REIT Mergers Seen Likely to Accelerate as Activism Climbs

Mergers and acquisitions by larger real estate investment trusts will increase, probably approaching four to five a year, after a slowdown since the financial crisis, said Michael Kirby, chairman of research firm Green Street Advisors.

Such deals have averaged one annually since 2008, an “unusually quiet” period compared with the prior 15 years, he said during a panel discussion Wednesday at New York University’s Schack Institute of Real Estate’s annual REIT Symposium.

“I would suspect that we will get back more toward a normal pace,” Kirby said. Activist investors “have new playbooks, and more money than they ever had before. And frankly there are quite a few REITs that have survived too long.”

The number of transactions involving sizable REITs, through mergers of public companies or privatizations, plunged almost 80 percent in the past seven years from 2000 to mid-2007, when there were 32 deals, Newport Beach, California-based Green Street said in a January 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 transactions. Even companies that aren’t under pressure to do deals, including private-equity firms and most REITs, are looking to increase the size of their portfolios to boost rental income.

Recent Deals

Several sizable acquisitions already have closed this year, including Washington Prime Group Inc.’s purchase of Glimcher Realty Trust for $3.8 billion, Select Income REIT’s takeover of Cole Corporate Income Trust Inc. for $3.1 billion and Ventas Inc.’s buyout of American Realty Capital Healthcare Trust Inc. for $2.6 billion, according to data compiled by Bloomberg.

Last week, Blackstone Group LP, the biggest private-equity real estate investor, agreed to buy shopping-center REIT Excel Trust Inc. for about $2 billion.

Kirby said he is less certain that the total number of REITs would decline significantly. Many REITs perform well without having to get bigger, he said, citing Boston Properties Inc., the largest office REIT. The company usually returns money to its investors through special dividends when it profits from a property sale, rather than buying new assets with it, Kirby said.

There’s also no reason to think that new REITs won’t enter the market, he said.


“We’re going to have a shockingly high number of entrants to the space, just as we’ve had the last several years,” Kirby said at the conference. “There’s a ton of companies getting listed. Just look at the non-traded REIT pipeline alone. I see no end to that ladder.”

Ventas Chief Executive Officer Debra Cafaro, whose company is buying Ardent Medical Services Inc., said additional deals are likely in the health-care portion of the industry.

“We’ve got $5 billion under our belt, and our peers are equally busy,” she said on the panel. “I do believe you will continue to see M and A.”

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