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BREIT and Brookfield REIT report annual losses of 0.5% and 6.71% in 2023. Class C office trades above junk bond yields. And Brookfield Properties is hiring CBRE to handle property management for its office assets. Homebuilder confidence grows in January, Google looking at more job cuts, U.S. oil production gets more efficient, Holiday sales rise by 3.8%, and Jaime Dimon bashes crypto

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Capital Markets

Market News

• Homebuilder Confidence Rises January

  The NAHB/Wells Fargo Housing Market Index rose to 44 in January, up from December’s 37. A reading above 50 indicates a favorable outlook on home sales; below indicates a negative outlook. Despite mortgage rates falling in December, 31% of builders lowered home prices in January. Single-family starts are expected to grow in 2024, but building costs and lot supply are expected to be challenges for builders in 2024

• Google CEO Says More Job Cuts Are Needed

  A Memo circulated by Google CEO on Wednesday said more job cuts are coming in 2024. The CEO hinted at making tough choices in order to hit their ambitious A.I. goals. The job cuts are expected to be less widespread compared to Google’s 12,000 layoffs in 2023

• U.S. Breaking Oil Production Records With Less Rigs

  Despite domestic oil drilling rigs being down by nearly 30% from four years ago, U.S. oil production has been at or near record highs since October. Thanks to drilling and fracking tech advancements in the early 2010s, along with easing regulations aimed at reducing foreign dependence on oil, oil output efficiency has improved. U.S. crude-oil production stood at 13.2M barrels per day for the week ended January 5, after reaching a record at 13.3M bpd for the weeks ended December 15 and December 22. This was the highest since the week ending March 13, 2020 when production hit 13.1M bpd

• Holiday Sales Rose 3.8% This Season

  According to U.S. Census Bureau data compiled by the National Retail Federation, Holiday sales rose 3.8% year over year to $964.4B. Pre-Covid, average sales growth during the holidays was 3.6%. The data shows the resiliency of consumers despite inflation

• Davos Update: Jaime Dimon Bashes Bitcoin

  The JPMorgan CEO bashed bitcoin during an interview at Davos. The CEO compared the cryptocurrency to a pet rock which does nothing. He noted the currency is mostly used to fuel payments for illegal and fraudulent activity but defended people’s right to chose to “do Bitcoin”

CRE Headlines

• BREIT Posts A 0.5% Loss In 2023

  Blackstone Real Estate Income Trust posts a 0.5% loss in 2023, the lowest since 2017 when it debuted. The trust failed to hit its 5% threshold which allows it to earn carried interest. According to its website, the REIT still has a 10.6% annualized return and 4.6% distribution rate. BREIT has returned $14.3B of investor money since November 2022, following a rise in redemption requests.

• Brookfield REIT Posts A Negative 6.71% Total Return in 2023

  Brookfield REIT ended 2023 down 6.71%, posting its first annual loss since its inception in 2019. The REIT previously posted a 23.31% and 12.68% total return in 2021 and 2022. The REIT is made up of 64% multifamily, 25% net lease assets, 6% logistics, and 5% office, with 90% of it being concentrated in the U.S. and 11% of the portfolio focusing on debt investments. According to a recent filing, discount rates used in the REITs latest filings range from 7.0% to 8.4% across asset classes

• Brookfield Properties To Hand Over Office Property Management

  Brookfield Properties is tapping CBRE to manage the day-to-day operations of its office assets. Brookfield will still handle asset management activities

• CBD Office Trading Above Junk Bond Levels

  Data from CBRE shows double-digit yields for Class C offices, exceeding that of junk bonds (less than Baa3 for Moody’s and BBB- for S&P). As of December 18, speculative bonds (rating of CCC or lower) were trading at a 13.2% yield while estimated cap rates for Class C office were above 15% in certain markets

  Asset Yield Comparison

  

Deals Deals Deals

Sales

• Hospitality: Gencom retakes majority ownership of Ritz-Carlton Key Biscayne, a 291-key hotel located in Miami, FL. Gencom developed the hotel in 2000 and sold a majority stake to a private REIT for $750M. Citigroup and KSL Capital Partners LLC provided financing. The company plans to execute on a $100M worth of improvement in 2025

• Multifamily: Eastham Capital and Mosaic Residential acquire Sola Westchase, a 318-unit residential community in Houston, TX. The asset was 95% occupied, with in-place average rents of $1,400/month

• Medical Office: Altera Fund Advisors and Virtus Real Estate Capital acquire a four-property medical outpatient portfolio in Tucson, AZ from Healthcare Trust of America for $43M

• Retail: Benderson Development acquires Glengary Shoppes, a 95K sf shopping center in Sarasota, FL from Regency Centers $31M

• Retail: Prairie Hill Holdings acquires The Rillito Crossing Marketplace, a 96K sf grocery-anchored retail center in Tucson, AZ, for $28M from Epic Real Estate Partners and Centerbridge

• Office: Free Chapel Worship Center acquires a vacant four-story, 124K sf office asset in suburban Atlanta, GA for $15M from Ravi Zacharias International Ministries

• Industrial: Bridge Logistics Properties acquires a 58K sf last-mile logistics facility at 1215 W. Walnut St. in Compton, CA, The asset is fully leased through 2025

• Office: 25K sf office in San Diego, CA trades for $8M in a 1031 exchange transaction. The deal was reported to have traded at a 5.8% cap rate

Debt

• Multifamily: Serrano Development Group secures a 5.5% interest, 5-year, $28M Fannie Mae loan for a 91-unit multifamily asset in Los Angeles, CA

Developments

• Industrial: Advantech Co., a Taiwanese-based maker of industrial PCs and devices, signs a 75-year ground lease with South Orange County Community College District valued at $265M. The company plans to build a 109K sf office building and 79K sf warehouse facility on the District’s Advanced Technology and Education Park (ATEP) in the Tustin Legacy area

• Data Centers: fifteenfortyseven Critical Systems Realty and Green Fig Land Co. annouce plans to develop a 290MW, 2M sf data center facility in Chester County, PA

• Office: Midway unveils plans for a 19-story, 320K sf office building in Houston, TX

• Multifamily: Multiplan Real Estate Asset Management acquired a $64M oceanfront residential asset in Surfside, FL with plans to develop a luxury condo building

• Industrial: Fortius Capital Partners receives approval to build a $125M, 1.3M sf industrial project. Early plans show nine industrial buildings to be developed between 2024 and 2028. The buildings would range from 84K to 250K sf

• Industrial: Link Logistics completes final phase of Live Oak Logistics, adding 779K sf across four buildings in suburban Dallas, TX

• Office: Equitas Management Group completes the renovation of a 57K sf office asset in Chattanooga, TN. The asset is fully leased to multiple tenants

Distress

• Office: The $308M loan on Blackstone’s 1740 Broadway in New York, NY is up for sale in a CMBS for $150M. The building was appraised for $605M in 2014

Capital Raising

• PropTech: PredictAP, a machine-learning enabled invoice ingestion & coding solution for real estate accounts payable, closes on $8M in its series A funding round. The round was led by RET Ventures, with additional participation from Wise Ventures

Leasing

• Life Sciences: Dow, a global materials science company, signs a 800K sf lease extension at David Werner Real Estate Investments and GreenBarn Investment Group’s Northeast Dow Center, a 1.9M sf life sciences and office campus in Collegeville, PA outside of Philadelphia

• Industrial: Macy’s signs 272K sf lease at Phelan Development’s 456K sf distribution center in Lathrop, CA east of San Francisco

Meme Summary

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