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Forest dump; divvy it up


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Essential IR Insights Newsletter - February 2023

Forest dump; divvy it up

S&P Global Market Intelligence offers our top picks of U.S. real estate news stories and more published throughout the week. Please note that some entries may have links to third-party sources that may require a subscription.

Forest dump

* Roughly a month after revealing that negotiations to ditch its dual-class common share structure fell apart, Forest City Realty Trust Inc. announced Dec. 6 that it has now agreed to the proposed change and will seek to convert each outstanding class B share into 1.31 class A shares. The move is part of a deal that would guarantee the board nomination of Ratner family members through 2021, subject to the family keeping a certain level of share ownership in the REIT. Forest City will put the proposed reclassification to a shareholder vote at the 2017 annual meeting. The company also disclosed certain other board changes, including Chairman Charles Ratner's retirement and director Bruce Ratner's resignation at the end of 2016.

Evercore ISI analysts Sheila McGrath and Nathan Crossett consider the reclassification a big boost for Forest City Realty and that the proposal would be approved by the company's stockholders. Although believing that the premium is not a bargain, the pair said the impact is merely more than 2% dilutive to the overall entity, and the transaction should be a "very favorable outcome for all shareholders."

Divvy it up

* CoreCivic Inc. President and CEO Damon Hininger announced Dec. 8 that the company updated its dividend level to take into account the business' current cash flows following the October renegotiation of the South Texas Family Residential Center contract by the U.S. Immigration and Customs Enforcement. The company said its board declared a quarterly cash dividend of 42 cents per share, lower than the previous payout of 54 cents per share, and the new dividend will be doled out Jan. 13, 2017.

* Hines Real Estate Investment Trust Inc. disclosed in a Dec. 8 filing that it will make an initial distribution of roughly $1.5 billion, or $6.20 per share, as part of its dissolution process. The board-approved distribution will be paid on or around Dec. 23 to stockholders on record as of Dec. 7. The company noted that most of its asset sales related to the dissolution have been completed, and it is working to divest the few remaining holdings.

* In the multifamily REIT sector, CNL Growth Properties Inc. disclosed in a Dec. 6 filing that it will pay Dec. 8 a second liquidating distribution of $2.30 per share as part of its dissolution plan. The company will fund the distribution using cash on hand and proceeds from the just completed sales of two joint venture multifamily communities in Florida and Georgia.

* Mid-America Apartment Communities Inc., which recently concluded its acquisition of Post Properties Inc., raised its quarterly common dividend for fiscal year 2017 by 6% to 87 cents per share.

Rolling Green and Blackstone

* SL Green Realty Corp. was reported this week to be planning an observation deck at its proposed One Vanderbilt office tower in Midtown Manhattan, N.Y., and that it is in talks with a foreign investor for a $500 million investment in the development. In a Dec. 5 report, Bloomberg News quoted SL Green executive Rob Schiffer as saying that the company expects the observation deck to be "a very high-margin business."

Jefferies LLC analysts Jonathan Petersen and Omotayo Okusanya downgraded the company following the news, saying in a Dec. 8 note that they expect the company to see more modest growth in 2017.

* Blackstone Group LP was also on a roll this week, as the private equity giant was said to have acquired the iconic office building at 815 Connecticut Ave. NW in Washington, D.C., for almost $190 million. The Washington Business Journal reported Dec. 6 that the transaction was part of a $1.8 billion portfolio deal with Swedish pension fund Alecta Real Estate Investment LLC. Meanwhile, unnamed sources reportedly told The Real Deal that Blackstone spent $620 million to buy the 894-unit Kips Bay Court rental complex in Manhattan, marking the largest multifamily deal in New York City thus far in 2016.

That's a wrap

* Cannabis facilities REIT Innovative Industrial Properties Inc. announced Dec. 5 that it finalized its downsized IPO of 3,350,000 common shares at $20.00 per share. The IPO closing comes days after the Maryland-incorporated company debuted on the NYSE, and the REIT aims to use roughly $30 million of the net proceeds to purchase its initial property in New York.

* Vornado Realty Trust on Dec. 5 said it completed a $400 million refinancing of its 571,000-square-foot office building at 350 Park Ave. in Manhattan, N.Y. The company raked in roughly $111 million in net proceeds from the refinancing.

* Also on Dec. 5, Paramount Group Inc. wrapped up its acquisition of the 38-story One Front Street office tower in San Francisco for $521 million, which it paid in cash.

Package deals

* Equinix Inc. announced Dec. 6 that it is poised to buy 24 data center sites and their operations in a $3.6 billion cash deal with Verizon Communications Inc. The transaction, slated to close by mid-2017, will bring Equinix's portfolio to 175 data centers spanning 17 million gross square feet across 43 markets across the Americas, Europe and Asia-Pacific.

* RLJ Lodging Trust said Dec. 6 that it offloaded two Hilton-branded hotels in Manhattan, N.Y., for $286 million, and separately sold a noncore hotel in Bakersfield, Calif., for $13 million. The company will funnel the proceeds for debt repayment and other general corporate purposes.

2016 nontraded REIT conference coverage

S&P Global Market Intelligence was on the ground in Dana Point, Calif., at IMN's Nontraded REIT & Retail Alternative Investment Symposium.

Conference Chatter: Is the traditional full-commission nontraded REIT on the way out?: Many nontraded REITs are exploring conversion to daily NAV REITs, a next-generation nonlisted product that provides improved liquidity, as market demand for deferred-commission products rises, observers said at a recent conference.

Conference Chatter: Gauging the 'Blackstone effect' on NTR sales, industry reputation: At a conference in California, nontraded REIT players weighed the pros and cons of having an institutional player of Blackstone's pedigree sponsoring nontraded REIT products.

Featured during the week on S&P Global Market Intelligence

Target Market: Risk-retention rules, maturity wave could spur CMBS defaults in 2017: While the market for commercial mortgage-backed securities is functioning smoothly, new regulations could combine with maturities in 2007-vintage loans to sow confusion in the coming months, market participants say.

Data Dispatch: US REIT capital-raising activity YTD up 6% YOY: In the month of November, U.S. equity REITs raised approximately $4.48 billion through capital offerings.

Data Dispatch: 130 North American real estate companies increase dividends through Dec. 1: Between Nov. 16 and Dec. 1, six SNL-covered North American REITs announced dividend increases.

Data Dispatch: US real estate ETFs log net outflows in November: While U.S. real estate exchange-traded funds have seen $7.68 billion of net inflows year-to-date through the end of November, investors shied away during that month, with $635.2 million of net outflows.