Real Estate Sector Ideas

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Crown Castle Intl - >>> EQT-backed Zayo, TPG vie for Crown Castle assets worth nearly $10 billion, sources say


Reuters

by Milana Vinn

October 2, 2024


https://finance.yahoo.com/news/exclusive-eqt-backed-zayo-tpg-140849905.html


By Milana Vinn

NEW YORK (Reuters) - Fiber network owner Zayo Group and buyout firm TPG are competing to acquire the fiber and wireless assets of Crown Castle, in a deal that could be valued at nearly $10 billion, according to people familiar with the matter.

Zayo, which is owned by buyout firms EQT AB and DigitalBridge, and TPG are the two remaining bidders for the assets, which include Crown Castle's fiber business and its small cell business, which provides wireless services and technology, the sources said, requesting anonymity as the discussions are confidential.

Both units are worth less than $5 billion each and it is possible that Crown Castle could choose to sell only one of the assets, one of the sources said. If both assets are sold, the deal is likely to be valued between $8 billion and $10 billion, the source added.

A deal is still several weeks away and not imminent, the sources said, cautioning that a transaction is not guaranteed. Another suitor could also approach Crown Castle, and it is possible that no deal with any party is reached, the sources added.

If the talks are successful, the transaction would come up at a time when dealmaking in the fiber industry is heating up, as the rapid growth of fiber broadband provides a major boost to infrastructure providers, making them attractive acquisition targets.

Crown Castle, TPG, EQT, and DigitalBridge declined to comment. Zayo did not immediately respond to requests for comment.

Houston, Texas-based Crown Castle is a telecommunications infrastructure provider which operates more 40,000 cellular towers across the United States.

The company, which has a market value of roughly $52 billion, has grown its fiber business through several acquisitions since its foray into the sector in 2015. However, the high cost of building fiber infrastructure has weighed on its financial performance, forcing the company to consider a retreat from the business and slash spending.

Crown Castle, which rents out towers to wireless carriers such as Verizon and AT&T, is now looking to focus on growing its tower business, which is expected to benefit from the largest U.S. carriers upgrading their networks to 5G and increasing capacity to meet booming data demand.

The company has been exploring options for its fiber assets, after reaching a deal with activist investor Elliott Investment Management over shaking up its board.

In February, Crown Castle's co-founder Ted Miller told Reuters in an interview that the company could fetch as much as $15 billion by selling its fiber assets if it let him and his partners join its board of directors.

In June, the company cut its annual profit forecast and said it would lay off 10% of its workforce as a result of an operational review of its fiber business.

Boulder, Colorado-based Zayo was taken private in 2019 by EQT and DigitalBridge's infrastructure fund that was known as Digital Colony at the time. Zayo operates a 145,000-mile fiber network across North America and Canada that connects wireless carriers, cloud service providers, data centers, and large corporations.

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>>> Gladstone Land Corp (NASDAQ:LAND) is a McLean, VA-based specialty REIT, founded in 1997. It owns farmland and related properties in major agricultural U.S. markets and leases or lease-backs its properties to farmers. Gladstone presently owns 168 farms with 112,000 acres across 15 states. Gladstone Land also owns 49,000 acre-feet of banked water in California worth approximately $1.5 billion. About 40% of Gladstone Land's acreage is utilized for organic produce. Its acreage is 99.4% leased.

Gladstone has paid out 135 consecutive monthly cash distributions since its January 2013 IPO and has increased its dividend 34 times over the last 37 quarters.

On May 7, Gladstone Land released its first quarter operating results. FFO of $0.14 missed the estimate of $0.15 and was below the FFO of $0.17 in Q1 2023. Revenue of $20.252 million missed the consensus estimate of $22.307 million and was below revenue of $21.202 million in Q1 2023.

On June 11, Alliance Global Partners initiated coverage on Gladstone Land with a Buy rating and announced a price target of $16. Oppenheimer rates Gladstone Outperform and also has a $16 price target. Gladstone Land was recently trading at $13.60.

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(June 13, 2024)

https://finance.yahoo.com/news/analysts-just-initiated-coverage-four-173951591.html


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>>> Cavco Industries, Inc. (CVCO) designs, produces, and retails factory-built homes primarily in the United States. It operates in two segments, Factory-Built Housing and Financial Services.

The company markets its factory-built homes under the Cavco, Fleetwood, Palm Harbor, Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny, Commodore, Colony, Pennwest, R-Anell, Manorwood, MidCountry, and Solitaire brands.

It produces park model RVs; vacation cabins; and factory-built commercial structures, including apartment buildings, condominiums, hotels, workforce housing, schools, and housing for the United States military troops.

In addition, the company produces various modular homes, which include single and multi-section ranch, split-level, and Cape Cod style homes, as well as two- and three-story homes, and multi-family units.

Further, it provides conforming and non-conforming mortgages and home-only loans to purchasers of various brands of factory-built homes sold by company-owned retail stores, as well as various independent distributors, builders, communities, and developers.

Additionally, the company offers property and casualty insurance to owners of manufactured homes. It distributes its products through a network of independent and company-owned retailers, planned community operators, and residential developers. Cavco Industries, Inc. was founded in 1965 and is headquartered in Phoenix, Arizona.

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https://finance.yahoo.com/quote/CVCO/profile/


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>>> D.R. Horton -- When interest rates drop, mortgage rates usually do, too. And when mortgage rates decline, more Americans can afford to borrow money to build new homes. Rate cuts, therefore, can provide nice catalysts for housing stocks.

https://finance.yahoo.com/news/3-stocks-buy-hand-over-095000813.html

D.R. Horton (NYSE: DHI) isn't just any housing stock; it's been the biggest homebuilder in the U.S. by volume for over 20 years. The company operates in 118 markets across 33 states. D.R. Horton builds residential houses and single-family and multifamily rental units, and provides mortgage financing and title agency services.

The stock is surprisingly cheap considering the gains it's racked up in recent years. D.R. Horton's forward earnings multiple is only 12.2. Its price-to-earnings-to-growth (PEG) ratio, based on five years of projected earnings growth, is a low 0.64.

Even if the Fed doesn't cut interest rates soon, D.R. Horton should still be a tremendous winner over the long term. The U.S. continues to suffer from an acute housing shortage, and the obvious solution to this problem is to build more homes -- exactly what D.R. Horton wants to do.

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>>> Lamar Advertising Co. (NASDAQ:LAMR) is a Baton Rouge, Louisiana-based specialty REIT, founded in 1902 with a focus on owning and leasing 363,000 displays throughout the U.S. and Canada, including digital and print billboards, interstate logos and airport advertising formats. Lamar Advertising and Outfront Media Inc. (NYSE:OUT) are the only two REITs exclusively devoted to billboard and display advertising.

https://finance.yahoo.com/news/4-reits-double-digit-total-150016109.html

On Feb. 23, Lamar Advertising reported its fourth-quarter results. FFO of $1.46 per share beat the estimate of $1.35 per share and was 124.62% better than its fourth-quarter 2022 FFO of $0.65 per share. Revenue of $555.91 million topped the estimate of $547.66 million and also bested its revenue of fourth-quarter 2022 revenue of $535.51 million.

On Feb. 26, Morgan Stanley analyst Benjamin Swinburne maintained an Equal-Weight rating on Lamar and increased the price target from $105 to $110. The same day, JPMorgan Chase & Co. analyst Richard Close maintained a Neutral rating on Lamar and raised the price target from $92 to $109.

Lamar pays a quarterly dividend of $1.30 per share, and the annualized $5.20 dividend yields 4.52%. Its total three- and five-year returns are 34% and 67.52%, respectively.

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>>> A $10 Billion Real-Estate Fund Is Bleeding Cash and Running Out of Options


The Wall Street Journal

by Peter Grant

5-20-24


https://www.msn.com/en-us/money/realestate/a-10-billion-real-estate-fund-is-bleeding-cash-and-running-out-of-options/ar-BB1mHSJw?cvid=b2ff3c3a3bdd460de568db2dc9f0b0e8&ei=39


A giant commercial real-estate fund is scrambling to escape a looming cash crunch caused by the long line of investors who want their money back.

The $10 billion fund from Starwood Capital Group has been trying to preserve its available cash and credit by limiting investor redemptions. In the first quarter, the fund was hit with $1.3 billion in withdrawal requests but satisfied less than $500 million of them, according to regulatory filings.

Even with these limitations, the fund’s liquidity, consisting of cash, marketable securities and a bank line of credit, has been drying up. It totaled $752 million at the end of April, down from $1.1 billion at the end of last year. It was $2.2 billion at the end of 2022, according to filings.

“They don’t have a lot of liquidity left,” said Kevin Gannon, chief executive of Robert A. Stanger, an investment bank that specializes in real-estate funds.

These developments have left the Starwood Real Estate Income Trust, known as Sreit, with three options—none of them appealing. It could take on more debt. It could sell properties into a tough market. Or it could halt completely or limit further redemptions, a move that would greatly impair the fund’s ability to raise new money. Unless it takes one of these three steps, Sreit looks poised to run out of cash and credit before year-end if the current pace of redemptions continues.

Rates, Risk & Real Estate: Starwood REIT limits withdrawals

Other real-estate funds are handling the pressure from the long queue of redemptions in varying degrees. The largest of the funds, Blackstone Real Estate Income Trust, or Breit, has $7.5 billion in liquidity and earlier this year was able to fulfill all redemption requests. But withdrawals continue to exceed new fundraising.

Sreit was one of the most prominent real-estate funds launched between 2017 and 2022, second in size only to Breit. These funds, known as nontraded real-estate investment trusts, invest in commercial property similar to publicly traded REITs. In all, these vehicles raised about $95 billion, mostly from individual investors, according to Stanger.

The funds also were very popular when interest rates were low because they paid dividends in the 5% range. Sold through financial advisers, they also gave small investors the opportunity to participate in what was then a hot commercial-property market.

But investors started to bolt as interest rates jumped and commercial real-estate values fell. In late 2022, Sreit and others began limiting redemptions to as much as 2% of their net asset values a month and up to 5% a quarter.

New fundraising also has dropped sharply as some analysts have criticized the structure of the funds and financial advisers have raised warnings. Sreit’s new fundraising has dwindled to about $15 million a month, down from more than $600 million a month in the first half of 2022.

Sreit’s ability to make redemptions will help determine whether the funds will be a long-term feature of the real-estate market or fade away. Some analysts believe that the funds are proving themselves through a tough commercial-property market. Others say the funds are showing major problems.

Because it can’t raise enough new funds to make up for even its limited redemptions, Starwood has been considering a number of difficult options, say people familiar with the firm’s thinking.

The fund could borrow more, but that would be costly at today’s high interest rates. Sreit’s current debt is already equal to 57% of its assets, which is more than many comparable real-estate funds. Sreit’s target leverage is 50% to 65%.

The fund could sell assets. Sreit owns hundreds of properties throughout the country, mostly warehouses and rental apartment buildings in the Sunbelt. But the value of most commercial real estate has been hammered by high interest rates, which drive up costs in the high-leverage business. Rental apartments have also been hurt by overbuilding in many markets.

Most rental-apartment owners who bought in the years just before the interest-rate spike “would prefer not to sell in this market,” said Matthew Werner, managing director with asset manager Chilton Capital Management.

Finally, Sreit could halt or limit further investor redemptions. But analysts believe that would be a last resort because it would make it even harder to raise new money. One of the main selling points of Sreit has been that investors would be able to redeem their shares, subject to the 2% and 5% restrictions.

A redemption halt “would be fatal,” Stanger’s Gannon said. “You wouldn’t be able to raise another dime.”

Sreit was launched in 2018 by Starwood Capital, a private-equity firm headed by Barry Sternlicht, the storied real-estate investor and founder of the Starwood Hotels chain. Sreit raised more than $13.5 billion in equity, which it used to buy more than $25 billion in real-estate assets.

The fund attempted to sell properties last year as the redemption queues began to lengthen. Sreit sold a portfolio of single-family rental homes to Dallas-based Invitation Homes for $650 million, including debt.

But more recently, the fund has slowed sales because of depressed prices. Like other owners, Sreit is hoping prices will rebound later this year, especially if the Federal Reserve begins to cut interest rates.

Instead, Sreit has relied on its line of credit. But that won’t last much longer at the rate the fund is drawing it down. The line has $275 million of capacity, down from its original size of $1.55 billion.

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>>> World’s largest 3D printer can build a small house in 80 hours


Interesting Engineering

by Maria Mocerino

4-24-24


https://www.msn.com/en-us/money/other/world-s-largest-3d-printer-can-build-a-small-house-in-80-hours/ar-AA1nzt4N


The University of Maine has smashed its own world record by creating the largest polymer 3D printer, paving the way for the future of sustainable manufacturing.

In 2019, they unleashed the first record-breaking 3D printer that constructed a 600-square-foot house made of recyclable materials.

Built to meet a demand for more affordable housing, the state of Maine needs another 80,000 homes over the next six years with a shortage of manpower to make it happen.

The bigger and better Factory of the Future 1.0 (FoF 1.0) 3D printer is here to help its predecessor reach this goal of providing more for less.

The FoF 1.0 3D printer will build affordable housing

The university, with a longstanding relationship with the US government, wanted to demonstrate that a 3D printer could print a home with a lower carbon footprint – as the construction industry produces about 37% of greenhouse gas emissions, according to the United Nations Environment Program.

The FoF 1.0 prints four times faster, which means that it can print a bio home in about 80 hours. A single-story bungalow, for example, could take a few months to build, but this printer can complete the project in less than four days.

The goal wasn’t to build a cheap house, but rather to build one that people wanted to live in, said Dr Habib Dagher, the Director of the Advanced Structures and Composites Center at the University of Maine.

Present for the official unveiling of the FoF 1.0 were representatives from the US Department of Defense, Energy, the Maine State Housing Authority, as well as other stakeholders who plan to put this Factory of the Future 1.0 3D printer to good use.

The FoF 1.0: The future of manufacturing and defense

The thermoplastic polymer printer can print objects as large as 96 feet long by 32 feet wide by 18 feet high — consuming 500 pounds of material per hour.

Its applications range from industries to national security — meaning, if they need to build ships fast, they have the technology to do so.

Though, typically, it takes years to build military ships, in WWII, the US manufactured the Liberty ships in 42 days. These large-scale 3D printers could feasibly meet that speed and maybe surpass it if needed.

The applications of the 3D printer, however, are far-reaching.

“UMaine and the Advanced Structures and Composites Center possess the innovation, capacity, and workforce to support the future needs of the Department of Defense in advanced manufacturing,” said US Sen. Susan Collins. “This is a great day for our University, our State, and our Nation.”

