M&A How the pandemic has created opportunities for buying real estate



Vacant office buildings and retail stores make this the perfect moment for private equity firms to raise funds for targeted deals in these types of properties. Everything else, from warehouses to warehouses, also attracts investors. The rise in e-commerce sales leads to an increase in demand for warehouse space.

Meanwhile, there is a growing need for real estate-related software, including data that helps realtors track demographics and digital technology that helps lenders and home buyers manage the mortgage process.

Michael Lyon

Software, especially contactless technologies for offices, as they gradually open up, will also generate interest. “Contactless access and visitor management will be key as more offices reopen and shared living space becomes more prevalent,” says Michael Lyon, managing director of a technology investment bank Vista Point Advisors

Here are some of the key trends that will drive real estate mergers and acquisitions:

Opportunistic fundraising

Private equity firms are raising funds to take advantage of the desired real estate opportunities created by the pandemic. In March, Cerberus Capital Management LP raised $ 2.8 billion for its flagship global real estate strategy fund. Cerberus Institutional Real Estate Partners V LP closed with over $ 2.5 billion in liabilities with an additional $ 300 million pledged to a dedicated investor fund to implement the strategy.

“The investment landscape plays an important role in our global real estate franchise,” said Lee Millstein, President of Cerberus Global Investments and Head of Real Estate. “There are market dislocations and macro trends that offer attractive opportunities for our broad platform. Our team will continue our disciplined approach to profitable investments, building innovative partnerships and applying our manufacturing capabilities and experience to tackle complex problems. ”

In February, warehouse operator Go store it, announced that its joint venture with Cerberus has acquired twelve warehouse assets, consisting of 6,000 units.

Other firms are pursuing a similar strategy. In May, a real estate investment company WHI Real Estate Partners LP closed WHI Real Estate Partners V LP at $ 385 million. According to the announcement, the fund will invest in residential, hotel and office real estate in the United States.

David Rosenbaum

“The uneven recovery in the US economy has created significant opportunities for savvy real estate investors who can target a wide range of real estate sectors and geographic regions,” says the managing director of WHI. David Rosenbaum… “We are currently focusing primarily on the repositioning of medium-sized assets and development opportunities in the industrial and multi-family sectors, but it is likely that our goals will change as market conditions evolve. Flexibility has always been a key element of our investment approach. ”

A surge in warehouse transactions

In addition to warehouse and office space, warehouses are also attracting buyers’ attention, especially in the e-commerce and logistics sectors. Online retailers are adding fulfillment centers to meet consumer needs for faster delivery times. More local fulfillment centers mean shorter delivery times and lower last mile costs for both retailers and customers. The last mile is the final step in the shipping process where the goods reach their final destination.

“Online shopping accelerated during the pandemic and increased demand for e-commerce fulfillment services,” according to 2021 data. Capstone headwaters a report entitled “Assessing the Impact of New Factors on Storage, Supply Chain and Order Fulfillment.” “As a result, and with this trend expected to continue over the next few years, acquisitions in the fulfillment sector have also accelerated and raised the valuation of companies that provide the infrastructure that makes e-commerce possible.”

In March, KKR acquired a five-building industrial complex in Phoenix totaling approximately 540,000 square feet for $ 68 million. The portfolio includes last-mile warehouses less than 10 miles from downtown Phoenix, according to KKR.

“The favorable Phoenix demographic trends we saw in 2019 and 2020 continued to accelerate in 2021,” says Ben Brudney, director of the KKR real estate group when the deal was announced. “We are delighted to further expand our market presence with the addition of this portfolio. Phoenix is ​​an important market for us as we continue to expand into 2021 and beyond. “

One of the competitors of KKR, Black stone, also relies on warehouses. December 2020 Profitable Trust Blackstone Real Estate bought 13 industrial facilities from Iron mountain (NYSE: IRM) in a sale and leaseback transaction.

“The industrial sector continues to benefit from strong demand driven by the tailwind of e-commerce,” he said. David Levine, senior managing director of Blackstone Real Estate when the deal was announced.

Technology plays a role

As buyers seek physical assets to buy, technology is playing an increasingly important role in the real estate industry. Software, from mortgage process management to industry trend data providers, is being bought up by both strategic buyers and private equity firms.

“Before Covid, the mortgage market was in constant flux,” says Lyon. “In particular, there has been a growing shift to digital lending, with consumers increasingly choosing to use online platforms to finance and refinance their homes. Covid has just spurred this change even more. “

For example, The first American financial corporation.Acquisition of a fintech provider for $ 350 million Dokutech of Serent Capital expands First American’s digital offerings to real estate lenders. Docutech is well known to homebuyers and mortgage refinancers. Anyone who has recently bought a home or refinanced a mortgage has likely used Docutech to electronically sign documents from a lender, especially in Covid. Docutech provides the technology that mortgage lenders use to provide online mortgage and settlement services, an essential tool in the Covid quarantine era. Serent invested in the company in 2016.

“The acquisition of Docutech demonstrates our continued commitment to investing and growing our core business,” he said. Dennis Gilmore, CEO of First American when the deal was announced. “It also reflects our commitment to improving the home buying experience and driving the digital transformation of the real estate dispute resolution process. Together, we are uniquely positioned to manage collateral files from the start of the mortgage process to closure, which will help accelerate the evolution of real estate closing.

And in another PE deal, Tom Bravo, a private equity firm specializing in the software sector, has acquired RealPage Inc., a provider of software and data analytics to the real estate industry, is in an approximately $ 10.2 billion deal, including debt.


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