Help with understanding a rights issue £whr

Tuesday, Mar 19 2019 by

Dear Stockcommunity,

I was hoping one of you kind folk could help me.

One of my holdings, Warehouse REIT (LON:WHR) has launched a 2 for 5 rights issue at a price of 103p per share.
The current share price (offer) is 103 which is the same as the rights price.
I expect the true price I can execute at is somewhere between 102 and 103

Should I be indifferent to taking up the rights versus buying the same number of shares in the open market?
For that question, let's assume there are no transaction costs.

In reality, I would incur commission and stamp duty, which may explain the difference between rights price and market price.

Separate question - to me it is pretty rare for a REIT to issue new shares at a premium to market price (still a discount to NAV). Is it naive to think this is a good sign or at least a signal of institutional confidence?

Many thanks in advance for your insights

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Warehouse REIT plc is a United Kingdom-based closed-ended investment company. The Company intends to invest in a diversified portfolio of the United Kingdom located warehouse assets. The Company seeks to hold a diversified portfolio of freehold and long leasehold warehouse assets, including warehouses in the industrial or manufacturing, storage and distribution, trade-counter and retail warehouse sub-sectors. Its subsidiaries include Tilstone Holdings Limited and Tilstone Warehouse Holdco Limited. Its Tilstone Property Portfolio comprises 27 freehold and long leasehold properties, located throughout the United Kingdom. The Company has seven indirect wholly owned subsidiaries, including Tilstone Industrial Limited, Tilstone Trade Limited, Tilstone Retail Limited, Tilstone Industrial Warehouse Limited, Tilstone Retail Warehouse Limited, Tilstone Glasgow Limited and Tilstone Basingstoke Limited. more »

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4 Posts on this Thread show/hide all

andrea34l 19th Mar 1 of 4

For this question, I think you shouldn't exclude transaction costs as this is the differentiation between whether it is more cost efficient to buy in the market or via the open offer. Note, you would not incur stamp duty as this trust is quoted on AIM.

Having come to the market less than 2 years ago it seems a bit odd that they are raising so much money again so soon. But perhaps conditions really are as buoyant as they say.

Maybe this makes the question for you easier as to whether you actually want to make an additional investment in this trust... for if you are not sure, then it doesn't seem to matter all that much whether you invest in the offer or outside it.

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sharmvr 19th Mar 2 of 4

Thanks Andrea - appreciate the feedback.
Was excluding transaction costs for sake is simpler.
I think the whole sector of last mile warehousing is a big growth area. The idea was to have the dividends compound, with awareness that there will be rights issues, which is par for the course with REITs.
As you point out was not expecting something this soon, especially since it is a relatively new position for me and I would rather have more time to watch / get comfortable with before adding.

Thanks again for your help - have a great evening

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Laughton 19th Mar 3 of 4

In reply to post #459658

No need to add. Being a REIT you're not really getting diluted in the same way as you would be with a "regular" shareholding. That's assuming that they've already identified assets to buy at similar or better yields.

Yes, you'll effectively have a smaller share of the company but the NAV should increase so that your smaller share will be worth the same.

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sharmvr 21st Mar 4 of 4

In reply to post #459703

Had to read that a few times but it makes sense now.
Thanks very much.

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