Pete Frandano, CCIM, MBA’s Post

Over the last weeks, I posted numerous times that investment in real estate across most sectors, including commercial and residential, is showing strong signs of life due to the lower valuation of most assets and the expected decline in interest rates. Yesterday's news, that Blackstone has agreed to acquire an owner of upscale apartment buildings for about $10 billion, is another signal that the tide is shifting. The acquired asset, AIR Communities, owns 76 rental housing communities in coastal markets, including Miami, Los Angeles, and Boston. Blackstone's president Jon Gray says it well: “We can see the pillars of a real-estate recovery coming into place. We are, of course, not waiting for the all-clear sign and believe the best investments are made during times of uncertainty.” Another sign of the upward trend is that financing for real estate is improving: Nearly $18 billion of U.S. commercial mortgage-backed securities were issued in the first quarter this year, or roughly three times the volume for the first quarter last year.

When people ask me why now is the golden window to buy multifamily? Here are a couple of compelling reasons: · Supply-Demand Discrepancy: A significant disconnect exists between supply and demand, promising continued strong absorption and rental dynamics. · Homeownership Cost Barrier: With homeownership increasingly out of reach for many, there's a growing renter pool, further bolstering the rental market. · Bond Market Dynamics: While bond markets are relatively high (at least for this decade) pricing reflects this state. Anticipated interest rate cuts could tighten spreads, potentially boosting investment values. · Buyer's Market Advantage: Presently, it's a buyer's market, offering less competition and more unique opportunities. · Inflation Hedge: Commercial real estate remains as an attractive option for investors seeking to outpace inflation and build long-term wealth.   As noted by experts from Blackstone, investing during periods of uncertainty can yield immense upside. “You want to be investing into this dislocation because there's a lot of uncertainty. When that uncertainty passes, those investments begin to deliver accelerated return.” While deals may be challenging in today's market, the potential upside CRE is unprecedented. For those with a long-term outlook, there's arguably never been a more exciting time to enter the nipsey hussle marathon than today. https://lnkd.in/e6FfhsH4 #greysteel #cre #blackstone #realestate #multifamily #investing

Blackstone's deal to acquire AIR Communities is priced 25% above AIR's stock price at the time of the announcement. But the valuation is closer to what apartment properties are actually trading for on the private market -- suggesting Blackstone is betting that the public markets are inefficiently pricing multifamily REITs. Whether that is true or not, we'll see, but apartments just haven't been trading at the values implied by REIT prices. One of my favorite commentators, CRE Analyst, published a post yesterday estimating an implied cap rate of 4.85%. That is by no means bargain bin discount shopping, but it is market reality. It's within the range of property-level trades for similar product -- high-quality assets in mostly high-quality markets. This is a good reminder that CRE and multifamily pricing indices based on stock prices are often poor gauges for real-world valuations. Stock prices can fluctuate for reasons that have nothing to do with the value of the underlying real estate assets. MSCI had a great chart last year showing valuations based on a repeat sales methodology were substantially higher than one using REIT stock prices. The deal also comes as no big surprise, given that Blackstone's Jon Gray has made headlines in recent months making the case that commercial real estate prices were bottoming and that now is a good time to buy. That's an increasingly accepted view in multifamily, where the consensus outlook now seems to be that multifamily is well-positioned for growth by 2025-26 after working through the multi-decade-high supply wave. It'll be interesting to see if this deal pulls other institutional buyers off the sidelines. I suspect it will. The AIR acquisition provides a good comp for apartment owners -- and a reminder to buyers that they aren't likely to see great real estate at greatly discounted prices. Bigger discounts are more likely to come in lower-tier assets in less-desirable locations. #multifamily #apartments #CRE https://lnkd.in/gCtiRm-B

Blackstone Makes a $10 Billion Bet On Multifamily Units As Real Rents Begin Re-Accelerating… The Wall Street Journal's headline announced Blackstone's $10 billion acquisition of Apartment Income REIT, taking the company private. "The acquisition is Blackstone's largest transaction in the multifamily market," WSJ pointed out. This move signals the firm's bullishness on the rental housing market, especially when rents are beginning to re-accelerate. Blackstone agreed to purchase AIR Communities for $39.12 a share, representing a 25% premium to the company's closing share price on Friday. The deal is being completed through the investment management company's $30.4 billion global real-estate fund. Blackstone favors rental housing as one of the hottest places in the commercial property market to invest. The acquisition of AIR will give the investment manager exposure to 76 rental housing communities in coastal markets, including Boston, Miami, and Los Angeles. Blackstone has been aggressively increasing investments in CRE markets, a major bet the Federal Reserve's interest rate hiking cycle has plateaued and cuts near…. #blackstone #multifamilyrealestate #interestrates

While we’ve done dozens of development deals in the past few years, we’re excited to announce our first property purchase since February 2020: the impending acquisition of a 300-unit garden-style multifamily property in suburban Dallas.     In today’s Bisnow article, Origin Co-CEO David Scherer discusses the impact of recent high-profile transactions by investment giants like KKR and Blackstone. With stabilized interest rates and strong fundamentals, multifamily demand is set to outpace supply. Read the article here: https://bit.ly/3XIGcFY #realestate #multifamilyinvestments #markettrends 

