Editors’ Weekly News Roundup, June 26th – June 30th
A massive portfolio sale, a big financing, a cross-border joint venture and two downbeat forecasts comprised the most read stories on Connect CRE over the past week. Leading the roster was a breaking news story on the latest transaction between two giants that have done numerous deals together, Prologis and Blackstone.
Prologis Acquires $3.1B of Blackstone Industrial detailed an agreement for San Francisco-based Prologis to acquire 14 million square feet of warehouse properties in 10 regional hubs, including Northern and Southern California, New York/New Jersey and South Florida. Although a $3.1-billion sale is sizable by any measure, it doesn’t exactly constitute a selloff of Blackstone’s industrial holdings: the company owns 175 million square feet of warehouses globally.
In second place was the latest economic outlook from Fannie Mae’s Economic and Strategic Research Group. As reported in Amid Mixed Data, Fannie Mae Sees Recession as “Most Likely”, the group expects the Federal Reserve to continue its restrictive monetary policy stance until it’s clear that inflation has eased. However, it’s likely that by that time the U.S. economy will already be heading for an inevitable recession.
Fannie Mae is expecting that recession to be relatively mild and short-lived. Unfortunately, the same can’t be said about the downturn in office pricing. A forecast from London-based Capital Economics says that U.S. office values are expected to plunge 35% from the peak by the end of 2025 and take 15 years or more to recover.
The week’s third most read story, U.S. Office Pricing Not Expected to Recover Until 2040, attributed that lengthy drought to changes in demand for desk space as hybrid and remote work reshape the sector. Economist Kiran Raichura wrote that while demolitions and conversions may take care of the lowest-quality office assets, “ultimately landlords will have to bear those costs.”
In the multifamily sector, the picture was brighter. $947M Loan Goes to West Coast’s Largest Apartment Complex, our fourth most read story of last week, told of a financing for the 4,249-unit Park La Brea complex in Los Angeles, arranged by a Newmark team for repeat borrower Prime Residential. Freddie Mac expects to securitize the loan through its K-Deal program.
The story illustrated the point that even in what Newmark’s Mitch Clarfield called “turbulent times,” quality properties and quality sponsors continue to get deals done.
Completing the top five was a story on a property type that is gaining more visibility in the eyes of institutional players: self-storage. This time, it’s the real estate subsidiary of one of Canada’s largest pension fund investors, CDPQ.
That subsidiary, Ivanhoé Cambridge, is collaborating with U.S. partners on a new venture. Ivanhoé Cambridge Forms Partnership to Enter U.S. Self-Storage Sector spells out the parameters of the program: Tier I and Tier II markets, with an initial investment of US$400 million.
Ivanhoé’s Michael Neuman observed that “self-storage has proven its resilience throughout economic cycles, outperforming almost all other sectors over the short and long term.” The firm considers self-storage to be a niche category within industrial, although an argument can be made that it’s actually a subset of retail, since it tends to draw individual and household users rather than larger-scale business customers.
Two stories that drew strong regional and national leadership, while remaining outside the top five, illustrated opposite ends of the success spectrum when it comes to closing deals. TruAmerica Multifamily refinanced five properties in its national portfolio for $300 million. It was a proactive move that replaced “excellent debt” with “even more attractive financing,” as founder, CEO and president Robert E. Hart put it. In the current lending environment, that’s an accomplishment not everyone could pull off.
Conversely, a partnership led by Terra Group failed to close a $1.225-billion acquisition of a 15.5-acre Downtown Miami site on Biscayne Bay. The seller, Malaysia-based casino operator Genting, wouldn’t budge on its terms, and the deal collapsed.