Ediston Property Investment Company is seeking a merger with “one or more” REITs as it launches a strategic review.
Ediston said the board had “a preference for structuring a merger with one or more REITs”.
But it added that it would consider “all options available” that offer maximum value for its shareholders.
These include selling the company through a “formal sale process”, undertaking “some other form of consolidation, combination, merger or comparable corporate action”, and selling the portfolio or subsidiaries and returning the cash to shareholders.
The board has appointed Investec as lead financial adviser and Dickson Minto Advisers as joint financial adviser to assist with the Strategic Review.
Ediston said there was no certainty that any changes will result from the strategic review. Further announcements will be made “in due course”.
It currently holds 11 retail warehouse assets, with a portfolio value of £203.1m, as at 31 December 2022. Its investment manager, Ediston Properties, currently manages around £1bn of property assets across the UK for institutional investors.
The announcement this morning is a major shift in direction from the ambition in 2021, when the company decided to invest exclusively in retail warehousing for the foreseeable future. This was followed by the sale of all its office and leisure assets.
The REIT said the pivot meant that it “currently has cash to take advantage of opportunities in the sector”, but it was is “unlikely to be able to raise new capital in the short or medium term”.
As a result, it finds itself unable to access opportunities in the sector.
“The company, like many of its peers, remains of a size which might deter some potential investors. Challenges as to liquidity, the ability of larger investors to achieve their desired quantum of investment commitment, market profile and cost efficiencies are all directly referable to the modest size of the company. In addition, the company’s share rating, while better than many of its peers within the REIT sector, nevertheless reflects a material discount to net asset value.”
Ediston said a merger was the obvious solution, as “the challenges described above are faced by many of the company’s peers in the REIT sector”.
“These challenges may be best addressed by achieving consolidation in the sector so shareholders can enjoy the ensuing economies of scale and enhanced liquidity. The board believes that such consolidation would enable investors to benefit from the medium-term recovery in the real estate sector through a re-rating of the REITs’ share prices and the attractive investment opportunities that are available to larger REITs.”
Chair William Hill said: “The board believes that it is an important time for new capital to flow into the real estate sector. The state of markets clearly impacts the timing of when investors might wish to invest new capital; but even when conditions are optimal, the opportunity will be lost if there are other factors at play that inhibit those investment decisions being made. However, it is in the gift of participants within the listed real estate sector to do something about this, and therefore a key element in the board’s decision to announce the strategic review.”
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