Quadrise Share Discussion Threads

[r ball] 05/8/2015 10:08

upside is greater. the 25% irr is post transaction costs (eg repaying QEDs debt, adviser fees). it's a low ball bid on the company with a mgt team with a newly appointed FD. thanks

[quepassa] 05/8/2015 09:30

In post 6801, scburbs wisely pointed out that the INTERNAL RATE of RETURN ( the IRR ) of the Lone Star Real Estate Fund-IV was 25%.

This is a very, very important point.

That is the TARGET Investment Return detailed by Lone Star to sophisticated investors who committed to the highly successful fund-raising.

A return of a massive 25%.

The Commitment Period of the Lone Star REF IV (real estate fund ) is three years.

It therefore follows that if the fund is targeted to give an IRR of 25%, then the potential investment in Quintain may or may not be expected to achieve a similar return ( if not higher) of 25%.

What I think needs very careful reflection, is that if Lone Star Ref IV has been sold to investors with a Target IRR of 25%, it means most probably that Lone Star see potential upside of some 25% to their 131p offer for Quintain.

Twenty-five per cent of 131p is 32.75p.

If you add back this 32.75p to the 131p bid, it seems quite clear to me that Lone Star are, in my opinion only, saying that the share could intrinsically be worth 163.75p.

The underlying fund was sold to investors on this basis of a 25% IRR. And it was very successful in achieving full subscription - indeed oversubscription- at its FIRST CLOSING.

That is to say that Lone Star didn't even need to market the fund on subsequent occasions, such was the investor appetite to subscribe in this fund in the first instance.

Why was it so successful? There is a lot of appetite for international real estate combined with the excellent reputation and track-record of Lone Star.

If Lone Star advertise a TARGET IRR of 25%, in my opinion they mean it.

They believe they can achieve that return. The investors believe in Lone Star, otherwise the investors would not have collectively committed more than $5billion in one go to the Lone Star Ref IV fund.

It seems to me absurd that if Lone Star are advertising that they can achieve an IRR of 25%, that this upside is handed to them on a plate by Quintain at a very low price of 131p.

In my opinion, Lone Star see a potential wealth of value in Quintain.

Potentially as much as circa 163.75p per share, if not higher - on the basis that all investments would need to conform to the 25% IRR Target of the overall fund.

The offer of 131p is woefully low.

It seems to me that Lone Star have already more than given a hint of how much they think Quintain may or may not really be worth.

ALL IMO. DYOR.
QP

[alan@bj] 05/8/2015 08:46

Also from today's Times:-

"Fresh chatter that Quintain Estates could be subject to a rival takeover bid pushed the shares to a record high of 134p, before they closed up ¾p at 132¼p — above the 131p recommended offer tabled last week by Lone Star, the American private equity company.

[cszjrh2] 04/8/2015 22:27

Little bit more speculation:"In other M&A news, shares in Quintain Estates & Development (LON:QED) rose as some suggest it could be the subject of a bidding war.Rumours in the city are that, despite the company reaching a 131p per share agreement with US-based Lone Star Real Estate fund last month, a new bid could be on the cards for the Wembley Arena owner. Shares nudged 0.75p to 132.25p."http://www.proactiveinvestors.co.uk/companies/news/109623/ftse-ends-flat-despite-commodity-improvement-109623.html

[maddox] 04/8/2015 17:23

OK guys I think we need to get a shareholder action group together to reject this bid - if you're interested please email me at [e-mail]

Regards, Maddox

[davidosh] 04/8/2015 14:55

QP.....Do you not want to start a campaign against acceptance of the bid ?

[badtime] 04/8/2015 14:00

So above offer now..albeit a tad

[quepassa] 04/8/2015 13:55

In my view only, the Lone Star offer sounds to me more like a hatchet job, asset-stripping exercise, strip-it-to-bits job by Lone Star.

My guess is that they just want to rip Quintain apart and sell off the juicy bits at a significant gain.