Because the FoF 1.0 is so much more than a printer. It can switch functionalities between “additive manufacturing, subtractive manufacturing, continuous tap layup, and robotic arm operations.”

It’s both a computer and a manufacturer that the Office of the Secretary of Defense and US Army Corps of Engineers helped to design and build.

The FoF 1.0 stands to revolutionize a variety of industries. That includes affordable housing, public works such as bridge construction, and ocean and wind energy. And it’s all recyclable.

“You can basically deconstruct it, grind it up if you wish, the 3D printed parts, and reprint with them, do it again,” Dr Dagher said.

FoF 1.0 sits at the center of a new research center in Maine

With two immensely powerful machines, the University of Maine can develop biobased, locally sourced feedstocks, print affordable homes, and meet national security demands quickly.

The University of Maine System Chancellor Dannel Malloy called it an intersection of engineering and computing that will “accelerate solutions that strengthen the state’s economy and communities.”

The FoF 1.0 3D printer is only the beginning. Set to open this summer, the Green-Engineering and Material Factory of the Future (GEM) will break new ground as a 47,000 square foot manufacturing innovation center.

Creating sustainable manufacturing practices and filling a much-needed gap in the workforce is its objective. They intend to nurture the next generation of leaders through a sustainable model.

“The Maine College of Engineering and Computing is proud to be a strong partner in developing the Factory of the Future 1.0,” said Giovanna Guidoboni, inaugural dean of MCEC.

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>>> SBA Communications Corporation (NASDAQ:SBAC) -- Average Analyst Price Target: $264.63

https://www.insidermonkey.com/blog/5-best-real-estate-and-realty-stocks-to-buy-according-to-analysts-1264847/4/

Upside Potential: 27.05%

Number of Hedge Fund Holders: 41

SBA Communications Corporation (NASDAQ:SBAC) is a telecom tower REIT based in Boca Raton, Florida. The company is an independent owner of wireless communications infrastructure such as towers, buildings, and rooftops.

In the fourth quarter, 41 hedge funds were long SBA Communications Corporation (NASDAQ:SBAC), with a total stake value of $1.5 billion.

An Outperform rating and a $265 price target were maintained on SBA Communications Corporation (NASDAQ:SBAC) on February 27 by BMO Capital.

Baron Funds mentioned SBA Communications Corporation (NASDAQ:SBAC) in its third-quarter 2023 investor letter:

“We reduced our stake in long-term holding SBA Communications Corporation (NASDAQ:SBAC), which owns and operates cellular towers, on concerns that higher interest rates will increase its debt servicing costs and indications that its primary customers will spend less on upgrading their cellular networks.”

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>>> VICI Properties Inc. (NYSE:VICI) -- Average Analyst Price Target: $34.59

https://www.insidermonkey.com/blog/5-best-real-estate-and-realty-stocks-to-buy-according-to-analysts-1264847/

Upside Potential: 16.94%

Number of Hedge Fund Holders: 44

VICI Properties Inc. (NYSE:VICI) is an experiential REIT based in New York. It owns one of the largest portfolios of market-leading gaming, hospitality, and entertainment destinations.

Mizuho maintains a Buy rating and a $33 price target on VICI Properties Inc. (NYSE:VICI) as of January 10.

There were 44 hedge funds long VICI Properties Inc. (NYSE:VICI) in the fourth quarter, with a total stake value of $960.1 million.

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>>> American Tower Corporation (NYSE:AMT) -- Average Analyst Price Target: $231.93

https://finance.yahoo.com/news/14-best-real-estate-realty-131053697.html

Upside Potential: 14.95%

Number of Hedge Fund Holders: 56

American Tower Corporation (NYSE:AMT) is another telecom tower REIT on our list of the best real estate stocks to buy. It is based in Boston, Massachusetts, and is an independent owner, operator, and developer of multitenant communications real estate.

An Overweight rating and a $230 price target were maintained on American Tower Corporation (NYSE:AMT) on February 28 by JPMorgan analysts.

We saw 56 hedge funds long American Tower Corporation (NYSE:AMT) in the fourth quarter, with a total stake value of $3.2 billion.

Baron Funds mentioned American Tower Corporation (NYSE:AMT) in its fourth-quarter 2023 investor letter:

“Early in 2023, we sold the majority of our position in American Tower Corporation (NYSE:AMT), a global operator of over 200,000 wireless towers, and even further reduced our modest position in the third quarter of 2023. We had concluded in late 2022 and early 2023 that growth expectations were too high given forthcoming headwinds from significantly higher financing costs (20%-plus exposure to floating rate debt), upcoming debt maturities, continued payment shortfalls from a key tenant in India, foreign exchange headwinds, and a reduction in mobile carrier capital expenditures.

Following a sharp decline in American Tower’s shares in the first nine months of 2023, we began rebuilding our position because we believed that the company’s shares had become more attractively valued, growth headwinds were better understood, and the potential monetization event of its India business would ultimately be value accretive to its business. Further, we believe that 2023 will mark the trough in earnings growth for American Tower and growth should reaccelerate in the next few years.”

Like KE Holdings Inc (NYSE:BEKE), Crown Castle International Corp. (NYSE:CCI), and Realty Income Corporation (NYSE:O), American Tower Corporation (NYSE:AMT) is among the best real estate stocks to buy now.

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>>> AvalonBay Communities, Inc. (NYSE:AVB) -- Average Analyst Price Target: $194.70

https://finance.yahoo.com/news/14-best-real-estate-realty-131053697.html

Upside Potential: 9.3%

Number of Hedge Fund Holders: 29

AvalonBay Communities, Inc. (NYSE:AVB) had 29 hedge funds long its stock in the fourth quarter, with a total stake value of $234.7 million.

Morgan Stanley upgraded AvalonBay Communities, Inc. (NYSE:AVB) from Equal Weight to Overweight on February 26, alongside placing a $191.5 piece target on the stock.

AvalonBay Communities, Inc. (NYSE:AVB) is a multi-family residential REIT based in Arlington, Virginia. The company owns or holds a direct or indirect ownership interest in 299 apartment communities containing 90,669 apartment homes in 12 states and the District of Columbia.

At the end of the fourth quarter, AEW Capital Management was the largest shareholder in AvalonBay Communities, Inc. (NYSE:AVB), holding 769,788 shares in the company.

Baron Funds mentioned AvalonBay Communities, Inc. (NYSE:AVB) in its third-quarter 2023 investor letter:

“In the third quarter, we maintained our exposure to apartment REIT AvalonBay Communities, Inc. (NYSE:AVB). We believe public valuations remain discounted relative to the private market. Tenant demand remains healthy and rent growth has modestly improved since the first quarter of 2023. Rental apartments continue to benefit from the current homeownership affordability challenges. Multi-family REITs provide partial inflation protection to offset rising costs due to leases that can be reset at higher rents, in some cases, annually. We continue to closely monitor new supply deliveries and job losses in key geographic markets.”

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>>> Prologis, Inc. (NYSE:PLD) -- Average Analyst Price Target: $144.94

https://finance.yahoo.com/news/14-best-real-estate-realty-131053697.html

Upside Potential: 7.68%

Number of Hedge Fund Holders: 46

Prologis, Inc. (NYSE:PLD) is an industrial REIT based in San Francisco, California. The company is a global leader in logistics real estate with a focus on high-barrier, high-growth markets.

In total, 46 hedge funds were long Prologis, Inc. (NYSE:PLD) in the fourth quarter, with a total stake value of $678.3 million.

As of February 16, RBC Capital maintains an Outperform rating and a $145 price target on Prologis, Inc. (NYSE:PLD).

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>>> Invitation Homes Inc. (NYSE:INVH) -- Average Analyst Price Target: $37.14

https://finance.yahoo.com/news/14-best-real-estate-realty-131053697.html

Upside Potential: 7.53%

Number of Hedge Fund Holders: 25

D1 Capital Partners was the most prominent shareholder in Invitation Homes Inc. (NYSE:INVH) at the end of the fourth quarter, holding 7.5 million shares in the company.

Invitation Homes Inc. (NYSE:INVH) is a single-family residential REIT based in Dallas, Texas. The company leases single-family homes to meet changing lifestyle demands and provide access to high-quality, updated homes in close proximity to good schools and workplaces.

RBC Capital reiterated an Outperform rating and a $36 price target on February 15 on Invitation Homes Inc. (NYSE:INVH).

Our hedge fund data for the fourth quarter shows 25 hedge funds long Invitation Homes Inc. (NYSE:INVH), with a total stake value of $497.8 million.

Here's what Baron Funds said about Invitation Homes Inc. (NYSE:INVH) in its third-quarter 2023 investor letter:

“Following strong second quarter results, we modestly increased our investments in single-family rental REITs Invitation Homes, Inc. (NYSE:INVH). Demand conditions for rental homes are attractive due to the sharp decline in home affordability; the propensity to rent in order to avoid mortgage down payments, avoid higher monthly mortgage costs, and maintain flexibility; and the stronger demand for home rentals in suburbs rather than apartment rentals in cities. Rising construction costs are limiting the supply of single-family rental homes in the U.S. housing market. This limited inventory combined with strong demand is leading to robust rent growth.

Invitation Homes have an opportunity to partially offset the impact of inflation given that their in-place annual leases are significantly below market rents. Valuations are compelling at mid-5% capitalization rates, and we believe the shares are currently valued at a discount to our assessment of net asset value. We remain mindful that expense headwinds and slower top-line growth could weigh on growth later in 2023 and 2024. We will continue to closely monitor business developments and will adjust our exposures accordingly.”

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>>> Crown Castle International Corp. (NYSE:CCI) -- Average Analyst Price Target: $118.54

https://finance.yahoo.com/news/14-best-real-estate-realty-131053697.html

Upside Potential: 6.74%

Number of Hedge Fund Holders: 45

This January, Ari Klein at BMO Capital placed a Market Perform rating and a $110 price target on Crown Castle International Corp. (NYSE:CCI).

Crown Castle International Corp. (NYSE:CCI) is a telecom tower REIT based in Houston, Texas. The company owns, operates, and leases over 40,000 cell towers and about 90,000 route miles of fiber supporting small cells and fiber solutions across US markets and is among the best real estate stocks to buy.

We saw 45 hedge funds long Crown Castle International Corp. (NYSE:CCI) in the fourth quarter, with a total stake value of $1.6 billion.

Fisher Asset Management was the largest shareholder in Crown Castle International Corp. (NYSE:CCI) at the end of the fourth quarter, holding 4.6 million shares in the company.

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>>> Extra Space Storage, Inc. (NYSE:EXR) -- Average Analyst Price Target: $149.78

https://finance.yahoo.com/news/14-best-real-estate-realty-131053697.html

Upside Potential: 4.48%

Number of Hedge Fund Holders: 26

Extra Space Storage, Inc. (NYSE:EXR) is a self-storage real estate investment trust (REIT) company based in Salt Lake City, Utah. The company owns and operates 3,651 self-storage stores in 42 states and Washington, D.C.

As of this January, Goldman Sachs analyst Caitlin Burrows maintains a Buy rating and a $187 price target on Extra Space Storage, Inc. (NYSE:EXR).

There were 26 hedge funds long Extra Space Storage, Inc. (NYSE:EXR) in the fourth quarter, with a total stake value of $330.8 million.

Diamond Hill Capital mentioned Extra Space Storage, Inc. (NYSE:EXR) in its third-quarter 2023 investor letter:

“Following a dip in share price after Q2 earnings and rising interest rates, we had an opportunity to make an initial investment in Extra Space Storage Inc. (NYSE:EXR). Despite facing near-term challenges like normalizing street rents and occupancy rates after two years of robust demand, as well as the recent merger with Life Storage, we believe EXR is well positioned for long-term growth of its intrinsic value. It boasts an impressive franchise and perhaps the industry’s best operating platform. The Life Storage acquisition broadens its real estate portfolio and presents more opportunities for growth. While the company faces some near-term headwinds, the recent sell-off created an opportunity for us to acquire shares in this high-quality franchise at a very reasonable price.”

Like KE Holdings Inc (NYSE:BEKE), Crown Castle International Corp. (NYSE:CCI), and Realty Income Corporation (NYSE:O), Extra Space Storage, Inc. (NYSE:EXR) is among the best real estate and realty stocks to buy now.

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>>> 14 Best Real Estate and Realty Stocks To Buy According to Analysts


Insider Monkey

by Fatima Farooq

Mar 4, 2024


https://finance.yahoo.com/news/14-best-real-estate-realty-131053697.html


In this article, we will be taking a look at the 14 best real estate and realty stocks to buy according to analysts. To skip our detailed analysis of the real estate sector, you can go directly to see the 5 Best Real Estate and Realty Stocks To Buy According to Analysts.

Housing Versus Retail: Where to Invest in Real Estate?

The real estate sector has been battling with elevated mortgage rates this year, resulting in the US housing market suffering from a lack of demand among the population. However, some may expect the struggles of the real estate sector to abate as the year progresses, especially as many financial professionals begin to analyze the state of US real estate markets. Several spaces within the real estate sector are under-invested in, leaving the arena free and open for investors looking to make a real estate play.

On February 29, Carly Trip, the Head of Investments at Nuveen Real Estate, joined CNBC's "Closing Bell Overtime" to discuss the state of the US real estate markets. Here's what she had to say:

"On the residential market, it's kind of like no new news, however what's interesting is that the consumer is really starting to explain their tolerance for mortgage rates. In December we saw really strong numbers, mortgage rates had come in about 50 basis points, bouncing around six and a half. As they have suddenly come up since then and hover above 7%, consumers do not like that. And so we're seeing the results of that in pending home sales. So we expect that that is not gonna improve, inventory will remain low until rates come around 6%, in which case your cost to own versus cost to rent margin really starts to shrink."

Despite the above observations, Tripp noted that other areas in the real estate markets are doing better. Here's what she said:

"Retail's doing amazingly well. So retail has been the underdog of the last decade. And what we're seeing in our centres is increased activity, a lot of demand, increased sales. The consumer is obviously very resilient and strong. That is accomodating to retail spending, 80% of retail sales do involve a physical store which is a positive for our centres. And not only that, there's no new supply added to retail. Over the last five years, about a 130 million square feet of retail has been converted to other uses, so it's really been under-invested in. So the outlook for retail is very, very strong."

Industrial Real Estate Performs Well

Similarly, for the industrial real estate side, Tripp had positive insights to share. Here are some of the comments she made:

"Industrial's been incredible. It has performed exactly as real estate should perform. Income has outpaced inflation, right, real estate is expected to be an inflation hedge, that's why it's such a great diversifier to a portfolio. And so we continue to see incredibly strong demand for industrial. Supply has slowed, that was the concern pre-pandemic. However, due to lack of construction spending, lack of financing just generally speaking, bottlenecks in the construction system, we expect that demand is just gonna continue to flow. E-commerce spending is not going anywhere.

