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Morgan Stanley set to earn landmark REIT M&A fee on VICI Properties deal

Morgan Stanley & Co. LLC is set to rake in a fee of up to $50 million for advising VICI Properties Inc. on its planned acquisition of MGM Growth Properties LLC, in what could become the largest-ever disclosed buyer advisory fee in a real estate investment trust transaction.

Morgan Stanley earned $5 million upon the roughly $17.20 billion deal's announcement in connection with delivery of its fairness opinion. The full $50 million fee, payable upon closing, would tie the record for the largest-ever disclosed advisory fee on a REIT M&A transaction for advising either the buyer or the seller, according to S&P Global Market Intelligence's database of publicly disclosed data. The announcement fee may be creditable toward the total transaction fee, VICI said in a filing.

In 2013, Goldman Sachs & Co. LLC was in line for a fee of up to $50 million for advising Cole Real Estate Investments Inc. on its $11.20 billion acquisition by American Realty Capital Properties Inc.

For Morgan Stanley, the VICI Properties assignment comes during a year in which the investment bank has already grown its revenue from M&A deals. The firm said it generated roughly $664 million in advisory revenue from completed transactions in the second quarter, up 44% from the second quarter of 2020, based primarily on an increase in the number of deals.

In a deal announced in September, Morgan Stanley also stands to earn a fee of roughly $33 million for advising Columbia Property Trust Inc. in its planned $3.90 billion acquisition by Allianz SE's Pacific Investment Management Co. LLC unit, according to a filing.

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REIT M&A volume ramped up sharply in the second and third quarters of 2021 after a pandemic-stricken 2020. The eight transactions so far in 2021 include Realty Income Corp.'s $17.27 billion acquisition of VEREIT Inc., and Kimco Realty Corp.'s $5.84 billion acquisition of Weingarten Realty Investors.

J.P. Morgan Securities LLC advised the buyer on both deals, setting the firm up to earn fees of up to $38 million on the Realty Income transaction and up to $30.1 million on the Kimco transaction. The two deals, both announced in April, helped raise the announced deal value on REIT M&A transactions to the highest level in any quarter during the last five years.

Yoel Kranz, a partner at Goodwin Procter LLP, attributed the rise in REIT deals in 2021 to the rebound from the worst period of the COVID-19 pandemic.

"You had at least a year of pent-up demand where people were unsure what valuations were, where people were unsure where the market was going," Kranz said in an interview. "The fact that you're seeing the spurt of it now is really just catch-up after COVID and the fact that prices seemed to have settled down."

Kranz said the hot REIT deal market is likely to continue through "the next couple of quarters" as a sense of normalcy returns to real estate markets, with favorable conditions for deals in the gaming, office and data center sectors.