Actually I at store capital (WKN: A12CRU ) was just waiting for a piece of news: what the dividend will be at the end of the third quarter. If so, management would actually have increased during that period. Because of the operational strength, I assumed that too.
On September 15, I look at Store Capital’s Investor Relations portal and almost fall off my chair: the property investment fund is about to be taken over. Yield? Suddenly a minor matter, even though the company announcement states that payment must be made for the third quarter.
Let’s look at the details and a really annoying purchase at a really bad time for me. Or: Unfortunately at a price that is too cheap.
Store capital: The takeover
As the management of Store Capital announced on 15 September this year, there is a purchase offer. The two major investors GIC and Oak Street have teamed up and want to buy the REIT in its entirety as part of a $14 billion deal. The investors and competition watchdogs still have to confirm that, of course. There is also a deadline for other interested parties to submit offers. But the first hurdle appears to have been cleared: that of the REIT’s management.
But what does this mean for us as shareholders? Store Capital could disappear to a share price of $32.25 if the deal goes through. This corresponds to a premium of approximately 20% compared to the previous closing price. And 17.8% for the 90-day average share price. My Comment: Just silly that the past 90 days have been relatively cheap for REITs due to general market conditions.
Store Capital’s management is apparently jubilant about the deal. It is said that investors can create short-term value. And also that we are happy to have two such strong partners in these uncertain times. Honestly, I’d rather not have such a cheap deal at the moment.
A deal if it goes through!
Store Capital is a coup for me, I didn’t hide that when the share prices were falling. Even with the 20% price gain, at $2.25 in funds from operations, the price-to-FFO ratio would still only be 14.3 right now. The dividend yield would also still be at a relatively high level of 4.8%. After all, behind the name is a quality REIT that has over 3,000 properties and has recently generated growing funds from operations from them.
In this connection, I take a critical view of the takeover. Instead of generating a 20% value premium in the short term, I would have preferred to benefit from Store Capital and its strong portfolio in the long term. Especially since a price-FFO ratio of just over 14 is really annoyingly cheap for me to buy.
But that’s how it is. Or how things are likely to proceed in relation to this REIT. I am looking for a new name to fill this gap in my repository soon.
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Vincent owns shares in Store Capital. The Motley Fool owns shares of and recommends STORE Capital.