What I’m Reading
Jumping on Board: When the pandemic hit last year, many of us waited for legendary distressed investor and self-proclaimed “grave dancer” Sam Zell to make an acquisition. Well, the wait is over but the acquisition is unexpected. Rather than targeting a struggling retail, hospitality or office purchase, Zell and Equity Commonwealth bought single tenant industrial REIT Monmouth Real Estate in a stock deal valued at $3.4 billion.
What I find most interesting here is the backstory. Zell, in recent years had raised valuation concerns about industrial warehouse and commented several times that it was likely getting overbuilt. That Zell jumped on board at this stage of the cycle strengthens the view that industrial growth is secular in nature and not cyclical.
Additionally, Zell didn’t mince words about retail, office and hospitality and why he chose not to focus there:
- Retail – Zell called it a falling knife that he had no interest in trying to catch at this time.
- Office – Too much supply prior to the pandemic. Worse now.
- Hotels – No meaningful discounts out there on anything that he’d want to own.
Of course this move doesn’t preclude Zell from making another big acquisition but it certainly throws more cold water on the $250 billion + of equity that has been raised to invest in pandemic-resulting distress and is still looking for a home. The Real Deal
Brick By Brick: Another day, another legal decision against the CDC eviction mandate – this one in federal court. The DOJ will obviously appeal but with two months left on the mandate, the legal wins are piling up for the other side. CNBC
Mean Reversion: Census data confirmed what we already knew – residents left big cities last year. The Real Deal However, the tide may be turning. tracking firm Unacast had earlier noted that phone users were shifting their overnight locations out of New York, but now sees them coming back. Reuters
On the Move: According to an ApartmentList Survey of 5,000 employed adults in the US, 42 percent of remote workers say that they’re planning to move over the next 12 months, compared to 26 percent on-site workers. Remote workers are more likely to be planning local moves as well as moves to a new city. About 19% of those surveyed expect to have a hybrid arrangement allowing for WFH several days per week, while 21% say they think they’ll have the ability to work exclusively from home. ApartmentList
No End in Sight: Prologis has revised their forecast for both industrial supply and demand upward for 2021. The industrial giant now predicts that rising replacement cost, limited availabilities and elevated demand should propel rent growth to 6.5% this year. ProLogis
Chart of the Day
Non-residential and residential construction decoupled bigly during the pandemic.
Source: The Daily Shot
WTF
Baby Got Back: The American Society of Plastic Surgeons has released data that showed broad declines in both minimally invasive and surgical cosmetic procedures as a result of pandemic closures in 2020. A notable bright spot was butt implants, where demand rose 22%. Bloomberg
Ok Karen: A 77-year-old retiree who was upset about the thickness of the tomato on her Whopper allegedly threw the sandwich at a Burger King employee and then spewed racial slurs at the worker because Florida. (h/t Steve Sims) The Smoking Gun
Basis Points – A candid look at the economy, real estate, and other things sometimes related.
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