Equity Commonwealth Agrees to Buy Monmouth Real Estate Investment in $3.4 Billion Deal

May 05, 2021 · reit.com
Equity Commonwealth Agrees to Buy Monmouth Real Estate Investment in $3.4 Billion DealSarah Borchers…May. 5 2021
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Equity Commonwealth plans to shed office assets; Sam Zell says still “significant” growth in industrial.

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Equity Commonwealth (NYSE: EQC) will acquire Monmouth Real Estate Investment Corp. (NYSE: MNR) in an all-stock transaction valued at approximately $3.4 billion, including debt, the two companies said May 5.

Once the acquisition closes, Equity Commonwealth is expected to have approximately $2.5 billion of pro forma cash on its balance sheet. The company plans to dispose of its four office properties and Monmouth’s portfolio of marketable securities over time and reinvest the proceeds in future acquisitions.

Equity Commonwealth President and CEO David Helfand said Monmouth provides “an attractive and scalable platform” that the company can grow, given its significant cash and balance sheet capacity.

Sam Zell, chairman of Equity Commonwealth, said the transaction provides Equity Commonwealth with a high-quality, net-leased industrial business with stable cash flows while preserving the REIT’s balance sheet capacity for future acquisitions.

During a conference call, Zell acknowledged that the industrial space is “very crowded at the moment,” but added that not many players have $5 billion of buying capability and cash on the balance sheet. “It’s going to be up to us to take advantage of that set of circumstances,” he said.

Zell denied a suggestion that Equity Commonwealth was late in entering the industrial sector, which he said, “still has a very significant amount of room yet to grow.” As for the office sector, Zell noted that the market was oversupplied even before the pandemic. “Oversupply is going to impact that sector very significantly over the next few years.”

Helfand noted during the call that the office properties are not currently being marketed and that the company will “look for opportunities when it makes sense.”

Meanwhile, Michael Landy, president and CEO of Monmouth, said that following a strategic alternatives process, the board unanimously determined that the merger was the best outcome to maximize value for Monmouth stockholders.

The transaction states that Monmouth shareholders will receive 0.67 shares of Equity Commonwealth for each share they own. Based on the closing price for Equity Commonwealth on May 4, this represents approximately $19.40 per Monmouth share, versus the May 4 closing price of $18.55.

The combined company is expected to have a pro forma equity market capitalization of approximately $5.5 billion.

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Realty Income, VEREIT Agree to Merge; Office Assets to be Spun-Off

April 29, 2021 · reit.com
Realty Income, VEREIT Agree to Merge; Office Assets to be Spun-OffSarah Borchers…Apr. 29 2021
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Combined net lease REIT will have enterprise value of approximately $50 billion.

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Realty Income Corp . (NYSE: O) said April 29 that it has agreed to acquire VEREIT, Inc. (NYSE: VER) in an all-stock transaction, creating a combined company with an enterprise value of approximately $50 billion.

In addition, the two REITs plan to spin-off 97 office properties into a new, self-managed, publicly traded REIT (SpinCo), saying that office real estate does not play a role in the company’s long-term acquisition strategy.

Under the terms of the agreement, VEREIT shareholders will receive 0.705 shares of Realty Income stock for every share of VEREIT stock, representing a 17% premium to the previous day’s closing price.

Following the merger and the spin-off, Realty Income will continue as the surviving public entity. Realty Income and former VEREIT shareholders are expected to own approximately 70% and 30%, respectively, of both Realty Income and SpinCo.

During a conference call, Realty Income President and CEO Sumit Roy said the merger would be immediately accretive to adjusted funds from operations (AFFO) and would provide value creation for Realty Income's shareholders—while enhancing the REIT’s ability to execute on its ambitious growth initiatives.

As a combined entity, the merged company will benefit from increased size, scale, and diversification, continuing to distance itself as the leader in the net lease industry, Roy said. He noted that VEREIT's real estate portfolio is “highly complementary,” which is expected to further enhance the consistency and durability of cash flows.

Glenn Rufrano, CEO of VEREIT, said the merger recognizes the value created in VEREIT, which had been the objective of the management team since 2015. "We put an excellent team in place, enhanced the portfolio, created an investment-grade balance sheet, and resolved all legacy issues,” he said.

Meanwhile, Roy described the net lease market as “incredibly fragmented.” While acknowledging the company’s global goals, he noted that “we have to walk before we can run.” Realty Income's growth strategy is expected to remain focused primarily on high-quality, single-tenant net lease retail and industrial properties in the U.S. and U.K., leased to clients that are leaders in their respective businesses.

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Industry Experts Publish First Academically-Focused Textbook on REIT Investment

April 23, 2021 · reit.com
Industry Experts Publish First Academically-Focused Textbook on REIT InvestmentSarah Borchers…Apr. 23 2021
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Stephanie Krewson-Kelly and Glenn Mueller are co-authors of Educated REIT Investing

 

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The authors of a new book on REITs and real estate investment, Educated REIT Investing, say it is the first of its kind to target academic institutions, while still being concise enough to attract a general audience.

The book is co-authored by Stephanie Krewson-Kelly, vice president of investor relations at CorporateOffice Educated REIT InvestingProperties Trust (NYSE: OFC), and Glenn Mueller, a professor at the University of Denver’s Franklin L. Burns School of Real Estate and Construction Management, and a real estate investment strategist at Black Creek Group.

The book updates Krewson-Kelly’s 2016 book, The Intelligent REIT Investor, and includes new chapters by Mueller. Nareit Senior Economist Calvin Schnure and Merrie Frankel, president of Minerva Realty Consultants, also contributed to the book.

Krewson-Kelly pointed to two main reasons to update the 2016 book: The 2017 Tax Cuts and Jobs Act changed the way that REIT dividends are taxed at the investor level, she said, and in 2018, Nareit tweaked its definition of funds from operations (FFO).

Since most of the 2016 sales came from educational institutions, it was decided to create the first textbook on REITs, Krewson-Kelly explained. She described it as “the only comprehensive book on how to analyze and invest in REITs.” Mueller added that the book includes presentations for each chapter, along with exams and case studies.

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