TSX:ERE.UN - Post by User
Post by
incomedreamer11on Dec 21, 2023 11:26am
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Post# 35795795
Scotia comments
Scotia comments(1) No Deal: Yesterday (after market close), ERE.UN (European Residential REIT) announced that the strategic review has been concluded with no transaction as there was a gap between buyers and sellers expectations. This is not the ideal outcome for unitholders and therefore we expect ERE unit price to trade sideways in the near-term. We continue to see value but recognize that a fair bit of patience is required on the name. For now, we are keeping our rating and target unchanged.
ERE strategic review concluded with no result: It was interesting to see that a number of transaction proposals were received but none of them met expectations. We have previously mentioned that a 5% cap rate on residential portfolio could have landed a $3.50 purchase price (at which we could have seen a transaction). Perhaps, the bids would have come in at mid-5% range or so (or higher), which is also closer to the current price in public markets. We think regulatory uncertainty might have also played a part in lack of M&A in the mulit-family sector. Now that the review is over, ERES is back to the basics i.e. focus on operations and reduce leverage over time. However, value creation is going to take a longer time in this scenario.