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Equity Residential Spends $964M on 3.5K Apt. Units

Equity Residential buys 11 apartment complexes with 3.5K units from Blackstone for $964M.

Equity Residential Spends $964M on 3.5K Apt. Units

Equity Residential buys 11 apartment complexes with 3.5K units from Blackstone for $964M.

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Good morning. Equity Residential is set to acquire 11 apartment communities from Blackstone Real Estate for $964 million, with the deal expected to close in the third quarter.

Today’s issue is sponsored by Agrippa — a broker-free, AI-powered platform that strategically connects commercial real estate capital seekers with capital providers.

📆 Webinar today: ​Join Travis Watts (Ashcroft Capital) and CRE Daily for a LIVE webinar on the “Mark-to-Market Value-Add Approach.”

Market Snapshot

S&P 500
GSPC
5,199.50
Pct Chg:
-0.77%
FTSE NAREIT
FNER
777.65
Pct Chg:
-0.95%
10Y Treasury
TNX
3.918%
Pct Chg:
+3.918
SOFR
1-month
5.35%
Pct Chg:
0.0%

*Data as of 8/7/2024 market close.

MULTIFAMILY MOVES

Equity Residential Makes $964 Million Bet on Apartment Portfolio

Equity Residential to Purchase Blackstone Portfolio for $964M

Equity Residential (EQR) has committed nearly $1 billion to acquire 11 apartment complexes, marking the largest public REIT acquisition in seven years.

Deal details: Equity Residential has agreed to buy more than 3,500 rental units in Atlanta, Denver, and Dallas/Fort Worth from Blackstone for $964 million.

  • Atlanta: Four properties totaling 1,357 units.

  • Dallas-Fort Worth: Four properties totaling 1,237 units.

  • Denver: Three properties totaling 978 units.

Zoom in: The acquisition targets high-growth markets with attractive pricing for relatively new properties. Alec Brackenridge, Equity Residential’s chief investment officer, highlighted the appeal of acquiring eight-year-old units at a cost lower than new construction. Equity Residential, one of the largest U.S. apartment owners, currently has about 80,000 units in nearly 300 properties.

Price discovery: The acquisition signals a new norm in multifamily valuations for Class A/B+ apartments, noted Jay Parsons on LinkedIn. Investors should expect ~5% capitalization rates rather than waiting for 6% caps, indicating a shift in market expectations. New buyers might face negative leverage and rents but can look forward to favorable supply/demand trends and potential rate cuts.

Active year: Equity Residential recently purchased and renamed Trailwinds Grapevine, a 324-unit garden-style community in Dallas-Fort Worth, previously owned by Greystar and Carlyle. Blackstone has been busy too, with a $3.5 billion acquisition of Tricon Residential and a $10 billion purchase of Apartment Income REIT Corp (AIR Communities), adding 76 multifamily communities.

➥ THE TAKEAWAY

Why it matters: Investor sentiment is rising, signaling more deals to come. This acquisition highlights the Sun Belt and Mountain regions as multifamily’s “new core” – large, diverse, and liquid growth markets with lower policy risk. Blackstone calls the sale “an excellent outcome for our investors,” reaffirming their strong conviction in rental housing and attractive market fundamentals.

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✍️ Editor’s Picks

  • Ready to spend: TPG Inc. (TPG) has built a $14B cash reserve for real estate investments, with $1.2B deployed in Q2, targeting strategic opportunities in CRE.

  • Master AI in real estate: Join this 3-day, 1-hour-per-day bootcamp to learn how to leverage AI. Ideal for capital raisers yet valuable for everyone in real estate. (sponsored)

  • Emergency positions: Jeremy Siegel urges the Fed to immediately implement a 75-bp emergency rate cut and possibly another one in September, aiming for a 3.5–4% benchmark.

  • Alternative financing: Commercial development is facing challenges with high interest rates at a 23-year peak and stricter loan terms, pushing developers towards non-bank funding sources.

  • Coliseum shake-up: The Oakland A’s are selling a 50% stake in the Coliseum complex for $125M to progress the team’s $5B mixed-use project.

  • Brookfield: Brookfield Asset Management reached the $1T in assets under management club, thanks in part to its diversified portfolio in renewable energy and artificial intelligence.

  • Credit crunch: Americans currently owe a record $1.14T on credit cards, or another $27B more as of 2Q24, a 5.8% YoY jump.

  • Inflation insights: Experts increasingly suggest that the Federal Reserve’s aggressive rate hikes caused systemic CRE distress, and are proposing targeted policy changes for inflation.

🏘️ MULTIFAMILY

  • Chicagoland sky: In 2018, the tower at 150 Forest Avenue in Oak Park was sold to FPA Multifamily for $103M, making it one of the suburb’s priciest transactions.

  • Western invasion: A California investor just bought a 270-unit building near Chicago, expanding acquisitions in the area.

  • Avalon Bay acquisition: Publicly traded Avalon Bay Communities (AVB) purchased a $95M, 306-unit apartment community in the south Denver metro area from Bell Fund VI.

🏭 Industrial

  • Opportunity knocks: The post-pandemic industrial real estate market is slowing down, with 46 MSF of projects started in Q2 despite an uptick in consumer activity.

  • Too big to fail: Bridge Industrial obtained $430M in loans to refinance its 2.2 MSF industrial complex in Rancho Cucamonga.

  • Mustang Crossing: Ryan Cos. and DWS Group are planning a 1.2 MSF industrial development in Austin, TX, with six buildings.

  • Golden groundbreaking: Crow Holdings Development acquired a 92-acre site in Wallkill, NY for its Golden Triangle Logistics Center, including a 535.6 KSF facility.

🏬 RETAIL

  • Fashioning a future: Department stores are losing ground to discounters and specialty stores, forcing many to close as their once strong pull on shoppers fades.

  • Retail resurgence: SJC Ventures secured $69.4 million in financing for the 83,329-square-foot Doral Marketplace in Florida. The project is already 69% leased and will feature five buildings, including an organic grocery store.

  • Quiet win: SRS Real Estate Partners sold a fully leased retail strip center in Ocala, FL, for $6.1M, with top tenants including Lumber Liquidators and MUV Dispensary.

  • Netting success: Orion Real Estate Group acquired a 12-property net lease retail portfolio for nearly $50 million, spanning 94,000 square feet across major metro areas in three states.

🏢 OFFICE

  • Office reopening: Manhattan office visits in June reached 77% of 2019 levels, the highest post-pandemic level on record, across 350 buildings.

  • Reviving Philly: Despite high office vacancy rates and empty buildings, Philadelphia foot traffic is rebounding, thanks to bustling streets and strict return-to-office mandates.

  • Modular office shuffle: As revenue hits $2.3B, modular office company WillScot Holdings (WSC) is set to move to a 90 KSF Scottsdale hub next year.

  • Bargain bonanza: A Chinese investor bought a 25-story office building in Downtown LA for $60M, $118M less than the property’s previous sale price.

🏨 HOSPITALITY

  • Upsized ambitions: A revised $600M project at 530 Sansome St. in San Francisco will include a 41-story tower with a luxury hotel and premium office spaces.

  • Empathetic AI: Hoteliers are busy exploring AI for optimal customer service enhancement, emphasizing the importance of human-like interactions for truly personalized experiences.

A MESSAGE FROM INNAGO

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📈 CHART OF THE DAY

Apartment rents stayed flat year-over-year through July, but Jay Parsons‘ key takeaway was the shrinking rent spread among the nation’s top 150 markets, the tightest since 2017. Are we at an inflection point?

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