CIM Commercial Trust said it is considering a potential recapitalization in order to improve the trading volume and liquidity of its common stock, among other things.
If the recapitalization occurs, CIM Group intends to dissolve CIM REIT, which holds about 95% of CIM Commercial's outstanding common stock, and distribute any CIM Commercial common stock it then holds to CIM REIT's 27 institutional partners.
Certain CIM Commercial officers and directors have shown willingness to reinvest their aggregate pro rata share of all net proceeds received by CIM Group and its affiliated entities from the return of capital event, estimated to be about $11 million, into newly issued common shares. Following the potential recapitalization, CIM Commercial officers and directors would own approximately 6% of the company.
The office real estate investment trust also said it aims to monetize its 10 stabilized assets totaling 2.7 million square feet, across Oakland, Calif; San Francisco; and Washington, D.C. The company plans to use the net proceeds from asset sales and cash on hand to return capital to its common shareholders for consideration approximating its net asset value, which was estimated at roughly $23 per share, as of June 30.
The company noted that it would maintain "attractive development opportunities" in Oakland; Austin, Texas; Washington, D.C.; and Sacramento, Calif.
The proposed recapitalization would also see CIM Commercial's public float increase to about 94% from 4%, which is expected to improve trading volume and make the company's common stock eligible for inclusion in several indexes.
Following the potential recapitalization, CIM Commercial would have total net assets at a fair value of approximately $607 million, with operating properties in Los Angeles, San Francisco, Sacramento and Austin. It would also have total in-place rents on remaining office properties "well below market" and roughly $592 million in real assets at fair value.
The company said it would also continue to target a capital structure comprising 45% common equity and will re-evaluate its common stock dividend policy after the potential recapitalization.
In connection with the potential recapitalization, CIM Commercial is conducting an offer to exchange each outstanding share of series L preferred stock for newly issued shares of its common stock or 1 newly issued share of its series M preferred stock, at the option of the holder.
The company, however, noted that it does not plan to launch the offer, and holders of series L preferred stock will be unable to participate in the offer, unless and until it consummates the potential recapitalization and determines the purchase price.