Major REIT Mergers Possibly On the Horizon

There are a few major REIT mergers reportedly in the works in the commercial real estate industry right now. These show a trend of continued consolidation. The two we would like to focus on right now of importance are Equity Commonwealth’s possible merger with Forest City Enterprises, in a $10-billion deal, and Brookfield Property Partners potentially purchasing General Growth Properties for about $15 billion.

These are some basic details about the four firms, to give you a picture of what these combinations could look like if they happen.

Equity Commonwealth

Equity Commonwealth is associated with commercial real estate tycoon Sam Zell, who is the firm’s chairman. It owns 20 assets in selected states and cities which are mainly office-based but have mixed-use components to them, such as ground-floor retail.

During its most recent quarter, Equity recorded at net income of $31.2 million, a drop from $84.4 million during the same year-ago period. However, its vacancy and rental rates were on the upswing compared to last year’s comparable quarter.

What would merging with Forest City Enterprises look like?

Forest City Enterprises

Forest City would add several components to Equity’s already impressive portfolio. It owns office, mixed-use, multifamily and retail properties across the country, including high-priced retail storefront space on Manhattan’s 42^nd Street.

In all, Forest City owns about 180 assets worth what the firm estimates are valued at $8.2 billion, mostly in gateway markets. Its third-quarter net earnings came in at $5.5 million, a bounce back from a loss of $430.9 million during the same year-ago period. Like Equity, Forest City’s fundamentals are stable, and NOI increased across all asset types. 

Brookfield Property Partners

Brookfield Property Partners, meanwhile, is no stranger to a diversified portfolio. It virtually owns every commercial real estate property type, including multifamily, industrial, mixed-use, and other assets, totaling about $68 billion. Brookfield’s net income was down during the third quarter compared to a year ago, though FFO saw a spike.

Office was the main culprit of the slight decrease, but retail was a different story, and saw a jump. A lot of that has to do with Brookfield’s 34 percent interest in General Growth Properties, which it plans to acquire.

So what is General Growth’s story?

General Growth Properties

General Growth Properties is the country’s second-largest mall owner, behind Simon Property Group. It owns a number of very well-known retail assets that our readers should find familiar. Included in the mix are Fashion Show, in Las Vegas; Glendale (Calif.) Galleria; and Providence (R.I.) Place. GGP also operates a handful of office properties.

During GGP’s third quarter, it saw a drop in net income, reflected by the sale of some assets last year, and NOI rose slightly. FFO also increased. The company currently has $1.5 billion in development, with about $1.3 billion currently under development. 

Ironically, in 2010, Simon Property Group made a $10-billion bid for GGP. Well, now Simon is reportedly considering a sale.

Could we see more major commercial real estate consolidation on the horizon?

About GRS Group
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions. 

Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance.  We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies and delivering customized solutions to assist our clients in achieving their investment goals.