According to highly regarded Costar which talks about the closing of the $5.8bn "Opportunistic" fund in May this year:-

QUOTE

In presentations to retirement funds, Lone Star executives said they plan to deploy the fund's capital by acquiring large portfolios and liquidate them quickly. The quick pay down debt reduces the leverage in the portfolio and reduces absolute dollar commitment in that market, Lone Star executives noted.

UNQUOTE

www.costar.com/News/Article/Capital-Raising-Craze-$87-Billion-for-New-CRE-Investments/171327


What the Lone Star executives are reported to have said by Costar during presentations to pension funds does not, in my opinion, sit well alongside what they said of plans to build out Wembley.

I know which version I favour.

It's not as if this bid for Quintain is a side issue of an investment to the Lone Star fund. It is approaching 25% of the whole $5.8bn fund.

If the investment criteria of the Lone Star Real Estate IV fund are apparently to liquidate portfolios quickly as reportedly mentioned to potential investors by Lone Star executives, one can but imagine that the same investment criteria must apply to this massive potential investment in Quintain.

If there is value to be had by selling off the parts of Quintain quickly - which would produce a rapid but handsome gain for Lone Star, shareholders should in my view demand a full and independent review and revaluation of the current asset valuations of Quintain prior to any sale.

In my view, the 131p offer is shameful.

ALL IMO> DYOR.
QP

[davidosh] 03/8/2015 15:36

Almost every transaction has been to suit the banks or bonus targets....why 200% bonuses ? Are they not paid well enough to run a small cap listed company anyway? No dividends for shareholders whilst all those assets were being sold off should have been linked to no bonuses available as well !!

If performance is compared to a basket of similar sized property companies since 2011 then I do not think QED would even be in the top 75% !

[911man] 03/8/2015 14:59

Just also remember, this is the same management that sold the secondary portfolio off and six months later the bidding company then revalued these assets around 50% more..
The management have been driven by bonuses based on KPIs. If this bid is accepted this will merely further line their pockets... I just don't know why they think that 131p off an existing 107p share price is enough.

[scburbs] 03/8/2015 14:58

25+% IRR expected for LS.

"The Texas-based fund manager is betting that Quintain’s 5,500-home Wembley Park project will deliver 25% returns over the next few years for investors in its $5.8bn (£3.7bn) Real Estate Fund IV, which held a first and final close in April this year.

While the 131p per share offer for the company, recommended by Quintain’s board this week, reflects a 22.4% premium to the share price and a 7.4% premium to NAV, Lone Star believes there is substantial growth to come for the stripped-back developer"

hxxp://www.estatesgazette.com/inside-deal-lone-stars-swoop-quintain/?x=1

[quepassa] 03/8/2015 14:44

The Directors have collectively pledged 0.3% of the share capital of Quintain.

Zero point three per cent is nothing.

They are NOT in any way in a strong position to influence by way of vote the outcome of this low-ball opportunistic bid from Lone Star.

The 99.7% of the share base of Quintain which is not held in Directors' hands command the situation and the outcome.

Investors would be well-advised, in my view, to make their own minds up as to whether this is a fair offer or not. And not, in my view, to be unduly influenced by the Directors' collective puny 0.3% holding.

The tiny fraction of shares held by Quintain Directors will not in any way influence my personal decision on this Offer. I hope this will also be the case for other investors small and large. And especially institutions.

My decision is already made in advance of receiving any documents. It is to vote AGAINST the offer.

It appears to me that the interests of The Quintain Directors, in my view only, are DISTINCTLY OUT OF LINE with the interests of the other shareholders who have done the heavy-lifting of supporting Quintain throughout the financial crisis and property crash, including investing into the Rescue Rights Issue.

Management have received handsome salaries and, recently, exceptional performance-related bonuses sometimes approaching and into the £millions.

All their executive and other options stand to be paid out in full if the tabled Offer goes ahead. Such details of options are contained in the Letters of Undertaking to be readily found on the Quintain web-site

Shareholders have not even been given the merest sniff of a dividend. Big bonuses for Directors but zippo in dividends for shareholders.

This is disgraceful and unacceptable in my view.

