Saba has set its sights on a new target – rental property landlord Grainger (GRI). It echoes its campaign at fellow London-listed REIT Workspace Group (WKP), where it has requisitioned to replace the board with its own nominees and push ahead with a managed wind down.

Both companies have attracted the attentions of the US hedge fund due to their entrenched wide discounts to net asset value (NAV) of around 50%. We are assuming that Saba will follow a similar playbook at Grainger: build a large stake – currently 5% mainly held through the use of derivatives – write an open letter to the chairman to agitate for change and gee up frustrated shareholders with the promise of speedy, but in our view unrealistic, sales timeframes, then requisition the board for failing to dance to its tune.

In Workspace’s case, a dominant shareholder may hold the key to its future. London & Amsterdam Trust – a Cayman Islands-based company owned by British real estate developer Nicholas Roditi – holds 29% of the shares and, perhaps tellingly, upped its position following Saba’s initial open letter. Workspace’s board has yet to respond in earnest to the requisition.

As for Grainger, another high-profile shareholder could have an influence on proceedings. High street mogul Mike Ashley has built up a 4.2% position but has not yet disclosed his plans for the company, if any.

Neither Saba nor Ashley are the shy, retiring type – so things could get interesting here.

Saba’s questionable tactics

Unlike its assault on investment companies, where it has looked to take over investment mandates – with mixed success, in real estate it seems to be targeting those on very wide and embedded discounts believing that sweeping sales of their portfolios would yield greater shareholder returns.

In theory, this makes sense. One would hope that if Grainger and Workspace were to sell their portfolios today, they would achieve close to NAV – that after all is the basis on which their properties are valued. But in reality, it is not as straightforward as that.

Firstly, the investment market is currently in a state of paralysis, which is being blamed on the ongoing war in the Middle East, with the few buyers out there falling short of vendors’ expectations. Secondly, announcing to the world that you are, in effect, a forced seller is not the best laid plan for maximising value.

However, with discounts narrowing in the investment companies sector, expect Saba to put its firepower to work at more real estate companies where the disconnect between share price and NAV is wider.

Both Grainger and Workspace have had issues – hence their share price ratings – even before the recent real estate selloff. Grainger’s earnings yield has been too low for too long, while Workspace has lost its way and struggled to fill vacancies.

Many Workspace shareholders would have heard from new chief executive Charlie Green for the first time this week as he delivered the company’s annual results. I’m sure most people in the room or tuning in to the presentation were, like me, impressed by his energy and passion for the sector – it was sure to have made Saba’s Boaz Weinstein sit up and take notice.

Having heard the flexible office veteran’s plans to turn around the company, most shareholders will hopefully give him the chance to execute it.

He talked of positioning Workspace as the leader in the ‘best-value’ category of flexible office, pitching its spaces to SMEs and scale-up businesses under the premium segment, which is saturated with players such as Fora (Green’s old stomping ground) and WeWork.

High on the priority list is upgrading buildings to offer more amenities, including more profitable meeting rooms (where he says just 55% utilisation would cover the equivalent achievable office rent on the same space), which should result in greater operating margin. £30m of its £45m annual capex projection has been earmarked for the value-add improvements, which are expected to deliver a mid-teens yield-on-cost.

It will also look to increase its ‘managed office’ offering, which includes the landlord taking care of utilities and maintenance for customers. This space can attract a 30-40% premium to simply renting out the space.

To accommodate the larger capex, the company has upped its near-term £200m disposal target by £100m+. Green was confident that evidence of the turnaround’s success would start to be seen fairly quickly, with an immediate task of sorting out the group’s complex leasing structure an easy win.

Grainger, too, is cognisant of the need to improve shareholder returns, and has a plan in place to grow earnings by 34% by 2029. It hopes to achieve this by letting up its committed development pipeline, with its target factoring in higher interest rates at debt refinancings and the planned disposal of £900m of assets.

In our view, both companies should be given the time to execute on their respective plans – and continue to give investors public market access to what are niche property sectors.

Picton shareholders being short changed?

When the board of Picton Property (PCTN) gave up the ghost at the start of the year, few (including myself) thought it would be considering an offer of 78.2p – not even 1% higher than the price it was trading at when it hoisted the for-sale sign. Afterall, the chairman Francis Salway bemoaned the unfair, persistent discount to NAV that the market had priced the company’s shares when he launched the sales process in January.

Yes, a lot has happened in that time, with real estate share prices tumbling on the expectation of a spike in interest rates as a surge in oil prices pushed up inflation expectations. But surely this is more reason to postpone the sale of the company.

Following the launch of the strategic review, Picton’s shares reached 89.1p in mid-February, when market conditions were set fair. Even after the war in the Middle East threw that off course, the share price was around 82p in mid-April.

With the bidding consortium – LondonMetric (LMP) and Schroder REIT (SREI) – seeing their share prices fall since the deal was announced on 12 May, the deal now values Picton at 76.1p per share or £392m. This is 25.5% below its NAV of 102.2p per share at 31 March 2026.

When the sales process was launched, Picton’s shares traded on a 24.0% discount and Salway stated that this did not “fully reflect the underlying quality and performance of the business”. I completely agree.