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Updated: Rent-A-Center'' s Board Weighing Purchase Alternative for 2,500-Store Chain

Retailer’s Chairman Steven Pepper Resigns Over Dispute with Board’s Decision

Rent-A-Center Inc. (NASDAQ/NGS: RCII), among the nation’s largest rent-to-own shop operators, which revealed early today plans to think about alternatives consisting of a sale of the chain which runs around 2,500 stores now has an at least one proposition to think about.

Vintage Capital Management LLC, an Orlando-based personal equity fund, made a nonbinding offer today to get all of the outstanding shares of the company for $13 per share in money.

Financiers don’t appear too fired up about the offer. Rent-A-Center’s stock leapt onlu about $1 per share to about $10.90/ share on news of the offer.

Rent-A-Center encouraged its shareholders not to take any action at this time however said it would review the offer.

[Editor’s Note: This story was upgraded Friday Nov. 3, 2017 at about 1:15 pm EST with news of the deal]

The Plano, TX-based company revealed earlier today that its chairman, Steven L. Pepper, resigned from his position efficient instantly. Pepper notified the company that his resignation was an outcome of his dispute with the board’s choice to start a tactical evaluation process for the retailer.

Rent-A-Center will suspend its stock dividend payments until it completes its review. The board’s choice follows calls from activist financiers to put the business up for sale after apparently decreasing buyout offers from a handful of private equity companies this year, consisting of an $800 million offer from private equity company Vintage Capital in June.

Engaged Capital, a Newport Beach financial investment company with a stake in the company, commended the board’s choice calling it long overdue.

“Engaged Capital thinks that Rent-A-Center stays an appealing acquisition opportunity. Our company believe the company’s strong cash flow generation, liquidity and management position in the appealing rent-to-own market integrate to underpin prospective transaction cost varieties that would permit both investors and a potential acquirer to realize considerable worth,” the business stated.

Engaged Capital also claimed Rent-A-Center previously cannot pursue reputable quotes at significant premiums to its stock cost earlier this year, including, “Engaged Capital reminds the board that our analysis shows that a strategic acquirer could recognize $300 million or more of synergies and operational enhancements.”

The firm has actually engaged J.P. Morgan as its financial advisor and Winston & & Strawn LLP as legal advisor. Rent-A-Center reported a loss this week the three months ended Sept. 30 of $12.6 million vs a $6.2 million profit for the same quarter last year.

UPDATED: Norges Bank Teams with Oxford Properties to Obtain Set of DC Office Characteristic

Norway’s Norges Bank Property Management, in joint endeavor with a brand-new financial investment partner, Canada’s Oxford Properties Group, got a pair of office buildings in downtown Washington, DC, from 2 various sets of sellers simply ahead of the Fourth of July holiday.

The JV purchased the just recently developed 900 16th St. NW, a nine-story, 127,825-square-foot structure at the corner of 16th and I streets, NW, and the much larger but older 1101 New York Ave. NW, a 12-story 404,495-square-foot building completed in 2006 that is 99% rented.

Toronto-based Oxford Residences, the real estate investment affiliate of the Ontario Municipal Worker Retirement System, will handle both properties.

“These are Oxford’s fifth and sixth jobs in D.C., and we are very happy to be making this investment next to the exceptional group from Norges Bank Property Management,” noted Chris Mundy, senior vice president of investments for Oxford Residence Group.

Oxford’s Washington, D.C. portfolio includes Washington Center (1001 G Street), 600 Massachusetts Opportunity and Gallery Location. In addition, Oxford is partnering with Gould Residential or commercial property Business on the prepared advancement of 900 New york city Opportunity.

The list price for 1101 New york city Ave., NW, was not revealed. W. R. Berkley Corp., an insurance coverage holding business, and Morgan Stanley Property Investing (MSREI), were the sellers.

Norges is investing $74 million for a 49% interest in 900 16th St., NW, which values the residential or commercial property at $151 million or about $1,208/ square foot. Oxford will own the staying 51% interest.