Considering these highlights, while the residential side of real estate seems to be still struggling in 2024, that does not mean all real estate should be avoided this year. Several other areas within the sector remain ripe for investment. As such, we have compiled a list of some of the best real estate stocks to invest in, including names such as KE Holdings Inc (NYSE:BEKE), Crown Castle International Corp. (NYSE:CCI), and Realty Income Corporation (NYSE:O). These include some of the best real estate stocks with dividends and some of the best real estate stocks to buy for the long term.

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>>> Blackstone to take Apartment Income REIT private in $10 billion deal


Reuters

Apr 8, 2024


https://finance.yahoo.com/news/blackstone-apartment-income-reit-private-122428050.html


(Reuters) -Asset manager Blackstone said on Monday it would take private rental housing firm Apartment Income REIT, known as AIR Communities, for $10 billion in cash, including debt, in what analysts see as a bet on easing pressure within the commercial real estate market.

Under the deal, Blackstone will pay $39.12 for each share of the real estate investment trust, representing a premium of about 25% to its closing price on Friday. Shares of the REIT jumped about 23%.

Elevated interest rates have put pressure on landlords with loans on rental housing and other commercial real estate properties. Monday's deal was seen by some analysts as a vote of confidence that this pressure has begun easing.

"With this transaction, we believe Blackstone is messaging they view interest rates as stabilizing and access to capital as improved, acting as a positive read-through for the sub-sector," Jefferies analysts wrote.

A top real estate investor, Blackstone has been sharpening its focus on rental housing, betting on its revival as the supply of apartments in the U.S. is expected to decline due to a slowdown in construction.

This was likely to lift rental growth, which has over the past few months remained flat or declined modestly due to fresh supply in many U.S. markets.

AIR Communities, which has a relatively diversified portfolio with apartments in both Eastern and Western coastal markets, has been largely insulated from such pressures.

"(It) represents the highest quality, large scale apartment portfolio we have ever acquired, and is located in markets where multifamily fundamentals are strong," said Nadeem Meghji, global co-head of Blackstone Real Estate.

The rental housing provider reported a 6.2% rise in same-store rental revenue in the fourth quarter, higher than the 2%-4% growth by other publicly listed REITs such as Mid-America Apartments and Equity Residential.

Blackstone plans to invest another $400 million to improve the firm's 76 rental housing communities. Its flagship Blackstone Real Estate Income Trust, which stabilized after some turbulence in late 2022, has outperformed non-listed peers by 600 basis points in 2023.

The company, whose real estate portfolio is valued at $586 billion, had in January agreed to take private Canadian single-family rental housing firm Tricon Residential.

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>>> 3 Types of REITs That Have Outperformed the S&P 500


by Matt DiLallo

Motley Fool

March 30, 2024


https://finance.yahoo.com/news/3-types-reits-outperformed-p-091300103.html


Congress created real estate investment trusts (REITs) in 1960 to level the playing field. REITs empower anyone to invest in wealth-creating, income-producing real estate.

They've certainly done that over the years. Over the long term, our research found that REITs have outperformed stocks. Since 1994, three REIT subgroups stood out for their ability to beat the S&P 500. Here's a closer look at these market-beating REIT types.

Storing up wealth

According to data from Nareit, self-storage REITs have delivered a 17.3% average annual total return since 1994. That has obliterated the S&P 500's 10.1% average annual total return during that period.

Self-storage REITs have routinely delivered strong returns compared to other REITs:

As that slide highlights, the group has delivered the No. 1 cumulative-sector return since 1999. The space has delivered strong returns over the past decade:

Extra Space Storage (NYSE: EXR) has led the way. As of the final day of 2023, it was the second-best performing REIT over the past decade, with a 443% total return.

A few factors have driven the sector's strong returns. Self-storage properties are very profitable, requiring an occupancy level of 40% to 45% to break even (compared to 60% for most multifamily properties). Meanwhile, demand is steadily rising and relatively economically resilient. On top of that, self-storage leases are short term, which enables operators to increase rents to market rates reasonably quickly. These catalysts have enabled the top-three remaining publicly traded self-storage REITs to grow their core funds from operations (FFO) per share by more than 200% apiece since 2011, with Extra Space growing by nearly 690%. That has enabled all three to deliver robust dividend growth. The rapidly rising dividend income and earnings have enabled these REITs to handily beat the S&P 500.

Dual catalysts

Industrial REITs have delivered the second-best performance in the sector since 1994, with an average annual total return of 14.4%. They have also delivered strong performance over the past decade, with Rexford Industrial and Prologis (NYSE: PLD) delivering two of the five highest returns among REITs at 440.8% and 379%, respectively, as of the end of last year.

Two factors have helped drive the performance of industrial REITs: The accelerating adoption of e-commerce and changing supply chain practices. They've enabled industrial REITs focused on logistics properties to deliver strong core FFO and dividend growth. Over the last five years, logistics REITs have grown their core FFO per share by 9% annually (with 12% from industry-leader Prologis) while delivering 10% compound annual dividend growth (and 12% from Prologis).

The sector expects to continue growing rapidly. Rents on existing warehouse properties are skyrocketing due to high demand and low vacancy levels. That's enabling REITs to develop additional properties. These catalysts drive Prologis' view that it can grow its core FFO per share by 9% to 11% annually through 2026. That should also enable the company to continue increasing its dividend at a strong rate. Those two drivers could enable the leading industrial REIT to maintain its market-beating performance.

Capitalizing on the housing shortage

Residential REITs have delivered the third-highest performance among REIT subgroups since 1994 at 12.7% annually. A few factors have helped drive the sector's strong performance. They include relatively economically resilient demand for rental homes (people need a place to live), enabling landlords to steadily increase rents. Housing market imbalances, especially since the Financial Crisis, have also helped drive demand for rental housing.

As an investment, manufactured home communities have stood out. Equity LifeStyle (NYSE: ELS) was the fourth-best performing REIT over the past decade, delivering a nearly 400% total return as of the end of last year. A big driver is the economic resiliency of manufactured-home communities. These landlords can continue raising rents during a recession because the costs of moving a manufactured home to another community are often too prohibitive.

That driver has enabled Equity LifeStyle to grow its same-store net-operating income at a 4.3% annual rate since 1998, faster than the REIT sector average and apartments (both at 3.3%). Add in an ever-expanding portfolio (which also includes RV parks and marinas), and the company has grown its normalized FFO per share at an 8.6% compound annual rate since 2006. That has allowed it to deliver 21% compound annual dividend growth during that period.

REITs can make great investments

REITs have outperformed the S&P 500 over the long term. A big driver has been the robust returns from self-storage, industrial, and residential REITs. The factors that have enabled those REIT subgroups to deliver strong returns remain in place. That's why investors should consider adding one or more of those REIT classes to their portfolio.

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>>> Innovative Industrial Properties (IIPR)

https://finance.yahoo.com/news/7-superstar-stocks-supercharge-dividend-203000230.html

In 2023, Innovative Industrial Properties (NYSE:IIPR) paid a $7.22 dividend per share, following constant increases for six years, and the company’s forward dividend yield stands at 7.5%. The Board’s planned dividend payout range of 75% to 85% of adjusted funds from operations (AFFO) was met by the company’s most recent quarterly dividend of $1.82 per share in Q4 2023.

Furthermore, a dividend payout ratio within the intended range suggests sustained growth potential and careful money management. Innovative Industrial Properties has a flexible and cautious balance sheet with a debt-to-total gross assets ratio of 12% and no variable-rate debt. The company’s overall liquidity at the end of Q4 2023 was over $175 million. This includes cash and short-term investments as well as availability under its revolving credit facility.

Moreover, Innovative Industrial Properties pledged up to $119.5 million in 2023 for upgrades to infrastructure, new leases, lease revisions, and property purchases. Overall, the company has a proactive attitude towards growing its property portfolio. Therefore, this facilitates the expansion of its tenant partners, as evidenced by its substantial capital commitments and investment activities.

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>>> Innovative Industrial Properties, Inc. (IIPR) is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialized properties leased to experienced, state-licensed operators for their regulated cannabis facilities. Innovative Industrial Properties, Inc. has elected to be taxed as a real estate investment trust, commencing with the year ended December 31, 2017. <<<



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>>> Realty Income's Third-Largest Customer Is Closing 1,000 Locations. Should Investors Be Worried?


by Adam Spatacco

Motley Fool

March 19, 2024


https://finance.yahoo.com/news/realty-incomes-third-largest-customer-104500172.html


One of the most lucrative sources of dividend income is real estate investment trusts (REIT). Realty Income (NYSE: O) is a retail REIT that leases space to brick-and-mortar stores.

The company has a generous history of raising its dividend -- certainly a nice characteristic for anyone looking for passive income. However, one of Realty Income's largest customers appears to be in some trouble.

Dollar Tree is Realty Income's third-largest tenant, and the cost-conscious retailer announced last week that it plans to close 1,000 locations. Not only could this spell trouble for Realty Income, but should investors be worried about the sustainability of its dividend?

Let's dig into the full details and assess what's going on.

What's happening at Dollar Tree?

Dollar Tree is a discount retailer known for selling basic items from home goods, school supplies, candy, and more. In addition to its namesake locations, the company also operates a fleet of stores under the Family Dollar moniker.

During its fourth-quarter earnings, management announced that 1,000 stores will be closing. On the surface, this looks like pretty bad news for Realty Income. But as the old adage goes, there are three sides to every story. Before hitting the panic button, let's dig into how this scenario really impacts Realty Income.

How does this impact Realty Income?

As of Dec. 31, Family Dollar and Dollar Tree represented 3.3% of Realty Income's total annualized-contractual rent.

Per Realty Income's investor presentation, the company leases 1,229 locations to Family Dollar and Dollar Tree. While this might seem like a lot, it actually represents less than 10% of the dollar store's total store count. That's right -- Dollar Tree and Family Dollar have more than 16,000 locations combined.

This dynamic should ease some investor panic as it's clear that Realty Income is just a small fraction of Dollar Tree's overall retail footprint.

Should investors be worried?

In addition to the details explored above, there is one more important nuance as it relates to the store closures. Dollar Tree will be conducting these closures over a multiyear period and will wait for the lease terms to expire for all the identified locations.

This means that even if some of Realty Income's locations are at risk of closure, Dollar Tree will at least continue to pay rent until the lease is up. Not only does this provide Realty Income with some level of predictable income, but it also provides the company time to seek new tenants.

Moreover, Realty Income's recent acquisition of Spirit Realty now looks even savvier in retrospect. The deal broadens Realty Income's reach by opening it up to additional end-markets. The new revenue streams from the acquired properties can help mitigate any losses Realty Income potentially experiences as a result of the Dollar Tree closures.

The last important detail to point out is that Realty Income announced yet another monthly-dividend increase. On the same day the Dollar Tree news broke, Realty Income declared its 645th consecutive monthly-dividend raise since the company's inception.

I would not worry if I was a Realty Income investor. Candidly, store closures are an inherent risk of any retail-related investment. With a long-term occupancy rate of 98.2%, Realty Income has proven that it can keep its properties filled.

I see the Dollar Tree news as more of an attention-grabbing headline than an inherent risk to Realty Income's future. With such a long history of dividend raises, I think now is as good a time as ever to scoop up shares in Realty Income for passive income investors.

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>>> The 6% commission on buying or selling a home is gone after Realtors association agrees to seismic settlement


by David Goldman and Anna Bahney

CNN

March 15, 2024


https://finance.yahoo.com/news/realtor-settlement-commission-fixing-could-141747151.html


The 6% commission, a standard in home purchase transactions, is no more.

In a sweeping move expected to dramatically reduce the cost of buying and selling a home, the National Association of Realtors announced Friday a settlement with groups of homesellers, agreeing to end landmark antitrust lawsuits by paying $418 million in damages and eliminating rules on commissions.

The NAR, which represents more than 1 million Realtors, also agreed to put in place a set of new rules. One prohibits agents’ compensation from being included on listings placed on local centralized listing portals known as multiple listing services, which critics say led brokers to push more expensive properties on customers. Another ends requirements that brokers subscribe to multiple listing services — many of which are owned by NAR subsidiaries — where homes are given a wide viewing in a local market. Another new rule will require buyers’ brokers to enter into written agreements with their buyers.

The agreement effectively will destroy the current homebuying and selling business model, in which sellers pay both their broker and a buyer’s broker, which critics say have driven housing prices artificially higher.

By some estimates, real estate commissions are expected to fall 25% to 50%, according to TD Cowen Insights. This will open up opportunities for alternative models of selling real estate that already exist but don’t have much market share, including flat-fee and discount brokerages.

Homebuilder stocks rose Friday midday on the news: Lennar shares gained 2.6%, PulteGroup shares added 1.1% and Toll Brothers shares added 1%.

For the average-priced American home for sale — $417,000 — sellers are paying more than $25,000 in brokerage fees. Those costs are passed on to the buyer, boosting the price of homes in America. That fee could fall by between $6,000 and $12,000, according to TD Cowen Insights’ analysis.

“While the settlement comes at a significant cost, we believe the benefits it will provide to our industry are worth that cost,” said Kevin Sears, president of the NAR, in a statement.

In November, a federal jury in Missouri found the NAR and two brokerages liable for $1.8 billion in damages for conspiring to keep agent commissions artificially high. Because it was an antitrust case, the NAR was potentially on the hook for triple those damages — $5.4 billion.

The NAR had pledged to appeal the case, but other brokerages settled — and, eventually, so did the NAR, on Friday.

“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” said Nykia Wright, interim CEO of NAR, in a statement. “It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals.”

The NAR had required homesellers to include the compensation for agents when placing a listing on a multiple listing service. Although NAR has long said commissions are negotiable and that the structure helped making housing more affordable for buyers, critics have long argued that the fees were expected and homesellers felt they would lose buyers if they didn’t offer them.

Settlement could lead to lower homebuying costs

Homesellers who brought lawsuits against the NAR have argued that in a competitive market, the cost of the buyer’s agent’s commission should be paid by the buyer who received the service, not by the seller. The sellers who brought the lawsuit against the NAR and the brokerages said that buyers should be able to negotiate the fee with their agent, and that the sellers should not be on the hook for paying it.

This settlement, which is subject to a judge’s approval, opens the door to a more competitive housing market. Realtors could now compete on commissions, allowing for prospective buyers to shop around on rates before they commit to buying a home. Brokers could begin to advertise their fees, allowing customers to choose lower-cost agents. The NAR, in its announcement, did not set a suggested fee.

This marks the biggest change to the housing market in a century, said Norm Miller, professor emeritus of real estate at the University of San Diego.

