Roark, the PE Firm Behind Arby’s, Poised to Add Subway to Its Portfolio with $9.6 Billion Deal

Roark Capital is inching closer to a $9.6 billion deal with Subway following a competitive bidding war that began earlier this year.

Roark, the PE Firm Behind Arby's, Poised to Add Subway to Its Portfolio with $9.6 Billion Deal

Roark Capital is inching closer to a $9.6 billion deal with Subway following a competitive bidding war that began earlier this year.

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Good morning. Roark Capital nears a $9.6 billion Subway deal after a fierce bidding war. The US's largest hospital landlord faces financial woes, while public REITs hold an edge over private ones for unexpected reasons.

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Roark, the PE Firm Behind Arby's, Poised to Add Subway to Its Portfolio with $9.6 Billion Deal

Roark Capital is inching closer to a $9.6 billion deal with Subway following a competitive bidding war that began earlier this year. This would add Subway to their collection of prominent brands, including Arby’s and Buffalo Wild Wings.

Deal details: Subway's potential sale was first unveiled in January. Originally projected for a May closing, the deal was rescheduled to July, and now as summer approaches its end, the anticipation grows. Insiders are currently leaning towards Roark Capital as the front-runner, valuing Subway close to its desired $10 billion tag. However, The Wall Street Journal says other players like TDR Capital and Sycamore might still re-emerge with a more enticing offer.

A bite of history: Originating from Milford, Conn., Subway's iconic foot-long sandwiches have solidified its reputation in the U.S. fast-food sector for half a century. In 2020, the brand recorded $9.8B in sales and operated 37,000 global outlets. Yet, the journey hasn't been smooth. Subway witnessed a decline from its $18B peak in 2012. Renewed competition, both from existing rivals revamping their branding and online presence and newcomers like Jersey Mike's Subs, has eroded profits, prompting store shutdowns.

Store closures: Since 2015, Subway has closed nearly 6,000 U.S. outlets. By 2022, its international presence had also reduced, resulting in McDonald’s surpassing it in global outlet numbers. This downturn, combined with valuation concerns and a shortage of strategic purchasers, made the sale process intricate. Adding to this was the notable departure of Subway’s North American president, Trevor Haynes.


Zoom out: Atlanta-based Roark Capital is a seasoned player in the food and restaurant domain. Over the past twenty years, the private equity firm has made notable acquisitions, encompassing brands such as Auntie Anne’s, Arby’s, Jimmy John’s, Baskin-Robbins, and Carvel. Their potential acquisition of Subway illustrates Roark's strategic ambition to solidify its position in the fast-food arena further. And with Roark's know-how, Subway might get that fresh boost it needs.


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Tenants Sweat as Biggest US Hospital Landlord Bailout on Hold

Cracks Deepen for America’s Biggest Hospital Landlord: Struggling Tenants, a Bailout on Hold

The closure of Delaware County Memorial Hospital in Drexel Hill, PA, meant more-crowded emergency rooms at the county’s remaining hospitals (Getty)

The largest hospital landlord in the US, Medical Properties Trust (MPW), is facing mounting challenges as struggling tenants and a halted bailout plan impact its financial stability.

Not so recession-proof: A transaction between MPT and Prospect Medical Holdings, designed to provide crucial financial support, was put on hold by a CA regulator in July, despite MPT announcing it as a done deal. Hospital closures by MPT tenants have resulted in reduced healthcare options and longer ambulance trips in certain communities. MPW shares have plummeted as a direct result.

Medical Properties Trust Share Price

Halted bailout: A CA regulator ordered the transaction between MPT and Prospect Medical Holdings to be put on hold, raising concerns about the financial stability of both companies. Prospect, which owed MPT hundreds of millions, has already closed hospitals and stopped paying rent. MPT's finances are under scrutiny, and the collapse of the deal would further pressure both companies.

Impact on communities: The closures of hospitals by Prospect, MPT's tenant, have had detrimental effects on dependent communities, such as longer ambulance trips and overcrowded emergency rooms. For example, in PA’s Delaware County, two hospital closures have left a significant portion of the population without access to maternity services, creating a "maternity desert."

Uncertain future: MPW has fallen by half over the past year, and its financial stability is in question. The company has extended financial support to troubled tenants like Prospect and Steward Health Care. The deal with Prospect was seen as a lifeline for both parties, but regulatory hurdles and Prospect's recent ransomware attack have further complicated the situation.


Healthcare needs a checkup: The halted bailout plan faced by MPT highlights the financial strains and regulatory hurdles that both MPT and its tenants are struggling with. Hospital closures, unpaid rent, and high debts have impacted healthcare access and all companies' stability. These challenges underscore the importance of stability and support in the healthcare sector to ensure quality care to at-need communities.


