James Dennin, Kapitall: Two major REITs merged this week. Does this signal upcoming changes in the sector?
REITs can add real estate to your portfolio. Because who wants to deal with tenants directly? Two major Real Estate Investment Trusts (REITs) merged this week, American Capital Reality Properties (ARCP) and Cole Real Estate Investments Inc. (COLE).
Read more on REITs from Kapitall: 5 REITs that Might be Ready to Rise
Both fit into the same niche, so-called net-lease investment trusts, which means they own property leased to single, large tenants like Walgreens (WAG) or McDonald’s (MCD). Combined, they will easily create the largest security in the sector.
- The deal is said to be worth over $7 billion.
- The new REIT would control almost 4,000 properties
- This creates a combined enterprise value of over $21 billion.
- If unemployment goes down, some REITs stand to benefit as more people can afford to buy or rent larger homes.
- On the flip -side, low unemployment is likely to lead to faster tapering from the Fed, and with that comes higher interest rates.
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