“I’ve been waiting 50 years for this,” Miller said.

Although it’s unclear what the future of the housing market will look like, Miller said he expected homebuying to pick up somewhat as costs fall dramatically for homebuyers.

“There are all kinds of models we might see in the future, and no one knows what they are,” he said, suggesting some brokers may charge, say, a $3,000 fee for selling a home, while others will offer a competitive commission.

The agreement will bring sweeping reforms for millions of Americans, said Benjamin D. Brown, managing partner of Cohen Milstein Sellers & Toll and co-chair of its antitrust practice, who helped craft the settlement.

“For years, anticompetitive rules in the real estate industry have financially harmed millions of Americans,” said Brown.

Individual sellers often feel powerless to negotiate a better deal for themselves, given the risk that offering lower commissions could cause brokers to steer buyers to other properties, said Robert Braun, a partner in Cohen Milstein’s antitrust practice.

“For far too long, home sellers have faced a system recognized by many as blatantly unfair. This class action and settlement provides justice for our clients and will require important changes that help future home sellers,” said Braun.

Although most realtors are included in the settlement, agents affiliated with the brokerage HomeServices of America continue to fight the case in court, the NAR said.

The NAR said it had encouraged HomeServices of America to join the settlement, but said it was pleased to have more than 1 million of its members on board with the agreement.

“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Wright in a statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”

Miller said the settlement could lead to a mass exodus of brokers from the industry — potentially half of the 2 million or so agents in America. But he said most brokers are making a living from the commissions — even if they sell just one home a year.

Lower fees mean mediocre agents are likely to leave the field, but top brokers will get more business. “The good ones will absolutely do better,” he said.

America’s fees are significantly higher than in foreign countries, Miller noted. In Israel, Singapore and the UK, brokers charge between 1% to 2% for the same thing that agents do in the United States.

Years of trouble for NAR

The NAR has been fighting off US antitrust officials and litigation for years regarding alleged anti-competitive practices. But November’s verdict marked the association’s biggest setback yet — and ultimately led to the downfall of the rules that have long protected its compensation model.

The association also faces scrutiny from the US Department of Justice, and it’s unclear whether this settlement with sellers will impact the government’s scrutiny of the brokerage industry.

The trade group has also undergone severe leadership turmoil over the past year.

In January, the former president of the NAR, Tracy Kasper, stepped down, after she said she received a threat to disclose a past personal, non-financial matter unless she compromised her position at NAR. Sears replaced Kasper earlier this year.

Kasper had just taken over the role in August 2023, after Kenny Parcell, the former president, resigned amid sexual harassment allegations that were first published by the New York Times. NAR employees reportedly said Parcell improperly touched them and sent lewd photos and texts. In the Times article, Parcell denied the accusations.

In November 2023, the chief executive of NAR, Bob Goldberg, also stepped down, and was replaced by Wright. Goldberg stepped down two days after the $1.8 billion judgment against the NAR.

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>>> Terreno Realty Corporation Announces Development Starts in Hialeah, FL


BusinessWire

February 26, 2024


https://finance.yahoo.com/news/terreno-realty-corporation-announces-development-141500772.html


BELLEVUE, Wash., February 26, 2024--(BUSINESS WIRE)--Terreno Realty Corporation (NYSE:TRNO), an acquirer, owner and operator of industrial real estate in six major coastal U.S. markets, announced today that it has commenced construction of Countyline Corporate Park Phase IV Buildings 32 and 33 in Hialeah, Florida. Building 32 of Terreno Realty Corporation’s Countyline Corporate Park is a 164,000 square foot 36-foot clear height rear-load industrial distribution building on 8.3 acres with 53 dock-high and two grade-level loading positions and parking for 148 cars. Building 33 of Terreno Realty Corporation’s Countyline Corporate Park is a 158,000 square foot 36-foot clear height rear-load industrial distribution building on 9.0 acres with 53 dock-high and two grade-level loading positions and parking for 136 cars. The buildings are expected to be completed in 2025 and achieve LEED certification, the total expected investment is $79.1 million and the estimated stabilized cap rate is 6.0%.

Countyline Corporate Park Phase IV consists of a 121-acre project entitled for 2.2 million square feet of industrial distribution buildings in Miami’s Countyline Corporate Park ("Countyline"), immediately adjacent to Terreno Realty Corporation’s seven fully-leased buildings within Countyline (Countyline Corporate Park Phase III). Countyline is a landfill redevelopment adjacent to Florida’s Turnpike and the southern terminus of I-75 located at the intersection of NW 170th Street and NW 107th Avenue. At expected completion in 2027, Countyline Corporate Park Phase IV is expected to contain ten LEED-certified industrial distribution buildings totaling approximately 2.2 million square feet providing 660 dock-high and 22 grade-level loading positions and parking for 1,875 cars for a total expected investment of approximately $511.5 million.

Taken together, Terreno Realty Corporation’s Countyline Corporate Park Phase III and IV will contain 17 industrial distribution buildings and 3.5 million square feet.

Estimated stabilized cap rates are calculated as annualized cash basis net operating income stabilized to market occupancy (generally 95%) divided by total acquisition cost. Total acquisition cost includes the initial purchase price, the effects of marking assumed debt to market, buyer’s due diligence and closing costs, estimated near-term capital expenditures and leasing costs necessary to achieve stabilization.

Terreno Realty Corporation acquires, owns and operates industrial real estate in six major coastal U.S. markets: Los Angeles; Northern New Jersey/New York City; San Francisco Bay Area; Seattle; Miami; and Washington, D.C.

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>>> Is Prologis Stock a Buy?


by Reuben Brewer

Motley Fool

March 2, 2024


https://finance.yahoo.com/news/prologis-stock-buy-141800671.html


Prologis (NYSE: PLD) has a market cap of $120 billion, making it one of the largest publicly traded real estate investment trusts (REITs) you can buy. There's a good reason it's so large, but size alone is no reason to buy the stock of a company. In fact, Prologis, despite being a well-run company, may be a less than desirable choice for some investors. Here's what you need to know.

Prologis' business is big, diversified, and attractive

Prologis owns warehouses, which is not unique at all in the REIT sector. What sets it apart from its peers is the size and diversification of its portfolio. Prologis owns 1.2 billion square feet of leasable space spread over 5,500 properties across four continents and 20 countries. No other warehouse REIT comes close to those statistics.

Notably, the properties Prologis owns are mostly located in key global distribution hubs. So not only is its portfolio big, but its properties are located where its over 6,700 customers want to operate. Given its scale, meanwhile, Prologis can actually offer something of a one-stop shop for customers with global operations.

On top of that, the company has been benefiting from leases ending and being resigned at materially higher rates. So there's built-in growth within the active properties it owns. Prologis, however, also owns over 12,000 acres of developable land around the world. That's another $40 billion growth opportunity, by management's estimate.

Now add in a decade of dividend growth at a compound annual rate of around 11%. That's an attractive track record for any company, but particularly impressive for a REIT. The most recent annual increase was 10%, so the company is still going strong on this measure. Given the business backdrop, meanwhile, there's good reason to think the dividend growth story will continue. If you are a dividend growth investor, Prologis could be a very attractive choice.

Prologis' yield is both good and bad

Prologis is currently offering investors a 2.8% dividend yield. If you're looking to live off of the income your portfolio generates, that probably won't be the least bit exciting to you. The average REIT, using Vanguard Real Estate ETF (NYSEMKT: VNQ) as a proxy, is offering a yield of over 4.1%. This is a dividend growth stock, not a high-yield stock.

That said, the dividend yield is around the middle of the road if you look at the REIT's yield range over the past decade. So while it would be hard to suggest the stock is cheap right now, it also doesn't look expensive, using yield as a rough proxy for valuation. If you're a growth-and-income or dividend growth-focused investor, a fair price for a well-positioned industry giant like Prologis is a pretty attractive proposition.

But the stock isn't trading at depressed levels, so value investors will probably also want to take a pass here. A yield above 3% would be a far more compelling entry point if you're value conscious. However, even that might not be enough to entice a yield-focused investor.

A fair price for a great company

Prologis is not a value stock, and it's not a high yield stock. It will probably never be either of those things, given its strong industry position. But it is a solid option for dividend growth and growth-and-income investors. While it looks fully priced today, it's not a bad thing to pay a fair price for a well-run company if you have a long investment horizon.

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>>> The Best Performing Self-Storage REITs Over The Past Year


Benzinga

by Ethan Roberts

Jan 25, 2024


https://finance.yahoo.com/news/best-performing-self-storage-reits-215814670.html


Of all the real estate investment trust (REIT) subsectors, self-storage is one of the most difficult to classify. According to the National Association of Real Estate Investment Trusts (Nareit), "Self-storage REITs own and manage storage facilities and collect rent from customers. Self-storage REITs rent space to both individuals and businesses."

Self-storage REITs often get classified as specialized REITs, but the specialized category also includes REITs that own timber, farmland, data centers and other types of properties, so it can be confusing. The basic self-storage REITs include:

CubeSmart (NYSE:CUBE), Public Storage (NYSE:PSA), Extra Space Storage Inc. (NYSE:EXR), National Storage Affiliates Trust (NYSE:NSA), U-Haul Holding Co. (NYSE:UHAL), Iron Mountain Inc. (NYSE:IRM) and AmeriCold RealtyTrust Inc. (NYSE:COLD).

But these REITs do not perform equally. Take a look at which storage companies have performed best over the past 52 weeks:


Iron Mountain Inc. is a Portsmouth, New Hampshire-based specialty REIT with a focus on information management and storage, data center infrastructure and asset lifecycle management. Iron Mountain was founded in 1951, became a REIT in 2014 and has more than 225,000 customers worldwide. In recent years, it has shifted most of its focus from paper to data storage.

In June 2023, Iron Mountain raised its quarterly dividend from $0.62 to $0.65. The forward annual dividend of $2.60 presently yields 3.84%.

In November, Iron Mountain acquired Regency Technologies, a provider of IT asset disposition (ITAD) services in the U.S. for $200 million.

Over the past 52 weeks, Iron Mountain has had a total return of 33.32%, far surpassing all the other storage REITs.


CubeSmart is a Malvern, Pennsylvania-based, internally managed self-storage REIT with 1,374 storage facilities across the U.S. It had its initial public offering (IPO) in 2004 under the name, U-Store-It. In 2011, it was rebranded as CubeSmart. Between 2012 and 2022, CubeSmart grew its funds from operations (FFO) per share by 242%. Its same-store occupancy rate was recently 92.1%.

On Dec. 7, CubeSmart announced an increase in its quarterly dividend from $0.49 to $0.51 per share. The dividend has increased by 55% over the past five years. The $2.04 annual dividend presently yields 4.46%.

On Jan. 2, Jefferies analyst Jonathan Petersen upgraded CubeSmart from Hold to Buy and raised the price target from $38 to $53.

Over the past 52 weeks, CubeSmart has had a total return of 10.11%, making it the second-best-performing self-storage REIT.


Public Storage is a Glendale, California-based, self-managed self-storage REIT that is one of the largest brands of self-storage services in the United States. Its portfolio includes 3,028 self-storage facilities with 217 million rentable square feet across 40 states. It has the largest market cap rate of all self-storage facilities with $51.63 billion.

In addition to providing storage units, it also sells packing and moving supplies and provides insurance services. Public Storage was founded in 1972 and became a publicly traded REIT in 1995 when it merged with Storage Equities. It was added to the S&P 500 in 2005. As of the end of the third quarter, its occupancy rate was 92.1%, but occupancy declined 1.2% from the third quarter of 2022.

Public Storage pays a $3 quarterly dividend. Its $12 annual dividend presently yields 4.09%.

Both Goldman Sachs and Truist Securities recently maintained Buy ratings on Public Storage. On Jan. 11, Goldman Sachs analyst Andrew Rosivach raised the price target from $307 to $340, and on Dec. 28, Truist Securities analyst Ki Bin Kim raised the price target from $285 to $315.

Over the past 52 weeks, Public Storage has had a total return of 5.09%, the third largest return among self-storage REITs.


Extra Space Storage Inc. is a Salt Lake City-based self-storage REIT with over 3,500 self-storage properties, comprising 2.5 million units totaling 280 million square feet across 43 states and Washington, D.C. It has a market cap of $32.72 billion.

In July 2023, Extra Space Storage and Life Storage Inc. completed a merger in an all-stock transaction that added 1,200 properties to Extra Space's total portfolio, making it the largest self-storage company in the United States.

On Jan. 11, Goldman Sachs analyst Caitlin Burrows maintained a Buy rating on Extra Space Storage and raised the price target from $149 to $168.

Extra Space Storage pays a quarterly dividend of $1.62. The annual dividend of $6.48 presently yields 4.36%.

Despite being the largest self-storage REIT, over the past 52 weeks Extra Space Storage only returned 2.57%, the fourth-best total among the self-storage REITs.

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Iron Mountain - >>> AI Revolution's Hidden Gem: This REIT Hack Profits from SMCI, AMD, and NVDA


Benzinga

by Shay Boloor

Feb 8, 2024


https://finance.yahoo.com/news/ai-revolutions-hidden-gem-reit-164844302.html


Iron Mountain Incorporated (NYSE:IRM), boasting a dividend yield of 3.8%, emerges as a pivotal investment opportunity within the real estate sector, uniquely positioned to capitalize on the exponential growth of data driven by advancements in artificial intelligence (AI). The company’s role in supporting the tech industry’s infrastructure needs, amid the rapid advancements by companies like Super Micro Computer (NASDAQ:SMCI), Advanced Micro Devices (NASDAQ:AMD), and NVIDIA (NASDAQ:NVDA), underscores its potential for growth and dividend sustainability. As AI technologies evolve and become more integrated into business operations, the demand for data storage, security, and management escalates, placing Iron Mountain at the forefront of this growing market.

The explosion of data generated by AI applications, from machine learning datasets to complex algorithms, necessitates robust data management and storage solutions. Iron Mountain, which specializes in information storage and management services, is strategically aligned with this demand. The company’s extensive portfolio of data centers and secure storage facilities is essential for businesses navigating the data-intensive landscape of AI, making Iron Mountain an integral player in the digital transformation era.

Investing in Iron Mountain offers investors a direct conduit to benefit from the AI-driven data boom. The company’s services are crucial for a wide array of industries leveraging AI, from tech giants to healthcare and financial services, all of which require secure and efficient data management solutions to harness the full potential of AI technologies. This widespread need for Iron Mountain’s services underscores its growth potential and investment appeal in an AI-driven future. Reflecting its strategic market position and confidence in its operational strategy, Iron Mountain announced a quarterly dividend of $0.65 per share in the fourth quarter of 2023, leading to an annual payout rate of $1.89.

