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Weyerhaeuser scores $2.2B pulp mill divestment deal; New York REIT back on M&A rumor mill

Gauging Supply Chain Risk In Volatile Times

The Commercial Real Estate (CRE) Sector Feels the Impact of the Coronavirus

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Weyerhaeuser scores $2.2B pulp mill divestment deal; New York REIT back on M&A rumor mill

The timber REIT sector announced a hat trick of high-value transactionsduring the week ending May 6, and New York REIT's merger discussions with The JBGCos. and Starwood Hotels' property deal talks with Qatar's sovereign wealth fundalso made news.

Pulp nonfiction

Weyerhaeuser Co.announced that it clinched a $2.2 billion cash deal to divest its cellulose fibers pulp mill portfolio to InternationalPaper.

The company said Monday that the transaction concludes the firstphase of the strategic reviewof its cellulose-fibers business and should be finalized in the fourth quarter.The deal includes five pulp mills in Mississippi, Georgia, North Carolina and Alberta,as well as two modified-fiber mills in Columbus, Miss., and Gdansk, Poland.

In a release, President and CEO Doyle Simons said the transaction"delivers compelling value for Weyerhaeuser shareholders and further focusesour portfolio as we work to be the world's premier timber, land, and forest productscompany."

Churning on the rumormill

* Rumors circulated again this week that New York REIT is in play. The office REIT was reported byReuters on Monday to be in mergertalks with The JBG Cos., a privately held real estate investment firm.

Roughly five months earlier, the company was reported to be a deal to be bought out bySL Green Realty Corp.That report was later refutedby an SL Green representative. New York REIT announced in October 2015 that it Eastdil Secured to helpit evaluate strategic alternatives.

* Starwood Hotels& Resorts Worldwide Inc. was also rumored this week to be on tapto divest its St. Regishotels in California and New York. Bloomberg News reportedWednesday that the company is tipped to be advancing talks to sell the 238-roomSt. Regis New York at 55th St. and the 260-room St. Regis San Francisco to the QatarInvestment Authority. The assets' value was pegged at up to $1 billion, althoughthey may sell for less, sources told the news agency.

The purported talks come as Starwood Hotels to close its to be acquired by MarriottInternational Inc. during the second quarter. The company has been seekingto offload five of its U.S. hotels, including two that will be to Interval Leisure Group as part ofits spinoff of its timesharebusiness, which is now expected to closethis month after a brief delay.

Splashing out on timberlands

A pair of timber REITs each announced high-value timberland transactionsthis week.

* Rayonier Inc.is investing about $263 million to acquire61,000 acres of timberlands in Oregon and Washington. The transaction is part ofits joint acquisition of private timber REIT Menasha Forest Products Corp. withForest Investment Associates. The timber REIT sold to Forest Investment Associatesroughly 55,000 acres of timberlands in Washington for about $130 million, balancingthe age-class distribution of its Pacific Northwest portfolio.

Rayonier said Monday that the transactions are meant to upgradeits timberland portfolio in the Pacific Northwest. It added that it obtained a $300million incremental term loan to help fund its portion of the Menasha buyout netof the $133 million received from the Washington sale.

* CatchMark TimberTrust Inc. is poised to expandits total acreage in the South to 480,400 acres through its planned acquisitionof the Carolinas Midlands III timberlands. The transaction would mark the timberREIT's single largest acquisition since it hitthe NYSE in late 2013.

The timber REIT said Thursday that it inked a $101.8 milliondeal to purchase 51,700acres of prime timberlands in South Carolina from Forest Investment Associates-managedfunds. It intends to fund the transaction, set to close by the end of the secondquarter or early third quarter, through its multidraw term loan.

Sticking it out

W. P. Carey Inc.CEO Mark DeCesaris disclosedThursday that the company is embarking on a six-point business strategy focusedon growth, diversification, operational efficiency, balance sheet strength and flexibility,proactive asset management, and transparency, as it seeks to as a diversified REIT.

According to an earnings release, the company arrived at thedecision after concluding its strategicreview intended to considerwhether it should split up its "core competencies into more focused entitieswith distinct strategies."

Closing time

Medical PropertiesTrust Inc., Iron MountainInc. and CommunicationsSales & Leasing Inc. each announced the completion of their respectiveM&A deals this week.

* Medical Properties finalizedthe merger of its investmentin hospital operator Capella Healthcare Inc. with RegionalCare Hospital PartnersInc. and the corresponding prepayment of two mortgages on Capella facilities.

The company said Monday that it applied the net proceeds fromthe transactions toward trimming its borrowings by about $550 million, which Chairman,President and CEO Edward Aldag said will pave the way for the company to be amongthe top third of all REITs in terms of leverage.

* Iron Mountain announced Monday that it closed on its buyoutof Australian peer Recall Holdings Ltd. in a roughly $2 billion .

The acquisition includes Recall's entire global operations, excludingthe Australian firm's U.S. assets that were soldand its Canadian facilities that will be divested to satisfy requirements. The acquisitionof Recall's U.K. business remains under regulatory review, and the Boston-based records management giant saidit seeks to resolve the concerns "as quickly as possible."

* Finally, Communications Sales & Leasing closed its of PEG Bandwidth LLC'sentire outstanding equity interests for $409 million, subject to adjustment.

