Columbia Property to weigh strategic alternatives; Ares US RE fund raises $1.7B

S&P Global Market Intelligence offers our top picks of real estate news stories and more published throughout the week.

Rising construction costs and the potential for higher corporate tax rates could benefit real estate investment trust shares, Robert W. Baird analysts said.

The analysts raised their fair-value estimate for the MSCI US REIT Index to 1,250 in an April 7 note, estimating total return potential of 5% to 6% in the near term. As of the close of trading on April 7, the index stood at 1,259.77.

Baird's forecast was driven in part by the prospect of a normalizing economy following the COVID-19 pandemic, with nearly one-quarter of the U.S. population now vaccinated against the virus. The analysts also argued that higher corporate tax rates under President Joe Biden's infrastructure plan would disproportionately benefit REITs, which enjoy special tax benefits.

Finally, they noted that building costs have risen 6.1% year over year as a result of higher materials costs — a dynamic that could protect current property owners against some new competition.

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Focus and refocus

* Potential M&A target Columbia Property Trust Inc. kicked off a comprehensive strategic alternatives review process, including considering the recent $19.50-per-share cash takeover proposal from an activist investor group for the company. The office REIT said as part of the process, it will continue constructive discussions with the bidding group, which includes Arkhouse Partners LLC and 8F Investment Partners Pte. Ltd.

* Private prison operator GEO Group Inc.'s board suspended its dividend and intends to evaluate the company's REIT structure. The company expects to conclude the review in the fourth quarter.

* Public Storage activist investor Land & Buildings Investment Management LLC plans to vote against the self-storage REIT's proposal to remove cumulative voting, terming the measure a setback for shareholder rights.

* Colony Credit Real Estate will internalize its management and operating functions in a deal that is expected to conclude in the second quarter. The company signed definitive agreements with its external manager and Colony Capital Inc. unit CLNC Manager LLC to consensually terminate their management agreement, with Colony Capital set to receive a one-time cash payment of $102.3 million at closing.

* A group of professionals with backgrounds at prominent companies such as Bank of America Corp. and RBC Capital Markets established SLB Capital Advisors, a real estate advisory firm focused on sale-leaseback and M&A-related real estate deals for private equity firms and corporate property owners. The New York City-based firm has six founding partners and principals across the U.S.

* Real estate brokerage Redfin Corp. closed its $608 million acquisition of online property marketplace RentPath LLC, which owns rental sites such as ApartmentGuide.com, Rent.com and Rentals.com.

Major property deals

* Yellowstone Real Estate Investments bought the 600-room Watson Hotel in Manhattan, N.Y., for about $175 million, Bloomberg News reported, citing people familiar with the sale.

* Horizon Land Co. LLC paid $743.3 million for a portfolio of manufactured housing communities, a 136-unit self-storage property and recreational vehicle pads spread across 13 U.S. states and 29 markets, Multi-Housing News reported.

Fundraising and IPO

* Ares Management Corp. raised about $1.7 billion for Ares U.S. Real Estate Opportunity Fund III LP, beating its $1.5 billion target and marking Ares' largest U.S. real estate equity fundraise.

* Lamar Advertising Co.'s newly formed special purpose acquisition company, Lamar Partnering Corp., filed for a proposed IPO of units with an expected base offering size of $300 million.

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NAV Monitor: US equity REITs trade at 2.1% premium to NAV on April 1