The Board of the Ediston Property Investment Company plc has entered into an agreement to sell its entire property portfolio to a wholly-owned subsidiary of Realty Income for approximately £200.8 million with agreed deductions of approximately £4m.
Under the sale agreement, Realty Income will purchase 11 retail warehouse assets located across the UK. The 1.18 million sq. ft. portfolio is let to 64 tenants over 108 units.
Completion of the sale is conditional upon the approval by EPIC shareholders at the General Meeting to be held on 26thSeptember. The Company has received an irrevocable undertaking to vote in favour of the shareholder resolution from its largest shareholder, TR Property Investment Trust plc, representing approximately 16.41 per cent. of the Company’s issued ordinary share capital.
The Board announced a strategic review on 16 March 2023 in response to several challenges that had been facing the Company for some time. These included low levels of liquidity in the ordinary shares; a small market capitalisation that limited the ability of larger investors to achieve their desired quantum of investment commitment; constraints on the Company’s ability to diversify across larger schemes in the retail warehouse market due to the relatively small size of the Company; and cost inefficiencies from operating a subscale company.
These challenges stem from the inability of the Company to grow through new equity issuance, as its ordinary shares – like those of its peers in the REIT sector – have traded at a material discount to net asset value.
The Board undertook the strategic review with a stated preference for structuring a merger with one or more REITs, while acknowledging all options for maximising value for shareholders should be considered including selling the entire share capital of the Company, or selling the Company’s portfolio or subsidiaries and returning monies to shareholders.
The Board considered a wide range of proposals, along with continuing in its current form, and concluded that a sale of the entire portfolio was the best course of action to maximise shareholder value.
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 per Share of 24.6 per cent. 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 disposal will result in estimated net assets per share on completion of approximately 72.0p, representing a 17.7 per cent. premium to the Company’s share price of 61.2p on 15 March 2023 (the closing price immediately prior to the strategic review announcement), a 14.0 per cent. premium to the share price of 63.2 pence as at 2 August 2023 (the closing price immediately prior to the strategic review update announcement) and a 10.8 per cent. premium to the average share price over the twelve months to 2 August 2023.The estimated net assets per share on completion equates to a 10.8 per cent. discount to the latest published net asset value per share of 80.77 pence, as at 30 June 2023.
If the disposal becomes unconditional, it is the intention of the Board to seek shareholder approval for the voluntary liquidation of the Company with a view to distributing substantially all of the Company’s net assets (which will comprise of cash) to Shareholders as soon as reasonably practicable (with the target being by the end of this calendar year), unless an appropriate corporate opportunity is identified in the meantime which, in the view of the Board (having consulted with key shareholders), merits further consideration. The Board would only recommend an alternative corporate opportunity if it reasonably believed that such opportunity would offer shareholders greater benefit than a simple return of capital.
William Hill, Chairman of Ediston Property Investment Company, comments: “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.”
