Proposal Would Deliver Immediate and Certain
14.5% Premium to Whitestone Shareholders Compared to
Share Price Prior to Initial Proposal
Per Share Price Represents a 61.8% Premium to
Whitestone's Unaffected Share Price Prior to Takeover
Rumors
Sends Letter to Whitestone Board
Detailing Compelling and Certain Value of All-Cash Proposal
Launches www.MaximizingWhitestoneValue.com
BALTIMORE, Oct. 9, 2024
/PRNewswire/ -- MCB Real Estate ("MCB"), a leading commercial
real estate developer and investment management firm with a diverse
nationwide portfolio and approximately $3
billion in AUM, today sent a letter to the Board of Trustees
of Whitestone REIT (NYSE: WSR) ("Whitestone") increasing the value
of its proposal to acquire the company in an all-cash transaction.
Additional materials regarding the proposal are available at
www.MaximizingWhitestoneValue.com.
Under the terms of the revised proposal, Whitestone shareholders
would receive $15.00 per share in
cash, representing a 14.5% premium to Whitestone's share price as
of June 3, 2024, the last trading day
prior to the disclosure of MCB's previous proposal, a 11.4% premium
to Whitestone's last trading share price, and a 61.8% premium to
the Whitestone share price prior to the rumored Fortress proposal
in October 2023. MCB's proposal is
not subject to any financing contingency.
"As the third largest Whitestone shareholder and largest
actively managed shareholder, our interests are aligned with the
company's other owners and we are committed to pursuing a
transaction that maximizes value," said MCB Managing Partner and
Co-Founder P. David
Bramble. "Our efforts to engage in constructive
discussions have been rebuffed to date, but we stand ready to
complete due diligence and execute a definitive agreement
expeditiously and are committed to seeing this through to
completion. We ask our fellow shareholders to urge the Whitestone
Board to uphold their fiduciary duties and engage with us in good
faith without further delay."
MCB previously disclosed a proposal to acquire Whitestone for
$14.00 per share in cash on
June 3, 2024. Since then, Whitestone
stock has notably underperformed its Peers1 and is still
trading at approximately the same value as when MCB submitted its
previous proposal.
MCB sent the following letter to the Whitestone Board regarding
the revised proposal:
October 9, 2024
Board of Trustees
C/O David K. Holeman
Whitestone REIT
2600 S. Gessner Rd, Suite 500
Houston, TX 77063
Dear Whitestone REIT Board of Trustees:
As a follow-up to our conversations following the MCB Real
Estate ("MCB" or "we") offer to acquire Whitestone REIT
("Whitestone" or the "Company"), submitted on June 3, 2024, and based on feedback we received
from Whitestone shareholders, MCB is hereby increasing its offer to
acquire all of the outstanding common shares of Whitestone,
including all of the outstanding common partnership interests ("OP
Units") in Whitestone REIT Operating Partnership, L.P. (the "OP"),
to a price of $15.00 per share (the
"Revised Proposal").
The improved $15.00 per share
all-cash proposal provides compelling and certain value to
Whitestone shareholders, representing a 14.5% premium to
Whitestone's share price as of June 3,
2024, the last trading day prior to the disclosure of our
previous proposal, and a 11.4% premium to Whitestone's last trading
share price. In addition, relative to the Whitestone share price
prior to the rumored Fortress offer, our $15.00 per share proposal represents a 61.8%
premium. Whitestone has not closed above $15.00 per share since 2016. As the third largest
Whitestone shareholder and largest actively managed shareholder,
with 4,690,000 shares representing 9.4% of Whitestone's common
shares, our interests are aligned with other shareholders. We are
focused on maximizing shareholder value and are confident that this
proposal is the most compelling opportunity to achieve that
goal.
Over the past few months since the initial proposal was
disclosed on June 3, 2024,
Whitestone's stock has noticeably underperformed its
Peers1, still trading at approximately the
same level as when MCB submitted the previous proposal.
- Whitestone's share price has increased 2.8% since our initial
proposal was disclosed on June 3,
2024, while Peer share prices have risen 17.7% (see Figure
1).
- Whitestone's share price has decreased 2.4% since the report of
its second quarter 2024 earnings results, while Peer share prices
have increased 4.0%.
- Whitestone's current 12.8x consensus NTM FFO multiple is 2.3
multiple turns lower than the Peers. This multiple discount is
consistent with historical averages and has expanded significantly
from the 0.4 multiple turns discount at the time of the previous
proposal. The trading discount is reflective of Whitestone's small
capitalization and trading float, limited growth prospects and
weaker overall asset quality relative to the Peer group.
