Monday was an active day for real estate investment trusts as a pair of merger deals were unveiled.

Healthpeak Properties
(ticker: PEAK) and
Physicians Realty Trust
(DOC) disclosed a deal to merge on Monday, while
Realty Income
(O) said it would acquire
Spirit Realty Capital
(SRC).

Healthpeak and Physicians Realty will combine in an all-stock merger in which each Physicians Realty common share will be converted into 0.674 of a newly issued Healthpeak common share. Healthpeak and Physicians Realty shareholders will own about 77% and 23% of the combined company, respectively.

The deal is worth about $2.6 billion. The combined healthcare property company should have a valuation of around $21 billion and pay an annualized dividend of $1.20 a share.

“We expect the transaction to be immediately accretive to each company’s shareholders, augment our strong balance sheet, and position the combined company for offense,” Healthpeak Chief Executive Scott Brinker said in the news release. Brinker will lead the combined company as CEO while John Thomas, chief executive of Physicians Realty, will become vice chair of the board.

Healthpeak shares declined 5% to $15.60. Physicians Realty stock was down 1.8% to $10.87.

In another REIT deal,
Realty Income
 will acquire 
Spirit
Realty in an all-stock transaction valued at about $9.3 billion. The combined company is expected to have an enterprise value of approximately $63 billion.

Spirit shareholders will receive 0.762 newly issued Realty Income common shares for each Spirit common share they own. The merger is expected to close in the first quarter of 2024.

Shares of Realty Income dropped 6.8% to $45.65. Spirit Realty stock jumped 6.6% to $34.49.

Both of the deals announced on Monday were all-stock transactions, which is not surprising amid an increased interest rate environment in which financing costs are high. REITs can choose to buy other companies with stock as high interest rates and a limited amount of available debt makes it more challenging to expand through property purchases.

The high-rate environment also has pushed REIT stocks lower this year. This year, Healthpeak stock has dropped 38%, Physicians Realty has declined 25%, Realty Income has fallen 28%, and Spirit Realty was down 14%. The
S&P 500
has gained 8% in 2023.

Compass Point Research analyst Floris Dijkum wrote in a research note Monday that a REIT correction bottom could be near.

“REITs should start their rally six to 12 months before the overall market bottoms which we expect could occur by the end of 2024 or early 2025, depending on economic conditions,” Dijkum said.

Write to Angela Palumbo at angela.palumbo@dowjones.com

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