As I’ve noted previously, 2025 has shaped up to be the year of REIT acquisitions. The latest chapter, with Blackstone considering a bid for Big Yellow, shows that the theme is very much still ongoing.

Oli Creasey is head of property research at Quilter Cheviot

For all REIT stakeholders, an approach can be bittersweet. It brings a share price uplift, but is a one-time pay-off rather than the compounding effects many stock market investors seek. Management must often feel similar; the uplift usually feeds through to discretionary bonuses, but the story may end with them out of work and the company name they built over time absorbed and probably dropped by the acquirer.

If receiving an unsolicited bid for a business and selling for a profit is a difficult choice, then spare a thought for the management teams and investors who don’t have that luxury. Far less talked about are the handful of names that have sought bids and come back empty-handed, and have instead chosen to liquidate portfolios and return capital.

For example, residential landlord PRS REIT started a strategic review in October 2024 and took almost 12 months to announce a buyer for the portfolio. Shares rallied prior to the first announcement, but have made little headway since and the proposed 115p-per-share price brings the recently reported 143p-per-share net asset value (NAV) into question.

Historically, the assumption has been that big portfolios command a premium over the reported red-book valuation (which makes no adjustment for scale); now, it looks as though there may be a portfolio discount to be factored in, given the relatively few investors willing to commit hundreds of millions of pounds to a single acquisition.

Takeover target: a possible Blackstone bid for Big Yellow would be the latest in a wave of REIT takeover deals

One way to avoid a discount is to sell the portfolio piece by piece. This is tempting, but if you thought PRS REIT’s process took too long, this approach will take longer still. Aberdeen European Logistics Income (ASELI) started a wind-down in May 2024, believing it would be largely completed by the middle of this year. But it only managed to return 4p per share to shareholders by that point, and while further distributions have been made since, seven of its 27 properties are yet to be sold and now won’t be until 2026.

Whether it was worth the wait remains to be seen, but just 29p of capital per share has been returned to shareholders to date. Given a lot of the sale proceeds so far have gone to pay debt, it isn’t inconceivable that the last distributions get the total capital returned up close to the 77p NAV reported in 2024, but we will have to wait until next year to find out.

Long wait for returns

Return on investment is one thing, but the time it takes to achieve it is what makes or breaks these decisions when working out internal rates of return. ASELI investors look like they will have to wait two years for the final cheque to clear.

But even that looks like a prompt wind-down compared with the JPMorgan Global Core Real Assets (JARA) fund, a real estate and infrastructure trust whose manager failed a continuation vote in 2024 and was forced to wind down by shareholders. The trust is invested in open-ended property funds also run by JPMorgan that are suffering from liquidity issues. JARA’s management expects more than 80% of the assets to have been sold by the end of 2026, leaving a small but significant rump lingering on into 2027.

The trust’s market cap has shrunk to around £60m and investors not willing to wait will have to find liquidity in the small-cap secondary market. Would investors have voted to wind down had they known this would be the case?

These examples are as good a reason as can be found to explain persistent REIT discounts to NAV, but may not represent compelling evidence compared with the number of unsolicited private equity bids made this year for larger peers. However, the experiences of the above companies show the investment market is not back to full health – and if you are forced to sell, you may come up short.

Oli Creasey is head of property research at Quilter Cheviot