M&A activity involving public US equity real estate investment trusts remained low in the first half of 2024, with only a single deal announced.
Elevated interest rates and an associated higher cost of debt has largely slowed transactions in the REIT sector.
The analysis included real estate deals where either the buyer or target is an equity REIT that trades on the Nasdaq, NYSE or NYSE American.
Only 1 deal in H1 2024
The sole deal announced in the first half of 2024 was Blackstone Inc.'s privatization of multifamily REIT Apartment Income REIT Corp. in an all-cash transaction valued at roughly $10 billion.
High interest rates have largely slowed privatizations within the REIT sector, which are often funded with debt. In 2023, there were only two REIT privatizations: KSL Advisors LLC's $1.4 billion acquisition of hotel REIT Hersha Hospitality Trust and INDUS Realty Trust Inc. being taken private by an investor group comprising Centerbridge Partners LP and GIC Real Estate.
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No all-stock mergers have been reported in 2024.
All-stock transactions were more prevalent last year given the high cost of debt and low valuations within the sector. Some of the larger all-stock deals in 2023 included Extra Space Storage Inc.'s acquisition of Life Storage Inc., Realty Income Corp.'s acquisition of Spirit Realty Capital Inc. and Healthpeak Properties Inc.'s merger with Physicians Realty Trust.
Many REITs still trade at large discounts to net asset value
While the majority of REITs still trade at large discounts to their net asset value (NAV) estimates, the market cap-weighted Dow Jones Equity All REIT Index closed at a slight premium to NAV on July 11 and July 12, signaling stronger valuations for larger-cap REITs than their smaller-cap counterparts.
Within the REIT sector, hotel, office and timber REITs trade at the largest discounts to NAV, while the majority of REITs trading at the largest premium came from the healthcare and datacenter sectors.
REITs that trade at a large discount to their NAV may be more attractive M&A targets.
