This summer, three big deals were made in the global REITs sector: Prologis’s bid for SEGRO, Brookfield Asset Management and the Canada Pension Plan Investment Board’s bid for LXP Industrial, and WDP Warehouse Depot merging with ARGAN.

In this video, Matthew Norris, Head of Real Estate Securities and manager of the TM Gravis Digital Infrastructure Income Fund, tells us how these deals came about, whether they are good news for investors and why they are unlikely to be the end of consolidation in this space.

The transcript is below.

Transcript:

Here we have a chart of 3 stocks that we own within the Fund that have been bid for. They all own critical modern infrastructure, whether that's e-commerce fulfilment centres, warehouses, [or] data centres. And what these bids show is, in the public market, those stocks are undervalued by general investors, but the specialist investors, the institutional investors, [and] the corporates are seeing an opportunity.

The top graph shows the bid from Prologis, the world's largest logistics REIT, bidding for SEGRO, the UK's largest REIT and Europe's largest logistics REIT. What Prologis saw was a great opportunity: a disconnect between very valuable assets, a very valuable pipeline, and a great development potential, and the market price - there's a disconnect there. Prologis came in, they made a series of bids which resulted in an offer being accepted by the board of about £10.32 a share. This is great news for investors. We get a premium to what the portfolio is worth and, in addition, investors get to participate in the future upside by acquiring or swapping the SEGRO shares for Prologis shares. Those Prologis shares will have a secondary listing on the London Stock Exchange. It's a great result.

The middle chart shows LXP Industrial. This is a US REIT that owns a fantastic portfolio of warehouse space. Here, Brookfield [Asset Management] and CPPIB [the Canada Pension Plan Investment Board] saw the opportunity: a great collection of assets underpriced by the public equity market. They have offered us a double-digit premium to the share price. We're receiving cash. Again, a good result for investors.

The third chart, the bottom chart, shows the bid for ARGAN. This is a French-listed business, and it's being themed as a merger, with WDP Warehouse Depot merging with ARGAN, creating what will be the third largest industrial REIT in Europe. This is good news for investors. This brings scale, efficiency, and also the ability to execute faster on the development pipeline. So, as investors in ARGAN, we will receive both shares in Warehouse Depot and an exceptional dividend. So once again, you know, [it’s a] good result for investors.

And when you look at these 3 charts collectively, what it shows is there's an opportunity for investors. If you invest in the Fund, we invest in these real estate companies. Right now they're attractively priced, and you may be on the receiving end of either a merger proposal or indeed a cash bid.

Important Information

This video is issued by Gravis Advisory Limited (“GAL” or the “Firm”), which is authorised and regulated by the Financial Conduct Authority. GAL’s registered office address is 24 Savile Row, London, United Kingdom, W1S 2ES. The company is registered in England and Wales under registration number 09910124.

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