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REIT underperformance continues in Q3; JPMorgan plans $700M residential fund

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REIT underperformance continues in Q3; JPMorgan plans $700M residential fund

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

Real estate investment trusts underperformed broader equity markets in the third quarter, with companies that invest in shopping centers posting the weakest results, while timber REITs fared best.

The MSCI U.S. REIT index grew 1.6% in the quarter, compared to 8.9% for the S&P 500, Stifel analysts said in a note. Shopping center REITs fell by 13.2%, office REITs fell by 7.5%, and apartment REITs fell by 6.1%. By contrast, timber REIT shares rose by 22.1%, while self-storage shares rose by 16.9%.

Shopping centers will remain "significantly challenged" in the near- and medium-term, amid significant tenant bankruptcies, the analysts wrote, while the timber sector is benefitting from record-low mortgage rates and a strong housing market, with more consumers building or renovating properties.

While the broader REIT sector's weakness dates back to the first half of 2020, prospects could improve in the future, given improving economic conditions and greater clarity on the COVID-19 pandemic's effect on earnings, the analysts said.

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Asset sales and development

* JPMorgan Chase & Co. unit JP Morgan Asset Management is targeting $700 million in fundraising for residential developments in the U.S. Sun Belt states, Bloomberg News reported, citing an investor presentation. The planned investment vehicle will develop single-family and multifamily rental homes in Atlanta; Austin, Texas; Charlotte and Raleigh, N.C.; Houston; and other cities, with a targeted annual return of up to 15% after fees, according to the report.

* Data center REIT Equinix Inc. closed on its $780 million acquisition of 13 data centers in Canada and their operations from BCE Inc. The properties are likely to yield roughly $112 million worth of annualized revenue in the fourth quarter.

* JRK Property Holdings is looking to sell 13 value-added apartment properties across the U.S. with a combined value of $1.2 billion, Real Estate Alert reported. The company will take initial bids Oct. 1 and Oct. 2, while the best and final offers are due Oct. 15.

Strategy shift

* Shopping center REIT Kimco Realty Corp. launched a restructuring program in the third quarter that includes a voluntary early retirement program and the merging of its Southern and Mid-Atlantic regions, effective Jan. 1, 2021.

* Diversified REIT Mack-Cali Realty Corp. suspended its common stock dividend for the third and fourth quarters to obtain greater financial flexibility during the coronavirus pandemic and to support leasing initiatives at its Harborside campus on the Jersey City, N.J., waterfront.

Sun-Marina merger

* Manufactured-home REIT Sun Communities Inc. struck an approximately $2.11 billion deal to acquire Safe Harbor Marinas LLC, which owns and operates 101 marinas. The deal is expected to close in the fourth quarter.

Around the world

* An Apollo Global Management Inc.-led group of its affiliates and institutional investors completed their $5.5 billion real estate investment partnership with Abu Dhabi National Oil Co.

* Canada's Brookfield Asset Management Inc. expects to raise up to $600 million from its planned IPO of a REIT in India, expected to take place by mid-December or early January 2021, Economic Times reported, citing unnamed sources. The planned REIT will have a portfolio of approximately 14 million square feet of office properties.

* The property management business of China Evergrande Group filed an application for a separate listing on The Stock Exchange of Hong Kong Ltd. Evergrande Property Services Group Ltd. also intends to offer its shares globally, but the details of the initial share sale are yet to be finalized.

* Data center solutions provider Chindata Group Holdings Ltd. priced its IPO of 40.0 million American depositary shares at $13.50 apiece, for a total of $540 million. The company granted a 30-day overallotment option for the underwriters to acquire up to 6.0 million additional ADSs.

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