MCB Real Estate, a leading commercial real estate development and investment management company with a nationally diverse portfolio and approximately $3 billion in assets under management, today presented the value of its proposal to the Board of Directors of Whitestone REIT (NYSE: WSR). I sent a letter encouraging you. Acquire a company in an all-cash transaction. Additional materials regarding this proposal are available at www.MaximizingWhitestoneValue.com.
Under the terms of the amended offer, Whitestone stockholders would receive $15.00 in cash per share, which would represent Whitestone’s stockholders as of June 3, 2024, the last trading day prior to the disclosure of MCB’s previous offer. The amount is the stock price (11.4%) plus a 14.5% premium. This is a premium to Whitestone’s last traded stock price, and a 61.8% premium to Whitestone’s stock price before the Fortress proposal rumored for October 2023. MCB’s proposal is not subject to any financing contingencies.
“As Whitestone’s third-largest shareholder and largest actively managed shareholder, our interests are aligned with the company’s other owners and we are committed to pursuing value-maximizing transactions. We are fully committed,” said P. David Bramble, MCB Managing Partner and Co-Founder. “Although our efforts to engage in constructive discussions have so far been rebuffed, we are prepared to complete our due diligence and enter into a final agreement quickly, and we are committed to seeing this through.” We ask our fellow shareholders to urge the Whitestone Board to uphold its fiduciary duties and engage with the company in good faith without further delay. Masu.”
MCB previously disclosed an offer to acquire Whitestone on June 3, 2024 for $14.00 per share in cash. Since then, Whitestone shares have significantly underperformed Piers 1 and are still trading at about the same value as when MCB submitted its last proposal.
MCB sent the following letter to the Whitestone Board regarding the proposed amendments.
October 9, 2024
board of directors
C/O David K. Hallman
Whitestone REIT
2600 S. Gessner Rd, Suite 500
Houston, Texas 77063
Dear Whitestone REIT Board of Directors:
As a follow-up to conversations following MCB Real Estate’s proposed acquisition of Whitestone REIT filed on June 3, 2024, and based on feedback received from Whitestone stockholders, MCB will acquire all outstanding common stock. We have decided to increase the amount proposed. Whitestone stock includes all outstanding common partnership interests in Whitestone REIT Operating Partnership LP and is valued at $15.00 per share.
The improved all-cash offer of $15.00 per share provides compelling and solid value to Whitestone stockholders as of June 3, 2024, the last trading day prior to disclosure of the previous offer. This represents a 14.5% premium to Whitestone’s stock price and an 11.4% premium to Whitestone’s stock price, which was the last trading day prior to disclosure of the previous offer. % premium to Whitestone’s last traded stock price. Additionally, our offer of $15.00 per share represents a 61.8% premium when compared to Whitestone’s stock price prior to the rumored Fortress acquisition. Whitestone has not closed above $15.00 per share since 2016. As Whitestone’s third largest shareholder and largest actively managed shareholder, with 4,690,000 shares representing 9.4% of Whitestone’s common stock, our interests are aligned with those of our other shareholders. We are committed to maximizing shareholder value and believe this proposal represents the most attractive opportunity to achieve that goal.
Over the past few months, since the first proposal was disclosed on June 3, 2024, Whitestone’s stock price has significantly underperformed Peer 1 and is still trading at roughly the same level as when MCB submitted its last proposal. has been done.
Since the disclosure of our initial offer on June 3, 2024, Whitestone’s stock price has increased by 2.8%, while its peer’s stock price has increased by 17.7% (see Figure 1). Whitestone stock has declined 2.4% since the company’s Q2 2024 earnings report, while its peers have increased 4.0%. Whitestone’s current consensus NTM FFO multiple is 12.8x, 2.3x lower than its peers. This multi-turn discount is in line with historical averages and is a significant increase from the 0.4 multi-turn discount in the previous proposal. This trading discount reflects Whitestone’s small capitalization, low trading float, limited growth prospects, and lower overall asset quality relative to its peer group.
