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US real estate M&A activity spikes in 2018 with cash-heavy deals

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US real estate M&A activity spikes in 2018 with cash-heavy deals

Editor's note: All total transaction values in this article are calculated by taking the first available value in the following hierarchy: transaction value as reported at announcement, S&P Global Market Intelligence-calculated deal value including debt assumption, deal value as reported.

U.S. real estate M&A activity surged in 2018, carried by investors looking to pay cash to bring assets owned by real estate investment trusts to the private market.

In 2018, 22 M&A deals involving SNL-covered U.S. real estate companies as either buyer or seller were announced. Those deals aggregated $90.55 billion in deal value, up 154.7% compared to the $35.55 billion over 18 M&A deals announced in 2017.

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Many of the announced deals included large cash components for shareholders. Cash accounted for 39.9% of total consideration for transactions announced in 2018, while common stock consideration totaled 24.5%. Conversely, in 2017, common stock represented 39.3% of total consideration and cash accounted for 24.2%.

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Brookfield Asset Management Inc. completed the largest REIT takeovers of any buyer during the year.

On Aug. 28, 2018, Brookfield Asset Management completed its acquisition of the remaining 66% of mall landlord GGP Inc.'s outstanding common shares not owned by its subsidiaries in a deal valued at $27.15 billion at announcement. Under the deal terms, GGP shareholders were given the option to elect to receive $23.50 per share in cash, or one unit of Brookfield Property Partners LP, or one share of the newly created Brookfield Property REIT Inc. for each GGP share owned. Total cash consideration for the deal came to $9.25 billion.

Brookfield Asset Management also completed its $11.40 billion buyout of Forest City Realty Trust Inc. on Dec. 7, 2018, paying $25.35 per share in the all-cash deal, a 10.1% premium to the REIT's share price one day before the deal announcement.

Other large REIT privatizations during the year included Blackstone Group LP's $7.60 billion acquisition of industrial-focused Gramercy Property Trust and Greystar Real Estate Partners LLC's takeover of Education Realty Trust Inc. in a deal valued at $4.60 billion.

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In addition to the privatizations, several REITs took advantage of 2018 market conditions to acquire publicly traded peers.

In the industrial sector, Prologis Inc. purchased Denver-headquartered DCT Industrial Trust Inc. in a stock-for-stock deal valued at $8.40 billion at announcement.

Hotel REIT Pebblebrook Hotel Trust completed its approximately $5.20 billion takeover of peer LaSalle Hotel Properties on Nov. 30, 2018.

Government Properties Income Trust completed its stock-for-stock merger with Select Income REIT on Dec. 31, 2018, creating Office Properties Income Trust. S&P Global Market Intelligence calculated the deal value at $3.94 billion, including debt assumption.

In the healthcare sector, Welltower Inc. completed its all-cash takeover of HCP Inc.-spinoff Quality Care Properties Inc. on July 26, 2018, for $20.75 per share.

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For further M&A analysis, try S&P Global Market Intelligence's US/Canada Real Estate M&A Profile Template. Other templates are also available in the Excel Template Library.