Rouse M&A illustrates public-private disconnect

February 26, 2016 admin

Couple Out Shopping

Rouse Properties, which was spun out of General Growth Properties in 2012, has agreed to be acquired by an affiliate of Brookfield Asset Management. The $2.8 billion acquisition fits into a larger trend of REITs acquired by real estate private equity funds. As the lead feature in the March issue of Institutional Real Estate Americas, “The public-private disconnect,” notes:

The past year was marked by several high-profile REIT privatizations, three instigated by The Blackstone Group alone.

The biggest privatization in 2015 was Blackstone’s agreement to acquire BioMed Realty Trust in a deal valued at $8.0 billion. Blackstone also has closed on a $6.0 billion acquisition of Strategic Hotels & Resorts and a $2.0 billion acquisition of Excel Trust. Another big real estate private equity player, Lone Star Funds, acquired Home Properties in a $7.6 billion deal.

Blackstone and Lone Star raised billions of dollars from investors in 2015, and that capital has to be put to work. Two major opportunity funds  — Blackstone Real Estate Partners VIII, which raised $15.8 billion, and Lone Star Real Estate Fund IV, which raised $5.9 billion — closed last year. In addition, Blackstone’s core-plus open-end fund, Blackstone Property Partners, continues to gather capital.

A pooled fund with billions of dollars in commitments is not going to reach its investment goals by buying single properties for $25 million a pop. Portfolio and platform deals are the only way to achieve the scale required to put those capital commitments to work.

Sources for the article all agreed 2016 will see additional REIT privatizations. The Rouse/Brookfield deal could well be one among many.

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LorettawebfinalLoretta Clodfelter is editor of Institutional Real Estate Americas.

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