US multifamily portfolio trades for $1.75B; CBRE acquires stake in Industrious

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

Real estate investment trusts that own strip malls have outperformed the broader REIT sector in February despite generally weak fourth-quarter 2020 earnings and 2021 guidance, Mizuho Securities USA analyst Haendel St. Juste wrote.

Strip center REIT share prices rose roughly 39% between Nov. 6, 2020 — the last full trading session before Pfizer Inc. and BioNTech SE announced promising results for their coronavirus vaccine — and Feb. 23, St. Juste wrote. By comparison, the overall REIT sector rose roughly 12% over the same period.

By closing the gap, the retail companies erased some of their valuation discount relative to their real estate peers. While that may make their stock a less attractive buy in the short term, St. Juste said they could post better earnings results in 2021 and 2022 as the economy recovers from the worst of the COVID-19 pandemic. The outlook "relies on 'hope' (that vaccine/recovery momentum continues) and 'patience' (wait 'til next year)," and will be tested as rising interest rates challenge all REITs, he added.

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Foreign interests

The U.S. real estate market saw some big-ticket property deals during the week, notable for the involvement of foreign buyers.

* Morgan Properties LLC and joint venture partner Olayan America Corp. paid $1.75 billion for a portfolio of 48 apartment communities across 11 U.S. states. The acquisition marks the largest multifamily deal so far in 2021. Olayan America is part of Saudi Arabia-based industrial conglomerate The Olayan Group.

* A South Korean syndicate agreed to pay $980 million to buy a 49% stake in the 14-story Midtown Center office complex in Washington, D.C., from Carr Properties Corp.

* Tricon Residential Inc. agreed in principle to enter into a joint venture arrangement with two institutional investors to invest in its wholly owned portfolio of 23 U.S. multifamily apartment properties. The deal reflects a total portfolio value of $1.33 billion including in-place debt. The investors will buy an 80% stake in the portfolio, with Tricon retaining the rest.

Consolidating competition

* CBRE Group Inc. picked up a 35% stake in Industrious LLC, becoming the largest shareholder in the flexible workplace provider. The deal will include roughly $200 million in cash and will see the merger of CBRE's own flexible-space solutions division Hana into Industrious. CBRE ultimately plans to increase its Industrious stake to 40%.

* Real estate brokerage Redfin Corp. is buying RentPath LLC in a cash deal valued at $608 million. RentPath owns websites ApartmentGuide.com, Rent.com and Rentals.com.

The IPO monitor

* A blank-check company formed by regional mall giant Simon Property Group Inc. raised $345.0 million in gross proceeds via an IPO of 34.5 million units. Simon Property Group Acquisition Holdings Inc. focuses on businesses that operate in the live, work, play, stay and shop ecosystem.

* Blank-check company BOA Acquisition Corp. priced its upsized IPO of 20.0 million units at $10.00 apiece for expected gross proceeds of $200.0 million. The company intends to merge with property technology businesses that cater to the broader real estate market and have a total enterprise value greater than $500 million.

Finding solutions

* Coworking giant and The We Co. unit WeWork Cos. Inc. is in discussions regarding a potential merger with Bow Capital-affiliated blank-check company BowX Acquisition Corp., and the companies could strike a deal as soon as the week of March 1, The Wall Street Journal reported, citing unnamed sources.

In another development, WeWork Co-founder and former CEO Adam Neumann is set to receive a $50 million special payout to settle a legal dispute with SoftBank Group Corp., which will also extend a $430 million loan it made in 2019 to Neumann by five years. SoftBank will reportedly buy approximately $1.5 billion of stock from other WeWork investors, including about $500 million from Neumann and pay $50 million for Neumann's legal fees.

* Regional mall landlord Macerich Co. is working with investment bank PJT Partners on options for its $1.5 billion revolving credit facility that is set to mature in July, Bloomberg News reported, citing people with knowledge of the matter. The REIT faces liquidity troubles amid retailer closures and bankruptcies due to the pandemic.

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