Extended Stay closes $6B Blackstone deal; Washington REIT to sell office assets

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An analysis of mail-forwarding request data from the United States Postal Service shows that migration trends away from coastal gateway real estate markets may have reversed in May, with even more residents set to return to coastal cities over the summer, Jefferies analysts said.

Since the start of the COVID-19 pandemic, 4.3% of New York City households and 6.7% of San Francisco households have moved out of the markets, the analysts wrote in the June 17 note, citing the postal data. Yet, they added, while mail forwarding requests originating from urban areas remain elevated so far in 2021 — up 9.2% from the 2018-2019 average through May — the pace of the increase has slowed from the fourth quarter of 2020, when such requests were 17.2% above the 2018-2019 average.

The number of households requesting mail forwarding into urban areas increased by 4.1% in the first five months of 2021 from the 2018-2019 average baseline, the analysts noted. In Manhattan, N.Y., they added, they expect roughly 10 basis points of net move-ins in May, with that figure growing during the summer as workers prepare to return to their urban offices by Labor Day.

Despite the encouraging signs for coastal cities, the Jefferies analysts said many office workers may migrate over the long term to employers with flexible work-from-home policies or in more desirable locations. As a result, they said they remain cautious on Equity Residential, Essex Property Trust Inc. and AvalonBay Communities Inc. — multifamily real estate investment trusts that own properties focused on the coasts.

Similarly, they said they remain optimistic for Mid-America Apartment Communities Inc. and NexPoint Residential Trust Inc., based on the expectation that migration trends toward the Sun Belt will continue for years.

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Arrival and departure

* A joint venture between funds managed by The Blackstone Group Inc.'s Blackstone Real Estate Partners and Starwood Capital Group wrapped up its roughly $6 billion takeover of Extended Stay America Inc. and its paired-share REIT ESH Hospitality Inc.

* Invesco Real Estate and Jera Asset Management set up a U.S. net-lease REIT seeded with roughly $500 million of assets that have been acquired or are under contract. The Mercury Trust intends to acquire up to $3 billion of assets over the next three to five years.

Property punches

* Washington Real Estate Investment Trust agreed to sell substantially all of its office portfolio to a Brookfield Asset Management Inc.-managed private real estate fund for $766 million. The move is part of the company's transition into a pure-play multifamily REIT.

* Urban office REIT Alexandria Real Estate Equities Inc. agreed to buy two buildings totaling 400,000 rentable square feet in Cambridge, Mass., for $815.0 million, with plans to redevelop them into technical office/laboratory space. The company also bought five operating buildings in San Diego for $298.5 million.

* Office landlord Kilroy Realty Corp. will acquire the Indeed Tower office project in Austin, Texas, for $580 million in an off-market deal, with closing expected by the end of the third quarter.

* Healthcare REIT Medical Properties Trust Inc. agreed to make $950 million worth of investments, including the acquisition of 18 behavioral health hospital facilities and a stake in the operations of behavioral health service provider Springstone LLC from Welsh Carson Anderson & Stowe.

* Nuveen Real Estate sold the 1,184-unit Palomino Park Apartments in the Highlands Ranch submarket of Denver for $435 million, making it the largest single-asset apartment trade in Colorado.

* A partnership between WS Development and Canadian pension manager PSP Investments is looking to sell up to a 90% ownership interest in an under-construction laboratory and office project at 400 Summer St. in Boston valued at about $850 million, Real Estate Alert reported.

Going bust

* Embattled regional mall landlord Washington Prime Group Inc. filed for Chapter 11 bankruptcy protection in the Southern District of Texas court.

Data Dispatch: Property sales could offer a lifeline for Washington Prime equity investors

Data Dispatch: US REIT capital offering activity rebounds in May after a slow month prior