Now that we have a clear upturn in London property, if not an incipient property boom, in my opinion the Directors want to sell out, see their options handsomely cashed in and succumb to a low-ball bid rather than wait to share the clear upside of future development with shareholders.

It remains UNSATISFACTORY that all hitherto negotiations with Lone Star were held behind closed doors and that the market was not informed of any approach which had been initiated.

This is what the Release says about the future for Quintain:-

"The Offer from Bidco crystallises value for shareholders at an early stage whilst enabling Quintain’s vision for Wembley Park to be accelerated through the addition of significant financial resources, creating more mainstream homes in the Capital more quickly than would otherwise be possible.”


The inherent value of " creating more mainstream homes in the Capital more quickly " is the UPSIDE which existing shareholders had been hoping for and waiting a very long time to enjoy. - This is most definitely not an upside which should be handed on a plate to a Private Equity firm at a low price.

In today's market, Quintain which is de-geared and lowly borrowed would have little difficulty on its own to raise finance to speed up their building plans. Indeed the Company is arguably significantly under-geared.

I have never met a Private Equity firm yet that doesn't want to max out financial return on investment/capital. I doubt Lone Star are any different.

Lone Star are ultimately funding this proposed offer through one of their funds.
This fund is called Lone Star Real Estate Fund IV which just raised in April this year 2015 a massive $5.8billion, such is the current insatiable appetite from global investors for real estate.

The Offer of 131p is fundamentally too low and is robbing shareholders, in my view only, of the long-awaited and enormous inherent value of the massive upturn in the London property market and seemingly insatiable demand for new housing.

ALL IMO. DYOR.
QP

[jaws6] 03/8/2015 14:21

David
You seen this ?

[maiken] 03/8/2015 13:11

I would also support.

[davidosh] 03/8/2015 13:02

QP....Why not set up a Shareholder Action Group and start a campaign on behalf of the smaller shareholders ? I am sure ShareSoc will help you if there are enough members interested and this will show how directors with miniscule holdings rarely get the best price for shareholders in deal situations !

I am fully tied up with a campaign at Vislink which is going extremely well and you certainly seem to have enough knowledge to run this one which I would fully support.

The smaller shareholders with about 25% of the shares need a voice here

[quepassa] 03/8/2015 12:29

Standard or not. It is still there.

The Directors are indeed on the hook to sell to Lone Star but the get-out words are that all bets are off if " the Offer lapses or is withdrawn"

If the Offer is not accepted by shareholders in general and Lone Star don't get the shareholder acceptance they want ( a massive 90% to go unconditional ), what will Lone Star do? They will either allow the Offer to lapse or withdraw it.

At that point, the Directors are off the hook.

In theory and practice what happens is that XYZ come in with a hypothetical blow-out bid of 160p which LS don't want to match, they know no-one will accept their 131p - so they walk and allow their Offer to lapse or withdraw it. - At that point the Directors are no longer obliged to sell.

The wording of " A MINIMUM OF 131p" is interesting.

It is backed up by Clause 4.6 of the same letter of Irrevocable Undertaking which further says that the Directors remain on the hook if Lone Star increase the offer as the term " OFFER extends to any improved or revised offer on behalf of the Offeror before the withdrawal or lapse of the Original Offer".


You might say that that is standard as well.

But one thing is crystal clear.

The Letter of Undertakings caters for, allows for and contemplates the eventuality of an increased offer from Lone Star.

That fact is not without a great deal of interest in my view.

The combined percentage of shares that the Directors have jointly undertaken to sell is microscopic in the scheme of things.

It's not like the Directors have committed shares totalling 30% of the Company, their holdings are insignificant in my view, other than being a token gesture.

ALL IMO> DYOR.
QP

[bscuit] 03/8/2015 11:40

The wording is standard to allow for a higher offer, but I suspect they would have to sell to LS even if a new offeror appears. I'm certain also that a dividend announcement would be a legitimate factor to enable LS to withdraw their offer --after all the monies to pay the dividend are in the company and they are seeking to buy the company.

Am I not right in thinking the price precludes LS from buying in the market?

