Arbor Realty Trust Discloses Takeover Offer for CBRE Realty (CBF) Which Was Rejected
In a 13D filing on CBRE Realty Finance, Inc. (NYSE: CBF), Arbor Realty Trust (NYSE: ABR) disclosed a 9.4% stake in the company and disclosed past discussions with the company in which Arbor offered to acquire the company, which was rejected by CBRE. In August, Arbor offered to acquire CBRE for $8 per share - the overture was rejected by CBRE.
Arbor also indicated they are seeking to request a waiver to exceed 9.8% ownership.
From the filing:
On August 14, 2007, Ivan Kaufman, the Chief Executive Officer of ArborRealty, met with Ray Wirta, the Executive Chairman of the Board of the Issuer,wherein Mr. Kaufman indicated that he may be interested in pursuing a businesscombination of Arbor Realty and the Issuer. Subsequent to that meeting, Mr.Kaufman sent Mr. Wirta a letter, dated August 23, 2007, a copy of which is beingfiled as Exhibit 1 hereto and is incorporated in this Item 4 by reference, inwhich Arbor Realty proposed to acquire each outstanding share of Common Stockfor consideration of $8. This proposal was a non-binding offer which expired onAugust 31, 2007. Prior to the expiration of Arbor Realty's proposed offer, theIssuer indicated that it was not interested in pursuing Arbor Realty's proposaland that it intended to remain an independent company.
On September 5, 2007, Mr. Kaufman met with Kenneth J. Witkin, the Presidentand Chief Executive Officer of the Issuer as of September 4, 2007, wherein Mr.Witkin indicated that the Issuer was not interested in pursuing a proposal byArbor Realty to acquire the outstanding shares of Common Stock.
On November 13, 2007, Mr. Kaufman met with Mr. Witkin to see if the Issuerwould discuss a proposal by Arbor Realty to acquire the outstanding shares ofCommon Stock. Mr. Witkin indicated that the Issuer's board of directors wouldnot consider such a proposal.
On November 23, 2007, Mr. Kaufman called Mr. Witkin to inform him thatArbor Realty would be filing this Schedule 13D based on its beneficial ownershipof more than 5% of the Common Stock on November 12, 2007 and its purchases fromsuch date to the date of this filing. Arbor Realty intends to request a waiverfrom the Issuer to exceed the 9.8% ownership limit contained in the Issuer'scharter, on the basis that Arbor Realty's ownership of the Common Stockshould not cause the Issuer to violate the "five or fewer" test for a realestate investment trust (a "REIT") under federal income tax law because ArborRealty is qualified as a REIT and satisfies this test.
Copy of Takeover Letter
Arbor Realty Trust, Inc. ("Arbor") is pleased to submit this offer (the "Offer")to combine the businesses of Arbor and CBRE Realty Finance, Inc. ("CBRE RealtyFinance" or "CBF"). This transaction represents the best opportunity for yourshareholders to realize significantly more value than they could as shareholdersof CBF alone.
Arbor is one of the premier commercial mortgage real estate investment trustswith investments in a diversified portfolio of multi-family and commercial realestate related bridge and mezzanine loans, preferred equity investments,mortgage related securities and other real estate related assets. Arbor ispublicly-traded on the NYSE and is externally managed and advised by ArborCommercial Mortgage, LLC, a national commercial real estate finance companyoperating since 1993. Arbor's strengths include its diversified originationplatform and proven management team with extensive industry experience. Arborhas consistently traded at a premium to book value multiple relative to ourpeers (1.54x on average) because of the strength of our company. Over the lasttwo years, we have traded at an approximate 10% premium to book value multiplerelative to comparable companies within our sector.
We believe the combination of Arbor and CBRE Realty Finance creates abest-in-class company with a strong balance sheet and a stable long-term growthplatform. We are enthusiastic about the prospects for the combined entity, whichprovides CBF shareholders numerous benefits currently not available to them,including: (i) stable lending relationships, (ii) the ability to attract anddeploy capital in a premium yield environment, (iii) substantial Wall Streetsponsorship within the research community, (iv) a strong reputation amonginstitutional investors and (v) significant upside in the common stock of thecombined entity through multiple expansion, growth and earnings.
The specifics of our Offer are:
- Each outstanding share of CBF common stock would be exchanged for consideration of $8.00, (a 18.2% premium to CBF's closing price of $6.77 on August 23, 2007). We believe we may be able to increase our Offer based upon the results of due diligence.
- Your shareholders will retain a significant equity interest in the combined entity which we believe provides your shareholders with the greatest return opportunity through a stock-for-stock exchange. However, we are willing to provide up to 25% of the consideration in cash at the election of CBF shareholders.
- We anticipate that we will be able to reach a mutually acceptable agreement with respect to members of senior management at CBRE Realty Finance during the course of negotiations.
- We are confident that we will come to a mutually acceptable arrangement with CBF's manager, CBRE Realty Finance Management, LLC, regarding our assumption of CBF's management agreement.
- We have completed a preliminary review of CBRE Realty Finance and have performed limited due diligence. In addition to the resources of Arbor, we have assembled a team of advisors including JMP Securities and Skadden, Arps, Slate, Meagher & Flom LLP. In concert with our advisors, we are prepared to move expeditiously to conduct further due diligence, which would begin immediately and would be completed within ten business days.
- Arbor is highly interested in pursuing this transaction on an expeditedtimetable, which we believe is a significant benefit to your shareholders, andlooks forward to working with you to accomplish this objective. This Offer isnot, and is not intended to be, a binding commitment or agreement.
- We are prepared to start due diligence and to negotiate a definitive agreementstarting the morning of Monday, August 27, 2007. Due to the volatility of themarkets and recent events involving your company, time is of the essence tocomplete this transaction. Arbor's Board of Directors is aware of this Offer andfully supports it. We believe we can reach a definitive agreement and can closethe transaction rapidly. We would like to move forward with you on the proposedtransaction, and trust that you and your Board of Directors will find the termsof the Offer in the best interest of your shareholders. Because of thevolatility of the markets and the number of opportunities available to us, thisOffer will expire at the close of business on Friday, August 31, 2007. Yourprompt response to this important opportunity for your shareholders isrequested.
If you have any questions about this Offer, please contact me at (516) xxx-xxx or Kent Ledbetter (415) 835-xxxx) or Thomas Kilian (415) 835-xxx) at JMPSecurities.
Arbor Realty Trust, Inc.
Chief Executive Officer