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2 office REITs to combine; $10.5B REIT consolidation reportedly eyed by AR Global

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2 office REITs to combine; $10.5B REIT consolidation reportedly eyed by AR Global

The busy earnings week ending April 29 ended on a high note,with two office REITs agreeing to merge in a stock-for-stock deal and rumors ofAR Global aiming to form two consolidated REITs out of its seven-managed real estatecompanies. A gaming REIT capping off its roughly $1.1 billion IPO, REIT spinoffupdates by two companies and a flurry of high-value property transactions also grabbedheadlines during the week.

Tying the knot

Cousins PropertiesInc. and Parkway PropertiesInc. closed out the week with a bang, announcing that they agreed tomerge and spin off theirHouston assets into a new publicly traded REIT.

The stock-for-stock transaction,set to close during the fourth quarter, will result in a combined portfolio of 41 properties in urban markets.

Under the terms of the deal, Parkway shareholders will receive1.63 Cousins common shares for each Parkway share they own. Cousins and Parkwayshareholders will respectively own about 52% and 48% of both companies after thespinoff.

Cousins President and CEO Larry Gellerstedt said in a releasethat the transactions should benefit shareholders "by having an expanded portfolioof office towers in key urban submarkets, greater tenant and geographic diversityand enhanced access to the capital markets," while allowing the company tocapitalize on the Houston market's "eventual resurgence" through the creationof the REIT spinoff, to be called HoustonCo.

Echoing Gellerstedt's views, Parkway CEO Jim Heistand said hebelieves the "compelling strategic transactions demonstrate [Parkway's] continuedcommitment to enhancing shareholder value" and that HoustonCo "will thrivedue to its strong, flexible balance sheet and a seasoned management team that hasa history of delivering excellent results for its shareholders."

Under 2 roofs

AR Global was rumored this week to be considering a consolidation play that would bring close to$10.5 billion worth of assets under long-term, 20-year advisory agreements withNick Schorsch's firm.

The plan calls for AmericanFinance Trust Inc. and GlobalNet Lease Inc., which are both managed by AR Global affiliates, to acquirefive other real estate companies managed by the firm, according to an Investment News reportTuesday.

Specifically, American Finance Trust would acquire , , and American Realty Capital Healthcare Trust III Inc. Global NetLease, meanwhile, would pick up American Realty Capital Global Trust II Inc.

The potential transactions are expected to bring in a largersource of fee revenue for AR Global over a long period of time, while making thetwo consolidated REITs more attractive acquisition targets, the publication noted,citing unnamed sources.

Fully fledged

MGM Resorts Internationalannounced Monday that the transactions needed to establish MGM Growth Properties as a publicly traded REIT were .

Concurrently, the newly minted REIT said it pulled in roughly$1.1 billion in proceeds from its IPO,after deducting underwriting discounts and estimated offering expenses.

MGM Growth sold 57.5 million class A common shares in the IPOat a price to the publicof $21.00 apiece. The offering included the full exercise of the underwriters' optionto buy 7.5 million additional class A shares.

The REIT used the proceeds to buy operating partnership unitsin a newly created operating partnership. The operating partnership, in turn, usedpart of the funds to acquire the real estate related to several properties fromMGM Resorts.

MGM Resorts is anticipated to own a 73% economic interest inthe operating partnership, as well as MGM Growth's lone class B share, which makesup a majority of the total voting power of the REIT's shares.

Taking chances

For its part, Healthcare Trust announced this week that it isevaluating strategic alternativesin hopes of maximizing long-term shareholder value.

To that end, the company said April 22 that its board set upa special committee and engaged Gibson Dunn & Crutcher LLP as special legalcounsel. It will also retain a leading real estate investment banking group as afinancial adviser.

The health care REIT, however, noted that there is no assurancethat the strategic review will result in a transaction.

The REIT spin zone

Hilton WorldwideHoldings Inc. and InvenTrustProperties Corp. provided details about their REIT spinoff initiativesthis week.

* Hilton announced Wednesday that Thomas Baltimore Jr. and SeanDell'Orto will join thetop brass of its proposed hotel REIT,which it expects to establish later in 2016.

Baltimore will assume the president and CEO roles at Hilton'splanned REIT, effective May 16. He will accordingly step down as president and CEOof RLJ Lodging Trust, of which he is also a co-founder, effective May 11.

Meanwhile, Dell'Orto will serve as the proposed REIT's CFO inaddition to his roles as senior vice president and treasurer of Hilton.

"The appointments of Tom and Sean represent a major stepforward in the execution of our REIT spin-off," President and CEO ChristopherNassetta said in a release. "We are confident that Tom's extensive capitalallocation experience and proven leadership make him the perfect fit to overseethe long-term success of the REIT business. Additionally, I have had the pleasureof working alongside Sean for the past six years, and he is a first-rate additionto the executive team."

* Two weeks after announcing that its board the transaction, InvenTrust its of Highlands REIT Inc. via a taxable pro rata distribution.

Specifically, InvenTrust stockholders received 1 Highlands commonshare for each InvenTrust share held at market close April 25.

