Dave Waters has recently highlighted this merger arb setup in the US multifamily/commercial REIT sector. First Real Estate Trust of New Jersey (FREVS) has received a buyout offer from the Kushner family at $22/share. There is a 16% spread to the offer price, but liquidity is very limited. FREVS is currently reviewing the proposal. The bidder noted that it might go hostile if management rejects the offer. Dave thinks the offer is fair.
The sale should presumably be a good outcome for shareholders compared to the semi-liquidation mode the company has been operating in for the last few years. However, I think it’s important to highlight that FREVS shareholders had already been burned by Kushners before. Kushners previously agreed to buy major part of FREVS portfolio in early 2020 and then refused to pay-up after the pandemic hit. The deal was terminated for non-performance. Both parties are still litigating for a $15m ($2/share) escrow deposit from that sale. The court previously decided in favor of FREVS, however, Kushners appealed. The market remains cautious here and puts a 60% probability on the takeover bid going through.
Note: The ‘Ideas Elsewhere’ section is intended to highlight interesting event-driven investment ideas by other authors. These ideas are not my own, and I am simply summarizing them to bring attention of SSI subscribers. I do not intend to actively follow the developments of these ideas, so you should expect limited updates or follow-ups in the comments section.