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REITs Ramp Up Year-End Buying Activity

January 30, 2017

REITs Ramp Up Year-End Buying Activity

Property Acquisitions in December 2016 by REITs Already Top December 2015 by 30% with More Deals Still to be Reported

January 18, 2017 | by Mark Heschmeyer | CoStar

Real estate investment trusts, both public and non-traded, began 2016 as major net sellers of property seeking to capitalize on higher property valuations at a time when many REIT managers believed underlying net asset values were not being reflected in their share prices.

With no shortage of interested buyers and plenty of capital available to fund deals, REITs sold billions of dollars of property through the first three quarters of the year.

Now, many REITs flush with cash from those earlier dispositions and eager to put that money to work, reversed course at the end of the year. Based on preliminary December sales totals, CoStar COMPs is already showing REITs buying more than $9.1 billion of property in December 2016, 30% more than $6.94 billion REITs bought in the same month in 2015.

At the same time, it appears REITs will have sold far fewer properties in December 2016 compared to December 2015. CoStar has tallied REITs selling about $6.65 billion in properties last month after selling $14.6 billion a year ago in December 2015.

More REITs appear to be interested in expanding their portfolios, particularly for office and industrial properties. By property types, REITs acquired $1.12 billion more in office properties than they sold so far; $750 million in more in industrial properties; and $500 million more in retail properties.

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Not surprisingly, multifamily has been the most traded property type so far, with REITs buying $4.38 billion and selling $4.23 billion, making them net buyers by about $158 million.

Office properties have been the second most traded property type with REITs buying $2.18 billion and selling $1.06 billion.

Hospitality has been the only property type in which REITs so far have been net sellers, selling $635 million in properties and buying $374 million.

The largest transaction of the month involved two REITs and shows up in both the bought and sold totals: Memphis-based Mid-America Apartment Communities NYSE: MAA completed its acquisition of Atlanta-based Post Properties Inc. NYSE: PPS) to form the largest publicly traded multifamily REIT by units.

MAA paid $3.88 billion for 82 of Post’s apartment properties totaling more than 24,000 units.

Following the merger, MAA owns 101,207 units in about 315 properties focused largely in Sunbelt region of the US. Its 10 largest markets by unit count will be Atlanta, Dallas, Austin, Charlotte, Raleigh, Orlando, Tampa, Fort Worth, Houston and Washington, DC.

Excluding MAA, the 10 largest net buyers among REITs are as follows.

REIT — Net Bought Volume

  • Gramercy Property Trust — $533,000,000
  • Paramount Group — $521,000,000
  • General Growth Properties — $321,986,576
  • Carey Watermark Investors 2 — $280,000,000
  • Preferred Apartment Communities — $210,100,000
  • Griffin Capital Essential Asset REIT II — $175,590,000
  • HCP — $150,500,000
  • Hudson Pacific Properties — $150,000,000
  • Franklin Street Properties — $146,800,000
  • Kilroy Realty — $130,000,000

    Excluding Post Properties, the 10 largest net sellers are as follows.

    REIT — Net Sold Volume

  • RLJ Lodging Trust — $286,000,000
  • Hines Global REIT — $275,833,563
  • Hines REIT — $256,925,000
  • Pebblebrook Hotel Trust — $217,500,000
  • Mack-Cali Realty — $158,633,000
  • Cousins Properties — $150,000,000
  • Xenia Hotels & Resorts — $119,000,000
  • Whitestone REIT — $84,000,000
  • Duke Realty — $75,927,610
  • CBL & Associates Properties — $64,580,000

 

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John E. Moriarty, ChFC
December 2015
February 3, 2016

I have been in the financial services industry for 20 years and our firm provides an education platform that gets clients to “think differently” about their financial picture.  For many years we have communicated to clients the need to diversify their portfolios using alternative asset classes and more specifically, private non-traded investments.  Due diligence on these types of financial vehicles is essential and when I learned about Blue Vault in 2010, our firm immediately began using their material as a tool to build confidence in the minds of our advisors on which alternatives to recommend to clients.  I am impressed with the way Blue Vault continues to add value to their subscribers and I view their publication as a tremendous resource in today’s complex world.