REITs in U.S. Seen as Ripe for Takeovers With Activism Climbing
2015-01-06 21:44:40.321 GMT
By Brian Louis
(Bloomberg) -- Takeovers among U.S. real estate investment
trusts are poised to accelerate as shareholder activism
increases and executives become more receptive to deals,
according to research firm Green Street Advisors LLC.
The number of transactions involving sizable REITs, through
mergers of public companies or privatizations, has plunged
almost 80 percent in the past seven years compared with 2000 to
mid-2007, when there were 32 deals, Newport Beach, California-
based Green Street said in a report. Conditions “now appear
ripe” to end the drought, the firm said.
The rise of activist investors in the industry, including
hedge-fund manager Jonathan Litt of Land & Buildings Investment
Management, is boosting the likelihood of more deals. REITs also
may go private amid “insatiable demand” for U.S. real estate
from buyers such as sovereign-wealth funds, Green Street said.
Apartment landlord Associated Estates Realty Corp. and mall
owner Pennsylvania Real Estate Investment Trust, both targets of
Litt’s, are top contenders for takeouts, the firm said.
“The biggest catalyst for revived activity is today’s new
breed of activist investor,” Green Street Chairman Mike Kirby
and analyst Peter Rothemund wrote in the report. “The recent
activist-induced changing of the guard at Equity Commonwealth
(the entire board and management team were replaced) was a
bellwether deal for the industry, as decades have passed since
activists have been so successful in forcing a change of control
that would otherwise not have transpired.”
CommonWealth Ouster
The board of what was then known as CommonWealth REIT was
ousted last year after a yearlong campaign by Related Cos. and
Corvex Management LP. The investors claimed that the company had
conflicts of interest and was making high-priced acquisitions
while selling real estate at low prices. The company changed its
name to Equity Commonwealth after a new board was installed and
elected billionaire investor Sam Zell as chairman.
Litt has been involved in pressuring for change at BRE
Properties Inc., which later was taken over by Essex Property
Trust Inc. and Mack-Cali Realty Corp., whose chief executive
officer eventually resigned. Associated Estates, one of his
targets, has about 90 percent odds of being taken over, while
Penn REIT has about a 50 percent chance, Green Street said.
Associated Estates last month added a former top executive
of Equity Residential to its board and said it hired an adviser
to review its business as it seeks to fend off a proxy fight
with Litt.
‘Swan Song’
“As a matter of policy, AEC does not engage in
speculation, nor does the company comment on speculation by
others,” Andrew Siegel, a spokesman for Associated Estates,
said in an e-mail today.
Heather Crowell, a spokeswoman for Philadelphia-based Penn
REIT, didn’t immediately respond to a voice mail seeking comment
on the report.
The aging of company leaders and their firms who went
public in the 1990s may lead some to be more open to selling
“as a swan song takes on increased appeal,” according to the
Green Street report. Private-market buyers also may be willing
to pay premiums to net asset value, the firm said.
Blackstone Group LP, the largest private-equity real estate
investor, may be an indicator of such deals. The company late
last year canceled plans to take its IndCor Properties Inc.
warehouse unit public as a REIT and instead opted to sell it to
investors including Singapore’s GIC Pte for $8.1 billion.
“In the U.S., I think when interest rates move up, you
could easily see the stock prices of REITs trade off,” Jonathan
Gray, Blackstone’s global head of real estate, said in a Nov. 13
interview on Bloomberg Television’s “Market Makers” program
with Erik Schatzker and Stephanie Ruhle. “That could create
privatization opportunities.”
For Related News and Information:
Associated Estates Hires Adviser Amid Investor’s Criticism (2)
Malls in U.S. Offer Discount That’s Not for Customers: Real M&A
GIC to Buy Blackstone’s IndCor Properties for $8.1 Billion (2)
Top real estate stories: TOPR <GO>
Merger and acquisitions monitor: MA <GO>
--With assistance from Hui-yong Yu in Seattle.
