RTW Biotech Opportunities (RTW), the £559m drug developer backer where activist Saba Capital doubled its stake to 10% last month, has expanded its capital allocation framework with a further $42.8m (£31.9m) for share buybacks. Having returned $42.3m of the $45m buyback target announced three years ago, and purchased 7.2m shares this year, the company says it will put up to 20% of realised gains from mergers and acquisitions into a liquidity pool for further buybacks. The increased allocation represents 4.9% of net asset value which with the remaining $2.7m from its original commitment takes the pool to $45.5m or 5.3% of NAV. It follows an intense period of M&A activity in the sector with the trust this year benefiting from seven bids or transactions involving portfolio companies such as Avidity, Penumbra, RAPT Therapeutics, Centessa, Apellis, Apogee and Alesta with premiums of 19% to 140% for the listed holdings. RTW is 69% invested in North America.
Matthew Read, senior analyst at QuotedData, said: “We think shareholders will be pleased to see RTW’s board committing a further $42.8m to share buybacks, given the persistent discount to NAV – c13% at the time of writing. The strong recovery in biotech M&A is providing opportunities to realise investments at decent valuations, and the board’s commitment to allocate up to 20% of realised gains to capital returns gives shareholders a clearer route to benefiting from these successes. However, we continue to believe that some caution should be exercised. Biotech investing is inherently long term and capital intensive, and RTW needs sufficient firepower to back its existing portfolio and exploit new opportunities. The recent flurry of takeovers and public listings suggests the environment for realisations is improving, but it also illustrates the potential value of remaining invested.”
Custodian Property Income REIT (CREI) has bought an £11m East Midlands portfolio for £400,000 cash and 10.6m new shares. The purchase from Lincoln Property Syndicates allows its underlying investors to roll their stakes into a more diversified and liquid investment trust. For £379m CREI, it means the addition of eight properties with an average lot-size of £1.4m that generate £800,000 of annual passing rent with a net initial yield of c.6.7% and a “reversionary yield” of 7.2%, should the properties achieve their full rentable value. CREI shares yield 7.2% and stand on a 19.4% discount. This is its fourth acquisition using its shares since summer 2025.
QuotedData’s Matthew Read said: “This transaction shows how Custodian Property Income REIT can use the liquidity afforded by its listing to grow its portfolio without putting pressure on its balance sheet. The deal is not NAV dilutive – it has been funded almost entirely through the issue of new shares on a NAV-for-NAV basis – brings in eight fully let properties with a 6.7% initial yield and scope for further rental growth. It also offers a neat solution for investors in property syndicates facing succession and liquidity challenges. With many similar portfolios potentially available, this could prove a useful source of growth at a time when raising fresh equity remains difficult. Importantly, the deal should improve earnings and dividend cover as rents increase, while spreading costs over a larger asset base.”
AEW UK REIT (AEWU) has sold the 51,000 sq ft Barnstaple Retail Park for £8.15m at a rate of £160 per sq ft. This reflects a 7.5% net initial yield and achieves a £1.36m or 20% profit on the October 2015 purchase price of £6.79m after £230,000 of capital expenditure. AEWU, whose lead manager is Laura Elkin, said its asset management contributed to a £900,000, or 12%, valuation uplift last December.
Matthew Read said: “This transaction is another good illustration of the benefits of AEW UK REIT’s active approach to asset management. The manager has added value through new lettings and lease restructuring before selling once the potential for further gains has largely been exhausted and the 20% uplift on the original purchase price has been achieved with relatively modest capital expenditure. With the next lease event not until 2029 and rents already close to market levels, it makes sense to sell the asset, which will allow the manager to invest in new assets with asset management potential.”
