Two leading brokers have speculated that there could be a resurgence of M&A activity in the "overcrowded" public real estate market. Jefferies said the fact that share prices of UK REITs were not rising as fast as property prices should drive M&A among the 78 UK listed real estate companies. He said REITs were currently trading at an 11% average discount to the broker's estimates of forward NAVs. "This dislocation should stimulate M&A activity," said Jefferies analyst Mike Prew. "In the current phase of the cycle with cheap and plentiful capital, the most likely form of M&A is management buyouts. Only REIT managements know the intrinsic value of their businesses." Meanwhile, Liberum said consolidation was most likely to occur within specialist sub-sectors such as retail, student accommodation or healthcare. "Increasing specialisation makes it unlikely that M&A will take place for the sake of diversification," the broker said.
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