Real estate company merger-and-acquisition activity was anemic in the first half, as broader economic uncertainty undercut the year’s initial optimism for a more liquid market.
Just four deals totaling $9.18 billion closed from January to June, according to Real Estate Alert’s biannual review of the sector. The largest, Blackstone’s $4 billion take private purchase of Retail Opportunity Investments Corp., was agreed to last November, while the second largest, Blue Owl Capital’s purchase of a larger stake in Store Capital, was a minority-interest recapitalization of a $16 billion deal from 2023.
The M&A market historically is lumpier than the investment-sales space, but the dearth of deals has been attributed to overall market uncertainty, some tied to President Donald Trump’s on-again, off-again tariff policy, as well as the federal government’s focus on immigration, which could strain the retail and hotel sectors.
“The ups and downs of the market in April, in particular, calmed a lot of appetite,” Cedrik Lachance, director of research at Green Street, the parent of Real Estate Alert, said. “On either side of it, people were thinking, ‘Why would I sell now? Why would I buy now?’ ”
Eastdil Secured led the race for top advisers at midyear, thanks to its work representing GIC on its sale of a 26% interest in Store Capital, a Scottsdale-based net-lease REIT. The deal boosted the firm’s total to two deals worth $6.5 billion, good for a 70.8% market share.
Bank of America, Citigroup, JPMorgan Chase, Morgan Stanley, Newmark and Wells Fargo all tied for second place, with each getting $4 billion of credit (44% market share) for their roles on the Blackstone-ROIC transaction.
Next came Centerview Partners and Matrix Capital Markets, which tied for eighth place with one deal worth $1.57 billion (17% share). The only other ranked firm was CS Capital Advisors ($1.11 billion, 12% share).
The light first-half volume has the sector on pace for its worst year in at least a decade. Andrew Warin, co-head of Newmark’s capital-markets strategic advisory group, attributed part of the weaker M&A activity to the growth of so-called secondaries deals.
“There are simply more private alternatives now,” Warin added.
For example, in prior years an owner of a $2 billion portfolio would have to sell itself or go public to generate a capital event or to raise growth equity. Now, more investors are willing to take an ownership stake in a company, recap an existing pool of properties to fund a forward pipeline,
or create a programmatic joint venture and participate in a general partner-led secondary transaction that skirts the need for a single monetization event.
In addition to new capital formation strategies, capital allocators increasingly are investing alongside sector specialists, as “they are laser-focused on finding high-quality operational platform models with great real estate to generate alpha,” Warin said.
While traditional public-to-public or take-private M&A is quiet right now, there has been more activity involving purchases of investment managers by larger fund shops, said Doug Weill, a founder and co-managing partner of New York-based Hodes Weill & Associates.
Ten real estate fund shops sold, recapitalized or merged — or announced the intent to do so — during the first half. That’s down from 14 in the first half of 2024, but on pace to beat the 2023 total of 19.
“We’re seeing continued velocity in terms of the number of deals that are getting done, the size of the deals getting done and the global nature,” Weill said. “We’re still early innings in terms of the consolidations we’re seeing in the industry.”
Fund-shop acquisitions in the first half included Barings’ purchase of Artemis Real Estate Partners, Apollo Global Management’s agreement to buy Bridge Investment Group and last week’s disclosure that BlackRock is set to purchase net-lease specialist ElmTree Funds.
What’s more, ever-hopeful market watchers say deals can happen in the current environment. The debt market, particularly for CMBS loans, is open, and real estate fundamentals in most sectors are steady.
“There are many more management teams that are more openly saying, ‘My share price is too disconnected from what we believe the value is, and at some point something has to happen,’ ” Green Street’s Lachance said. “Some of those are starting to talk like sellers.”
He noted that the announcement of the next large M&A deal could be a confidence boost for the overall market.
“We have these conversations until there’s one big deal done,” Lachance added, “and then three big deals get done.”
Real Estate Alert tallies acquisitions of entities that primarily own income-producing commercial properties in the U.S. It excludes single-property and portfolio transactions; sales of advisory, management or brokerage firms; roll-ups of investment vehicles; and other reorganizations involving affiliated entities in which ownership doesn’t change substantially.
Advisors are given full credit for transactions if they represent either the buyer or the seller. As a result, two or more advisors often receive full credit for a deal. Investment banks are given credit only when expressly named as “advisor” or “financial advisor” to a transaction. Advisors don’t receive credit if their duties are limited to providing fairness opinions.
