The Blackstone Group Buys GLP

The Blackstone Group Buys GLP

Fall 2019

The Blackstone Group buys GLP: A Look at Big Industrial Buys

Just when you thought the industrial real estate buying spree had hits its peak, another big deal closes. The recent high water mark was closed by The Blackstone Group in its acquisition of GLP’s US warehouse portfolio. Click here for more.

This involved 179 million square feet of urban logistics assets, for $18.7 billion, breaking the record as the largest private commercial real estate transaction globally. Blackstone’s focus on logistics is directly correlated to the growth in e-commerce, a coveted sector that is projected to see at least 10 percent annual growth.

The Blackstone Group is one of the largest real estate private equity firms in the world today with $157 billion of investor capital under management.

What does this acquisition mean for the industrial real estate market? The CoStar Group, a leading commercial real estate research and analytics firm, gives a closer look at the deal, including the properties involved.

Industrial Real Estate: Prologis to Acquire Liberty Property Trust for $126 billion

In another mammoth industrial acquisition, Prologis has plans to buy Liberty Property Trust for $12.6 billion, securing a bigger presence in Lehigh Valley, Chicago, Houston, Central PA, New Jersey and Southern California. Click here for more.

The board of directors of each company unanimously approved the transaction.

According to Prologis, the industrial real estate acquisition comprises:

  • 107 msf logistics operating portfolio; 87 percent overlap with key markets
  • 5.1 msf of logistics development in progress
  • 1,684 acres of land for future logistics development with build-out potential of 19.7 msf
  • 4.9 msf of an office operating and development portfolio
Multifamily Investment: Foreign Investment Keeps Going

Multifamily Investment: Foreign Investment Keeps Going

October 2019

Foreign Investors Drive Multifamily

In Chicago skyscraper race, multifamily is outpacing office, as Millennials flock to the urban environment.

Foreign investors continue to focus on the multifamily investment, despite a pull back in other asset classes, according to a Real Capital Analytics report. Foreign investors spent $16.1 billion on U.S. apartments over the last 12 months, end in Q2 2019, with Canadian buyers as the most active

Industry experts note that this activity is being driven by the low volatility seen in this sector and the continued movement toward renting versus home-buying in the U.S.

As ongoing demand for apartments has reduced vacancy in many markets, investors keep moving in. They also are attracted to the diverse rental stream from a variety of tenants, an environment that is viewed as less volatile than a single tenant office building, for example.

As noted by National Real Estate Investor, cross-border multifamily sales volume rose 10 percent, year-over-year, to $16.1 billion

Foreign Investors want Class A Assets

Foreign investors were focusing on bigger deals with more expensive, Class A assets. The average sale during the past 12 months, ending with Q2 2019, was $43 million per community. The average cap rate was 5.3%.

The low down on Grocery Store Cap Rates

Looking for more commercial real estate industry intel? Click here for more from RCA on the wide spread of cap rates among grocery store brands.

DLA Piper Forecast: CRE Strong, Opportunity Zones Still Hot

DLA Piper Forecast: CRE Strong, Opportunity Zones Still Hot

Commercial Real Estate News Update

September 2019

DLA Piper Survey: Strong CRE Outlook, Opportunity Zones are Strong

Commercial real estate executives are feeling positive about the industry’s future, according to DLA Piper’s annual State of the Market Survey. The survey shows that 50% of executives have a bullish outlook on the market, while 38% are taking a neutral position and just 12% feel bearish. Respondents noted that Opportunity Zones and ecommerce should drive investment in the coming years, while coworking may dwindle and property technologies could have less impact in coming years. Read more in Commercial Property Executive.

More on the DLA Piper Summit

DLA Piper’s real estate forum, in its 15th year, gathered intel from many of the industry’s key companies. Executives from Blackstone, Brookfield, USAA Real Estate, Ventas, The Cohen Group, Hines, Wells Fargo, Goldman Sachs and others met in Chicago to discuss a variety of topics, from interest rates and policy to proptech and industry outlooks. Here are the key comments of note:

Wells Fargo — the $3.5 billion mortgage business is seeing delinquencies at an all-time low at 1 percent. This compares to a 9 percent delinquency at the peak of the great financial crisis.

