CRE deal volume could drop 15% in 2023; Realty Income to buy $1.3B of properties

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

Investment volume in the commercial real estate space could decrease 15% year over year in 2023 as rising rates, a looming recession and limited credit availability weigh on investors’ buying decisions, according to the CBRE 2023 U.S. Investor Intentions Survey.

Some 60% of the respondents expect to purchase less real estate in 2023, and almost half of the respondents expect to cut purchasing by over 10%. Only 15% expect to increase their purchases.

Concerns about falling market pricing are making potential sellers hesitant to do deals. About 60% of respondents said they will either sell less than in 2022 or not sell at all in 2023.

Sectorwise, multifamily and industrial properties remain the most attractive for investors, while in terms of location, investors continue to prefer the Sun Belt markets, including Dallas/Ft. Worth and Austin, Texas; Miami; Los Angeles; and Nashville, Tenn.

Investment activity could improve in the second half as economic conditions stabilize, according to the report.

CHART OF THE WEEK: Large REIT privatizations drive real estate M&A in 2022

⮞ M&A involving public U.S. equity real estate investment trusts remained elevated in 2022, according to S&P Global Market Intelligence data.

⮞ Transaction value in 2022 stood at $82.63 billion, only 16.6% lower than the sky-high $99.09 billion aggregate deal value announced in 2021.

⮞ Public REIT privatizations comprised $40.20 billion of the total M&A transaction value in 2022.

Property transactions

* Realty Income Corp. said it agreed to buy as of Jan. 6 additional properties for about $1.3 billion. The retail real estate investment trust entered acquisition agreements for properties valued at roughly $1.1 billion and signed letters of intent to purchase assets worth approximately $200 million.

* Vici Properties Inc. completed the purchase of the remaining 49.9% stake it does not already own in the MGM Grand Las Vegas and Mandalay Bay Resort properties in Las Vegas from Blackstone Real Estate Income Trust Inc. for approximately $1.27 billion in cash and assumption of the seller’s share of existing debt.

* Two newly formed joint ventures between Corporate Office Properties Trust and entities affiliated with Blackstone Real Estate bought a 90% interest in a data center shell portfolio for $278 million. The portfolio spans roughly 1.1 million square feet across five single-tenant properties.

* Kaizen Development Partners and an unnamed wealthy individual are selling a 25-story office tower in Dallas in a deal that could value the building at about $250 million, according to Green Street’s Real Estate Alert. The Link at Uptown building spans approximately 292,000 square feet and was completed in 2021.

Financings

* Red Apple Real Estate Inc. obtained a $252 million loan from Bank OZK to build a residential tower in St. Petersburg, Fla., the Tampa Bay Business Journal reported. The Residences at 400 Central will offer 1.3 million square feet of interior space across 46 stories and feature 301 luxury condominiums, class A office space, shops and restaurants.

* OKO Group LLC and Access Industries Inc. secured a $277 million loan for the construction of a condominium building and the redevelopment of a hotel in Miami Beach, Fla., The Wall Street Journal reported. The companies are building an 18-story beachfront tower with 22 apartment units and renovating the former Versailles hotel to become a 56-room, Aman Resorts-branded property.

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