"In a testament to how brutal the year has been, only two multifamily markets have produced positive total returns in the last 12 months, according to a new report by Newmark: Fort Lauderdale and Miami at 0.7% and 0.3% respectively, helped by 4.0% income growth. Appreciation declined but West Coast markets like Los Angeles, San Jose and San Francisco all showed double-digit total return losses." Cap rates have gone up 90 bps Y-o-Y. But where there is pain, there is also opportunity - dry powder at closed-end funds has increased by 11% since the start of this year. Record fundraising by opportunistic funds in this year’s second quarter appears to have pushed the increase as investors plan to take advantage of asset repricing. The $219 billion in dry power raised for equity investments—but not for debt strategies—equates to a leveraged purchasing power of $488 billion. That uses a 55% loan-to-value ratio. Newmark estimates that more than half of this capital is targeted at multifamily assets with most of the remainder focused on industrial assets. The capital targeting office and retail assets is quite small by comparison. #realestateinvesting #cre #multifamily #equityfunds #debtfunds #lending

Blackstone is set to purchase multifamily real estate in a $10 billion transaction, signaling a renewed confidence in residential real estate. Additionally, the company plans to invest an additional $400 million in upgrading these properties. Jonathan Gray, President of Blackstone, emphasizes the positive signs of real estate recovery, stating, 'We observe the foundational elements of real estate resurgence.'" #blackstone #realestate #investment #strategy

Blackstone’s $10B Multifamily Buy: A Strong Message to the Market As I shared during a recent panel at the Appraisal Institute - Metro NJ Chapter Conference in Princeton NJ, I emphasized the significance of Blackstone’s monumental $10 billion acquisition of AIR Communities. This strategic move by the institution sends a powerful message to the market, reflecting a shift in investor sentiment and providing valuable insights for industry stakeholders. Especially noteworthy is the fact that private capital typically moves much quicker than institutions. Thus, the institutions’ decisive action at this juncture indicates even greater confidence in the market. When institutions are making moves, it signals that this is indeed the time to take action. Despite recent challenges, including projections of temporary lower occupancy due to anticipated supply through 2025, the multifamily sector remains resilient. With single-family homes becoming increasingly expensive for home ownership, the demand for rental apartments is expected to rise, further bolstering the appeal of multifamily investments. This trend was further underscored by Blackstone’s recent acquisition of Tricon Residential , a single-family home operator, for $3.5 billion. Blackstone’s 10B acquisition underscores the value proposition of multifamily properties at this juncture. It signals confidence in the market and asset class and highlights opportunities for investors to capitalize on potential upside. As we navigate through evolving market conditions, staying attuned to transformative developments such as this is crucial for making informed investment decisions. #RealEstate #Multifamily #Apartments #Investment #MarketInsights #PropertyInvestment #Advice #newjersey Appraisal Institute Connor Montferrat Matthew Englehardt The Eider Group at Marcus & Millichap

🌆 Why Invest In Multifamily Properties? They Are A Real Estate Goldmine✨ Hello, savvy investors! Today, let’s uncover why investing in multifamily properties often beats the single-family route and why ironclad partnerships are key🗝️📈 Multifamily real estate, encompassing everything from duplexes to apartment complexes, offers a unique advantage—*multiple revenue streams*. Unlike single-family homes, multifamily units ensure that an empty apartment doesn’t spell zero income. This diversification means steadier cash flow and less financial fluctuation💰🔄 Plus, the scalability! Managing a 20-unit building doesn’t require 20 times the effort of a single unit. Efficiency in management and maintenance can lead to higher profit margins and more impactful growth opportunities🚀📊 Now, let’s talk partnerships. Before you join forces with someone on a real estate deal, having a clear, comprehensive partnership agreement is non-negotiable. These agreements set expectations, split responsibilities, and outline financial contributions, protecting all parties if things get rocky. 📝🤝 So, whether you're stepping into your first investment or scaling up, consider multifamily properties for robust returns and ensure your partnership terms are solid from the start. Ready to discuss how you can jump into multifamily investing? Let's chat For more from Seth, this week's guest on "Inspired To Invest" tune into his episode https://lnkd.in/gpkZHFMP TO GET YOUR TICKET for @themultifamilyconference! 🔗 https://lnkd.in/gUecT8-k #RealEstateInvesting #MultifamilyInvestment #InvestmentPartnerships #RealEstateTips #DurhamRegionRealEstate #WealthBuilding #PropertyManagement

Interesting read with your morning coffee ☕ As I previously stated in a corresponding post regarding this acquisition. Blackstone cannot be ignored... and it certainly hasn't. As the world’s largest commercial real estate owner, Blackstone’s impact stretches well beyond AIR and to the rest of the sector. Blackstone’s acquisition of AIR, which is expected to close next quarter, represents the company’s largest acquisition in the multifamily sector. Blackstone will take the company private. #multifamilyinvesting #multifamily #apartments