This REIT ETF Is Surging As It’s Biggest Holder Looks To Get Bigger
Simon Property Group Inc. on Tuesday said it has made an offer to acquire General Growth Properties Inc., the real estate investment trust that filed for bankruptcy last year, in a deal valued at more than $10 billion, including about $9 billion in cash. A combination of Simon and General Growth would create a mall giant that some estimate would own about one-third of the U.S. retail market. The offer includes a consideration to creditors totaling roughly $7 billion, Simon Property Group (SPG) said. General Growth filed for bankruptcy protection in April 2009 after it was unable to restructure its debt. The mall REIT collapsed after a series of acquisitions funded by debt. It was the biggest real estate failure in U.S. history,” John Spence Reports From MarketWatch.
Spence continues to say, “Retail REITs such as Simon have been hit by declining rents and occupancies during the economic downturn. However, Wall Street analysts like Simon’s solid balance sheet and its portfolio of assets. Simon owns or has an interest in 382 properties. In December 2009, Simon reached an agreement to buy the outlet shopping center business of Prime Outlets Acquisition Co. in a deal valued at more than $2 billion including debt. Simon shares advanced 3.9% to $74.82 Tuesday as the sector also traded higher. The SPDR Dow Jones REIT ETF (RWR) gained almost 3%.”
While Simon’s offer is “a far cry from the $60 General Growth’s common stock traded at during the height of the recent property boom, $9 per share seems like a fair price for its shares currently, as it is still working through bankruptcy brought on by an overly burdensome debt load,” said Morningstar analyst Todd Lukasik. “If Simon’s bid is successful, we think General Growth’s malls will fit in nicely with Simon’s portfolio and further solidify the latter firm’s position as the premier mall operator in the United States,” he wrote in a report Tuesday. “Other suitors may well emerge, as General Growth’s quality mall assets represent an attractive addition to other U.S. mall operators’ portfolios or a way for a foreign operator to get a sizable footprint in the U.S. market.”
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Here are some details on the SPDR Dow Jones REIT ETF (RWR):
The investment seeks to provide investment results that, before expenses, correspond generally to the total return of the Dow Jones U.S. Select REIT index. The fund uses a passive management strategy designed to track the total return performance of the Wilshire REIT index. The subadviser seeks a correlation of 0.95 or better between the funds performance and the performance of the index. It is nondiversified.
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