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With discounts reaching 15%, REITs have the most favorable buyout market since 2006, creating the biggest gap in five years. With US property values reaching record highs, the likelihood of REIT buyouts is increasing—as long as share prices continue to underperform property prices, that is.
Blackstone’s $3.93B Strategic Hotels & Resorts acquisition and its interest in buying BioMed Realty Trust seem to be the spark for a whole explosion of REIT takeovers. According to Green Street, more than half of publicly traded REITs have at least a 10% chance of being bought out. Green Street also notes that hotel REITs in particular are up on the trading block, since hotels are hit particularly hard by any shake-up in the economy.
There have been $12B of takeovers of publicly traded REITs since April, and this doesn’t even include Blackstone’s Strategic acquisition. Before this rise, however, REIT deals remained flat. There was only one deal in 2014, a $763M acquisition, with the 2007 $20B takeover of apartment landlord Archstone-Smith Trust the only one of note before that.
A huge factor in the rise of buyouts is the rise of activist investorsurging underperforming REITs to find buyers. This rise in takeovers is a good sign for REITs, which have suffered during the recent stock market chaos. [Bloomberg]
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