If dealmaking is a duty, LondonMetric’s Jones is up to the task
EDITOR’S COMMENT About seven months ago, as the board at Balanced Commercial Property Trust told shareholders they should vote for a £673m take-private deal at the hands of Starwood Capital Group, I wondered in these pages just who would still see the attraction in running a listed REIT.
For many, the gaps between share price and net asset value remain sizeable. Raising fresh equity can be a slog. Strategies can be called into question by activists and directors urged to fall on their swords.
So when faced with the choice between a tie-up with a fellow listed company and disappearing from the public market with a private buyer, you can’t blame many for taking the latter route.
EDITOR’S COMMENT About seven months ago, as the board at Balanced Commercial Property Trust told shareholders they should vote for a £673m take-private deal at the hands of Starwood Capital Group, I wondered in these pages just who would still see the attraction in running a listed REIT.
For many, the gaps between share price and net asset value remain sizeable. Raising fresh equity can be a slog. Strategies can be called into question by activists and directors urged to fall on their swords.
So when faced with the choice between a tie-up with a fellow listed company and disappearing from the public market with a private buyer, you can’t blame many for taking the latter route.
Last week, healthcare real estate investor Assura made just that call, its board recommending that shareholders accept a £1.6bn cash takeover by private equity group KKR and Stonepeak at the same time as it knocked back a £1.5bn cash-and-share approach from listed peer Primary Health Properties.
PHP had said a merger would create the eighth-largest UK listed REIT. Assura said the proposal was “not at a level that is sufficient to be recommended to shareholders”. But it also emphasised the problems with its listing. In the announcement of the recommended offer from KKR, it added: “Assura’s operational capability, track record and growth potential have not been reflected in the company’s share price, which has traded at a discount to EPRA NTA per share since September 2022.”
But Andrew Jones and his team at LondonMetric Property are showing that you can play for scale in real estate in terms of M&A and still be listed. The company is courting Urban Logistics REIT, with the latter saying its board is likely to recommend a takeover if LondonMetric makes a firm cash-and-share offer at its suggested price of £674m.
This kind of deal is very much Jones’s jam. LondonMetric has been buying companies big and small. Last year it merged with LXi REIT, buying the business for £1.9bn, and last month it agreed the terms of a £44m takeover of Highcroft Investments, with that deal now to be put to shareholders.
Jones has told Estates Gazette in the past that he sees this kind of dealmaking as a duty, describing it as “my job to buy companies” and adding that the mispricing of many of small REITs means it is “beholden upon those who can afford it, and have got the right rating, to do something about it”.
As Peter Bill points out in his latest Bill Post column this week, Jones is likely to find Urban Logistics shareholders amenable to selling to a new owner that can offer “solid dividends from an expanding business with the lowest overheads in the sector”.
And fewer, larger REITs could ultimately make for a stronger listed real estate market in the UK. As well, of course, as creating other potential targets for private equity. But let’s take one deal at a time.
Image © Colin Miller
