Vertical Capital Income Fund
On January 22, 2019, Vertical Capital Income Fund (Vertical Capital) filed a definitive proxy in which the board of directors (the Board) is seeking shareholder approval of the elimination of Vertical Capital’s fundamental policy of making quarterly repurchase offers. As an interval fund, Vertical Capital is required to make periodic repurchase offers of at least 5% of outstanding shares. This proposal, if approved, would convert Vertical Capital from an interval fund to a closed-end fund, which does not require periodic liquidity from the issuer.
The Board also announced that it is contemplating a listing of the shares on the NYSE. If shareholders do not approve the elimination of the fundamental policy, the Board will not list Vertical Capital’s shares on the NYSE or any other exchange. Vertical Capital has noted that the elimination of the repurchase policy will also allow the fund to hold less cash to meet portfolio redemption requests, allowing the Fund to invest more assets into its investment portfolio, eliminating a certain amount of cash drag. Cash as a percentage of total assets was approximately 5.2% as of the most recent reporting period. Vertical Capital also maintains liquidity through a line of credit of $35 million. Vertical Capital has had significant demand from shareholders for repurchases, with 37% of outstanding shareholders tendering their shares for redemption in the most recent repurchase offer reported in the most recent annual report. The Board estimates that if shareholders approve the elimination of the fundamental policy, a listing on the NYSE could occur in late March 2019.
The Board also noted that the listing would provide shareholder liquidity and in the short-term the shares may trade at “a substantial discount to NAV.” The Board also cautioned that in the long-term shares may trade at a discount to NAV as is typical with many exchange-traded closed-end funds. The Board also anticipates cost savings in the conversion to a closed-end structure, including the elimination of distribution and servicing fees, and reduced transfer agency fees among other expense reduction, which are estimated to be 0.25% to 0.50% per year.
Shareholder votes are due by a special meeting to take place on March 8, 2019.
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Strategic Storage Growth Trust, Inc.
On January 18, 2019, Strategic Storage Growth Trust, Inc. (SSGT) announced that its shareholders had approved the merger with and into Strategic Storage Trust II, Inc. (SST II). SSGT shareholders received $12.00 in cash for each share of common stock in merger consideration totaling approximately $350 million. SSGT reported an estimated NAV per share of $11.58 as of December 31, 2017. SST II assumed the liabilities of SSGT in connection with the merger and increased its portfolio with 29 self-storage facilities to 111 operating self-storage facilities in 17 states and Ontario, Canada. Note that SST II has historically focused on stabilized properties and the SSGT acquisitions adds growth-oriented properties to SST II’s portfolio.