Shares of PS Business Parks (PSB), a real estate investment trust (REIT) that owns industrial, office, and apartment properties, rose a dramatic 13% on Monday. The big news was the pre-market announcement that the REIT had agreed to be taken private.
Affiliates of Blackstone (BX -3.95%) have agreed to purchase the outstanding shares of PS Business Parks for $187.50 in an all-cash deal. This comes roughly a week after affiliates of the giant asset manager agreed to buy American Campus Communities in a roughly $13 billion deal. The PS Business Parks transaction reflects a 15% premium to the REIT's average value over the previous 60 days. The board of directors has approved the deal, and it is being supported by Public Storage, which owns nearly 26% of the REIT.
The deal as currently outlined is expected to close in the third quarter. That said, PS Business Parks has a 30-day go-shop period in which it can try to find someone willing to provide it with a better offer.
In the agreement, PS Business Parks will be able to pay $1.05 in dividends prior to the consummation of the currently proposed deal. So the full value of the shares is more like $188.55, which is roughly where the stock is trading today. Normally there is a slight discount between a company's share price and the offer price following a deal, which suggests either that investors think the likelihood of the deal taking place is a near certainty or that Wall Street thinks PS Business Parks might actually find another buyer.
For current shareholders, this all-cash deal seems to be fully reflected in the price. Unless you believe another, higher offer is in the cards, selling now to lock in profits might be a worthwhile consideration.
That said, the more interesting thing about the deal is probably that Blackstone has agreed to buy yet another REIT so soon after announcing its last deal. That suggests that at least some public REITs are trading for less than what institutional investors think they are worth.