Citigroup — While many reference the length of this economic cycle and question what inning we are in, Citigroup executives note that baseball is not limited to nine innings. As an aside, baseball fans can check out this MLB.com article for a recap of the many ways to slice and dice the longest baseball game, the longest double header, etc.

Goldman Sachs & Co — Their investment banking division noted that many studies point to loan-to-value improving ratios in CMBS’. As for Goldman Sachs, they are focused on markets they like, sponsors they like, with perhaps a slightly riskier loan to get to the right cost of capital.

Click here for more.

The Blackstone Group Buys $19 Billion GLP Portfolio

June 2019

The Blackstone Group Buys GLP $19 Billion Portfolio

In the largest private real estate transaction in history, Blackstone Real estate has acquired a 179 million square foot logistics portfolio from GLP for $19 billion. The portfolio includes urban infill assets in 36 major metropolitan areas.

According to Reuters, the deals comes as investors are spending billions of dollars to buy industrial assets that support e-commerce activity. This deal nearly doubles the size of The Blackstone Group’s U.S. industrial footprint. The key is logistics, which focuses on helping industrial businesses move products from A to B. This buy allows The Blackstone Group to tap into GLP’s logistics platform, which includes clients such as Amazon, Walmart, and others. Check out these stories for more:

GlobeSt

Connect Commercial Real Estate Media

According to PERE News, the portfolio has assets that have below market rents, which will give The Blackstone Group an advantage in the long term.

Senior Housing Investment Outlook: $2.8 B in sales, stable activity ahead

Senior Housing Investment Outlook: $2.8 B in sales, stable activity ahead

May 1, 2019

The senior housing sector is redefining itself, following several years of robust sales and construction activity. According to a new Real Capital Markets Report, activity slowed in early 2019, but investors are confident in the long term outlook.

RCM’s report incorporates the sentiments of investors across the U.S., as well as statistics from Real Capital Analytics (RCA) and the National Investment Council for Seniors Housing & Care (NIC). The report notes that U.S. investment sales in this sector totaled $2.8 billion in the first two months of 2019, down from $3.0 billion in the same period in 2018. There were $15.2 billion in sales in 2018. Sixty-six percent of investors and other real estate professionals interviewed for the report believe that activity in 2019 will be comparable to the total sales for 2018.

As noted in Senior Living News, investors are looking at operational issues, including focusing on strong operational partners. Given the challenges with shrinking profits and shortages of skilled labor, a strong operating partner is a must. Investors also are looking at the long-term view of this sector.

“Perspective is an important attribute for all commercial real estate investors, including those focused on the senior housing sector,” said Tina Lichens, Chief Operating Officer, RCM. “The sector as we know it today is vastly different from five years ago and rapidly changing. There remains considerable demand and capital in the market, yet investors need to look at the long-term as the market redefines its new normal.”

RCM Senior Housing Outlook

Highlights of the RCM Senior Housing Snapshot are:

  • The investor profile has shifted—with private investors leading the way, followed by institutional investors.
  • Construction activity has slowed—Newly constructed senior housing units declined by 14.8 percent from 2017 to 2018, according to NIC; experts consider this a needed slowdown to reach supply/demand equilibrium.
  • Strong operating partners a must—Over 61 percent of investors agree that a strong operating partner is important due to the challenges finding skilled labor, and managing costs and shrinking profits.
  • Long-term view is key—experts remain bullish on senior housing, but say that investors should look at the long-term, as they work through an oversupply of new construction in many markets.
Commercial Real Estate: What’s Trending Now?

Commercial Real Estate: What’s Trending Now?

Jan. 8, 2019

Opportunity Zone Activity, Medical Office and Multifamily are hot for 2019

As 2019 kicks into full swing, commercial real estate experts are out in force with activity and predictions. From a surge in Opportunity Zone activity to the sale of a major medical office portfolio and a new apartment building for Chicago’s West Loop neighborhood, here’s the latest CRE news:

Curbed.com reports that Opportunity Zones, created by the new federal tax overhaul, are starting to get a lot of attention from developers and investors looking to get tax benefits to invest in blighted neighborhoods. Check out this story for a look at how investors are getting in on Opportunity Zone opportunities.

Medical office portfolios remain a big draw for investors, as shown by Welltower’s $1.25 billion purchase of CNL Healthcare Properties’ 55 MOB portfolio. According to Bisnow, the deal is one of the largest for medical office buildings in recent years. The buildings total 3.3 msf in 16 states, including this Atlanta property, pictured. This strong outlook for medical office was also shown in this Avison Young Medical Office Report.

