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Real Estate News & Analysis: May Edition


Brookfield bailing out Kushner tower; GreenOak raises $1.55B US real estate fund

S&P Global Market Intelligence offers our top picks of U.S. real estate news stories and more published throughout the week. Please note that some entries may have links to third-party sources that may require a subscription.

Bailout

* Brookfield Property Partners LP is in advanced discussions to bail Kushner Companies LLC out of the troubled office tower at 666 Fifth Ave. in Manhattan, N.Y., which it jointly owns with Vornado Realty Trust, The New York Times reported, citing two unnamed sources. If a deal materializes, Kushner would buy out Vornado's 49.5% stake in the tower's office portion with Vornado retaining ownership of the building's retail spaces.

Brookfield Property would assume the leasing and operation of the 41-story tower, which reportedly only generates about 50% of its annual mortgage payment and is about 30% vacant. The company intends to invest "hundreds of millions of dollars" to renovate the building, the publication noted.

Kushner Cos. head Charles Kushner would pay $120 million to Vornado to settle an $80 million high-interest loan provided by the real estate investment trust for the building.

Raising billions

* GreenOak Real Estate LP raised $1.55 billion for its third U.S. real estate fund, Bloomberg News reported, citing partner and founder Sonny Kalsi. The fund has the ability to spend roughly $5 billion, through leverage, and is the largest investment vehicle for GreenOak, which was founded by former Morgan Stanley property executives.

Kalsi told Bloomberg that the fund is targeting returns of about 15% through value-add real estate investing in Seattle, Miami, New York, San Francisco, Los Angeles, Boston and Washington, D.C., among other cities.

Selling off

* Diversified REIT H&R Real Estate Investment Trust agreed to sell the majority of its retail properties in the U.S. for US$633 million, subject to customary closing conditions. The sale price represents a 7.3% cap rate on 2018 forecast property operating income and involves 63 assets, with the transaction expected to close in June.

Activists in retreat

* Daniel Loeb's Third Point LLC exited its stake in Macerich Co. during the first quarter, according to a filing. At the end of 2017, the hedge fund owned 1,425,000 Macerich shares, or 1.01% of the regional mall real estate investment trust's outstanding stock, with a value of $93.6 million. As of March 31, Third Point no longer held any shares of the REIT, according to the filing.

The hedge fund's investment in Macerich came at a time when several prominent investors were amassing stakes in retail REITs. The exit follows Macerich's announcement in April that CEO Arthur Coppola would step down at the end of 2018.

* Activist investor Elliott Management Corp. sold its stake of 2,923,902 shares of mall landlord Taubman Centers Inc. during the first quarter, according to a filing. The stake represented roughly 4.8% of Taubman's outstanding shares. The hedge fund held talks with Taubman's board in 2017 to encourage the REIT to consider being taken private or other strategic alternatives.

Buying rentals

* Invitation Homes Inc. disclosed funds from operations for the first quarter of $120.6 million, or 23 cents per share, compared to $11.0 million, or 4 cents per share, in the comparable 2017 period. The S&P Capital IQ consensus FFO-per-share estimate for the first quarter was 28 cents.

On the company's first-quarter earnings call, Dallas Tanner, the single-family rental REIT's executive vice president and chief investment officer, said Zillow Group Inc.'s and Opendoor's nascent home buying and selling businesses could also provide Invitation Homes an opportunity to find new customers and possibly create a sale-leaseback program, in which homeowners sell their homes to the company and lease them back.

* Tricon Capital Group Inc. plans to acquire as many as 600 additional rental homes in the U.S. Sunbelt states in the second quarter, seeking to double its assets under management to $10 billion by 2023, Bloomberg Markets reported. In an interview with Bloomberg News, CEO Gary Berman said Tricon is looking to tap into what he called an "insatiable" demand for single-family rental homes in the U.S., which he viewed as an approximately $3 trillion market that remains primarily owned by individual investors.

Planned upgrades

* Simon Property Group Inc. is planning to invest more than $4.0 billion to revamp certain properties. The mall REIT plans to add an office building, a hotel and residences to its King of Prussia mall near Philadelphia and similar additions are planned at its Phipps Plaza mixed-used property in Atlanta. An expansion is planned at its Sawgrass Mills property in Sunrise, Fla.

Marriott International Inc. plans to open at least five new hotels at Simon's shopping malls in various U.S. states over the next several years, including Sawgrass Mills.

Timber sale

* A partnership led by CatchMark Timber Trust Inc. agreed to buy 1.1 million acres of East Texas timberland for roughly $1.39 billion, with the timber REIT's investment to total up to $227.5 million. Under the deal terms, CatchMark COO John Rasor will become president of the newly formed joint venture company, to be called TexMark Timber Treasury.

Campbell Global is selling the property on behalf of the property owners to the joint venture, which also includes BTG Pactual Timberland Investment Group, Highland Capital Management, Medley Management Inc. and an undisclosed Canadian institutional investor.

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