquire 16% of the shares of the Polis fund, but another hedge fund overbid them on the Mediolanum Real Estate Fund and apparently there was little interest from Fondo Alpha and Immobiliare Dinamico shareholders to tender their shares. As a result Elliott Associates decided to increase their bid for those two funds. They raised the offer for Fondo Alpha by 12.4% from €1156.25 to €1300.00 and the offer for Immobiliare Dinamico was increased by 12.5% from €69.31 to €78.00. I didn’t tender my shares in the previous offers, and I don’t intent to tender them in the new offers, but I do find it very encouraging to see the large interest from hedge funds in Italian REIFs. I bought them last year and no-one was interested, and now everybody tries to get a piece of the action:
Author is long Fondo Alpha and Immobiliare Dinamico
This year a lot seems to be happening in the Italian REIF sector. First we had Elliott Associates launching tender offers for four different funds, and then York Capital Management joined the party by offering €54/share (plus CVR) for Fondo Delta. It didn’t take long before a second interested bidder emerged who was willing to offer €56.70/share and on Monday the bidding war intensified with a third fund launching a tender offer at €65/share. I’m not exactly sure why there is so much interest in this specific fund, but I can’t complain. This offer is still at a 30% discount to the €92/share NAV, but it’s a huge improvement to the 50% discount Fondo Delta was trading at earlier this year. Despite that I don’t think I’ll tender my shares since I expect that simply waiting for the fund to liquidate will be better.
One fund that is making excellent progress in this regard is Valore Immobiliare Globale. The fund announced last Friday that it sold its Milan property for €26.8 million (equal to its appraised value as of 31 December 2015). This is a pretty big deal since the fund now only has two properties remaining with a combined value of €28.3 million. The announcement caused the stock the jump by 20%, but also in this case the discount to NAV remains big at 30%.
Author is long QFDI.MI and QFVIG.ME
After Elliott Associates launched a bid for four Italian REIFs less than two weeks ago another hedge fund has announced that it also wants to join the party. York Capital Management (I never heard of the name, but apparently they have $14 billion of AUM) will launch a tender offer for Fondo Delta, another stock that happens to be in my basket of Italian REIFs. The offer is for up to 60% of the outstanding share capital at a price of €54/share which is a premium of just 11.7% compared to the closing price yesterday and a price 40% below NAV of €92/share.
While the premium is small York Capital Management has structured the offer in such a way that shareholders will get an additional consideration if the fund can be liquidated close to NAV. Depending on the timing of the liquidating selling shareholders would receive between 18 and 30% of the liquidation proceeds above €75/share. Since that is roughly a 20% discount to NAV there is a reasonable probability that shareholders will receive some additional consideration. With the stock currently trading at €52 the spread, excluding the value of the CVR, is 3.8% which looks pretty attractive to me. Because of that I decided to add a bit to my position today with the intention to tender it in the offer.
Author is long Fondo Delta