Chambers Street Properties (NYSE:CSG) began trading as a public company on May 21st at $10 per share. The formerly non-traded REIT originally known as CB Richard Ellis Realty Trust raised $2.4 billion during its offering stage and is now providing initial inventors with a more liquid option. In addition to listing on the New York Stock Exchange, the company initiated a modified Dutch auction tender offer.
Chambers Street Properties is offering to purchase up to $125,000,000 of its common stock outstanding (roughly 5% of shares outstanding) at a purchase price not greater than $10.60 per share and no less than $10.10 per share. The tender offer is in place until 5:00pm EST on June 19, 2013. Shareholders of record may attempt to tender their shares in $0.10 increments:
$10.10 --- $10.20 --- $10.30 ---- $10.40 --- $10.50 --- $10.60
Chambers Street Properties will purchase under the tender offer at the lowest price offered until the full offering amount is reached. For example if $125,000,000 worth of stock is offered at $10.10 and you submit a tender offer at $10.20, you will not have your order filled. If the offer is over-subscribed at a specific bid increment, all tendering shareholders at that increment will be paid on a pro-rata basis.
An interesting point to keep in mind is that shareholders with 99 shares or less and tender their shares will be filled first. Larger blocks of shares will be filled second based upon the conditions described above. This gives investors with a small amount of capital a better chance that their order will be filled at $10.10 (assuming the tender offer goes through).
I would point potential investors to the offering document to review all the risks associated with this tender offer. Most importantly to keep in mind is Chambers Street Properties has the ability to extend or withdraw the offer up to one day prior to expiration. If you decided to purchase shares and then participate in the tender offer you will want to keep a close eye on the expiration date as the premium may not materialize. I will highlight a few other risks which I believe are noteworthy:
If an increase or decrease of more than 10% in the market price of the common stock of CSG, Dow Jones Industrial Average, New York Stock Exchange Index, or Nasdaq Composite Index, or Standard and Poor's 500 Index, measured from the close of trading on May 21, 2013 occurs, the tender offer can be called off (this is very critical to watch). CSG closed at $10 per share on May 21st and currently trades just above that 10% decrease level ($9).
If any entity acquires more than 5% of the company, the tender offer may be called off.
Any lawsuits brought against Chambers Street Properties relating to this offer will cause the offer to be called off.
The return potential on this short-term investment depends on several factors. First is your entry price point (for all assumptions below I will use a purchase price of $9.10). Second is the specific bid increment you tender your shares at and if that bid increment is actually filled.
Assuming you purchase shares at $9.10, submit your tender offer in the proper manner, and Chamber Street Properties purchases all your stock at the minimum bid level, $10.10, you would make $1 per share. This is a hypothetical gain of 11% (gross) for a one month hold.
Your actual return may be higher or lower depending on your purchase price and where you decide to tender shares. For example, if you tender 1/3 of your shares at $10.10, 1/3 at $10.20, and 1/3 at $10.60 and have all lots filled, your realized return would be much higher than the 11% estimated above. Of course, keep in mind that the offer may not go through at all.
Keep in mind that Chambers Street Properties can rescind this offer at any point prior to June 19th. I would urge any investor to keep a close eye on the company's press releases and financial filings to make sure this does not occur.
Note: All data reported is pulled directly from Chambers Street Properties Investor Relations website.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CSG over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: This is not an offer to buy or sell any security. Carefully consider your investment goals and objectives before initiating a position in Chamber Street Properties and please remember that the value of investments in equity securities, like CSG, will fluctuate in response to general economic conditions and to changes in the prospects of particular companies and/or sectors in the economy. Purchasing CSG may result in a total loss of principal.