Happy Friday To All!

Spooky news today with office CMBS defaulting at an 89% rate for loans that matured in September. Mackenzie Capital makes a nearly 40% discount to NAV offer for BREIT shares. NYC’s Flatiron Building looks to be converted into luxury condos. And in a coincidence with the Flatiron announcement, the White House announces a variety of funding programs for office-to-residential conversions. In broader markets, mortgage rates remained below last week’s 23-year high. The pullback in consumer spending begins to impact EV strategies. And, Blackstone’s CEO gets some backlash for saying productivity dropped for employees who work from home.

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Capital Markets

Market News

• Blackstone CEO says remote workers during the pandemic didn’t work as hard. The CEO said people got used to working from home and the benefits from not having to commute, dress up to go into the office, or buy lunch. He estimated 20% of US office buildings are vacant with another 20% leased but empty (CNN)

• Bank of England likely to hold Bank Rate at 5.25%. The central bank has tried to target 2% inflation but had 6.7% in September. The BoE has stressed it will maintain rates higher for a period as it waits for the impact of its previous hikes to materialize (Reuters)

• Shell CEO to cut 200 roles from low-carbon division in a move to boost profits. The CEO plans to shift focus into high-profit oil projects (TheGuardian)

• Ford to postpone $12bn in EV investment as buyers are no longer willing to pay a premium for an electric vehicle. The company lost $3bn through Q3 on its Model e EV unit this year. The company plans ramp up spending on EV manufacturing more gradually (CNBC)

• 30-year mortgages come down from last weeks 23-year high to 8.27% (Investopedia)

  30-Year Mortgage Average 

  

• Autonomous vehicle startup owned by GM, Cruise, suspends driverless operations after crashes led to investigations, disagreements with state regulators, suspension of licenses in California. GM said the company lost roughly $2bn through Q3 this year (CNBC)

CRE Headlines

• White House opens up $45bn in funding for office-to-residential conversions. The program will make use an existing $35bn in low-cost loans available through the DoT to fund multifamily developments near transit hubs, as part of the clean energy push. The program will also offer additional funding sources, tax incentives, a guidebook for federal funding programs for developers, and technical assistance for conversions. The program will also list government-owned buildings available for sale (MarketWatch)

• 89% of office CMBS loans maturing in September defaulted, while the rest were paid off, with no extensions or modifications. Defaulted office loans in September totaled $672mm. Multifamily-linked CMBS payoffs dropped to 72%, following three months where payoff rates were above 95% (Bisnow)

• Mackenzie Capital Management offers to buy investor shares of BREIT at a 38% discount to NAV. The letter to shareholders highlights the oversubscribed redemption program and illiquidity of the shares. The letter outlines investors who choose to sell would get paid out within 3 business days, with the offer open until December 11, 2023. Blackstone said this was attempt to mislead and take advantage of shareholders (Mackenzie, Bisnow)

• New York Community Bank’s charge-offs, or nonrecoverable debt, rose to $26mm in Q3, up from $1mm in Q2. The rise was attributed to office defaults (TheRealDeal)

• NYC’s vacant Flatiron Building to be converted to luxury condos. GFP Real Estate bought the building at auction for $161mm in early 2023 and now estimates to spend $100mm in the office-to-residential conversion. The Brodsky Organization and Sorgente Group will lead the renovation efforts (NYPost)

  

Deals Deals Deals

Sales

• Industrial: LCN Capital Partners completes sale-leaseback with Anchor Hocking LLC near Columbus, OH. Anchor executed a 1mm sf lease for the glassware manufacturing facility at the time of the sale (commercialsearch)

• Industrial: Seerfield Industrial Properties and Affinius Capital sell 489k sf distribution facility in Dallas, TX (JLL)

• Industrial: Evergreen Equity acquires a 211k sf industrial warehouse in San Antonio, TX leased to Flasher Equipment (REBusinessOnline)

• Office: Formation Capital acquires a 147k sf office asset in Houston, TX from Geosam Capital (RNR)

• Industrial: Brit Properties acquires a three-property, 82k sf industrial portfolio for $13mm in Chicago, IL. Union National Bank provided a 30% LTV loan (connectcre)

Debt

• Multifamily: Barings Real Estate secures a $115mm loan from PGIM Real Estate to refinance Playa Vista Apartments, a 405-unit multifamily community, in Los Angeles, CA (connectcre)

Developments

• Life Sciences: Brandywine Realty Trust and Drexel University top-out a 435k sf Life Sciences tower in Philadelphia. PA’s University City. The asset is part of a larger JV for a $3.5bn mixed-use project (commercialsearch)

• Retail: Tanger Factory Outlet Centers completes 290k sf outlet mall in Nashville, TN. The mall in 97% occupied with 60 retailers and restaurants (REBusinessOnline)

• Multifamily: The Opus Group completes a 255-unit multifamily development in Kansas City, MO (REJournals)

• Multifamily: Related Group and W5 Group to develop a 63-unit co-living project in Miami, FL’s Wynwood neighborhood. The development will consist of 63 fully furnished apartments and 217 private suites (REBusinessOnline)

Distress

• Office: Blackstone in negotiations with special servicer CWCapital to potentially surrender four Club Quarters hotels in San Francisco, CA, Chicago, IL, Boston, MA, and Philadelphia, PA after defaulting on $274mm loan (TheRealDeal, connectcre)

• Office: Wells Fargo wins foreclosure auction over 3003 Perimeter Summit. The deed for 391k sf office tower was valued at $38mm. The bank had lent the previous owners, General Electric Pension Trust and State Street Global Advisors, $75mm in 2016 (Bisnow)

• Multifamily: TPG forecloses on Sandstone Properties’ 176-unit multifamily development in Los Angeles, CA. Sandstone defaulted on the loan earlier in the year. TPG Capital bought the asset for $30mm (TheRealDeal)

Capital Raising

• Diversified: Tidewater Capital raises $250mm for TC Fund III from LPs, university endowments, and family offices. The fund will pursue various property types and both redevelopments and ground up construction (connectcre)

Leasing

• Office: Linkedin signs 10-year, 144k sf lease at Empire State Realty Trust’s Empire State Building (CommercialObserver)

• Office: UL Solutions, a safety testing and certification group, signs a 40k sf lease at 155 N Wacker Dr. in Chicago, IL with The John Buck Co. (commercialsearch)

• Office: Shopify signs 36k sf lease in Vornado’s 85 10th Ave in New York, NY (Bloomberg)

Meme Summary

Merch Spotlight