Carl E. Berg announces receipt by stratus properties
Carl E. Berg- the largest shareholder (17.6%) of Stratus Properties Inc., announced that on January 25, 2016, he received from Capretta Properties Inc. a copy of Capretta’s January 22 letter of intent to Stratus offering to purchase substantially all of Stratus’s real estate properties for $435 million cash. The terms of the offer provide for the properties to be transferred to Capretta free of existing debt, which Capretta noted in the letter aggregated approximately $255.6 million on September 30, 2015.
Capretta’s nine-page letter of intent was addressed to William Armstrong, Stratus’ CEO, and indicates that Capretta sent copies of the letter to Stratus’ five largest stockholders, including Berg. The letter describes Capretta’s offer as representing “an offer equal to $21.60 per share net of existing debt” for Stratus’s real estate portfolio alone. Capretta also notes in the letter that Stratus has “other assets, including cash that total over $6.00 per share” and, as a result, Capretta’s offer “presents a financial return to Stratus far in excess of its current stock price in the $19.00 range.”
Berg understands that statement to mean that Capretta’s offer implies a liquidation value of Stratus of approximately $27.60 per share (pretax). Capretta’s offer states that it is not subject to any financing contingency and that no real estate brokerage commissions will be payable by either party.
Capretta Properties is a privately owned real estate development and investment company that was established in 1989 and is based in Mill Valley, California.
Berg said, “After having submitted for a vote at the 2016 Annual Meeting a proposal requesting Stratus’ Board of Directors to engage an investment banker to explore a sale of Stratus, I am delighted to learn that four months before the expected date of that annual meeting Stratus has received an unsolicited offer from a credible party to purchase all of Stratus’ real estate assets. To me, Capretta’s offer appears to have significant merit and represents an excellent point from which to begin the process of exploring the sale of Stratus. I definitely agree that Stratus should not incur any brokerage fees in connection with selling its real estate portfolio in response to a third party’s unsolicited offer to purchase Stratus’ real estate assets.
After the Stratus shareholders have endured years of underperformance by Stratus, the Board – including its two recent Board appointees, James Joseph and John Wenker – needs to seriously and objectively evaluate Capretta’s offer and any other offers that Stratus receives, with the aim of allowing Stratus’ stockholders to realize the full value of Stratus’ real estate portfolio. I repeat what I wrote on December 19, 2015 to each Board member: I will hold them accountable for any lack of independence, unsound business decisions or failure to live up to their legal obligations to the Stratus shareholders. I am making today’s announcement because all of the shareholders deserve to know that Stratus has received this significant offer, but Stratus has made no public statement to its owners about the offer.”
Capretta’s president, Ricardo Capretta, addressed the letter of intent to Stratus’s Chairman and CEO William Armstrong, and begins the letter by stating: “I have tried to contact you on five separate occasions now [December 12 and 18, 2015; January 4, 19 and 20 of 2016]. I appreciate that you returned one of my calls on January 19…. I have not received a second return phone call…. At this point, it does not seem as though I will hear back from you so therefore I thought it might be more productive to forward you an unsolicited offer for your assets since they are possibly going to be offered for sale soon. I understand that potential suitors have, or are considering submitting unsolicited offers, in the near future.”
Stratus is a real estate company engaged primarily in the development, management, operation and sale of commercial, hotel, entertainment, and multi- and single-family residential real estate properties located in Texas, primarily in the Austin, Texas area.
Berg is a real estate investor and venture capitalist and was the Chief Executive Officer of Mission West Properties, a real estate investment trust, from 1997 through December 22, 2012, when that company was sold to DivcoWest, a privately owned real estate investment company. He believes he has been Stratus’ largest shareholder for almost the last 15 years.