BRE Select says MacKenzie offer is below last redemption of preferreds

New York, Jan. 30 – BRE Select Hotels Corp. said that a tender offer by affiliates of MacKenzie Capital Management, LP for its 7% series A cumulative redeemable preferred stock is at a price below the initial liquidation preference of the preferreds and also below the most recent redemption price.

BRE Select said that neither it nor its board of directors is making any recommendation as to whether to participate in the offer by MacKenzie.

MacKenzie is offering to buy up to 1 million shares of the preferreds at a price of $1.30 per share less any cash distributions made by the company after Feb. 27.

However BRE Select said that holders of the preferreds should consider that:

• MacKenzie’s $1.30 offer price is a 32% discount to the initial liquidation preference of $1.90 per preferred share;

• MacKenzie’s offer price is also lower than the $1.9281 per share that the company paid to redeem 24.65 million of the preferreds on Dec. 31, a price equal to the liquidation preference plus accumulated dividends. BRE Select added that it does not currently intend to redeem any further preferred shares unless it is required to do so by their terms. The company previously responded to an offer by MacKenzie with an alternative tender at $1.30 per share but does not plan to provide a counter-offer this time;

• MacKenzie’s offer price is lower than the implied value of $1.67 to $1.82 per preferred calculated in a report to the board of directors of Apple REIT Six, Inc. as part of BRE Select’s acquisition of Apple REIT Six. BRE Select noted, however, that the report is more than two years old; and

• On the other hand, the $1.90 initial liquidation preference is subject to downward adjustment if there is more than $3.5 million of net costs and payments relating to litigation and regulatory legacy matters from the Nov. 29, 2012 date of the merger agreement between Apple Six, BRE Holdings and the BRE Select. So far there has not been an adjustment, BRE Select said.

BRE Select also noted that the MacKenzie offer only applies to 1 million, or 1.4%, of the 72,382,848 outstanding preferreds and is on a “first-come, first-buy” basis.

As a result, the company characterized the offer as “coercive” because it encourages holders to tender as soon as possible without necessarily taking adequate time to evaluate the offer, a problem made worse by the lack of withdrawal rights.

BRE Select is a New York-based non-listed real estate investment trust focused on the ownership of upscale, extended-stay and select-service hotels.

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