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Essential IR Insights Newsletter - February 2023

REIT Replay: Sealing the deal

Rebounding oil prices helped push a broad market rally, whileREITs were relatively flat Tuesday, May 10, a day after Morgans Hotel Group announcedthat it finally reached an agreement to be acquired by SBE after earlier mergertalks came to .

The MSCI US REIT Index (RMZ) was flat, at 1,194.09, and the SNLUS REIT Equity Index rose 0.08% to close at 317.61. The Dow Jones Industrial Averagesurged 1.26% to close at 17,928.35, while the S&P 500 popped 1.25% to end theday at 2,084.39.

After years of being the targetof potential , Morgans Hotel Group Co. finally accepted a buyout offer,according to a Monday release.

The company agreed to be acquiredby SBE in a cash deal valued at $2.25 per share. The deal has already obtained approvalfrom Morgans' board and should be finalized during the third or fourth quarter,subject to regulatory approvals and other conditions. The transaction may be by either party undercertain conditions, with the terminating party required to pay the other a $6.5million termination fee.

Under the terms of the deal, SBE will pick up Morgans' 13 hotelassets in London, Los Angeles, New York, Miami, San Francisco, Las Vegas and Istanbul,including its Hudson New York and Delano South Beach hotels.

MKM Partners analyst Christopher Agnew upgraded Morgans to "neutral"from "sell," with a $2.25 price target on the stock.

Agnew said in a note that he believes the company's proposedbuyout by SBE overshadows its first-quarter results and that he expects a floorset in the stock's value. With Morgans planning to unload its two owned hotel assets by the second quarter,the analyst said he thinks the company "had effectively run out of options"and that "it is unlikely there will be additional interest."

Shares of Morgans rose 0.95% to close at $2.12.

In major property news, NorthStarRealty Finance Corp. said it is offloadingits manufactured housing communities in a $2.04 billion deal struck subsequent tothe first quarter. The transaction is expected to bring in net proceeds of roughly$620 million.

The company added that it sold certain real estate securitiesfor net proceeds of $54 million during the first quarter, among other transactions.

NorthStar Realty shares lost 2.95% to close at $13.84.

In capital offerings, CoreSiteRealty Corp. announced that certain Carlyle Group-affiliated funds launchedan offering of 3.0 millionshares of the company's common stock.

J.P. Morgan, the offering's sole underwriter, will sell the commonshares from time to time in various transactions. Pending customary closing conditions,the offering is expected to close by May 13.

CoreSite shares shed 1.91% to closeat $76.63.

Jefferies analysts Omotayo Okusanya and George Hoglund liftedtheir rating on HCP "hold" from "underperform" in light of the company's planto spin off its HCR ManorCareportfolio of skilled-nursing and assisted-living assets into an independent publiclytraded REIT during the second half of 2016.

Given that the spinoff will absorb the headwinds related to the"underperforming" portfolio, the pair views the plan as a "net positive"for the health care REIT. The pair, however, noted that the stock's positive reactionto the proposed spinoff was rather surprising given limited details about the plan.

"[W]e still believe that rents to ManorCare will have tobe reset" in order for the REIT spinoff to be a "viable" entity,they said.

HCP shares dropped 3.56% to close at $34.71.

In executive moves, PostProperties Inc. Executive Vice President and CFO Christopher Papa isleaving the company totake over the same roles at LibertyProperty Trust.

Papa will step down at Post, effective May 31, with his rolesto be assumed by other senior management team members. He will join Liberty startingJune 1, succeeding George Alburger Jr., who is retiring.

Post shares gave up 0.78%, closing at $61.23, while Liberty sharesadded 0.57% to close at $36.79.

On the macro front, CoreLogic reported that foreclosure inventoryin the U.S. fell 23.2%year over year in March. Completed foreclosures were down 14.9%, compared to theyear-ago period.

Completed foreclosures came to 36,000 in March, compared to 42,000in the year-ago period, reflecting a 69.7% drop from a peak of 117,782 completionsin September 2010.

Now featured

Data Dispatch:Despite potential gain, big questions surround HCP spinoff: After thecompany disclosed plans to spin off properties leased to skilled nursing operatorHCR ManorCare, observers wondered whether the new company can succeed where itspredecessors have not.

The Guidance Report:This roundup of recent guidance from real estate companies includes updates fromNexPoint Residential, SoTHERLY Hotels and Bluerock Residential.

The Property Ledger:NexPoint Residential to sell 3 assets; Brookdale Senior Living unloads 7 communities:The May 10 North American property news roundup also features details of CT REIT'snew investments.

Market prices and indexvalues are current as of the time of publication and are subject to change.