Friday, July 26, 2013

Another Liquidity Event

W.P. Carey (WPC) announced this morning that it is buying an affiliated real estate investment trust, Corporate Property Associates - 16 Global, Inc. (CPA 16), in an all-stock transaction valued at $4 billion.  The merger, which requires approval from shareholders in both companies, is expected to close in the first quarter of 2014.  WPC is purchasing CPA 16 at an exchange ratio based on a value of $11.25 per share.  The exchange ratio allows for a price adjustment based on the value of WPC stock before the close of the transaction.

WPC plans to boost its dividend to $3.52 per share, a $.16 per share increase, or 4.76%, upon the completion of the merger.  The combined company will have an enterprise value of over $10 billion, according to WPC's press release announcing the transaction.

The market likes the news.  In early trading WPC's stock is up over 5%.

This transaction comes on the heels of American Realty Capital Properties' planned merger with American Realty Capital Trust IV, which is scheduled to close by the end of the third quarter, and the anticipated listing of Wells REIT II, now named Columbia Property Trust.

Wednesday, July 24, 2013

Short Memories

It's 2005 and 2006 all over again.  Home prices increase for a few months and home buyers abandon caution and prudence.  Here is a Bloomberg article on adjustable rate mortgages, which are at their highest levels since 2008.  Read the quotes; the hard lessons of 2008 through early 2012 are a distant memory. 

Ireland Rising

Here is a Bloomberg article on Ireland's rebounding housing market.  A rising housing market helps the overall economy, whether in the US or abroad.

Tuesday, July 23, 2013


Here is an article on American Realty Capital in today's Wall Street Journal.  I didn't learn anything from the article, but it's a good summary of issues surrounding ARC and the non-traded REIT industry.  I thought the article would have mentioned ARC's and other non-traded REIT sponsors' recent liquidity events.  This sea of unlocked cash helps explain the $17 billion the non-traded REIT plans to recycle raise in 2013.

Monday, July 22, 2013

Another Profile In Courage

I just re-read the InvestmentNews article I linked to earlier today.  It seems lame to me that the broker / dealer that terminated its Cole relationship last week waited so long.  This blog and other publications listed all the fees related to the Cole Holdings / Cole Credit Property Trust III transaction back in March.  Pulling selling agreements then would have sent a stronger, more effective message than waiting four months. 

I guess the supposed (passive-aggressive) punishment is to deny Cole reinvestment dollars when reps sell shares of Cole's two recent liquidity events.  But to me, this begs a bigger issue: BDs are scared of liquidity events because their reps are selling shares of the newly liquid, but established, fully invested REITs and reinvesting back into high commission blind pool REITs.  BDs don't want to tell their reps "no" and deny them a big payday.  I'd bet this thinking was not only behind the Cole termination, but also played a part in the other BDs' decision to suspend sales of American Realty Capital Trust V, despite the excuses given in InvestmentNews.

Stuff Happens

Boy, take about ten days off and stuff happens.  Here is an article from InvestmentNews' Bruce Kelly, which summarizes a few articles from last week, on broker / dealers halting sales of some big named non-traded REITs. 

Tuesday, July 02, 2013

Housing Drives Hiring

The good news related to the housing market is coming too fast for me to note all the articles I read.  But occasionally one story stands out, and this Calculated Risk post jumped out to me.  Actually, the Calculated Risk post links to five articles, some that date from February, but all that predict a home construction hiring boom.   The primary story is a recent Deutsche Bank research report estimating the creation of 300,000 new construction jobs in the second half of 2013.  This is a large increase that would have positive impacts for the entire US economy.


American Realty Capital Properties (ARCP) has entered into a merger agreement to acquire an affiliated real estate investment trust, American Realty Capital Trust IV (ARCT IV).  The value of the transaction is $3.1 billion.  The move comes as no surprise, and was telegraphed (to me at least) by ARCP's and ARCT IV's June purchase of a large portfolio of restaurant properties from GE Capital. 

ARCP is offering 2.05 of its shares for each ARCT IV share, the equivalent of $30.34 per share based on ARCP's closing price of $14.80 yesterday, or cash of $30.00 per share, but ARCP has guaranteed ARCT IV investors that choose stock a floor of $30.62 per share.  In conjunction with closing of the merger (and ARCP's closing of its previously announced acquisition of CapLease), ARCP is raising its distribution from $.91 per share to $.94 per share.

The transaction is expected to close by the end of the third quarter and is a full liquidity event for ARCT IV investors, so there is no share lock-up or tranched share release.

Update:  Here is a Bloomberg article on merger,

Monday, July 01, 2013

Drilling Deep

Here are a couple of short, but informative reads on oil and gas. The first is from the Financial Times' Alphaville Blog and explores whether Europe can replicate the shale boom experienced in the United States.  Short answer:  yes, but Europe is years behind the US.  Here is an interesting fact that shows how far the US leads the rest of the world in drilling technology:
Citing Baker Hughes, Maugeri notes that more than half of the world’s drilling rigs are employed in the United States. Ninety percent of them are equipped to drill horizontal wells, and almost all oil and gas wells in the United States are now fractured to stimulate production. In the rest of the world, by contrast, fracturing is used on fewer than one well in 10.
The second post is from Calculated Risk, and it notes the shrinking spread between the West Texas Intermediate (WTI) crude and Brent crude.  The post notes that at one point a barrel of Brent crude was 25% higher than a barrel of WTI crude, and the spread is now only 7%.  A big part of this drop is improved pipelines and other transportation means that are moving oil from the middle of the United States to demand centers and refineries on the coasts.  The domestic oil lowers demand for higher priced foreign imports, leading to the drop in Brent crude prices