The trade-off between growth and income that investors often face is elegantly balanced by Iron Mountain. As a REIT, it provides a steady income through dividends, fulfilling the income aspect. Simultaneously, its pivotal role in the data management sector, fueled by the AI revolution, positions Iron Mountain for significant growth, addressing the growth component investors seek.

Investing in Iron Mountain transcends traditional real estate investment, offering a strategic stake in the infrastructure underpinning the AI revolution. As the reliance on AI continues to escalate, driving unprecedented data growth, Iron Mountain’s services become increasingly indispensable, potentially enhancing its dividend prospects and solidifying its position as a compelling investment choice for those looking to capitalize on the digital and AI-driven future.

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>>> Commercial real estate a 'manageable' problem but some banks will close: Powell


Yahoo Finance

by David Hollerith

Feb 5, 2024


https://finance.yahoo.com/news/commercial-real-estate-a-manageable-problem-but-some-banks-will-close-powell-161201936.html


Federal Reserve Chair Jerome Powell is predicting that more small banks will likely close or merge due to commercial real estate weaknesses, but that the problem is ultimately "manageable."

The central bank official made this point during a "60 Minutes" interview that aired Sunday night. It was Powell’s first comments about the industry following a new bout of turmoil cascading through the stocks of many regional banks.

"I don't think there's much risk of a repeat of 2008," Powell said, referring to a financial crisis 16 years ago that took down some of the biggest institutions on Wall Street as well as hundreds of banks across the US.

"I do think it’s a manageable problem," he added.

The new concerns about regional banks were triggered by $116 billion commercial real estate lender New York Community Bancorp (NYCB), which shocked Wall Street last Wednesday when it slashed its dividend, reported a surprise quarterly loss, and stockpiled millions for future loan losses related to commercial real estate holdings.

The stock of the Hicksville, N.Y.-based lender fell 38% on Wednesday and another 11% on Thursday, dragging the rest of the sector down with it. The stocks recovered Friday but dropped once again on Monday as New York Community Bancorp fell more than 10%.

Powell acknowledged in his "60 Minutes" interview that some smaller banks will "have to be closed" or merged "out of existence" due to losses tied to the falling values of properties across the US that are suddenly worth much less due to the Fed’s elevated interest rates and the effect of a pandemic that emptied out many city-center buildings.

But "we looked at the larger banks' balance sheets, and it appears to be a manageable problem," Powell said.

"There's some smaller and regional banks that have concentrated exposures in these areas that are challenged. And, you know, we're working with them. This is something we've been aware of for, you know, a long time, and we're working with them to make sure that they have the resources and a plan to work their way through the expected losses."

Regional banks are particularly vulnerable because they hold a lot more exposure to these properties than larger rivals. For banks with more than $100 billion in assets, commercial real estate loans only account for 13% of total credit. For smaller banks, they account for 44% of total bank credit.

Loans tied to offices and certain multifamily housing properties are showing the most weakness. Not all segments of commercial real estate are expected to face the same problems.

Demand for commercial real estate loans from US banks, meanwhile, weakened in the fourth quarter of 2023 as bank officers tightened their standards, according to a new Fed report released Monday. These officers expect standards to stay tight in 2024 on all loan categories except for residential real estate.

David Chiaverini, a regional and midsized bank analyst for Wedbush Securities, told Yahoo Finance that commercial real estate "will be managed better at some of the other banks" than at New York Community Bancorp, which also has a high level of exposure to rent-controlled apartment complexes in New York City. Those buildings account for 22% of its loans.

Chiaverini said the bank should have set aside more in reserves last year while booking a gain from its purchase of assets from the failed Signature Bank.

"The severity of the issue is, I would say, mostly idiosyncratic to New York Community Bank because they were so under-reserved relative to the risk in their portfolio," he added.

The "perfect storm" that could create problems for the rest of the industry, according to Chiaverini, is if inflation goes back up, forcing the Fed to keep rates higher for longer, and the US economy enters a recession. Borrowers would then have problems keeping up with their loans.

If those things don’t happen, the commercial real estate pain should be "manageable" for the banks, he added.

The Fed chair repeated that same word three times in his "60 Minutes" interview.

"It should be manageable," Powell said.

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>>> Iron Mountain Incorporated (IRM) is a global leader in information management, innovative storage, data center infrastructure, and asset lifecycle management. Founded in 1951 and trusted by more than 225,000 customers worldwide, Iron Mountain serves to protect and elevate the power of our customers' work. Through a range of offerings including digital transformation, data centers, secure records storage, information management, asset lifecycle management, secure destruction, and art storage and logistics, Iron Mountain helps businesses bring light to their dark data, enabling customers to unlock value and intelligence from their stored digital and physical assets at speed and with security, while helping them meet their environmental goals.

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https://finance.yahoo.com/quote/IRM/profile?p=IRM


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>>> NVR, Inc. (NVR) operates as a homebuilder in the United States. The company operates through, Homebuilding and Mortgage Banking segments. It engages in the construction and sale of single-family detached homes, townhomes, and condominium buildings under the Ryan Homes, NVHomes, and Heartland Homes names. The company markets its Ryan Homes products to first-time and first-time move-up buyers; and NVHomes and Heartland Homes products to move-up and luxury buyers. It also provides various mortgage related services to its homebuilding customers, as well as brokers title insurance; performs title searches in connection with mortgage loan closings; and sells mortgage loans to investors in the secondary markets on a servicing released basis. The company primarily serves in Maryland, Virginia, West Virginia, Delaware, New Jersey, Eastern Pennsylvania, New York, Ohio, Western Pennsylvania, Indiana, Illinois, North Carolina, South Carolina, Florida, Tennessee, and Washington, D.C. NVR, Inc. was founded in 1980 and is headquartered in Reston, Virginia.

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https://finance.yahoo.com/quote/NVR/profile?p=NVR


Note - NVR is a Berkshire holding



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>>> Realtors found liable for $1.8 billion in damages in conspiracy to keep commissions high


CNN

by Elisabeth Buchwald

November 2, 2023


https://finance.yahoo.com/news/realtors-found-liable-1-8-191400056.html


Washington, DC (CNN) — A Missouri jury on Tuesday found the National Association of Realtors, a real estate industry trade group, and some residential brokerages liable for nearly $1.8 billion in damages after determining they conspired to keep commissions for home sales artificially high.

The lawsuit covered home sales that took place between April 2015 to June 2022.

“We view it as a tremendous day of accountability for these companies,” Michael Ketchmark, the lead attorney for the plaintiffs, told CNN.

Despite the verdict, the matter is still far from being resolved.

“This matter is not close to being final. We will appeal the liability finding because we stand by the fact that NAR rules serve the best interests of consumers, support market-driven pricing and advance business competition,” NAR president Tracy Kasper said in a statement after the verdict was announced.

However, she said NAR “can’t speak to the specifics” to its basis of appeal until it is filed. “In the interim, we will ask the court to reduce the damages awarded by the jury,” Kasper added.

Warren Buffett’s Berkshire Hathaway-owned HomeServices of America and two subsidiaries, as well as Keller Williams Realty, were among the other real estate groups the jury found guilty of conspiring.

A spokesperson from HomeServices told CNN the company is “disappointed with the court’s ruling and intends to appeal.”

“Today’s decision means that buyers will face even more obstacles in an already challenging real estate market and sellers will have a harder time realizing the value of their homes,” the spokesperson said.

Keller Williams did not immediately respond to CNN’s request for a comment.

Ketchmark said groups like HomeServices are claiming this “because they’re desperate to hang on to the system that they have rigged against everyone.”

“They made that same argument in court for the last couple of weeks and it took a jury all of two and a half hours to disregard it,” he said.

Appeals process could be protracted

The appeals process could take up to three years, said Jaret Seiberg, a housing policy analyst at TD Cowen. The losing party he said will likely attempt to have the case tried by the Supreme Court.

But Tuesday’s verdict does not mean “buyer commissions are a thing of the past,” he said.

The judge presiding over the case will have to decide the scope of the injunction, which could end up amounting to “minor tweaks” to the current commission-sharing system. “If that is the case, then the impact may be limited as we expect most brokers will continue to offer commission sharing to boost interest in the property,” Seiberg. added.

Minutes after Tuesday’s victory, Ketchmark filed a new class-action lawsuit against real estate companies including Douglas Elliman, Compass and Redfin. The new suit also alleges the companies violated antitrust laws by conspiring to keep commissions high.

Douglas Elliman and Compass declined to comment on the new case. Redfin CEO Glenn Kelman labeled it “a copycat lawsuit.”

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>>> One 'safe' trade wallops another


Yahoo Finance

by Julie Hyman

October 4, 2023


https://finance.yahoo.com/news/one-safe-trade-wallops-another-100038814.html


Bond yields are the new bane of the equity market.

But unlike other market moments over the past 18 months — like when they smacked down tech stocks — the pain is being felt much more widely.

In particular, traditional interest rate sectors that had mostly shrugged off earlier surges are now taking a hit. Since the beginning of August, when the 10-year yield hit 4%, utilities and real estate have plunged, falling about 16% and 14%, respectively.

Two key factors make these sectors particularly sensitive to rising rates. First off, they tend to have high debt loads, so their servicing costs are soaring.

Secondly, these have relatively high dividend yields, so they are in direct competition with Treasuries.

The SPDR Utility ETF yields 3.3%; the SPDR Real Estate ETF yields 3.9%. Contrast that with 10-year notes, where investors’ yield is hovering around 4.75% — ever higher out to 30 years. And as government debt, it’s viewed as virtually risk-free.

The latest bout of selling in utilities in particular on Monday was sparked by a warning last week from NextEra Energy (NEE) subsidiary NextEra Energy Partners (NEP).

NextEra happens to be the largest power company in the US by market cap.

The folks over at Bespoke Investment Group highlighted the slump in utilities in their Tuesday morning note, writing that shares have been “decimated.” Looking at the sector’s five-day slide, they found it’s underperforming the S&P 500 over that period by the most in a year.

So now what? Perhaps a bounce — which investors saw (at least somewhat) on Tuesday as the SPDR Utility ETF rose 1.1% while the S&P 500 fell in counterpoint 1.37%.

“It isn’t often that you see the sector get this oversold,” Bespoke wrote in that pre-bounce note.

Cantor Fitzgerald head of derivatives and cross asset Eric Johnston said “utes” could be poised to rebound.

In a Tuesday morning note, he laid out the momentum and technical indicators showing the XLU — that utility ETF — could bounce.

“With the macro getting very dicey, investors may soon look to utes again as a place of safety. At that point, everyone has already sold,” Johnston wrote.

Utilities could prove attractive if investors get more worried about the macro picture, since they’re typically viewed as defensive, which, to be fair, is a status at times in conflict with its interest rate sensitivity.

Maybe it was just all this positive energy that fueled Tuesday’s gains. Or perhaps the bounce is real and we’re pulling up off the bottom.

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>>> Severe Crash Is Coming for US Office Properties, Investors Say


https://finance.yahoo.com/news/severe-crash-coming-us-office-000003441.html


(Bloomberg) -- Office prices in the US are due for a crash, and the commercial real estate market faces at least another nine months of declines, according to Bloomberg’s latest Markets Live Pulse survey.

About two-thirds of the 919 respondents surveyed by Bloomberg believe that the US office market will only rebound after a severe collapse. An even greater majority says that US commercial real estate prices won’t hit bottom until the second half of 2024 or later.

That’s bad news for the $1.5 trillion of commercial real estate debt that according to Morgan Stanley is due before the end of 2025. Refinancing it won’t be easy, particularly the roughly 25% of commercial property that is office buildings. A Green Street index of commercial property prices has already fallen 16% from its peak in March 2022.

Commercial property values are getting hit hard by the Federal Reserve’s aggressive tightening campaign, which lifts a key cost of owning property — the expense of financing. But lenders looking to offload their exposure now are finding few palatable options, because there aren’t many buyers convinced the market is close to a bottom.

“Nobody wants to sell at a huge loss,” said Lea Overby, an analyst at Barclays Plc. “These are properties that don’t need to be sold for long periods of time, and that means holders are likely to delay a sale as long as they can.”

Adding to the trouble is stress among regional banks, which held about 30% of office building debt as of 2022, according to a March report from Goldman Sachs Group Inc. Smaller banks saw their deposits shrink by nearly 2% over the 12 months ended in August, according to the Fed, after Silicon Valley Bank and Signature Bank collapsed. That translates to less funding for the banks, giving them less capacity to lend.

Pain from higher interest rates can take years to filter through to owners of the US commercial real estate, which Morgan Stanley values at $11 trillion in total. Investors in office buildings, for example, often have long-term fixed-rate financing in place, and their tenants can be subject to long-term leases as well.

It will take until 2027 for leases that are in place today to roll over to lower revenue expectations, according to research by Moody’s Investors Service published in March. If current trends hold, then revenues by then will be 10% lower than today.

“It tends to be a slow reckoning for US real estate when rates change,” Barclays’s Overby said. “And the office sector is deeply distressed, which will take a long time to work out.”

Even if there is a serious and prolonged downturn in US commercial real estate, including major loan losses from a cratering office sector, Overby isn’t worried it will threaten overall market stability. The property sector is large, but the debt is spread across a wide enough array of investors to absorb losses, she said.

Besides high interest rates, offices are struggling with tenants cutting back or moving out, with the trend especially strong in the US, where office workers are more reluctant to badge in than in Europe or Asia. Some of the resistance to the return to offices could be attributed to commuting pains. More than 40% of MLIV Pulse respondents said they would be enticed to come to the office more often if they had better public transit options available. Faster, more frequent or cheaper public transit options may be of particular appeal to Americans and Canadians. Among 649 respondents from that region, about half said they currently use a car to get to the office.

About 20% of respondents said that they moved farther away from their office during the pandemic and only 3% regretted their escape. Nearly a third said their commutes got longer than before Covid, probably either because they moved, or because of pandemic-era transit service cuts.

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>>> Prologis to buy industrial properties from Blackstone for $3.1 billion


by Reuters

June 26, 2023


https://www.msn.com/en-us/money/other/prologis-to-buy-industrial-properties-from-blackstone-for-3-1-billion/ar-AA1d3tsV?OCID=ansmsnnews11


(Reuters) - Prologis Inc said on Monday it has agreed to buy 14 million square feet of industrial properties from real estate funds affiliated with Blackstone for $3.1 billion in an all-cash deal.

The acquisition price represents about "4% cap rate in the first year and a 5.75% cap rate when adjusting to today's market rents", the warehouse-focused real estate investment trust (REIT) said in a statement.