(See figure 1)
Whitestone is burdened with a cost of capital disadvantage
relative to its public and private peers. MCB believes that the
Company is trading at a cap rate, based on last twelve months NOI
of approximately $102 million, of
7.7%. The Company's cost of borrowing, based on its corporate
credit facility, is SOFR+1.70%, which equates to a borrowing rate
above 6.5% with today's SOFR rate. In addition, to preserve capital
for growth initiatives, the Company cut its dividend in
April 2020 and has a lower dividend
yield than the majority of Peers, which will also continue to limit
future share price appreciation due to the lack of support from
retail and income-oriented investors. The expensive cost of equity
and cost of borrowing make it a challenge for Whitestone to raise
any new capital to fund acquisitions, developments or
redevelopments, or tenant buyouts and asset repositioning. These
are the fundamental drivers of value creation for shareholders and
illustrate why the Company should not remain public.
Since making our initial proposal, we've heard from a number of
shareholders that they are supportive of a potential transaction
and would like to see the Whitestone Board engage with us. During
that time, we have attempted on numerous occasions to engage with
the Whitestone management team to work toward a transaction that
would maximize value for Whitestone shareholders. We are now
delivering a per share proposal price that is higher than where
Whitestone shares have closed at any point in over eight years.
While our efforts have been rebuffed to date, we remain
committed to seeing our proposed transaction through to completion
as we strongly believe this is the right path forward for
shareholders. We are confident that with engagement and diligence,
we can quickly reach agreement on a transaction that delivers far
more value for Whitestone shareholders than they could achieve if
Whitestone stays on its current course.
We expect to fund the acquisition with a combination of equity
and debt. Our contemplated equity for this transaction is fully
committed from discretionary capital managed by MCB. With respect
to the debt portion of the acquisition, we have received a Highly
Confident Letter from Wells Fargo with respect to the debt
financing needed to complete the transaction, to be converted to a
full commitment at execution of the definitive transaction
agreements. The Highly Confident Letter was attached to the
original proposal and has been reaffirmed by Wells Fargo. Any
definitive transaction agreement between us and the Company would
not be subject to a financing contingency. Representatives of Wells
Fargo are available to address any questions you may have on the
proposed debt financing.
MCB is a trusted leader in commercial real estate investment
with a track record of high-performance investments throughout
the United States. We have
considerable resources and access to capital, and a consistent
track record of successfully closing complex commercial real estate
transactions. Based on our knowledge of the industry and public
data regarding your portfolio and financial performance, we are
confident our improved $15.00 per
share offer represents an extremely compelling proposal.
We have reviewed in detail this potential transaction with our
Investment Committee and have received full support to submit this
proposal. Any binding offer for the Company on behalf of MCB would
require the final approval of our Investment Committee. No binding
obligation or commitment for either of us will arise with respect
to this Revised Proposal or any transaction until we have executed
a mutually agreeable definitive agreement.
We remain very enthusiastic about an acquisition of Whitestone
and will immediately commit the resources to expeditiously move
forward. Please do not hesitate to call me if you have any
questions.
Sincerely,
/s/ P. David Bramble
P. David Bramble, Managing
Partner
cc:
Via email, under separate cover:
Peter Pinkard, Managing
Partner
Gina Baker Chambers, President
Drew Gorman, Principal
Mike Trail, Chief Investment
Officer
Brian Mendell, Managing Director
Daniel LeBey, Vinson & Elkins
L.L.P.
1 Peers defined as AKR, BRX, FRT, IVT, KIM, KRG,
PECO, REG, ROIC, UE.
Advisors
MCB has engaged Vinson & Elkins LLP as lead counsel in
connection with the transaction. Wells Fargo is serving as financial advisor to
MCB.
About MCB Real Estate
Founded in 2007, MCB Real Estate is a community-centric,
privately held institutional investment management firm
headquartered in Baltimore,
Maryland. MCB boasts a nationwide portfolio of $3 Billion Assets Under Management totaling
approximately 15 million square-feet. of industrial, office,
retail, mixed-use, multi-family and life sciences properties with
almost four million square-feet in its development pipeline. The
firm offers a seamlessly integrated suite of commercial real estate
investment services, including development, construction, property
management, asset management, acquisitions, and legal expertise,
thus ensuring comprehensive support throughout every stage of an
asset's lifecycle. www.mcbrealestate.com.
Media Contacts
Andrew Siegel / Lucas Pers / Lyle
Weston
Joele Frank, Wilkinson Brimmer
Katcher
212-355-4449
View original content to download
multimedia:https://www.prnewswire.com/news-releases/mcb-real-estate-increases-proposal-to-acquire-whitestone-reit-to-15-00-per-share-in-cash-and-seeks-board-engagement-302271549.html
SOURCE MCB Real Estate