Tag Archives: estate-income

Summary On January 15, 2015, Bulldog Investors initiated a 6.01% active stake in the LMP Real Estate Income Fund. Sent a letter to LMP Real Estate Income shareholders highlighting management’s “dirty tricks” in fighting off Bulldog. On September 18, 2015 they increased their position to 16.33% (up from 15.32%). The gap between current prices and NAV equals 5.16%. On January 15, 2015, Bulldog Investors initiated a 6.01% active stake in the LMP Real Estate Income Fund (NYSE: RIT ). They state that the closed-end fund has traded at a double digit discount to NAV for over a year. As a result, shareholders should be given the opportunity to realize value at NAV through a self-tender offer, open-ending or liquidation. Bulldog Investors is a hedge fund known for its value-driven investment strategy, its activist investment campaigns and focus on closed-end mutual funds. They were recently recognized as one of the top investors in the world of activism. Phillip Goldstein (Bulldog Investors) has been very active against closed-end fund trading at discounts to NAV in the past. And they’ve had great success. Many of these closed-end funds are issued and the stock price falls well below the NAV of the actual holdings of the fund. Many of these funds issue dividends or distributions, similar to RIT’s distribution rate of 5.65%. Bulldog will simply buy at a significant discount to NAV and pressure management to close the gap. They will go into these closed-end funds that have significant discounts to NAV and push for management to close the gap between current price and NAV or liquidate the fund. In the interim, they collect a nice dividend or distribution. In the case of RIT, Bulldog asserts that the “persistent” discount is a problem that needs to be fixed immediately. And the management of RIT has had ample opportunity and time to fix the discount between current prices and NAV. Bulldog goes on to say that there is an inherent conflict of interest when they say: Legg Mason is clearly conflicted. A self-tender offer for RIT will result in Legg Mason receiving lower management fees while shareholders that tender will receive a higher price for their shares than they could get by selling them in the market. That is why Legg Mason has budgeted more than $100,000 of its own funds to persuade shareholders to vote against our proposal and to keep its friendly “independent” directors on the Board. Legg Mason knows that they are unlikely to bite the hand that feeds them. Things have gotten a little “chippy” of late with RIT’s management pushing back on some of Bulldog’s proposals. In a letter filed April 20, 2015, Phillip Goldstein says: As they say, liars cheat and cheaters lie. Regardless of what any shareholder thinks about the merits of our tender offer proposal, the actions described above should be troubling. They should cause shareholders to consider whether management of RIT can be trusted to do the right thing when its own interests conflict with the interests of shareholders. BOTTOM LINE The company trades at a 5.16% discount from its NAV. The discount to NAV is not as large as we would like in this case. Seeing as most tender offers are ~100% of NAV, we don’t see an overly attractive investment at current levels unless you believed in the underlying closed-end fund. We do not see an adequate margin of safety right now to justify investment. We would pass on this right now, but keep it on our watch list for any opening of the gap between current prices and NAV. Notable Shareholders: Mariner Investment Group | Bulldog Investors Please share your thoughts in the comments section below as I learn just as much from you as you do from me. It can be a timely endeavor, but I answer all of your comments and questions myself. Your patience and understanding is greatly appreciated. I will get to your comments as soon as possible. Source of above figures and quotes: Morningstar , Letter to Shareholders , SEC Filing