Local Shopping Reit (LSR:30.5p), a small-cap property investment company that’s sold off almost all its properties with a view to returning the cash to shareholders, has reached an agreement with its largest shareholder, Thalassa (THAL:80p), to enable a cash return after Thalassa had used its 25.5 per cent stake to thwart the directors’ attempt to return the cash to shareholders at the end of last year. Thalassa subsequently launched an unsuccessful takeover which failed last month.
Local Shopping Reit will shortly issue a tender offer to buy back all the holdings of shareholders, excluding the 21m shares held by Thalassa, at the 31 March 2019 net asset value (NAV) per share of 31.33p. The company’s NAV of £25.8m has been calculated on a liquidation basis and also factors in £400,000 of wind-up and liquidation costs previously booked in the 2018 financial year. At the end of March 2019, Local Shopping Reit held 10 investment properties for sale, which had a carrying value of £3.6m and net cash of £22.7m. Thalassa will not participate in the tender offer.
The half-year results reveal that Local Shopping Reit incurred legal and professional costs of £885,000 in the six-month period, the lion’s share being the cost of defending Thalassa’s bid and fees relating to a liquidation of the company. That sum is worth 1.07p a share and would otherwise have been distributed to shareholders.
Having first advised buying Local Shopping Reit's shares, at 30.8p, to play the end game of the liquidation process (Alpha company research, 5 Mar 2018), if you have been following my advice then you will turn a tiny profit by taking up your tender offer entitlements. That’s my recommendation as, although the financial return is not what I had originally hoped for, and the cash return has taken far longer than I had anticipated due to Thalassa's stalling tactics, it’s still positive and compares favourably with the 8 per cent negative return on the FTSE Aim All-Share in the same 15-month period. Take up the tender offer.
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