MCB Real Estate Raises Bid to Acquire Whitestone REIT for $1.45 Billion

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Retail Real Estate Giant MCB Pushes for Takeover Amid Booming Demand for Shopping Center Space

In a strategic move, MCB Real Estate has sweetened its offer to acquire Whitestone REIT, a prominent U.S. shopping center operator, raising the bid to $1.45 billion, including debt. The new proposal offers Whitestone shareholders $15 per share in cash, representing a 14.5% premium over Whitestone's share price on June 3, prior to MCB’s initial offer.

MCB, based in Baltimore and currently holding a 9.4% stake in Whitestone, initially offered $14 per share, a proposal that Whitestone rebuffed. David Bramble, MCB’s co-founder, expressed determination in a letter to Whitestone’s board, stating the company’s readiness to expedite due diligence and finalize the agreement. "We ask our fellow shareholders to urge the Whitestone Board to uphold their fiduciary duties and engage with us in good faith without further delay," Bramble emphasized.

The timing of MCB’s bid reflects the broader retail real estate landscape, where landlords like Whitestone have managed to pass rising inflation costs onto tenants. Whitestone's recent performance highlights this trend; during the quarter ending June 30, the company saw a 34% rise in revenues from new leases, amounting to $16.1 million. With limited new construction of retail properties, quality spaces remain in high demand—U.S. shopping center vacancies reached a historic low of 5.3% in Q2 2024, per Cushman & Wakefield.

Despite its strong performance, Whitestone’s shares, which have surged 43% over the past year, are still trading at a discount compared to peers. Currently, Whitestone’s earnings multiple stands at 14.82 times earnings before interest, taxes, depreciation, and amortization (EBITDA), lower than the multiples for Acadia Realty Trust (21.19 times) and Federal Realty Investment Trust (17.73 times), as noted by LSEG data.

MCB has argued that Whitestone’s regional focus and high borrowing costs have constrained its growth compared to larger public REITs. Whitestone, based in Houston, operates 57 shopping centers across Texas and Arizona, managing 5.1 million square feet of gross leasable area. The company’s debt totaled approximately $667 million as of June 30, with an occupancy rate of 93.5%.

MCB’s bid, backed by Wells Fargo for debt financing, represents a blend of equity and debt. MCB remains confident in securing the necessary funding for the acquisition, signaling its commitment to complete the deal. Founded in 2007, MCB manages over $3 billion in assets, spanning industrial, office, retail, and multi-family properties.

Pressure has been mounting on Whitestone’s board, with other shareholders such as Erez Asset Management recently launching proxy fights to nominate new board members. Erez's Chief Investment Officer, Bruce Schanzer, noted, "MCB’s revised offer of $15 per share is compelling enough that it would behoove the Whitestone board to engage with MCB to see if there’s a transaction to be done at or around this level."

Whitestone previously rejected a takeover bid from Fortress Investment Group last year, according to Bloomberg reports.