The home offered unencumbered by financial obligation, and no financing was associated with the deal.

The seller, a development joint venture in between The JBG Cos. and ICG Characteristics LLC, completed construction of the structure in April 2016. Law firm Miller & & Chevalier occupies about 70% of the structure.

It is also the home of the 12,000 square-foot sanctuary, reading space and administrative offices of First Church of Christ, Researcher, formally the Third Church of Christ, which originally owned the website and had actually looked for to redevelop the valuable area in what amounts to a fascinating backstory to the deal including an impressive historical conservation battle lasting nearly two decades.

John Duffy and Andrew Asbill of the Washington DC workplace of JLL represented JBG and ICG Characteristics in the sale.Nevertheless, ICG Persisted In the early 2000s, the church parish looked for to offer its building at the popular place at 16th and I streets, NW and replace it with a new sanctuary, mentioning the difficulty and expense of keeping the big structure. Nevertheless, unidentified to the congregation, in 1991 a group of preservationists applied to have the Third Church structure designated as a D.C. historic landmark. The former church structure was an example

of the hulking, Brutalist-style architecture that flourished from the 1950s to the mid-1970s. Similar to the current FBI head office building the GSA is looking for to sell. ICG thought it had a deal with the church to change the

structure with an office building that would include a brand-new sanctuary and filed for demolition licenses. Nevertheless, in 2007 the city officially landmarked it, triggering the congregation to file suit to have the status got rid of. That triggered 3 more years of settlements in between ICG, the church, the court, the

District government and the D.C. Preservation League, prior to a settlement was reached in 2010. However it would be another two years prior to the task was finally approved by the D.C. Historic Conservation Review Board and the D.C. Zoning Commission. The structure was lastly demolished in 2014, and changed by the new structure in 2015. At the time his firm finally secured the essential approvals, David Stern of ICG kept in mind that he began working on the brand-new building

at the start of 2006.”My child was two. She’s now 9, “he said. Please refer to CoStar COMPs 3943853 for 1101 New york city Ave. NW and 3943751 for 900 16th St. NW. This report was upgraded given that it was initially released to include the second asset obtained by the Norges/Oxford collaboration, 1101 New York Opportunity,

NW.

Updated: Amazon to Obtain Whole Foods Markets for $13.7 B In Game-Changing Deal for Retail Property

Analyst: Deal Catapulting E-Tailer Into Leading Ranks of United States Grocery Market is Proof Well-Located Retail Property Will Win Out, Even as E-Commerce Continues Rapid Development

In its very first large-scale push into brick-and-mortar retail, Amazon (Nasdaq: AMZN) revealed this morning it has actually agreed to purchase Whole Foods Market, Inc. (Nasdaq: WFM) in an all-cash merger transaction valued at $13.7 billion.

The historic pairing, together with today’s statement by retail huge Wal-Mart Stores, Inc. that it will buy Bonobos, Inc., a New York-based guys’s clothing merchant that does most of its service online, casts a spotlight on the seismic modifications reshaping the way we purchase items and services.

The transactions reveal the increasing acknowledgement of the interdependence and symbiosis of e-commerce and physical retail. They likewise underscore the heated competition between the country’s retail titans, Amazon and Wal-Mart, as well as Amazon’s recognition that developing a presence in strong retail places, a minimum of in the grocery sector, may be needed to take the fight to its brick-and-mortar rivals across multiple retail sectors.

Under the conclusive contract, Amazon will pay $42 per share to shareholders of Whole Foods, which has had a hard time economically in recent quarters, a 27% premium over its Thursday closing price. The transaction is expected to close in the 3rd or fourth quarter.

Editor’s note: CoStar News will be updating this significant retail and technology story with news and analysis throughout the day.

