Major Private Equity Firm Buys Large Stake In Our Largest Mall Position, Macerich
Major Private Equity Firm Buys Large Stake in Our Largest Mall Position, Macerich
A week ago, we learnt in a 13-D filling by Macerich (MAC) that an institutional investor had bought a 6.8% stake in the company.
This institutional investor used a trust structure in an attempt to hide its identity. The trust is called “Passive Investment Trust”.
However, after some more digging, we found that MAC committed a mistake that actually reveals the name of the investment group. They forgot to change the name of the file, which includes the word “Ashkenazy”:
It appears very likely that the investment group behind “Passive Investment Trust” is Ashkenazy Acquisitions, which is a major private equity real estate investment firm with over $12 billion of assets under management. They specialize in highly urban core office and retail properties, such as those owned by MAC:
You can visit their website by clicking here.
We estimate that MAC currently trades at an 85% discount to NAV and therefore, it is not surprising that Ashkenazy prefers to buy shares of MAC than private properties.
What does this mean for MAC shareholders?
It reaffirms that MAC is deeply undervalued and has significant upside potential in the recovery. The fact that private equity investors are circling MAC is a very clear signal.
MAC could triple from here and still remain deeply undervalued relative to our estimate of fair value.
Why did they try to hide their identity?
Perhaps they want to accumulate more shares and do not want to move the market.
If the market realized that a major private equity firm was buying shares of MAC, maybe it would have jumped higher.
The "Passive Investment Trust" front allows them to accumulate without greatly impacting the market sentiment.
What is their plan with this investment?
The name of the trust clearly states that they will be “passive” investors. They also noted the following in a press release: “Passive Investment is supportive of and encouraged by MAC's recent engagement with management and the board of directors of MAC and expect to continue to engage with management and the Board.”
Therefore, we do not expect a liquidation or take-over anytime soon. However, they also noted that they may increase their position depending on market conditions. Eventually, these private equity investors will want to see returns on their investment and they will certainly push for alternative strategies if needed.
It is nice to know that a strong private equity group is now backing MAC. If they wanted to, they could probably take the whole firm private and pay a substantial premium of the current share price.
MAC is today trading at $7.50 per share and we estimate the NAV at $50-60 per share. As such, it is the cheapest holding of our entire Portfolio and based on this new piece of information, we expect to buy more shares in the near term. You can read our full investment thesis by clicking the below link:
Bill Ackman And GGP: Important Lessons From One Of The Greatest REIT Investments In History
Santa Monica Place, highly urban Class A mall owned by MAC:
Finally, is this private information?
It may seem like it, but it is not. MAC itself publicly released this information. Whether it was intentional or not shouldn’t be our concern. We did our investigation and were able to find this important piece of information from public fillings. Anyone else can find it if they do their homework.
We expect to buy more shares before others take notice.
Good investing from your HYL Research Team,
Jussi Askola
