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REIT Conversion Advisory

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Insight for navigating a complex REIT Conversion process

Green Street works with management teams and boards of directors to review the opportunities and challenges associated with a C-Corporation to REIT conversion. Companies often own and control properties in non-traditional sectors, such as cell towers, correctional facilities, document storage, billboards, farmland, gaming, and other property subsectors that are unfamiliar to REIT investors. Presenting an investment thesis that will resonate with REIT investors is an important part of what we do.

Green Street’s approach to advising REIT conversion clients begins with a thorough assessment of the conversion value proposition based on the company’s operational and financial attributes relative to those of its potential REIT peer group. These multi-phase engagements address general REIT market positioning, value maximization, strategic positioning, and investor communications to maximize the likelihood of success.

Our team will work with management to evaluate the following variables of REIT conversions:

  • A thorough analysis of possible structures for those deciding whether to convert
  • A roadmap addressing the operational complexities of the REIT conversion process
  • An overview of the REIT market and its relative valuation to other markets
  • An in-depth company and portfolio analysis, including benchmarking with sector peers and traditional publicly-traded REITs
  • NAV estimate and warranted pricing expectations
  • Investor positioning and disclosure, including supplemental reporting
  • Index inclusion considerations
  • Preparation for management presentations

REIT Conversion Advisory Case Study


The client

Equinix

Property Sector: Data centers


Portfolio Size

$10 billion

Situation

The client was exploring the possibility of converting to a REIT. Management sought to educate its board on the REIT market, valuation and operational considerations associated with becoming a REIT, and the potential risks/opportunities to expanding its shareholder base to include REIT investors. The client wanted to understand how REIT investors would evaluate the company relative to existing data center REIT peers considering its larger service business, reliance on leases, and portfolio size.

Our solution

Results

Green Street worked closely with management on the following:

  • Provided an initial valuation of the company, incorporating Green Street’s proprietary REIT valuation methodologies to highlight competitive strengths and influence the company’s disclosure strategy
  • Conducted a comparative analysis of the portfolio relative to those of REIT peers to help position the company to potential investors
  • Invited the client as a panelist at a Green Street-organized REIT conversion conference
  • Arranged one-on-one, onsite meetings with REIT buy-side investors
  • Advised management on investor communications best practices

In September 2012, Equinix’s Board of Directors approved a plan to pursue conversion to a REIT, and Equinix has announced its intention to elect REIT status for its taxable year beginning January 1, 2015. Green Street worked closely with the company to provide a roadmap for its REIT conversion.

Completed REIT Conversions & Spin-Offs

Company Ticker Industry Equity Market
Cap ($Mil)
Initial
Announcement
Conversion
Date
Status
Weyerhaeuser WY Timber $14,739 2008-09-16 2010-01-01 Conversion Completed
American Tower AMT Cell Towers $29,349 2011-12-31 Conversion Completed
W.P. Carey WPC Corporate Leased RE $2,021 2012-02-21 2012-09-28 Conversion Completed
Cyrus One CONE Data Centers $1,200 2013-01-18 Spin-off Completed
Crown Castle International CCI Cell Towers $18,887 2010-07-29 2014-01-01 Conversion Completed
Corrections Corp. of America CXW Prisons $3,519 2012-04-05 2013-01-01 Conversion Completed
GEO Group GEO Prisons $1,773 2012-05-07 2013-01-01 Conversion Completed
Gaming & Leisure Properties GLPI Gaming $3,500 2012-11-15 2013-11-04 Spin-off Completed
Lamar Advertising LAMR Billboards $3,655 2012-08-08 2014-01-01 Conversion Completed
CBS Outdoor CBSO Billboards $3,600 2013-01-16 2014-07-17 Spin-off Completed
Iron Mountain IRM Document Storage $6,599 2011-03-09 2014-01-01 Conversion Completed
Ryman Hospitality Properties RHP Hotels $2,459 2012-05-31 2013-01-01 Conversion Completed
Sabra Health Care SBRA Health Care $1,522 2010-05-25 2010-11-15 Spin-off Completed
Equinix EQIX Data Centers $8,804 2012-02-15 2015-01-01 Conversion Completed
Windstream WIN Telecom $6,250 2014-07-29 2015-02-20 Spin-off Completed
Sertiage Growth Properties SRG Retail, Single-Tenant $990 2014-11-07 2015-07-06 Spin-off Completed
CareTrust REIT CTRE Health Care $524 2013-11-07 2014-06-03 Spin-off Completed

Announced Intentions to Convert or Spin-Off to a REIT

Company Ticker Industry Equity Market
Cap ($Mil)
Initial
Announcement
Conversion
Date
Lifetime Fitness LTM Fitness Centers $2,130 2014-08-25
Pinnacle Entertainment PNK Gaming $1,533 2014-11-06 2016
Caesar's Entertainment Corp CZR Gaming $2,250 2014-11-19
Boyd Gaming Corp BYD Gaming $1,360 2014-10-30
Forest City FCEA Diversified $4,300 2015-01-13 2016
MGM Resorts International MGM Gaming $10,878 2015-03-17
Darden Restaurants DRI Full Service Restaurants $9,000 2015-06-23