Value of REIT M&A Deals Rises Significantly Year-to-Date in 2018

 

 

 

“You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur “ . ARE YOU READY TO SELL OR PURCHASE YOUR LAND OR COMMERCIAL BUILDING IN PHOENIX, SCOTTSDALE, MARICOPA COUNTY AND PINAL COUNTY, ARIZONA,  CLICK HERE  AND PLEASE CALL ME.     

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By Mary Diduch, Staff Writer,     OCTOBER 16, 2018

WHILE THE NUMBER OF TRANSACTIONS WAS ROUGHLY THE SAME, REIT M&A VALUE ROSE TO $81.75 BILLION FROM $33.37 BILLION LAST YEAR.

There was roughly the same number of M&A deals in the U.S. REIT sector so far this year compared to last year—but they sure are worth more overall, thanks to Brookfield Asset Management Inc.’s two big recent privatization plays.

REIT M&A activity has totaled $81.75 billion year-to-date as of Oct. 3, according to new data from S&P Global Market Intelligence. During the same period last year, deal volume totaled $33.37 billion.

However, the data showed that there have been 13 deals that either represent “definitive agreements” or have been completed between the start of the year and Oct. 3. Last year, there were 15 deals during the same period. There were 18 deals in all of 2017, totaling $35.61 billion, according to S&P. In 2016, there were 17 deals whose transaction value totaled $40.13 billion.

This uptick in total transaction value is part of the REIT cycle, says Daniel LeBey, a partner in the capital markets and M&A practice at law firm Vinson & Elkins LLP. It has been harder for REITs to raise money in the capital markets, causing REITs to seek other alternatives for liquidity and growth, such as M&As, he says. “In the last couple of years, the REIT IPO market has been challenging and REIT equity capital markets in general have been challenging, so it is not surprising that M&A activity picked up,” LeBey says.

There have been four equity REIT IPOs in 2016, 2017 and 2018, and similar figures in 2014 and 2015, according to industry group Nareit. In 2013, there were 13 equity REIT IPOs.

There was roughly the same number of M&A deals in the U.S. REIT sector so far this year compared to last year—but they sure are worth more overall, thanks to Brookfield Asset Management Inc.’s two big recent privatization plays.

REIT M&A activity has totaled $81.75 billion year-to-date as of Oct. 3, according to new data from S&P Global Market Intelligence. During the same period last year, deal volume totaled $33.37 billion.

However, the data showed that there have been 13 deals that either represent “definitive agreements” or have been completed between the start of the year and Oct. 3. Last year, there were 15 deals during the same period. There were 18 deals in all of 2017, totaling $35.61 billion, according to S&P. In 2016, there were 17 deals whose transaction value totaled $40.13 billion.

This uptick in total transaction value is part of the REIT cycle, says Daniel LeBey, a partner in the capital markets and M&A practice at law firm Vinson & Elkins LLP. It has been harder for REITs to raise money in the capital markets, causing REITs to seek other alternatives for liquidity and growth, such as M&As, he says. “In the last couple of years, the REIT IPO market has been challenging and REIT equity capital markets in general have been challenging, so it is not surprising that M&A activity picked up,” LeBey says.

There have been four equity REIT IPOs in 2016, 2017 and 2018, and similar figures in 2014 and 2015, according to industry group Nareit. In 2013, there were 13 equity REIT IPOs.

S&P’s analysis looked at real estate deals where the buyer or target is a U.S. equity REIT and was limited to deals where 100 percent of the total equity of the target company changed control. S&P calculated total deal value by taking whichever value was reported first: transaction value as reported; deal value including debt assumption; or unavailable deal value.

There were four deals where the as-reported transaction value was not available, so SNL calculated the deal value, including debt assumption.

Likely helping to skew the deal volume amount was Brookfield Asset Management’s privatization moves involving diversified REIT Forest City Realty Trust Inc. and mall REIT GGP Inc. Brookfield Property Partners, the real estate arm of Brookfield Asset Management, completed its acquisition of GGP for $27.15 billion—the costliest transaction so far this year which included debt assumption. Brookfield Asset Management has a initive agreement in place to buy Forest City for $11.4 billion.

Even without these two deals, deal volume would be $43.2 billion—still above the year-to-date total deal value for 2017.

