Happy Valentine’s Day (to All Whomst Observe)!

Afternoon Newsletter! D.C. leads the nation with 65% of all planned office-to-residential conversions, Senior Housing is largely recovered from its pandemic days with demand outpacing new supply, Wyndham rolls out a group booking platform, and Florida-based developer has plans to add nearly 5,000 units to Miami. Stocks tumbled yesterday thanks to stronger-than-expected CPI data, proposed banking regulations could further impact CRE lending, some economists express concerns that inflation data is lagging actual data, and Instacart is the latest company to announce layoffs

If you enjoy the newsletter, then help us out by sharing with friends and colleagues. Click the referral link below to share the newsletter, hit milestones, get rewards!

Interested in advertising? Then get in touch with us

Capital Markets

Market News

• Stock Market Tumbles As Investors Price In New Inflation Data

  All three major indices took a tumble on Tuesday following the release of CPI data which showed January annual inflation coming in at 3.1%, down from 3.4% a month earlier but above the 2.9% expected amount. Core CPI remained unchanged at 3.9%. The result is that traders have abandoned hopes of Fed rate cut in March and have adjusted expectations down to just 37% of a probability of at least a 25bps rate cut for the Fed’s May meeting. Traders were pricing in a 60% chance of at least a 25bps rate cut on Monday, and 100% chance a month ago

• New Proposed Bank Rules Could Further Limit CRE Lending

  Proposed Basel III regulations would require banks to maintain more capital to protect against loan losses. The head of the Mortgage Bankers Association slammed the proposal stating it would only further limit lending and reduce liquidity in the commercial property sector. The regulatory framework would mandate that banks with $100 billion or more in total assets ramp up their capital by an average of 20%. If the regulation goes into effect, the eight largest banks would see a roughly 19% rise in capital requirements, while lenders with assets ranging from $100 billion to $250 billion would see a 5% increase

• Inflation Data Could Be Lagging Actual Inflation

  CPI rose more than expected in January, but January is typically a strong month for inflation readings as businesses roll out price increases to start the year. Some economists believe these price increases were not fully addressed by the government’s model to account for seasonal fluctuations in the data. New weights published last week increased housing's share on January CPI. Rent measures in the CPI tend to lag the independent gauges by several months, resulting in elevated rental inflation despite independent data pointing to rent demand going down thanks to large apartment deliveries

• Instacart to Lay Off 250 Employees, Roughly 7% of Company

  Instacart announced the layoffs on Tuesday, with the focus being on middle management and creating a flatter organizational structure. Instacart’s COO, CTO and chief architect are also departing the company for personal reasons, with only the CTO role planned to be backfilled

CRE Headlines

• Swerdlow Group Proposes 4,900-Unit Affordable Housing Development Plan in Miami

  Swerdlow Group has proposed a 65-acre redevelopment plan that aims to add 4,900 affordable and workforce housing units to Miami’s Little Haiti and Little River neighborhoods. The plan calls for various properties to be added along the rail line used by Florida East Coast Railway for freight and the Tri-Rail for its service to Downtown Miami. The proposal was a response to a request for proposals from Miami-Dade County to rebuild and expand public housing projects in the neighborhood

• D.C. and NYC Lead The Office-to-Apartment Conversion Movement

  High office vacancies and potential mortgage defaults, combined with strong housing demand are driving office-to-apartment conversions, particularly in metros that are still supply constrained with regards to housing. D.C. led the ranking with ~5,820 units to be created from office properties, representing 65% of total residential conversions. New York held the most future units in planned projects, with 11,485 units that might be added to the conversion pipeline

  Planned Office-to-Apartment Conversions by Metro

  

• Senior Housing Recovering With Demand Outpacing Supply

  U.S. senior housing continue their recovery from Covid. Cap rates have increased as interest rates remain elevated. Data shows senior housing cap rates averaged 5.0% in Q1 2021 have since expanded by roughly 200bps. Q4 2023 saw the 11th quarter of positive net absorption following the pandemic. Occupancy has largely recovered reaching 22.1% in Q4, but is still 2015/2016 peaks. The inventory growth has been 50% lower than pre-pandemic with demand being driven by the baby boomer generation. Estimates show the 75+ population will grow by 18% over the next five years and double by 2045

  U.S. Senior Housing Demand

  

• Wyndham Hotels Rolls Out Instant Group Bookings Platform

  Wyndham teamed up with Groups360 to offer group instant bookings for 10 to 50 rooms at a time via the GroupSync marketplace. The method allows for direct bookings by travel planners without the need of direct interaction with the hotel. Wyndham believes this is a $3.3B revenue opportunity for franchisees. The program targets small to mid-size businesses, travel advisors, and meeting planners, and offers discounted rates and perks

Deals Deals Deals

Sales

• Retail: 5Rivers CRE acquires Fayette Pavilion, a 1.1M sf outdoor retail center south of Atlanta, GA from Nuveen Real Estate. The asset was 96% leased and includes anchors Publix, Hobby Lobby, Burlington, Ross Dress for Less, Marshalls, PetSmart, Old Navy, pOpshelf, Dollar Tree, and Five Below

• Retail: Crosspoint acquires Brookside Shops, a 76K sf shopping center in Boston, MA, for $21M from Clarion Partners

• Multifamily: Howard County Housing Authority acquires Ellicott City Apartments, a 240-unit multifamily asset outside Baltimore, MD for $63M

Debt

• Retail/Office: Design Development Partners secured $45M from Kawa Capital to refinance a 48K sf mixed-use building in the Miami, FL

• Hospitality/Multifamily: DTH Capital and Rose Associates secured a $395M from Goldman Sachs refinancing for 70 Pine Street, a 67-story tower converted from an office building into a hotel and luxury apartment complex in 2016.

• Multifamily: Artimus NYC secures a $90M financing package to develop a 17-story apartment tower in Brooklyn, NY. JPMorgan provided a $75M senior loan, while Community Preservation Corporation provided a $15M subordinate loan

• Multifamily: Woodfield Investments and Argosy Real Estate Partners secured a $120M loan to to refinance Morrison Yard Residences, a 379-unit apartment community in Charleston, SC. Northwestern Mutual Life Insurance Company provided a ~6% fixed-rate loan

Developments

• Office: BDP Holdings released plans for a 130K sf office development in Montclair, NJ

• Industrial: Clarion Partners and Seefried Industrial Properties begin construction on phase I of a four-building, 860K sf logistics center outside Tampa, FL

• Multifamily: CEDARst Companies and Bridge Investment Group acquire a 2.3 acre site in Las Vegas, NV to build a $180M, 311-unit multifamily development in an Opportunity Zone

• Multifamily: McNair Interests begins construction on a 371-unit multifamily project in Houston, TX

Leasing

• Industrial: Coaster Fine Furniture renews its 250K sf lease at Sunbeam Porperties’ Miramar Park of Commerce distribution center outside Miami, FL

• Office: China Merchants Bank signs a 43K sf, 15-year lease extension at Park Tower Group’s 535 Madison Ave., a 37-story, 502K sf Class A+ office tower in Midtown Manhattan, NY

• Office: BIG 12 Conference relocating their 14K sf HQ to Williams Square in Irving, TX. The 1.4M sf office campus is owned by Apollo Global, Vanderbilt Office Properties and Hillwood Urban

• Office: Com2uS, a Korean video game developer/publishing company, to take a 12K sf space at Kilroy Realty’s 6255 West Sunset Boulevard in Los Angeles, CA

Meme Summary

Interested in advertising? Then get in touch with us