Risks Mount as Lederer Seeks Control of ECF with Undervalued Takeover Offer

Background and Offer Overview

Elanor Commercial Property Fund (ASX – ECF) has formally responded to the unsolicited off-market takeover bid from LDR Assets Pty Ltd, trustee for the Lederer Assets Trust, offering $0.70 cash per stapled security. The offer, declared unconditional and open until 13 October 2025, seeks to acquire all ECF securities not already owned by Lederer, which currently holds approximately 31.6% of the fund.

In response, ECF’s Independent Board Committee (IBC), comprising independent directors Ian Mackie and Kathy Ostin, has unanimously recommended that securityholders reject the offer. This recommendation is supported by an Independent Expert’s report from Kroll Australia Pty Ltd, which concludes that the offer is neither fair nor reasonable.

Valuation and Fairness Concerns

Kroll’s detailed valuation analysis places the fair value of ECF securities between $0.73 and $0.75 per security, exceeding Lederer’s offer price. The expert report highlights that the offer provides only a 1.9% premium to ECF’s net tangible asset backing (NTA) as at 30 June 2025, which is materially below premiums typically observed in comparable ASX-listed real estate investment trust (REIT) transactions. Moreover, the offer fails to adequately compensate securityholders for the stamp duty savings Lederer would realize by acquiring securities rather than direct property assets, estimated at approximately $17 million or 4.2 cents per security.

The offer also lacks an appropriate control premium, with traditional Australian market takeovers often exceeding 15% premiums. Lederer’s bid reflects only a modest premium of 5.3% to the last close price before the offer announcement, which the IBC and expert consider insufficient given Lederer’s stated intention to replace both the responsible entity and manager of ECF if control is achieved.

ECF’s Market Position and Growth Prospects

ECF has demonstrated resilience and outperformance relative to comparable office-focused A-REITs since its 2019 IPO, with a total unitholder return outperforming the ASX A-REIT Office Index by 18.2%. The fund’s portfolio is heavily weighted towards high-quality commercial office assets in Queensland (52%), with no exposure to softer Victorian markets, positioning it well to benefit from an improving commercial property cycle.

Market commentators and data indicate that Australian office property valuations are at or near cyclical lows, with signs of stabilizing capitalisation rates and improving leasing activity, particularly in Brisbane and other key markets where ECF holds assets. The IBC views Lederer’s offer as opportunistic, coming at a time when the commercial office market is showing signs of recovery, and securityholders could participate in potential capital gains and distribution growth.

Risks and Strategic Implications

Accepting the offer would mean securityholders forgo future distribution entitlements, with ECF forecasting a FY26 distribution yield of 9.3% based on the offer price. The offer price will also be reduced by any distributions declared after 4 August 2025, including the recently declared September distribution.

The IBC also warns that accepting the offer precludes securityholders from accepting any superior proposal should one emerge, although the likelihood of a competing bid is considered low given Lederer’s significant stake and blocking power.

Further, Lederer’s intentions to replace the responsible entity with Evolution Trustees Limited and the manager with LDR Capital Pty Ltd raise concerns. LDR Capital, a new real estate funds management platform affiliated with Lederer, lacks experience managing ASX-listed REITs. Additionally, key proposed executives at LDR Capital are recent Elanor employees potentially subject to non-compete clauses, which could complicate management transitions.

Legal and Contractual Considerations

The offer and potential change of control could trigger termination rights under ECF’s management agreements, potentially resulting in termination fees estimated at around $6 million payable to the current manager. Financing agreements also contain change of control provisions that may be triggered if Lederer gains control without lender consent, possibly leading to acceleration of debt obligations.

ECF notes that Lederer has not disclosed intentions to terminate certain key leases or engage with tenants and financiers regarding trustee replacements, adding further uncertainty to the post-offer operational landscape.

Securityholder Guidance and Next Steps

Securityholders are advised to carefully consider the Target’s Statement, the Independent Expert’s Report, and the Replacement Bidder’s Statement. The IBC encourages securityholders to assess their individual risk profiles, tax positions, and investment objectives, and to seek professional financial, legal, and tax advice before deciding whether to accept or reject the offer.

To reject the offer, securityholders need only take no action. Those wishing to accept must do so for all their securities, noting that acceptance is irrevocable and may involve brokerage fees if securities are held on the CHESS subregister.