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New York

Discounts on REITs could lead to wave of private buyouts

Public real estate firms trading at highest discount in five years

Rip Gellein and the JW Marriott Essex House in Midtown
Rip Gellein and the JW Marriott Essex House in Midtown

Real estate investment trusts could face a wave of buyouts, with REITs trading at almost a 15 percent discount to what investors would pay for individual properties.

The gap is the largest in five years and has steadily grown since May, pushing the odds of REIT buyouts to the highest since 2006, according to research by real estate analytics firm Green Street Advisors.

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It means acquisitions like Blackstone Group’s $6 billion deal for Strategic Hotels & Resorts Inc. and its interest in buying BioMed Realty Trust could mark the beginning in an acceleration of REIT takeovers, according to Bloomberg.

Bargain prices represent a lure for opportunistic private investors, who could snap up entire REITs and then sell them off in pieces or build business around their existing infrastructures.

There have been $12 billion worth of takeovers of publicly traded REITs since April, according to Green Street – a figure that doesn’t include Blackstone’s pending acquisition of Strategic Hotels & Resorts. [Bloomberg] – Rey Mashayekhi

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