|
1
|
NAMES
OF REPORTING PERSONS:
I.R.S.
IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
Third
Avenue Management LLC (01-0690900)
|
|
2
|
CHECK
THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE
INSTRUCTIONS):
(a)
o
(b)
o
|
|
3
|
SEC
USE ONLY:
|
|
4
|
SOURCE
OF FUNDS (SEE INSTRUCTIONS):
WC
|
|
5
|
CHECK
IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) or
2(e):
o
|
|
6
|
CITIZENSHIP
OR PLACE OF ORGANIZATION:
Delaware
|
|
NUMBER
OF SHARES
BENEFI-
CIALLY
OWNED BY EACH REPORTING
PERSON WITH
|
7
|
SOLE
VOTING POWER:
2,331,200
shares
|
|
8
|
SHARED
VOTING POWER:
0
|
|
9
|
SOLE
DISPOSITIVE POWER:
2,333,700
shares
|
|
10
|
SHARED
DISPOSITIVE POWER:
0
|
|
11
|
AGGREGATE
AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
2,333,700
shares
|
|
12
|
CHECK
IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
o
(SEE
INSTRUCTIONS):
|
|
13
|
PERCENT
OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
9.07
%
|
|
14
|
TYPE
OF REPORTING PERSON (SEE INSTRUCTIONS):
IA
|
Note:
All
shares identified above are the Issuer’s common shares, and the percentage in
Row 13 above relates to such common shares.
This
statement on Schedule 13D relates to the shares of common stock, par value
$0.001 per share (the “Common Shares”), of Quadra Realty Trust, Inc., a Maryland
corporation (the “Issuer”), with principal executive offices at 622 Third
Avenue, 30
th
Floor, New York,
New York, 10017.
Item 2.
Identity and
Background
(a) NAME
This
statement is filed by Third Avenue Management LLC (“TAM”). The
executive officers of TAM are:
|
·
|
David
Barse: Chief Executive Officer of
TAM.
|
|
·
|
Vincent
J. Dugan: Chief Financial Officer of
TAM.
|
|
·
|
W.
James Hall: General Counsel and Secretary of
TAM.
|
(b) RESIDENCE
The
address of the principal business and principal office of TAM and its executive
officers is 622 Third Avenue, 32nd Floor, New York, NY 10017.
(c) PRESENT
PRINCIPAL OCCUPATION OR EMPLOYMENT AND THE NAME, PRINCIPAL BUSINESS AND ADDRESS
OF ANY CORPORATION OR OTHER ORGANIZATION IN WHICH SUCH EMPLOYMENT IS
CONDUCTED
The
principal business of TAM, a registered investment advisor under
Section 203 of the Investment Advisors Act of 1940, is to invest funds on a
discretionary basis on behalf of investment companies registered under the
Investment Company Act of 1940, sub-advised accounts and individually managed
separate accounts. The principal occupation of each of its executive
officers is to act in the capacity listed above.
(d) CRIMINAL
CONVICTIONS
Neither
TAM, nor, to the best of its knowledge, any of its executive officers has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) CIVIL
PROCEEDINGS
Neither
TAM, nor, to the best of its knowledge, any of its executive officers has,
during the last five years, been a party to a civil proceeding of a judicial
or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such
laws.
(f) CITIZENSHIP
TAM
is a
limited liability company organized under the laws of the State of
Delaware. Each of its executive officers is a citizen of the United
States.
TAM
is a
registered investment adviser that acts as direct adviser to certain investment
companies and other funds, as a sub-adviser to certain other institutions,
and
as an adviser to separately managed accounts. Certain portfolios of
these funds have used working capital to purchase Common Shares upon the orders
of TAM acting as adviser or sub-adviser.
Advised
Funds: (i) Third Avenue Real Estate Value Fund, an investment company
registered under the Investment Company Act of 1940, has expended $32,543,400.61
to acquire 2,235,800 Common Shares and various separately managed accounts
for
which TAM acts as investment adviser have expended a total of $1,459,372.41
to
acquire 97,900 Common Shares.
TAM
plans
to use the available capital of these funds and accounts in any future purchase
of Common Shares.
TAM
previously acquired, on behalf of certain investment advisory clients of TAM,
Common Shares for investment purposes. TAM currently exercises
control or direction over approximately 9.07% of the Common
Shares. TAM’s purchases of Common Shares were made in the ordinary
course of business. The Common Shares over which TAM currently
exercises control or direction are beneficially owned by certain investment
advisory clients of TAM on whose behalf TAM has discretionary investment
authority.
On
January 29, 2008, the Issuer and Hypo Real Estate Capital Corporation (“HRECC”),
a wholly-owned United States subsidiary of Hypo Real Estate Bank International
AG, announced the execution of an Agreement and Plan of Merger dated as of
January 29, 2008 (the “Merger Agreement”), by and among the Issuer, HRECC and
HRECC Sub Inc., a Maryland corporation and a wholly-owned subsidiary of HRECC
(“Merger Sub”). HRECC is the Issuer’s manager and, according to the
Issuer’s public filings, beneficially owns approximately 34.7% of the Common
Shares. The Merger Agreement provides for a tender offer for the outstanding
Common Shares not owned by HRECC followed by the merger of the Issuer into
Merger Sub (the “Transaction”).