InvenTrust and Highlands also concluded the internal reorganizationtransactions meant to consolidate the ownership of Highlands' portfolio into thenewly spun-off REIT. As disclosed earlier, Highlands' portfolio comprises sevensingle- and multitenant office assets, two industrial assets, six retail assets,two correctional facilities, four parcels of unimproved land and one bank branch.

In addition, R. David Turner and Paul Melkus were named to Highlands'board, expanding its size to three members from one. Richard Vance was first electedto the newly minted REIT's board, effective Dec. 16, 2015. Melkus and Turner willchair the board's audit committee and compensation committee, respectively, accordingto a filing.

A clarion call

An activist investor reportedly is calling on AshfordHospitality Prime Inc. to take prompt action on its stock buyback program,one of five initiatives the hotel REIT has decided to embark on after its .

Snow Park Capital, which picked up a 4.6% stake in the hotelREIT, is encouraging the company to "expeditiously execute its $50 millionbuy-back plan to take advantage of its depressed trading price," Reuters reportedWednesday, citing an emailed statement.

In response, the hotel REIT told Reuters in an email that itshares Snow Park's view that executing the share repurchase program "is themost strategic way to maximize value for all of our shareholders."

A rebalancing act

Washington RealEstate Investment Trust revealed this week that it is unloading sixof its office assets in suburban Maryland, confirming an earlier report.

In its first-quarter earnings release Wednesday, the companysaid it agreed to sellthe roughly 1.2 million-square-foot portfolio for $240 million in two separate transactionsslated to close late in the second quarter and late in the third quarter.

The Washington BusinessJournal identified the buyer to be BrookfieldProperty Partners LP affiliate BSREP II Office Holding LLC.

Additionally, Washington REIT said it is acquiring the 1,222-unitRiverside Apartments in Alexandria, Va., for an estimated $244.8 million. It addedthat it reached a deal to sell a land parcel at Dulles Station in Herndon, Va.,expects to offload a multifamily property later in 2016 and is marketing a suburbanoffice asset to evaluate investor interest.

The Journal noted thatthe transactions are part of the company's attempt to rebalance its portfolio amidchanging office space demand in the D.C. market.

Separately, the company announced that it launched an public , with plans to use part of the estimated$130.4 million in gross proceeds to fund an acquisition.

C-changes

Brixmor PropertyGroup Inc. has found a permanent CFO, while DDR Corp. is parting company with its finance chief.

* Brixmor said Tuesday it reeled in Angela Aman, a former Retail Properties of America Inc. executive, to serve asits CFO, starting May 20. She will replace Barry Lefkowitz, who has been as Brixmor's interim CFOsince accounting irregularitiesat the company were revealed in February.

* DDR announced Thursday that CFO and Treasurer Luke Petherbridge,who has served as itsCFO and treasurer since March 2015, is leaving the company, effective May 6.

The shopping center REIT said DDR President and CEO David Oakeswas appointed to serve as interim CFO and treasurer as the company begins the searchprocess for Petherbridge's successor.

Petherbridge will joinExcel Trust, a shopping center REIT acquiredby a Blackstone Real Estate-managed fund in 2015, as that company's president andCEO.

From coast to coast

A trio of REITs each announced high-value property deals on theEast Coast and West Coast.

* Boston PropertiesInc. recently made a strategic acquisitionin California's Silicon Valley, a market that the company "definitely wantsto be a part of," President Douglas Linde said on an earnings call Wednesday.

The company acquired the 218,000-square-foot office buildingat 3625-35 Peterson Way in Santa Clara, Calif., for $78.0 million. The asset, whichis leased to a single tenant through 2021, will be entitled for a roughly 630,000-square-footoffice campus during the remaining lease term, CEO Owen Thomas revealed during thecall.

"The Peterson Way site offers an opportunity for us to deliverproduct in 2023 at a cost basis of under $700 a square foot … and an initial returnin excess of 7% at rents that are less than 10% above market rents today,"Linde added.

The executives also noted that the company wrapped up the $105.4million sale of in Cambridge, Mass.,to MIT in February and disclosed several other transactions.

* Mack-Cali RealtyCorp. announced Tuesday that it reached a deal to EquityCommonwealth's leasehold interest in the 566,215-square-foot officeasset at 111 River St. in Hoboken, N.J., marking Mack-Cali's first property in thatcity. The $235 million transaction, set to close in June, will bring Mack-Cali'sshare of the Hudson River Waterfront class A office market to about 25%.

Additionally, Mack-Cali is buying for $82.3 million an officeproperty in Edison, N.J., in a deal slated to close in May and acquired three smallerassets for an estimated $34 million. It also closed on two property sales in Washington,D.C., and downtown Manhattan, N.Y., which were valued at $93 million and $202 million,respectively.

* As part of its capital-recycling initiatives, a 15-community portfolio in LasVegas in a $630 million deal.

The company said Tuesday that the portfolio includes 4,918 apartmenthomes, a retail center and about 19.6 acres of undeveloped land.

