Justina Chiu, CEO of the real estate investment trust, says "we expect a better set of results in the second half of this year."
Tag: REIT management
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OUE REIT CEO discusses earnings and business outlook
Han Khim Siew, CEO of the Singapore OUE Real Estate Investment Trust, says "we don't want to over-hedge at this point in time."
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How RealPage influences rent prices across the U.S.
RealPage software is used to set rental prices on 4.5 million housing units in the U.S. A series of lawsuits allege that a group of landlords are sharing sensitive data with RealPage, which then artificially inflates rents. The complaints surface as housing supply in the U.S. lags demand. Some of the defendant landlords report high occupancy within their buildings, alongside strong jobs growth in their operating regions and slow home construction.
09:56
Sat, Feb 3 20248:27 AM EST
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Why U.S. renters are taking corporate landlords to court
A group of renters in the U.S. say their landlords are using software to deliver inflated rent hikes.
“We’ve been told as tenants by employees of Equity that the software takes empathy out of the equation. So they can charge whatever the software tells them to charge,” said Kevin Weller, a tenant at Portside Towers since 2021.
Tenants say the management started to increase prices substantially after giving renters concessions during the Covid-19 pandemic.
The 527-unit building is located roughly 20 minutes away from the World Trade Center, on the shoreline of Jersey City, New Jersey. A group of tenants at the tower is involved in a sprawling class-action lawsuit against RealPage and 34 co-defendant landlords. The U.S. Department of Justice filed a statement of interest in the case in December 2023, arguing that the complaints adequately allege violations of the Sherman Antitrust Act.
In November 2023, the attorney general of Washington, D.C., filed a similar but more narrow complaint against RealPage and 14 landlords that collectively manage more than 50,000 apartment units in the District.
“Effectively, RealPage is facilitating a housing cartel,” said Attorney General of the District of Columbia Brian Schwalb in an interview with CNBC. His office filed the complaint on antitrust grounds. They allege that landlords share competitively sensitive data through RealPage, which then sets artificially high rents on a key slice of the local rental market.
Office of the Attorney General for the District of Columbia, November 2023
“Rather than making independent decisions on what the market here in D.C. calls for in terms of filling vacant units, landlords are compelled, under the terms of their agreement with RealPage, to charge what RealPage tells them,” said Schwalb.
RealPage says its revenue management products use anonymized, aggregated data to deliver pricing recommendations on roughly 4.5 million housing units in the U.S. The company says its tools can increase landlord revenues between 2% and 7%.
“Just turning the system on will outperform your manual analyst. There’s almost no way it can’t,” said Jeffrey Roper, a former RealPage employee and inventor of YieldStar.
YieldStar is one of three key revenue management tools offered by RealPage. The software balances prices, occupancy and lease lengths to help property managers optimize their portfolio’s yield. The company feeds data from its models into a newer tool dubbed “AIRM” that considers the effect of credit, marketing and leasing effectiveness.
RealPage told CNBC that its landlord customers are under no obligation to take their price suggestions. The company also said it charges a fixed fee on each apartment unit managed with its software.
RealPage was acquired by Miami-based private equity firm Thoma Bravo for $10.2 billion in 2021. In court filings, Thoma Bravo has claimed that it is not liable for the alleged acts of its subsidiary outlined by plaintiffs in the class-action complaints.
Renters told CNBC they discovered how revenue management software is used in real estate after reading a 2022 ProPublica investigation. Equity Residential investor materials show that the company started to experiment with Lease Rent Options between 2005 and 2008. RealPage acquired the product in 2017.
“How could we possibly know?” said Harry Gural, a tenant in an Equity Residential property located in the Van Ness neighborhood of Washington, D.C. Gural says he has been involved in legal matters against his landlord’s pricing practices for more than seven years.
Affiliates of Equity Residential are contesting a separate decision made by a local housing authority in Jersey City regarding prices set on the Portside Towers property. The company has filed a lawsuit in federal court challenging the decision, stating that the decision could result in millions of dollars in refunds for tenants.
Equity Residential and other defendant landlords declined to comment on ongoing RealPage litigation.
Redfin reports that asking rents in the U.S. ticked down to $1,964 a month in December 2023, a decline from recent highs. Prices are coming down in markets such as Atlanta and Austin, Texas, where home construction is high. But analysts believe low rates of homebuilding on the U.S. East Coast could give well-located landlords more pricing power.
“Guys like us that own 80,000 well-located apartments, we’re still in a pretty good spot,” said Equity Residential CEO Mark Parrell in a June 2023 interview with CNBC.
