LBA Agrees to Buy Bedford REIT for $430M

IRVINE, CA-An affiliate of LBA Realty LLC has agreed to acquire Lafayette-based Bedford Property Investors Inc., a publicly held REIT, for $27.21 per share, or more than $430 million. The deal marks the latest example of what principal Craig Silvers of Los Angeles-based Bricks & Mortar Capital describes to GlobeSt.com as "the difference between what Wall Street is willing to pay and what Main Street is willing to pay."Silvers, whose Bricks & Mortar fund invests in REIT stocks, tells GlobeSt.com that the LBA-Bedford deal illustrates that private buyers are likely to value a REIT's portfolio at significantly higher prices per sf than the public markets.The price that LBA will pay represents a premium of 17.6% premium over the $22.95 average closing price of Bedford's common stock for the 30 days ending Feb. 9.Peter Bedford, chairman and CEO of the REIT, says that the company sees this as a good time to sell to maximize shareholder value, "given the current conditions in the real estate market." According to Silvers, REITs find that now is a good time to sell because interest rates remain relatively low and capital continues to flood the real estate markets. "With so much capital chasing deals, you might as well be a seller at a time when everybody wants to buy," Silvers says.As of Bedford's last quarterly filing with the Securities and Exchange Commission, the company owned 57 industrial buildings and 31 suburban office properties in California, Arizona, Washington, Colorado, Oregon and Nevada. LBA owns office and industrial properties totaling more than 12 million sf and invests on behalf of LBA's institutional investment funds.The LBA-Bedford deal, expected to close in the second quarter, marks the second time in less than two months that a West Coast REIT has agreed to a buyout. In late December, Los Angeles-based Arden Realty Inc. agreed to a $45.25 per share sale to the GE Real Estate unit of GE Commercial Finance.The Arden deal works out to about $4.8-billion, including $3.2 billion in cash and the assumption of approximately $1.6 billion of Arden debt. Although the transaction will take Arden private, a piece of the company is going to the publicly held Trizec Properties Inc. REIT of Chicago, which has agreed to buy 13 Arden properties totaling 4.1 million sf for $1.63 billion.Silvers comments that while the main theme lately is private buyers bidding for publicly held REITs, "You're going to see a few deals like Arden," where a REIT sells to a combination of public and private buyers."In certain cases, some of the assets of a REIT are more valuable to a public buyer than they are to a private buyer," Silvers says. A REIT or a publicly held real estate company might have a stock price that makes it worth trading the shares for new assets, or it might have the cash on hand and be looking for a place to invest it, for example.In the LBA-Bedford deal, Banc of America Securities LLC acted as financial adviser and Simpson Thacher Bartlett LLP acted as legal adviser to Bedford. Merrill Lynch Co. acted as financial adviser to LBA, with Goodwin Procter LLP and DLA Piper Rudnick Gray Cary US LLP as legal advisers.The law firm of Venable LLP served as Maryland counsel to Bedford, including Venable attorneys Jim Hanks, Sharon Kroupa, Mike Schiffer and Carmen Fonda. The deal is contingent upon customary closing conditions and the approval of Bedford's stockholders.