This deal expands Prologis' presence to Atlanta, Washington DC, California, Dallas, Las Vegas, New York regions, Phoenix and South Florida, and its relationship with 50 existing customers and adds 77 new customers.

The company plans to hold all of the properties acquired. It currently owns 1.2 billion square feet of logistics real estate in 19 countries.

"This transaction demonstrates the exceptional demand for high-quality warehouses. With near record-low vacancy, logistics remains a high conviction theme for us," Nadeem Meghji, head of Blackstone Real Estate Americas, said.

Prologis and Blackstone have completed more than a dozen transactions together in the past 11 years, according to the statement.

Prologis has been expanding its presence in the U.S., with the company last year acquiring Duke Realty Corp for about $23 billion, including debt, in an all-stock deal.

The deal with Blackstone is expected to close by the end of the second quarter.

Eastdil Secured, Barclays, BofA Securities, Citigroup Global Markets, Deutsche Bank Securities, Goldman Sachs, J.P.Morgan Securities, Morgan Stanley, PJT Partners and Wells Fargo acted as financial advisers to Blackstone.

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>>> Landlords Face a $1.5 Trillion Bill for Interest Only Commercial Mortgages

Interest-only loans as a share of new commercial mortgage-backed securities issuance increased to 88% in 2021, up from 51% in 2013, according to Trepp.


Mish Talk

JUN 6, 2023


https://mishtalk.com/economics/landlords-face-a-1-5-trillion-bill-for-interest-only-commercial-mortgages


Share of Interest Only Commercial Mortgage Backed Securities




Commercial Real Estate Bust

A trend to walking away from commercial mortgages is just beginning. The Wall Street Journal reports Interest-Only Loans Helped Commercial Property Boom. Now They’re Coming Due.

Interest-only loans as a share of new commercial mortgage-backed securities issuance increased to 88% in 2021, up from 51% in 2013, according to Trepp. Nearly $1.5 trillion in commercial mortgages are coming due over the next three years.

Fitch Ratings recently estimated that 35% of pooled securitized commercial mortgages coming due between April and December 2023 won’t be able to refinance based on current interest rates and the properties’ incomes and values. While many malls and hotels face high default risks, the situation is particularly dire for office owners.

Mark Edelstein, chair of law firm Morrison Foerster’s global real-estate group, said he is seeing more lenders take over office buildings than at any point since the early 1990s.

Oblivious to Risks

Lenders and borrowers had widespread belief in two things, both now proven false.

Interest rates would stay low forever

Property values, already clearly in a bubble, would keep rising forever

Now a $1.5 trillion bill is coming due, with property values, especially office space and some big city hotels, plunging like a rock.

83 Percent on Securitized Office Loans in Trouble

Xiaojing Li, managing director at data company CoStar’s risk analytics team, estimates that as much as 83% of outstanding securitized office loans won’t be able to refinance if interest rates stay at current levels.

The 1,921 Room Hilton Union Square Hotel in San Francisco Was Just Abandoned

Yesterday, I noted The 1,921 Room Hilton Union Square Hotel in San Francisco Was Just Abandoned

Park Hotels & Resorts also walked away on the nearby 1,024-room Parc 55. Park Hotels & Resorts cited the continued debt burden of the two hotels and multiple factors that have made the San Francisco market less desirable.

Well, don't worry. Lenders who are handed back the keys can recoup their losses if they borrow money and plow it all into Nvdia and Apple with leverage. /sarcasm

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>>> Blackstone REIT Continues Trend Of Bad News For Real Estate Investors


Benzinga

by Eric McConnell

June 5, 2023


https://finance.yahoo.com/news/blackstone-reit-continues-trend-bad-193739975.html


Blackstone real estate investment trust (BREIT) is known as one of America’s largest and most dependable privately held REITs when it comes to delivering investor returns. However, 2023 has proven to be a difficult year for real estate investors, and Blackstone is not immune. As of May 1, 2023, Blackstone announced it is limiting investor withdrawals from its REIT, which is worth an estimated $70 billion.

This move is not a new trend, as Blackstone has been limiting monthly investor withdrawals since November. A clause in Blackstone’s standard shareholder agreement allows the company to limit withdrawals if the total amount of the withdrawal requests exceeds 5% of the fund’s net asset value. In what can be seen as a sign of the times for the troubled real estate market, Blackstone hasn’t released an estimate on when it may fulfill all investor redemption requests.

Blackstone investors requested a combined $4.5 billion in redemptions in April, but the fund only approved the release of $1.3 billion (29%) of the total requests. In March, investors also requested a total of $4.5 billion in redemptions, only for the fund to release $666 million in funds or 15% of the total amount.

So, it’s not necessarily that Blackstone isn’t paying out at all, it’s that investors heading for the exit doors may have to wait in line before they can cash out. It’s understandable that Blackstone exercises the limitations clause on investor redemptions, but the news comes as a severe blow to investors, many of whom have been dealing with the effects of a declining real estate market for the last several months.

It’s not hard to imagine that many of the investors making the recent redemption requests were looking at Blackstone as their safe harbor REIT — the one that they could rely on when other real estate and investment holdings began to underperform. The overall trend of the commercial real estate market is down for several reasons, not the least of which is a steady diet of rate increases from the Federal Reserve.

Why Is Blackstone Suffering Right Now?

Rate increases are hitting the commercial real estate market particularly hard because of the way commercial real estate is financed. Since 2008, REITs, developers and fund managers have taken advantage of historically low interest rates to borrow aggressively because it allowed them to drastically increase the size of their portfolios. However, much of the borrowing for commercial real estate depends on shorter-term financing such as adjustable-rate mortgages (ARMs) or 15-year mortgages that need to be refinanced at some point in the life of the asset.

The need to refinance wasn’t a problem as long as interest rates stayed low. The pro-forma budget on many commercial assets assumed low interest rates, which helped REITs pay out impressive dividends while also making it easy to refinance or sell the asset at a profit to another REIT that could borrow money at a low interest rate to buy it.

When interest rates began to spike as the Fed tried to ward off inflation, a period of easy financing terms and being able to quickly liquidate assets or turn them profitable after renovations turned into the good old days. The new reality caught Blackstone and many other REITs off guard. The question facing Blackstone and other investors now is, how long will the trouble last and how bad will it get?

Hundreds of billions of dollars in commercial real estate assets may be coming up for refinancing in the next several years, and it’s already an impossibility that they will be able to complete those re-fis at the investor-friendly rates the fund managers were planning on. Some of the most dire predictions are for a wholesale slaughter, with foreclosures and plummeting asset values reminiscent of 2008.

Other prognosticators are not so bearish. They believe that there will be a market correction but that the increased liquidity requirements that were imposed on banks after 2008 should be able to stave off massive bank failures if there is a wave of commercial foreclosures.

Some of the increased liquidity requirements were relaxed for regional banks (after an extensive lobbying effort), and this move likely played a role in the collapse of several regional banks collapsed, most notably First Republic Bank, which was taken over by regulators and ultimately sold to JP Morgan Chase last month.

What Does The Future Hold For Real Estate Investors And REITs?

So, what is the long-term future for Blackstone and REIT investors? It probably lies somewhere in between the direst predictions and the most rose-colored expectations of today’s market. At a minimum, it may be a bumpy ride for the next few years, but investors should keep one important thing in mind — real estate’s performance history has shown it to be a resilient asset and a reliable one in terms of delivering returns.

The people who run REITs like Blackstone are well-versed in their fields and have proven track records of performance. As they get used to the new normal, the next stage of deals and acquisitions they make will be more reflective of the new reality confronting investors in terms of acquisitions, opportunity cost and investor returns.

For their part, investors will need to remain patient and increase their due diligence. In the meantime, they may want to consider publicly traded REITs or other investments such as tokenized real estate investing that will allow them to have greater flexibility in terms of liquidating their investment capital when the need presents itself. However, it is unlikely that real estate will cease being a vital investment sector.

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>>> 'Commercial Real Estate Is Melting Down Fast': Elon Musk Warns Home Prices Will Be The Next To Crash — Yet One Property Type Could Prove Resilient


Benzinga

by Jing Pan

June 5, 2023

As a serial entrepreneur who co-founded Tesla Inc., revolutionized the electric car industry and is sending rockets into space, Elon Musk isn’t known for being a real estate guru. But lately, the billionaire has been sounding the alarm for the sector.

“Commercial real estate is melting down fast,” Musk said in a recent tweet. “Home values next.”

He elaborated on the dire forecast during an interview with former Fox News personality Tucker Carlson in April.

“We really haven’t seen the commercial real estate shoe drop. That’s more like an anvil, not a shoe,” Musk said. “So the stuff we’ve seen thus far actually hasn’t even — it’s only slightly real estate portfolio degradation. But that will become a very serious thing later this year, in my view.”

The Tesla CEO pointed out that the work-from-home trend has substantially reduced the use of office buildings around the world. And that does not bode well for commercial real estate.

“Almost all cities at this point have record vacancies of commercial real estate,” Musk said.

But not all commercial real estate is created equal. Here’s one type of property that could be more shockproof than others.

Medical Office Buildings

According to the latest Office National Report from commercial real estate brokerage Marcus & Millichap, medical offices face “fewer headwinds” because of the nature of their practice.

“While most medical office tenants have incorporated some degree of virtual work, hybrid interactions supplement in-person visits rather than replace,” the report said.

In other words, while the remote work trend has transformed the office property landscape, medical office buildings continue to serve a vital purpose because of the need for in-person visits.

Another compelling factor contributing to the resilience of medical offices is America’s aging population. Approximately 10,000 baby boomers reach age 65 in the U.S. every day, and the demand for medical services tends to increase as people grow older.

The report said that this demographic trend could be a backstop for long-term space demand.

To see how resilient medical office buildings are, look at Riverside-San Bernardino. The report highlighted that this region is expected to “maintain the lowest traditional office vacancy rate among major U.S. markets in 2023,” attributed in part to the presence of “strong medical office fundamentals.”

“Medical office vacancy here was at 6.8% in March,” the report said.

Getting A Piece Of The Action

Medical office buildings can be a significant investment, often requiring substantial capital to acquire. The good news? You don’t necessarily have to purchase an entire building. Nowadays, there are multiple avenues for investors to participate.

For instance, some publicly traded real estate investment trusts (REITs) own medical office properties. Investors can gain exposure to the segment by purchasing shares of these REITs.

Here’s a look at two that Wall Street finds particularly attractive.

Healthcare Realty Trust Inc. (NYSE: HR): Healthcare Realty Trust is a REIT that specializes in medical office buildings and outpatient facilities. The company’s portfolio consists of 715 properties in 35 states totaling approximately 41.8 million square feet.

Notably, 72% of the properties are on or adjacent to hospital campuses. The REIT pays quarterly dividends of 31 cents per share, translating to an annual yield of 6.7%. Barclays analyst Steve Valiquette has an Overweight rating on Healthcare Realty Trust and a price target of $25, implying a potential upside of 34%.

Ventas Inc. (NYSE: VTR): Ventas is a healthcare REIT with a broader focus. With more than 1,200 properties in the U.S., Canada and the U.K., the company’s portfolio spans senior living communities, medical offices and outpatient facilities and hospitals as well as life science, research and innovation properties. The stock offers an annual dividend yield of 4.1%. Mizuho analyst Vikram Malhotra has a Buy rating on Ventas and a price target of $53. Since shares trade at $43.70 today, the price target implies a potential upside of 21%.

Income investors are drawn to REITs because they are some of the higher-yielding names in the stock market. But remember, publicly traded REITs — including those that focus on medical properties — are still subject to the stock market’s ups and downs. If you don’t like the volatility associated with publicly traded REITs, note that there are also private market options that allow retail investors to add medical office buildings to their portfolios.

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>>> Commercial real estate poses risks to US banks - and lenders should brace for higher interest rates, JPMorgan CEO Jamie Dimon warns


Business Insider

by Zahra Tayeb

May 23, 2023


https://finance.yahoo.com/news/commercial-real-estate-poses-risks-185708735.html


JPMorgan CEO Jamie Dimon warned commercial-real estate loans could cause problems for US banks.

"There's always an off-sides," he said. "The off-sides in this case will probably be real estate."

The bank's chief also said US lenders should be prepared for benchmark interest rates to climb as high as 7%.

The US banking sector is still recovering from the worst turmoil since the 2008 financial crisis, but its troubles may be far from over.


JPMorgan & Chase CEO Jamie Dimon has warned that the next jolt to the American banking system could come from commercial real-estate (CRE) loans.

Stress has been mounting for months in the commercial property industry, which is being buffeted by headwinds including high interest rates, tighter credit conditions, and work-from-home trends causing office vacancies. That's fueling concerns about potential loan defaults by the more vulnerable borrowers in the sector.

"There's always an off-sides," Dimon said during the bank's investor conference on Monday, per CNBC. "The off-sides in this case will probably be real estate. It'll be certain locations, certain office properties, certain construction loans. It could be very isolated; it won't be every bank," he added.

Additionally, banks - especially smaller ones - should also brace for the risk of benchmark interest rates rising even higher, possibly up to 6% or 7%, according to Dimon. The Federal Reserve has boosted its policy rate to more than 5% currently, from near-zero levels in the first quarter of 2022.

"I think everyone should be prepared for rates going higher from here," Dimon said, according to CNBC.

Small and mid-sized US regional lenders are highly exposed to the CRE industry - financing around 70% of all debt in the sector - and that's made investors anxious about the overall health of the US financial system given the risk of CRE loan defaults.

Dimon said the banking industry is already building capital for potential losses by squeezing its lending activity.

"You're already seeing credit tighten up because the easiest way for a bank to retain capital is not to make the next loan," he said.

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>>> While Brookfield Properties defaulted on $1 billion of loans, they lost $850 million in their prior equity value in these properties.

333 S Hope Street $701 million
333 S Grand Ave $656 million
725 S Figueroa Street $497 million

These properties are essentially fully leased, although there is a substantial amount of space available for sublease. Brookfield must have been facing a lot of lease expirations they didn't think they could fill.

A US debt default would really knock the floor out from under commercial real estate values

Brookfield had previously filed an application to add a residential high-rise to Bank of America Plaza, a 55-story office tower located at 333 S. Hope Street.

The project, named the Residences at 333 South Hope Street, would replace a portion of the building's plaza and parking structure with a new 34-story edifice featuring 366 studio, one-, and two-bedroom dwellings with a 425-square-foot cafe located at street level.

At one time this added residential would have saved their bacon. -

https://downtownla.com/building/residences-at-333-south-hope-street




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>>> New York skyscrapers sit empty as Manhattan reels from rise of home working


The Telegraph

by Riya Makwana

May 20, 2023


https://finance.yahoo.com/news/york-skyscrapers-sit-empty-manhattan-110000787.html


Simon Mitchell’s office in Union Square, New York City has had an eerily empty feel since the Covid pandemic. With four in five desks unused in a space with capacity for 300, the marketing manager only goes in when he feels like he might have some company.

