Highlands REIT Bought 18.7% of Its Shares at $0.20. Its Own Offer Said That Price Was Stale

A REIT that has been winding down for ten years

Highlands was spun out of InvenTrust (the former Inland American) in April 2016 with the assets InvenTrust did not want: some multifamily, some retail, some office, unimproved land and one correctional facility in Hudson, Colorado. The FY2025 10-K states how long it sat empty, and states it exactly: "Our Hudson correctional facility has been vacant since January 2020. Correctional facilities can remain vacant for many years." The 10-Q still describes the strategy as selling "non-core" properties over time on a timeline that "cannot be made." The estimated NAV has gone from $0.31 to $0.29 in a year. The stock does not trade on an exchange; in the second quarter, per the Stanger Report, 1.84 million units changed hands on the secondary market at 4 to 14 cents.

That is the company that, on July 9, signed the most valuable lease in its history, and seven weeks later offered to buy back a sixth of itself.

The lease, clause by clause

Read the last row twice. $958,333 a month becomes $20,833 a month if the tenant loses one contract. The lease does not say which contract or with whom. It does not need to; the day it was signed, the Colorado Sun, the Denver Gazette and Denver7 reported that ICE had awarded GEO a five-year contract worth up to $528.6 million to reopen the building as the Big Horn Contract Detention Center, up to 1,188 detainees. We cite that from the press, not from the filing, because the filing is silent on it.

What it means for a Highlands holder is arithmetic. $11.5 million a year is a large number for this company: net investment properties are carried at $279.1 million in total, so the Hudson rent alone is a 4.1% yield on the whole portfolio's book value, from one building that produced nothing for a decade. And all of it depends on a federal contract the REIT is not a party to, cannot see, and whose termination would cut the rent by 97.8%.

The tender, and the three prices around it

The tender price is 31% below NAV. It is also 1.4x to 5x what the secondary market has been paying. Both facts are true, and which one matters depends on which side of the offer you are on.

Those who tendered got more than the market had been offering and less than the company says the shares are worth, in cash, within weeks. The priority rules (odd lots first, then pro rata) were written for an oversubscribed offer, and the offer was oversubscribed, by 10,380,970.82 shares. But because that excess sat inside the 2% top-up the company had reserved for itself, it simply bought all 135,380,970.82 shares and nobody was pro-rated. In 2023 the company ran a Dutch-auction tender on the same logic.

Those who stayed now own a company that spent $27.1 million of the $44.5 million of cash it reported at June 30 buying 18.7% of its own shares at 69% of NAV, which is accretive to the shares that remain. The directors and officers, the September 8-K noted, "do not intend to tender." That was a signal about which side they thought was the better one, and they kept their shares.

What funds it is the question the two filings answer together. Cash went from $19.5 million at December 31 to $44.5 million at June 30; the tender was sized at $25.0 million and closed at $27.1 million. The lease starts paying in December.

The company's own offer document says the $0.29 is stale

This is the sentence that decides whether $0.20 is a fair price, and Highlands wrote it itself. On page after page the Offer to Purchase compares the $0.20 to the $0.29 estimated per-share value struck as of March 31, 2026. Then, in the section describing the Hudson lease, it says this:

"The Hudson Lease was entered into after the date as of which the Company's most recent estimated per Share value was determined and was not reflected in the estimated per Share value of $0.29 described above. The Company believes that the Hudson Lease may have a material impact on the value of the Company's assets and, accordingly, on the estimated per Share value."

So the benchmark the tender is measured against was struck before the asset it depends on was leased, and the company says so. The FY2025 10-K explains why that gap is large rather than technical: for the correctional facility the valuation used "a sales comparison approach", not a discounted cash flow — because in March there were no cash flows to discount. The building was priced as an empty special-purpose property. Four months later it carried an 88-month lease at up to $11.5 million a year.

There is a second filing that makes the sequence hard to read as coincidence. On December 16, 2025, Highlands announced it would publish no estimated per-share value that December — the only year it has skipped one since the 2016 spin-off — and gave the reason:

"the Company will not publish an estimated per share value of its common stock in December of 2025, as the Company continues to evaluate a potential transaction involving one of the Company's assets and the possible impacts of such transaction on the Company's results of operations and financial condition."

The lease was signed seven months later.

The word that appears twelve times in the lease and zero times in the tender

We counted, on the documents themselves, how often each of these appears:

The last two rows are the control: "Hudson" appears 17 times and "Highlands" 19 times in the Offer to Purchase, so the search is reading the document. The zeros above them are real zeros.