To contact the reporter on this story:
Brian Louis in Chicago at +1-312-443-5920 or
blouis1@bloomberg.net
To contact the editors responsible for this story:
Kara Wetzel at +1-415-617-7318 or
kwetzel@bloomberg.net
Daniel Taub
2015-01-06 21:44:40.321 GMT
By Brian Louis
(Bloomberg) -- Takeovers among U.S. real estate investment
trusts are poised to accelerate as shareholder activism
increases and executives become more receptive to deals,
according to research firm Green Street Advisors LLC.
The number of transactions involving sizable REITs, through
mergers of public companies or privatizations, has plunged
almost 80 percent in the past seven years compared with 2000 to
mid-2007, when there were 32 deals, Newport Beach, California-
based Green Street said in a report. Conditions “now appear
ripe” to end the drought, the firm said.
The rise of activist investors in the industry, including
hedge-fund manager Jonathan Litt of Land & Buildings Investment
Management, is boosting the likelihood of more deals. REITs also
may go private amid “insatiable demand” for U.S. real estate
from buyers such as sovereign-wealth funds, Green Street said.
Apartment landlord Associated Estates Realty Corp. and mall
owner Pennsylvania Real Estate Investment Trust, both targets of
Litt’s, are top contenders for takeouts, the firm said.
“The biggest catalyst for revived activity is today’s new
breed of activist investor,” Green Street Chairman Mike Kirby
and analyst Peter Rothemund wrote in the report. “The recent
activist-induced changing of the guard at Equity Commonwealth
(the entire board and management team were replaced) was a
bellwether deal for the industry, as decades have passed since
activists have been so successful in forcing a change of control
that would otherwise not have transpired.”
CommonWealth Ouster
The board of what was then known as CommonWealth REIT was
ousted last year after a yearlong campaign by Related Cos. and
Corvex Management LP. The investors claimed that the company had
conflicts of interest and was making high-priced acquisitions
while selling real estate at low prices. The company changed its
name to Equity Commonwealth after a new board was installed and
elected billionaire investor Sam Zell as chairman.
Litt has been involved in pressuring for change at BRE
Properties Inc., which later was taken over by Essex Property
Trust Inc. and Mack-Cali Realty Corp., whose chief executive
officer eventually resigned. Associated Estates, one of his
targets, has about 90 percent odds of being taken over, while
Penn REIT has about a 50 percent chance, Green Street said.
Associated Estates last month added a former top executive
of Equity Residential to its board and said it hired an adviser
to review its business as it seeks to fend off a proxy fight
with Litt.
‘Swan Song’
“As a matter of policy, AEC does not engage in
speculation, nor does the company comment on speculation by
others,” Andrew Siegel, a spokesman for Associated Estates,
said in an e-mail today.
Heather Crowell, a spokeswoman for Philadelphia-based Penn
REIT, didn’t immediately respond to a voice mail seeking comment
on the report.
The aging of company leaders and their firms who went
public in the 1990s may lead some to be more open to selling
“as a swan song takes on increased appeal,” according to the
Green Street report. Private-market buyers also may be willing
to pay premiums to net asset value, the firm said.
Blackstone Group LP, the largest private-equity real estate
investor, may be an indicator of such deals. The company late
last year canceled plans to take its IndCor Properties Inc.
warehouse unit public as a REIT and instead opted to sell it to
investors including Singapore’s GIC Pte for $8.1 billion.
“In the U.S., I think when interest rates move up, you
could easily see the stock prices of REITs trade off,” Jonathan
Gray, Blackstone’s global head of real estate, said in a Nov. 13
interview on Bloomberg Television’s “Market Makers” program
with Erik Schatzker and Stephanie Ruhle. “That could create
privatization opportunities.”
For Related News and Information:
Associated Estates Hires Adviser Amid Investor’s Criticism (2)
Malls in U.S. Offer Discount That’s Not for Customers: Real M&A
GIC to Buy Blackstone’s IndCor Properties for $8.1 Billion (2)
Top real estate stories: TOPR <GO>
Merger and acquisitions monitor: MA <GO>
--With assistance from Hui-yong Yu in Seattle.
To contact the reporter on this story:
Brian Louis in Chicago at +1-312-443-5920 or
blouis1@bloomberg.net
To contact the editors responsible for this story:
Kara Wetzel at +1-415-617-7318 or
kwetzel@bloomberg.net
Daniel Taub