Earnings call coverage

As the first-quarterearnings season during the week endingApril 29, some of the larger players in the real estate sector hosted conferencecalls.

Ventas CEO courtsgeneralist investors ahead of GICS change: Debra Cafaro, Ventas Inc.'schairman and CEO, said the company should be "incredibly attractive" togeneralists.

Ventas detailsdebt investment in Blackstone life-science properties: The $140 millioninvestment was linked to properties in the former BioMed Realty Trust portfolio,which Blackstone Group LP acquired in January.

Duke Realty CEO:Pennsylvania concerns are 'misplaced': Management attributed the company'soccupancy decline entirely to a spec development in the Lehigh Valley while testifyingto the overall strength of the region.

$550M NYC developmentproject will boost AvalonBay into next cycle, execs say: The development,on East 96th Street in Manhattan, is a public-private partnership that is expectedto include 1,100 apartments, 20,000 square feet of retail space and two public schoolbuildings.

Growth in broadereconomy will sustain hotels, Marriott CEO argues, dismissing downturn talk:Marriott International Inc. President and CEO Arne Sorenson predicted improvingGDP growth and transient bookings in the rest of 2016 and disputed a more bearishassessment from his counterpart at LaSalle Hotel Properties.

Realty Income CEOaddresses tenant watch list: On an earnings call, CEO John Case brieflyaddressed the expected impact of Sports Authority's planned liquidation.

Self-storage propertymarkets are unappealing, but Public Storage has found deals anyway, CEO says:In an earnings conference call, Chairman, President and CEO Ronald Havner Jr. saidthat despite more product, lower quality and higher prices in the market for storageproperties than in 2015, Public Storage has found assets to buy.

Despite revenuepullback and choppy NYC, Equity Residential expects strong 2016: Evenif 2016 does not turn out to be as "spectacular" as 2015 was, it is stillon track to be a "great" year, an executive said in an earnings conferencecall.

Boston Propertiesexecs talk Silicon Valley buy: The company acquired a property it plansto expand in the sought-after technology hub of Silicon Valley.

Brixmor exec talksSports Authority liquidation, new C-suite hires: On an earnings call,Interim President and CEO Daniel Hurwitz doffed his hat to Federal Realty's DonaldWood for the way he handled Brixmor's hiring of his CFO.

Hilton CEO predictsmore M&A, outlines 2016 optimism: On an earnings conference call,President and CEO Christopher Nassetta also weighed in on the planned combinationof Marriott International and Starwood Hotels and Resorts Worldwide.

Hilton CEO laudsREIT spinoff's exec team, but details remain sparse: In an earningsconference call, Hilton President and CEO Christopher Nassetta complimented ThomasBaltimore Jr., the intended CEO of the company's planned spinoff, and said moreinformation on the spinoff will come soon.

Simon talks big-picturestrategy, GICS change: The executive told industry observers on SimonProperty Group's earnings call that the company is not weighing any transformationalmoves and is still effectively out of the big deal business.

David Simon onmall biz crisis: 'We don't see it': On an earnings call, Simon Property'sChairman and CEO once again sought to discredit media reports about the existentialcrisis facing the mall business.

American Campusmeeting with institutional investors on a large portfolio sale, execs say:The company hopes to direct the proceeds of a round of asset sales into new development,executives said in an April 26 earnings conference call.

Now featured

HoustonCo a valueplay in its own right, Cousins, Parkway execs say: On a conference call,executives touted the strategic advantages of a Houston-only REIT and the resilienceof the city that has been undermined by recent energy market volatility.

Houston will getworse before it gets better, Camden execs say: Camden Property Trustexecutives said in an earnings conference call that continued low oil prices andjob losses have made Houston the multifamily REIT's weakest market.

Cousins, Parkwaydeal talks go back two years: Parkway Properties' president and CEOsaid no sensible private bids came in during the companies' wide-ranging negotiations.

Data Dispatch:Upgrades, downgrades about even in S&P's recent REIT ratings actions:Of the 93 U.S. equity REITs with Standard & Poor's Ratings Services' corporateratings, 73% are investment grade, with members of the shopping center, self-storage,regional mall and multifamily sectors boasting 100% investment-grade ratings.

Data Dispatch:April state of the housing market: Data released in April showed a generallypositive picture of conditions in the U.S. housing market.

Data Dispatch:US equity REITs' capital raising activity down 27.8% YOY: Year-to-datethrough April 15, publicly traded U.S. equity REITs have favored senior debt offerings,raising around $12.30 billion through such issuances.

Columbia Propertyshares spike on 'big news' lease deal: An analyst pair applauded thede-risking impact of the company's 30-year, full-building lease deal at 222 E. 41stSt. in New York.

Recurring reports

Best of SNL, Real Estate: most read; editors'picks

The Property Ledger: LibertyProperty details Q1 activity; InnSuites nixes $14.8M deal to sell Calif. hotel,Retail Opportunity picks up 2 centers;Duke Realty details $90M in Q1 property sales

Hires and Fires: RealEstate moves through April 27, North America edition

Research Roundup: Wednesday,North American real estate edition; Wednesday, North American real estate edition