 

Changes for Net Lease Market

The net lease market is changing, according to a new report from The Boulder Group, featured in GlobeSt. Find out more on why the spread between asking and closed cap rates on fully leased buildings is growing. And, what does it mean for net leased properties moving forward?

The GlobeSt. story notes that there remain bargains, for those buyers willing to assume a certain amount of risk. This means taking on shorter lease terms or assets without investment grade tenants. According to The Boulder Group, sellers are adding more non-core assets to the market — one reason why cap rates should continue to rise. Interest rates are another factor.

 

More Chicago Multifamily Development

Another Chicago multi-family project has been approved in the West Loop, according to The Real Deal Chicago. How will this 166-unit, 10-story LG Development building at 1220 W. Jackson Blvd fit into the mix of multifamily developments? And, will affordable housing portion meet the needs of area residents?

REJournals 2019 Forecast Event is Jan. 8, 2019 in downtown Chicago. Look for discussion on Opportunity Zone activity, as well as office, retail, and industrial activity.

Forecast 2019 is Here

Chicago’s commercial real estate forecast remains positive for 2019, according to panelists from Illinois Real Estate Journal’s Commercial Real Estate Forecast Conference— the longest running event of its kind. The event attracts more than 900 commercial real estate and related professionals.

Check out the preview story– and check back for post-conference coverage.

 

 

RCM Report: Multifamily Investment Still Strong

RCM Report: Multifamily Investment Still Strong

Sept. 2018

Strong Multifamily Investment Outlook for 2018-19

Real Capital Markets Report: Job growth and strong market fundaments propel multifamily

Strong market fundamentals, an abundance of capital, and an influx of investors continue to push the U.S. multifamily investment market, according to Real Capital Markets’ 2018 Multifamily Investor Sentiment Report.

As detailed in this Globe Street article, the majority of investors surveyed are looking to buy, with many finding a shortage of quality assets, particularly in the value add category. Experts interviewed by RCM noted that underlying fundamentals shaping rental demand continue to draw a wide range of investors into the multifamily sector, despite upward movement in interest rates.

“Based on the number of multifamily properties being brought to market, 2018 is a very solid year in California,” Steve Shanahan, executive managing director at Real Capital Markets, tells GlobeSt.com. “So far, the number of multifamily investment assets brought to market is up year over year, and we believe the activity will continue through the second half of 2018.”

Across the country, both job growth and home prices are high. Because of prohibitively priced homes and millennials’ continued focus on renting over buying, rents are rising to record levels, making apartment buildings a solid investment.

There is $250 billion or more  in capital currently allocated to multifamily investment across the country. For example:

  • National–there is significant capital ready to be deployed in this sector. “Closed end real estate funds have billions of dollars in callable capital—capital that has to be invested over the next three years,” said David Schwartz, CEO, Chairman, and Co-Founder of Waterton, a real estate investment and property management firm based in Chicago. “On top of that is a plethora of non-traded REITS, public REITS, private high net worth capital, foreign capital and other sources, each of which has some interest in multifamily investment. That’s what’s keeping these cap rates low.”
  • Phoenix— more than 1,000 older properties with 100 units or more are well-positioned for value-add redevelopment.
  • Dallas–pricing has risen dramatically from $35,000 to $45,000 per unit in a Class B building five years ago to $90,000 today, creating competition for higher end and value-add units across the MSA.
RCM Report: Retail Investors Still Buying

RCM Report: Retail Investors Still Buying

May 2018

Real Capital Markets Report: Retail Investors Still in Buying Mode

Retail investors are still in a buying mode, as they continue to focus on finding assets that can meet the changing needs of today’s consumers and produce desirable returns, according to Real Capital Markets’ May 2018 Retail Investor Sentiment Report.

While big box vacancies and high-profile retail store closures continue to adversely affect parts of the industry, investors surveyed noted optimism in other retail segments. Retail owners who embrace new models—whether they are experiential or contain some variation of mixed use—are considered to be in the best position to succeed in today’s retail environment.

