Despite many analysts believing M&A activity for real estate investment trusts would simmer down in the near future given current macroeconomic conditions, the surprise $14 billion privatization announcement of Store Capital Corp. could signal that private capital is still keeping an eye on the REIT sector, despite the cost of debt increasing with rising interest rates.

"The transaction was a surprise to the market, and provided evidence that private capital buyers are flush with cash, and may be taking a longer-term view of the interest rate and economic environment," BMO Capital Markets analyst John Kim wrote in an analyst note.

REIT M&A activity still high in 2022

Real estate M&A activity involving public U.S. equity REITs has remained high year-to-date, after a hot year prior. The recently announced Store Capital deal marks the 10th REIT deal year-to-date, with total transaction value reaching $82.63 billion in aggregate, according to S&P Global Market Intelligence data.

The analysis included real estate deals where either the buyer or target is an equity REIT that trades on the Nasdaq, NYSE or NYSE American.

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REIT privatizations accounted for the largest portion of deals announced year-to-date, aggregating to $40.20 billion in transaction value. Meanwhile, deals where a publicly traded REIT acquired or merged with another listed REIT totaled $39.73 billion in transaction value, while the remaining $2.70 billion involved a publicly traded REIT acquiring a nontraded REIT.

All the other REIT privatizations announced in 2022 came at the hands of private equity giant Blackstone Inc., which acquired PS Business Parks Inc. for $7.60 billion, American Campus Communities LLC for $12.80 billion and Preferred Apartment Communities Inc. for $5.80 billion.

Dow Jones Equity All REIT index trading at a discount to NAV

As of Sept. 14, the Dow Jones Equity All REIT index traded at a market-cap-weighted 7.8% discount to net asset value. Within the REIT sector, office and regional mall REITs trade at the largest discounts.