W.P. Carey joins nontraded-REIT liquidity conga line

Another sizable nontraded real estate investment trust has plans to move toward a liquidity event this year, making it at least the sixth such REIT to announce or transact such a deal so far in 2013. W.P. Carey Inc., a traded REIT, said last month that it will acquire one of its related nontraded REITs, Corporate Property Associates 16, in a transaction valued at close to $4 billion. Following the merger, which is subject to the approval of stockholders from both REITs, the combined company is expected to have an equity market capitalization of about $6.5 billion and an enterprise value of $10.1 billion. Shareholders of CPA 16, the nontraded REIT, will receive shares of W.P. Carey valued at $11.25 each for the nontraded REIT. At first blush, that represents a hefty premium of 29% over the last estimated net asset value of CPA 16, which was $8.70 a share at the end of last year. In reality, the premium CPA 16 investors will receive is closer to 12%, said Kristin Brown, head of investor relations for W.P. Carey. That difference stems from two factors, she said. First, the $8.70-a-share valuation from last year was a third-party appraisal and based on historical numbers, and such “appraisals are more conservative than the market value” of properties in a REIT portfolio, Ms. Brown said. Second, W.P. Carey previously had acquired 18.5% of CPA 16, which had an impact on the size of the premium, she said. The combined portfolio will consist of more than 700 properties. The transaction is expected to close in the first quarter of 2014.

SPATE OF ANNOUNCEMENTS

This year, a spate of announcements have been made about liquidity events, or mergers and listings, of nontraded REITs. In May, Chambers Street Properties listed on the New York Stock Exchange, as did Cole Credit Property Trust III in June after a merger with its investment manager. Meanwhile, Cole Credit Property Trust II merged with a publicly traded REIT last month. REIT sponsor American Realty Capital, a relative newcomer to the industry, has worked to more quickly create liquidity events. In February, traded REIT American Realty Capital Properties Inc. and nontraded REIT American Realty Capital Trust III merged. And last month, American Realty Capital Properties said that it will buy the outstanding shares of another related nontraded REIT, American Realty Capital Trust IV.