4/13/2015 | By Sarah Borchersen-Keto
Private equity firm Blackstone announced two major real estate deals on April 10, underscoring the current vibrancy of the market, according to analysts.
Blackstone Property Partners L.P. announced April 10 that it had agreed to purchase retail REIT Excel Trust, Inc. (NYSE: EXL) in an all-cash transaction valued at approximately $2 billion. Blackstone will pay $15.85 per Excel share, a 14.5 percent premium on the stock’s closing price on April 9 of $13.84. Blackstone also said it had partnered with Wells Fargo to purchase most of the assets of GE Capital Real Estate in a transaction valued at approximately $23 billion.
Vivek Seth, managing director and head of real estate investment banking at Raymond James, said the abundance of private capital looking for assets means there will be widespread activity in 2015.
“It’s definitely a very vibrant marketplace right now. Those that have been sitting on the sidelines are coming in,” he said.
David Auerbach, a REIT trader with Esposito Securities, said the Excel Trust deal could be a “potential catalyst” for more transactions involving the purchase of “companies that fall under the radar.” Auerbach stressed, however, that Blackstone is “only one of a handful of players” that have the means to carry out such deals.
For his part, Seth said he did not see the beginning of a trend toward more privatizations of real estate assets.
“I don’t think there’s going to be a one-way street of valuations being so good in the private market that a bunch of REITs go private like we saw at the last market peak,” he noted.
Michael Knott, managing director with Green Street Advisors, observed that while the Blackstone transactions are significant, they are not surprising.
“Everyone knows that robust global capital markets have made deals easier to finance and execute, and buyer interest remains elevated,” he said.”
Excel Trust owns a portfolio of community shopping centers, power shopping centers and grocery-anchored neighborhood centers. Gary Sabin, the firm’s chairman and CEO, disclosed that undervaluation of its portfolio by the market factored into the deal.
“We did not believe the market accurately reflected the value of the assets,” he said. “This led the board to conclude it was time to more fully assess the value of our portfolio. After reviewing our options, we were pleased to have a group with Blackstone’s reputation step forward with this offer.”
Seth said the decision by Excel to sell makes sense in the current environment.
“Any mispriced asset today has a variety of options available to them,” he said. “If you are mispriced for an extended time as a public company, could you consider going private? Absolutely.”