A majority of publicly traded REITs and real estate companies in the U.S. plan to sell off properties at peak prices in 2016 and use the proceeds to finance acquisitions and development projects, a news report from the CoStar Group says.
In fact, CoStar said, total property dispositions are expected to more than double acquisitions, and three times as many REITs expect to be net sellers compared to net buyers this year. The finding are based on CoStar’s 2016 review of acquisition and disposition activity as reported by 80 publicly traded REITs and real estate companies in their year-end and fourth quarter 2015 earnings statements and 2016 guidance outlines.
CoStar said the review revealed that the REITs and real estate companies clearly plan to finance acquisitions, development and redevelopment through property sales.
Full 2016 guidance were posted by nearly half the publicly traded equity REITs and showed these companies anticipate they will sell just over $20.7 billion in properties, while acquisitions are project at $9.8 billion, CoStar reported.
The top seller by far is Sam Zell’s Equity Residential, a multifamily REIT that expects to sell $7.4 billion in properties in 2016, according to the news report. That level of sales represents more than a third of the combined total reported by REITs so far. In contrast, the company said it expects to purchase only $600 million in property at the high end of its 2016 guidance assumptions, CoStar said.
Equity Residential already completed a large part of 2016’s anticipated sell-off last month by finalizing the sale of 72 properties comprised of 23,262 apartment units to affiliates of Starwood Capital Group, according to CoStar. The $5.365 billion sale translated to approximately $230,634 per unit on average.
The REIT plans to refocus its portfolio into higher density urban locations with close proximity to public transportation and job centers, according to the news report. The company has 10 properties with close to 4,000 units now in development at a cost of $2 billion, CoStar said.
CoStar found that like Equity Residential, development and redevelopment costs are a major factor for the other four companies that round out the top five projected net sellers of property in 2016: Prologis, Liberty Property Trust, Brandywine Realty Trust, and Macerich Co.
CoStar said Prologis currently has $2 billion of properties in development that total 25.5 million square feet.
Pennsylvania-based Liberty Property Trust completed five development properties with 678,000 square feet in leasable space at a cost of $75.3 million in the fourth quarter 2015, CoStar reported. At the same time, CoStar said, the company had $252 million in developments projects ongoing, and kicked off development of another five properties totaling 806,000 square feet of leasable space at an expected cost of $107.6 million.
Brandywine Realty Trust, which also is based in Pennsylvania, was ahead of the trend, nearly completing its portfolio repositioning during the past 13 months with $1.1 billion in property sales, including the recent sale of 58 office properties representing 3.9 million square feet to Och Ziff Capital Management Group LLC for $398.1 million, CoStar said. With that sale, Brandywine significantly reduced its non-core holdings in Pennsylvania, New Jersey, Delaware, Richmond and Northern Virginia, according to the news report.
Last quarter, Brandywine inked a fee development deal to develop Subaru’s new North American headquarters in 250,000 square feet in Camden, N.J.
CoStar said the top five projected buyers for 2016 were Douglas Emmett, Physicians Realty Trust, Store Capital, Essex Property Trust, and SL Green Realty.
Los Angeles-based Douglas Emmett, the top projected net-buyer, did not report assumptions on property dispositions but just this week announced a significant deal to acquire a portfolio of four office buildings in L.A.’s Westwood area totaling a little more than 1.7 million square feet, for $1.34 billion, according to CoStar.
Physicians Realty Trust more than doubled gross real estate assets last year and currents has five pending acquisitions of seven health care properties in five states for $100 million, the news report said.
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