BRG arb pitch:
– Multi-family REIT getting acquired by BX at $24.25/share + 1 spin-co share of single-family assets BHOM.
– BHOM NAV stands at $5.6 (at a 9.7% cap rate) vs $2 per share implied cost. BHOM peers trade at much lower 4% cap rates.
– The spin-off will be taxable.
– Discount to other single-family peers deserved due to external manager structure and additional capital required to establish a position in pre-spin BRG.
– Target BHOM spinco valuation of c. $4.9/share.
Exp. gain: +46% for taxable accounts and +144% for no tax on implied BHOM spinco price.
Full write-up (free guest account required):