Union Square was once known for its bustling bars and restaurants, into which office workers would swarm as they enjoyed their fast-paced city lives. The change in the area today is stark.

Mr Mitchell, his partner and their one-year-old baby moved to Queens just after the pandemic. He has no intention of returning to the office full time.

“Rents are sky high and if you can avoid paying City prices on food and have a flexible lifestyle, why would you go into the office more?” he says.

Not even cheap subway commuting could entice him or his colleagues back to the office, Mr Mitchell adds. “I wouldn’t even consider taking a job that didn’t offer flexibility”, he says.

While New York is starting to show signs of life, only around half the number of workers that should be in the office have returned more than a year on from the pandemic. Vacancy rates for office buildings in central New York have hit 22.7pc, up 11.4pc on pre-pandemic levels.

Meanwhile, the level of workers returning to the office has plateaued at around 60pc, data from The Real Estate Board of New York shows. The consultancy group has warned of a coming wave of “zombie” buildings rendered barely functional due to low vacancy rates.

Some skyscrapers are already lifeless. The 47-story tower at 60 Wall Street has sat empty since 2021, when Deutsche Bank – its only tenant – relocated uptown, to the edge of Central Park. The building’s owners, Singapore’s sovereign wealth fund and Paramount Group, have undertaken an expensive renovation in order to tempt in new tenants.

Eric Adams, the City’s mayor, has urged workers to return to the office as the city struggles with a shifting landscape. He said last year: “You can’t run New York City from home”.

But employees’ desire for flexibility is higher “than ever”, says David Smith, head of Americas insights, global research at Cushman & Wakefield New York. “And this demand is greater here than in any other part of the world,” he adds.

White-collar workers are fleeing New York in huge numbers for a life free from commuting, says Mr Smith, as well as the option to spend more time on their families and other personal pursuits.

“It’s particularly people in their late twenties and thirties who are unwilling to return to the office full time,” he adds.

The lack of people returning to the office has hit the local economy, with remote work costing New York around $4,661 (£3,750) annually for each worker, according to Bloomberg, as employees spend less on food and entertainment at businesses around their offices.

There is currently around 22.7 million sq ft of sublet space in New York, with this figure rising as companies look to shrink their office footprints.

Agents note that the majority of companies releasing space are in the tech or media industries. Spotify recently put 200,000 sq ft on the market for sublease at 4 World Trade Center, vacating five of its floors. Facebook also announced it is subletting roughly 250,000 sq ft of their 1.9 million sq ft office space in Hudson Yards.

In response, companies have mandated a return to the office. Blackrock, the world’s largest asset manager, on Tuesday announced that staff must be on-site for at least four days a week.

In a memo, bosses wrote: “Career development happens in teaching moments between team members, and it is accelerated during market-moving moments, when we step up and get into the mix. All of this requires us to be together in the office.

“We will shift to at least four days per week in the office, with the flexibility to work from home one day per week. This new approach begins on 11 September.”

Other companies have put similar policies in place, JP Morgan recently told its senior bankers to return to the office for a full five days, adding that slackers would be punished for poor attendance.

At the time, the bank said: “As we’ve returned to more normal patterns in our lives and work, we can all appreciate the many benefits of in-person engagement.

“We believe this is especially true when it comes to the importance of being in the office – being together improves the speed of decision making, while also providing valuable opportunities for spontaneous learning and creativity, as well as allowing our professionals to learn through our apprenticeship model.”

Blackrock’s announcement came after it committed to downsizing its headquarters in New York. Fellow asset manager Macquarie and Twitter have also shrunk their footprint.

Surprisingly, the most famous buildings in New York are not the most attractive to big name companies – and have not been for a long time, says Andrew Lim, JLL New York City research director.

LinkedIn’s head office, located in the Empire State Building, is leased for five more years. Agents have speculated that the business will look to reduce the space it occupies once its tenancy is over, with a move to more modern offices in mind.

“These older buildings have characteristics that are not as popular today with occupiers who tend to prefer newer buildings that have amenities, modern finishes and more customizable layouts,” Mr Lim says.

According to JLL, around 25 million sq ft of office space in Manhattan alone has sat empty and on the market for more than 24 months. Agents and investors believe that the next logical step would be to repurpose these buildings, with around six million sq ft of office space being considered for conversion into residential or retail space, among other uses.

On the mainland, Washington DC is leading the way by committing to converting 40 offices into residential buildings, according to Cushman & Wakefield. That trend is already spreading to the east coast, with at least four office buildings due to be converted. If it continues, New York’s empty skyscrapers could become towers of housing.

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>>> Brookfield's Downtown L.A. Trophy Towers Falling Like Dominoes

Payments now have been missed on a $275 million loan for the 41-story EY Plaza.


Globest.com

By Jack Rogers

May 18, 2023


https://www.globest.com/2023/05/18/brookfields-downtown-l-a-trophy-towers-falling-like-dominoes/?slreturn=20230420035147


A year ago, Brookfield Property Partner’s downtown Los Angeles office portfolio encompassed 8 million square feet, including four of the city’s highest-profile trophy towers. It was not a stretch to say that the Canadian REIT dominated the downtown Los Angeles skyline.

What a difference a year makes: Brookfield has now defaulted or missed payments on collateralized mortgage backed security loans encompassing more than $1 Billion that are backed by three of its largest downtown Los Angeles office trophies...

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>>> San Francisco fire sale: downtown high rise selling at a 73% discount


Fox News

by Aislinn Murphy

May 17, 2023


https://finance.yahoo.com/news/san-francisco-fire-sale-downtown-120042720.html


A high-rise office building in San Francisco’s financial district is reportedly being sold for significantly lower than what it had been valued at a few years ago, potentially providing a signal for the city’s office market.

The San Francisco Business Times first reported last week that unnamed sources said the 350 California Street high-rise is being purchased for a per-square-foot price that equates to a value in the $60 million to $67.5 million range. The outlet identified SKS Real Estate Partners as the buyer of the Mitsubishi UFJ Financial Group-owned property.

According to the San Francisco Business Times, the $67.5 million figure marks a 73% decrease from 2020, when the high-rise belonged to Union Bank who listed it for approximately $250 million. An investor from South Korea is reportedly also involved on the buyer’s side.

CBRE reported San Francisco’s office market having a vacancy rate of 29.4% for the first quarter. In the prior quarter, it was 27.6%, according to the real estate company.

COMMERCIAL REAL ESTATE INDUSTRY ON EDGE AS DOWNTOWN EMPTY OFFICE SPACE GOES UNUSED

FOX Business sent an inquiry to SKS Real Estate Partners about the reported purchase. Mitsubishi UFJ Financial Group Americas declined to comment.

With the reported transaction of 350 California Street, participants in San Francisco’s office space market could potentially have a new gauge in terms of pricing. On the seller’s side in the deal, CBRE’s Kyle Kovac and Mike Taquino provided representation.

Derek Daniels, research director for San Francisco at Colliers International, told FOX Business on Tuesday that the 350 California Street sale will be a "great data point for our market right now."

"It will give other market participants a great data point to look to for other potential sales that might be happening," he continued. "It’s a jolt of positivity for the San Francisco market that an institutional, local owner is willing to make a significant investment."

SAN FRANCISCO'S ‘DOOM LOOP’ THREATENS TO GUT DOWNTOWN ECONOMY AS EMPLOYEES WORK FROM HOME

Daniels said the buyer was "going to have to put a lot of capital into the property to get it to the point where it can be leased again, but it is in the north financial district and California Street’s a great address, great street to be on." The Real Deal, which also covered the sale, reported 350 California Street’s vacancy rate was around 75%.

The reported fire sale of the high-rise comes as San Francisco’s office market has continued to deal with high vacancy rates stemming from factors including the COVID-19 pandemic and tech companies located in the city letting their employees work remotely.

San Francisco is the third-best city for jobs in 2022, according to WalletHub.

Daniels described the market as "very challenged right now." He noted San Francisco saw a "massive spike in subleases" early in the pandemic, adding that tech "was easily able to go remote and a lot of firms kind of went that route right away."

Colliers International, where he works, said in its latest office market report for the city that the overall vacancy rate came in at 23% for the first quarter. That proportion was notably higher than the 5.3% in the same three-month period in 2020. Availability has also hit a record high.

Meanwhile, CBRE reported San Francisco’s office market having a vacancy rate of 29.4% for the quarter. In the prior quarter, it was 27.6%, according to the real estate company.

Daniels expressed optimism about return-to-office recovery in the long-term.

"The sentiment in the industry is that with announced layoffs, I think the pendulum is going to swing back in management’s favor to get folks back in the office," he said.

He also pointed to recent growth in the artificial intelligence sector.

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>>> Commercial Real Estate Prices in the US Fall for First Time Since 2011


Bloomberg

by Rich Miller

May 17, 2023


https://finance.yahoo.com/news/commercial-real-estate-prices-us-210410652.html


(Bloomberg) -- US commercial real estate prices fell in the first quarter for the first time in more than a decade, according to Moody’s Analytics, heightening the risk of more financial stress in the banking industry.

The less than 1% decline was led by drops in multifamily residences and office buildings, data culled by Moody’s from courthouse records of transactions showed.

“Lots more price declines are coming,” Mark Zandi, Moody’s Analytics chief economist, said.

The danger is that will compound the difficulties confronting many banks at a time when they are fighting to retain deposits in the face of a steep rise in interest rates over the past year.

Excluding farms and residential properties, banks accounted for more than 60% of the $3.6 trillion in commercial real estate loans outstanding in the fourth quarter of 2022, with smaller institutions particularly exposed, according to the Federal Reserve’s semi-annual Financial Stability Report published last week.

“The magnitude of a correction in property values could be sizable and therefore could lead to credit losses” at banks, the report said.

Fed Vice Chair for Supervision Michael Barr told lawmakers on Tuesday that supervisors have increased their oversight of financial institutions with significant exposure to the sector. “We’re looking quite carefully at commercial real estate risks,” he said.

The price declines seen so far have been more marked for higher-priced properties, according to commercial property company CoStar Group. Its value-weighted price index has fallen for eight straight months and in March stood 5.2% lower than a year ago.

Transactions though have been limited in a market still coping with the aftershocks of the pandemic.

The rise in employees working from home has driven some downtown retailers and restaurants out of business and forced owners of office buildings to reduce rents to retain tenants or to sell all together.

What Bloomberg Economics Says

“Regional and community banks currently account for a disproportionately large share of office real estate lending. Further consolidation of the banking industry may prove to be the solution that allows the banking industry at-large to work out problem loans.”

- Stuart Paul (economist)

Post Brothers recently bought a Washington office building that went for $92.5 million in the fall of 2019 for $67 million, while Clarion Partners is offering a San Francisco office tower for roughly half of what it paid around a decade ago.

Banks held more than $700 billion in loans on office buildings and downtown retailers in the fourth quarter of last year, according to the Fed. More than $500 billion of that was extended by smaller lenders.

Lending officers at banks told the Fed that they further tightened credit standards on commercial real estate loans in the first quarter.

Paul Ashworth, chief North America economist for Capital Economics, sees the risk of a “doom loop” developing, with a pull-back in lending by banks leading to a steeper drop in commercial real estate prices, in turn prompting even further cuts in credit.

One potential bright spot: The big run-up in prices in past years has left many borrowers with substantial equity cushions in the properties they own. That reduces the dangers of defaults and limits the potential losses for lenders.

The loan-to-value ratio of mortgages backed by office buildings and downtown retail properties was in the range of 50% to 60% on average at the end of last year for credit extended by bigger banks, based on data collected by the Fed.

“Delinquencies and defaults will rise, but I don’t think we’ll see a lot of forced sales,” Zandi said.

He forecasts prices dropping about 10%, assuming the US skirts a recession. If it doesn’t, the declines could get a lot worse.

“We’re on a razor’s edge here,” he said.

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>>> American Tower Corporation: Reiterating BUY as AFFO tops consensus

Summary


https://finance.yahoo.com/research/reports/ARGUS_3627_AnalystReport_1683112910000?yptr=yahoo&ncid=yahooproperties_plusresear_nm5q6ze1cei


American Tower operates wireless and broadcast communications real estate, including wireless towers, distributed antenna systems, and managed rooftop systems. The company leases multitenant space to wireless service providers and radio and television broadcasters. AMT has over 226,000 towers and small cell systems networks, with 43,000 properties in the U.S. and Canada and about 182,000 international properties. International sites represent about 45% of revenues. Top U.S. tenants include T-Mobile, AT&T, and Verizon, with T-Mobile accounting for about 16% of revenue. At the end of 2021, AMT expanded into data centers with the acquisition of CoreSite, a hybrid IT provider with 25 interconnected data centers in the U.S. The company has ongoing plans to leverage its U.S. data centers. The current market cap is $95 billion. The shares are a component of the S&P 500.

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>>> Home prices are back on the rise as the spring market proves more competitive than expected


CNBC

MAY 2 2023

by Diana Olick


https://www.cnbc.com/2023/05/02/home-prices-rise-in-march-amid-competitive-spring-market.html


KEY POINTS

Home prices in March rose for the third consecutive month, on a seasonally adjusted basis. New listings are 30% lower than pre-pandemic norms for this time of year.

Nearly half of homes on the market are selling within two weeks.

After cooling for the better part of last year, home prices are on the rise again.



A sharp drop in new listings, adding to an already meager supply of homes for sale, is leading to renewed bidding wars and more homes selling for above asking price.

Home prices rose a seasonally adjusted 0.45% in March from February, according an early look at the Black Knight Home Price Index provided exclusively to CNBC. After revisions to January and February reads, this is now the third consecutive month of price increases.

Roughly 30% fewer new listings came on the market in March compared with pre-pandemic norms. The deficit continues to grow, as fewer potential sellers want to list their homes in today’s higher-mortgage-rate environment. This comes in the heart of the spring housing market, when demand is historically highest.

“A modest bump in homebuyer demand ran headlong into falling for-sale supply,” said Andy Walden, Black Knight’s vice president of enterprise research. “Just five months ago, prices were declining on a seasonally adjusted month-over-month basis in 92% of all major U.S. markets. Fast forward to March, and the situation has done a literal 180, with prices now rising in 92% of markets from February.”

Competition among buyers is not only pushing prices higher but also accelerating the market again. Nearly half of homes on the market are selling within two weeks, the highest share in nearly a year, according to Redfin, a real estate brokerage.

The national gains, however, do not show sharp differentials in price strength and weakness regionally. Prices in the West, where metropolitan markets had been most expensive, are well off their recent peaks, while 40% of other major markets have seen prices return to peak levels.