Amazon in 2015 appeared to be preparing for a significant push into book shops and other physical retail, but defying the forecasts of some analysts, has actually not revealed a major roll out to this day. The ambitious move into the supermarket space would provide Amazon control of the 460 areas in the U.S., Canada and United Kingdom run by Austin-based Whole Foods, which utilizes 87,000 people and reported $16 billion in income for 2016.

‘ Shot Heard Round the World’

The statements were greeted with a lot of commentary by analysts in both the retail and property industries.

Citi REIT equity expert Michael Bilerman described the relocation as a recognition of the long-lasting power of premium, well-located retail real estate.

Bilerman stated the deal is more evidence that online sellers appreciate the power that a brick-and-mortar existence can have as online merchants increasingly have problem with the costs and logistics of both last-mile shipment to shoppers along with product returns and exchanges.

“All this is consistent with our views that high-quality, well-located retail real estate will continue to win out even with ongoing growth in e-commerce,” Bilerman said.

Morgan Stanley & & Co. retail analyst Simeon Gutman noted that while Amazon was anticipated to rake into the physical supermarket space, consisting of reports that it had an interest in opening 2,000 Amazon Fresh grocery stores in the U.S. over Ten Years, “we did unknown in what kind or when.”

“In thinking of other brick-and-mortar classifications, food retail makes good sense for Amazon to go deeper, offered the high frequency of purchases and distinct approach of circulation,” Gutman stated, who explained the offer as the “shot heard round the world.” “Besides auto parts and possibly appeal retail, we do not think there are other categories that are so unique that Amazon would have an interest in pursuing traditional areas.”

While was relatively well known that Amazon had actually planned to pursue a more aggressive brick-and-mortar technique, the small number of bookstore openings up until now have actually been restricted to high-traffic street retail areas, added Bilerman.

“Plainly, Amazon has opted to purchase rather of construct, and in picking a grocer, the seller is acquiring some extremely well-located shops,” Bilerman added.

Under the contract, John Mackey would stay CEO of Whole Foods, established in 1978, and the grocer would continue to operate under its existing brand and maintain its headquarters in Austin.

The partnership is an opportunity to maximize value for Whole Foods investors, a number of which have actually slammed the chain for its sagging stock rate in the intensely competitive U.S. grocer area, while at the very same time leveraging Amazon’s deep pockets and innovation platform.

“Whole Foods Market has actually been pleasing, thrilling and nourishing customers for nearly four years – they’re doing a remarkable task and we want that to continue,” said billionaire Jeff Bezos, Amazon founder and CEO.

The merger has the benefit of “extending our objective and bringing the highest quality, experience, benefit and development to our clients,” stated Mackey, a Whole Foods co-founder.

Updated: 10:30 a.m, 11 a.m., 11:45 a.m. PDT

Updated: Forestar Provides a Nod to Surprise Bid from Homebuilder D.R. Horton

Not So Quick: Quote for 75% of the Company Bests Starwood Capital’s Deal by $2/Share

Forestar Group Inc.(NYSE: FOR)this morning announced that its board has actually determined that the unsolicited, nonbinding proposition gotten from D.R. Horton Inc. (NYSE: DHI)to acquire 75 % of the impressive shares of Forestar typical stock for $16.25 in money might reasonably be anticipated to cause a “exceptional proposition,” to Forestar’s merger arrangement with Starwood Capital Group.

The decision enables Forestar to enter into negotiations with D.R. Horton for a binding offer.

[Editor’s Note: This story was updated Thursday June 8 at 9 AM]

The unforeseen deal beat the formerly revealed deal from Starwood Capital Group to purchase Forestar for $14.25 per share (roughly $605 million).

Forestar remains subject to that merger contract with Starwood. And Forestar’s board of directors is not customizing, withdrawing, amending or qualifying its suggestion in favor of the Starwood merger. The company added that there can be no assurance that it will reach a remarkable handle D.R. Horton.

Forestar, a domestic and mixed-use realty advancement company, owns interests in 50 residential and mixed-use jobs consisted of 4,600 acres in 10 states and 14 markets.

