The £147.9m Ediston Property Investment Company (EPIC) has agreed to sell its entire portfolio to Realty Income in a deal worth approximately £200m.
Should the deal be approved by shareholders on 26 September, the EPIC board said it would seek approval to wind up the investment trust.
Under the agreement, Realty Income will purchase 11 retail warehouse assets located across the UK.
William Hill, chair of EPIC, said: “The board was very pleased with the interest shown in the company, with proposals being received from a number of potential counterparties. Having considered multiple options, and after detailed analysis, the board determined a sale of the entirety of the property portfolio to Realty Income was the best means of maximising shareholder value.
“The board unanimously considers the disposal to be in the best interests of the company and its shareholders as a whole and recommends that shareholders vote in favour of the resolution at the general meeting.”
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Strategic review
The move comes after a strategic review of the trust announced in March in response to several challenges facing the company.
The issues included low levels of liquidity; small market capitalisation; constraints on the trust’s ability to diversify across larger schemes in the retail warehouse market due its relatively small size; and cost inefficiencies from operating a subscale company.
The Reit sector has faced issues with widening share price discounts in recent times. EPIC said the challenges listed mainly stem from the inability to grow through new equity issuance, as its ordinary shares have traded at a material discount to net asset value.
According to FE Fundinfo, the trust’s discount had grown to 28.69% at the end of June.
The board said: “When considered in the light of the current market backdrop, the fact that the company’s ordinary shares traded at an average discount to their net asset value (NAV) per share of 24.6% over the 12 month period to 15 March 2023 -being the date immediately prior to the strategic review announcement – and the inability of the company to raise additional capital in order to achieve scale, the board has concluded that the disposal represents the best means of maximising shareholder value.”
The sale will result in NAV per share on completion of 72p, representing a 17.7% premium to the trust’s 61.2p share price at the time of the strategic review.
EPIC is the top performer of the 12 trusts within the AIC’s UK Commercial Property sector over one and three years.
Over the last 36 months, the fund has returned 64% compared to the sector average of 11.44%.
