Ediston Property Investment Company (EPIC) is in advanced discussions with a third party buyer over the possible sale of the company’s property portfolio.
As part of its strategic review into the future of the company, announced in March, the board today says that it has entered negotiations over the sale of the group’s retail park portfolio – last valued at £204.3m at 31 March 2023.
The board said that there could be “no certainty at this time that a sale of the company’s property portfolio will take place; nor as to the final terms on which, or the price at which, any such sale might be undertaken”.
Announcing the strategic review, the board said its preferred route was a merger with another REIT. It launched the review having battled a persistent wide discount to net asset value (NAV), which had severely impacted its ability to grow.
It was sitting on a 21% discount yesterday, but its share price leapt almost 9% in early trading this morning to 68.8p. This is still a 14.4% discount to its NAV at 31 March of 80.4p.
In a statement in March the board said: “While the company is well positioned from an investment perspective, and has in place a very capable investment manager, both the board and the manager recognise that 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 real estate investment trust (REIT) sector, nevertheless reflects a material discount to net asset value.
“Growing the company has been a stated objective of the EPIC board for a number of years. Unfortunately, for the reasons noted above, the board has concluded that it is unlikely to be able to raise new capital in the short or medium term. This is particularly disappointing given the opportunities which the board and manager anticipate may arise to acquire properties that could substantially enhance returns to shareholders over the medium term. The board and manager recognise that the challenges described above are faced by many of the company’s peers in the REIT sector, and they have concluded that 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 EPIC 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.
“Accordingly, the board today announces that it is undertaking a strategic review of the options available to the company to maximise value for shareholders. The board, for the reasons stated above, has a preference for structuring a merger with one or more REITs; but it will consider all options available to the company that offer maximum value for its shareholders including, but not limited to, selling the entire issued, and to be issued, share capital of the company, undertaking some other form of consolidation, combination, merger or comparable corporate action, and selling the company’s portfolio or subsidiaries and returning monies to shareholders.”
[QD comment: It is a shame to see EPIC go, and joins a growing list of merger and acquisition (M&A) activity in the REIT sector. Persistently wide discounts have cursed the sector, and until there is a change in investor sentiment towards the sector it is likely to continue. That is likely to come when there is more visibility on interest rates peaking or falling.]
EPIC : Ediston Property in discussions to sell portfolio