Strong demand boosts single-family rental returns; SL Green sells NY tower stake

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Single-family rentals are outperforming other real estate investment trust subsectors on the back of strong demand and lack of supply, Evergreen Residential CEO Joseph Negri said in a conference call with BTIG.

Single-family rentals recorded a 15.6% return year to date, compared with a 0.3% return for REITs as a whole.

Negri said demand for single-family rental homes remains strong, although the pace of rent growth has slowed from the strength in 2021 and 2022.

Rent growth is expected to remain in the mid-single digits, although seasonality is expected to return following the pandemic, Negri said.

Future capital allocation decisions for single-family rental home operators is expected to be affected by pressures on the fixed costs such as property taxes and insurance as well as labor costs.

CHART OF THE WEEK: US equity REIT market activity up in May

⮞ US equity real estate investment trusts pulled in $7.30 billion in May, compared with $3.25 billion raised the month prior.

⮞ Of the total, $7.28 billion was secured through debt offerings, while common equity offerings accounted for $9.5 million.

⮞ American Tower Corp. collected the largest amount in May with $2.71 billion across four debt offerings.

M&A

– INDUS Realty Trust Inc. completed its sale to affiliates of Centerbridge Partners LP and GIC Real Estate for approximately $868 million. An Abu Dhabi Investment Authority subsidiary will act as a strategic investor alongside Centerbridge in the ownership of INDUS.

– Kushner Cos. LLC offered to buy First Real Estate Investment Trust of New Jersey Inc. for $22.00 per share in cash.

Portfolio revamp

– Prologis Inc. agreed to pay $3.1 billion to purchase a portfolio of US warehouses and distribution properties from Blackstone Inc. The portfolio comprises roughly 14 million square feet in about 70 assets in major markets including Atlanta, California, Dallas, south Florida, and the Washington, DC, and New York regions.

– SL Green Realty Corp. divested a 49.9% stake in 245 Park Ave. in New York City to a US affiliate of Japanese real estate company Mori Trust Co. Ltd. at a gross asset valuation of $2.0 billion.

– Vornado Realty Trust is spending $1.2 billion for the renovation of two office buildings near Penn Station in New York City, Dow Jones Newswires reported.

– Alexandria Real Estate Equities Inc. agreed to sell a portion of a life science project at 421 Park Drive in Boston's Fenway neighborhood to an affiliate of Boston Children's Hospital. The REIT expects to receive initial proceeds at closing of $155 million, along with development fees to be earned over the next three years.

– Separately, Alexandria sold the three-building Riverside Center office complex in Newton, Mass., to a MassMutual subsidiary and developer Greatland Realty Partners for $117.5 million, the Boston Business Journal reported. The sale price reflects a 50% discount to the price the REIT paid for the property in 2020, according to the report.

– Oxford Properties and the Canada Pension Plan Investment Board put up for sale two office buildings in Vancouver, British Columbia, including a building leased to Amazon, Bloomberg News reported, citing people familiar with the sales process. The duo expect to receive roughly C$350 million for the properties at 402 Dunsmuir St. and 401 West Georgia St.

Financing

– Prime Residential obtained a loan worth $974 million for the 4,249-unit Park La Brea, a multifamily apartment community at 6200 West Third St. in Los Angeles. The property features 18 high-rise towers and is 95.5% occupied. Newmark Group Inc. brokered the loan.

See key people moves in North America real estate.

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SL Green's sale of 245 Park Ave. sparks optimism in Manhattan, NY, office market