M&A deals involving real estate investment trusts have been hot in 2006. So hot that deals for REITs reached a record value $47 billion so far this year, according to Dealogic. Some experts attribute the interest for REITs to the perception among some REITs and would-be buyers that these trusts are undervalued. Some recent big deals include:
- Health Care Property Investors Inc. $5.2 billion purchase of CNL Retirement Properties Inc. on May 2, creating the biggest player in the health-care REIT sector.
- Kimco Realty Corp.'s $4 billion purchase of Pan Pacific Retail Properties Inc. on July 10. The deal makes Kimco, already the largest owner of shopping centers, by far the most dominant in the REIT shopping center sector.
- Private equity firm Blackstone Group LP reached an agreement to buy CarrAmerica Realty Corp., which has holdings of office space in 12 major cities, including San Francisco and Los Angeles, for $5.6 billion in cash and debt on March 6.
These deals are not the end of the consolidation fervor in the REIT sector. Capital Partners Inc. has expressed continued interest for Highwoods Properties Inc. despite having its $1.95 billion bid rejected on June 29. In addition, with $5 billion in commitments for what it calls the largest real estate opportunity fund,
Blackstone is armed with the needed ammunition for possibly more REIT purchases in the near future. With that said, look for REIT M&A valuations to continue its upward trend and total deal valuations for the year to possibly surpass the remarkable $100 billion mark. — Gerald Magpily
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