CoStar in Talks to Buy Murdoch's Move Inc. for $3B

Good morning. Rupert Murdoch has decided to hand over the News Corps real estate business, Move Inc., to CoStar in a $3B deal. Harbor Group International raises $1.6B in a fund to fuel multifamily projects. Meanwhile, $11.3B in federal funding for rail infrastructure is poised to impact developments across the country.

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Murdoch Plans to Sell Move Inc. to Costar Group For $3B

After abandoning his plans to merge News Corp (NWS) and Fox Corp (FOX), it appears that Rupert Murdoch is reevaluating previous investments to maximize shareholder value. The first brand on the chopping block? Online real estate business Move Inc., which operates popular real estate websites like realtor.com.

Making bigger moves: News Corp purchased Move back in 2014 for $950M, but now seeks to offload it to CoStar (CSGP) for a tidy sum of $3B according to sources close to the matter. Between 2013 to the end of 2022, Move’s annual revenues shot up from $227M to $700M. Today, News Corp owns 80% of Move outright, while the remaining 20% is controlled by REA, a News Corp subsidiary.

Building an empire: This acquisition would contribute to CoStar’s growing brand in residential real estate. Since 2014, the $32B industry titan has spent $2B acquiring residential real estate brands. Notable deals include buying Apartments.com for $585M in 2014 and snatching up ForRent.com in 2017 for $385M.

From the horse's mouth: CoStar, led by Andy Florance, said, "The estimated value of commercial real estate assets in the U.S. is $16 trillion" he said at the time. In comparison, the residential sector totaled $27 trillion in assets. "With the new addition of clients and information … we are almost tripling the size of our addressable markets."

➥ THE TAKEAWAY

Future-sight: With billions at their disposal, it’s clear CoStar won’t shy away from ambitious M&A activity to grow in the residential space. And since current market factors likely pushed Murdoch’s advisors to nudge him towards offloading News Corp’s real estate business, we may very well see similar deals shortly if market uncertainty prevails.

BACK ON TRACK

US Earmarks $11.3B For New Amtrak Developments

A new era for US rail infrastructure is on the horizon. With $11.3B of federal funds available to expand Amtrak and regional service providers nationwide, commercial and residential developers will likely swarm wherever new stations go up.

The Great Rail Awakening: $9B has been allocated to the busiest Amtrak region, the Northeast Corridor, which runs from DC to Boston. The remaining $2.3B is available to transportation authorities elsewhere. Nationwide, projects already underway or that have existing agreements for local funding are expected to win a piece of this federal grant pie easily.

Full steam ahead: Cities that lack sufficient rail service—like Scranton, Baton Rouge, and Columbus, Ohio—could all receive funding from Amtrak or state and local-owned rail operators. Hundreds of acres of commercial property will likely be purchased soon for new stations, rights-of-way, and staging yards. According to industry experts, rail projects in NY, PA, LA, MN, and CA are the most likely to win funding.

➥ THE TAKEAWAY

One for the history books: Anyone who took high school history in the US knows that big money followed the railroads West. But since trains are no longer the premier way to travel, new stations won’t necessarily attract entire towns like they used to. Still, we’ve seen new rail stations in Raleigh and Sacramento stimulate development due to higher foot traffic for local businesses and more demand for property nearby.

MULTIFAMILY MOVES

Harbor Group Raises $1.6B for Multifamily Debt Fund

Harbor Group International has closed on a $1.6B fund to finance multifamily projects despite the lull in the markets. The fund began raising money in 2021 before the Fed brought the hammer down in 2022.

We want in, eh? Among HGI’s biggest investors is the Canada Pension Plan Investment Board, which committed $585M. The multifamily fund will provide fixed and floating-rate, mezzanine, and preferred equity loans with interest rates between 8–12%. The company currently manages $20B in assets but plans on investing in more mortgage bonds and loans as well.

In the nick of time: Multifamily has outperformed compared to other CRE sectors, which makes HGI’s haul unsurprising. That being said, they’re lucky to have raised these funds before the CRE sector can shrink further. According to Green Street, average prices fell 13% last year. This year, lending for multifamily properties is forecast to fall 11% to $393B.

➥ THE TAKEAWAY

Some silver linings: HGI President Richard Litton remains optimistic despite an impending recession. He expects apartment bets to do well as high mortgage rates keep homebuyers in the rental market. HGI isn’t alone, either—other nonbank lenders like Madison Realty Capital and the Carroll Organization are also raising capital for funds to take advantage of the changing market.

• Libor no more: As the end of Libor looms, 70 CLO equity investors have convened to ensure the transition doesn’t cost them millions.

• Race against the clock: NYC building owners must report their building emissions starting in 2024, and as many as 3.7K properties are expected to be non-compliant.

• Eat my dust, Dad: Josh Kushner’s net worth has now surpassed Donald Trump's after he received a sizable investment in his firm, Thrive Capital.

• On thinner ice: Veritas is defaulting on a $448M CMBS loan secured by 1.7k apartments across 62 properties in San Francisco.

• Reading the rap sheet: The IRS just disclosed its 10 biggest criminal cases of 2022. The lawyer for Stormy Daniels in her case against Donald Trump is #1 on the list. Can’t make this up.

• Greener pastures: While the buyer pool for homes is shrinking due to higher rates, those still looking to buy a home are moving towards metro areas that are still affordable.

• Firing on all cylinders: New York’s industrial market surges forward as leasing velocity spiked 106% in Q4, with Class A rents nearing $30/SF.

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• Factory expansion: Tesla announced plans to invest over $3.6B to expand its facility in Reno, Nevada, which is used for assembling batteries and manufacturing EV cars.

• Come and stay awhile: Weller Development, partnering with luxury resort brand Six Senses, announced plans to construct a resort and residencies in Napa Valley.

• Room and board: Brookfield Properties (BPYPO) plans to add to the Woodlands Mall by building two hotels as part of their $100M expansion.

• All about those bricks: The Lego Group announced plans to move their Americas HQ from Connecticut to Boston by 2026. Field trips incoming!

• Cleaning house: To cut costs, Intel (INTC) is selling its 61-acre corporate campus in Austin, including 424 KSF across three connected buildings.

• From the ashes: The $850M redevelopment of the 1.4 MSF Metrocenter Mall in Phoenix is ready to kick off.

• Lean, green machine: Renewable energy developer Invenergy has signed a lease for 7,187 KSF of office space at the Starrett-Lehigh Building in Manhattan.

📈 Chart of the Day

The title really says it all, doesn’t it? As long as you don’t need the money you stick into the markets in the next year or two, you should probably just leave it there and let it grow.

😎 Offering-MEME-Orandum

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.