Urban retail rents up in 2023; Medical Properties to sell 5 hospitals for $350M

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Asking rents in prime urban retail corridors in the US grew 3.3% year over year in 2023 on the back of growing consumer spending and record-low retail vacancy, JLL said in a report.

Consumer spending in September 2023 exceeded $705 billion. During the same month, the spending of visitors to the US jumped 31.6% from the same period in 2022.

Meanwhile, retail vacancy stood at a record low of 4.2% at the end of 2023.

Urban retail transaction volume dropped 39% year over year in 2023, dragged by a lack of portfolio transactions exacerbated by turbulence in the debt market, JLL said.

Investment activity in the sector is expected to pick up in the next 12 to 18 months due to expectations of rate cuts in 2024, expiring private equity fund life and maturing securitized debt over the next three years, according to the report, citing data provider Trepp.

CHART OF THE WEEK: US REIT green bond issuance sinks to 6-year low in 2023

⮞ US real estate investment trusts in 2023 raised $1.6 billion in gross proceeds across three green bond issuances, the lowest in six years.

⮞ The green bond issuances accounted for 3.6% of the total bond proceeds in 2023, the lowest proportion since green bond issuances picked up steam in 2018.

⮞ Office REIT Boston Properties recorded the biggest green bond offering in 2023, at $750 million, on May 4.

M&A

– Stratus Properties Inc. received a revised acquisition offer of roughly $27.30 per share in cash from NXSTEP Opportunity Partners. The company said the updated offer was subject to "incorrect assumptions," similar to NXSTEP's prior proposal of $27.18 per share in cash. Stratus said its board will consider the revised offer and respond to the offeror in due course.

– The respective stockholders of Healthpeak Properties Inc. and Physicians Realty Trust approved the companies' proposed merger at their separate special meetings Feb. 21. The deal is expected to close on or around March 1, with the merged entity operating under the Healthpeak Properties Inc. name.

Property trade

– Medical Properties Trust Inc. said it agreed to sell five hospitals to Prime Healthcare Services Inc. for $350 million. The healthcare REIT also sold its remaining noncontrolling stake in a tenant and two under-leased hospitals in South Carolina for approximately $17 million in combined proceeds.

– Broadstone Net Lease Inc. said it executed contracts to sell 37 clinical, surgical and traditional medical office building properties for roughly $253 million at a weighted average cash capitalization rate of 7.9%. The move is part of the company's plan to focus on its core net lease assets in the industrial, retail and restaurant sectors.

– Realty Income Corp. is looking to sell nine Walmart Neighborhood Markets for a combined $88.3 million, CoStar News reported. The properties are spread across Georgia, Louisiana and the Carolinas.

US hotel performance

US hotel occupancy closed at 59.2% during the week ended Feb. 17, down 2.5% from the comparable week in 2023, STR reported, citing data from CoStar, which provides information and analytics on property markets.

Year over year, the average daily rate (ADR) was 4.2% higher, at $162.24, while revenue per available room (RevPAR) gained 1.6% to $96.10.

Among the top 25 markets, Boston and New Orleans were tied for the largest occupancy increase. Las Vegas had the highest gain in ADR and RevPAR.

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REIT Replay: US REIT stocks largely flat again during week ended Feb. 16