Private real estate mergers and acquisitions activity has continued to swing upwards, increasing sharply over the couple of years.
“Real estate and real assets manager acquisition conversations are at an all-time high right now,” said Ted Gooden, partner at Berkshire Global Advisors, one of the sector’s most active investment banks in private real estate mergers and acquisitions. He added: “I would say our activity level is higher right now than it was even last year, concerning both the number of deals we’re working on and with respect to the quality and volume of our pipeline.”
A year prior, Gooden had predicted activity would decline in 2018 after a banner year in 2017. However, 2018 turned out to be another record year for private mergers and acquisitions, both in terms of number of transactions and total deal volume. A total of 44 transactions involving real estate and real assets managers closed, representing an aggregate volume of $5.5 billion, according to the New York-based firm’s own statistics.
Last year, M&A transactions activity beat the previous record of 30 deals with a total volume of $3.27 billion in 2017 and was more than triple the 13 deals that closed in 2014 with an aggregate volume of $1.46 billion, the data shows.
The Berkshire data represents full, majority or minority stake sales of private real estate or real assets managers. It does not include privatizations of listed real estate investment trusts.
But while total M&A transaction volume shot up nearly 70 percent from 2017 to 2018, this surge in activity largely reflected the rising number of deals over the year. Average deal size grew more modestly over the same period, from $109 million to $125 million, and was down from $161 million in 2016, according to the Berkshire data.
Total seller assets under management also continued to rise over the past five years, reaching $228 billion in 2018, up from $184 billion last year, according to Berkshire’s statistics. Once again, however, this increase could be attributed largely to the increase in the number of the transactions, as average seller AUM has been on the decline since hitting a peak of $8 billion in 2016, slipping from $6 billion in 2017 to $5 billion in 2018.
As for the largest M&A transactions by seller AUM, the top five included high-profile trades involving real estate-focused firms, such as Harrison Street Real Estate Capital and GreenOak Real Estate’s majority stake sales to Colliers International and Sun Life Financial, respectively. The biggest transaction, however, was the 100 percent sale of Greystone Capital Management, the parent company of Greystone Managed Investments, a Canadian investment manager that invests in real estate and multiple other asset classes, according to Berkshire data.
In terms of minority transactions, topping the list was Boston-based Rockpoint Group’s minority stake sale to Blackstone, followed by London-based Tristan Capital Partners’ own deal with New York Life Insurance, the data shows.
For more real estate M&A coverage, look for our feature, “Do private real estate M&As work?” on our website and the print edition of our April issue next week.