US office owners use concessions to raise asset value; Blackstone buying Tricon

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

Office owners in the US have been relying on providing cash gifts, no-rent periods and other financial maneuvers to increase the value of their properties, The Wall Street Journal reported.

The average rent-free period on rents at class A office buildings in major US cities increased to 10.1 months in 2023 from 6.8 months in 2019, according to the report, citing CBRE.

Cash payments to tenants for construction work on their offices went up 37% during the period.

As a result of the concessions provided by the landlords to their tenants, actual building sales prices have changed a little.

While concessions are legal, analysts raised concerns about whether publicly available property valuations are inflated, according to the report.

CHART OF THE WEEK: Canadian REIT capital activity up in 2023

⮞ Publicly traded Canadian real estate investment trusts raised C$3.77 billion via capital offerings in 2023, up 6% year over year.

⮞ Debt offerings accounted for the bulk of the total, while common equity offerings secured about C$450.4 million in capital.

⮞ Retail REITs raised the largest portion of the total capital raised in 2023.

M&A

– Blackstone Real Estate Income Trust Inc. and Blackstone Real Estate Partners X LP are acquiring Canadian apartment landlord Tricon Residential Inc. for an equity transaction value of $3.5 billion. The deal stipulates a roughly $122.8 million termination fee to Blackstone if Tricon terminates the transaction and a $526 million reverse termination fee to Tricon should Blackstone terminate the agreement.

– Realty Income Corp. closed its all-stock merger with Spirit Realty Capital Inc. The combined group started trading under the ticker O on the NYSE on Jan. 23.

Property trade

– French luxury goods company Kering SA acquired a multilevel luxury retail space at 715-717 Fifth Avenue in Manhattan, NY, for $963 million. The space totals roughly 115,000 square feet.

– Blackstone Inc. agreed to sell the Arizona Biltmore luxury hotel in Phoenix to British private equity real estate manager Henderson Park for $705 million, Bloomberg News reported, citing people familiar with the matter.

– Canada-based NexLiving Communities Inc. is buying a multifamily portfolio spread across Ontario and Québec from Devcore Group Inc. and related entities. The assets were appraised at C$224 million as of October 2023.

US hotel performance

The average daily rate of US hotels was $142.27 during the week ended Jan. 20, up 1.6% from the comparable week in 2023, STR reported, citing the latest data from CoStar, which provides information and analytics on the property markets.

Occupancy was down 3.8% to close the week at 52.2%. Revenue per available room fell 2.2% to $74.31.

Among the top 25 markets, Seattle recorded the largest annual jump in occupancy. Atlanta had the highest increase in average daily rate and revenue per available room.

See key people moves in North America real estate.

REIT Replay: US REITs underperform broader markets during week ended Jan. 19