Strikes me the current price makes a smallish holder sale a lower return than a completed sale and the market is hedging its bets as it is by no means certain another bidder will appear.

[quepassa] 03/8/2015 11:08

The main Directors have issued letters of Irrevocable undertakings to the bidding company saying that they have committed to sell their shares.

These letters can be found on the QED web-site.

The question is at what price have the Directors undertaken to sell their shares to Bidco?

The Letters do not just say 131p.

The price at which the Directors have undertaken to sell their shares is at "NOT LESS THAN 131p".

Wise precaution perhaps.

Prodding by the shareholders should push the QED management to go back to the negotiating table with Lone Star.

Of course, if they can produce a more acceptable offer, it is good for them as it is shareholders in general.

If QED cannot get a fairer offer for shareholders than the 131p so far tabled, in my opinion shareholders would be far better off to reject the initial low-ball offer.

The FT article about London property on page 3 to-day sums up the situation very succinctly:-


"Post-crisis high

OVERSEAS INVESTORS FLOCK TO SECURE LONDON DEVELOPMENT LAND"

citing for example the land-grab at Battersea Power Station and the Asian Business Port at Royal Docks in East London ( we of course know about Greenwich Peninsula and Knight Dragon)


The FT article continues

"London's housbuilding shortage has sent housebuilders scrambling to fill the gap. The capital's population grows by about 52,000 households a year but last year just 18,260 new homes were built."




At 131p, the Lone Star bid is far too low. If they fall away at 131p - which I hope they do- others will in my view soon come knocking/flocking at a fairer price.


Over and above that, Quintain should announce an immediate 5% dividend which would close the gaping discount-to-NAV and provide shareholder value of approaching 131p without selling the Company. Irrespective of the fact that this would likely cause the 131p offer to lapse.



ALL IMO. DYOR.
QP

[r ball] 03/8/2015 10:12

or sell % of holding.

[aberdare] 03/8/2015 10:09

What can we read from all the notices are the big boys selling buying or just sitting still makes you feel should you top up for a few just in case of a higher bid. After all not much to lose

[quepassa] 01/8/2015 00:45

I was talking to an acquaintance yesterday who is the proprietor of a small City-based financial boutique about the Quintain offer.

He spoke very highly of Lone Star and their excellent reputation as a top and aggressive buyer of distressed assets with a great eye for spotting value. He said (in a positive/laudatory way )that in the sharks' pool of distressed buyers, they were king shark.

Lone Star know they have a good deal here with their Quintain offer.

Hopefully, shareholders will collectively come together to oppose the very low offer which has so far been tabled.

It remains unsatisfactory in my opinion that Quintain never informed the market that they were in talks with a counterparty which may or may not have lead to a bid.



As I have said before and will say again, all The Board need to do is declare immediately by way of EGM the immediate implementation of a progressive 5% dividend policy and shareholders will crystallise the same value as the Lone Star offer without the Company being sold at that low price.

With the announcement of a dividend, the share price would rise to NAV, the big discount would be obliterated and the 5% dividend would near as dammit immediately equate to the 131p being offered by Lone Star. Without the Company being sold at all.

That is the best way to crystallise 131p of shareholder value not through a low-ball bid.

That is why an offer of 131p doesn't come close, in my opinion, to offering anything like fair or reasonable value for Quintain.

ALL IMO. DYOR.
QP

[maddox] 31/7/2015 20:13

Hi badtime, one would have expected that the Lone Star cowboys, might have also approached substantial holders..."er do you mind if I rob you?".

We'll see!?!

Regards, Maddox

[badtime] 31/7/2015 19:45

QP..whats your view (sorry if i have missed it)re a counter offer...with the directors not having substantial holdings...surely the bidder would have sounded out the larger shareholders first?

[quepassa] 31/7/2015 18:07

Excellent post.

Good concrete reasons to further substantiate why the opening offer is far too low.

I am sure that those reasons will be picked up by institutional and big-ticket holders, as well as the smaller guy, who monitor the bulletin boards.

Any further valuation insights on Quintain would be most welcome from you and everyone else.


ALL IMO. DYOR.
QP