Condor Hospitality plans exchange offer for series A, B preferreds

By Angela McDaniels

Tacoma, Wash., July 23 – Condor Hospitality Trust, Inc. announced plans for an exchange offer for its 8% series A cumulative preferred stock and 10% series B cumulative preferreds.

The company plans to offer up to 11,664,615 shares of common stock in exchange for the preferreds at a designated value of $2.3254 per common share, according to an 8-K filing with the Securities and Exchange Commission.

The share value is equal to the average weighted sale prices of the common stock for the three trading days preceding July 15, the date the company announced agreements to purchase three new hotels.

The company plans to offer 5.38 common shares for each series A preferred, representing a value of $12.502 for each series A preferred. This amount is equal to the $10 liquidation value, a 10% premium and the accrued dividends prorated to Sept. 15.

The company plans to offer 13.71 common shares for each series B preferred, representing a value of $31.875 for each series B preferred. This amount is equal to the $25 liquidation value, a 10% premium and the accrued dividends plus compounded interest prorated to Sept. 15.

A condition to the acceptance of the exchange offer will be that the holders accepting the exchange offer will waive their rights to unpaid dividends.

In addition, the company plans to condition the offer on the receipt of tenders for at least 80% of each of the series A preferreds and series B preferreds.

As of March 31, there were 803,270 series A preferreds outstanding with a total liquidation preference of $8,032,700 outstanding and 332,500 series B preferreds outstanding with a total liquidation preference of $8,312,500.

Shareholder agreement

On July 23, Real Estate Strategies LP agreed that if the 80% minimum acceptance condition is met, then it will convert a minimum of an equivalent percentage of series C convertible preferred stock into common stock, subject to Real Estate Strategies retaining a minimum beneficial ownership of 1,000 shares of series C convertible preferred stock.

If the series A preferreds and series B preferreds are each exchanged at 80% or above but at different percentages, the percent of conversion of the series C convertible preferreds above 80% will be the weighted average (based on liquidation value) of the difference in the exchanged percentages of the series A preferreds and series B preferreds.

Real Estate Strategies also agreed that accrued dividends, and compounded interest, prorated to Sept. 15 on series C convertible preferreds that are converted into common stock will be waived and Real Estate Strategies will receive in connection with the conversion additional shares of common stock equal to the accrued dividends and compounded interest at a value per common share equal to $2.3254, the same per share value to be used in the exchange offer.

The company will not issue shares to Real Estate Strategies in connection with the conversion of the series C convertible preferreds as a premium except in the event the common shares trade lower than $2.00 just prior to the end of the exchange offer period. In that case, the company will, if approved by its board of directors, issue additional common shares to Real Estate Strategies equal to 10% of the liquidation value of the series C convertible preferreds so converted, with the common shares valued at $2.3254 each.

The agreement is conditional on the completion of the exchange offer and amendments to the company’s charter, including the removal of the limitation on Real Estate Strategies owning more than 34% of the issued and outstanding voting stock. Real Estate Strategies’ voting power, however, will not exceed 49% to otherwise avoid consolidation of the company’s financial results on IRSA Inversiones y Representaciones SA’s consolidated financial statements. ISRA is the entity that indirectly controls Real Estate Strategies.

Shareholder approval is needed on various matters related to the exchange offer and the agreement with Real Estate Strategies and will be sought at a special meeting.

Condor, formerly Supertel Hospitality Inc., is a real estate investment trust based in Norfolk, Neb.

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