Warehouse REIT bid cut by Blackstone, but broker says ‘shoot for the stars'

Blackstone has lowered its takeover offer for Warehouse REIT PLC to 109p per share, down from 113.4p, due to valuation disagreements over a development site; the revised offer also eliminates future dividends. Shore Capital maintains the offer undervalues Warehouse REIT, citing a net asset value estimate of 133p per share and potential upside from a key development site near a BAE facility, particularly given Labour's defense spending pledges. Despite strong performance in Warehouse REIT's core portfolio, shares remain static at 106.73p, with Shore Capital advising investors to hold out for a better offer.

Analysis

Blackstone has revised its final takeover offer for Warehouse REIT PLC (WHR) downwards to 109p per share from a previous 113.4p, a reduction attributed to differing valuations of the Radway Green development site in Cheshire. This revised offer also stipulates that WHR shareholders will forgo any future dividends. Financial broker Shore Capital contests this valuation, asserting that Blackstone's bid significantly undervalues Warehouse REIT, whose net asset value (NAV) ShoreCap estimates at 133p per share for the current financial year, placing the offer approximately 18% below this mark. Shore Capital highlights the strategic potential of the Radway Green site, located near a BAE munitions facility, suggesting it could benefit from Labour's pledged £1.5 billion for new weapons factories. Concurrently, Warehouse REIT's core multi-let industrial portfolio demonstrates robust performance, with recent lease activity achieving substantial 32% uplifts and yield compression contributing to NAV growth. The company has also expanded its footprint in high-growth regions with a new acquisition in Oxfordshire. Despite these strong fundamentals and a 6% dividend yield (prior to the offer's terms on dividends), Warehouse REIT's shares remained static at 106.73p, trading at a notable discount to ShoreCap's NAV assessment. The overall sentiment is mixed, reflecting the tension between the reduced offer and the company's underlying strengths, with a more positive sentiment specifically towards WHR's prospects if it remains independent or secures a better deal.

Key Decisions for Investors

• Warehouse REIT shareholders should carefully evaluate Blackstone's revised 109p final offer against the company's strong operational performance, including 32% lease uplifts, and Shore Capital's significantly higher NAV estimate of 133p.
• Investors should consider the potential for an enhanced valuation of the Radway Green development site, particularly given its strategic proximity to defence infrastructure and prospective government investment in the sector, which may not be fully reflected in Blackstone's current offer.
• Assess the implications of the offer's terms, notably the cessation of future dividends and the current share price of 106.73p trading below both the offer and ShoreCap's NAV, when deciding whether to accept the bid or hold for potential long-term value realization based on underlying fundamentals.