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CMCT - CIM Commercial Trust


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I think between Pupil and I, we are going to turn this forum into real estate galore.  I own a small position in CMCT.  It is a subscale Office REIT with decent assets in California.  The investors are actually decent.  But they are trying to steal the company by issuing shares in lieu of cash to external management.  I am kind of lukewarm about this idea as the management has proven to be less shareholder friendly than I have hoped.  Well, what's another discount to NAV story in the public market? 

 

Enters Engine Capital who have converted from 13G to 13D and publicly shared this letter.  Big picture, $28 of NAV and currently trades at $10 and an activist agitating for change. 

 

https://app.box.com/s/lzazmg6rfhjly0ogldlb4x4h0w73br71

 

 

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I got involved in this one too early in the $14s and am underwater.

I am very disappointed to see the possible equity raise which makes me doubt management.

I had previously seen management as a strength after they monetized about 1B of the former portfolio at 98% of NAV, then doubled down on position in stub leading me to believe they wanted to use the vehicle to gain some scale.

 

A positive development in March - largest tenant Kaiser cancelled move into a new HQ and will likely renew current lease (which is below market).

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CIM management are certainly known as astute real estate investors who have created a ton of wealth over time.  No doubt about that.  However, I'm not sure anyone would use the term "shareholder friendly" to describe them. To be clear, I know very little about their REIT vehicle.  They "grew up" as opportunity fund operators.  This REIT, I believe, was the result of a separate account being monetized.  Generally speaking, I think that handing real estate operators the keys to a permanent capital vehicle (read permanent fee stream as opposed to a series of closed end funds), is not a recipe for success for investors in that vehicle.  For me, this would have to be a TON cheaper than VNO.  Utilizing the LCD theory, and without knowing the REITs incentive structure for management, it affords the manager a much cheaper cost of capital than its opportunity funds.  I think of this more as a non-traded REIT.  Again, I have no idea of the portfolio or the valuation metrics, but in betting on management, not sure incentives are aligned. 

 

Enter the activists!  I'd do a deep dive on the control documents and hope Engine did.

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