Private investment real estate managers still have a lot of capital committed to real estate that needs to be deployed, triggering a wave of privatization in the REIT space, says Brad Case, senior vice president of research and industry information at Nareit. Meanwhile, private real estate is overvalued. “REITs are undervalued, so it’s very appealing to buy a REIT,” he says. “You’re essentially getting the same real estate assets, but at a better price.”

Case says he wouldn’t be surprised if more aggressive privatization offers for public REITs start to come in, as private equity investors look to complete deals before the gap in valuations closes. “That window is likely to close at some time in the next couple of years,” he says.

According to S&P’s data, four diversified REIT deals made up the largest portion of total deal value year-to-date, with Brookfield’s Forest City buy coming out on top in the group.

Matt Kopsky, a REIT analyst at Edward Jones, says he expects shopping center REITs to see more M&A activity in the future. As the perception grows that retail is improving for high-quality retailers in good centers with strong demographics, “you could start to see larger buyers come into the space and try to make a value play and buy some of these shopping center REITs at discounts,” Kopsky says.

The question remains, though, whether these public REITs would be willing to sell at below net asset values. “There still remains that disconnect, but if these valuation disconnects continue for a longer period of time I think you would get some shareholder pressure to do that for one or two of these companies,” Kopsky says.

SEE IT ALL: https://www.nreionline.com/reits/value-reit-ma-deals-rises-significantly-year-date-2018?NL=NREI-21&Issue=NREI-21_20181016_NREI-21_774&sfvc4enews=42&cl=article_1_b&utm_rid=CPG09000005957475&utm_campaign=16669&utm_medium=email&elq2=58af5289a5a94345bee01ab519fa01e8

“You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur “ . ARE YOU READY TO SELL OR PURCHASE YOUR LAND OR COMMERCIAL BUILDING IN PHOENIX, SCOTTSDALE, MARICOPA COUNTY AND PINAL COUNTY, ARIZONA,  CLICK HERE  AND PLEASE CALL ME.    

Office / Direct : 602-759-1209 , cell: 520-975-5207 or email me walterunger@ccim.net.  ….  VIEW ALL OF WALTERS LISTINGSLet me know if you are interested in Apartments: CLICK HERE FOR APARTMENTS FOR SALE     

Timeline of Arizona from  900 BC – 2017              

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PHOENIX TOPS US IN POPULATION GROWTH (MORE THAN LA, NYC) AND WHY THAT’S GOOD FOR THE ECONOMY, BUSINESS

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“You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur “ . ARE YOU READY TO SELL OR PURCHASE YOUR LAND OR COMMERCIAL BUILDING IN PHOENIX, SCOTTSDALE, MARICOPA COUNTY AND PINAL COUNTY, ARIZONA,  CLICK HERE  AND PLEASE CALL ME.     

Office: 602-445-4113,  Direct : 602-759-1209 , cell: 520-975-5207 or email me walterunger@ccim.net.  ….  VIEW ALL OF WALTERS LISTINGSLet me know if you are interested in Apartments: CLICK HERE FOR APARTMENTS FOR SALE     

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Kasten Long Commercial Group

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Timeline of Arizona from  900 BC – 2017                                                                    

WHY PHOENIX? AMAZING!!!  POPULATION IN 1950 – 350 K PEOPLE; “NOW 5 MIL”. – “5TH. BIGGEST CITY IN USA”

PHOENIX TOPS US IN POPULATION GROWTH (MORE THAN LA, NYC) AND WHY THAT’S GOOD FOR THE ECONOMY, BUSINESS

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DOT – LOOP 202 / SOUTH MOUNTAIN FREEWAY / PHOENIX AZ – UNDER CONSTRUCTION

ARIZONA FACTS – YEAR 1848 TO 2013

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  • DEMOGRAPHIC FACTS ABOUT MARICOPA COUNTY:
  • The average age of the population is 34 years old.
  • The health cost index score in this area is 102.1. (100 = national average)
  • Here are some of the distributions of commute times for the area: <15 min (22.7%), 15-29 min (36.8%), 30-44 min (25.1%), 45-59 min (8.6%), >60 min (6.8%).

PHOENIX PROJECTED AS NUMBER ONE US HOUSING MARKET FOR 2017

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2016 Official Arizona Visitors Guide

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Why Phoenix?  This is a very interesting article, you should read it, amazing, there were only 350 K people living in Phoenix in 1950

Timeline of Phoenix, Arizona history

Phoenix, Arizona

Facts of Arizona – year 1848 to 2013

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Phoenix , AZ 85018

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