TAM
does
not believe the Transaction is in the best interests of the Issuer’s
shareholders, and intends to take action to oppose the Transaction including,
but not limited to, making public statements in opposition to the Transaction
and not tendering its shares in connection with the tender
offer. Accordingly, on February 1, 2008, TAM published an open letter
to the Issuer's Board of Directors stating its opposition to the
Transaction. The open letter is attached hereto as Exhibit
A.
In
addition, TAM may consider the feasibility and advisability of various
alternative courses of action with respect to its investment in the Issuer
including, without limitation, (i) to hold the Common Shares as a passive
investor or as an active investor (including as a member of a “group” with other
beneficial owners of the Issuer’s securities), (ii) to acquire beneficial
ownership of additional securities of the Issuer in the open market, in
privately negotiated transactions or otherwise, or (iii) to dispose of, or
cause
to be disposed, any or all of the Common Shares held by it at any
time.
In
connection with its consideration of various alternatives, TAM may seek to
meet
with the board of directors and/or members of senior management or communicate
publicly or privately with other stockholders or third parties to indicate
its
views on issues relating to the strategic direction undertaken by the Issuer
and
other matters of interest to stockholders generally. As part of any
such discussions, TAM may suggest changes in, or take positions relating to,
the
strategic direction of the Issuer as a means of enhancing shareholder
value. Such suggestions or positions may be related to one or more of
the transactions specified in clauses (a) through (j) of Item 4 of the Schedule
13D.
Except
as
set forth above, TAM has no present plans or intentions which would result
in or
relate to any of the transactions described in subparagraphs (b) through (j)
of
Item 4 of Schedule 13D.
Item 5.
Interest in Securities
of the Issuer
(a-b)
The
aggregate number and percentage of Common Shares to which this Schedule 13D
relates is 2,333,700 Common Shares, constituting approximately 9.07% of the
25,723,780 Common Shares outstanding.
A.
Third
Avenue Real Estate
Value Fund
(a) Amount
beneficially owned: 2,235,800 Common Shares.
(b) Percent of class: 8.69
%
(c) Number of Common Shares
as to which TAM has:
(i) Sole power to vote or
direct the vote: 2,235,800
(ii) Shared power to vote
or direct the vote: 0
(iii) Sole power to dispose
or direct the disposition: 2,235,800
(iv) Shared power to
dispose or direct the disposition: 0
B.
Third
Avenue Management
Separately Managed Accounts
(a) Amount
beneficially owned: 97,900 Common Shares.
(b) Percent of class: 0.38
%
(c) Number of Common Shares
as to which TAM has:
(i) Sole power to vote or
direct the vote: 95,400
(ii) Shared power to vote
or direct the vote: 0
(iii) Sole power to dispose
or direct the disposition: 97,900
(iv) Shared power to
dispose or direct the disposition: 0
(c) A
list of the transactions in the Issuer’s Common Shares that were effected by TAM
during the past sixty days is attached as
Schedule A
hereto and
is incorporated herein by reference. All of the transactions listed
on
Schedule A
were effected in the open market.
(d) No
other person is known to have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, such Common Shares
other than the funds and accounts identified above.
(e) Not
applicable.
Except
as
otherwise set forth herein, TAM does not have any contract, arrangement,
understanding or relationship with any person with respect to any securities
of
the Issuer.
The
following documents are filed as exhibits:
Schedule
A: List of the transactions in the Issuer’s Common Shares that were
effected by TAM during the past sixty days.
Exhibit
A: Open Letter to Board of Directors
SIGNATURE
After
reasonable inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and
correct.
|
|
Dated:
February 1, 2008
THIRD
AVENUE MANAGEMENT LLC
|
|
|
By:
|
/s/
W.
James Hall
|
|
|
Name:
|
W.
James Hall
|
|
|
Title:
|
General
Counsel
|
|
|
Fund
|
Nature
of Trade (Purchase or
Sell)
|
Transaction
Date
|
Quantity
of
Shares
|
Price
per Share or
Unit
|
|
|
|
Third
Avenue Management Separately Managed Accounts
|
Sell
|
12/12/07
|
6,400
|
7.61
|
|
|
|
Third
Avenue Management Separately Managed Accounts
|
Sell
|
1/24/08
|
50,000
|
8.17
|
|
Exhibit
A
February
1, 2008
Mr.
Juergen Fenk, Director
Mr.
Robert H. Mundheim, Chairman of the Board
Mr.
Robert R. Glauber, Director
Mr.
Thomas F. McDevitt, Director
Ms.
Bettina von Oesterreich, Director
Mr.
Ronald M. Stuart, Director
Mr.
Lawrence A. Weinbach, Director
Mr.
