AEW UK REIT (AEWU) has withdrawn its bid interest in Alternative Income REIT (AIRE) after talks over an all-share offer broke down.

The £165m smaller commercial properties fund announced its interest in AIRE a month ago on the same day that LondonMetric Property (LMP) and Schroder Real Estate (SREI) confirmed their interest in a potential joint bid for Picton Property Income (PCTN).

This afternoon, ahead of a 5pm deadline to confirm its interest, AEWU told the market that, “although indicative heads of terms were reached at an early stage of the process, it was established during the course of due diligence that agreement on certain key matters could not be concluded. Accordingly, AEWU confirms that it does not intend to make a firm offer for AIRE.”

It said this was “regrettable” as “a combination of the companies could have served both sets of shareholders’ interests”.

Shares in AIRE, a small £60m long-lease fund run by M7 Real Estate Financial Services, fell 2.9% to 75.4p, widening their 8.6% discount to net asset value on a 7% yield.

Its chair Simon Bennett said the AIRE board had concluded it was not in shareholders’ best interests to seek an extension to the deadline and so had terminated all discussions with AEWU.

“The board is confident in AIRE’s ability as a standalone entity to generate a secure and predictable income return, whilst maintaining capital values, by investing in UK properties, in alternative & specialist sectors,” he said, adding that it remained on track to deliver its target annual dividend of no less than 5.6p per share for the financial year to 30 June.

On a down day for the UK stock market with the FTSE 100 off 1% at 10,498 on concerns over the state of talks between the US and Iran, AEWU slipped 1.7% to 104.4p. Shares in the 7.5%-yielder stand close to net asset value, a positive rating that reflects their good performance in the past decade.

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