📖 Read: SL Green and its partners take control of the ground below 625 Madison Avenue from billionaire investor Ben Ashkenazy, marking the end of a decade-long battle over the site near Central Park. 

▶️ Watch: In this video from CNBC, Marcus & Millichap (MMI) CEO Hessam Nadji, talks about CRE in 2023 and ongoing concerns surrounding rising interest rates and tightening credit.

🎧 Listen: Trader Joe’s founder and CEO, Joe Coulombe, talks with Patty Civalleri about how he created a work environment employees love while also crafting a beloved shopping experience over 60 years.


Public REITs Offer Investors More Than Just Good Risk Management

Janus Henderson Prefers Public REITs to Private Ones — Not for the Reason You Think

(Institutional Investor)

Publicly traded REITs continue to trade at lower valuations than private ones. But according to the portfolio managers at Janus Henderson, the relative valuation gap is not the primary reason to invest in public REITs today.

Returning to returns: Janus Henderson believes the next decade of real estate returns will rely on real estate fundamentals and operating acumen instead of cheap debt. During the previous decade leading up to the pandemic, public REITs outperformed their private counterparts due to their focus on improving real estate fundamentals while reducing balance sheet debt.

Exposure to diversity: Public REITs offer exposure to a wider range of property types, including non-traditional assets such as cell towers, data centers, self-storage, senior housing, and single-family rentals. Additionally, public REITs invest in single-tenant, net-lease real estate, providing commercial property lease agreements with combined rent and property tax payments.

Stronger operating platforms: Public REITs also have stronger operating platforms, making them well-suited for the investments they make as publicly traded companies. They also have access to unsecured credit and equity markets, which private funds currently lack. In a low-interest-rate environment, public REITs can obtain pricey properties more easily, while private REITs may face challenges in refinancing high loan-to-value ratio properties.


Back to basics: Janus Henderson argues that public REITs present a compelling investment opportunity due to an increasingly divergent return outlook. As the next decade of real estate returns is expected to be driven by real estate fundamentals and cash flow growth, public REITs, with their focus on improving fundamentals and access to capital, are well-positioned to capitalize on acquisition opportunities.


  • WeWork woes: Real estate firms like Starwood Capital (STWD) and Cushman & Wakefield (CWK) face huge losses as WeWork's (WE) market cap drops to $275M from $8B.

  • Higher rates: Mortgage rates spiked to 7.48% on Monday, the highest since November 2000, following inflation concerns, marking a 29 basis point increase within a week.

  • Amazon sets the bar: Amazon (AMZN) dominates the US multistory warehouse market, occupying 92% of properties. But other companies are starting to embrace this concept, too.

  • Student housing hustle: UC Berkeley junior Priscila Sepulveda may have to sleep in her car when classes start due to housing shortages.

  • From private to public: Private capital has driven the data center industry's growth, but a return to Wall Street through IPOs may be on the horizon.

  • The bigger they are: China Evergrande, one of the world's biggest developers, files for US bankruptcy protection amid a worsening property crisis.

  • Sublease shuffle: Google (GOOGL) is seeking to sublease over 182,500 SF of office space in Palo Alto as it continues to downsize its real estate portfolio in the region.

  • The evolution of leisure: Leisure travel is driving the hotel industry's recovery from the pandemic, with cruise lines and all-inclusive resorts seeing increased demand.

  • Cutting costs: Residential brokerage Compass (COMP) achieved its self-imposed milestone of being cash-flow positive in Q2, with adjusted EBITDA of $30M.

  • Merging for success: Regency Centers (REG) completes its $1.4B acquisition of Urstadt Biddle Properties, expanding its portfolio to 480 properties with a total market cap of over $11B.

  • Week of drama: CA Ventures faces eviction from its HQ in Chicago. Berkshire Hathaway (BRK.A) invested $814M in homebuilders. Meanwhile, Unibail-Rodamco-Westfield (UNBLF) is close to refinancing a $925M loan for its Westfield Century City mall.

  • Not a bad idea: The EB-5 immigration investment program has generated at least $834M in 1H23, thanks to pent-up demand and the rise of alternative financing sources in a challenging market.

  • Flushed fortunes: Miami's overflowing septic tanks and trash piles pose a multibillion-dollar problem, threatening the city’s appeal for wealthy residents and out-of-state workers.

  • Jumbo loans: Big banks are rapidly reducing their interest in jumbo mortgages due to interest rate hikes and recent bank failures.


Multifamily hangover

RBC Wealth Management

Since the pandemic, over 20% of outstanding US apartments were purchased, amounting to roughly $900B during exceptionally low rates. The pace of acquisition surpasses other real estate sectors significantly. While fixed-rate borrowers previously paid 3–4% and floating-rate borrowers paid below 2%, current rates stand at 7%.

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