The £159m AEW UK REIT has made an “indicative and non-binding” offer to purchase the £60m Alternative Income REIT (AIRE), according to a London stock exchange announcement released on 24 March.
AEW will have until 5pm on the 21 April to confirm whether it will make a full offer for the fellow real estate investment trust.
The exact terms of this offer will be assessed based on the net asset value of both trusts, adjusted for transactions and dividends and will incorporate a 3% discount to Alternative Income’s net asset value.
Richard Williams, senior analyst at QuotedData, said: “AIRE has struggled to gain any traction with investors – being too small and its shares too illiquid – and so it has been a potential M&A candidate for a long time.”
He added: “AEWU has been a retail investor darling due to its high dividend payout, but it has also struggled to grow, with the board and management making no secret of their desire to expand.”
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That said, both have performed well for investors in absolute terms. Over the past five years, AEW was up 72.1%, while alternative income has returned 57.8% to investors in sterling terms. By comparison, the average return of the IT Property – UK Commercial peer group over this period is 10%.
While this merger does have some “portfolio nuances for investors to get their head around”, their focus on smaller lot-sized properties that fall under the radar should “sit nicely” with each other, according to Williams.
