Source: Securities Times Author: Han Chengyu
What is Kuroishi's take on real estate behind it?
On April 8, local time, the official website of the Blackstone Group announced that they have reached a final agreement. According to the agreement, the Blackstone Group will buy Apartment Income REIT (or AIR Communities), one of the largest apartment owner companies in the US, at a price of about 10 billion US dollars (approximately RMB 72 billion).
This is the second time this year that Kuroishi Group has bought a real estate company. In January of this year, Blackstone also bought Canadian-based real estate company Tricon for $3.5 billion.
Blackstone Group CEO Jon Gray said that Blackstone believes “real estate valuation has bottomed out” in the US.
Received a $10 billion premium acquisition, and AIR Communities stock soared
According to the agreement, the purchase price is 25% higher than the closing price of AIR Communities on the New York Stock Exchange on April 5, 2024 (the last trading day before the transaction announcement). AIR Communities shares also surged more than 22% last Friday.
According to reports, AIR Communities is a publicly traded, self-managed real estate investment trust. The company's portfolio includes 76 communities spread across 10 US states and the District of Columbia, totaling approximately 27,000 condominiums.
Regarding the acquisition, Air Communities President and CEO Terry Considine said, “I'm proud of the team and their outstanding culture. The deal will reinforce the company's mission to provide others with a home, an ideal place to work, act as a responsible manager, and be a trusted partner for investors. The business the team has established will focus on residential services and investment opportunities through cooperation with the Blackstone Group. We are grateful to the Blackstone Group for the opportunity and confidence that working together can achieve results.”
Kuroishi has taken action many times, betting on real estate
According to public information, Blackstone Group is one of the largest independent alternative asset managers in the world. Its real estate business was founded in 1991 and is currently the world's largest commercial real estate owner. It owns and operates assets in various major regions and industries, including logistics, residential, office, hotel and retail. In recent years, it has been seeking to acquire poorly managed and well-located assets around the world.
Regarding the acquisition, Blackstone Global Co-Head Nadeem Meghji said, “AIR Communities represents the highest quality large apartment portfolio we have acquired, and is located in a multi-unit and fundamentally-strong market. We are impressed by the excellent operations team at AIR Communities and look forward to working closely with them while continuing to provide a great resident experience.”
In fact, this isn't the first time this year that Blackstone has acquired a real estate company. As early as January of this year, Blackstone Group announced that it would spend 3.5 billion US dollars (about RMB 25.3 billion) to acquire Tricon, which is headquartered in Canada. According to information, this is a real estate company that invests in single-family rental and multi-family rental housing. Both the US and Canada have operations, and Blackstone Group bought all of Tricon's issued common shares at a price of $11.25 per share at the time. The transaction price is 30% higher than the closing price of Tricon on the New York Stock Exchange on January 18, 2024 (the last trading day before the trading announcement). If this acquisition is added, Blackstone Group's real estate investment this year has exceeded 13 billion US dollars (about 94 billion yuan).
According to information, Tricon's business model is to provide high-quality rental houses and apartments in high-quality communities, and provide resident services through its technology-supported operating platform and dedicated on-site operation team. The scope of services includes Atlanta, Charlotte, Dallas, Tampa, and Phoenix, as well as Toronto, Canada. In addition to managing single-family rental housing portfolios, Tricon has a single-family rental development platform in the US and is developing approximately 2,500 homes, as well as numerous land development projects, which can support nearly 21,000 single-family future development homes. The company also owns a Canadian multi-family housing development platform and is building approximately 5,500 affordable multi-family rental apartments.
Following Blackstone's acquisition, Tricon plans to complete a $1 billion new single-family rental housing development in the US and a $2.5 billion new condominium development in Canada (along with its existing joint venture partners). At the same time, it will continue to improve the quality of existing single-family homes in the US through an additional $1 billion planned capital project over the next few years.
According to information, the rise in interest rates in the US over the past year has put pressure on landlords for rental housing and other commercial real estate loans. Some analysts believe that Blackstone Group's deal is a vote of confidence that this pressure has begun to ease. Analysts at Jefferies Financial Group said, “We believe that the message Blackstone Group is conveying through this transaction is that they believe interest rates are stabilizing and access to capital is improving, which is a positive interpretation for the industry.”
Behind Blackstone's real estate gambling: I think the valuation has bottomed out
Why a massive takeover of real estate companies in 2024? Jon Gray explained that they think the real estate industry's valuation has bottomed out. On April 8, local time, Jon Gray said in a video posted on Blackstone Group's official website: “2024 will be another year of acceleration. Although the inflation problem has caused the Fed to raise interest rates many times in the past, the latest data shows that the inflation problem has been mitigated, but I don't think the Fed will cut interest rates too soon or drastically. We believe that real estate valuations have bottomed out, but this does not mean that the industry will suddenly reverse. We can see that some real estate companies in the market are still facing problems such as poor management and excessive debt. So we hope to enter the industry when it hits bottom, even if it may still fluctuate at the bottom for some time now.”
According to the latest survey data from Zillow, the largest real estate vertical information website in the US, the number of newly listed homes on Zillow increased 21% in February compared to the same period last year, and an increase of 20% over January. In February, housing prices rose month-on-month in 45 of America's 50 largest metropolitan areas. The biggest increases were in expensive coastal metropolises: San Jose (1.6%), San Diego (1.3%), Seattle (1.2%), San Francisco (0.8%), and Washington, D.C. (0.8%). Housing prices in 47 regions have risen compared to the same period last year. The highest annual price increases were in Hartford (12.5%), San Diego (10.8%), San Jose (8.8%), Boston (8.8%), and Providence (8.4%). There is growing evidence that the effects of “interest rate lock-ins” are beginning to wane.
According to the website's survey, the number of new listings increased by more than 3% month-on-month in February. This is the biggest monthly increase since 2018, and the increase is significant. At the same time, the traffic of newly listed listings was 20.8% higher than the same period last year, providing buyers with more choices.
The Blackstone Group's big gamble on US real estate is probably just the beginning. Jon Gray has shown confidence in investing in the real estate industry many times in 2024. Two weeks ago, he said that real estate prices are bottoming out, and now is the time to buy.
edit/lambor