5 June 2025
If you are covering the news that Unite Group has made an offer to acquire Empiric, please find below a comment from Oli Creasey, head of property research at Quilter Cheviot:
“Today’s announcement of a possible tie-up between Unite Group and Empiric Student Property is the latest in a string of M&A transactions in the publicly listed property space, with Care REIT, Urban Logistics REIT, Warehouse REIT, Tritax Eurobox, and Assura PLC either recently closed or in advanced negotiations. And while Care REIT and Warehouse REIT represent all cash offers from foreign buyers, the other two look likely to be taken over by other UK REITs seeking to consolidate within the sector.
“Unite’s offer for Empiric, which is approximately 30% cash and 70% Unite shares, is another example of consolidation in a sector where scale has been difficult to build in recent years. With REITs almost universally trading at discounts to NAV for some time, raising new equity has been a challenge as any new shares would be dilutive from an NAV perspective. Some companies have been able to make an equity raise work, but the acquisition of another public company, especially one in the same sub-sector and trading at a similar discount, is an easier sell to shareholders. Scale increases share liquidity, but also unlocks economies of scale and synergies. While Empiric has made considerable improvements in recent years, we would expect that Unite’s best-in-class systems could further optimise pricing and rental revenues from Empiric’s properties.
“The other angle here are the private equity bargain hunters. Small cap REITs are increasingly being targeted with all cash offers that may offer a premium to the previous share price, but still value the company below NAV, and permanently remove the share capital from the public markets. Both the would-be buyers and sellers in a deal like this might be increasingly aware that the target might not be available indefinitely, and perhaps the battle over Assura between KKR and Primary Health Properties has reminded Unite that pre-empting a cash bid with a share-for-share takeover is the best way to ward off that kind of interest. To be clear, we are not aware of any private interest shown in Empiric, but Unite may have decided to make its move before another potential buyer has a chance to start making enquiries.”
