Market Overview

4 REITs That Could See M&A Activity Soon

4 REITs That Could See M&A Activity Soon
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D.A. Davidson analysts Barry Oxford and Steve Shaw just issued a new research note on the real estate sector that asked a simple question: "Will this be the summer of mergers & acquisitions?"

While the two aren't aware of any current M&A chatter, they name three office REITs -- Brandywine Realty Trust (NYSE: BDN), First Potomac Realty Trust (NYSE: FPO) and Corporate Office Properties Trust (NYSE: OFC) -- along with one industrial REIT -- Rexford Industrial Realty Inc (NYSE: REXR) -- to keep an eye on.

This subset of names "present an opportunity for investors," the analysts wrote, because they trade at "persistent discounts" to NAV.

More broadly, Oxford and Shaw explained that the real estate industry is "favorable" for consolidation.

"The REIT market has been trading-off nearly 10% year-to-date while cap rates have remained relatively unchanged," they wrote. The REIT marketplace trades at a near 10 percent discount to NAV, with some trading at more than a 15 percent discount.

The key insight? "If this spread persists, the environment could become ripe for M&A activity as institutions buy the cheaper REITs portfolio over like kind assets in the private real estate market," they added.

On Wednesday morning, Chambers Street Properties (NYSE: CSG) and Gramercy Property Trust Inc (NYSE: GPT) announced they will merge to create the space's largest industrial and office net lease REIT worth nearly $6 billion.

D.A. Davidson analysts admitted while market reaction to the move was sub-par, shareholders will become part of a "stronger and faster growing company, which may benefit them 12-24 months down the road."

Latest Ratings for BDN

Apr 2018Stifel NicolausMaintainsHoldHold
Mar 2018Stifel NicolausDowngradesBuyHold
Jan 2018BarclaysMaintainsEqual-WeightEqual-Weight

View More Analyst Ratings for BDN
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Posted-In: Barry Oxford DA DavidsonAnalyst Color Long Ideas M&A Analyst Ratings Trading Ideas Real Estate


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