Happy Monday All!

Data center capacity is expected to triple in the next six years, a trend accelerated by A.I. The Denver multifamily market is up while Las Vegas Hospitality is down. The 10-year Treasury breaks 5.00%. CLO activity is down, potentially impacting financing markets at a time when major maturities are coming due. Global corporate defaults are up YTD and trending above the 5-year average. Lots of earnings and data this week, so expect the market to try and price in new info as reports come out.

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Capital Markets

Market News

• 10-year U.S. Treasury note breaks the 5.0% mark, the highest since July 2007. The run up has been driven by investors pricing in stronger than expected U.S. growth and government spending (Yahoo)

• About 40% of securities issuers have yet to price in a new CLO deal this year, based on data from Citi. With M&A activity down and interest rates rising, demand for the product has dropped as better returns can be had elsewhere. With lower demand and roughly half a trillion dollars for levered loans coming due in the next three years, companies will find it hard to refinance (Bloomberg)

• Lots of earnings and economic indicators this week. New home sales for September will be reported on Wednesday, U.S. GDP estimates for Q3 will be out on Thursday, and Personal Consumption Expenditures will be out on Friday. Look for the market to digest info from those indicators along with earnings results from large corporations like Alphabet, Amazon, Coca-Cola, Intel, GM, and everyone else reporting this week (Investopedia)

• Gas prices are going down as companies switch to winter blend vs. summer blend at the pump. WTI remained above $85 a barrel, with many monitoring the war in the middle east for potential price changes (FoxBusiness)

• Global corporate defaults are up to 118 for the year, with 11 in September, down from 16 in August. The 118 is above the five-year year-to-date annual average of 101. Many of the companies which have defaulted come from the consumer sector which relies on consumer spending, currently is under pressure given inflation and high-interest rates (SPGlobal)

  Year-to-Date Defaults by Type

  

CRE Headlines

• A.I. is leading push for more data center space. Data center capacity is expected to triple in the next six years, with average power demand doubling sooner. Global AI computing is expected to use more power than some western nations within the next four years. To put things in context, an A.I.-powered google search can use up to 30x more electricity than a traditional search (Bisnow)

• Atlanta-based real estate lawyer, pleads guilt to wire fraud. The attorney used client funds to pay off his law firm’s expenses. After misappropriating the funds he would then use new client money to complete prior transactions. The attorney fabricated information to make it appear his firm was paying off a seller’s mortgage (Justice)

• Denver multifamily asking rents rose to $1,934/unit ($2.22psf) for Q3, a $14 YoY increase. Occupancy was at 94.3% and net absorption was 3,326 units in Q3. There were 35,300 units under construction with 2,959 units delivered in the quarter. Transaction volume was also up, with $1bn in deals for Q3 (CBRE)

• Las Vegas ADR and RevPAR were down from a year prior in Q3 with ADR at $160.81 and RevPAR at $133.13. Room occupancy was also down compared to Q2 at 82.8% but up from a year prior. Employment in the sector was up by 6.5%, with sales in the leisure and hospitality sector up 11.3% over the last 12 months. No asset sales have been recorded in 2023 (Colliers)

Deals Deals Deals

Sales

• Retail: VICI Properties buys a 38-bowling center via a sale-leaseback with Bowlero. The $433mm sale-leaseback involved Bowlero signing a 25-year, NNN master lease agreement with initial rent at $31.6mm annually. The acquisition cap rate shakes out to a 7.3% cap rate. The lease has annual escalations of the greater of 2.0% or CPI (2.5% ceiling) and six five-year renewal options. The transaction was structured as a tax-deferred capital contribution (BusinessWire)

• Industrial: Faropoint acquires two industrial parks in New Jersey for $145mm from Camber Real Estate Partners. The portfolio totaled 770k sf (commercialsearch)

• Multifamily: Eagle Property Capital and Promecap acquired a 432-unit apartment community in Tampa Bay, FL for $81mm from Providence Real Estate. Berkadia originated a seven-year, fixed-rate Fannie Mae loan (MHN)

• Industrial: Buchanan Street Partners acquires a five-building, 300k sf industrial portfolio for $71mm in Los Angeles, CA from TA Realty (Bisnow)

• Hospitality: MCR completes sale of 146-key Residence Inn by Marriott in Renton, WA for $55mm (~380k per key) (connectcre)

• Industrial: Provender Partners acquires a 469k sf cold-storage three-property portfolio for approximately $50mm. The seller executed a sale-leaseback Provender (REJournals)

• Multifamily: Green Leaf Capital Parnters acquired a 206-unit multifamily building from Fairfield Residential in Portland, OR for $43mm. The asset was financed with a $23mm, seven-year Fannie Mae loan (MHN)

• Industrial: Arden Group affiliate paid $43mm for a 194k sf three-property warehouse portfolio in West Palm, FL from Alliance Partners HSP (CRENews)

• Retail: Regency Centers acquires an 80-year ground lease for a 104k sf grocery-anchored retail center in Los Angeles, CA for $25mm (OCRegister)

Debt

• Hospitality: Fort Partners obtains a $410mm loan to refinance two Four Seasons resorts in Surfside, FL and Palm Beach, FL. Citi Real Estate Funding and German American Capital will originate the interest-only, 8.7% fixed-rate loan (CommercialObserver)

• Multifamily: A partnership between Kushner Real Estate Group and National Real Estate Investors secured a $124mm loan to refinance a 458-unit multifamily building in Jersey City, NJ (REBusinessOnline)

• Multifamily: Empire Group secures a $73mm construction loan to develop a 317-unit build-to-rent project in Fort Worth, TX. Construction is set to begin at the end of the month (REBusinessOnline)

• Multifamily: Related Affordable obtains a $41mm financing package from KeyBank for a 193-unit affordable housing community outside of New York City. The package consists of $17mm in LIHTC equity and $24mm Fannie Mae loan (REBusinessOnline)

• Senior Housing: Sculptor Real Estate lands a $29mm three-year loan from Live Oak Bank to refinance a 101-unit senior housing asset in Long Island (CommercialObserver)

Developments

• ndustrial: Lincoln Property Company breaks ground on $515mm 2.4mm sf industrial park in Glendale, AZ. The development will feature three buildings with 40-foot clear heights (REBusinessOnline)

• Multifamily: JPI Companies buys 25 acres in Murrieta, CA for $38mm to develop an 852-unit multifamily community (CommercialObserver)

• Multifamily: Enterprise Community Development secures $30mm in financing to develop a 72-unit affordable housing community outside of Washington D.C. (CommercialObserver, SouthernMarylandChronicle)

Capital Raising

• Diversified: Blackstone raises $3.2bn for its BREP Europe VII fund (IPERealAssets)

Leasing

• Industrial: Footlocker signs a seven-year, 361k sf lease at Ares and Black Creek Group’s El Monte Logistics Center in Los Angeles, CA, which is slated for delivery in 2024 (Bisnow)

Meme Summary