Real estate investment trust Ladder Capital has rejected Related Companies‘ $1.6 billion offer to take the company private, according to a Thursday filing with the Securities and Exchange Commission.
New York-based Related bought $80 million of stock in the commercial mortgage provider from pre-initial public offering shareholders in February 2017, PERE previously reported. On January 15, Related offered $15 a share for the 91.8 percent of the Ladder stock it does not own in a deal valued at $1.6 billion, according to a filing with the SEC.
“After carefully reviewing the proposal, the company’s board of directors has determined that the proposal undervalues the company and has therefore respectfully declined the proposal as not being in the best interests of the company or its shareholders,” Ladder’s rejection letter said.
A spokeswoman for Related declined to comment and Ladder could not be reached.
When Related first bid, the company said it intended to raise additional capital for the platform and retain the majority of Ladder employees, according to a letter to the board.
Jessica Levi-Ribner, an analyst who covers Ladder for investment bank B Riley FBR, wrote in a research note last week that her team thinks Related is underbidding for Ladder when the sum of the REIT’s parts is considered.
“We believe the takeout bid does not fairly reflect the intrinsic value of the company, but it does validate Ladder’s business model and the strength of the platform,” she wrote. “As such, we would expect any further discussions between Ladder and Related to center around a higher bid for the company.”
Ladder, which was founded in 2008 and went public in 2014, originates commercial real estate loans and invests in real estate equity. The company originated $630 million of loans in the third quarter of 2017 and had $1 billion in real estate assets as of September 30, according to its third-quarter earnings report.
The REIT is known for bankrolling many of President Donald Trump’s US properties since 2008. The company has issued about $275 million of loans to the Trump Organization, according to Crain’s New York, a local business magazine. Jeff Blau, Related’s chief executive, has publicly spoken about how the property entrepreneur-turned-president could boost the real estate industry, highlighting Trump’s promises to deregulate banks, increase infrastructure spending and reform the tax code.
In a 2017 interview, Justin Metz, president of Related’s fund platform, told PERE the two firms complement each other because, while both originate loans, the REIT also has a securitization business.
As part of the original deal, Related received a right of first offer for certain horizontal risk retention investments in which Ladder plans to keep its stake. Related used that right to purchase a subordinate interest in a loan secured by a Florida hotel the month after its initial Ladder stock purchase.
“The option gives us the opportunity to see deals we might not otherwise see,” Metz said at the time.
Capital for Related’s 2017 stock purchase came from its $1 billion value-added fund, Related Real Estate Fund II, which closed in December 2015. Investors in the fund include Indiana Public Retirement System, which earmarked $50 million; Texas County and District Retirement System, which allocated $40 million; and Teachers’ Retirement System of Louisiana and the University of Michigan, which each committed $35 million, according to PERE data.
Related is currently seeking to raise $1.5 billion for its second real estate debt fund, Real Estate Credit Solutions II, launched in early 2016 in partnership with HPS Investment Partners.
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