AEW UK REIT has ruled out making a firm offer for Alternative Income REIT (AIRE), bringing an end to its proposed all-share combination of the two UK-focused REITs.
The proposed transaction, announced on 16 July, would have seen AIRE shareholders receive 0.725 new AEW UK REIT shares for each AIRE share held.
If the offer had been implemented, it could have offered greater portfolio diversification, the benefits of increased scale, a reduction in operating costs and an attractive ongoing dividend per share, according to AEW UK REIT.
The decision to withdraw followed a public statement from major shareholder Glenstone, which said it would not support a bid from AEW UK REIT, despite the board of AIRE indicating its support for the proposal.
Glenstone, which holds 25.4% of AIRE, has instead made a cash offer for the company at a substantial discount to net asset value (NAV).
AEW UK REIT said Glenstone’s support was fundamental to the orderly implementation of any combination in which AEW UK REIT would be the successor company.
The decision comes as AEW UK REIT reported its latest quarterly performance, with NAV standing at £171.05m, or 107.80p per share, at 30 June. NAV total return for the quarter was 1.31%, while the company recorded a 0.11% like-for-like increase in portfolio values.
The latest valuation growth marks the 13th quarter of like-for-like capital growth in the past 14 quarters.
EPRA earnings per share increased to 1.89p for the quarter, compared with 1.71p in the previous quarter, providing dividend cover of 94.5%.
The company has maintained its quarterly dividend at 2p per share, equivalent to its targeted annual dividend of 8p. At the end of June, this represented a dividend yield of 7.7%.
AEW UK REIT also secured £427,250 of additional annual contractual income from three industrial transactions completed during the quarter.
Laura Elkin, portfolio manager at AEW UK REIT, said: “We remain confident in the outlook for AEW UK’s strategy and believe that the portfolio is robustly positioned to continue to achieve the company’s investment objective.
“We continue to see significant attractive buying opportunities in the UK real estate market and are working with the company’s board and advisers to explore routes to raise capital, with a view to taking advantage of these.”
