BALTIMORE - MCB Real Estate, a prominent commercial real estate firm, announced today its decision to retract its offer to acquire Whitestone REIT (NYSE: NYSE:WSR), citing the latter's board's refusal to engage in meaningful discussions or explore strategic alternatives. The withdrawn proposal was valued at $15 per share, representing a 14.5% premium over Whitestone's share price before the initial proposal on June 3, 2024, and a 61.8% premium over the price before rumors of a Fortress proposal on October 26, 2023.
In a letter to Whitestone's Board of Trustees, MCB expressed frustration over the board's consistent rebuff of its acquisition attempts, suggesting a culture of entrenchment and self-interest within the boardroom. MCB's managing partner, P. David Bramble, criticized the board for making unsupported claims about Whitestone's "intrinsic value" and for not being open to considering opportunities to maximize shareholder value.
The letter also highlighted recent public comments by Whitestone CEO David Holeman, which MCB interpreted as misleading, given the board's actions. MCB, as Whitestone's largest actively managed shareholder with a 9.4% stake, has called on the board, including recently added independent trustees Kristian M. Gathright and Donald A. Miller, to fulfill their fiduciary duties and act in the best interest of shareholders.
Despite withdrawing its proposal, MCB, which manages a diverse portfolio with approximately $3 billion in assets under management, remains a significant shareholder of Whitestone and is open to exploring other options to ensure the board upholds its responsibilities.
This development follows MCB's attempts to engage with Whitestone over several months, which were met with resistance from Whitestone's board. The situation underscores the challenges activist investors can face when attempting to influence the direction of a company.
The information is based on a press release statement from MCB Real Estate.
In other recent news, Whitestone REIT delivered a strong financial performance in Q3, as outlined by CEO Dave Holeman and CFO Scott Hogan. The real estate investment trust reported a core Funds From Operations (FFO) of $0.25 per share and raised its annual same-store Net Operating Income (NOI) growth guidance to a range of 3.75% to 4.75%. The company also added $20 million in unsecured debt and extended a term loan to Q1 2028, bolstering its financial position.
In addition to financial growth, Whitestone REIT has made strategic progress through remerchandising efforts, adding a high-end liquor store and an Asian grocer to its portfolio. The company's occupancy rates reached 94.1%, with anchor occupancy at 97.4%, demonstrating the effectiveness of these initiatives.
Furthermore, Whitestone REIT plans to onboard two new trustees by the end of the year. However, the company remains cautious about the timing of leasing activity impacting Q4 same-store NOI growth. Despite this, the management expressed confidence in maintaining momentum into Q4 and aims to maintain a debt-to-EBITDA ratio between 6.6 to 7 times by year-end.
InvestingPro Insights
To provide additional context to MCB Real Estate's withdrawn offer for Whitestone REIT (NYSE: WSR), let's examine some key financial metrics and insights from InvestingPro.
As of the latest data, Whitestone REIT has a market capitalization of $735.58 million, with its stock trading near its 52-week high. This aligns with MCB's assertion that their $15 per share offer represented a significant premium over recent trading prices.
InvestingPro Tips reveal that Whitestone has maintained dividend payments for 15 consecutive years and has raised its dividend for 3 consecutive years. This consistent dividend history may contribute to the board's confidence in the company's standalone prospects and their reluctance to engage with MCB's acquisition proposal.
The company's P/E ratio stands at 33.78, which InvestingPro categorizes as "trading at a high earnings multiple." This valuation metric could be a point of contention between MCB and Whitestone's board regarding the company's intrinsic value.
Whitestone's revenue for the last twelve months as of Q3 2024 was $149.45 million, with a revenue growth of 4.67%. The company's profitability is evident, with a gross profit margin of 69.48% and an operating income margin of 31.16% for the same period. These solid financial metrics may support the board's stance on the company's standalone value proposition.
It's worth noting that InvestingPro lists 7 additional tips for Whitestone REIT, which could provide further insights into the company's financial health and market position. Investors interested in a more comprehensive analysis may find these additional tips valuable in assessing the situation between MCB and Whitestone.
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