American Realty Investors Inc Arbitrage Play with TCI Buyout

TCI owns many residential and commercial real estate buildings that they have acquired many years ago and have renovated/leased out.

TCI just received a buyout offer of 383 million at $44.40 per share from Brixton capital.

ARL is entitled to the 300m payout for its 78.4% of the proceeds.

ARL is currently trading at 217m market cap meaning there is a 38% upside once the deal closes. (assuming offer does not increase and excluding ARL equity)

This does not factor in if Brixton increases their offer which I fully expect as Brixton would not lead with their highest offer.

TCI's assets have greatly appreciated from their cost as a result of inflation and increased real estate prices. Just look at their recent commercial building sale in August. TCI sold 600 Las Colinas commercial building after acquiring it 10 years ago at 42.2m for 74.5m. (75% increase) Most of TCI's assets have appreciated 50-75% over the past decade while its stock has remained fairly flat.

TCI's real estate at cost amounts to 431 million and their fair market value is closer to 650m.

This alone would make TCI's share price worth around 70$ when factoring in TCI's equity + real estate at FMV.

Brixton is tendering this offer for TCI as they realize the true value of real estate TCI is holding. I expect Brixton to increase their offer from 44.40$ up to as high as 55$ or 475m buyout which would still be undervaluing TCI's assets.

This does not factor in ARL's other joint ventures and property outside of TCI.

ARL has 30m of equity on the books outside of TCI. (equivalent of 2$ a share)

ARL Fair Value (383M buyout) =((383*.784)+30M)/ 16.15M shares = $20.45$ (47% upside)

ARL Fair Value (475M Buyout) =((475*.784)+30M)/ 16.15M shares = $24.92 (80% upside)

ARL has a 1.48m float so once people figure out this it will run to 18-19$ fast.

PT: 20$ at the minimum, may run higher once we get more press releases about buyout negotiations.