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American Tower in €7.7B Telxius deal; Monmouth to study strategic alternatives

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

After an uninspiring year for real estate investment trust stocks in 2020, analysts took divergent views on the outlook for the sector in the coming year.

Analysts at Mizuho Securities USA, Janney Montgomery Scott and Jefferies all noted in forecasts that generalist and retail investors turned cool on REITs in 2020, seeing more attractive growth in other industries. The teams differed in their views of 2021, though, based in part on their expectations for interest rate movement.

The Janney team predicted "modestly positive" total returns of roughly 8% in 2021, with "outsize" returns in 2022.

"While the group should benefit from a US 10-Year Treasury rate still hovering around 1.0%," they added, "the recent rate bias has been upward, and that has rarely been good news historically for REIT stock performance."

The Jefferies analysts predicted a roughly 18% to 22% total return for the sector in 2021, based in part on the assumption that rates will remain low.

"When investors focus on fundamentals again, we expect the REIT sector to see significant mean reversion," they wrote.

The Mizuho team, meanwhile, predicted mid-single-digit price returns for REITs versus an expected roughly 6.5% return for the S&P 500. As such, they argued, investors should be selective among REITs, focusing on companies that own data centers, industrial properties and single-family rental homes — property types that performed strongly through much of the pandemic's early months before hopes for coronavirus vaccines took over the narrative.

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Investment lane

* Communications REIT American Tower Corp. is buying Telxius Telecom SA from Spain's Telefónica SA in a roughly €7.7 billion deal set to close in multiple tranches starting in the second quarter. The transaction for the KKR & Co. Inc.-backed company covers almost 31,000 communications sites in Germany, Spain, Brazil, Chile, Peru and Argentina.

* Funds managed by Ares Management Corp.'s Real Estate Equity and Alternative Credit Strategies, along with Pretium Partners LLC, completed the acquisition of single-family rental home company Front Yard Residential Corp.

* Monmouth Real Estate Investment Corp. rejected Blackwells Capital LLC's $18-per-share takeover offer, saying the proposal is not in its best interest. The single-tenant, net-lease industrial REIT moved to evaluate strategic alternatives instead, including a possible sale or merger.

* An affiliate of private equity firm Bombe Asset Management LLC will invest more than $125 million and become a majority owner of Parking REIT Inc., an internally managed, nonlisted real estate company that focuses on parking lots and garages in the U.S. The deal is expected to close in the second quarter.

* Single-tenant REIT Realty Income Corp. said it entered into agreements or letters of intent to acquire U.S. and U.K. properties for about $676.8 million.

The IPO monitor

* Homebuilder Dream Finders Homes Inc. filed for an IPO of 9.6 million class A common shares, with an expected price range of $12.00 to $15.00 apiece.

* Real estate brokerage Urban Compass Inc., doing business as Compass, filed a draft registration statement with the SEC related to its planned IPO.

Investor activism

* Two activist investors are calling for a board overhaul at office REIT CIM Commercial Trust. Lionbridge Capital LP and Robotti & Co. Advisors LLC nominated a slate of six candidates for election to the REIT's board, saying they expect a new board to "engage in an open and transparent strategic review exploring all options" for the company.

Around the world

* A Starwood Capital affiliate intends to launch a mandatory takeover offer for all shares and convertible bonds it does not already own in Austrian real estate company CA Immobilien Anlagen AG. The offer price is €34.44 for each CA Immobilien share.

* Chinese regulators are expected to authorize the country's first REITs as soon as the first quarter, Bloomberg News reported, citing people familiar with the matter. The move is meant to create an additional means for local governments to finance infrastructure projects and open investment opportunities for retail investors, according to the report.

* Spain's Neinor Homes SA agreed to acquire local peer Quabit Inmobiliaria SA. Neinor stands to gain a consolidated land bank capable of housing more than 16,000 residential units. The company will continue as a listed company and will incorporate joint assets for a value of about €2.00 billion.

* Private equity giant KKR raised $1.7 billion at the final close of its KKR Asia Real Estate Partners fund.

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