In addition, Forestar notes a collection of numerous other properties that it has actually recognized as non-core, including 523,000 acres of owned mineral possessions throughout the southern US, 19,000 acres of timberland, 4 multifamily residential or commercial properties and 20,000 acres of groundwater leases in central Texas.

For the time being at least, Forestar’s board continues to advise that investors vote in favor of adoption of the Starwood merger agreement and has actually not made a recommendation with regard to the D.R. Horton proposal.

But, Forestar revealed its board would “quickly and carefully review and think about the D.R. Horton proposition” to identify the very best course of action for its stockholders. Either deal would require investor approval.

Under D.R. Horton’s proposed transaction, Forestar would stay a public company, permitting Forestar investors to participate in the “substantial value production” it sees through a tactical relationship with a significant homebuilder being a buyer of its homebuilding websites.

Under Horton’s offer, Forestar would be led by new executive chairman Donald Tomnitz, who served as CEO of D.R. Horton for over 15 years.

“We believe that D.R. Horton is uniquely positioned to make Forestar the country’s leading domestic land development business,” stated Donald R. Horton, chairman, in a statement announcing its deal.

“Together, we can grow Forestar into a lot more significant and important business for all of its investors,” he included.

Starwood Capital has yet to react to the D.R. Horton’s bid.

In April, Starwood Capital all of a sudden sold off its $150 million stake in homebuilder TRI Pointe House (NYSE: TPH), releasing a terse statement saying that decision “was because of its ongoing frustration in the performance of the business over the previous a number of years, uncertainty in the tactical instructions of the business, and argument over the very best way to optimize shareholder value.”

Starwood had actually taken TRI Pointe public in 2013 and later combined it with a Weyerhaeuser subsidiary to produce one of the largest homebuilders in the United States

JMP Securities LLC is functioning as financial advisor to Forestar and Skadden, Arps, Slate, Meagher & & Flom LLP is working as legal advisor.


Updated: Quality Care Properties Seeks Funding To Conserve Largest Renter, Abandoning REIT Status

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HCR ManorCare Falls Behind in Full Rent Payments, Pursues Out-of-Court Restructuring

Quality Care Residence(NYSE: QCP), the new healthcare REIT set up by HCP last year to take the troubled skillled nursing center operator, HCR ManorCare Inc., off its hands, is facing a hard choice.

With HCR ManorCare falling back in rent and doggedly pursuing an out-of-court restructuring, Quality Care Properties is considering taking control of the struggling competent nursing center operator, which is without a doubt its most significant renter.

Nevertheless, as QCP just recently acknowledged, such a relocation might cause it to lose its REIT status

As it pursues its alternatives, Quality Care stated it is looking for a dedication from HRC ManorCare’s loan providers for acquisition financing of approximately $500 million to be used to re-finance HRC’s existing financial obligation and supply operating capital.

Quality Care would promise money and substantially all properties of both skilled nursing
and hospice entities to secure the financing.

Quality Care is searching for a dedication by June 15.

[Editor’s Note: This story was upgraded Friday June 9 with info on financing request.]

Quality Care Characteristic was formed in 2016 when HCP Inc. (NYSE: HCP) spun off HCR ManorCare and other health care-related homes. While releasing itself from ManorCare enabled HCP to concentrate on higher-growth chances in its diversified healthcare real estate portfolio, it saddled Quality Care Characteristics with the prospect of a difficult turn-around circumstance.

Since March 31, Quality Care’s holdings included 257 post?acute/ competent nursing residential or commercial properties, 61 memory care/assisted living properties, one surgical hospital and one medical office complex throughout 29 states. HCR Manor Care leases 292 of the 320 properties, accounting for 94% of QCP’s earnings.

The REIT revealed that HCR ManorCare remains in default of its master lease contract, behind completely lease payments, and HCR’s lending institutions have actually also accelerated loan payments from the Toledo, OH-based nursing center operator.

