Editors’ Weekly News Roundup, July 24th – July 28th
It’s been said that an impressive percentage increase from a low basis looks more dramatic than it actually is, and maybe the same holds true for a big percentage decrease from a high basis. The most-read story of the past week on Connect CRE provides an example of the latter scenario.
Based on a report from Avison Young, Multifamily Sales Post Steep Year-Over-Year Decline for H1 2023 charted a 70.6% drop from the volume seen in the first half of 2022. It could be argued that the decrease looks more pronounced because 2021 and early 2022 represented a recent peak for multifamily investment sales. However, it could also be argued that 70.6% is a big percentage drop no matter how you look at it.
That being said, the decrease didn’t occur in a vacuum: the second half of 2022 saw “spiking interest rates, growing cap rates [and] softening rents” beginning to take their toll, as Avison Young’s Peter Sherman put it. More recently, he added, “There is greater investor clarity, and a new equilibrium is settling in the market.”
Investment sales volume isn’t the only thing that has been halted by external forces. Our second most-read story, Chip Maker Delays Opening of $40B Phoenix Plant, brings another factor into the equation: a shortage of specialized labor.
The story drew strong response from both Phoenix and national readers, largely because a great deal of investment and development in the region has been predicated on the opening of that $40-billion semiconductor plant. Taiwan Semiconductor Manufacturing Co. had planned to begin production at the facility in 2024, but due to a shortage of workers to install equipment at the site, the launch date is now up in the air.
Third and fourth places in our weekly countdown of the top five Connect CRE stories went to M&A news. Blackstone Real Estate Income Trust is selling its Simply Self Storage business at a nice markup over what it paid to acquire the platform less than three years ago.
Public Storage to Acquire BREIT’s Self-Storage Platform for $2.2B illustrated a continuation of the strategies of both buyer and seller. For Public Storage, the acquisition “reflects the continued execution of our multi-factor external growth platform,“ said CEO Joe Russell. For Blackstone, which paid $1.2 billion for the Simply business in late 2020, the deal is another example of its successful and time-honored buy/fix/sell strategy.
Connect CRE’s fourth most-read story of the past week originated as a breaking news story on our sister platform, Connect Money. PacWest Bancorp, which has made headlines on Connect CRE recently for a series of construction loan sales, will now combine with another bank in the Golden State. As detailed in Banc of California, PacWest to Merge in All-Stock Deal, the all-stock transaction will create a company with approximately $36.1 billion in assets, $25.3 billion in total loans and $30.5 billion in total deposits.
Rounding out the top five is another California transaction. This one provides a good illustration of how the hospitality sector has rebounded since the pandemic, especially the leisure travel segment. Sonnenblick-Eichner Arranges $100M Sale of Luxury Boutique Resort in Rancho Santa Fe summarized the deal for the 85-key Inn at Rancho Santa Fe in north San Diego County. The quality of the property’s renovation and the lack of encumbrance by franchise and management agreements made it a sought-after investment, said Sonnenblick-Eichner’s Elliot Eichner.
For a comprehensive overview of the current CRE market—its challenges and concerns on the one hand, its opportunities on the other—be sure to delve into our Weekender coverage of the latest LightBox survey. You’ll find it in this weekend’s edition, along with stories focusing on the current office outlook, efforts to decarbonize the semiconductor industry and the impact of a certain blonde musical superstar on economics.