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Four REIT Filings Reveal Where Investors See Opportunity

Four REIT Filings Reveal Where Investors See Opportunity

Positive Leverage
July 25, 2023

Good morning,

Four major real estate investment firms have set up nontraded REITs this month, Fed expected to raise rates 25 bps on Wednesday after June pause, BX sells Simply Self Storage for $2.2B, and five year multifamily rent projections. Let's delve into today’s topics.

📈 Market Update

🏢 Four New REIT Filings Reveal Where Investors See Opportunity Amidst CRE Price Correction

Sculptor Capital Management, ExchangeRight, EQT Exeter, and Invesco Real Estate filed paperwork with the SEC in June. This is twice as many as the entire H1 2023, representing a heightened increase in CRE as buying opportunities arise. Nontraded REITs are publicly offered to accredited investors but can only be bought via private transactions. Publicly traded REIT share prices have declined, while private nontraded REITs have performed better but are now starting to drop; its estimated that private REITs self-reported valuations are anywhere from 20% - 40% higher than their comparable public valuations. Buying opportunities are expected to emerge in about 12 to 18 months as private companies truly mark-to-market.

Sculptor’s $455M purchase of CapGrow Partners will make up its initial portfolio. CapGrow owns 1k+ SFH that are operated by care providers and lease to individuals with disabilities. ExchangeRight is focused on net-lease deals. EQT Exeter will invest in supply chain industrial and medical office properties. Invesco will provide debt and preferred equity for multifamily, industrial, SFH, and self-storage.

📈 Fed Expected to Raise Rates Another 25 bps

There is a 99.8% chance the Fed raises rates 25 bps on Wednesday. This brings the fed funds rate to 5.25% - 5.50%, the highest its been in 22 years.

⚫️ BX Sells Simply Self Storage as BREIT Faces Redemptions

BX sold Simply Self Storage to Public Storage for $2.2B. The deal, projected to close in Q3 2023, will net $600M in profit for BREIT. BX said they’re focused on higher growth sectors and has faced investor withdrawal requests due to the uncertainty in the market. BREIT has limited redemptions for the past eight months, and the sale of Simply Self Storage will provide liquidity to either deploy into new opportunities or meet redemption requests.

🏘️ Multifamily Rent Growth Projections

Data analytics firm Makerr predicted the top 100 U.S. markets will see a 3.9% increase in rent growth through 2024 and 5% in 2025. Winston-Salem is projected to lead the way, with Florida cities rounding out the top 5. SLC, LA, SF, DC are among the lowest forecasted rent growth cities.