Good Morning!

CPI inflation came in hot this morning at a 3.1% annual rate for January, exceeding expectations but still below December’s 3.4% reading. Midwest multifamily rent growth outperforms the U.S. average, lending activity rises very slightly in Q4, manufactured housing is seen as strong investment play, and New Jersey industrial rents rise despite new supply. The Super Bowl hit a record 123M viewers, the Atlanta Fed President doesn’t see any rate cuts until summer, and credit rating downgrades outweighed upgrades last week

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Capital Markets

Market News

• CPI Comes In Hot With 3.1% In January

  CPI inflation came in at a 3.1% annualized rate for January, it was expected to come in at 2.9%. The data was still down from December’s 3.4%. Core CPI inflation remained flat at 3.9% on an annual basis. Inflation data has been critical to Fed’s timing on rate policy, with the central bank targeting 2% inflation

• Super Bowl LVIII Hit A Record 123 Million Viewers

  The super bowl was the most watched TV show in history with 123.4M viewers across all platforms, up from 115.1M a year ago. Live sports have shown strong viewership despite TV viewership breaking down to multiple streaming platforms

• Atlanta Fed Chief - Rate Cuts Unlikely Until Summer

  Atlanta Fed President Raphael Bostic expects inflation to drop in the lower 2% by end of 2024. He also expects a Fed policy change to occur sometime in the summer. He noted that he was surprised at the January jobs report which kept unemployment below 4% for the 24th month in row and could serve to keep inflation high as low unemployment can mean more money to spend and businesses being able to raise pricing

• Credit Rating Downgrades Outweighed Upgrades Last Week

  The net outlook for North America remained negative for credit ratings, with chemicals, packaging, and environmental services most at risk. Credit rating upgrades (9) outweighed downgrades (11) with three defaults coming from U.S. companies; Cano Health Inc (Healthcare), Astro Intermediate Holding II Corp (Consumer), and Pluto Acquisition I Inc (Healthcare)

  • Bonus CRE Info - Part 1: Park Hotels & Resorts Inc. and Ryman Hospitality Properties Inc. saw their ratings upgraded from B/Positive to BB-/Stable and B+/Positive. Meanwhile, Office Properties Income Trust saw its debt downgraded to CCC/Negative from CCC+/Watch, Negative

  • Bonus CRE Info - Part 2: Cano Health, a primary care U.S. physician group and one of the companies to default, asked a bankruptcy court to terminate 72 leases across multiple states. The company is also exploring opportunities to sell all, or a portion, of its assets

CRE Headlines

• Midwest Multifamily Rental Growth Outperforms U.S. Average

  According to RealPage, national apartment rent growth is expected to remain stagnant this year as new supply outweighs demand in Sun Belt and Mountain markets. Markets in the Northeast and Midwest are seeing steady annual growth in the 2%-5% due to low supply. While Midwest rarely outperforms a strong market, in periods of volatility it delivers consistent growth

  Midwest Vs. National Rent Growth

  

• Manufactured Housing Could Be A Huge Opportunity

  During periods of economic turmoil manufactured housing offers an affordable option to homeowners/renters and a cheaper alternative to traditional multifamily investments. With resident turnover around 5%, according to Crow Holdings Capital, and homes priced up to 50% lower than traditional homes both investors and homeowners can benefit. However, stigma surrounding the manufactured housing, also known as trailer parks, create supply constraints as many communities seek to limit new development sites. The opportunity arises from institutional owners acquiring sites from unsophisticated investors that have held the sites long term and have not reinvested capital into their parks for years

• Lending Activity Rises In Q4 2023

  According to data tracked by CBRE, lending activity rose by 1% in Q4, the first increase since Q1 2022. However CBRE’s Lending Momentum Index was down 38.1% year-over-year. Banks share of lending volume dropped sharply in Q4 from nearly 60% in Q3 to just below 40%. Alternative lenders and life companies made up a larger share, while CMBS loans remained a small piece of lending activity. Interest rate spreads for commercial and multifamily loans continued to rise with 234bps and 192bps over the 10-year at the end of Q4. Spreads appeared to tighten by 15bps and 20bps in January. 22% of all loans had a coupon rate of over 7% in Q4 2023