Watch the video above to learn about the rising tide of lawsuits against U.S. corporate landlords.CORRECTION: A previous version of this article misstated when Equity Residential purchased Portside Towers.
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Higher funding costs forcing Asia’s biggest REIT to set a ‘much higher’ bar for acquisitions: CEO
Link REIT's CEO George Hongchoy explains the company's appetite for more M&A amid capital management challenges.
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How Wall Street’s REIT giants are reshaping U.S. real estate
U.S real estate investment trusts today manage $4.5 trillion in real estate worldwide. Many groups on Wall Street offer these tax-friendly funds to retail investors.
KKR’s real estate business is one of the big players in the REIT game. The private equity firm manages multiple REIT funds. The KKR Real Estate Select Trust, which currently manages $1.5 billion in assets, paid a dividend of 5.4% to its investors in July 2023.
But the benefits extend beyond returns.
“When you look at the after tax equivalent of that yield, it is very compelling.” said Billy Butcher, CEO of KKR’s global real estate business. “The depreciation from our properties has covered 100% of the income generated by our properties, and there’s no tax on that dividend,” he said in an interview with CNBC.
Larger funds sometimes contain a diversified pool of assets. Categories may include office, student housing, casino, timberlands, radio and cell towers, server farms, self-storage properties, billboards, and much more.
“Back in the 1960s, there were three or four different types [of REITs], said Sher Hafeez, a managing director at Jones Lang LaSalle, a real estate services firm. “Now, I can count at least 20 different types.”
Top performing REIT sub-sectors in recent years include data centers, self-storage properties, residential housing and tower REITs. Residential housing delivered a return of 16% from 2010 to 2020, according to a S&P Global Investments report.
The investor-friendly tax rules can also increase the pace of large-scale development.
“Having REITs there as a potential exit helps the market, and helps the availability of financing,” said Michael Pestronk, CEO and co-founder of Post Brothers, a Philadelphia-based housing developer.
Some funds like Invitation Homes and American Homes 4 Rent were founded in the yearslong slowdown in U.S. home construction. At the time, REITs bought and managed commercial-scale properties, which could include products like master-planned communities or traditional apartment complexes.
In recent years, publicly traded trusts have targeted single-family rental market, and today, these REITs have grown tremendously — enough to build new neighborhoods in their entirety.
Watch the video above to learn the fundamentals of real estate investment trusts.
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East Coast mayors call for more office-to-apartment conversions
Mayors in cities across the U.S. want to loosen rules that can slow the pace of office-to-residential conversions. In some instances, cities have offered generous tax abatements to developers who build new housing.
“We have a great opportunity to change the uses in the downtown,” said Washington, DC, Mayor Muriel Bowser at a December 2022 news conference in support of her housing budget proposals.
“It’s absolutely a budget gimmick” said Erica Williams, executive director at the DC Fiscal Policy Institute, referring to Bowser’s 2023 proposal to increase the downtown developer tax break. “We fully support the idea that some of these buildings could be turned into residential properties or into mixed-use properties, but that we don’t necessarily need to subsidize that.”
In New York City, a task force of planners assembled by Mayor Eric Adams is studying the effects of zoning changes, and possible abatements for developers who include affordable units in conversions.
Cities like Philadelphia have previously embraced these policies to revitalize their downtowns. In Philadelphia, homeowners and investors received more than $1 billion in tax breaks for their renovation projects.
A small collective of developers have taken on this challenging slice of the real estate business. Since 2000, 498 buildings have been converted in the U.S., creating 49,390 new housing units through the final quarter of 2022, according to real estate services firm CBRE.
Prominent investors Societe Generale and KKR have worked with developers like Philadelphia-based Post Brothers to finance institutional-scale office conversions in expensive central business districts.
“Capital has gotten much more limited,” said Michael Pestronk, CEO of Post Brothers. “We’re able to get financing today. … It is a lot more expensive than it was a year ago.”
Many experts believe local governments will alter zoning laws and building codes to make these conversions easier over the years.
“Our rules are in the way, and we need to fix that,” said Dan Garodnick, director of New York City’s Department of City Planning.
Watch the video above to learn how cities are getting developers to convert more offices into apartments.
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Here’s what’s stopping cities from converting offices into apartments
Some U.S. mayors are loosening up rules that determine how developers convert office buildings into apartment complexes. The conversion trend sped up in the 2020s, as the Covid pandemic remote work boom reshaped cities. Declines in office leasing activity is constraining funding for services like education and transit, leading some local leaders to prioritize conversion of dated buildings. These rule changes may create some additional housing supply in regions like the U.S. East Coast.
11:46
Sat, Jul 15 20237:00 AM EDT