Real estate investment trust (REIT) LXP Industrial Properties (LXP 1.23%) ended the week on a serious down note. On Friday, the company's stock dived by more than 14% on a sudden reversal in business strategy that disappointed investors.
LXP announced in an official press release that it is no longer evaluating "strategic alternatives." That comes exactly two months after the REIT announced it was initiating such a review. Among other options the company was to consider was a merger with another company, and a sale.
When the move was originally announced, LXP quoted CEO T. Wilson Eglin as saying:
Over the last five years, we have successfully transformed LXP into a leading, predominantly single-tenant industrial REIT with a much stronger and more valuable portfolio. With this transformation substantially complete, we believe now is an opportune time to launch a comprehensive process to determine the best path to drive shareholder value.
But apparently the best path is to make no move at all.
In its Friday press release announcing the cancellation, the company said that during its evaluation, "multiple potential counterparties" were generally positive about LXP's current portfolio and its transformation efforts. However, on the down side they expressed concern about "significant changes to macroeconomic, geopolitical, and financing conditions" since the start of the review.
Given that, LXP is opting to remain an independent company for now.
Such "strategic reviews" raise shareholder hopes that a company will be sold at a premium to an eager investor. So it's not shocking that investors would react so negatively to LXP's abandonment of the same.
Although it's not one of the more popular REITs on the scene, LXP does operate in a segment that's hot right now (warehouse/distribution). It's also showing decent if unspectacular revenue growth, and pays a dividend with a not-bad-for-a-REIT 3.1% yield. Investors, then, shouldn't necessarily bail out of the stock just because the company's abandoning its search for a suitor.