Happy Friday To All!

First the bad news: CRE CLO distress rates are up in January, Apollo’s Chief Economist doesn’t see any rate cuts in 2024, retailers predict lower sales this year, oil prices could rise from OPEC+ production throttling, NYCB shares plunge after leadership changes putting other regional lenders under pressure.

Now for the good news: D.C. could take control of the former RFK stadium site and trigger new development, Resorts World unveils a $5B expansion plan in hopes of winning one of New York’s casino licenses, and retail closures are helping REITs backfill spaces at higher rates

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Capital Markets

Market News

• Retailer’s Expect Less Shopping In 2024

  Retailers reported earnings this week, and while many beat estimates they all pointed to lower sales projections for 2024 amid concerns that consumers will start to feel the burden of higher interest rates and inflation finally. Macy’s pointed at a slow down in wage and labor growth that will counter the slowdown in inflation. Other retailers like Best Buy noted they expect consumers will prioritize food and housing, and shift spending towards experiences rather than goods

• Apollo’s Chief Economist Says Fed Won’t Cut Rates in 2024

  Apollo Management’s Chief Economist says a resilient U.S. economy and sticky inflation will prevent the Fed from any rate cuts in 2024. The economist also flagged a tight labor market and sticky wage inflation, along with rising costs manufacturing services and rents. The economist previously warned that he sees a strong chance the Fed could issue a rate increase as its next move vs. a rate cut

• Oil Prices Rise Ahead of OPEC+ Decision

  Crude oil (WTI and Brent) futures rose more than 1% on Friday as signs point to a tightening market ahead of an OPEC+ decision on production cuts. According to a Reuters source, OPEC+ is considering rolling over its production cuts through Q2 and possibly the end of the year with a decision expected in the first week of March

• Regional Bank NYCB Sees Share Price Drop Following CEO Change

  Shares of New York Community Bancorp plunged in premarket trading after the regional bank announced its executive chairman, is immediately taking on the roles of president and CEO and disclosed issues with its internal controls. NYCB has been under pressure partially due to concerns over its loan exposure to CRE

CRE Headlines

• CRE CLO Distress Rate Climbs to 8.6% In January

  CRED iQ’s Overall Distress Rate for CRE CLO surged in 2023 rising from 1.4% to 7.4%, and jumped to 8.6% in January. This metric includes any loan that is reported 30+ days delinquent and/or is with the special servicer. Outstanding CRE CLO loans amount to ~$80B, with the majority on a floating rate 3-year term. Many of these CLO loans were originated in 2021 at times where cap rates were low, valuations high, low interest rates, and are starting to run into maturity issues causing the 440% growth in distress levels over the past 12 months

  CRE CLO Overall Distress Rate

  

• Bill To Redevelop RFK Stadium Gains Momentum

  The bill, the D.C. RFK Memorial Stadium Campus Revitalization Act, passed the House by a vote of 348-55. If the bill passes the senate, it will allow D.C. to turn the federally-owned 174-acre plot into a mixed-use development that could include commercial and residential uses, and possibly a new NFL stadium for the Washington Commanders. The bill would transfer ownership to D.C. for term of 99 years with no rent costs and making the city responsible for any remediation and redevelopment costs

• Retail Store Closures Are An Opportunity For Some Landlords

  As retail closures hit the retail world, some companies like Brixmor are benefiting by backfilling spaces at higher rates. In one example the REIT was able to release space vacated by Big Lots with a Sprouts at a higher rate. Retail REITs have also used the departure of major tenants as an opportunity to redevelop their centers and attract higher quality merchants. Thanks to supply constraints in the retail sector, anchor vacating early has allowed many REITs to raise rents sooner vs. waiting out the full term. Shopping center vacancy was at 5.3% at the end of 2023 with rents having grown by 4.1%

• Resorts World Casino Unveils $5B Expansion Plan in NYC

  The Casino’s expansion proposal calls for an entertainment hub, concert hall and more. It is currently the frontrunner bid to secure one of three full-fledged gaming licenses in New York. The plan hopes to create 10,000 jobs in Queens, NY. The casino would span 350K sf, host 1,600 additional hotel rooms, include a 7,000-seat arena, and include 10 acres of public green space

  

Deals Deals Deals

Sales

• Multifamily: FPA Multifamily acquires a two-property, 409-unit, multifamily portfolio outside Los Angeles, CA for $153M from a private investor

• Multifamily: IDEAL Capital acquires 325-unit luxury multifamily community from Hines in Phoenix, AZ

• Multifamily: Carmel Partners acquires a partial interest in National and The HYM Investment Group’s The Sudbury, a 36-story multifamily asset in Boston, MA

• Multifamily: A state pension fund, via an account managed by Heitman, acquired a 175-unit SFR community in Orlando, FL from Shoreham Capital 

• Industrial: BKM Capital Partners acquires a 199K sf light industrial portfolio made up of 13 buildings in Los Angeles, CA for $71M from Los Angeles County Employees Retirement Association

• Industrial: Chick-fil-A buys a 207K sf distribution warehouse outside Fort Lauderdale, FL for $51M from Cabot Properties

• Industrial: Invesco Real Estate acquires a 216K distribution facility in South Brunswick Township, NJ for $55M. The asset was fully leased to Five Star Warehouse and last traded in 2018 for $22M

• Industrial: The Greater Los Angeles Vector Control District acquired a 38K sf warehouse in Los Angeles, CA from Glenoaks Partners, LLC for $13M

Debt

• Multifamily: Williams Equities secures a $65M loan from 3650 REIT to refinance 304 East 45th St in Midtown Manhattan, NY

• Retail: Midland Atlantic Properties secured a $24M construction loan from BWE for Morganton Park South in Southern Pines, NC

Developments

• Multifamily: BH Group and PEBB Enterprises plan to develop a 500-unit mixed-use project in Boca Raton, FL that will include 79K sf of retail and two office buildings totaling 408K sf

• Hospitality: New City to open a 196-key hotel in Atlanta, GA. The $150M hotel, Forth, is expected to open in June an will include apartments for extended stays, an event venue, a coworking space, and a social club

• Multifamily: AIRN Management acquired a 13K sf development site in Hoboken, NJ for $7.5M to develop into a multifamily housing

Capital Raising

• Multifamily: MassHousing and the Massachusetts Housing Investment Corporation (MHIC) to launch a new $50M Equitable Developers Fund. The fund will provide enterprise level financing to active developers from socially and economically disadvantaged backgrounds and communities in the state

Leasing

• Industrial: 84 Lumber signs a 142K sf lease at Molto Properties’ Cypress Distribution Center in Cypress, TX

• Office: MoneyLion Inc. subleased 35K sf in Columbia Property Trust’s 281K sf office asset at 245-249 W 17th St in Manhattan, NY

Meme Summary

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