Life Sciences Real Estate Faces an Overbuilding Crisis

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Good morning. The life sciences real estate boom has become a bust as oversupply plagues the sector post-pandemic.

Today's issue is sponsored by RSN Property Group.

🎙️ No Cap Episode 7: Co-hosts Alex Gornik and Jack Stone talk with Vikram Raya, CEO of Viking Capital, on how he went from cardiologist to acquiring $800M+ in multifamily assets.

Market Snapshot

PROPERTY REPORT

TOGETHER WITH RSN PROPERTY GROUP

226 Units in the Thriving Dallas Market

RSN Property Group is thrilled to introduce its latest investment opportunity, “The Avalon Apartments,” a 226-unit multifamily community located in Dallas, TX. 

With $13MM in equity available, this 506c offering is accepting investments from accredited investors and a limited number of 1031 exchanges. Institutional investors are welcome under negotiable terms.

Investment highlights:

• Strong risk-adjusted returns: 1.99x EM, 15.95% IRR, 6.11% CoC, 19.72% AAR

• Highly experienced sponsor: RSN has spent a decade executing value-add business plans across $850MM of similar assets. 

• Distressed Seller: After spending $4.9MM in CAPEX, a distressed seller is forced to let the asset go for $111k/door, well below comps. 

• Simple Business Plan: 30% of the units are renovated, achieving $200-$300 premiums. The remaining 70% can be renovated to that same standard, achieving those same rental premiums.

*Please see the advertising disclosure at the bottom of this newsletter.

• Confidence boost: Wells Fargo's Chief Economist predicts that even a minor Federal Reserve rate cut could boost commercial real estate sentiment, though lending is expected to slow.

• Banking on rate cuts: The Bank of Canada lowered its interest rate for the third time this year, with potential further cuts expected to boost housing affordability.

• Gain time for growth: Metonic reduced time on back-office work by 10X and improved investor engagement by 70% with Agora’s comprehensive investment management platform. (sponsored)

• Homebuilders thrive: Homebuilder stocks surged 20% in Q3 on the promise of impending interest rate cuts, outperforming the S&P 500 with 21% YTD growth.

• Steel deal: President Biden plans to block Nippon Steel's $14.1B acquisition of U.S. Steel, threatening job losses and plant closures.

• Office space: Investor Warren Wachsberger of Eldridge Acre Partners sees older U.S. office buildings as the biggest concern for commercial real estate but believes the market has hit bottom.

• Condo chaos: Shvo’s Mandarin Oriental Residences in Beverly Hills faces a bulk sale of its remaining units after a $200M default notice, with plans to reallocate investments.

• Eastern expansion: Developers plan to build a 360-unit complex on 7th & Pleasant Valley and a 44-unit complex on East Austin's East 4th Street.

• Family fortune: The Wirtz family sold a 139-unit Lakeview complex in Chicago to FMA Properties for $22.5M amid United Center's redevelopment plans.

• Buying well: Cypress Capital Investments bought a San Francisco apartment building for $9.7M, its third deal this year.

• Renovating fortunes: Northlink Capital secured $24M in construction financing for a 53-unit Brooklyn multifamily property near Flatbush Ave train station.

• Truckin' trust: Yellow Corp. (YELLQ) may create a real estate investment trust for its truck terminals in the company’s bankruptcy restructuring.

• Investment insights: Investcorp (ICMB) acquired a $95.8M, 435 KSF industrial portfolio in Suffolk County from Metropolitan Realty Associates and TPG Angelo Gordon (TPG).

• Rising trend: Co-warehousing is becoming increasingly popular for small businesses, with over 5.5 million new business applications filed in 2023 alone.

• Rite Aid rises: Rite Aid (RADCQ) emerged from Chapter 11 with a slimmer focus on 1.3K stores, down from 2.1K pre-bankruptcy, after paying off $2B in debt and getting $2.5B in financing.

• Canadian convenience: Canadian convenience store and fuel supplier Parkland is exiting Florida to sell off its non-core assets, as reported by CoStar.

• Crypto crash fallout: Andreessen Horowitz shut down its 2-year-old Miami office due to low employee attendance after the city’s tech ambitions hit traffic in the post-FTX crypto crash.

• Property predicament: Hertz Properties, a major U.S. office landlord, faces significant financial troubles, hiring a restructuring officer after disclosing doubts about its survival due to rising vacancies, inflation, and failed property sales.

• Real estate revamp: SL Green Realty (SLG) acquired the $224M senior loan on an office property at 522 Fifth Avenue at a significant discount.

• Office visitation: Post-pandemic Manhattan office visits hit 72% of 2019 levels, with Midtown buildings leading at 75% average weekday visitations.

• Farm frenzy: The Riverhead town board withdrew its agritourism inns and resorts re-zoning plan after facing backlash from the North Fork community.

• Star-studded makeover: Billionaire Barry Sternlicht is leading a group looking to revamp Miami's waterfront Standard hotel with architect Bjarke Ingels; partners include Peter Thiel.

📈 CHART OF THE DAY