  Q4 2023 Interest Rate Distribution By Loan Size 

  

• New Jersey Sees Industrial Rent Growth Despite Rising Supply

  Despite average asking rents decreasing in Q4 by 2.3% to $17.15 psf the average remained 10% higher year-over-year. Northern Bergen saw a 9.8% increase quarter-over-quarter and Exit 9 had the average asking rent rise 6.5% to $16.49 psf. New supply added 3.5M sf to the market in Q4, with 6.8M sf in construction and 5.8M being delivered over the next two quarters. Leasing activity for Q4 consisted of 9.3M sf but absorption was still negative with 2.4M sf. The availability rate climbed to 6.7% and while asking rents did not fall on an annual basis, rent concessions did increase

  Jersey Average Asking Rent vs. Availability Rate

  

Deals Deals Deals

Sales

• Retail: Big V Property Group and Equity Street Capital acquire Merchant’s Square, a 232K sf open-air shopping center in Carmel, IN from Kimco 

• Industrial: EastGroup Properties acquires Spanish Ridge Industrial Center, a 231K sf industrial campus in Las Vegas, NV, from CapRock Partners and Ares Asset Management for $55M

• Office/Industrial: Somerset Properties and ABR Capital Partners acquired Scarlet Oak, a 81K sf flex building in Charlotte, NC, for $11M

Debt

• Multifamily: New Land Enterprises secures a three-year, floating rate, $98M loan from Barings Real Estate to refinance a 25-story, 259-unit luxury multifamily asset in Milwaukee, WI

• Multifamily: Sound West Group, secures a $79M loan from TPG Real Estate Credit, to refinance a 270-unit mixed-use apartment community outside Seattle, WA. The financing consisted of a five-year, floating-rate loan

• Multifamily: K2 Real Estate Partners secured a $75M loan from Dwight Mortgage Trust to refinance a recently completed 165-unit multifamily asset in East Flatbush, Brooklyn in New York

• Multifamily: California Landmark Group secures a $25M loan to refinance an 88-unit apartment asset in Los Angele, CA. State Farm provided a five-year, fixed-rate, interest-only loan

Developments

• Multifamily: Curve Development to develop 302 BTR homes outside of Dallas, TX. The development is planned across 60 acres and will be a part of the Painted Tree master-planned community

• Multifamily: Hall Emery and Woodfield Development are planning a 22-story, 333-unit high-rise apartment building in Nashville, TN. The tower is expected to break ground in Q3 and be completed in early 2027

• Industrial: Creation breaks ground on a $60M, 243K sf distribution center in Scottsdale, AZ. The project is slated for completion at the end of the year

• Industrial: Crow Holdings Development completes the redevelopment of a 207K sf industrial facility in Elmwood Park, NJ. The facility was previously a warehouse destroyed by a fire in 2019

Distress

• Office: RGA Reinsurance Co. filed to foreclose on 405 Main St., a 76K sf office in Houston, TX owned by a LLC tied to Expansive

Capital Raising

• Diversified: DRA Advisors raised $2.3B for DRA Growth & Income Fund XI exceeding its original target. DRA XI will target value-add real estate opportunities across retail, industrial, multifamily, life science and office in the U.S.

• Multifamily: Pretium raises $1B to acquire built-to-rent homes and make loans to small homebuilders

Leasing

• Industrial: Tru Vue signs a 299K sf lease extension at High Street Logistics Properties‘s asset in McCook, IL

• Office: Gainsco Auto Insurance plans to not renew its 107K sf lease at 3333 Lee Parkway, a 239K SF office building in Dallas, TX owned by Granite Properties

• Office: Convene has partnered with RXR Realty to open a new 30K sf meeting and conference center at RXR’s 5 Times Square in Midtown Manhattan, NY

Meme Summary

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