Evan
F. Denner, President, CEO and Director
c/o
Quadra Realty Trust, Inc.
622
Third
Avenue, 30
th
Floor
New
York,
NY 10017
Dear
Directors of Quadra Realty Trust, Inc.,
Third
Avenue Management LLC (“TAM”) is the investment advisor for the Third Avenue
Real Estate Value Fund and various investment accounts that collectively
hold
approximately 2.33 million shares of Quadra Realty Trust, Inc. (“Quadra”) common
stock which, to the best of our knowledge, represents approximately 9.07%
of the
outstanding common shares.
TAM
was
quite surprised by Quadra’s January 29, 2008 announcement that it has entered
into a merger agreement with Hypo Real Estate Capital Corporation (“HRECC”)
contemplating that HRECC will acquire the 65.3% of Quadra’s outstanding common
shares that it does not currently own at a price of $10.6506 per
share. The fact that the consideration to be paid by HRECC (excluding
the $0.3494 dividend, which will be funded by Quadra) represents a 33.8%
premium
over the January 28, 2008 closing price ($7.96) is of little comfort to
us. The acquisition price represents a
24.6%
discount to the $14.12 book value per share
as of September 30,
2007.
TAM
suggests that the best course of action, as opposed to the proposed transaction,
may be a formal plan of liquidation which would consist of an orderly sale
of
the loan portfolio followed by a full liquidation and distribution to
shareholders. It seems obvious that even in the worst case scenario,
the entire loan portfolio could be sold for an amount that would generate
net
proceeds of greater than $10.65 per share. If the entire portfolio
cannot be sold quickly, the loan maturities are relatively short-term,
and
liquidating distributions could be made to shareholders as proceeds are
received
from loan payoffs.
The
$10.65 per share acquisition price implies a “fair value” for Quadra’s loan
portfolio that is approximately $89 million below the carrying value of
$653.7
million. While TAM certainly understands that credit spreads on
commercial mortgages, mezzanine loans and bridge loans have widened since
Quadra
completed its initial public offering in February 2007, it is inconceivable
to
us that spreads have widened to the point where Quadra’s entire portfolio would
be valued on a mark-to-market basis at nearly a 14% discount to the carrying
value. In fact, as of September 30, 2007 (per Quadra’s Form 10-Q
filing), the carrying value of Quadra’s twelve commercial construction loans
($312.3 million) was not impaired because “credit spreads on construction loans
on larger high end projects to established real estate developers remain
stable.” The 10-Q also stated that Quadra’s “Manager continues to
syndicate construction loans into the marketplace at similar
spreads.” The only fair value adjustment noted in the 10-Q related to
Quadra’s six mezzanine loans, two bridge loans, and five whole
loans. The total fair value adjustment was $5.68 million on $344.7
million of carrying value (equivalent to approximately $0.22 per common
share). Additionally, according to the 10-Q, at September 30,
2007, the portfolio continued to perform as underwritten and there were
no
defaults or material changes in the credit quality of any individual
asset.
TAM
believes that the proposed transaction with HRECC is not in the best interests
of Quadra’s shareholders. It is of particular note to us that HRECC
is Quadra’s manager, which, according to public filings, owns approximately
34.7% of Quadra’s outstanding common stock. It seems totally
unconscionable for Quadra to give HRECC, its manager, the opportunity to
acquire
a portfolio of performing loans at nearly a 14% discount to carrying value,
especially considering that only two months prior, Quadra filed its 10-Q
and
clearly stated that HRECC continued to syndicate loans in the marketplace
at
similar spreads. Moreover, Quadra has given HRECC the protections of
a “Break-Up Fee” and a “Top-Up Option” (to allow the completion of the
transaction by way of a “short-form” merger, which will not require a vote of
Quadra’s shareholders). Every aspect of this transaction, from the
tender offer and merger price to the deal protections given to HRECC, appears
to
be heavily skewed to the benefit of HRECC at the expense of Quadra’s other
shareholders.
TAM
is
dismayed that Quadra chose this form of transaction rather then the myriad
of
other options that are currently available. Specifically, before
approving a merger with Quadra’s manager that includes deal protections, the
board of directors could have considered, among other things, an auction,
sale
to strategic buyers, or a liquidation as suggested above. The board
of directors’ intention to “seek superior proposals” for 30 days (as stated in
the January 29, 2008 press release) seems like a half-hearted effort that
is
doomed to fail due to Quadra’s structure as a REIT with an external
manager.
For
all
of the reasons expressed in this letter, TAM opposes the proposed
transaction. TAM intends to withhold tendering its shares in the
proposed tender offer and will encourage other Quadra shareholders to do
the
same. In addition, TAM urges Quadra’s board of directors to reconsider your
approval of the proposed transaction with HRECC and to consider an alternate
plan that will maximize value for
ALL
shareholders.
Thank
you
for your attention to this very important matter. We look forward to
seeing the board of directors acting in the best interests of all Quadra
shareholders.
Very
truly yours,
Michael
H. Winer
Senior
Portfolio Manager