Fundraisings, Demographic Trends Set for Banner Real Estate Takeover Year
January 27, 2022 | Brandon Zero | Mergers & Acquisitions
Surging interest in real estate is not just from private equity funds focused on the strategy, says Jeffrey Horowitz, Bank of America Securities’ global head of real estate. Infrastructure funds are also present in recent sale processes, and the competition shows. “People are willing to do things they weren’t a while ago,” he said at this morning’s Real Estate Capital Markets Conference, sponsored by Goodwin Capital.
That meant sweeteners topping 10 to 30 percent, bidders taking on financing risk, and buyers who are “certainly willing to go faster, and be more aggressive, saying ‘I need to win this.’”
Harsh competition is the natural outgrowth of a sector that’s spawned record private equity fundraisings. Core and opportunistic fundraisings have been “immense,” says Horowitz.
Newly raised capital clocked in at $278.8 billion as of December, Preqin data shows, and firms are already putting it to work. Blackstone Real Estate Income Trust announced plans to acquire Resource REIT for $3.7 billion earlier this week. The private equity fund teamed up with Starwood Capital Group last year to mount a $6 billion takeover of Extend Stay America, an offer itself bumped after it stoked shareholder consternation.
Last-mile industrial real estate remains hot in a country increasingly addicted to e-commerce, and new inventory has been slow to come to market thanks to Covid-related delays. Multifamily is also seeing strong tailwinds. Rentals are the new starter homes for a generation of Millennials priced out of the housing market.
Horowitz says that means strong rent growth—even low cap rate transactions perform well thanks to rental increase capacity.
Dealmaking interest could stay healthy, “if you have the right product,” he said.
