{"id":1004125651,"date":"2015-08-19T10:13:44","date_gmt":"2015-08-19T18:13:44","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004125651"},"modified":"2022-12-08T06:34:29","modified_gmt":"2022-12-08T14:34:29","slug":"reit-spin-offs","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/reit-spin-offs\/","title":{"rendered":"REIT Spin-Offs"},"content":{"rendered":"

By Jim Sullivan, Managing Director, <\/em>Advisory & Consulting<\/em><\/a>, Green Street Advisors\"Jim<\/a><\/em><\/p>\n

Commercial real estate values have never been higher. \u00a0Green Street Advisors estimates that average property values are nearly 20 percent higher today than at the previous peak in 2007.<\/p>\n

Prices for real estate used by businesses have soared to new highs<\/strong><\/p>\n

\"Sullivan<\/a><\/p>\n

 <\/p>\n

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View Green Street\u2019s full Commercial Property Price Index release.<\/a><\/p>\n

These record-high prices are providing interesting opportunities for companies that aren’t in the real estate business \u2013 but happen to control large real estate portfolios \u2013 to pursue real estate value-maximization strategies. \u00a0Publicly traded retailers and restaurant chains are the companies most commonly cited as being well-positioned to enhance shareholder value through strategies such as REIT spin-offs.<\/p>\n

Retailers in transition have commonly raised capital through real estate transactions in order to shore up their balance sheets.\u00a0 A key difference today is that sky-high real estate prices have created compelling opportunities for thriving operating companies to create shareholder value through creative real estate strategies.<\/p>\n

Darden Restaurants, Hudson’s Bay Co., and Sears are three publicly traded companies that are using REIT spin-offs as a means to increase shareholder value.[1]<\/a> \u00a0Each company has contributed a portion of its real estate holdings to a newly created property company structured as a REIT. \u00a0The properties have then been leased back to the operating company, allowing those stores and restaurants to continue operating just as they were prior to the “prop-co\/op-co” split. \u00a0In addition to allowing operating companies to capitalize on high real estate values, REIT spin-offs can generate tax advantages in many situations, as well.<\/p>\n

Shareholders have become increasingly vocal in promoting real estate maximization strategies for a variety of publicly traded companies. \u00a0REIT spin-offs are often at the top of the list of suggested alternatives. \u00a0Management teams and Boards would do well to proactively explore their alternatives before an investor takes its case to the market in a way the company will not be able to control.<\/p>\n

The key questions operating companies should explore include: \u00a0“What is our portfolio worth?” \u00a0“What are the options available to us?” \u00a0“What are the pros and cons of each alternative?” “Will a real estate transaction potentially impact our core operating business in a negative way?”<\/p>\n

For some companies, REIT spin-offs will be the right answer. \u00a0For others, sale-leasebacks will be a better option. \u00a0And for some, doing nothing at all could be the appropriate path, especially if they have access to more attractively priced sources of capital and\/or the impact on the operating company (such as losing control over the real estate) represents too much of a burden.<\/p>\n

Real estate capital market conditions are currently very hospitable for any large real estate owner. \u00a0That said, rising interest rates would certainly represent a headwind for a capital-intensive business such as commercial real estate and potentially place downward pressure on prices. \u00a0Consequently, shareholders of companies with substantial real estate portfolios should expect management teams to be able to articulate what alternatives they have considered to capitalize on record-high valuations. \u00a0Management teams that either don’t or can’t should not be surprised when an activist investor shows up and attempts to convince the market that the company is missing out on an appealing opportunity.<\/p>\n

For more information about REIT Spin-offs, please visit https:\/\/www.greenstreetadvisors.com\/Spinoff<\/a><\/p>\n

<\/a>[1]<\/sup><\/u><\/sup> See Green Street\u2019s initial in-depth valuation analysis of Darden Restaurants, Inc.\u2019s (NYSE DRI) real estate holdings for Starboard Value.<\/a> \u00a0The analysis included a review of each Darden location.\u00a0 The client used this information as part of a publicly-filed presentation to argue for a sale or spin-off of the Company’s real estate to enhance shareholder value in 2014.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Jim Sullivan, Managing Director, Advisory & Consulting, Green Street Advisors: Find out if a REIT spin-off is right for you.<\/p>\n","protected":false},"author":952,"featured_media":1004125653,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1004125651","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"yoast_head":"\nREIT Spin-Offs - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/reit-spin-offs\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"REIT Spin-Offs\" \/>\n<meta property=\"og:description\" content=\"By Jim Sullivan, Managing Director, Advisory & Consulting, Green Street Advisors: Find out if a REIT spin-off is right for you.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/reit-spin-offs\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2015-08-19T18:13:44+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-08T14:34:29+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/08\/Jim-Sullivan-Headshot.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"353\" \/>\n\t<meta property=\"og:image:height\" content=\"336\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Anna Spiewak\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/reit-spin-offs\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/reit-spin-offs\\\/\"},\"author\":{\"name\":\"Anna Spiewak\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/#\\\/schema\\\/person\\\/1bbb99675c2609ea2e6792f8b25d7b76\"},\"headline\":\"REIT Spin-Offs\",\"datePublished\":\"2015-08-19T18:13:44+00:00\",\"dateModified\":\"2022-12-08T14:34:29+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/reit-spin-offs\\\/\"},\"wordCount\":612,\"image\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/reit-spin-offs\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/wp-content\\\/uploads\\\/sites\\\/46\\\/2015\\\/08\\\/Jim-Sullivan-Headshot.jpg\",\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/reit-spin-offs\\\/\",\"url\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/reit-spin-offs\\\/\",\"name\":\"REIT Spin-Offs - 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