Activist investor Boaz Weinstein, founder of Saba Capital, is exerting pressure on Workspace, a London-based flexible office landlord and FTSE 250 company, to sell off its extensive $4 million square feet of London properties and replace six non-executive directors, including the chair. Saba Capital, which is Workspace's second-largest shareholder with an 18.2% and then later a 24.7% stake, argues that the company's shares are trading at a 45% to 50% discount to the book value of its portfolio, and selling assets would unlock significant value for shareholders. This intervention comes amidst an uncertain period for commercial property, influenced by evolving work trends and the impact of AI on office demand.
Saba Capital's campaign began in January, with a public letter demanding capital returns through sales. This was swiftly followed by the resignation of Workspace's chief executive, Lawrence Hutchings, and the appointment of Charlie Green. Saba has proposed an accelerated disposal program and share buybacks as an alternative to Workspace's current strategy, which involves reinvesting disposal proceeds into property upgrades to foster long-term earnings growth. Saba identifies a three-phase disposal roadmap covering 56 assets, arguing its plan would generate value more quickly and with less execution risk.
Workspace, however, has rejected Saba's proposal to wind down the company over a 12-month period, deeming it unachievable and not in the best interest of all shareholders. The company confirmed it is reviewing Saba's recent letter and stands by its new strategy, announced alongside its annual results, which focuses on becoming an "earnings-focused business." Workspace has urged its shareholders to take no action in response to Saba's demands while it prepares a full response, emphasizing that its shares have fallen 60% since 2021 and reported a $120 million loss, reflecting broader challenges in the commercial real estate sector. The situation highlights ongoing struggles in the commercial real estate sector, where flexible office models face headwinds from hybrid work adoption, making them targets for activist investors due to undervalued assets.
