This M&A wave has already seen three companies—Colonial, BRE, and AEC—removed from the public sphere. But that’s probably not all. Reports indicate Home is in discussions with a potential buyer, and analysts are speculating that a number of other names could be in play. Earlier this year (after the AEC deal was announced), Green Street Advisors, a real estate research and advisory firm, rated the likelihood of various REITs being bought out. Here’s the list, along with the odds they’ll be sold:
Home Properties: 60% Odds
Like Post, Home has long been a rumored takeout candidate (that became a reality in late June). Now, with Lone Star’s interest in the Rochester, N.Y.–based company that outcome may finally be becoming a reality. “Our understanding from the management team at Home is that they are open to selling the business at the right price,” says Jonathan Litt, managing director of Land and Buildings.
As many REITs migrate to new product on the coasts, Home is sticking with its older properties and renovation-heavy platform. “Its business as intensive rehabber—the private markets may like that or understand it more than public market investors do,” says Conor Wagner, a research associate at Green Street Advisors.
Post Properties: 30% Odds
Post has long been rumored to be on the block. But with the AEC sale and, more importantly, the recent Gables deal, the time may finally be right.
“The Gables transaction is an excellent comp for Post, given that they have a similar footprint and similar quality,” Wagner says. “For someone who underwrote Gables and got excited about that, we would think they’d be interested in Post.”
But Alexander D. Goldfarb, managing director at Sandler O’Neill + Partners, doesn’t think Post is as easily absorbed as conventional wisdom would suggest. “Post is everyone’s favorite,” he says. “But when you run the math, it would be a very specific buyer that would accept the low yields for the board to say yes.”
Camden: 10% Odds
After Home and Post, Green Street’s takeout odds decline dramatically, It’s possible to think of Camden as a takeout candidate. And, while the company would weigh any offer it gets, CEO Ric Campo is proud of the platform he built, which includes being named to Fortune’s “100 Best Companies to Work For” list.
And Campo doesn’t seem too eager to be taking on equity partners anytime soon. “I would much rather have a shareholder that’s mad at me than a partner that’s mad at me,” he says.
Aimco: 10% Odds
Once the largest owner and manager in the country, Aimco has simplified its story over the past decade, shedding businesses and properties that weren’t valued by the public markets. Still, the company possesses a diverse portfolio that would probably be broken up if sold.
While some observers contend that the only way Aimco would consider selling is when CEO Terry Considine decides it’s time, Wagner thinks any disruption with Fannie or Freddie could cause the company to revisit its options. “Aimco’s specified mission is being a secured-only borrower and buying high-quality assets,” he says. “If Fannie and Freddie pull away and try to focus on affordable properties, that’s not good for Aimco.”
UDR: 10% Odds
With a $12 billion market cap that would force a buyer to write a big check, UDR would seem to be the REIT less likely to sell. Over the past decade, the company, under CEO Tom Toomey, has revamped its portfolio by scooping up newer product in high-barrier, coastal cities. Still, the company’s legacy secondary market and Southeastern properties remain—creating almost two different REITs.
“With UDR, we would expect [a potential buyer] would expect it would break it up into two companies,” Wagner says. “Someone who wants secondary markets and the Sun Belt could get that. If someone wants coastal gateway, they could do that. We think there would be an attraction for investors.
