Happy Wednesday!

Latin America’s loss, is Miami’s gain. Latin American investors move capital to Miami as turbulence in their home countries sees them seek safer/higher returns in the U.S. CBRE expects cap rates to continue expanding in 2024. Property Managers outsource more white-collar jobs in an effort to reduce costs. And in a rare win for office, vacancies are nearly 10% at the top floors (50+) of high-rises. Markets continue to rally, 30-year mortgage rates hover at 7%, shoppers continue spending, credit card debt and interest rates continues to grow, and Southwest reaches a tentative labor agreement with its pilots.

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Merch Spotlight

Capital Markets

Market News

• Holiday Shoppers Spending Earlier This Year

  A report by McKinsey & Company showed 50% of holiday shopping began in October or earlier, followed by 40% in November. Despite consumers feeling cautious, they still want to spend for the holidays. According to Bankrate, over half of holiday shoppers say they feel financially burdened this holiday season. Installment services are on the rise, recording $8.3bn in transactions in November 2023

• Credit Card Companies Are Still Raising Rates

  Despite the Fed halting its rate hikes, Americans with credit card debt won’t see relief and may see their situation get a bit worse next year. Banks are being cautious and maintaining rates high as delinquencies and total debt rise. Outstanding credit card balances surpassed $1tn this year for the first time ever. The delinquency rate on credit cards reached 2.98% in Q3, the highest level since 2012, when it was 2.92%

• 30-Year Mortgage Rates Near 7-Month Low

  30-year mortgage rates hovering near 7%, the lowest since May 2023

  30-Year Mortgage Rates

  

• Southwest Pilots Reach Agreement

  The Southwest Airlines Pilots Association (SWAPA), which represents more than 10,000 pilots, said it reached a tentative agreement for a new 5-year contract worth $12bn over five years. The union board still needs to decide whether to send the deal to members for a ratification vote. An industry-wide shortage of pilots has caused pilots to leave for rival carriers as negotiations dragged on

CRE Headlines

• Latin American Investors Transferring Assets to Miami

  Driven by regional instability in their home countries and the appeal of higher returns, wealthy Latin American investors have been rapidly transferring their assets to Miami, marking one of history’s fastest wealth migrations. Major banking institutions like JPMorgan Chase and leading Brazilian banks are seeing substantial growth in their asset management and client base due to capital migration. The capital flight pattern has also fueled increased investment in Miami’s real estate market as investors prefer U.S. real estate investments

• Cap Rate Increases Coming in 2024

  A report by CBRE forecasts another 25-50bps increase in cap rates in 2024. Between early 2022 and 2023 YTD, cap rates have increased between 150-200bps. The rise in rates has already fueled an estimated 20% erosion in property value. CBRE expects another 5% drop in values as cap rates continue to rise

  Cap Rate Forecast

  

• Office Vacancy Falling for Top Floors

  High-rise availabilities carry a significantly lower vacancy rate than the overall office market. The vast majority of office inventory in the U.S. sits in lower floors of buildings. 66% of all office space sits on floors 1-5, while 1% of inventory sits on the 40^th floor or higher. Combine the rarity of high-rise assets and the smaller floor plates at higher levels and you end up with vacancy rates of 12.4% for floors above the 20th floor compared to 20%+ vacancy rates for the overall office market

  U.S. Office Inventory and Vacancy Rate by Floor

  

• Property Managers Are Offshoring Skilled Roles

  In an effort to cut costs some property management companies are turning to offshore employees. Jobs tasks being offshored include basic accounting and administrative roles, like calling utility companies to start and stop service. The rise in remote work has led to an uptick of jobs moving abroad, with some economists predicting up to 20% of white-collar jobs moving oversees

Deals Deals Deals

Sales

• Hospitality: VICI Properties acquires a leasehold interest in Chelsea Piers in New York, NY and provides Cabot with two delayed draw development loans for the development and redevelopment of golf courses in Saint Lucia and Scotland. The potential total committed capital of $550mm is expected to yield a blended investment of 8%

• Multifamily: FPA Multifamily acquires a two-property, 253-unit luxury multifamily portfolio in Thousand Oaks, CA from Decron Properties for $171mm. The asset previously traded at $127mm in 2016

• Cold Storage: PGIM Real Estate and Bridge Industrial, sold Bridge Point Cold Logistics Center, a 312k sf cold storage facility outside of Miami, FL to an industrial development venture of Zara founder Amancio Ortega

• Life Sciences: Hines acquires the IBM 500 Campus, a four-building, 774k sf property at 4205 S. Miami Blvd. in Durham, NC. The $66mm transaction was a sale-leaseback with a IBM

• Office/Retail: Geshary, Japanese coffee company, has acquired 560 Fifth Avenue, a 14k sf office and retail building in New York, NY from Riese Organization for $38mm. The building has 125ft of frontage in New York’s Fifth Ave corridor

• Retail: Brixton Capital acquires a Monterey Plaza, a 178k sf shopping center in San Jose, CA, for $33mm from Kimco and Prudential Global Investment Management

Debt

• Multifamily: Woodmont Properties secures a five-year, fixed-rate loan through Northwestern Mutual to refinance a 443-unit apartment community outside of Trenton, NJ

Developments

• Multifamily: Monadnock Development, CB Emmanuel Realty, and Equity Developers secured $256mm in financing to create Utica Crescent, a 322-unit affordable housing project in Brooklyn, NY. Part of the financing consisted of $122mm in tax-exempt bonds from the New York State Housing Finance Agency, backed by JPMorgan Chase during construction, and $106mm in low-income tax credits from Hudson Housing Capital

• Multifamily: STG Capital Partners has obtained $97mm in construction financing for a 214-unit, built-for-rent project in Paso Robles, CA. The developer paid $17mm for 17 acres of land for the project

• Multifamily: EDEN Living started constructing on its 214-unit build-to-rent project in Port St. Lucie, FL. The company recently secured a $55mm construction loan for the project. The project is expected to be completed in late 2025

• Industrial: Triangle Equities secures a $50mm loan from Centennial Bank for its 425k sf industrial development in Queens, NY

Distress

• Office: According to a Trepp report, the value of EY Plaza, a 920k sf office building owned by Brookfield in Los Angeles, CA, has dropped from $446mm three years ago to $211mm this month, putting it below its $275mm CMBS loan balance

• Office: Signa, Austrian-based company, in talks to sell its stake in New York’s Chrysler Building, after declaring insolvency last month

• Office: Savanna hands back keys to 1825 Park Avenue, a 12-story office asset in New York, NY, to TPG Real Estate Finance. The property is valued at $56mm

Capital Raising

• Diversified: Merchant Bank BDT & MSD Partners raise $3.2bn for a new real estate credit fund, MSD Real Estate Credit Opportunity Fund II

Leasing

• Sports: The Baltimore Orioles sign a 30-year lease at Oriole Park at Camden Yards with the Maryland Stadium Authority 

• Office: The McKnight Foundation signed a new 20-year, 50k sf office lease at 921 Washington Ave. South in Minneapolis, MN with STF Holdings LLC

Meme Summary

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