NexPoint Grills RAIT Financial Trust (NYSE:RAS)’s Board, Reiterates its Merger Offer

A latest SEC filing showed that NexPoint Real Estate Strategies Fund, an affiliate of Highland Capital Management, L.P. and Nexbank Capital, Inc,  wrote yet another letter to RAIT Financial Trust (NYSE:RAS) board of directors as a follow up to its November letter in which the fund had proposed to merge RAIT Financial Trust (NYSE:RAS) into a new company that would be externally managed by Nexpoint.

Nexpoint Real Estate Advisors is ready to invest up to $30 million in the entity. In the latest letter, NexPoint Real Estate Strategies Fund said it is disappointed with RAIT board’s lack of engagement and response. The board has also failed to explain its plan to increase shareholder value, as it had promised to do so in response of NexPoint’s previous offers. The letter sought the attention of RAIT board’s chairman, Michael J. Malter, and said the senior board members haven’t yet solved the problem of RAIT’s increasing general and administrative expense (G&A). The letter also criticized the recently approved document of policies and procedures by RAIT’s board, and claimed it was designed to “disenfranchise shareholders”. NexPoint Real Estate Strategies Fund thinks that RAIT’s “chronic underperformance” is not debatable under any circumstance, and it is “surprised” to see independent board members continuously approving board’s unrealistic plans and poor performance.

RAIT Financial Trust (NYSE:RAS)
Source: https://www.sec.gov/Archives/edgar/data/

The letter also focused RAIT’s tumbling returns in a graphical form (above), and mentioned Resource Capital Corp. (NYSE:RSO)’s efforts to create shareholders value as a comparative case.

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NexPoint Makes an Offer Again

NexPoint Real Estate Strategies Fund yet again reiterated its offer for a mutually beneficial transaction, and said it still believes the company can perform well under its proposed structure. Apart from externally managing RAIT and merging it into a new entity, NexPoint wants a two-year management agreement, renewable by the board for the same period, but terminable within 60 days. The investment fund also proposed an annual asset management fee that is equal to 1.5% on common and preferred stockholders’ equity. The fund also wants to limit the total G&A and compensation expenses to about $25 million, versus the current expenses of $49 million. NexPoint one again pledged to invest $30 million in the new company, in exchange for a proportionate ownership stake and board representation.

RAIT Financial Trust(NYSE:RAS) is up about  13% year-to-date. James Dondero’s Highland Capital Management owns about 6.1% of the company’s total float. Last month, in response to Highland’s position disclosure and merger proposal, RAIT Financial Trust (NYSE:RAS) issued a statement and said its board of trustees and management are confident about their own strategy to boost shareholder value. In the third quarter, the Pennsylvania, Philadelphia-based real estate trust reported GAAP per share loss of $0.00, compared to a per share loss of $0.07 recorded in the same quarter last year.