Earlier this week (04/19), we saw another large M&A transaction in residential real estate.
A premier private investment firm Blackstone paid $13bn to acquire American Campus Communities – this is another multi-billion dollar residential real estate acquisition that Blackstone inked in 1Q22. And Blackstone paid 30% premium!
As a quick background on American Campus Communities (ACC)
ACC is the largest developer, owner, and manager of high quality student housing communities in the United States.
As shown below in quick overview, they own 166 properties with 119K beds that are spread out across 69 markets.
69 markets are a lot of markets and they are widely dispersed across the United States.
What this means is that this deal is a BET on AMERICAN HOUSING MARKET AS A WHOLE – POTENTIALLY PLAYING FOR INFLATION ACROSS THE UNITED STATES.
The thesis seems WAY TOO familiar… that is because Blackstone did a deal that smells just like this earlier this year! They acquired APTS for essentially the same reason.
they are deploying capital into residential real estate before inflation eats away its buying power every day.
I like to follow money / capital of big investors because they are in the information flow – they have access to the right people and have capability to influence the policies through network and lobbyists.
I continue to remain bullish on American real estate with key tailwinds being 1) sustainable population growth, 2) hyper inflation, and 3) rising rate pushing the cost side of the monthly rent higher.
People can say cap rate is going up – it could mean that the price is coming down while rent stays flat. However, it can also mean that price no longer appreciates, but the rent goes up because the cost of financing is going up (rate rising).
With 30 year fixed rate now sitting at 5%, rental property owners will demand at least 5% of the cost basis of their apartment so that they can cover at least their interest expense plus monthly principal paydown.
I continue to save every dollar so that I can continue to aggregate assets so that I can fight off hyperinflation.
*not investment advice
