December 4, 2023

2020 worst year for US hotels; Blackstone leads FY’20 nontraded REIT fundraising

S&P Global Market Intelligence offers our top picks of real estate news stories and more…

2020 worst year for US hotels; Blackstone leads FY’20 nontraded REIT fundraising

S&P Global Market Intelligence offers our top picks of real estate news stories and more published throughout the week.

The sell-off of net-lease real estate investment trusts at the start of 2021 around the uptick in interest rates offers an attractive entry point for the group, which should have a positive year, an analyst said.

Among the REIT property groups, net-lease landlords, which own single-tenant properties leased on a long-term basis, are particularly interest-rate sensitive, and tend to underperform when interest rates are on the rise. But while rates have ticked higher in recent weeks, absolute rates should remain low by historical standards, contributing to “historically wide” investment spreads for many net-lease names, Evercore ISI analyst Sheila McGrath said in a research note.

“We remain constructive on the net-lease sector given improving collections and a low interest rate environment that sets the stage for positive spread investing, growing [adjusted funds from operations]/share and dividends per share,” the analyst said, citing STORE Capital Corp., Essential Properties Realty Trust Inc., VEREIT Inc. and Four Corners Property Trust as “focus names.”

What is more, the reopening of the economy as the coronavirus pandemic recedes will boost net-lease fundamentals, especially for those in the retail arena. McGrath expects AFFO among the net-lease names she covers to grow, on average, 3.5{d54a1665abf9e9c0a672e4d38f9dfbddcef0b06673b320158dd31c640423e2e5} in 2021 and 5{d54a1665abf9e9c0a672e4d38f9dfbddcef0b06673b320158dd31c640423e2e5} in 2022.

“Even if rates continue to drift gradually higher, we believe that the AFFO and dividend growth stories should stack up favorably versus other REIT sectors,” she said.

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Pandemic blows

* U.S. hotels recorded all-time low figures for the year ended 2020, with occupancy and revenue per available room falling 33.3{d54a1665abf9e9c0a672e4d38f9dfbddcef0b06673b320158dd31c640423e2e5} and 47.5{d54a1665abf9e9c0a672e4d38f9dfbddcef0b06673b320158dd31c640423e2e5} to 44.0{d54a1665abf9e9c0a672e4d38f9dfbddcef0b06673b320158dd31c640423e2e5} and $45.48, respectively, and average daily rate sliding 21.3{d54a1665abf9e9c0a672e4d38f9dfbddcef0b06673b320158dd31c640423e2e5} to $103.25, the lowest figure in any year since 2011, according to STR. The data provider said the U.S. hotel industry exceeded 1 billion unsold room nights for the first time, eclipsing the 786 million unsold room nights during the great recession in 2009, making 2020 officially the worst year on record for the industry.

* Real Capital Analytics said commercial real estate is still priced attractively compared to other asset classes despite the challenging market, noting that industrial and multifamily were the leading property types for investment in 2020, as office took the back seat due to investor uncertainty around the near- and long-term future of the asset class.

Funds in 2020

* Private equity and real estate giant The Blackstone Group Inc. dominated nontraded REIT fundraising in 2020 by raising $7.78 billion of the total $10.8 billion, representing a 71.8{d54a1665abf9e9c0a672e4d38f9dfbddcef0b06673b320158dd31c640423e2e5} market share, according to investment banking firm Robert A. Stanger & Co. Inc. This compares to $11.88 billion raised by nontraded REIT sponsors in 2019.

Free going

* Hotel REIT Ashford Hospitality Trust Inc. said it was no longer in default of a $395.0 million loan it secured in 2018 that was backed by eight hotels.

Call for action

* Activist shareholder Land & Buildings Investment Management LLC called on Apartment Income REIT Corp. to refresh the majority of its board members and form a special board committee to review strategic alternatives for the REIT. In a letter addressed to Apartment Income’s board, the shareholder claimed the company had failed to close the gap to NAV, even after spinning off from Apartment Investment & Management Co.


* Dream Finders Homes Inc. priced its IPO of 9.6 million class A common shares at $13.00 apiece. The Jacksonville, Fla.-based homebuilder expects gross proceeds of roughly $124.8 million from the offering. The company’s shares are expected to begin trading on the NASDAQ Global Select Market under the ticker DFH on Jan. 21.

Property panel

* Canada’s Dream Industrial REIT disclosed more than C$465 million of property acquisitions across Canada, Europe and the U.S. The acquisitions comprise 20 already closed or about-to-be-closed assets totaling 2.9 million square feet of gross leasable area.

Around the world

* Marriott International Inc. said it is planning to open 100 hotel properties in the Asia-Pacific region in 2021. The hotelier plans numerous openings in China, including JW Marriott Shanghai Fengxian in Shanghai, expected to open in spring, and will debut the W Hotels brand in Osaka, Japan, among other openings.

* Blackstone secured regulatory competition approval from the Swedish Competition Authority to acquire a portfolio of 214 warehouses and logistics assets from Castellum AB for 18.1 billion Swedish kronor. The properties total approximately 1.3 million square meters and are 92{d54a1665abf9e9c0a672e4d38f9dfbddcef0b06673b320158dd31c640423e2e5} occupied.

* Aggregate Holdings SA is in talks with the shareholders of CA Immobilien Anlagen AG to make a takeover offer for the Austrian property company, Bloomberg News reported, citing people familiar with the matter. The real estate investor later confirmed it was contemplating a potential acquisition of a stake in CA Immobilien, potentially hinting at a rival offer to the one planned by Starwood Capital.

* Swedish real estate company Samhällsbyggnadsbolaget i Norden AB (publ) revised its takeover offer for Norwegian peer Entra ASA to 190 Norwegian kroner per share, topping Castellum’s 185 kroner-per-share proposal. The offer reflects a 32.2{d54a1665abf9e9c0a672e4d38f9dfbddcef0b06673b320158dd31c640423e2e5} premium to Entra’s closing share price as of Nov. 23, 2020.

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