Fitch: REITs' modest development activity helped keep cycle going | JBG Smith Properties begins trading on NYSE | CMBS challenged as pre-crisis loans come due
July 19, 2017
The daily source on REITs and real estate investment
REITs' restrained approach to development during the expansion has kept supply in check and likely allowed the cycle to continue longer, according to Fitch Ratings. "Throughout this postcrisis cycle, REITs have demonstrated discipline, as the sector has navigated an environment of historically low-cost debt capital, record high commercial real-estate values and good liquidity positions," the ratings agency said in its research note.
JBG Smith Properties, now the largest REIT that focuses on the Washington, D.C., area, began trading Tuesday on the New York Stock Exchange. Trading for the REIT, which has over $8 billion in assets, closed at $37.24 per share -- above the $33-to-$36.50 range that analysts had predicted and below the $41.75 per share that analysts say the REIT is worth.
Investors are losing their appetite for US commercial mortgage-backed securities as pre-crisis loans become due for refinancing. As they flock to debt from simpler balance-sheet lenders, the market is left with too much risk sitting on a limited number of properties.
A Europe-focused fund sponsored by Gramercy Property Trust has completed the sale of the fund's assets to a consortium of clients managed by AXA Investment Managers - Real Assets. The previously announced sale of the portfolio, which includes 40 properties in the UK, France, Germany, Poland, Belgium, the Netherlands and Luxembourg, has been valued at $1.1 billion.
Colony NorthStar, which is billionaire Tom Barrack's main investment vehicle for real estate, is still working to appeal to investors. "We've got a lot more work to do, but we're quite optimistic about what we are doing and how it's going to look six months to a year from now," says CEO Richard Saltzman.
There is more opportunity in the listed real estate market because the private space has gotten so expensive due to the liquidity in the system, particularly in Asia-Pacific markets, says Mira Christanto of APG Asset Management. In the listed market, "there is a NAV discount of 40% to 50% for some of the names," many of which are high-quality, she says.
Bluerock Residential Growth REIT is going to be a net acquirer of properties this year, says its president and CEO Ramin Kamfar. "You'll see us outside the Sun Belt as we grow," he says.
Wyndham Hotel Group is advancing its presence in the midscale and Midwestern markets with its planned acquisition of the AmericInn brand and its management company, Three Rivers Hospitality. The $170 million purchase from Northcott Hospitality brings Wyndham's brand count to 20.
Housing starts -- led by multifamily construction -- rose in June compared to the previous month, reversing three months of decline, the Commerce Department reports. Although builders are less confident and the labor market is tight, "demand for new housing continues to outpace supply," wrote NatWest Markets economists.
Parts of the Sarbanes-Oxley Act set barriers too high for accounting compliance and should be rolled back, New York Stock Exchange Group President Tom Farley told lawmakers during a congressional hearing. "The regulatory environment for public companies over the past 15 years has grown increasingly difficult to navigate," Farley said.
