Real Estate Advisory & Investment
Morgan Stanley’s commitment to a Labor Day return to office, leads our team to do a quick deep dive into current occupancy rates for ten top US office markets.
Austin, Dallas, and Houston lead the most recent numbers with 45% average office occupancy. Chicago, Philadelphia, and Washington DC are at 25.5%. Los Angeles, San Francisco, and San Jose are at 20%. New York is 18.2%.
Washington Prime Group (WPG) announced its prepackaged bankruptcy and $100 million debtor in possession loan yesterday. The restructuring support agreement with Consenting Creditors includes provisions to reduce total debt by nearly $1 billion and the possibility of a $325 million equity rights offering.
WPG is the third publicly-traded mall operator in the US to file for bankruptcy in the past 8 months.
Ares is expanding its real estate AUM by almost 50% with the takeover of Black Creek and its $11.6B in core and core-plus assets. Black Creek manages the assets thru two non-traded REITs and several institutional funds, including an open-ended vehicle focused on US industrial property.
The deal follows closely on the heels of Ares raising $1.7B for an opportunistic real estate fund as well as Ares buying Landmark Partners to capture $18.7B AUM in private equity, real estate, and infrastructure funds.
LOW reported 1Q21 comps +25.9% with SSS increased +24.4% (compared to HD U.S. +29.9%). LOW saw over +18% growth in all 15 U.S. regions and +30% growth from Pro customers.
Lumber, kitchen & bath, electrical, seasonal & outdoor living, and décor categories led the charge with comps well over 30%. Positive traffic and ticket growth were in double digits and have been for the past 4 quarters.
Operating fundamentals improved across U.S. markets in April as the economy reopens and begins to normalize in eight major markets: Boston, Manhattan, DC, Atlanta, Dallas-Fort Worth, Los Angeles, San Francisco, and Seattle.
Asking rates improved across the markets, led by 2.2% MoM Atlanta; effective rents improved YoY for each market except Manhattan and San Francisco; absorption on a trailing 12-month basis was strongest in Atlanta, Dallas-Fort Worth, and Boston, while Manhattan and San Francisco were negative.
2H2021 outlook remains bullish
CWK reported better than expected 1Q201 EPS on Friday driven by stronger capital markets and leasing revenue, particularly industrial leasing.
1Q2021 leasing revenue declined 3.3% YoY compared to a 36% YoY decline in the prior quarter. Office leasing activity remains soft, although in line with its peers, CWK noted that property tours continue to pick up and should drive revenue acceleration in 2H2021.
Eight residential REITS reported 1Q2021 earnings within the past week. Key trends include improving rent collection rates, rising occupancy, and increasing rent rates over 4Q2020.
More specifically, operating highlights include: 1) sunbelt strength in rent collections and relative weakness in urban, coastal collections; 2) occupancy trends improving in coastal cities; and 3) challenged blended leasing spreads for companies exposed to coastal, urban markets, but signs of emerging strength in April.
Dick’s Sporting Goods, Restoration Hardware, Tractor Supply, and 20 additional retailers are leaning into their digital transformation with 46% YOY increases in capex and 40% of capex estimated to be tied to digital infrastructure.
To put the investment in perspective, DKS and RH digital sales are estimated at 30% and 48% percent of total 2020 sales, respectively, while TSCO digital sales only represented 3% of 2020 sales.
BlackRock’s new $4.4 billion five-year credit facility ties lending costs to ESG targets. BlackRock is joining Carlyle Group in the emerging use of finance terms that encourage borrowers to meet ESG goals. Carlyle secured a $4.1 billion three-year facility from a consortium led by Bank of America in February.
“The ESG-linked credit facility enhances BlackRock’s commitment and accountability to achieving certain sustainability goals by integrating a component of financial alignment through our liquidity management strategy,” a BlackRock spokesman said.
Cerberus Capital Management has raised $2.8bn for its opportunist global real estate fund, Cerberus Institutional Real Estate Partners V (CIREP V).
Half of the CIREP V’s investment is forecast to be in Europe with the US forecast to be 40% of assets. The 10% balance is expected to be Brazil, China, and other Asian markets.
