From Business Law Center: Survey Of REIT Transactions Over $1 Billion

October 6, 2014

5273In November 2011, Penn National Gaming, owner of the Hollywood and Argosy casino chains, announced plans to split itself into two public companies: it would transfer its real property to a newly created Real Estate Investment Trust, or “REIT,” a tax-exempt, passive real estate investment vehicle, and distribute the REIT’s shares to Penn National shareholders in a tax-free spin-off. The new REIT would generate income by leasing the transferred property back to Penn National.

Much has been made of the number and variety of companies taking advantage of the IRS’ expanding definition of “real estate,” by reconfiguring themselves as a REIT. Companies choosing REIT status are often rewarded by the markets. In fact, an IRS ruling allowing one telephone company to organize a REIT to hold its real property led to an increase in the share prices of all telephone companies. By contrast, the markets punished Civeo Corporation for deciding to invert to Canada rather than reorganize as a REIT.

Penn National’s restructuring plan took a year to complete. Following “a series of internal corporate restructurings,” characterized by CEO Peter Carlino as, “the most difficult thing we have ever done,” Penn National successfully spun off a REIT called Gaming and Leisure Properties. For all of Penn National’s suffering, its REIT conversion was by no means the longest or most complex. The intricacy of REIT conversion makes it difficult to pinpoint when a REIT conversion starts and when it is complete, and many of the REIT conversions presently underway have been in the planning stages for years. For purposes of this survey, we have dated each conversion to the year when the company announced its intention to convert.

The survey results, below, cover all REIT restructurings and new REIT elections by public companies with market capitalization over $1 billion announced between January 1, 2009 and September 30, 2014.

Year of Announcement 2009 2010 2011 2012 2013 2014
Number of Announcements 1 1 2 5 2 4
Market Capitalization of Converting Cos (b) $16.38 $1.16 $40.63 $29.05 $30.85 $16.6


Announced Company industry mkt cap (b) transaction shareholder approval sought? legal adviser
2011 American Tower Corp cell towers $37.15 merger yes Sullivan & Worcester LLPGoodwin Procter LLP
2013 Crown Castle Int’l Corp cell towers $26.84 conversion yes Cravath, Swain & Moore LLPSkadden, Arps, Slate Meagher & Flom LLP
2009 Weyerhaeuser Company forest products $16.38 conversion yes
2012 Equinix data centers $11.26 conversion yes Sullivan & Worcester LLP
2014 Windstream Holdings Inc telecom $6.45 spin-off no Skadden, Arps, Slate Meagher & Flom LLP
2012 W.P. Carey & Co. LLC real estate $6.36 merger yes DLA Piper LLPClifford Chance
2012 Iron Mountain REIT Inc warehousing $6.31 merger yes Sullivan & Worcester LLPLatham & Watkins LLP
2014 Lamar Advertising REIT Co outdoor advertising $4.66 merger yes Goodwin Procter LLPEdwards Wildman Palmer LLP
2013 Corrections Corp. of America prisons $4.01 conversion yes Wachtell, Lipton, Rosen & KatzSkadden, Arps, Slate Meagher & Flom LLP
2014 CBS Outdoor Americas Inc outdoor advertising $3.57 spin-off no Latham & Watkins LLP
2011 Gaming & Leisure / Penn hotel and motels $3.48 spin-off no Wachtell, Lipton, Rosen & Katz
2012 Geo Group Inc prisons $2.74 merger yes Skadden, Arps, Slate Meagher & Flom LLPAkerman LLP
2012 Gaylord / Ryman resorts $2.38 merger yes Bass, Berry & Sims PLCSkadden, Arps, Slate Meagher & Flom LLPHogan Lovells
2014 Life Time Fitness sports clubs $1.92 spin-off N/A Skadden, Arps, Slate Meagher & Flom LLPFaegre Baker Daniels LLP
2010 Sabra Healthcare REIT Inc health services $1.16 merger yes Fried, Frank, Harris, Shriver & Jacobson LLPVenable LLPO’Melveny & Myers LLP


Other Resources 

Article, REIT Conversions

Spin-Offs: The Decision to Separate and Considerations for the Board, Practical Law The Journal, 2014

Practice Notes

What’s Market, Spin-Offs

Business Law Center, Spin-Off Transactions