Investment trust insider on shed investors – Richard Williams:
Property analyst Richard Williams picks out one undervalued real estate investment trust that looks attractive as bids and mergers sweep the commercial property sector.
Recent bids for real estate investment trusts (Reits) at more than 40% premiums to prevailing share prices should have been a much-needed shot in the arm for the sector and triggered a re-rating.
This has not come to pass, however, and has left me scratching my head as to why. In April, Industrials Reit (MLI) was the subject of a take-private bid by US private equity giant Blackstone valuing it at £511m and a 42% premium to its share price.
Then last week, Civitas Social Housing (CSH) announced it had agreed to an offer from CK Assets valuing it at £485m at a hefty 44% premium to its share price. Unlike the Industrials Reit offer, however, the bid price of 80p per share was a substantial 26.7% discount to its net asset value (NAV). This may reflect the challenges facing the social housing sector, but in our view undervalues the company’s medium and long-term prospects.
In any event, the bid prices do show the extent of the depressed values that shareholders are placing on the real estate sector. They have done little to change investor sentiment towards property, it seems, and at these levels there is no doubt that private equity companies will continue to be on the prowl (as was the case with Industrials) and more opportunistic bids will be attracted (as with Civitas).
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