Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide.
CoreLogic (NYSE: CLGX) continues to be a hot commodity. The real estate data company was the subject of a bidding war between commercial real estate information, analytics, and online marketplace giant CoStar Group (NASDAQ: CSGP) and several private equity firms. It ended up agreeing to an all-cash offer from two private equity funds, valuing the company at $80 a share, or $6 billion.
While the buyers had committed debt financing in place from J.P. Morgan (NYSE: JPM), they're already seeking to line up permanent funding for CoreLogic by launching a $4 billion bond deal. That's the biggest acquisition-related loan since the pandemic started last year.
Proposals from several suitors
Takeover interest in CoreLogic started last June, when Senator Investment Group and Cannae Holdings offered to acquire all its outstanding shares for $65 per share in cash. They nudged up their offer in September to $66 per share. That interest led CoreLogic to launch a formal sales process, with it stating in a press release a willingness to "engage with all credible potential buyers expressing interest at an appropriate price level."
The company eventually agreed to an all-cash deal for $80 a share, or $6 billion, from private equity funds Stone Point Capital and Insight Partners. That deal was less than the $86 per share cash-and-stock offer by CoStar Group. However, CoreLogic opted for the certainty of the all-cash go-private transaction due to antitrust concerns. CoStar tried to sweeten its deal by increasing the cash component and increasing its offer to $89.94 per share but ultimately walked away as mortgage rates started rising.
A big-time debt deal
Now that the bidding war for CoreLogic has ended, the winners are lining up long-term financing. They're seeking to raise $4 billion to fund the go-private transaction, which is the largest acquisition-related debt financing launched since Zayo Group issued $4.75 billion in debt in February 2020 to fund its $13.4 billion privatization transaction led by several investment funds.
The debt offering is one of several big bond deals in recent weeks as the credit markets remain wide open and borrowers tap near record-low interest rates and yield-thirsty credit investors. Investment bank Barclays (NYSE: BCS) predicts the leveraged loan market will top $860 billion this year, well in excess of 2013's record of around $700 billion.
One of the potential drivers of this year's borrowing binge could be the real estate sector. Investor groups are sitting on an enormous amount of cash that they can leverage at low interest rates to make acquisitions. That could drive an acceleration of M&A activity in the real estate investment trust (REIT) sector, which has already seen a surge in go-private transactions this year.
For example, private equity firms Blackstone Group (NYSE: BX) and Starwood Capital are teaming up to buy hospitality REIT Extended Stay America (NASDAQ: STAY) for $6 billion in cash. Meanwhile, Brookfield Asset Management (NYSE: BAM) and its institutional partners agreed to privatize its publicly traded real estate affiliates, Brookfield Property Partners (NASDAQ: BPY) and Brookfield Property REIT (NASDAQ: BPYU), in a cash-and-stock deal valued at about $6.5 billion. Finally, another investor group has offered to take office REIT Columbia Property Group (NYSE: CXP) private in an all-cash deal valued at $2.24 billion.
A sign of things to come
With the credit markets wide open, strategic and financial investors have tremendous firepower to go shopping. That's evident in the CoreLogic saga, where its shareholders benefited from a fierce bidding war, driven in part by the winner's expectation that they could tap the debt markets to finance a significant portion of the purchase price at an attractive rate.
This outcome suggests we could see several more deals in the real estate sector this year. That wheeling and dealing could drive compelling returns for real estate stock investors this year, as it could push valuations across the industry higher as more deals get done.
Unfair Advantages: How Real Estate Became a Billionaire Factory
You probably know that real estate has long been the playground for the rich and well connected, and that according to recently published data it’s also been the best performing investment in modern history. And with a set of unfair advantages that are completely unheard of with other investments, it’s no surprise why.
But those barriers have come crashing down - and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you.
To get started, we’ve assembled a comprehensive guide that outlines everything you need to know about investing in real estate - and have made it available for FREE today. Simply click here to learn more and access your complimentary copy.