US self-storage deals drop in H1 2023; Kimco to buy RPT; KSL to acquire Hersha

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Transaction volume for self-storage properties in the US was down in the first half of 2023, with trailing-12-month volume declining 57% year over year, Cushman & Wakefield PLC said in a report.

Like other commercial real estate sectors, self-storage properties were not spared from the knock-on effects of interest rate hikes and the stagnating debt market.

"While this decline is significant, self-storage remains a top performer, with volume remaining above the 12-month levels leading up to the pandemic," the London-based real estate services firm said in the report.

Self-storage valuations averaged $165 per square foot, up 2.5% year over year, although a tad lower than the peak pricing of $172 per square foot on average in the fourth quarter of 2022.

Occupancy has remained nearly flat through the first half after reaching about 90% in the fourth quarter of 2022.

Western US markets recorded the highest asking rate in the second quarter, averaging $170 per square foot. Asking rents in the US East, Midwest and South remained relatively flat, while markets in the Southwest tallied an approximately 2.8% year-over-year increase.

CHART OF THE WEEK: US REIT same-store NOI growth slows in Q2 2023

⮞ The median same-store net operating income (NOI) growth across the US real estate investment trust industry slowed to 4.3% year over year in the second quarter, coming from a 5.1% median growth in the first three months of 2023.

⮞ The industrial sector recorded the highest year-over-year increase in same-store NOI, at a median growth rate of 8.2%.

⮞ Among all US REITs, the biggest gainer was healthcare REIT Diversified Healthcare Trust, tallying 34.2% year-over-year growth in same-store NOI.

M&A

– Kimco Realty Corp. will acquire RPT Realty in an approximately $2 billion all-stock deal, including assumed debt and preferred stock. The combined shopping centers-focused company will have a total enterprise value of approximately $22 billion. The total consideration is about $11.34 per RPT share, reflecting a 19% premium to RPT's closing price on Aug. 25.

RPT will add 13.3 million square feet of gross leasable area to Kimco's portfolio upon completion of the acquisition, which is expected to occur at the start of 2024, subject to RPT shareholders' approval and other customary closing conditions.

– Hotel REIT Hersha Hospitality Trust agreed to be privatized by affiliates of private equity firm KSL Advisors LLC. The buyer will pay $10 per Hersha share in an all-cash deal valued at nearly $1.4 billion.

– Diversified Healthcare Trust and Office Properties Income Trust will adjourn their respective special shareholder meetings on the companies' pending all-stock merger. The meetings, which were scheduled for Aug. 30, will be adjourned until Sept. 6 to allow continuing discussions between representatives of both companies and their respective shareholders, according to a joint statement.

Blackstone deals

– Blackstone Inc. partnered with office REITs Vornado Realty Trust and Hudson Pacific Properties Inc. to invest about $350 million to build a studio campus, called Sunset Pier 94 Studios, in New York City. The trio entered into a public-private partnership with the City of New York and New York City EDC for the project. Vornado will own 49.9% of the venture, Hudson Pacific will own 25.6%, and Blackstone's institutional core-plus real estate strategy will own 24.5%.

– Blackstone Real Estate Income Trust Inc. will sell a 21.9% stake in the joint venture that owns a 95% interest in the real estate assets of The Bellagio Las Vegas to single-tenant retail REIT Realty Income Corp. Realty Income will invest a total of about $950 million for common and preferred equity interests in the venture.

See key people moves in North American real estate.

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