The communications REIT said Monday it funded its of the fiber-network firmusing $321 million of borrowings under its revolving credit facility and by issuing1 million of its common shares and 87,500 shares of its 3% series A convertiblepreferred shares.

Big-ticket deals

* Taubman CentersInc. revealed Monday that its Taubman Asia unit and Wangfujing GroupCo. picked up the remaining40% stake in the CityOn.Xi'anshopping center in Xi'an, China, for roughly $150 million.

Taubman said the transaction brings the joint venture's ownershipinterest in the property to 100%, with Taubman Asia and Wangfujing each holdinga 50% stake.

* Macerich Co.said Tuesday that it soldthe Capitola Mallin Capitola, Calif., in a $93 million deal with an unnamed buyer.

The company said it incorporated the dilutive impact of the saleinto its reaffirmed FFO-per-shareguidance range of $4.05 to $4.15.

* Summit HotelProperties Inc. recently pickedup the 226-room Courtyard by Marriott in Nashville, Tenn., and the 160-roomResidence Inn by Marriott in Atlanta. The company paid$109.0 million for the assets, which have a projected combined cap rate of 8.25%to 8.75%, according to a Tuesday earnings release.

* Education RealtyTrust Inc. said in a Monday earnings release that it recently signedbinding deals to acquirea portfolio of five collegiate housing communities aggregating 1,645 beds near theUniversity of Wisconsin, University of Arizona and Colorado State University forroughly $284.0 million. It closed on one of the assetsduring the first quarter and expects to finalize its purchase of the other fourduring the second and third quarters. Among other transactions, the company alsodetailed the sale of the 384-bed 605 West community near Duke University in NorthCarolina for net proceeds of $52.4 million.

Earnings call coverage

Some of the larger players in the real estate sector hosted conferencecalls, as first-quarterearnings to roll in duringthe week ending May 6.

American Homes4 Rent offloading the dregs of American Residential Properties' portfolio, execssay: Roughly 1,300 acquired properties that do not meet the company'squality standards will be sold, likely in bulk, executives said in an earnings conferencecall.

VEREIT CEO indicatesCole Capital sale unlikely in the near term: The company faced a questionon its earnings call about its current views on the nontraded REIT sponsor.

STORE Capital CEOweighs in on retailer troubles: On an earnings call, STORE Capital'sChristopher Volk said the company's business is not registering "current orpending recessionary pressures."

Ashford HospitalityPrime execs defend strategic review, company's viability: Company executivessaid on a call that they intend to buy back shares aggressively and sell four ofthe company's hotels.

Regency execs shedlight on Sports Authority, Eastern Mountain exposure: On an earningscall, executives said the company's exposure to the sporting goods tenants is likelyto affect its same-property NOI in the near term.

Macerich execstalk Aeropostale, coming e-tailer demand wave: On an earnings call,Macerich's Arthur Coppola said the retail real estate landscape is on the cusp ofa wave of e-tailer conversions that will "change the face" of the business.

Welltower's NYCproperty will target an 'affluent, cognitively challenged population,' CEO says:The property, to be developed with Hines, is part of the REIT's strategy of focusingon top-tier markets, company executives said during an earnings conference call.

Vornado's prospectiveDC spinoff looking more likely: Exchanges with management during theQ&A segment of the company's May 3 earnings call suggested a spinoff of Vornado'sWashington, D.C., business could come sooner rather than later.

General Growthpursuing JVs on several assets: The company plans to primarily use proceedsfrom any stake sales to pay down debt.

National Retailexecs field questions on 'difficult' sporting goods segment: The troublebrewing among sporting goods retailers again reared its head in conversation withmanagement.

Leaving Las Vegaswas the right move for Camden, CEO says: "The decision to exitLas Vegas was a balance between losing a market with above-average NOI growth forthe near term versus the long-term challenges that Las Vegas faces," Chairmanand CEO Richard Campo said during an earnings call.

Education Realtyis buying opportunistically, despite slimmer yields, execs say: In aconference call, company executives said they also have become comfortable withslimmer development yields on properties near top-tier universities.

Hersha Hospitalitycloses JV with Chinese investor, after a delay: The $571.4 million venture,for seven Manhattan, N.Y., properties, could foreshadow future joint investments,executives said.

Now featured

Data Dispatch:72 North American real estate companies increase dividends YTD in 2016:A total of 72 North American real estate companies had raised dividends year-to-datethrough April 29, with Summit Hotel Properties announcing the largest relative increaseduring the two-week period between April 16 and April 29.

Data Dispatch:REITs only slightly scathed by planned Sears, Kmart closures: Although14 REITs report Sears or Kmart as a top tenant, they have minimal exposure to thelatest round of planned store closings, according to S&P Global Market Intelligencedata.

Data Dispatch:Cousins, Parkway saved from 'Houston purgatory,' analyst says: Cousinshad to pay up for Parkway, but the merger and accompanying HoustonCo spinoff willlikely pay off in the end for having saved the companies from the drags their Houstonholdings would have had on their portfolios, analysts said.

Wireless Investor:Small cell economics: Cash flow margins on small cells are slimmer thanmargins on pole-type towers, according to new Crown Castle data.

Recurring reports

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