Good Morning!

Good news today as CMBS delinquency falls in December, Kimco finalizes its acquisition of RPT, D.C.’s office market remains stagnant in 2023, Hines’ outlook for 2024 is stuck in a hold/sell scenario for most asset classes, and Greystone spins off its affordable housing vertical to a nonprofit. Job openings fall in December, rate cuts remain uncertain, and Xerox kicks off the year with layoffs

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Capital Markets

Market News

• Fed December Minutes Show Path to Rate Cuts Uncertain

  Fed meeting minutes showed members expect three 25bps cuts by the end of 2024. The meeting summary noted a high level of uncertainty on when the cuts might come, and cited the possibility of maintaining rates higher for longer. Inflation across sectors was also discussed, with energy and core goods having moved lower while services have continued to rise

• Job Openings Fall to Two-Year Low in November

  The Labor Department reported on Wednesday that US job openings fell in November to the lowest level since March 2021. There were 8.79mm job openings in November, down from October’s 8.85mm, and in line with economists’ expectations of 8.77mm

• Xerox to Cut 15% of Workers

  The layoffs are expected to impact an estimated 3,000 employees. the company revealed a new operating model which will see it focus on its printing business, global business services, and its IT & digital services. The company also realigned its leadership team

CRE Headlines

• Greystone Spins Off Affordable Housing Arm to Nonprofit

  Greystone’s affordable housing development arm is being acquired by Harmony Housing, a nonprofit founded by Greystone’s CEO. Greystone will continue to manage the assets

• Kimco Finalizes $2BN RPT Acquisition

  On Tuesday, KIM announced the completion of the acquisition of RPT. The deal adds 56 open-air shopping centers to KIM’s 527 properties. The all-stock transaction results in $34mm of cost savings synergies, with most being realized in 2024. JPMorgan advised Kimco and Lazard advised RPT

• CMBS Delinquency Falls in December

  In a report released by KBRA, the delinquency rate among KBRA-rated U.S. CMBS in December fell to 4.21%, offsetting the 19bps increase in November. The total delinquent and specially serviced loan rate (distress rate) also declined from November to 6.65%, a 25bps drop. Five of seven sectors experienced declining distress rates. The exceptions were multifamily and industrial, which increased for a second straight month

• D.C. Office Market Sees Vacancy and Negative Net Absorption Remain Elevated

  A Colliers report showed vacancy in D.C.’s office market rose to 18.8% in Q4 2023, up from 18.2% a year prior. Net absorption was negative all four quarters in 2023, despite total inventory decreasing by 600k sf. Class B assets were most impacted by tenant move-outs and downsizing

  D.C. Office Market Demand & Supply

  

  Source: Colliers

• Hines Sees the Market in Hold/Sell Cycle

  Hines’ 2024 Outlook shows retail as stabilizing while multifamily struggles with decreasing valuations. Retail seems to be recovering after years of being battered by ecommerce and excess supply. Another notable point from Hines’ is outlook is the pending impact of market valuations. Many appraised values have not devalued assets as much as recent transactions would imply, meaning sellers are likely not yet adjusting to what buyers are willing to pay

  U.S. Market Cycle by Asset Class & Region

  

Deals Deals Deals

Sales

• Life Sciences: Phase 3 Real Estate Partners acquires 640 Memorial Drive and 100 Beaver St. in Boston, MA from Alexandria Real Estate Equities for $306mm. 640 Memorial Drive (226k sf) was acquired in 2015 through a ground lease for $177mm with a debt assumption of $82mm. 100 Beaver St. (83k sf) was acquired in 2005 for $11mm

• Medical Office: Anchor Health Properties and Australian Retirement Trust, acquire a three-property, 166k sf, 94% occupied medical office portfolio the Seattle, WA and Charlotte, NC, for $62mm

• Multifamily: Breneman Capital acquires Adams Laflin Place, a 52-unit apartment community in Chicago, IL‘s West Loop neighborhood built in 2020

• Multifamily: Enterprise Community Development Inc. acquired Coralain Gardens, a 106-unit affordable housing complex outside Washington D.C., for $22mm

• Multifamily: Capital Square acquires a 120-unit BTR community in Knoxville, TN. The community was acquired via a DST offering which seeks to raise $18mm in equity from investors

• Office: Rhino Capital Advisors LLC acquires a 56k sf office asset in Boston, MA for $15mm from Alcion Ventures and Quaker Lane Capital. The sellers acquired the asset in 2021 for $24mm and completed renovation in December 2022. The building is within the city's residential conversion incentive program area

• Office: WTHHWD, LLC acquires Crown Ridge at Fair Oaks, a 195k sf office outside Washington D.C., for $10mm from Crown Ridge HQ7, LLC. Cushman & Wakefield | Thalhimer arranged the sale. The asset was previously acquired for $31mm in 2020

Debt

• Office: Wanxiang America Real Estate Group negotiates a two-year loan extension on Prudential Plaza, a 2.3mm sf two-building office complex, in Chicago, IL. The CMBS loan had its maturity extended to 2027, with options to extend through 2029

• Multifamily: Roers Companies secures $65mm in construction financing for a 292-unit garden-style apartment community north of Fort Meyers, FL. A non-recourse construction loan was obtained from Knighthead Funding and preferred equity through Amzak Capital Management

• Multifamily: Bruklyn Builders secures a $41mm bridge loan to refinance its newly constructed 73-unit high-rise apartment building in Brooklyn, NY. Dwight Mortgage Trust provided the loan

• Senior Housing: Monterra MF, LLC secures a $36mm, 10-year, fixed-rate, interest-only, 60% LTV loan to refinance a 175-unit active adult community in Cooper City, FL from a life company

Developments

• Life Sciences: A partnership between Magellan Development Group, RAS Development, Cypress Equity Investments and Affinius Capital, delivers 10 Prospect St., a 205k sf life sciences building outside Boston, MA. The building is part of a $2bn master planned community

• Industrial: The Missner Group and CBRE Investment Management deliver a 170k sf industrial project at 3900 S. Normal Avenue in Chicago, IL

Leasing

• Office: Rippling, a payroll management platform, subleases 69k sf from Spotify at Silverstein Properties’ 4 World Trade Center in New York, NY

• Office: MLB Players Association signs a 15-year, 50k sf lease at Paramount Group’s 1325 Avenue of Americas New York, NY office

• Industrial: Penguin Packaging Solutions, signed a 65k sf lease at 8257 Patuxent Range Road in Jessup, MD

• Life Sciences: RegenLab signs a 16k sf, long-term lease at Thor Equities Group’s 95 Greene St., a new life sciences property in Jersey City, NJ

Meme Summary

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