Slowing Commercial Real Estate Market Leads To Consolidation
The slowing real estate market is leading to a consolidation in the commercial side of the industry as early movers look to cash out and large interests look for a good long term deal on the properties. Mondays sale of Trizec Properties to New York based Brookfield Properties Corp. is an example of the consolidation.
The replacement cost of these buildings are fairly high so as a long term asset they are still very valuable. But in the short term poor occupancies can hurt the smaller operators and REITs.
New York-based Brookfield Properties Corp. and Blackstone Group, a private equity firm, said they are buying the Chicago-based REIT and its Canadian subsidiary in a deal valued at about $8.9 billion, including assumption of $4.1 billion in debt.
Trizec owns 61 office buildings, including four in Chicago, with 36 million square feet of space. Brookfield will assume ownership of Trizec’s properties in New York, Washington, and downtown Los Angeles, while the four Chicago buildings will be taken over by Blackstone. The equity firm also will take over the Trizec properties in Houston, Atlanta and Dallas.
‘Brookfield wants a competitive edge by adding properties in the strong markets of New York and Washington, and in resurgent downtown Los Angeles,’ said Morningstar Inc. senior equity analyst Arthur Oduma. ‘These markets outpace Chicago in terms of sales values, leasing activity and vacancy rates.’
Trizec deal displays a slow market.
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