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Into the lap of luxury; to sell or not to sell


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Into the lap of luxury; to sell or not to sell

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.

Into the lap of luxury

* Ashford Hospitality Prime Inc. announced Jan. 24 that it is refining its strategy to focus on luxury hotels and will pursue new acquisitions in this segment. "In the lodging REIT space we want to be the leader in RevPAR, and you do that by having a greater proportion of luxury assets," CEO Richard Stockton said in an interview with S&P Global Market Intelligence at a lodging conference.

The hotel REIT is also increasing its 2017 quarterly cash dividend by 33% starting with the first quarter, a move the executive said would bring the company's payout ratio more in line with the rest of the sector. The company also refinanced certain existing loans with a new $365 million loan.

To sell or not to sell

* FelCor Lodging Trust Inc. was rumored this week to be considering an outright sale, several months after receiving shareholder calls to do so. According to a Jan. 25 report in The Wall Street Journal, the hotel REIT, which had a roughly $1 billion market cap as of the same day, is in early discussions with potential buyers. On Jan. 26, FelCor disclosed that two of its directors will not seek re-election at its upcoming annual meeting as part of a deal reached between the REIT and activist shareholder Snow Park Capital Partners.

FBR & Co. analysts Bryan Maher and Wendy Ma said in a note that the purported sale talks come as no surprise given recent shareholder activism at the REIT and CEO Rick Smith's September 2016 retirement without a reported successor. They posited that although a sale makes sense, buyers lining up and launching a bidding war is unlikely.

* Starwood Capital Group's roughly US$1.3 billion bid to take over Milestone Apartments Real Estate Investment Trust reportedly is getting pushback from certain shareholders of the REIT who believe the offer was too low. A Manulife Asset Management senior portfolio manager wants Starwood to boost its bid by at least 11%, while another portfolio manager at AGF Management Ltd. wants an increase of 5% or more, according to a Jan. 24 Bloomberg News report.

* Brookfield Canada Office Properties could also be bought out, as Brookfield Property Partners LP offered to acquire the remaining 16.9% stake that it or its affiliates do not already own for C$30.10 per unit, or C$475.6 million in the aggregate. Brookfield Canada Office said Jan. 23 that a special committee is evaluating the offer.

* On the property front, The Real Deal reported Jan. 26 that Forest City Realty Trust Inc. is in negotiations to shed its 51% stake in a 15-property retail portfolio in New York City to fund manager Madison International Realty LLC. The rumored talks come a few months after Forest City announced that it launched a review of strategic alternatives for its retail portfolio.

Blackstone on a roll

* Blackstone Group LP's single-family rental unit, Invitation Homes Inc., set the price range of its IPO at between $18 and $21 per share. The offering of 77 million shares is expected to generate up to $1.86 billion, including the exercise of the underwriters' additional-share option, according to a Jan. 23 filing. Invitation Homes also secured funding commitments from Wells Fargo Bank NA and Fannie Mae for up to $1.00 billion in mortgage loans collateralized by some of the company's properties. Subject to the IPO's closing, the company also expects to close on a new $2.50 billion credit facility and will use the net proceeds to repay existing debt.

In a separate same-day filing, Blackstone's nontraded REIT, Blackstone Real Estate Income Trust Inc., said it acquired a hotel at the University of California, Davis, and entered into an unsecured, uncommitted line of credit of up to $250 million. The roughly $32.2 million purchase of the Hyatt Place UC Davis hotel marks the nontraded REIT's first acquisition.

Big-buck deals

* A 5/95 joint venture between Paramount Group Inc. and Singapore sovereign wealth fund GIC purchased the U.S. headquarters of Deutsche Bank in downtown Manhattan, N.Y., in a $1.04 billion deal. The office REIT said the joint venture closed on a $575 million financing of the property.

* Meanwhile, SL Green Realty Corp. sold a 27.6% stake in its 1.7 million-square-foot One Vanderbilt Ave. tower development in New York City to the National Pension Service of Korea and a 1.4% stake in the project to Hines Interest LP for $525 million in combined equity, according to a Jan. 26 release. On Jan. 25, the office REIT reported its 2016 full-year and fourth-quarter earnings, including a 6.0% year-over-year gain in same-store cash NOI for the full year.

Gains and losses

* Crown Castle International Corp. on Jan. 25 said it increased its 2017 earnings outlook, as it logged a 9% year-over-year gain in adjusted funds from operations for the fourth quarter of 2016.

* Duke Realty Corp. on the same day offered its first 2017 guidance and reported year-over-year growth in FFO for the 2016 fourth quarter and full year.

* Prologis Inc. said Jan. 24 that although its core FFO per share for the 2016 fourth quarter dropped slightly year over year, it recorded a 15% rise in the metric for the full year. The company also issued guidance for full-year 2017.

Featured during the week on S&P Global Market Intelligence

Conference Chatter: 'If you're not looking forward in this business today, you're going to lose': Private real estate players at a conference in California said 2017 will likely be as punishing to the retail industry as 2016 was.

Data Dispatch: 4 North American REITs raise dividends YTD through Jan. 16: The U.S. and Canada both witnessed two REITs increase dividends through the first half of the month.

Data Dispatch: 12 US REITs flagged as candidates for dividend increases: From Jan. 1, 2015, through Dec. 30, 2016, 73 publicly traded U.S. REITs did not increase their common dividends. In this analysis, REITs with the lowest estimated AFFO payout ratios are identified as likely candidates for increases.

Data Dispatch: Publicly traded US REITs raise $2.2B in first 15 days of 2017: Hospitality Properties Trust raised the most capital during the first half of January, raising $600 million through two senior debt offerings.