Whitestone REIT Rejects $1.45B Acquisition As Would-Be Buyer Calls For End To ‘Entrenchment Tactics’
Whitestone REIT has formally rejected the latest acquisition offer from MCB Real Estate, prompting the Baltimore-based investment management firm to urge Whitestone’s board and management team to "cease their entrenchment tactics."
MCB first offered the Houston-based shopping center owner $700M, or $14 per share, in June, and it upped its acquisition offer to $1.45B, or $15 a share, on Oct. 9 when that was rejected.
Whitestone’s board said it didn't believe the latest offer was an “appropriate valuation” in an Oct. 30 letter to MCB Managing Partner David Bramble.
“While your indication of interest is premised on public market valuation, the Board views [net asset value] and [discounted cash flow] as critical to determining the intrinsic value of Whitestone REIT,” the letter reads. “Your valuation falls short on both marks.”
MCB countered that its offer is “compelling by all reasonable metrics,” according to a statement from the company released Thursday. The company said the Whitestone board has continuously refused to consider MCB’s all-cash offers over the last several months.
“We have heard from other shareholders that they are supportive of a potential transaction and share our frustration with the Whitestone Board,” MCB’s statement reads. “The Board's refusal to grant due diligence, engage in any meaningful discussions, or commence a strategic alternatives process is not consistent with its duties and indicates that the Board is entrenched.”
Whitestone also reportedly rejected an acquisition attempt from Fortress Investment Group last year.
Whitestone’s current management team delivered total shareholder returns of just 0.1% from the time it took over the REIT on Jan. 18, 2022 through Oct. 25, 2023, the day before the reported proposal from Fortress, according to MCB’s statement. Since that time, Whitestone shareholders have seen returns of nearly 58% due to Fortress’ rumored offer and MCB’s two proposals, it said.
The Whitestone board said accepting MCB’s offer would deprive shareholders of the chance to maximize their investments and give the investment management firm additional value. The board stated that Whitestone is well-positioned for growth and will increase the value of its shares.
“The Whitestone REIT Board of Trustees believes the indication of interest is opportunistically timed to take advantage of Whitestone’s performance while the company is still gaining momentum under the new management team,” the REIT wrote in its letter.
Whitestone owns and operates more than 50 properties in Chicago, Phoenix, Dallas, Houston, San Antonio and Austin. The properties had an average occupancy of more than 94% at the end of Q3, while the company had $634.6M in debt.
MCB has $3B in assets under management and is also the developer of the Viva White Oak mixed-use project in Maryland, which was approved for more than 12M SF on a 280-acre campus next to the Food and Drug Administration earlier this year.
