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Amazon may acquire J.C. Penney properties; Hilton reopens China hotels

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

U.S. equity real estate investment trusts on average saw a 9.0% decline in earnings on a sequential basis in the first quarter and a 6.2% decline year over year, industry trade group Nareit said this week.

The results, as measured by funds from operations, the widely used REIT earnings metric, varied widely across property segments. Lodging and resort names posted a 67.2% decline in FFO quarter over quarter, and industrial REITs logged a 21.7% increase in the metric. FFO is determined by adding depreciation and amortization to earnings and then subtracting any gains on sales.

Regional mall landlords, which saw an average 11.6% decline sequentially in FFO, were the worst-performing group after lodging names.

"[L]ow leverage, longer debt maturities, and high interest coverage ratios all indicate that REITs entered this crisis with solid financial fundamentals and have substantial resources to meet this challenge," Nareit President and CEO Steven Wechsler said in a release.

Analysts continued to scour the particularly hard-hit retail real estate scene for relative value. Compass Point's Floris van Dijkum noted that the strip center segment has been among the three worst-performing REIT groups through the coronavirus pandemic, and that its low level of rent collection has "scared away" investors. The strip center names he covers collected only 59% of April rents, together have lost 43% of their market value, and trade, as of May 20, at around a 41% discount to his lowered estimated net asset value per share.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

"The current economic recession will test balance sheets, portfolio quality, and tenant quality for each of our strip owners," van Dijkum said in a research note. "Therefore, we continue to favor stronger balance sheets and higher credit quality portfolios."

The analyst said he expects the pandemic to cause a wave of retailer bankruptcies in the coming months, further compromising rent collection. And the ongoing bifurcation between the best- and worst-performing strip center names is likely to continue even if there is a return to "economic normalcy," he said.

Big property moves

* Amazon.com Inc. is in talks with J. C. Penney Co. Inc. to acquire all or part of the bankrupt department store chain's real estate assets, potentially to expand its apparel business, Women's Wear Daily reported, citing an unnamed source.

The department store company, which recently filed for bankruptcy, is also planning to turn its real estate into a publicly traded REIT, CNBC reported, citing court filings. The plans involve creation of a new retailer called JCP and spinning its properties into a REIT that will collect rent from store locations.

* The planned sale of Brookfield Property Partners LP's Diplomat Beach Resort Hollywood hotel in Florida was canceled by its third-party purchaser, The Real Deal reported, citing an SEC filing. Fontainebleau Development had agreed to acquire the 1,000-room hotel at 3555 S. Ocean Drive for roughly $800 million, according to sources.

* Goldman Sachs Group Inc. raised approximately $2.75 billion for its Vintage Real Estate Partners II fund and related separate accounts, exceeding the fundraising target of $1.25 billion.

Shareholder activism

* Engine Capital, a shareholder of CIM Commercial Trust, urged the office landlord to sell or liquidate itself and voiced concerns over an equity raising plan and probable appointment of its CEO to other roles.

The Coronavirus effect tracker

* The latest data from Real Capital Analytics indicated a 71% year-over-year slide in U.S. commercial property deal flow in April. Overall deal volume for the month was $11.0 billion, a figure that is usually surpassed by the office and apartment subsectors alone. Notably, only eight hotels traded in April the lowest monthly total on record.

* U.S. hotels logged a 73.6% year-over-year decline in revenue per available room for the week ended May 16, according to industry tracker STR. The pandemic continues to impact the hotel sector, albeit less severely than in the past few weeks. Average daily rate and occupancy for the week were down 42.4% and 54.1%, respectively, as "the trend of 'less bad' data continued," STR said.

* Hotel giant Hilton Worldwide Holdings Inc. reopened its hotels in mainland China after about 150 of its properties were shuttered due to the coronavirus pandemic.

* Regional mall landlord Macerich Co. reopened 20 of its retail properties in Arizona, Colorado, Indiana, Iowa, Missouri, Oregon, Texas and Virginia with sanitation and social distancing protocols in place.

Around the world

* French REIT Covivio closed its voluntary takeover of Godewind Immobilien AG, accumulating approximately 86% of Godewind's share capital. It also granted a put option to certain outside shareholders, which collectively own about 10% of the German office property company's stock.

* Real estate and private equity giant The Blackstone Group Inc. completed its £4.66 billion acquisition of IQ Student Accommodation in the largest ever private equity deal in the U.K. Goldman Sachs' merchant banking division and medical research charity Wellcome Trust sold the student lodging company that owns and manages more than 28,000 beds across the country.

* U.K.-based real estate manager Meyer Bergman Ltd. launched a €2 billion last-mile logistics platform that will target single-tenant assets in Europe, IPE Real Assets reported.

* German property developer Consus Real Estate AG is selling eight development projects in Germany to Partners Immobilien Capital Management in a move that will help it cut its project finance debt by roughly €390 million. The selling price was not disclosed, but the gross development value of the projects totals €2.0 billion.

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