Reit mergers: Is NAV a useful guidepost of value?

LAST week, this column delved into the proposed merger of Frasers Logistics & Industrial Trust and Frasers Commercial Trust, and concluded that the transaction will benefit FLT at the expense of FCOT. The key point of contention was that FLT will be issuing new units priced at a steep premium to its net asset value to acquire units in FCOT priced at a much-lower premium to its NAV.

So, would the merger of FLT and FCOT be any fairer if their NAVs, instead of their market prices, were used as a guidepost in setting their valuations for the transaction? Many investors would reflexively disagree with such an idea.

In the first place, the whole point of Reits (real estate investment trusts) being listed is for them to be priced by the public market.