Summary

• Blackstone Group has been on an aggressive REIT buying spree in the last few years.
• The asset manager is buying so aggressively because REIT valuations are significantly below the private market valuations of their real estate.
• We take a look at two attractive REITs trading significantly below their net asset values.
• Looking for more investing ideas like this one? Get them exclusively at High Yield Landlord.

Asset management giant Blackstone (BX) boasts a portfolio of assets under management reaching nearly $1 trillion, made up largely of real estate. The asset manager partners with big money players like pension funds and insurance companies to provide strong returns and steady income.

Though Blackstone sometimes acquires individual real estate properties, such as The Bellagio in Las Vegas, it more often seeks opportunities to scoop up whole portfolios that will move the needle. This year, the company has set its sights, particularly on acquisitions of real estate investment trusts (“REITs”). Click to read more at www.seekingalpha.com.

Uncertainty be damned. The multifamily market in a number of Texas cities continues to be strong – even “white hot,” depending on whom you ask.

“Dallas multifamily vacancies sit at roughly 5 percent with rents roughly 15 percent over pre-pandemic levels,” rental housing experts at Greystar told REDnews. “Dallas has also had considerable amounts of pipeline delivery, which have been absorbed at record levels during the past few quarters at over 25+ units per month despite rising rents.”

Austin, too, boasts one of the strongest multifamily markets in the state.

“It’s important to understand the supply/demand fundamentals,” said Marcy Phillips, vice president of real estate development for Ryan Companies. “Sometimes, there can be booms in other primary Texas markets. Austin has weathered this well and it appears there is a long runway as the MSA continues to grow.”

There’s no shortage of incentive to build here, according to Venkat Avasarala, founder of Stryker Properties. Click to read more at www.rednews.com.

Randy Blankstein, president of the Boulder Group in Wilmette, Illinois, in an interview with Midwest Real Estate News earlier this year referred to higher interest rates as a possible wrench in the net lease market, something that could slow this commercial sector’s long-building momentum.

And it’s true that interest rates were a big topic of conversation during the 8th annual National Net Lease Summit held by REjournals and Midwest Real Estate News July 28 at the University Club of Chicago. But the speakers during this event — and they included the biggest and most successful players in this space — all agreed, too, that the net lease market remains a resilient one, one capable of fighting through the country’s current economic uncertainties.

As Blankstein said during his early summer interview with Midwest Real Estate News, demand remains high for net lease assets. That demand is strong enough that it is so far overcoming the challenges of higher interest rates. Speakers during the summit agreed: Net lease assets are so attractive, demand is not yet waning.

Optimism, then, ruled the day during the summit. Speakers focused on the strength of such net lease products as drug stores, fast-casual restaurants with drive-thru lanes, dollar stores and auto-supply stores. They also pointed out the seemingly endless demand for industrial real estate.

It was a day filled with positive messages. And the biggest? Yes, rising interest rates are a challenge and could scuttle some net lease deals. But this sector remains resilient. And investors still love this asset class.

Despite the economic challenges facing the country, members of the National Net Lease State of the Market panel had plenty of good news to share with attendees. Participating in this panel were Joel Tomlinson, Ares Management; Randy Blankstein, moderator, The Boulder Group; Andres Dallal, Strategic Lease Partners; Gordon Whiting, Angelo Gordon; Richard Hurd, Hurd Real Estate; and Zachary Pasanen, W.P. Carey.

The optimism continued with the Net Lease Capital Markets Overview panel. Speaking on this panel were Joshua Zhang, Four Corners Property Trust; Ralph Cram, moderator, Envoy Net Lease Partners; Caitlin McLaughlin, Prudential Private Capital; Sean Keane, First Savings Bank; and Karly Iacono, CBRE.

Industrial and healthcare real estate remain in high demand from investors. Speaking about the seemingly unquenchable demand for these product types were Industrial and Healthcare Net Lease panel participants Chad Firsel, moderator, Quantum Real Estate Advisors; Tivon Moffitt, Institutional Property Advisors; Robert Vanecko, Brennan Investment Group; and Gino Lollio, Cushman & Wakefield.

Members of the Net Lease Sale-Leaseback panel were Guy Ponticiello, CBRE; Andrew Sandquist, Newmark; Elizabeth Randall, moderator, Randall Commercial Group; David Piasecki, BV Net Lease Capital; Daniel Nyhan, Mesirow Financial; and James Hanson, Avison Young.

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Brandon Svec, national director of retail analytics for CoStar, served as the keynote speaker of the summit. He shared the strong activity numbers in the net lease sector with attendees.

Sharing the latest news on the future of the 1031 Exchange program, were Daniel Wagner, Inland Real Estate Group; Tracy Treger, Syndicated Equities; and Matthew Douglas, Accruit, all of whom participated in the summit’s 1031 Tax Exchange Update panel.

