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Goldman Sachs, J.P. Morgan stand to lose millions in M&A fees as REIT deal fails

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Goldman Sachs, J.P. Morgan stand to lose millions in M&A fees as REIT deal fails

Investment banks serving as advisers on Equity Commonwealth's planned acquisition of Monmouth Real Estate Investment Corp. stand to lose tens of millions of dollars in fees as a result of the deal's collapse.

Equity Commonwealth, helmed by Chairman Sam Zell, terminated the roughly $3.4 billion deal after Monmouth failed to secure the necessary support from its shareholders.

For advising Equity Commonwealth, Goldman Sachs & Co. LLC was set to earn a $16 million fee, all of which was contingent upon the consummation of the deal. The termination pushes the firm lower in the real estate investment trust M&A advisory rankings for 2021.

Based on deal value, Goldman Sachs led real estate investment trust M&A advisers in 2020, and was in fifth place in the category through the first half of the year based in part on its credit for the now-canceled transaction, according to S&P Global Market Intelligence data. Factoring in the termination, the firm fell to eighth place through August.

BofA Securities Inc. also served as an adviser to the buyer but its fee was not disclosed. Neither Goldman Sachs nor BofA responded to requests for comment.

J.P. Morgan Securities LLC and CS Capital Advisors LLC served as advisers to Monmouth and were set to earn advisory fees of roughly $15 million and $13 million, respectively. While the bulk of those fees would have been payable upon closing, J.P. Morgan secured $3 million and CS Capital secured $1 million on delivery of their fairness opinions.

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J.P. Morgan, which led REIT M&A advisers in the first half based on deal value, remained in the lead in the category through August in spite of the termination. The firm declined to comment, and CS Capital did not respond to a request for comment.

The deal appeared to be in peril in late July when a merger vote was rescheduled , and in recent weeks the proxy advisory firm Institutional Shareholder Services Inc. urged Monmouth shareholders to vote no.

Monmouth executives said following the vote that the company "remains open to all available options" to maximize shareholder value. The company's board earlier rejected an unsolicited offer from Starwood Real Estate Income Trust Inc., an affiliate of Starwood Capital Group.