InvestmentNews INsider

The INsiderblog

InvestmentNews reporters offer their take on intriguing or controversial articles from around the web.

Liquidity events heating up REIT market this summer

New deals are being announced, while others are being completed

Jul 16, 2014 @ 12:15 pm

By Bruce Kelly

Nontraded REITs, traded REITs, liquidity events, listings on an exchange, mergers and acquisitions
+ Zoom
(iStock)

Liquidity events of nontraded real estate investment trusts are heating up during the dog days of summer.

This month already has seen one liquidity event — meaning a merger or a listing on an exchange; while a significant nontraded health care REIT is reportedly in talks to be acquired.

July has also witnessed the announcement of an acquisition of a traded REIT that was composed of former nontraded REITs and a spinoff of a nontraded REIT asset manager from its traded REIT parent.

The flurry in activity comes after the first half of the year saw only two liquidity events: the listings in April of the $2 billion American Realty Capital Healthcare Trust Inc. on Nasdaq and the $1.9 billion American Realty Capital New York Recovery REIT Inc., which changed its name to New York REIT Inc., on the New York Stock Exchange.

In June, a giant health care REIT, Ventas Inc., said it agreed to acquire the ARC Healthcare Trust for $2.6 billion in cash and stock, with the deal expected to close by the end of the year.

Also in June, shares of United Development Funding IV (UDF) began trading on the NASDAQ Global Select Market. Formed in 2006 as a nontraded REIT, it has about $614 million in equity

At the start of the month, Kite Realty Group Trust, a traded REIT, said it had completed its merger with the Inland Diversified Real Estate Trust, with the deal valued at about $2.1 billion. Inland Diversified stockholders receive 1.7 shares of Kite Realty Group Trust stock for each share of Inland Diversified.

The merger “was a transformative event for Kite,” said Mitchell Sabshon, chief executive of Inland Real Estate Investment Corp. “It doubled its market capitalization and added high-quality properties to the portfolio.”

The deal has been one of the most successful for nontraded REIT investors in the recent past, Mr. Sabshon said.

He noted that on July 2, the first full trading day for the Inland Diversified/Kite merger, Kite closed at $6.40. At an exchange rate of 1.7, that translates to an Inland Diversified exit value of $10.92, he said.

Excluding nontraded REITs that were purchased by related or affiliated REITs, a common industry practice, the Inland Diversified merger represents the highest nonaffiliated transaction exit price in two years, Mr. Sabshon said.

Kite Realty Group Trust, with the ticker symbol KRG, was trading Wednesday at $6.37 per share.

Meanwhile, NorthStar Realty Finance Corp., a traded REIT, is in exclusive talks to buy Griffin-American Healthcare REIT II, according to published reports. Damon Elder, a spokesman for the $3 billion Griffin-American Healthcare REIT II, declined to comment on the reports.

Other announced mergers and listings of former nontraded REITs or related companies have also occurred this month.

Last week, Regency Centers Corp. said it had offered to acquire AmREIT Inc. for $22 per share in cash and stock. The move was a positive for nontraded REIT investors, according to one financial adviser.

“AmREIT is a traded REIT that was created when several older vintage nontraded REITs specializing in retail real estate were combined” and listed in 2012, said Larry Solomon, director of investments and financial planning with OptiFour Integrated Wealth Management.

“AmREIT had several small public nontraded offerings that raised money in the pre-crash period,” Mr. Solomon said. During the Great Recession, the REIT slowed down, he said, cutting costs and reducing its fees. It also stopped raising new money, he said, “so they could focus on going full cycle with their existing programs. The strategy worked and they listed in 2013. Now they are being bought out for a substantial premium.”

Finally, NorthStar Realty Finance last month spun off its asset management division, NorthStar Asset Management Group, with the ticker NSAM. It began trading on the New York Stock Exchange June 27. NSAM manages nontraded REITs NorthStar Real Estate Income II Inc. and NorthStar Healthcare Income Inc.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Apr 30

Conference

Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video

INTV

Schwab's Jon Beatty: How independent firms are winning high-net-worth clients

Independent advisers have a distinct advantage when it comes to acquiring new clients, according to Schwab's latest RIA Benchmarking Study. Jon Beatty, senior vice president at Schwab Advisor Services, discusses the findings.

Latest news & opinion

DOL fiduciary rule causing DC-plan record keepers to change business with insurance agents

Principal has communicated that independent agents must change their business models to keep receiving compensation.

DOL fiduciary rule opponents want to push implementation back until 2019

ICI, Chamber of Commerce among groups asking for delay, while Democratic lawmakers call on DOL to keep to its earlier planned schedule of Jan. 1, 2018.

Take 5: Vanguard's new CIO Greg Davis talks bonds, stocks and costs

Having just stepped into the role, this veteran of the firm now oversees $3.8 trillion in assets in more than 300 mutual funds and exchange-traded funds.

Tech companies deploy behavioral finance tools for advisers

They seek to turn knowing more about clients into growing more revenue.

Retirement planning for women

Longer lifespans and lower savings require creative income strategies.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print