REITS Weekly Report

The past few months have shown a trend of private equity buying out REITS with the belief that the market has undervalued them. This past week could not have exemplified that better. A record breaking bid of $38 billion was made for Equity Office Properties (EOP) by Vornado, a commercial REIT. EOP is the largest owner of office buildings with real estate in the Chicago, New York and DC area. The bid comes as a counter bid against Blackstone's previous $36 billion bid. The deal has lifted the entire sector by 3.6% due to investors anticipating more buyouts. Blackstone has also recently purchased the REIT CarrAmerica. Private equity firms like Blackstone have the ability to use their properties more for leverage compared to publicly traded REITS, hence bolstering this trend.

The declining Residential REITS sector may be hitting a floor as there has been a growth in housing starts, although this may only be due to unseasonably warm weather. Also boosting this sector is the trend of people renting, rather than buying homes. Since many people believe housing prices will keep on falling, rentals have increased therefore raising renting fees.

In other news: Colony Capital Acquisitions LLC is moving along quickly with $1.5 billion in new financing with its development of Meadowlands Xanadu which will be the most expensive mall built in the US.

Glenborough Realty Trust Inc. agreed to be acquired by funds managed by Morgan Stanley for roughly $1.9 billion. The buyout values Glenborough at $26 a share-an 8.2% premium over Friday’s closing price of $24.03. Goldman, Sachs & co. acted as a financial adviser for Glenborough’s board and Morgan Stanley acted as a financial adviser to Morgan Stanley Real Estate.

Commercial REIT deals are hot right now-be on the look out for possible arbitrage investments.