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Eight Must Reads for the CRE Industry Today (Nov. 18, 2021)

Kayne Anderson Real Estate has closed a new opportunistic equity fund with $2.75 billion in commitments to buy student housing, seniors housing and medical office buildings, reports Multi-Housing News. The amount of sublease office space in the U.S. market declined in the third quarter for the first time since the pandemic began, according to research from Cushman & Wakefield. These are among today’s must reads from around the commercial real estate industry.

  1. Kayne Anderson Real Estate Raises $2.8B Fund “Kayne Anderson Real Estate, the real estate private equity arm of Kayne Anderson Capital Advisors LP, has closed its sixth opportunistic equity fund with $2.75 billion in capital commitments that it intends to invest in student housing, senior housing and medical office assets. The fund, Kayne Real Estate Partners VI LP, significantly surpassed its original $2 billion goal and is the largest fund raised by Kayne Anderson Capital Advisors to date.” (Multi-Housing News)
  2. U.S. Apartment Building Sales Soar to Record, with Sun Belt Driving Deals “U.S. apartment building sales have jumped to record levels, outpacing all other forms of commercial real estate. Deals totaled $241.9 billion in the 12 months through September, up 27% from the same period in 2019, according to a RealPage Inc. analysis of data from Real Capital Analytics Inc. going back to 2001. Apartments accounted for 44% of all transactions, the most for any commercial-property type.” (Bloomberg)
  3. Sublease Office Sector Inventory Declined for the First Time Since Pandemic Began “The North American sublease market may have finally peaked after several quarters of increasing inventory. This timing would match a similar path to previous recessions when sublease space increased for approximately two years before hitting its highest point and then receding. In Q3 2021, sublease office space declined in more than 50% of North American markets, including 20 markets where sublease inventory dropped quarter-over-quarter (QoQ) by 100,000+ SF.” (Cushman & Wakefield)
  4. U.S. Distressed Investor Oaktree Capital Raises U.S. $16 Billion in Latest Fund “U.S. distressed-investing expert Oaktree Capital Management has raised nearly US$16 billion with its biggest fund ever, as it hunts opportunities in China’s embattled property development market and other parts of Asia. The Oaktree Opportunities Fund XI, which began operations in July 2020, has committed about 70 per cent of its capital raised to a mix of opportunities in both public and private investments across a mix of geographies and sectors, including investments in out-of-favour industries and capital solutions to companies with limited funding options, the company said.” (South China Morning Post)
  5. Vornado Seals $950M CMBS Loan for Trophy Tower “Vornado Realty Trust has completed the $950 million refinancing of 1290 Avenue of the Americas, a 2.1 million-square-foot Class A office building in Midtown Manhattan’s Plaza District. The investment trust has a 70 percent majority interest in the 43-story property, while The Trump Organization holds the remaining stake. The seven-year, interest only CMBS loan has a LIBOR plus 1.51 percent rate in the first five years, which increases by .25 percent in the last two years.” (Commercial Property Executive)
  6. Cross-Border Investors Are Back Firing on All Cylinders—But What They Want from CRE Has Changed “If you're a global investor, what you're buying now is probably changing.” (Bisnow)
  7. What Went Wrong with Zillow? A Real Estate Algorithm Derailed its Big Bet “Zillow, which rose to prominence with online listings, had bet its future on an algorithm-based home-flipping outfit called Zillow Offers, which would buy houses, make minor renovations and sell quickly. The first quarter delivered home-sale profits that were more than twice as high as anticipated, the company said. Zillow expected to make money primarily from transaction fees and from services such as title insurance—not from making a killing on the flip. The company’s algorithm, which was supposed to predict housing prices, didn’t seem to understand the market. Zillow was also behind on its target for home purchases.” (The Wall Street Journal)
  8. Former Pittsburgh Steel Mill to Become Biomedical-Manufacturing Plant with Mellon Grant “The Richard King Mellon Foundation announced a $100 million grant to fund a center for biomedical manufacturing, the latest piece in a plan to redevelop a stretch of riverfront outside Pittsburgh nearly half the size of the city’s downtown. The 178-acre property known as Hazelwood Green is the site of a former LTV Steel mill that shut in the 1990s. The $100 million grant will fund a bio-manufacturing facility called the Pitt BioForge to be run by the University of Pittsburgh, with the aim of attracting companies that produce cell and gene therapies to treat cancer and other health conditions.” (The Wall Street Journal)
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