The operator’s problems are not new to Bethesda, MD-based Quality Care. HCP initiated the spin-off as part of a strategy to boost its portfolio performance, which was being hindered as the more comprehensive knowledgeable nursing facility market continued to experience difficulties from much shorter lengths of stays for homeowners, modifications in Medicare compensation designs that lowered compensation rates, and lower resident counts.

HCR ManorCare’s monetary problems escalated this spring. In April, the company entered into a forbearance agreement with HCR ManorCare agreeing not to pursue “exercise of solutions” readily available to it as an outcome of HCR ManorCare’s default under its master lease and security agreement.

The forbearance arrangement needed, to name a few things, that HCR ManorCare pay $32 million in rent on the very first of April, Might and June of 2017, with as much as $7 countless the quantity got monthly potentially avilable in loans back to HCR ManorCare.

This month, HCR ManorCare only made a $15 million rent payment, less than half its total under the forebearance arrangement, according to a Quality Care filing with the United States Securities & & Exchange Commission.

HCR ManorCare notified Quality Care that its secured lending institutions have actually accelerated their loans which the decreased lease payment “corresponds to the quantity that it thought to be proper to pay at this time in light of the impressive velocity by HCR ManorCare’s secured loan providers, the desire to protect liquidity for its stakeholders, the incurrence of professional charges and other restructuring expenditures and newly provided HCR ManorCare management projections of minimized capital from the QCP-owned properties.”

HCR ManorCare also forecasted a decrease in the future financial efficiency compared to forecasts it made even earlier this year.

Quality Care said it continues to remain in discussions with HCR ManorCare about its lease default and a prospective out-of-court restructuring, saying it “thinks that an out-of-court restructuring will require a considerable decrease in HCR ManorCare’s liabilities, however included it might offer no guarantee that the required agreements among stakeholders would be reached.

On the other hand, QCP stated it is thinking about all alternatives, including taking complete equity ownership of HCR ManorCare.

While Quality Care thinks such a restructuring would allow HCR ManorCare’s to create a sustainable company operation, if it were to occur, it would likewise indicate that QCP would not be able to keep its REIT status.


Updated: TA Realty Continues Squandering Property Fund; Sells Multifamily Portfolio to Blackstone REIT for $430 Million

Portfolio Comprised of Six Apt. Communities Totaling 2,514 Systems


In its 2nd big property personality this spring, TA Realty LLC offered a six-property, 2,514-unit multifamily portfolio to Blackstone Real Estate Earnings Trust for $430 million.

TA Real estate offered the portfolio on behalf of The Real estate Associates Fund IX LP. Previously this month, TA Realty offered a 45-property industrial and workplace portfolio from the fund to Brookfield-managed realty funds for $854.5 million.

Realty Associates Fund IX was formed in 2007 and has hit a 10-year financial investment cycle.

“Our company believe the result of this transaction represents engaging value for Fund IX investors,” said Tom Landry, handling partner at TA Realty. “The rate we had the ability to command for this well-located portfolio of apartment communities reflects the considerable value created through strategic functional and capital enhancements over the ownership period.”

The apartment or condo communities that comprise the portfolio are located across four states in such major markets as Dallas, Chicago and Orlando. Though TA did not recognize the private homes, the offer includes a 461-unit complex in Orlando that sold for $105 million ($227,765/ unit) last week, according to CoStar (See Sales COMPENSATION # 3882359).

Blackstone REIT is likewise accquring the following properties.The Maintain at Osprey,

Gurnee, IL, 483 systems;
San Merano at Mirasol, Palm Beach Gardens, FL, 479 units;
Estates at Park Opportunity, Orlando, FL, 432 systems;
Keller Springs Apartments, Dallas, TX, 353 units; and
West End at City Center, Lenexa, KS, 309 systems.

[Editor’s Note: This story was upgraded April 20 with the full list of homes acquired.]

The TA Real estate staff member involved in the deals consist of partners Nicole Dutra Grinnell, Michael Haggerty, Jim Raisides and dispositions officer Luke Marchand. JLL represented TA Realty in the sale.

