Get ready for a wave of takeovers of U.S. publicly traded landlords.

Real estate investment trusts-- companies that own properties such as luxury hotels, office towers and shopping malls -- are trading at an almost 15 percent discount to what investors would pay for buildings individually, according to Green Street Advisors LLC. The gap, the biggest in five years, has been growing since May, pushing the odds of REIT buyouts to the highest since 2006, the property-research firm’s data show.

That means acquisitions such as Blackstone Group LP’s $3.93 billion deal for Strategic Hotels & Resorts Inc. and its interest in buying BioMed Realty Trust Inc. may mark the beginning of a REIT-takeover acceleration. Bargain prices are a lure for opportunistic buyers sitting on piles of cash who can snap up entire companies, then sell them off in pieces or build businesses around their existing infrastructures.

“If I’m a fund and still have money to put to work, it’s better to go buy at a discount and have a platform in place,” said Lukas Hartwich, an analyst at Newport Beach, California- based Green Street.

Since April, there have been $12 billion of takeovers of publicly traded REITs, Green Street data show. That doesn’t include Blackstone’s pending acquisition of Strategic, an owner of hotels including the Ritz-Carlton Half Moon Bay in California and Manhattan’s Essex House. Prior to the $763 million purchase of AmREIT Inc. last year -- the only one in 2014 -- such deals had been at a standstill since the $20 billion takeover of apartment landlord Archstone-Smith Trust in 2007.


BioMed Suitor


BioMed, a San Diego-based REIT focused on laboratory and medical office space, is considering a sale, and Blackstone is a potential suitor, people familiar with the matter said this week. The stock has under-performed other REITs in the past year.

REIT stocks have been pummeled by the same issues shaking markets around the world, including China’s economic slowdown and a rout in commodity prices. But real estate shares have been hit harder because of investor concern that interest rates, once they increase, will be a drag on property values and make it more expensive for REITs to raise money.

The Bloomberg REIT Index is down 15 percent from an eight- year high, reached in January, compared with a 6.1 decline for the Standard & Poor’s 500 Index in the same period. Property stocks got a temporary boost last week when the Federal Reserve held off raising its benchmark lending rate for the first time in nine years.

The REIT selloff is an overreaction when the performance of U.S. commercial real estate is considered, said Rich Moore, an analyst at RBC Capital Markets in Solon, Ohio. The fundamentals that support property values, such as occupancy and rental rates, haven’t deteriorated, he said. Additionally, the deep well of capital that has been raised for property purchases should provide a buffer against a minor increase in interest rates, he said.

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