Today, geniant, a next-generation experience consulting company, announced the acquisition of Eastlake Studio, a Chicago-based architecture and interior design firm. Together, the forward-thinking teams will collectively transform the nature of experience consulting by integrating architecture and digital solutions to deliver exceptional experiences for employees and customers.

“We’re entering a new era in workplace design,” says geniant CEO of Physical Space David Dewane. “To meet future demands, we must think about the employee experience holistically – space, people, and technology. Eastlake is a best-in-class design firm that instantly brings geniant’s capabilities to a new level.”

“As we’ve been examining unique hybrid work models, we are finding that additional skill sets and methods are needed to truly understand the evolution of the modern workplace,” says Eastlake Studio Architect and Principal Kevin Kamien.

“geniant provides our team with experience research expertise that, when integrated with architecture and design, can shape the future for organizations in this critical moment in history,” added Eastlake Studio Interior Designer and Principal Christina Brown.

As consultants who have partnered with top companies around the country, geniant believes that the experience and performance of information workers can be radically improved. The modern office has not kept pace with the rapid changes in technology and lifestyles. The pandemic exposed this misalignment and has called the status quo into question.

To effectively adapt the employee experience to this new reality, geniant employs contextual research methods, producing crucial, actionable insights for optimal workplace performance — this has specific implications for workplace design, as well as cultural and change management programs.

“As designers, our curiosity has led us to deliver award-winning solutions for our clients over the past 35 years,” says Eastlake Studio Principal Emeritus Tom Zurowski. “This next step is a natural evolution. It allows our teams to gain even more insights into the clients we’re designing workspaces for,” added Jon Salzmann, principal emeritus of Eastlake Studio.

Eastlake Studio recently received an Interior Design Firm of the Year award at the 2022 Chicago Commercial Real Estate Awards and frequently has projects awarded by the International Interior Design Association (IIDA) and the American Institute of Architects (AIA). The firm’s work has appeared in publications including Metropolis, Interior Design, Architect, and Crain’s Chicago Business.

“Experiences happen in physical spaces, between people and through technology, shaping the world we live in,” says Chairman and Co-CEO David Lancashire. “The addition of Eastlake Studio is a key step in our strategy to provide a complete suite of services to help businesses optimize their entire brand experience.”

Resilient. That’s how a new report from The Laramar Group describes the multifamily market across the nation and the Midwest.

According to the Laramar Group’s Mid-Year Multifamily Review, record-low vacancy rates and double-digit rent growth will continue to fuel the multifamily market across the United States.

This doesn’t mean that this sector won’t face challenges throughout the rest of 2022 and into next year.

Interst rates remain a major concern. Laramar Group says that rising interest rates during the second quarter of this year have already had an effect on capital markets, resulting in lower loan-to-value ratios, increased borrowing costs and an uneven transaction market.

“We are expecting continued upward trajectory for rents in the multifamily sector, especially in the Southeast and Mountain states where demand drivers such as job and population growth are strong,” said Bennett Neuman, chief investment officer with Laramar. “At the same time, the recent dislocation in the capital markets may present interesting acquisition opportunities on a selective basis.”

According to Laramar, investment volume will remain elevated but may decrease from recent record levels. The multifamily market saw $63 billion of sales in the first quarter of 2022, a year-over-year increase of 56%.

This was the strongest first quarter on record for overall multifamily activity, according to CBRE research. But rising interest rates will have an impact on investment activity and pricing through the remainder of 2022.

Laramar predicts that multifamily construction will continue at a steady pace. Given population shifts and housing demand, Gateway and Texas markets are leading the way for new supply.

During the first quarter of 2022, the multifamily market saw the highest absorption in more than 20 years. New York topped the list for absorption in the first quarter, with 105,600 units.

Among the other top 15 markets noted by CBRE are high-population growth markets such as Denver, which ranked ninth, and Orlando, which ranked 12th, as well as mature markets such as Chicago, which ranked fifth, and Washington, D.C. which ranked sixth.

Another study, commissioned by the National Multifamily Housing Council and the National Apartment Association, said that the United States needs 4.3 million new apartments by 2035.

In the Midwest, markets such as Indianapolis and Columbus will each need 3,000 additional units annually by 2035 to meet market demand. Apartment construction represents a notable segment of the economy, generating $984 million for the local economy in Columbus and $779.5 million in Indianapolis, according to the NMHC/NAA study.

CBRE research from the first quarter of this year shows several Midwest markets with 10% or higher yearly rent growth, including Detroit (10.4%), St. Louis (10.4%), Kansas City (10.5%), Cincinnati (10.6%) and Indianapolis (13.0%).