Updated: Sears Pulls Trigger On REIT Spinoff; Stock Cost Plunges

Major Sale-Leaseback Deal Includes 235 Sears, Kmart Stores and JV Interests in 31 Additional Characteristics

As it remains to have problem with declining sales, Sears Holding Corp. remains to try to find ways to engineer monetary flexibility. The latest example of that is the rights providing the renowned, Chicago-based seller commenced for Seritage Development Properties, a new REIT it plans to sequel ownership of more than 200 shops to investors and joint endeavor partners.

However up until now today, Sears’ stock financiers seem to be betting versus the company’s plan. Considering that revealing the launch of the REIT’s rights offering, Sears’ stock has actually plunged almost $9/share to about $29.50.

Part of the drop no doubt came from Sears’ simultaneous release of its very first quarter profits. The company reported a first-quarter loss of $303 million, and same-store sales, considered a key gauge of retail efficiency, dropped 11 %.

Sears’ profits decreased roughly $2 billion to $5.9 billion for the merchant’s quarter ended Might 2, 2015, down a complete $2 billion inned comparison to incomes of $7.9 billion for the exact same quarter a year back. Sears said a significant portion of the decline relevant to actions it took to simplify its operations.

Those actions consisted of a decline of $697 million associated with Sears Canada, which was de-consolidated in October 2014, $222 million from the separation of the Lands’ End company, which occurred in the very first quarter of 2014, and $501 million as a result of fewer Kmart and Sears stores.Share with Your Fans on Twitter Tweet”Generally, the company’s operating losses continue to be substantial, with little indication regarding what near-term

drivers would decrease these losses in a product way,”said Scott Tuhy, vice president-senior credit officer at Moody’s Investors Service.” At its existing level of efficiency, Sears Holdings’money burn is still significant at more than$1.1 billion a year, after capital expenditures, interest expenditures and pro forma for the incremental lease obligations payable to Seritage and other property joint ventures.”Sears anticipates to clear $2.6 billion from the REIT rights providing. When combined with proceeds from previously announced joint venture deals, Sears said it will certainly enjoy profits in extra of $3 billion. That’s a lot of financial flexibility. However the sequel will certainly add to Sears’continuous expenditures. In addition, Sears is losing some of its greatest value buildings and has been counting on its assets as

a backstop against money burn.” We anticipate that at least initially, the sale-leaseback deal will involve incremental money lease costs. We estimate that pro forma, Sears will pay about$182 million in lease,

“Tuhy said. Nevertheless, Sears will also make use of a few of the cash proceeds to pay back a yet-to-be determined amount of debt, which will certainly reduce cash interest expenses, he noted.REIT Spinoff The

REIT deal will certainly involve the sale and leaseback of 235 Sears and Kmart stores, as well as the retailer’s 50 % interests in 31 of its mall-based stores

held in joint
endeavors with Simon Equipment Group Inc., General Growth Properties Inc. and The Macerich Co. The strategy calls for Seritage to lease most of the obtained buildings back to Sears Holdings, with the staying shops being leased to third parties. Under the regards to the master rents with Sears Holdings and the joint endeavors, Seritage can regain area from Sears Holdings, enabling the REIT to reconfigure and rent the recaptured space to third-party tenants over time. The 31 properties included in the three JVs with Simon, GGP and Macerich are among the greater quality homes consisted of in the Sears Holding portfolio, inning accordance with evaluation by

Morgan Stanley Research study. Morgan Stanley identified 27 CMBS-held loans totaling $1.16 billion on 27 of those buildings. In addition, it mapped 72 properties that will certainly be spun off to the REIT, which will certainly likewise manage the JV equipments. The shopping center quality of the 72 homes to be held directly by Seritage is fairly uniformly distributed across Class A, B and C categories at 32 %, 25 % and 31 %, respectively. By loan balance, though, the portion of Class A malls shifts greater to 52 %.