Displaying items by tag: real estate

The real estate market took a big hit last year as interest rates rose substantially. As debt became more expensive, real estate investors lost purchasing power. For instance, the average 30-year fixed mortgage is more than double where it was in January 2021. This led to sales of luxury homes in the U.S. falling 38.1% from the previous year during the three months ending on November 30th. According to Redfin, it was the largest decline on record. Ari Rastegar, the founder, and CEO of Rastegar Property Company believes that if investors have the liquidity and the ability to execute on investment opportunities, this is a generational buying opportunity. He noted, "This is not 2008 where the banks are jeopardized. The banks have good bills of health, we don't have these subprime loans that are going to blow up. Additionally, we are beginning to see inflation soften. The Consumer Price Index, which peaked in June at 9.1%, has been gradually declining.” He also noted investors don't have to invest in property to take advantage of this opportunity. He told Business Insider that REITs are also on clearance. Rastegar expects the multi-family and industrial property to recover the fastest and recommends looking at the Blackstone Real Estate Income Trust (BREIT) and the Starwood Real Estate Income Trust (SREIT).

Finsum:Due to a record decline in luxury home sales in the U.S., real estate investor Ari Rastegar believes this is a general buying opportunity for investors.

Over the last few years, the housing market has clearly been a sellers’ market, with many buyers missing out on their dream homes. But that may be changing as the market starts to cool off. In fact, 2023 could mark a turning point according to some real estate analysts. For instance, Danielle Hale, chief economist for Realtor.com, recently wrote in her housing forecast, that “there will be more homes for sale, homes will likely take longer to sell, and buyers will not face the extreme competition that was commonplace over the past few years.” Matthew Speakman, senior economist for Zillow told MarketWatch in an email, that “competition has lessened and negotiating power is flowing from sellers to buyers. This means that in many cases, buyers don’t have to settle for the first house they can win a bid on, and inspection and finance contingencies are back on the table.” In addition, Fannie Mae, Freddie Mac, the National Association of Realtors, and the Mortgage Bankers Association all forecast some type of decline in mortgage rates next year, which would make it more affordable for buyers to secure mortgages. However, this doesn’t mean it will be a buyers’ market next year. Lisa Sturtevant, the chief economist for Bright MLS, warns that “even if buyers have more negotiating power than they had in 2021, it is still very much a seller’s market.”

Finsum:While 2023 is expected to be a better year for real estate buyers due to more inventory, less competition, and lower mortgage rates, it will still likely be a sellers’ market.

The private REIT market was recently rocked by the decision of Blackstone and Starwood, which manage two of the nation's largest private REITs, to limit and prorate investors' repurchase requests because they exceeded redemption restrictions. Private REITs are real estate investment trusts that are exempt from SEC registration and whose shares do not trade on national stock exchanges. While the private REIT market flourished during the low interest-rate era between 2017 and 2021, the expectation that interest rates will continue to rise could make it difficult for these private funds to perform well in the future. That and a perceived gap between the performance of nontraded private REITs and public REITs led to a surge in investor redemptions for Blackstone and Starwood. Both firms are trying to shore up their funds’ liquidity through redemption restrictions. The Blackstone Real Estate Income Trust (BREIT), which has $125 billion in assets under management, announced the closing of redemptions for this quarter in a letter to shareholders last week. The announcement from the Starwood Real Estate Income Trust (SREIT), which is valued at about $14.6 billion, came more recently over the weekend. 

Finsum:Rising interest rates led to a surge in investor redemptions for private REITs, resulting in Blackstone and Starwood restricting redemptions this quarter.

PIMCO recently announced the launch of the PIMCO Flexible Real Estate Income Fund (REFLX). The fund is the firm’s first real-estate-focused interval fund that will invest in public and private markets and will seek to harness the expertise and resources of its $190 billion commercial real estate (CRE) platform. REFLX will have the flexibility to invest in four distinct quadrants of the commercial real estate markets: private equity by acquiring stabilized income-oriented CRE, private real estate loans, public debt such as commercial mortgage-backed securities, and public equity such as REITs. Dan Ivascyn, PIMCO Managing Director and Group Investment Officer and head of the team managing the fund stated, “Higher yields and lower valuations in both public and private markets make for an attractive environment for patient investors ready to deploy funds in a flexible vehicle that can allocate investments across commercial real estate.” Similar to a mutual fund, interval funds are continuously offered. Investors can sell their shares back to the fund, but unlike a mutual fund, they may only be able to do so quarterly through the fund’s periodic repurchase offers.

Finsum:PIMCO adds to its stable of interval funds with the launch of the commercial real estate-focused Flexible Real Estate Income Fund.

Based on research by S&P Global Market Intelligence, more than half of U.S. equity REITs reported third-quarter funds from operations (FFO) that exceeded sell-side analyst expectations. S&P analyzed 127 U.S. REITs and found that 71 reported FFO per share higher than third-quarter consensus estimates. Out of the remaining REITs, 24 equaled consensus expectations for the quarter and 32 fell short of FFO expectations. The research covered U.S. equity REITs that trade on the Nasdaq, NYSE, and NYSE American, have market caps over $200 million, and have had three or more FFO-per-share estimates for the three months ending on September 30th. The top industries that outperformed were industrials and self-storage, with 9 out of the 11 industrial REITs surpassing analyst FFO-per-share estimates during the quarter. One notable self-storage REIT was Americold Realty Trust Inc., which reported a core FFO of 25 cents per share, 31.6% above its consensus estimate. Out of all the industries, the largest beat was Safehold Inc., which more than doubled its estimate of 42 cents per share.

Finsum:REITs had a strong quarter with 56% reporting third-quarter funds from operations that outperformed sell-side analyst expectations.