S&P Global Market Intelligence offers our top picks of real estate news stories published throughout the week.
The U.S. office real estate sector is showing “slow signs of progress,” but a rebound in office demand to pre-pandemic levels may not be critically important for real estate investment trusts’ share prices, an analyst argued.
The office sector “will eventually look like its pre-pandemic self,” with a few potential caveats, SMBC Nikko Securities America analyst Richard Anderson wrote in a May 12 note. Office tenants are likely to give employees more flexibility to work from home, but at least some of the reduction in demand for space will be offset by tenants allocating more space per employee in the office, Anderson wrote.
As a result, the question of a full demand rebound is “interesting,” but unlikely to affect REIT share prices in the short term, with most office tenants remaining current on rent and office REITs proceeding confidently through development and redevelopment pipelines, he added.
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Sun Belt cinches big money
* Tricon Residential Inc., Pacific Life Insurance Co. and an unnamed global investor teamed up to create a $1.5 billion joint venture that will acquire new single-family rental homes in the U.S. Sun Belt region. Homebuilder Direct will target the middle-market demographic.
Separately, a partnership of Tricon and Canada Pension Plan Investment Board wrapped up its first investment in a 1.8-acre development site in Toronto where they plan to build two towers with 870 units at an estimated development cost of about C$600 million.
* Starwood Capital Group Management LLC agreed to pay approximately $1.2 billion for 17 multifamily properties mainly in the Sun Belt. Centennial Holding Co. LLC is selling the assets containing about 5,200 units spread across Florida, Georgia, Maryland, North Carolina, Tennessee and Texas.
* Private equity giant Blackstone Group Inc. and TruAmerica Multifamily LLC are buying a 66-property apartment portfolio in San Diego County from the Conrad Prebys Foundation for more than $1 billion, The San Diego Union-Tribune reported. Blackstone intends to invest $100 million to improve the assets and will keep a majority of the units affordable.
* Storage and information management services provider Iron Mountain Inc. said it is divesting its intellectual property management unit to focus on its core strengths. U.K.-based NCC Group PLC will buy the business for gross proceeds of $220 million.
Refinancing and acquisitions
* Office real estate investment trust Vornado Realty Trust secured a $1.2 billion loan to refinance the 555 California St. property in San Francisco. Vornado owns a 70% controlling stake in the partnership that owns the three-building, 1.8 million-square-foot office campus.
* MGM Growth Properties LLC is set to buy real estate assets associated with the MGM Springfield casino in western Massachusetts from MGM Resorts International for nearly $400 million.
* National Storage Affiliates Trust acquired a self-storage portfolio from a private equity real estate fund advised by Crow Holdings Capital Partners LLC for an undisclosed sum. The transaction involved the 857-unit Sugar Land Self Storage property in Richmond, Texas, and the 746-unit Crestwood Self Storage in Crestwood, Ill.
* Authentic Brands Group LLC and its joint venture with mall REIT Simon Property Group Inc. are buying outerwear brand Eddie Bauer LLC. Terms of the deal with Golden Gate Capital-backed PSEB Group were not disclosed.
End of partnership
* Private prisons operator GEO Group Inc. disclosed that the Federal Bureau of Prisons will not renew the contracts for the Great Plains Correctional Facility in Hinton, Okla., and for county-owned and managed Reeves County Detention Center I & II in Texas. GEO does not expect renewals for its remaining contracts with the bureau that expire between November and the end of September 2022.
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