They said it
“Pacing throughout the course of the year, as you deploy capital in an uncertain world, I think is the best strategy”
Roger Morales, head of commercial real estate acquisitions at KKR, speaking on CBRE’s Weekly Take podcast last week about how his firm is hedging against market uncertainty.
What’s new
Real estate’s golden child loses its luster
The office sector’s challenges have dominated much of real estate discourse since the pandemic, but problems in the residential space are now beginning to vex landlords across the country. In this month’s cover story, PERE takes a Deep Dive into the growing default risk in the multifamily sector, which is catching out some managers and their investors. Many developers whose investments were fueled by cheap debt now face soaring rates, while significant oversupply has created a difficult leasing environment and corresponding rent stagnation in parts of the US.
Meanwhile, other managers are on the hunt for deals – though it is not simply about snapping up discounts. “I’d rather take a lesser discount on something I actually want to own than a stark discount on something that I don’t think has the right demand tailwinds going forward,” Lauren Hochfelder, managing director of investment bank platform Morgan Stanley Real Estate Investing, says in the story.
Blackstone’s double exit
Last week, Blackstone made not one but two high-profile exits from investments originally funded with capital from multiple vehicles.
On Thursday, the New York-based mega-manager announced the sale of a 48-property, three million-square-foot combined industrial portfolio to Los Angeles-based real estate investment trust Rexford Industrial Realty for a total of $1 billion. The assets, located across Southern California, were sold via separate transactions involving vehicles from its core-plus Blackstone Property Partners and opportunistic Blackstone Real Estate Partners strategies, as well as its non-traded REIT Blackstone Real Estate Income Trust.
The following day, Blackstone also went public with the disposition of Arc Place, a Class A office building in Seoul, for 792 billion Korean won ($590 million; €545 million) to local asset management company Koramco, as PERE reported. The firm originally acquired the property in 2022 through its core-plus funds.
PAG leads China mall group buyout
Hong Kong-based private equity firm PAG leads a consortium of global investors in one of the largest private equity transactions ever seen in China: the $8.3 billion buyout of the world’s largest shopping mall operator.
In an announcement, PAG revealed it had signed a venture with fellow Hong Kong-based alternatives manager CITIC Capital, US private equity firm Ares Management, an Abu Dhabi Investment Authority subsidiary and sovereign investor Mubadala Investment company to acquire a 60 percent stake in Newland Commercial Management, a new holding company for Zhuhai Wanda Commercial Management Group, which operates 496 shopping malls across China. PERE understands PAG has the largest share in the controlling venture.
PAG and former Zhuhai Wanda parent Dalian Wanda Commercial Management Group – which owns most of the malls Newland manages – signed an agreement to restructure the latter last year after the business failed to list on the Hong Kong Stock Exchange. In 2021, PAG, CITIC and Ares joined other investors to provide $5.9 billion in pre-IPO financing for the group.
Trending topics
Nuveen backs off SFR
Nuveen is stepping away from being a single-family rental landlord. The firm has reportedly reached a deal to move the management of 3,000 single-family rental units over to Invitation Homes, amid an environment of stagnating rents and soaring interest rates.
Nuveen, an investment subsidiary of the pension fund TIAA, bought the properties through a $400 million investment in SFR company Sparrow four years ago, Bloomberg reported. Interest in the asset class ratcheted up during the pandemic, as would-be homeowners priced out of the for-sale market super-charged demand and drove up rents. In the deal, New York-based Nuveen, which has $152 billion in real estate assets under management, will continue to own the units.
More specialization in private REITs
Just as institutional capital is seeking greater exposure to sector-specific fund strategies, high-net-worth investors are likewise looking to tailor their sector allocations within their real estate portfolios. Managers are tapping into this growing retail demand with an increasing number of sector-specific private real estate investment trusts.
To date, these specialist vehicles have largely been concentrated in the industrial sector, including BGO’s industrial-focused IREIT, Ares Management’s Ares Industrial Real Estate Income Trust and Bridge Investment Group’s Bridge Investment Group Industrial Real Estate Income Trust, which was launched last month, as PERE previously reported.
Dallas-based S2 Capital, however, is focusing on multifamily with its newly launched private REIT, for which it is seeking to raise up to $1 billion. With a $1.6 billion seed portfolio encompassing 10,000 apartments, the vehicle will be the largest unlisted REIT focused on the multifamily sector by the number of operating units. For more on S2’s private REIT, including a major refinancing the firm has done with Fannie Mae, read the full story here.
Data snapshot
New York office woes
Manhattan’s office challenges continue, with the availability rate now climbing to a post-pandemic peak of 20.1 percent in the first quarter of the year, according to brokerage Savills. The increase in availability is the result of slow leasing mixed with several big blocks of space hitting the market, putting available space at 94.1 million square feet in the borough.
People
Moorfield explores the co-CEO approach
Manager Moorfield Group announced a major senior leadership change on Tuesday, with current chief executive Marc Gilbard taking on the newly created position of executive chairman. Meanwhile, Charles Ferguson-Davie, who remains Moorfield’s CIO, will be coming on as co-CEO alongside Gilbard. In a statement, Gilbard, who launched Moorfield’s private equity real estate strategy, said the executive changes would strengthen the firm and its board.
“Moorfield has been an early entrant into many of the alternative sectors that are now becoming increasingly mainstream, having entirely exited cyclical sectors such as retail, office and hospitality/leisure some years ago,” he said. “Moorfield’s focus is currently on the living and storage sectors which we believe to be supported by structural drivers of demand and a shortage in suitable supply.’’
Investor watch
CitizenM owners look to check out
Two of the world’s largest real estate investors are set to take Dutch hotel developer and operator citizenM to the market with a potential €4 billion price tag. According to the Financial Times (paywall), owners Dutch pension manager APG, Singaporean sovereign wealth fund GIC and citizenM founder Rattan Chadha have appointed Morgan Stanley and Eastdil Secured to advise on the options, which could include the sale of a minority stake or a full sale to help the company continue to grow. Both APG and GIC declined to comment on the matter.
The news comes five years after GIC acquired a 25 percent stake in citizenM, a transaction which valued the business at €2 billion. The deal was an investor-to-investor sale by APG, which was an early backer of the modular-build hotel chain and invested in the opening of its first hotel at Amsterdam’s Schiphol Airport in 2008. APG’s stake sale generated €750 million of equity to realize the next phase of citizenM’s expansion, PERE reported at the time. Since then, the business has grown its portfolio to 40 hotels across Europe, North America and Asia.
This week’s investor meetings
Wednesday, April 3
- Alameda County Employees’ Retirement Association (ACERA)
- Fresno County Employees’ Retirement Association
- Imperial County Employees’ Retirement System (ICERS)
Thursday, April 4
- Adams County Retirement Plan
- Dallas Fort Worth International Airport
- Los Angeles Fire & Police Pension System
- North Yorkshire Pension Fund
- Police & Fire Retirement System of the City of Detroit
- San Bernardino County Employees’ Retirement Association (SBCERA)
- South Dakota Investment Council
- Teachers’ Retirement System of Louisiana
- Wyoming State Loan and Investment Board
Friday, April 5
Today’s letter was prepared by Miriam Hall, with Evelyn Lee and Charlotte D’Souza contributing.
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