REITdaily Morning Call: March 12, 2015

Markets 

S&P futures are up +0.4%, and the 10-year is falling again today, down to 2.054%, from 2.11% yesterday — this bodes well for REIT stocks today.

 

Economic Indicators

Initial Jobless Claims came in at 289k, which is below consensus of 306k consensus, and Retail Sales ex- Auto declined by -0.1%, which was a surprise from the +0.6% consensus.

 

Company News

Omega Healthcare Investors (OHI) priced a $700M 12 year bond offering at 4.5%. The company is using the proceed to fund its planned acquisition of Aviv REIT (AVIV).  For comparison purposes, OHI only has an investment grade rating at Fitch and is a notch below at Moody’s and S&P, so the pricing is comparable to the typical BBB rated REIT.

Fitch assigned a BBB+ rating on Essex Property Trust (ESS) notes, which is a notch above S&P’s rating. Fitch also affirmed a BBB rating on Eastgroup Property (EGP) notes.

Columbia Property Trust (CXP) announced that Glenn Rufrano has stepped down from the company’s board. Rufrano was appointed CEO of American Realty Capital Properties (ARCP) earlier this week, and the two companies could be considered competitors, which is likely the reason why Rufrano stepped down.

Industry News

Land & Buildings continued its activism with Associated Estates (AEC) and nominated three individuals for AEC’s board: Charles Elson (a professor who has written extensively on board of directors), Jonathan Litt (founder of Land & Buildings, and former sell-side analyst at Citi), and Scott Sellers (former CEO of Archstone). Land & Buildings has formerly nominated an entire new board, but backed away from that when AEC nominated three new directors, who were agreed upon by both parties. Land & Buildings states,

“Land and Buildings believes a majority of new highly regarded independent directors is critical to real change and maximizing shareholder value. All discussions with Chairman and CEO Jeff Friedman thus far have not resulted in a mutually agreeable resolution because Mr. Friedman is committed to avoiding a board that has a majority of new members independent of both the Company and Mr. Friedman, including the Company’s own appointees. Mr. Friedman has stated directly to us that his first priority is “to win” – not, apparently, maximizing value for shareholders, the true owners of the Company. Land and Buildings is not seeking ‘control’ as the Company alleges – our nominees are independent of both the Company and (other than Mr. Litt) of Land and Buildings, and highly-qualified and singularly focused on what’s best for all shareholders. To that end, Land and Buildings intends to nominate only three candidates to the board of Associates Estates.”


Millennium Partners
broke ground on 706 Mission St. in San Francisco, which is a $500 million luxury condo and office high rise, with a Mexican Museum on the first floor.  The tower is expected to be one of the most expensive high-rise projects ever built in San Francisco. The growth of the tech sector has created an insatiable demand for new office space and housing in the entire Bay Area. The Bay Area is one of the few markets in the country where new office construction makes any sense — the other was Houston, before oil price crashed.