Glenstone, the 25.4% shareholder in Alternative Income REIT (AIRE), says it will resume its push for a managed wind-down of the real estate investment trust if its takeover offer fails, casting doubt on the “subscale” company’s dividend prospects.
With two weeks to go until the deadline for acceptances for its £56.3m cash offer, Glenstone REIT has received the support of just 17,849, or 0.025%, of shares in addition to the 1.9m it had in its concert party. This included those held by Glenstone director Adam Smith who sits on the AIRE board.
AIRE shareholders are waiting to see if AEW UK REIT (AEWU) finalises the all-share offer it announced last month at a 6% discount to net asset value. Its deadline is next Friday. While all in paper, it beats the 70p per share offer from Glenstone at a 17% discount to the value of AIRE’s 19 properties.
However, Glenstone cautioned investment platforms’ deadlines for its offer would be earlier than its 4 September deadline, meaning they might pass before any AEWU statement. It made its approach in May after AEWU withdrew from talks over an earlier offer for AIRE, saying it needed a “viable exit”.
In an update yesterday, Glenstone said the AIRE board was urging shareholders to “turn down the certainty and liquidity” of its offer with no assurance on future dividends.
It said: “Shareholders should not assume that dividend income will be 5.6p per share as it was for the financial year ended 30 June”, which was cut from the previous year’s 6.2p due to higher finance costs.
It warned that the possible vacancies in Dudley and Sheffield created by the closure of Meridien Steel, a tenant that paid 10% of AIRE’s rent last year, were “indicative of Glenstone’s wider concerns around issues which may arise within the portfolio.”
If its offer lapsed, Glenstone said it “intends to renew its support for a managed wind-down of AIRE” which it regards as too small to be viable “in order to return capital to shareholders over the medium term.”
In its statement on 9 July, AIRE said Meridien had fully paid its rent for the third quarter and there was no impact from its closure on its results for the year to 30 June with the 31 March valuation assuming the leases would terminate next May.
In addition, AIRE expected “minimal impact” in the current financial year due to a guarantee from Meridien’s Belgian parent company Duferco.
As the properties were let on below market rents, there was the chance to re-let them at higher rates when the company gained vacant possession. “The AIRE board’s view continues to be that the Glenstone offer fundamentally undervalues the company,” it said on Wednesday, recommending that shareholders should take no action.
