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Extended Stay receives sweetened offer; Prologis to sell US portfolio for $920M

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Extended Stay receives sweetened offer; Prologis to sell US portfolio for $920M

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

Faster-than-expected U.S. vaccinations and declining COVID-19 cases have pushed real estate investment trusts into fully valued territory, as generalist investors have returned to the sector in search of recovery plays, Mizuho Securities USA analysts wrote in a June 3 note.

While REIT gains during 2021 are not surprising given the economic rebound and potential for further stimulus, the sector's outperformance versus the S&P 500 — about 22% price gains for the year compared to 13% gains for the broader market — was unexpected, they added.

Given high valuations throughout the REIT space, "it's a stock picker's market," and investors seeking to outperform benchmarks should pursue relative values within sectors, the analysts argued. They named Alexandria Real Estate Equities Inc., AvalonBay Communities Inc., Invitation Homes Inc. and Realty Income Corp. as their top picks, citing strong earnings growth and stock-specific catalysts relative to peers in their property sectors.

Fuller values could also produce more M&A activity in the coming months, the Mizuho team added, with the highest potential for deals among healthcare, strip center and triple-net property REITs, given the high number of smaller companies at wider valuation multiples in those sectors.

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Not sweet enough

* Extended Stay America Inc. shareholder Tarsadia Capital LLC said the increased takeover offer by The Blackstone Group Inc. unit Blackstone Real Estate Partners and Starwood Capital Group for Extended Stay and its ESH Hospitality Inc. unit still significantly undervalues the company. Tarsadia urged its fellow shareholders to vote against the company's planned sale at $20.50 per paired share at the upcoming special meeting.

Overseas business

* Communications REIT American Tower Corp. completed the first tranche of the acquisition of Telxius Telecom SA from Telefónica SA for about €6.2 billion. The tranche included about 20,000 communication sites in Germany and Spain, while another 4,000 additional rooftop communication sites in Germany are expected to close in the third quarter. The REIT also closed on the Latin American tranche of its acquisition of Telxius for about €900 million.

Secondary offering

* Certain shareholders of Cushman & Wakefield PLC, including funds affiliated with TPG Capital LP, PAG Asia Capital and the Ontario Teachers' Pension Plan Board, are selling 10.0 million ordinary shares of the commercial real estate services firm in a public offering. The offering priced at $18.75 per share.

Property trades

* Certain Prologis Inc. affiliates will sell the entire fee interest in a portfolio of 48 industrial buildings across 13 U.S. markets to a Black Creek Industrial REIT IV Inc. unit for $920.0 million, subject to customary prorations, with closing expected July 14.

* Multifamily REIT Centerspace entered into contribution agreements with entities managed by KMS Management Inc. to acquire a 17-property apartment community portfolio totaling 2,696 homes in Minnesota for $323.8 million.

* UBS Realty Investors LLC, which owns the 47-story office tower at 1177 Avenue of the Americas in New York City in a joint venture with the California State Teachers' Retirement System and Silverstein Properties Inc., is looking for an investor that could replace CalSTRS and Silverstein, Green Street reported. The 1 million-square-foot property could receive bids ranging from $850 million to $900 million.

* Corporate Office Properties Trust formed a joint venture with Blackstone Real Estate to acquire a 90% stake in two single-tenant, data center shell properties valued at $119 million.

* Granite REIT is poised to acquire four income-producing properties in the U.S. and two in Canada for a total price of C$170 million. The company is also in discussions to acquire four development properties for C$198.3 million.

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