Two newsworthy items this morning:
EQC / MNR merger: This morning MNR announced that their Board has unanimously rejected the revised offer from Starwood Capital Group in support of the previously announced pending merger with Short Bias name EQC. Recall that MNR holders will receive 0.67 EQC shares per MNR share, implying a current equity purchase price of $18.09/share based on EQC's 7/21 close of $27/share. MNR shares are currently priced at $19.10 (~5.5% above the implied offer) and set to open ~2% higher looking at the pre-market, implying that the market could be looking a higher offer from Starwood in the coming days. Reading between the lines, the press release could be signaling to Starwood what the pain points are: (1) it highlighted that Starwood's bid was below the number submitted in MNR's original strategic review and marketing process, and (2) that MNR shareholders would benefit from a tax perspective in receiving EQC shares and not having to incur capital gains. We would not be surprised to see Starwood attempt to come over the top to compensate MNR shareholders for these two items. As it relates to EQC, we have not been fans of the deal since announced in May: if consummated we would view as a negative catalyst for shares to the downside, however if Starwood prevails in a bidding war would likely see EQC shares move to the upside and undermine the short thesis.
REXR 2Q21 Results: Core FFO of $0.39/share beat consensus by $0.03/share and came in $0.02/share above our model. Revised guidance for FY21 Core FFO in the range of $1.48-1.51 (up +5% at the midpoint) is conservative, and the Street was essentially already there coming into the print at $1.50 for the year. The name is on our Long Bias list and the results were excellent from an operational perspective, however probably not enough to move shares materially higher from here. With that said, we expect further guidance raises throughout FY21 so would want to watch this one on any weakness if it should come. Leasing spreads indicate favorable forward ROC dynamics.
Figure 1: REXR 2Q21 Variances
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Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
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