Of the nation’s 50 largest housing markets by population, just Austin, Salt Lake City and San Antonio are seeing prices fall month to month. Prices in Phoenix and Dallas are flat.

The initial softening in home prices came early last summer, when mortgage rates had basically doubled in the span of a few months. Rates are now off their recent peak, but not by much. The average rate on the popular 30-year fixed mortgage has been bouncing between 6% and 7%; in the first few years of the pandemic it hit more than a dozen record lows, generally hovering around 3%.

Buyers are clearly getting used to the higher-rate environment, as sales have strengthened for the past few months. Homebuilders have recently reported strong quarterly earnings, as they use incentives like mortgage rate buydowns to pull in sales. Builders also have far more supply and are clearly benefitting from the lack of existing homes for sale.

A separate report released Tuesday from CoreLogic focuses on home price comparisons from a year ago, but also shows prices gaining month to month. Prices in March were just over 3% higher than last year nationally, but markets in the sunbelt are far outpacing cities in the West and Northeast. Prices in Miami were up nearly 15% from a year ago.

Meanwhile, home prices in 10 states are lower than they were last March, according to CoreLogic: Washington (-7.4%), Idaho (-3.6%), Nevada (-3.5%), Utah (-3.4%), California (-3%), Montana (-2.3%), Oregon (-2%), Colorado (-1%), Arizona (-0.9%) and New York (-0.6%).

“The monthly rebound in home prices underscores the lack of inventory in this housing cycle,” wrote Selma Hepp, CoreLogic’s chief economist in a release. “In addition, while the lack of affordability generally weighs on home price growth, mobility resulting from remote working conditions appears to be a current driver of home prices in some areas of the country.”

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>>> Half a million landlords to leave buy-to-let sector as baby boomers retire


Yahoo Finance

by Eir Nolsoe

Mon, April 17, 2023


Nearly half a million landlords are expected to sell up in the next five years, as the baby boomer generation retires and cashes in their nest eggs.

Around 140,000 landlords sold up and left the market last year after reaching retirement age, according to research from estate agent Hamptons. Almost 100,000 a year are expected to follow them for the next half decade.

The wave of landlord retirement is set to put more upward pressure on rents as the number of lettable homes available drops.

High prices, rising interest rates and growing red tape means new buy-to-let landlords are not replacing those quitting the market in the same numbers.

Aneisha Beveridge, head of research at Hamptons, said: “Over the next couple of years, we're expecting rental growth to be quite strong and probably outpace house price growth.”

She added: “One of the big reasons for that is that we think landlords will continue leaving the sector and we can't see that huge numbers will enter.”

“Age and retirement planning is a big factor” for investors deciding to call it quits, Ms Beveridge said.

The first buy-to-let mortgage was launched in 1996 and many landlords moved into the market as an investment for their retirement.

Over half of mortgaged rental properties were bought within 11 years of such loans being introduced and many of these early adopters are now cashing out.

The average age of buy-to-let landlords now stands at 60 and roughly 96,000 property investors will reach retirement every year over the next half-decade.

Many are expected to sell rather than continue managing their properties in retirement. Changes to taxation and regulation also meant “some landlords have decided that they just don't want the hassle”, Ms Beveridge said.

Retiring landlords accounted for nearly three quarters of buy-to-let property sales last year, Hamptons found.

Almost half of buy-to-let properties sold last year were bought at least 15 years prior, up from a third in 2018.

The expected wave of retirees cashing out is expected to push sales of buy-to-let properties to a new peak in the coming years, Hamptons said.

However, many are likely to be bought as homes, rather than rental properties.

Soaring house prices and rising interest rates have put the buy-to-let market out of reach for many later generations, Ms Beveridge said.

"We have lived through a decade or longer with people struggling to afford to buy their own home, never mind have the cash to buy additional buy-to-lets.

“I think it's that sort of demographic change that we're going to start seeing play out.”

Separate research from Hamptons found that high interest rates have destroyed hopes of building buy-to-let portfolios in four in five local authorities.

Historically, buy-to-let investors have purchased new properties by taking equity out of their existing properties to get new mortgages.

Last year, portfolio landlords in every single local authority in England and Wales could have boosted their income by using £100,000 to put a 25pc deposit on a new property that would generate rent.

However, most would now lose money on the same transaction at today's rates.

A lack of supply of homes available to rent has sent prices soaring. Rents have risen by 11pc on average in the 12 months to March, according to Hamptons data, marking the second fastest annual increase in at least a decade. In Inner London, prices have risen by nearly a fifth.

In 263 of the 330 local authorities in England and Wales, buy-to-let landlords would be better off using their savings to pay down their existing debt to boost the profit margins on the properties that they already own.

Hamptons’ calculations were based on a landlord with a property portfolio in a company structure worth £1 million, with mortgages at an average of 60pc.

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>>> Blackstone Raises More Than $30 Billion for Giant Real Estate Fund


Bloomberg

by Natalie Wong

Apr 11, 2023


https://finance.yahoo.com/news/blackstone-raises-more-30-billion-113156238.html


(Bloomberg) -- Blackstone Inc. has closed on its largest global property drawdown fund, targeting opportunistic deals across sectors such as rental housing, hospitality and data centers.

The company secured $30.4 billion of total capital commitments for the fund, called Blackstone Real Estate Partners X, according to a statement Tuesday. Blackstone’s latest fund is the largest of that type, according to PitchBook data going back to 2002.

The real estate market has come under pressure over the past year due to a pullback across commercial-property lending, as borrowing costs skyrocketed. At the same time, the stocks of public real estate investment trusts have also suffered amid the uncertainty in the market and increasing concerns about certain property types such as offices.

“Pullback with all forms of capital will create opportunities,” said Kathleen McCarthy, global co-head of Blackstone Real Estate. “We can use our capital and expertise to capitalize on the moment for our investors.”

Blackstone’s latest fundraising helps cement the private equity firm’s status as a powerhouse in the real estate market. Blackstone’s real estate business, which started in 1991, now has $326 billion of investor capital under management.

One of Blackstone’s real estate vehicles has faced a rougher past few months. Blackstone Real Estate Income Trust, which caters to wealthy individuals, has been facing heightened withdrawal requests recently.

The firm started to raise money for the large property drawdown fund last year. Three of its strategies — global, Asia and Europe — now have a total of $50 billion in capital commitments, the firm said.

Blackstone Real Estate’s portfolio is about 80% concentrated in properties such as logistics, rental housing, hospitality, lab offices and data centers.

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>>> Iron Mountain Incorporated (IRM), founded in 1951, is the global leader for storage and information management services. Trusted by more than 225,000 organizations around the world, and with a real estate network of more than 90 million square feet across approximately 1,450 facilities in approximately 50 countries, Iron Mountain stores and protects billions of valued assets, including critical business information, highly sensitive data, and cultural and historical artifacts. Providing solutions that include secure records storage, information management, digital transformation, secure destruction, as well as data centers, cloud services and art storage and logistics, Iron Mountain helps customers lower cost and risk, comply with regulations, recover from disaster, and enable a more digital way of working

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>>> Extra Space (EXR) to Acquire Life Storage in an All-Stock Deal


Zacks Equity Research

April 4, 2023


https://finance.yahoo.com/news/extra-space-exr-acquire-life-150503229.html


Extra Space Storage Inc. EXR has struck a deal to acquire Life Storage, Inc. LSI in an all-stock transaction. The move will result in the combined company becoming the largest storage operator in the country with more than 3,500 locations, more than 264 million square feet and serving more than two million customers. Life Storage earlier rejected a bid from the industry behemoth Public Storage PSA.

The move seems a strategic fit as within the first year of closing, the transaction is expected to be accretive to core funds from operations (FFO) per share and is also expected to be leverage neutral. The transaction is currently expected to close in the second half of 2023 and is subject to Extra Space and Life Storage shareholders’ nod and the satisfaction of other customary closing norms.

Shares of Life Storage were up 3.54% during Monday’s regular trading session, while shares of Extra Space were down 5.17%.

Per the agreement terms, shareholders of Life Storage will get 0.8950 of an Extra Space share for each share they own. Based on Extra Space's share price close on Mar 31, 2023, this represents a total consideration of roughly $145.82 per share. Public Storage earlier offered $129 per share for Life Storage, which was rejected by the latter, noting that the offer “significantly” undervalued the business.

The combined company is expected to have a pro forma equity market capitalization of around $36 billion and a total enterprise value of roughly $47 billion. When the transaction closes, shareholders of EXR are expected to own around 65% of the combined company, while shareholders of LSI are to own the rest 35%. Also, there will be an expansion of Extra Space’s board from 10 to 12 directors, comprising nine directors from Extra Space's board and three directors from Life Storage.

The transaction will increase the size of Extra Space's portfolio by more than 50% by store count. Particularly, it will add Life Storage's 1,198 properties — including 758 wholly owned, 141 joint ventures and 299 third-party managed stores — thereby adding more than 88 million square feet to the portfolio.

In addition to offering a “transformative scale” and enhanced diversification, the transaction is expected to generate at least $100 million in annual run-rate operating synergies from general and administrative and property operating expense savings, together with improved property operating revenues and tenant insurance income.

Based in Salt Lake City, Utah, Extra Space is a notable name in the self-storage industry and offers a vast array of well-located storage units to its customers, including boat storage, recreational vehicle storage and business storage. EXR is currently the second-largest owner and/or operator of self-storage properties and is the largest self-storage management company in the United States.

Here’s how the shares of Public Storage, Extra Space and Life Storage have performed over the past three months against the industry’s decline of 1.4%.

Currently, PSA, EXR and LSI have a Zacks Rank #3 (Hold).

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CoStar Group (CSGP) - >>> Washington, D.C.-based CoStar Group (NASDAQ:CSGP) is a diversified real estate services company.


https://finance.yahoo.com/news/7-great-growth-stocks-buy-110030242.html


Best known for its public-facing platforms such as ApartmentFinder.com, LoopNet and BizBuySell, the company also provides information and analysis services to the commercial real estate industry.

Sure, given the current situation with commercial real estate, I admit it may seem odd to consider CSGP stock one of the best growth stocks to buy. After all, isn’t commercial real estate facing numerous headwinds right now? Yes, but given its subscription-based revenue model, and the strong need for its services, CoStar could stay resilient, despite the near-term weakness in the industry.

Long-term, with its deep economic moat and other advantages, the company has a strong chance of continuing to grow at an above-average pace. This will enable B-rated CSGP to sustain its high valuation (51.6 times earnings) and climb up to higher prices.

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Realty Income - >>> Realty Income (NYSE:O) has been a dependable income stock over the years. The real estate investment trust (REIT) delivered its 100th consecutive quarter of dividend increases in late 2022 and has boosted its payout 117 times since its initial public offering (IPO) in 1994. It has delivered more than 25 years of dividend growth, putting it in the elite category of a Dividend Aristocrat.

The REIT focuses on buying essential retail properties (think home improvement, grocery, and convenience stores) and industrial real estate. It triple net leases (NNN) the freestanding properties to high-quality tenants, making them responsible for building insurance, maintenance, and real estate taxes. That provides Realty Income with very stable income to continue increasing its dividend.

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https://www.fool.com/investing/stock-market/types-of-stocks/income-stocks/


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>>> US real estate market in ‘big trouble,' expert warns


Fox News

by Kristen Altus

January 13, 2023


https://finance.yahoo.com/news/us-real-estate-market-big-110000451.html


As the Federal Reserve continues its hawkish market reset – which has contributed to a rise in interest and mortgage rates – real estate experts are sounding the alarm that "big trouble" lies ahead for the U.S. market.

"When you have a rise and increase in interest rates like we've had, that is a big problem for housing. Interest rates are like the mother's milk of housing," Pulte Capital CEO Bill Pulte told FOX Business’ Maria Bartiromo Thursday. "And if you cut it off, you're in big trouble. And when you've had these massive increases in interest rates, it just puts a lot of things to a stop."

"It's a tale of two cities. I hate to relate it to politics, but the more red states, places like Florida, Texas, the office buildings are pretty busy. Business is booming. There's more demand and supply," Thor Equities CEO Joe Sitt said later on "Varney & Co." "It's more, I hate to say it, markets like ours here in New York, Chicago, San Francisco is a ghost town. San Francisco's been destroyed."

One of the nation’s largest homebuilders, KB Home, released its Q4 report Wednesday which indicated more signs of housing weakness. According to the report, KB Home saw a 68% cancelation rate on new construction projects.

Mortgage rates also increased last week, with the 30-year rate rising to 6.48% and the 15-year mortgage coming in at 5.73%, up from 5.68% the week prior. Higher mortgage rates continue to test homebuyer affordability, according to the Mortgage Bankers Association (MBA).

The U.S. housing market has "big trouble" ahead, Pulte Capital CEO Bill Pulte said on "Mornings with Maria" Thursday, January 12, 2023.

Fed Chair Jerome Powell warned on Tuesday that raising interest rates to slow the economy "are not popular" in the short term, and could even create political opposition.

"Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time," Powell said Tuesday in remarks prepared for delivery at a conference held by Sweden's central bank. "But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy."

"It’s going to be tough," Pulte spoke of the real estate market. "The [KB Home] cancelation rate... was through the roof, something like 68%, which is just enormous. Usually, that number is around 10, at most 20%. So I think we've got a tough road ahead this year, and I think you'll start to see that in earnings toward the back half of this year and frankly, into next year. I think the earnings are going to continue to deteriorate."

Property investor Sitt claimed it’s "going to take some time" for metropolitan areas to see a rebound in their commercial and personal housing markets.

"I think the cities are going to wake up and try to react," Sitt said. "I would say San Francisco rents are probably down somewhere in the neighborhood of about 35%. No exaggeration. It's dramatic what's going on in that marketplace."

Real estate investments are going where the money "feels comfortable," according to Sitt, who predicted that Sunbelt states might experience less volatility this year due to a manufacturing job boom.

"I hate, again, relating to politics, but from a global place, the autocratic countries are doing the best. Singapore, Dubai, Monaco. Some people joke Florida and Texas is part of that," the Thor Equities CEO said. "The world order is changing, particularly because of some of the conflict with China. So you've got this tremendous onshoring wave, and so all of the Southeast now is going to get their next economic benefit. I call it the battery belt, that battery belt market of all those jobs that are going to create for manufacturing, is going to have ripple effects there."

Pulte contested that his firm has yet to find promising opportunities in the real estate sector so far this year under rising rate pressure.

"Not yet. It's going to be pretty interesting," Pulte said. "The M&A [mergers and acquisitions] environment in housing and building products is something to keep an eye on over the next six, 12, 18 months. It's not time yet."

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