Earlier this year, Paragon REIT’s sponsors proposed a scheme consideration (privatisation price) of 98 cents compared to its FY2024 net asset value (NAV) of 93.8 cents, and 91.5 cents after distribution per unit (DPU). The announcement also stated that the scheme consideration would NOT be reduced by Paragon REIT’s 2HFY2024 DPU of 2.33 cents.
On April 23, the managers of Frasers Hospitality Trustannounced they are conducting a review of FHT’s strategy. In 2022, Frasers Property(FPL), the sponsor of FHT, offered to take the trust private by acquiring all FHT stapled securities, excluding those held by itself, its subsidiaries, and TCC Group Investments, for $0.70 per stapled security by a scheme of arrangement. At the time of the scheme proposal, FHT’s NAV was 65.19 cents. Subsequently though, 74.88% of independent stapled securityholders voted in favour of the scheme (a slither short of 75%) and hence the privatisation failed.
FHT’s NAV as at March 31 stood at 64 cents and the distribution per stapled security (DPS) in 1HFY2025 for the six months to end-March is 1.0257 cents.
DBS Group Research says: “[FHT’s] recent price momentum suggests the market could be positioning for a privatisation rerun in the light of the recent successful Paragon REIT offer. From the sponsor’s perspective, privatisation makes sense given the redevelopment potential within FHT’s local assets. We now view privatisation as the base case with a potential offer coming in above the previous 70 cents.”
See also: C-REITs increasingly being used to tap onshore capital
Other analysts have suggested that 68 cents would be a generous offer given that the post-Covid peak in travel is over, and a recession could be looming. “If the catalyst fails, FHT will be back to 45 cents,” an analyst says.
Separately, on Jan 13, First REIT announced it had received a preliminary non-binding letter of intent (LOI) from Siloam International Hospitals to acquire First REIT’s portfolio of hospital assets in Indonesia. Siloam is the existing tenant and operator of these hospital assets, and is majority-owned and controlled by a fund managed by CVC Capital Partners. The board announced it has decided to undertake a strategic review to assess the LOI and explore all strategic options for First REIT. The board has also appointed Citigroup Global Markets Singapore to conduct the strategic review.
“A marketing agent has been appointed to run a competitive and robust price discovery process where there was an outreach to over 60 parties to solicit interest for the Indonesia portfolio. Separately, through Citi, we have approached multiple parties to explore all options relating to the business, including joint ventures, partnerships, asset acquisitions and/or divestments as part of assessing opportunities with a view to delivering sustainable long-term value for unitholders,” First REIT’s manager said in its 1QFY2025 business update.
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First REIT’s unit price is trading at 0.97 times its NAV of 27.37 cents as at March 31, compared to an NAV of 28.6 cents as at Dec 31, 2024.
UK REITs which could privatise
Interestingly, two UK REITs are conducting strategic reviews with the purpose of narrowing the discount between their trading prices and their NAVs and/or net tangible assets (NTAs). Two UK REITs have received offers (though not all in cash), announced during their strategic review process; and one UK REIT has received an all-cash offer from KKR and Stonepeak Partners.
PRS REIT (PRSR) listed in 2017 via an IPO which raised GBP560 million. It had follow-ons in February 2018 and September 2021. PRS owns 5,437 new rental homes valued at GBP1.18 billion ($2.03 billion) as at Dec 31, 2024.
In October 2024, the REIT’s management initiated a strategic review and formal sale process. On Feb 11, 2025, PRSR announced it had received multiple non-binding acquisition proposals. The majority of these were pitched within a price range representing a premium to the then-share price and a discount to the NAV (published June 2024) of 133.2 pence. As at Dec 31, 2024, PRSR’s NAV stood at 139.6 pence, up 5.5% h-o-h. The REIT last traded at 115.6 pence as at May 5.
The REIT says it has invited a select number of parties to undertake due diligence and discussions are ongoing. It adds: “Alongside this, and as part of the wider strategic review, the board continues to explore all the options available to the company, with a view to maximising value for the company's shareholders. Further updates will be made in due course, and by no later than the end of calendar 2Q2025.”
Life Science REIT (LABS) is a specialist property business focused on the UK's life science sector. The REIT's portfolio is located across the "Golden Triangle" of research and development hubs in Oxford, Cambridge and London's Knowledge Quarter. However, it is facing headwinds.
