- FTSE 100 peer swoops for warehousing specialist
- Bid is latest in a string of takeover approaches for UK property stocks
- Offer values Urban Logistics at a 5% discount to historic net asset value
- UK REITs trade on average discount to historic NAV of 23.2%
“Investors do not seem to be particularly interested in UK real estate plays, judging by the poor performance of the FTSE 350 Real Estate Investment Trusts (REITs) sector and the wide discounts at which many property plays trade relative to their asset value, but private equity and trade buyers continue to snap them up,” says AJ Bell investment director Russ Mould.
“FTSE 100 giant Londonmetric Property is the latest firm to try to take advantage of this with a swoop for Urban Logistics REIT, the third bid for UK listed property play in 2025 and the tenth since April 2023.
“First mooted in April, details of the bid are now public and confirmed.
“Londonmetric Property is offering a combination of cash and stock which equates to 150.3p a share, a 4.9% discount to the latest stated net asset value per share of 158.1p at Urban Logistics REIT. Investors will also get a 4.35p dividend per share for the second half of the target’s financial year.
“The offer also represents a tidy 22% premium to Urban Logistics’ share price when Londonmetric Property first revealed its interest back in April.
“The board of Urban Logistics is recommending the approach and it will be interesting to see if these approaches flush out any more interest from would-be buyers of UK real estate assets, be they private equity or industry players or institutional or retail investors.
“The relentless onslaught faced by brick-and-mortar retailers from online rivals, the rise of hybrid working and worries over the wider economy mean that the FTSE 350 REIT sector continues to lag, even as interest rates start to fall, more and more firms summon senior staff back to the office and the bids continue to come in for British property stocks.
“The industry benchmark is the eleventh-worst performer within the 39 sectors that make up the FTSE 350 over the past twelve months, with a 6.5% drop, compared to a 5.7% advance in the FTSE 350 itself.
Source: LSEG Refinitiv data
“However, underperformance can signify an asset class is unloved and unloved can mean it is undervalued, and a series of bids for UK real estate plays suggest that someone, somewhere thinks there is an opportunity to be had.
Source: Company accounts, LSEG Refinitiv data
“The bids of the last three years, which have come in the form of all cash, all stock or a mixture of the two, have come at an average discount to historic net asset value per share of just over 7%.
“That compares to the average discount of nearly 23% that prevails across 24 leading REITs and Real Estate Investment and Services companies that are listed in London, many of which come with a juicy dividend yield, thanks to the rental income they generate (and the requirement to pay out at least 90% of profits to maintain REIT status).
Source: Company accounts, LSEG Refinitiv data
Source: Company accounts, Marketscreener, consensus analysts’ forecasts, LSEG Refinitiv data
“It is therefore easy to see why REITs might attract the attention of private equity or trade buyers, given the combination of cash flow from rents, asset backing and lowly valuations. It now remains to be seen whether investors take the hint and show any further interest, although it may take further clarity on the trajectory of both the UK economy and interest rates for them to do so.”