The Offer to Purchase does disclose the rent cliff. It describes the trigger as "a certain agreement between the Lessee and an unrelated third party." Every number is there and nothing is hidden in the legal sense. But a stockholder deciding whether to sell at $0.20 cannot learn from the tender documents that the difference between $958,333 a month and $250,000 a year is one federal immigration-detention contract. To learn that, you have to go back to July and open Exhibit 10.1.

The governance fact that sits under all of it

On May 22, 2026 Highlands held its annual meeting. 219,744,634 of 722,202,902 shares were represented: 30.4%, against a quorum requirement of a majority. "No business was conducted," the 8-K says, "the 2026 annual meeting of stockholders was adjourned," and "we do not expect to reconvene." The three directors continue in office as holdovers.

We wrote about the same mechanism at Lightstone Value Plus REIT V: a non-traded REIT whose holders are too dispersed, too small and too disengaged to form a quorum cannot elect a board, and the board that cannot be elected is the one that signs an 88-month lease and launches a $25 million tender. Nothing about that is improper. It is what the structure produces.

What a holder should have checked before September 29 (and still should, for the next offer)

1. Your lot size. Under 100 shares, you were bought first and in full at $0.20. Over, you could have been pro-rated; in the event the company added its 2% of outstanding shares and took every share tendered, so the rule never bit.
2. Your basis. InvenTrust holders received these shares in a 2016 spin-off; the tax basis allocated then decides whether $0.20 is a loss you can use.
3. What you believe about the ICE contract. The rent, and therefore the value of staying, is a bet on a five-year federal contract renewing and not being terminated. That is a political-risk position inside a Maryland REIT, and the filing's own step-down clause prices what happens if it ends.

Correction, September 6, 2026

Two changes to this piece, both ours.

The vacancy date was wrong. We wrote that the Hudson facility "had been closed since roughly 2016." The FY2025 10-K (accession 0001661458-26-000004) states it exactly and differently: "Our Hudson correctional facility has been vacant since January 2020." Corrected above. The lesson we keep relearning is the one in the word "roughly": the filing had the precise date, and we hedged instead of reading it.

The headline overstated Highlands' side of the deal. The original title ended "...for a $529 Million ICE Detention Contract." The body always attributed that figure correctly — it is the ceiling of the five-year contract between ICE and GEO Group, reported from federal contracting data by the Colorado press, and it is in no SEC filing by anyone. But a title is read on its own, and next to Highlands' name it implies Highlands collects $529 million. Highlands collects rent: $11.5 million a year at the full rate, roughly $61 million guaranteed over the sixty months of elevated rent the lease floors, against a contract whose ceiling is GEO's. Those are three different quantities and the title conflated the largest one with ours. Retitled to a claim that is ours and that a filing supports.

Method

All financial and contractual figures are from Highlands REIT, Inc.'s own filings on SEC EDGAR: the Schedule TO-I and Form 8-K of September 1, 2026, the Form 8-K of July 13, 2026 (the lease), the Form 10-Q for the quarter ended June 30, 2026, and the Form 8-K of May 26, 2026 (the annual meeting). Secondary-market prices are from the Q2 2026 edition of The Stanger Report, cited as its figures. The identity of the tenant's government counterparty and the value of that contract are from the Colorado Sun, the Denver Gazette and Denver7, all of July 13, 2026; the SEC filings do not name it, and we say so where we use it.

This piece exists because a subscriber who has bought Highlands on the secondary market told us the tender and the lease had just been filed. We read both before writing a word.

Sources

• Schedule TO-I, filed September 1, 2026, accession 0001104659-26-104051, and Form 8-K of the same date, accession 0001104659-26-104075 (CIK 1661458): tender terms, priority, funding
• Schedule TO-I/A (Amendment No. 1, final), filed October 1, 2026, accession 0001104659-26-112892, and Form 8-K of the same date, accession 0001104659-26-112895: 135,380,970.82434 shares tendered and accepted, $27,076,194.16, 18.7% of shares outstanding
• Form 8-K, filed July 13, 2026, accession 0001661458-26-000023, Item 1.01 and Exhibit 10.1: the Hudson lease
• Form 10-Q, quarter ended June 30, 2026, filed August 11, 2026, accession 0001661458-26-000025: balance sheet, shares, NAV, portfolio description, subsequent events
• Form 8-K, filed May 26, 2026, accession 0001661458-26-000021: annual meeting quorum failure
• The Stanger Report, Q2 2026 edition, secondary market transactions section
• The Colorado Sun, The Denver Gazette, Denver7, July 13, 2026: the ICE contract with GEO Group for the Hudson facility

Retrieved September 4, 2026.