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Nine Must Reads for Real Estate Investors Today (April 12, 2023)

Diversified Healthcare Trust struck a merger agreement with Office Properties Income Trust, reports McKnights Senior Living. Commercial Observer looks at the conflicting pictures of what's going on in the multifamily sector. These are among today’s must reads from around the commercial real estate industry.

  1. Diversified Healthcare Trust to Merge with Office Properties Income Trust “Newton, MA-based Diversified Healthcare Trust, with a senior living operating portfolio that includes 237 communities with 25,346 living units, has entered into an agreement to merge with Office Properties Income Trust, the real estate investment trusts announced this morning. The transaction is expected to close during the third quarter. ‘The merger with OPI greatly benefits DHC both strategically and financially,’ DHC President and CEO Jennifer Francis said in a statement. ‘Strategically, the combined company will be in immediate compliance with debt covenants, have immediate access to multiple capital sources through its greater scale and diversity to address upcoming debt maturities and increase liquidity to continue funding the ongoing SHOP [seniors housing operating portfolio] recovery and capital improvement plan.’” (McKnights Senior Living)
  2. Soaring Insurance Costs Could ‘Paralyze’ CRE, So Investors Are Calling for Reform “The price of commercial property insurance has risen so dramatically in the last two years that it has reached a crisis point, real estate players, who are calling for lending reform and government support to alleviate the pressure it is putting on the market, say. ‘Something's got to give or it's just going to paralyze the industry,’ said Kevin Keane, the chief operating officer at Bainbridge Cos., an owner, developer and manager of apartment communities that run from Maryland south down to Florida, west to Texas and into Tennessee.” (Bisnow)
  3. The Janus Face of Multifamily Real Estate “It is a tale of two economies when it comes to the multifamily space in commercial real estate. A pair of reports by data research firms Yardi Matrix and MSCI paint a dueling picture of the national multifamily market: rental prices and occupancy rates have stabilized amid a challenging first quarter, revealing strong fundamentals, but monthly transaction volume and pricing for the buildings themselves fell in February, threatening investors’ returns.” (Commercial Observer)
  4. Third-Party Logistics Providers Drive U.S. Big-Box Warehouse Leasing Activity “Based on new data from CBRE, third-party logistics (3PL) providers leased more big-box (200,000 sq. ft. or larger) warehouse space in North America than any other occupier category. Accounting for 41% of all big-box lease transactions in 2022, 3PLs expanded their footprints and claimed the largest share for the first time since CBRE began tracking the activity in 2012. 3PLs typically operate companies' logistics and warehousing operations on a contractual basis, gaining efficiencies by handling that work for multiple clients simultaneously. As a result of enduring pandemic-era shifts, companies have expanded their reliance on 3PL partners to create resilient supply chains and economically address customer needs.” (World Property Journal)
  5. Houston Apartment Owner Loses 3,200 Units to Foreclosure as Multifamily Feels the Heat “An apartment-building investor lost four Houston complexes to foreclosure last week, the latest sign that surging interest rates are beginning to upend the multitrillion-dollar rental-housing market. Applesway Investment Group borrowed nearly $230 million to buy the buildings with more than 3,200 units as part of a Texas buying spree during the pandemic. Arbor Realty Trust, a publicly traded mortgage company, foreclosed on the properties after Applesway defaulted on the loans, according to public documents filed in Harris County, Texas.” (The Wall Street Journal)
  6. A Big Reason Cities Want Workers to Return to the Office “If workers continue to work remotely, it will further disrupt the ecosystem of restaurants, bars, clubs, gyms, nail salons, haircutting establishments, retail-shopping stores and an array of other businesses in urban areas. Without the steady flow of people into the city, mom-and-pop shops and an array of businesses close shop, as they don’t have enough customers to keep them afloat. For example, New York City businesses are losing customers and revenue with people working remotely. The workers coming into Manhattan are spending $12.4 billion less per year than they were before the pandemic, according to a Bloomberg report citing data from Stanford University economist Nicholas Bloom’s WFH Research team.” (Forbes)
  7. Investors Can Pick the ‘Hot Spots’ in International Real Estate “Investors who bemoan that fact that they didn’t get in on real estate investments in the United States in the past should look overseas today in areas where they can get in on the ground floor now, according to Ronan McMahon, a seasoned real estate investor and advisor and the editor of ‘Real Estate Trend Alert.’ ‘There are always huge opportunities out there, an advisor just has to help his client do his due diligence and have trusted resources on the ground,’ McMahon said in an interview. McMahon is the author of ‘The Profit Principle: An Insider’s Guide to Doubling Your Money in Real Estate Overseas’ and ‘Real Estate that Will Make You Rich, And You Can Get It for Free.’” (Financial Advisor)
  8. Ultra Low Interest Rates Will Be Back—But That’s Not Necessarily a Good Thing for Real Estate “Inflation was a blip, and long-term ultra-low interest rates will return — but only because world economic growth will be anemic. That is the not entirely upbeat conclusion of the latest IMF World Economic Outlook, which portrays inflation as a blip, not a global reset.” (Bisnow)
  9. Woodcliff Realty Advisors Hires Retail Real Estate Veterans “Woodcliff Realty Advisors, a commercial real estate consulting group based in New Jersey, has announced the new addition of two retail real estate veterans, Gregory T. Maloney and Bill Rose. ‘Greg Maloney and Bill Rose bring new areas of expertise previously missing from the consultant lineup at Woodcliff Realty,’ said Rudolph E. Milian, president and CEO of the Woodcliff Lake.” (Connect CRE)


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