Ares Management Corp. plans to buy Whitestone REIT and take its 5M SF portfolio of open-air retail space off the public market at a $1.7B valuation.
The Los Angeles-based alternative asset manager announced an all-cash deal to buy out Whitestone shareholders for $19 per share, a 12.2% premium on the stock's Wednesday closing price. The deal, set to close in the third quarter, is the latest in a string of take-private acquisitions from investment firms looking to capitalize on perceived discounts in REIT valuations.
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Ares, which has a global platform with some $623B in assets under management, will add 56 convenience-focused retail properties across the Sun Belt — including in Phoenix, Austin, Dallas-Fort Worth, Houston and San Antonio — to its portfolio.
The publicly traded investment firm is acquiring the assets through a merger with “certain Ares Real Estate funds,” it announced Monday. The deal has unanimous approval from the Whitestone board but still needs to pass with Ares shareholders.
There’s no financing component to the deal, and Whitestone will be deregistered from the New York Stock Exchange once the transaction closes.
Ares has picked up properties and bought out firms over the last year. It partnered with Makarora Management in October on a $2.1B deal to take Plymouth Industrial REIT private. Earlier this month, the alternative asset manager announced it had raised a $5.4B fund to buy value-add real estate across the U.S. and Europe.
The REIT’s stock jumped 11% in early trading Thursday to just under the acquisition price. Shares in Ares were down more than 1.5% around 10 a.m. ET. The company has shed more than 35% of its value since the start of the year and missed fourth-quarter analyst expectations in February.
“The Sun Belt states, which have continued to see job growth and population growth, is a particularly attractive area for international investment. And Whitestone is an Arizona and Texas owner, and that makes it very attractive to the big institutions,” Joe Lubeck, CEO of Sun Belt multifamily owner American Landmark told Bisnow in an interview Thursday.
Houston-based Whitestone hired Bank of America in March as it courted potential buyout offers, including from Blackstone and TPG. The REIT grew same-store profits by 4.8% year-over-year to $25.6M in the third quarter, the most recent data available. Base rental revenue grew 8.2% year-over-year to $25.59 per SF.
Private capital, including Ares, has been targeting REITs for more than six months, with the segment’s lagging performance relative to other stocks leaving firms priced below the net asset value or perceived worth of their assets.
Rithm Capital agreed to acquire Paramount Group for $1.6B in cash and other liquidity in September. Funds associated with Blackstone were part of a $1.5B deal to take a Hawaiian REIT private in December. Affinius Capital and Vista Hill Partners bought Veris Residential and its 17-property portfolio in February in a deal valued at $3.4B.
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