Abrdn Property Income Trust’s (API) sale of two assets at book value ‘casts doubt’ on the merits of its proposed merger with Custodian, according to QuotedData analysts.
In a stock exchange announcement this morning (20 March), the trust announced the sale of two properties for a combined £16.6m, representing a 0.3% discount to the portfolio’s December valuation.
Mark Blyth, deputy fund manager of API, said the two sales continue the trust’s disposal strategy implemented at the end of last year, with the proceeds being used to pay down its rolling credit facility.
“It follows on from the sale in December of the industrial asset in Livingston and demonstrate the continued appeal of the API assets to investors at prices close to NAV,” he said.
QuotedData analysts argued, however, that the sale poses questions over the benefits for shareholders from its proposed merger with Custodian Reit.
“We are not sure why API shareholders would vote for a merger with CREI at this current price when these sales prove that a managed wind-down would be of far greater value – even before the positive impact of any potential drop in interest rates later this year and into 2025,” analysts said.
See also: Urban Logistics Reit tables rival bid for API
API shareholders are due to vote on the Custodian merger next Wednesday (27 March). Custodian shareholders voted in favour of the deal earlier this week.
“Today’s news makes it hard to get behind a case for voting for it, in our view,” they added.
In January, the boards of the two trusts set terms of a recommended merger that would see API shareholders receive 0.78 new CREI shares.
At the time, this valued API at £237m and 62.1p per share – a 20.8% discount to its NAV of 78.4p at the end of 2023.
QuotedData said: “However, CREI’s share price dropped following the announcement (from 79.6p to 72.2p at last night’s market close), which now values API shares at 56.3p – a very substantial 28.2% discount to NAV. These latest sales expose the ridiculous discount that API was trading on before this, but also the lowball offer from CREI.
“We have been long time admirers of API and its manager Jason Baggaley and believe it would be a shame for it to wind-down, but it appears that this is the best course versus a merger with CREI.
“As things stand, a managed wind down that delivered NAV less 0.3% would put almost 38% more in investors’ pockets than the CREI bid. We believe it would take around two years to sell its portfolio – hopefully into an improving investment market.”
