Q: Hello 5i Team
I own European Residential REIT in a taxable account.
The REIT has previously announced it will sell all its remaining properties and essentially close down operations and delist from the public markets.
Current price is approximately $1.14 and the net asset value as of December 31, 2025 is approximately $1.44 (as per financial statements released).
How does this process occur? Do they essentially liquidate their portfolio, pay taxes and distribute the proceeds to unit holders (say $1.40 per unit to account for taxes and closing costs) and the trading price of the units goes to zero. This would result in a "capital loss" on the units and some form of taxable distribution (mix of capital gains, income and or return of capital).
Or does a private buyer make a take-over offer of say $1.35, take the units private and then internally deal with the closing down of operations.
Has there been other examples of companies / reits closing down operations?
Is this a potential arbitrage opportunity?
Thanks
I own European Residential REIT in a taxable account.
The REIT has previously announced it will sell all its remaining properties and essentially close down operations and delist from the public markets.
Current price is approximately $1.14 and the net asset value as of December 31, 2025 is approximately $1.44 (as per financial statements released).
How does this process occur? Do they essentially liquidate their portfolio, pay taxes and distribute the proceeds to unit holders (say $1.40 per unit to account for taxes and closing costs) and the trading price of the units goes to zero. This would result in a "capital loss" on the units and some form of taxable distribution (mix of capital gains, income and or return of capital).
Or does a private buyer make a take-over offer of say $1.35, take the units private and then internally deal with the closing down of operations.
Has there been other examples of companies / reits closing down operations?
Is this a potential arbitrage opportunity?
Thanks
5i Research Answer:
In a wind down, companies typically sell all their assets, pay taxes and lawyers and accountants, and give shareholders what is left. The distribution can be taxed differently, but is most often a return of capital. We may have missed one, but we do not have a recent example of a wind down. Arbitrage is difficult, because net asset value is not guaranteed, and uses many assumptions. Final value can vary widely from NAV.