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On March 14, Life Science REIT announced that it was undertaking a strategic review to consider the future of the REIT and to explore all options available to maximise value for shareholders. The background to that decision includes the significant headwinds the REIT has faced since its IPO in November 2021.
“These challengers include higher inflation and elevated interest rates, as well as the company’s size and low levels of liquidity, which have resulted in the share price trading at a significant discount to NAV for a prolonged period of time. The outcome of the strategic review may include a potential sale of the whole business or a managed wind down of the company,” Life Science REIT says in a statement.
The total value of the portfolio stood at GBP385.2 million as at Dec 31, 2024, up marginally on an absolute basis, but with the investment portfolio down 4% on a like-for-like basis, driven by 30 basis points of yield expansion, partially offset by like-for-like estimated rental value (ERV) growth of 8.6%.
The financial statement for the 12 months to Dec 31, 2024, contains a “going concern with material uncertainty” statement. However, the REIT’s board says its forecast cash flow for at least the next 12 months and under its base-case scenario indicates that the REIT can meet its covenants and liquidity requirements.
“Further to a number of discussions with potential acquirors in recent months, the board has confidence that, in the context of a strategic review, the business should be attractive to multiple parties if the outcome of the strategic review leads to the sale of the business,” an announcement dated March 14 says.
EPRA NTA (which excludes goodwill and tax liabilities) per share was 74.4 pence as at Dec 31, 2024, compared with 79.9 pence a year earlier — reflecting the portfolio revaluation loss (GBP17.4 million) and dividend payments (GBP7.0 million), partially offset by positive adjusted earnings. The IFRS NAV per share was 75.1 pence as at Dec 31, 2024, compared to 81.1 pence a year earlier. Life Science REIT last traded at 43.2 pence.
Urban Logistics REIT (SHED) announced a proposal to internalise its management on March 7, after facing activist pressure from Achilles Investment Company, which, along with other shareholders, is calling for board changes and a strategic review. The internalisation has been paused following the offer of a merger from LondonMetric Property on April 14.
LondonMetric is proposing a shares and cash offer. For each Urban Logistics share, its shareholders will receive 0.5612 new LondonMetric shares (the exchange ratio) and 42.8 pence in cash, and shareholders can receive a dividend per share expected at 4.35 pence.
Based on LondonMetric's closing share price of 182.1 pence on April 11, the LondonMetric proposal values each Urban Logistics share at 145.0 pence comprising 102.2 pence in new LondonMetric shares, with cash representing the remaining consideration as at April 11.
The pricing represents an implied EPRA NTA discount of approximately 3% of LondonMetric's and Urban Logistics' EPRA NTAs per share as at Sept 30, 2024. Urban Logistics’ NTA was 158.05 cents, down 1.5% h-o-h. LondonMetric’s EPRA NTA was 195.7 pence as at Sept 30, 2024.
Following the April 11 offer, Urban Logistics announced that should a firm offer be made, its board “would be minded to recommend such an offer to Urban Logistics shareholders, subject to agreement on the other terms of the offer”.
According to UK M&A regulations, LondonMetric must announce a firm offer for Urban Logistics by no later than 5pm (London time) on May 9.
Warehouse REIT (WHR) said it would recommend Blackstone Europe’s latest indicative, non-binding cash offer of 115 pence per share to its shareholders adjusted for the interim dividend of 1.6 pence, should it turn into a firm proposal.
The latest published NAV as at Sept 30, 2024, was 128.8 pence per share. According to an update by Morningstar, Warehouse REIT has “requested a further extension of the ‘put up or shut up’ deadline to May 12”. The deadline extension is to allow Blackstone additional time to complete due diligence work, Morningstar said.
Blackstone’s 115 pence bid for Warehouse REIT is its fifth, and is 4% higher than its most recent bid it made along with Sixth Street Partners. Altogether, Blackstone and Sixth Street have made four bids for Warehouse REIT. Sixth Street has dropped out of the bidding. The March 27 bid values Warehouse REIT at GBP489 million.
Assura (AGR) is a REIT that specialises in the development of, investment in and management of a portfolio of healthcare buildings across the UK and Ireland. On April 9, its directors received a cash offer from Sana Bidco consisting of funds managed by KKR and Stonepeak Partners. The offer of 49.4 cents is made up of a cash offer of 48.56 cents and a quarterly dividend of 0.84 pence which was paid on April 9. Assura’s last announced NAV as at Sept 30, 2024, was 49.4 pence.
