US Real Estate Investment Trusts have purchased USD 24 billion worth of properties in the last 12 months. This is more than triple what they spent in the 12 months previous, and commercial property transactions as a whole were twice as high in 2010 as in 2009, as the US market continues to turn bullish.
Confidence in the market - which is crucial to growth according to experts - has grown massively in the last few months, fuelled by major purchases such as the 9.4 billion USD acquisition of Centro's US Mall portfolio by Blackstone, and Ventas Inc. proposed USD 5.7 billion buyout of a health-care real estate investment trust.
Landmark deals like this, and others including the Probis-AMB merger in January could trigger a surge in commercial property investment in 2011 as buyers regain confidence in the market, according to experts. Dan Fasulo, managing director of Real Capital Analytics Inc. said in a telephone interview "Both these deals are a great signal that liquidity has returned to the commercial real estate space. It certainly will have ripple effects on the entire industry."
Commercial property transactions totalled USD 140 million in 2010, which is well down on the USD 579 billion peak seen in 2007, but double the low of USD 69 billion seen in 2009. Fasulo said he "wouldn't be surprised" if transactions doubled again this year. I also wouldn't be surprised if U.S. commercial property purchases double in 2011 from almost USD 140 billion in 2010, Fasulo added.
The two sectors we keep hearing about lately are retail and healthcare. The Centro portfolio purchased by Blackstone for USD 9.4 billion consisted of 588 strip-malls and related properties, including Vallejo's Gateway Plaza and Pleasanton's Metro 580. A source with inside knowledge of the deal revealed that Blackstone plans to hold onto the Centro assets in anticipation of a recovery in U.S. property values. The source remains nameless because the details of the transaction are private. Ventas's USD 5.7 billion purchase of Nationwide Health Properties Inc.
Is not only the biggest ever among health-care real estate investment trusts, but will also create the largest health-care REIT as HCP Inc. is currently the biggest health-care REIT by market value. Meanwhile, in a deal announced recently the third largest health-care REIT (Health Care REIT Inc.) agreed to buy substantially all the property assets of closely held Genesis HealthCare for USD 2.4 billion. However, this is unsurprising when you think about it; healthcare and retail are big money industries, capable of paying large sums of money for prime real estate. So buying now when prices are heavily distressed makes sense.
- Thursday 17 March 2011