BALTIMORE - MCB Real Estate, an established commercial real estate developer and investment management firm, has increased its offer to purchase Whitestone REIT (NYSE: NYSE:WSR) in an all-cash transaction. The revised proposal, announced today, offers Whitestone shareholders $15.00 per share, which is a 14.5% premium over the share price on June 3, 2024, before the initial bid was made public, and an 11.4% premium to the most recent trading price.
This new offer also represents a significant 61.8% premium over the share price before takeover speculation began in October 2023. MCB's bid is not dependent on financing, as the company has confirmed the equity portion is fully committed and has received a Highly Confident Letter from Wells Fargo for the necessary debt financing.
MCB's Managing Partner P. David Bramble emphasized the alignment of MCB's interests with those of Whitestone shareholders and urged the Whitestone Board to engage in discussions regarding the offer. Bramble highlighted the underperformance of Whitestone's stock compared to its peers since the initial proposal and the potential value maximization for shareholders through this acquisition.
The press release also notes that Whitestone has not seen a share price above $15.00 since 2016 and that the current trading discount reflects its small capitalization, limited growth prospects, and weaker asset quality compared to peers. MCB believes that Whitestone's public status is disadvantageous, citing a high cost of capital and lower dividend yield that could hinder future growth and share price appreciation.
MCB, which holds a 9.4% stake in Whitestone, has expressed its readiness to proceed expeditiously with due diligence and finalizing a definitive agreement. The firm has engaged Vinson & Elkins LLP as lead counsel and Wells Fargo as a financial advisor for the transaction.
The information in this article is based on a press release statement from MCB Real Estate.
In other recent news, Whitestone REIT has exhibited strong growth in the second quarter of 2024, with notable increases in leasing spreads, same-store net operating income (NOI), and occupancy rates. B.Riley has adjusted the company's stock target to $15.00, maintaining a neutral rating, citing Whitestone REIT's robust rent and occupancy growth, and potential long-term growth drivers. These include expected decreases in expenses due to the resolution of lawsuits related to former employees and potential developments at Pillarstone REIT.
The company reported a 17.5% increase in leasing spreads on a straight-line basis, a 7.7% increase on a cash basis, and a 6.6% growth in same-store NOI. Occupancy rates rose to 93.5%, a 20 basis point improvement from the previous year. The company has also raised its full-year same-store NOI guidance range to between 3% and 4.5%.
In addition to these financial results, Whitestone REIT plans to strengthen its board of trustees with two new independent members. The company also financed $56 million of secured debt maturing in 2031 and plans to sell $20-30 million of properties in the remaining year. As part of its strategic initiatives, Whitestone REIT is executing a capital recycling plan to be capital neutral, with acquisitions outpacing dispositions by approximately $20-25 million for the year.
InvestingPro Insights
Adding depth to MCB Real Estate's offer for Whitestone REIT (NYSE: WSR), recent data from InvestingPro provides valuable context to this potential acquisition.
As of the latest available data, Whitestone REIT's market capitalization stands at $718.11 million, reflecting its position as a smaller player in the REIT sector. This aligns with MCB's assessment of Whitestone's small capitalization as a factor in its trading discount.
Interestingly, Whitestone's P/E ratio (adjusted) for the last twelve months as of Q2 2024 is 61.44, indicating that the company is trading at a high earnings multiple. This high valuation metric could be seen as justification for MCB's offer, which represents a significant premium over recent trading prices.
On the dividend front, InvestingPro Tips reveal that Whitestone has maintained dividend payments for 15 consecutive years and has raised its dividend for 3 consecutive years. The current dividend yield is 3.67%, which supports MCB's argument about Whitestone's lower dividend yield compared to peers potentially hindering growth.
Another relevant InvestingPro Tip notes that Whitestone is trading near its 52-week high, with the price at 99.1% of its 52-week high. This information adds context to MCB's offer of $15.00 per share, which still represents a premium despite Whitestone's strong recent performance.
For investors seeking a more comprehensive analysis, InvestingPro offers 3 additional tips for Whitestone REIT, providing further insights into the company's financial health and market position.
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