Urban Logistics REIT has outlined details of an alternative proposal for abrdn Property Income Trust (API), that it says provides a better deal for API shareholders than the current Custodian Property Income REIT (CREI) bid.
The proposal involves the acquisition by Urban Logistics of API’s logistics and retail warehouse assets (portfolio 1 – 66% of portfolio), with the remaining portfolio (portfolio 2 – 34% of portfolio) held by API and, through a managed wind-down process, the cash being returned to API shareholders.
API shareholders would benefit from ongoing equity market exposure to a focused, high-performing REIT as well as cash proceeds from a managed wind-down of the minority of API’s net tangible assets, the board of Urban Logistics said.
Based on the 31 December 2023 API EPRA net tangible assets (NTA) per share, the portfolio 1 NTA equates to approximately 51.5p per API share.
Under the terms of the proposal, Urban Logistics would issue 0.31 shares to API shareholders for each API share. This represents consideration for portfolio 1 NTA of around 35.8p per API share based on the share price of Urban Logistics of 118.0p as at close on 15 March 2024 (adjusted downward for the Urban Logistics special dividend of 2.45p per share to be paid prior to the completion of any transaction).
The board of Urban Logistics said that it believes that the proposal represents a superior structure for API shareholders than the CREI offer “given its mix of Urban Logistics shares and cash realisations”.
The board added that the “real question from here would be how best to achieve the value” in API’s logistics and retail warehouse assets. It said that it believes that this would be achieved through a shareholding in a focused, actively managed logistics real estate company.
“[We] believe in the compelling investment merits of logistics real estate over the medium to longer term,” the board said. “Other real estate asset classes may currently be higher yielding but the Urban Logistics board believes that long term value will be created through a sustainable and growing rental income base derived from assets which are fit for modern purpose and actively managed.”
The board added that the realisation of portfolio 2 would be attractive for API shareholders seeking cash as part of the deal.
Urban Logistics said that it was “strongly of the view” that was wrong to conclude that the Custodian–API combination addresses challenges in the REIT sector that were highlighted by API’s board – particularly surrounding small and mid-sized generalist REITs.
It said that it believes that the Custodian–API combination in reality does no more than create a bigger version of the same problem, and has called on API shareholders to call a halt to the merger with Custodian and urges the board of API to actively focus on the Urban Logistics alternative.
Urban Logistics has until Wednesday (20 March) to announce a firm intention to make an offer for API or not.