RLJ Lodging reportedly rejects $3B bid from Blackstone | Big companies converge on suburban single-family home rental market | CRE sales starting to tail off, but investors find bright spots
July 21, 2017
The daily source on REITs and real estate investment
RLJ Lodging Trust recently rejected a $24-a-share acquisition offer worth $3 billion from a private equity firm that sources identified as Blackstone. If RLJ had accepted the offer, about which it made a regulatory filing, it would have ended its bid to acquire FelCor Lodging Trust.
Wall Street is betting that homeownership levels will remain low as Americans affected by the Great Recession turn to rentals instead. Major companies such as Progress Residential and Colony Starwood Homes are snapping up suburban single-family homes to rent out and are gradually growing their market share.
Commercial real estate investment sales volume remains above historical levels but dropped year-over-year in the first half of 2017, according to CoStar. However, some sectors -- particularly logistics, light industrial and office -- are showing strength.
Two of Canada's largest REITs, RioCan REIT and a unit of H&R REIT, are among the potential bidders for Sears Canada's assets now that the retailer has gotten the green light to entertain offers, two sources say. The REITs are currently looking at the leases but are also waiting to see how the company may be restructured before they make an offer, the sources say.
To position themselves for demand related to "last mile" distribution for e-commerce retailers, institutional investors such as Canada-based Ivanhoe Cambridge and DRA Advisors are buying small warehouses in urban areas. These properties are trading higher than newer product in suburban locations, and the rents are rapidly rising.
Demand is so great for medical office buildings now that cap rates have compressed to 6.2%, from their spike of close to 8.5% in 2013. "Combined with off-peak total transaction volume, the numbers seem to reflect what a lot of us are feeling, which is a very competitive market with more interested buyers than there are opportunities," says Revista's Hilda Martin.
Colony Northstar has acquired a 2.8 million-square-foot industrial portfolio from TA Realty for $201 million. The portfolio is concentrated in the Baltimore area, with 400,000 square feet in Philadelphia and Delaware.
A provision of the Emergency Economic Stabilization Act of 2008 allowing hedge funds to defer tax payments on offshore income will sunset in 2018, forcing funds to pay federal, state and local back taxes. The Joint Committee on Taxation estimated in 2008 that the measure would raise $25 billion.
Rick Rieder, global chief investment officer of fixed income at BlackRock, expects low interest rates to persist, regardless of who succeeds Janet Yellen as head of the Federal Reserve. "Quite frankly, part of why the Fed is executing this reduction of the balance sheet -- you're getting ready for the new Fed chair," he says, noting Fed leadership transitions tend to be smooth.
