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Commercial real estate

REITs on the Upswing: Mergers and Takeovers Abound in the Property Market

Strategic Insights

— 2 min read

The largest merger of the year, between LXI REIT and Londonmetric Property, marked the beginning of a frenzy of consolidation in the real estate investment trust (REIT) market, with £2.5bn of equity issuance, £3bn of mergers, and £2bn of take-private deals taking place in 2024. Despite this activity, a split is emerging between the 'haves', which have raised new money and seen their stock price rise, and the 'have nots', externally-managed trusts struggling to stay afloat. Justin Bell, director of sales at Deutsche Numis, highlights five REITs primed for takeover: Warehouse REIT, Urban Logistics REIT, Picton, Schroder Real Estate, and Life Sciences REIT.

Key Takeaways:

  • The REIT market has seen a significant shift in investor sentiment, with the mood changing drastically in recent months following a bleak couple of years.
  • REITs have begun to take in new money again, with £1.6bn raised in primary equity issuance across eight different trusts since February 2024.
  • The market is increasingly split between the 'haves', which have raised new money and seen their stock price rise, and the smaller, externally-managed 'have nots'.
  • Five REITs are primed for takeover: Warehouse REIT, trading 30% below the value of its underlying assets; Urban Logistics REIT, trading at a 26% discount; Picton, with a well-located portfolio of assets being undervalued by the market; Schroder Real Estate, with a 62% exposure to the strongly performing industrial and retail warehouse sectors; and Life Sciences REIT, trading at nearly half the value of its underlying assets.
  • Activist shareholders in PRS REIT have tried to remove the chair and add new directors to its board, which triggered a sales process.
  • £2.5bn of equity issuance, £3bn of mergers, and £2bn of take-private deals have taken place in 2024, a significant increase from 2023.
  • Custodian Property Income REIT has been vocal about its desire to seek merger targets and should be an attractive acquirer to shareholders stuck in smaller diversified strategies.

Statistics:

  • £1.6bn raised in primary equity issuance across eight different trusts since February 2024.
  • £2.5bn of equity issuance in 2024.
  • £3bn of mergers in 2024.
  • £2bn of take-private deals in 2024.
  • £600m of equity issuance in 2023.
  • £200m in mergers in 2023.
  • £1.1bn in take-privates in 2023.

Sources:

  • City A.M. - LXI and Londonmetric agree mega-merger to create UK's fourth-largest real estate investment trust
  • City A.M. - Commercial real estate investment trust giants agree to £924m merger
  • City A.M. - Columbia Threadneedle Property Trust bought out for £673m despite management complaints
  • City A.M. - Brookfield wins round Tritax EuroBox in £1.1bn tie-up
  • City A.M. - Not another one: Abrdn Property Trust moves to shutter
  • City A.M. - Abrdn trust to strike £350m deal with Travelodge owner
  • City A.M. - Real Estate Credit Investments
  • City A.M. - Home REIT set to pay off Scottish Widows debt in step toward closure
  • City A.M. - Strong demand for shares allows Segro to tap investors for £900m to fund growth and new data centres
  • City A.M. - PRS REIT reveals excellent results as strategic review looms
  • City A.M. - Urban Logistics REIT boosts rental income after failed Abrdn Trust bid

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