“Retail may be the most diverse and bifurcated of all commercial real estate asset classes,” said Steve Shanahan, Executive Managing Director, Real Capital Markets. “Certain subsets of retail perform well, are in great demand and push the market in terms of price and value. Others have issues and are part of what is leading investors to consider other options, such as exploring other asset types.”

In May 2018, RCM surveyed its U.S. database of retail investors to gauge their sentiment on various investment related topics. Highlights of the 2018 RCM Retail Investor Sentiment Report include:

  • The State of Retail is Most Impactful—The overarching state of the retail market is having the greatest impact on retail property investing.
  • Investors are Expanding Into Alternative Asset Classes—Almost 70 percent of investors surveyed categorize themselves as net buyers with only 11 percent taking a wait and see attitude.
  • Anchored Shopping Centers Remain the Preferred Retail Investment—Especially grocery-anchored centers—by a greater margin in 2018 than in 2017. Nearly half of investors, 48 percent, said anchored centers are the most attractive retail investment today compared to strip centers, which were characterized as the most attractive by 23 percent.
  • Greatest Threat is Big Box Vacancy—With new big box bankruptcies and previously announced store closures taking place, investors’ views on the greatest threat to retail investing has changed. Big box vacancy is now viewed as the greatest threat, cited by 39 percent of investors.
  • The Call for Core and Value—Many buyers—private capital, entrepreneurs, foreign investors and private equity investors—primarily are acting when a value component is present. The survey results echo that finding that value-add remains a popular strategy, with 52 percent seeking properties where they can create value.

Industrial Real Estate Investment Still Strong

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A Real Capital Markets and SIOR Report found investors bullish on industrial real estate heading into 2018.

Industrial real estate investment is expected to continue its healthy run into 2018, as strong leasing, construction, and investment sales fuel the market, according to the recent Real Capital Markets (RCM)/SIOR Investment Sentiment Report. What’s driving this record investment? It’s easy to point to e-commerce as a major force, but that is just one part of the story, according to survey respondents.

Here are 5 key findings from the report:

  • Volume for 2018? — 90.3% of investors and brokers across the country say investment levels will at least stay the same going into 2018, with many predicting a slight increase in activity.
  • E-commerce Effect — E-commerce is having the greatest impact on market activity, but is not the only factor driving industrial activity. There is growth in light manufacturing, specialty food manufacturing and general corporate distribution space, for example. Also, many corporations are expanding their distribution space needs, moving to larger or newer facilities. Other companies are using warehouse and distribution space for newer manufacturing needs — such as recycled materials or green energy related uses.
  • Investment sales pricing — is expected to stay the same (92.7% of respondents) or rise by 5% or more going into 2018 (33.8% of respondents).
  • Watch out for overbuilding — 40.6% of investors say that overbuilding is the greatest threat to the industrial market.
  • Mid-size and modern new buildings win out — 35.8% of respondents prefer new, mid-size, modern, multi-tenant building

This current industrial market is unique in its longevity — and the array of market fundaments that are propelling activity. With growth in the supply chain, corporate distribution space realignment, and the continued expansion of e-commerce, it’s difficult to see an end in sight for investment in industrial real estate.

Greatest Threat to Retail? E-commerce and Shifting Consumers Habits

Greatest Threat to Retail? E-commerce and Shifting Consumers Habits

June 2017

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While e-commerce is often blamed for struggles in the retail sector, there are several other factors at play, according to Real Capital Markets’ recently released 2017 Retail Sentiment Report, which gauged opinions from investors across the U.S. The study examines changing consumer habits and how some survey respondents are trying to reinvent their approach to retail.

Among the study findings are:

  • Shifting consumer buying habits are the greatest threat to the industry. From e-commerce to in-store pickup and attitudes toward power shopping centers, shifting consumer habits have the eye of retailers as they try to navigate this current retail climate. Disruption has hit the retail industry and investors are aware of its impact and looking for ways to mitigate risks.
  • Most investors feel reinvention is the key to solving the industry’s greatest issues. In light of large tenant shake-ups and e-commerce pressures, investors are looking long-term at where retail is heading and what investments make sense.
  • Anchored shopping centers are the preferred property type for investors by a margin of 3:1. In this category, centers anchored by grocery tenants are preferred, as this sector is considered secure against e-commerce.
  • More than 57 percent of investors surveyed are net buyers of retail properties, an indication investors looking for opportunities and the ability to “balance” portfolios previously buoyed by other asset types.

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