First and foremost, I would like to personally thank Roshni Revankar for all her service to The Stute and Stevens community. I look forward to taking over this business news column next semester and onwards, hoping to bring as much insight and analysis into current events and companies I follow.
On April 25, Blackstone announced that it would acquire Real Estate Investment Trust (REIT) PS Business Parks (PSB : NYSE) for $7.6 billion including debt. This comes less than a week after the private equity firm acquired student housing owner and developer, American Campus Communities (ACC : NYSE) for $12.8 billion including debt.
As part of the take-private component of the deal, Blackstone will pay $187.50—a 15% premium over the 60 day weighted average—for each outstanding share of PS Business Parks. In their acquisition of American Campus Communities, Blackstone paid a 14% premium above deal-day’s closing price of $65.47 per share.
According to Reuters, “Mergers and acquisitions (M&A) activity involving REITs reached a record high in 2021, driven by a robust U.S. housing market, availability of cheap capital from low interest rates, and strong economic recovery from the pandemic.”
These moves continue a trend of the PE firm’s aggressive expansion into the REIT market after previously purchasing Preferred Apartment Communities (APTS : NYSE) in February for $5.8 Billion cash and private REIT Resource REIT Inc (RREO) for $3.7 Billion in January.
The likely mindset behind Blackrock is to capitalize on the rise in mortgage rates, which have risen for seven consecutive weeks, settling in at a 12 year high. The current rate for 30-year fixed mortgages is sitting at 5.11%, up from the last high experienced by the market in November of 2018 at 4.94% and the highest since April 2010, according to mortgage loan company Freddie Mac. For reference, just a year ago, the 30-year mortgage fixed rate was 2.97%.
It certainly will be interesting to see how the demand in the real estate market progresses, especially with the consensus that the Fed will hike rates by at least 50 Basis Points consistently, with some speculating that rates will reach or surpass neutral expectations of 2.25-2.50% by the end of this year.
The ultimate question for firms in the real estate sphere is how will these rising rates impact the economy? Will they prove profitable for mortgage lenders, who are able to charge higher rates, or will they prove to send the economy into recession, thus crashing the demand for housing and lowering prices? The anticipation is high as the Fed plans its next move.
Not Financial Times (NFT) is an Opinion column created by Roshni Revankar ‘22 to share insights and research into students’ favorite companies, industry trends, and anything in financial markets that really irks their curiosity.
Be First to Comment