O.C.’s Koll Co. Tries Hostile Bid for Texas Real Estate Holdings
Koll Co. is making a $13.2-million hostile bid for units of two Texas-based real estate limited partnerships--a bottom-fishing move that could pay off for the company if it can win over enough of the two funds’ 27,000 individual investors, most of them in California.
Koll has made a tender offer to buy 51% of the units in two Consolidated Capital Properties limited partnerships, which would give the Newport Beach developer control. Koll’s offers--$43.75 a unit for one partnership and $52.50 for the other--are 25% and 50% more, respectively, than offers made by ConCap Equities, the general partner of the two partnerships.
The units in the two partnerships were originally sold at $500 each in the early 1980s for a stake in about two dozen apartment buildings across the South and Southwest. But their values have plunged because of the real estate bust, and investors have not had a cash distribution in several years.
Koll, in trying to cash in as real estate values are lifting, has put pressure on ConCap to raise its offer or face the risk of being booted out, which Koll says it may do if its tender offer is successful. That sort of pressure, though frequently felt in corporate boardrooms, has rarely been borne on general partners, who manage limited partnerships for a fee but generally have strong independence and control.
“It’s a watershed event. It’s going to pave the way” for further competitive pressures on real estate limited partnerships, said Tom Frame of Paradigm Investment Corp., a Bay Area firm that manages partnerships, including the two ConCap funds.
Frame said Koll’s move may benefit the limited partners, but only if it spurs ConCap or another player to make higher offers. Frame and others who represent investors say that Koll’s bids are too low.
“We don’t think the Koll offer is adequate,” said C.E. Patterson, president of MacKenzie Patterson Inc., a Moraga, Calif., firm that owns between 1.5% and 2.5% of the units in each of the two limited partnerships on behalf of investors.
“The interest of the limited partners (is) being blown by the wayside because of the stampede to gobble up real estate at low prices,” Patterson said.
Koll officials did not return telephone calls Thursday seeking comment. In its offering papers, the company said it had no plans to liquidate the properties. According to the documents, Koll’s offers will expire Dec. 27.
Officials at ConCap also did not return calls. However, ConCap, in response to Koll’s bids, has extended its buyout offer, which was originally set to expire today.