Whitestone is at a cost of capital disadvantage compared to its public-private peers. MCB believes the company trades at a cap rate of 7.7% based on trailing 12-month NOI of approximately $102 million. Our cost of borrowing under the Corporate Credit Facility is SOFR+1.70%, which corresponds to a borrowing rate of more than 6.5% at current SOFR rates. Additionally, to preserve capital for our growth efforts, we reduced our dividend in April 2020 and our dividend yield is lower than most of our peers, also supported by retail and income. This shortfall will likely continue to limit future stock price appreciation. oriented investor. High costs of equity and borrowing make it difficult for Whitestone to raise new capital to fund acquisitions, development, redevelopment, or tenant acquisitions and asset repositioning. . These are the fundamental drivers of value creation for shareholders and explain why we should not go public.
Since making our initial offer, we have heard from a number of shareholders who support the potential transaction and want the Whitestone Board to engage with us. During that time, we have repeatedly attempted to work with Whitestone’s management toward a transaction that maximizes value for Whitestone’s shareholders. The Company is currently offering a per share price that is higher than Whitestone’s stock’s closing price at any point in the last eight years.
Although our efforts have been rebuffed to date, we strongly believe this is the right path for our shareholders and we remain committed to completing the proposed transaction. We are confident that with our engagement and diligence, we will be able to quickly reach an agreement on a transaction that will deliver significantly greater value to Whitestone’s stockholders than could be achieved if Whitestone continued on its current course. Masu.
The acquisition will be financed through a combination of equity and debt. The Company’s anticipated capital for this transaction will be fully funded from discretionary capital managed by MCB. Regarding the debt portion of the acquisition, the Company has received a letter of high confidence from Wells Fargo regarding the debt financing required to complete the transaction, which is expected to be converted to a full commitment upon execution of the definitive transaction agreement. is. A highly confident letter was attached to the original proposal and was reaffirmed by Wells Fargo. The definitive transaction agreement between us is not subject to any financing contingency. Wells Fargo representatives are available to answer any questions you may have regarding the proposed debt financing.
MCB is a trusted leader in commercial real estate investments with a track record of high-performing investments across the United States. We have extensive resources and access to capital, and a consistent track record of successfully completing complex commercial real estate transactions. Based on our knowledge of the industry and publicly available data about your portfolio and financial performance, we believe that our $15.00 per share improvement proposal is a very attractive offer.
We have reviewed this potential transaction in detail with our investment committee and have received their full support to submit this proposal. A binding offer to us on behalf of MCB is subject to final approval by our investment committee. No binding obligations or commitments will be created by either of us with respect to this Proposed Revision or any transaction until we have executed a mutually agreeable definitive agreement.
We remain very enthusiastic about the Whitestone acquisition and intend to immediately commit resources to move it forward quickly. If you have any questions, please feel free to call us.
Sincerely,
/s/ P. David Bramble
P. David Bramble, Managing Partner
cc:
By email, with a separate cover:
Peter Pinkard, Managing Partner
Gina Baker Chambers, President
Principal Drew Gorman
Mike Trail, Chief Investment Officer
Brian Mendel, Managing Director
Daniel Levey, Vinson & Elkins LLP
1 Peers are defined as AKR, BRX, FRT, IVT, KIM, KRG, PECO, REG, ROIC, UE.
advisor
MCB has retained Vinson & Elkins LLP as lead counsel in connection with this transaction. Wells Fargo is acting as financial advisor to MCB.
About MCB Real Estate
Founded in 2007, MCB Real Estate is a private, community-focused institutional investment management firm headquartered in Baltimore, Maryland. MCB boasts a national portfolio of $3 billion in assets under management totaling approximately 15 million square feet. The development pipeline includes approximately 4 million square feet of industrial, office, retail, mixed-use, multifamily, and life sciences properties. The company provides a seamlessly integrated suite of commercial real estate investment services including development, construction, property management, asset management, acquisitions and legal expertise, providing comprehensive support through every stage of an asset’s lifecycle. I guarantee it. www.mcbrealestate.com.
