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10 Must Reads for Real Estate Investors for the Weekend (June 2, 2023)

REITs are seeking higher share prices by stepping up mergers and acquisitions, reported Bisnow. Blackstone has brought its office holdings from 60% of its portfolion in 2007 down to 2% today, according to The Real Deal. These are among today’s must reads for real estate investors.

  1. Commercial Real Estate Can Be a Problem for Banks, and Also a Solution “People are worried about banks’ commercial real-estate lending. They should also be worried about what would happen if they didn’t do it. Right now, banks are facing a revenue issue. In the first quarter, the yield U.S. lenders earned on what they owned rose more slowly from the fourth quarter than the interest rate they paid to fund those assets, according to the Federal Deposit Insurance Corp.’s updated Quarterly Banking Profile, released this week. That compressed banks’ net interest margin, which is a key measure of their core profitability.” (The Wall Street Journal)
  2. Seeking Better Share Prices, REITs Rack Up $22B in M&A “Upheaval seems to be the new normal in the real estate industry, at least for now, and as they try to navigate the changing tides, REITs are seeking safety in numbers through mergers and acquisitions, with several major marriages taking place so far in 2023. Five real estate income trust acquisitions totaling about $22B occurred in the first five months of this year, putting it on pace to beat 2022 in deal count, if not dollar volume, as REITs look to boost their share prices or insulate themselves from market shocks.” (Bisnow)
  3. Blackstone Nearly Out of Slumping Office Market “Blackstone’s office holdings account for just 2 percent of its real estate portfolio, down from 60 percent in 2007.” (The Real Deal)
  4. REIT Stocks Outperform Private Equity, Real Estate Historically: Report “Maybe the publicly traded REITs are getting a bad rap? A new report from Center Square Investment Management, a Philadelphia-based real estate investment firm, found that publicly traded real estate investment trusts (REITs) — at least the ones that aren’t focused primarily on office space — have historically outperformed private real estate and public equities in the aftermath of Federal Reserve interest rate hikes going back 28 years.” (Commercial Observer)
  5. Investors Slam Brakes on U.S. Home Purchases as Profits Dry Up “With the easy money gone, investors are retreating from the US housing market at record speed. Investors bought nearly 49% fewer homes in the first quarter compared to a year earlier, with higher interest rates, softening rents and declining values cutting into their ability to make money, according to a report from Redfin. That’s the biggest annual decline in data going back to the first quarter of 2000 and was larger than the nearly 41% drop in overall purchases.” (Bloomberg)
  6. Miami CRE Investment Sales Drop 80% from 2022 Peak “Miami’s once seemingly unstoppable investment sales market appears to have come to a screeching halt, with an 80 percent annual dropoff across all commercial real estate asset types in the first quarter of 2023, according to a report from brokerage Dwntwn Realty Advisors. The numbers indicate that the rapid rise of interest rates throughout 2022 is hitting Miami just as it is elsewhere, despite the strength of its fundamentals, per the report.” (Commercial Observer)
  7. Veritas in the Running for its Own $1B in Delinquent Debt “Veritas Investments is planning to bid on its own delinquent debt, totaling roughly $1B, associated with two sizable portfolios of apartment buildings in San Francisco. The investor probably will do so with a new deep-pocketed capital partner to forestall the possibility of another default, The Real Deal reports, citing an anonymous source close to the bidding.” (Bisnow)
  8. Airbnb Sues New York City Over Limits on Short-Term Rentals “A yearslong conflict between Airbnb and New York City escalated on Thursday after the home-sharing platform sued the city to undo stringent new restrictions that limit short-term rentals. A new law, passed by the city in 2021, sought to prevent illegal short-term rentals by requiring hosts to register with the city. Short-term rentals — for fewer than 30 consecutive days — have largely been barred if hosts are not present, according to state law, though the city and Airbnb have disagreed about how expansive such prohibitions and other complicated city codes should be.” (The New York Times)
  9. S.F. Started Taxing Vacant Storefronts. Here’s Why Only 74 Owners and Tenants Have Paid So Far. “The low numbers mean there were only 2.6% of around 2,800 San Francisco property parcels that were potentially subject to the tax.” (San Francisco Chronicle)
  10. Designing Student Housing for the Modern Renter “Today’s college students want a housing environment that reflects a dynamic blend between contemporary and functional design. The pandemic also induced new preferences for social spaces and amenities. These factors are influencing how architects and designers approach student housing projects to deliver spaces that students want to be in.” (Multi-Housing News)
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