Happy Thanksgiving-Eve!

Through Q3, debt origination has fallen by 48% compared to 2022 with refinancing being the bulk of transactions. Smaller leases are dominating the life sciences market as funding for early stage companies dries up. Foot traffic is up for retailers in October, but an online sales surge for deals could dampen November sales. Multifamily construction is likely overstated in the latest U.S. Census data according to RealPage. In broader markets, home sales are down, mortgages rates crept back up, couple of Wells Fargo retail locations seek to unionize, UK and US central banks unlikely to lower rates anytime soon, and the OpenAI saga comes to a close with the former CEO being reinstated following his long and tumultuous 4-day exile.

Safe travels to everyone headed back home today!

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Capital Markets

Market News

• Wells Fargo Staff at Two US Branches Attempt to Unionize

  Employees in Albuquerque, NM and Bethel, AK filed for union elections on Monday. In a petition to the National Labor Relations Board, bankers and tellers declared their intent to join the Communication Workers of America’s Wells Fargo Workers United

• Bank of England Governor Dismisses Rate Cuts 

  Andrew Bailey explained interest rates are likely to remain high in order to further bring down inflation. Even though inflation was cut in half, the Bank of England will remain focused on bringing inflation to 2%. The bank noted that the sharp drop from 6.8% inflation was largely due to energy prices

• Home Sales at 13-Year Low, Prices Go Higher

  Existing home sales dropped by 14.6% year-over-year to a seasonally adjusted annual rate of 3.79mm, compared to 4.44mm in October 2022. The median home price rose to $392k in October, 3.4% higher than a year ago when the median was $379k. Distressed sales only represented 2% of all sales, unchanged from a year ago

• Mortgage Rates are Back on the Rise

  After falling to 7.64%, 30-year mortgage rates are once again rising with Monday seeing a 23bps increase to 7.87%

  30-Year Mortgage Rate Average

  

• Central Banks are Cutting Rates, Unlikely the Fed Joins Movement Soon

  The number of central banks cutting rates has surpassed those raising rates. Several banks in Latin America raised rates ahead of the Fed, now they’re beating the Fed to cutting them. Analysts caution that even if the Fed pivots policy by mid-2024 it could still mean the economy does not hit a soft landing. With inflation still above target levels its unlikely the Fed starts cutting rates anytime soon

• Sam Altman to Return as OpenAI CEO

  Sam Altman, Co-Founder and former CEO of OpenAI, is reinstated after being ousted by the board last Friday. All board members except one are replaced

CRE Headlines

• Smaller Leases Dominate the Life Sciences Market

  Markets across the US are seeing a severe decrease in demand for Life Sciences space as funding dries up for early stage firms. Markets like Boston which previously saw 30%-40% of new tenants take on 75k sf or more, are now seeing those large leases represent less than 5% of the market and 80% of companies needing less than 30k sf. Some firms have bought into the mega campus model to accommodate tenants as they grow, while others are prepping smaller spaces to accommodate short-term leases

• Debt Origination Down 48% YoY through Q3 2023

  Acquisition financing has taken a steep dive from 2021-2022 levels with refinancing being the bulk of transactions largely due to record loan maturities in 2023. Most surprising is the sharp drop in origination activity for multifamily which dropped 55% YoY YTD from ~$250bn to just over $100bn. Development sites were a bright spot with 4% YoY increase

  CRE Debt Origination Volume

  

  Source: RCA, Newmark Research as of 10/24/2023 Note: Data is based on preliminary loan sums, which are subject to future revision

• Core Retail Sales and Foot Traffic Up in October

  Core retail sales rose by 0.2% month-over-month in October and foot traffic was up by 5.36%, with deal days driving 150mm consumers, 7.5% higher than 2022. Sporting goods, Home Improvement, and Apparel lead the charge with a 5.70%, 3.25%, and 2.30% increase in foot traffic. Online sales surged to 10.4% in October, which could impact November spending and cause Black Friday to have a reduced impact

• U.S. Census Likely Overestimating Multifamily Construction

  Data released by the U.S. Census Bureau shows multifamily construction starts down 12% YTD in 2023, private sector data points to a drop closer to 40%. With the Bureau only tracking a small sample of permit holders its possible construction was understated in 2022 and overstated in 2023. In addition, data from architects, developers, banks, and investors points to a decrease in billings for multifamily work, difficulty in obtaining construction loans, tightening lending standards, and investor appetite for development diminished

  Census vs. RealPage: Multifamily Units Started by Month (Thousands)

  

Deals Deals Deals

Sales

• Hospitality: Throckmorton Partners to buy the southern tower of the Signia by Hilton San Jose for $73mm in San Jose, CA. The company will lease the tower to San Jose University for use as student housing

• Multifamily: Granite Capital Group acquires a 164-unit apartment building outside of San Francisco, CA for $58mm via 1031 exchange. Granite Capital Group assumed an existing $41mm Fannie Mae loan with a 4.42% fixed-rate and interest-only payments

• Multifamily: Bonaventure acquires a 121-unit apartment community in Norfolk, VA for $42mm

• Multifamily: Holidays Network Group acquires a 88-unit building in Miami Beach, FL for $27mm. The buyer obtained a $35mm loan from Western Bank to reposition the asset

• Multifamily: Breneman Capital acquires a 47-unit multifamily asset in Chicago, IL. Breneman assumed the existing loan with a 73.5% LTV, 4.60 fixed-rate, and ~five years of remaining term

• Industrial: Bridge Logistics Properties, a subsidiary of Bridge Investment Group, acquires an 84k sf warehouse outside San Jose, CA via sale-leaseback with Vital Records Control

Debt

• Multifamily: The Ronto Group and Wheelock Street Capital secure a $174mm construction loan from Bank OZK to develop a 65-unit luxury condo building in Sarasota, FL

• Multifamily: Borough Developers secures a $44mm construction loan from BridgeCity Capital to build 13-story luxury multifamily asset in 526 Baltic Street in Brooklyn

• Multifamily: Wendover Housing Partners obtains a $29mm loan from JPMorgan to develop a 1,000-unit affordable housing project in Orlando, FL

Developments

• Mixed-Use: Crescent Heights lands Whole Foods for its $40mm Miami Beach, FL

• Multifamily: Alliance Residential opens, Broadstone 2Thirty, a 278-unit apartment community in Atlanta, GA

Leasing

• Industrial: Nova Medical Products leases 92k sf at TradeLane Properties’ 410 Smoke Tree Plaza in suburban Chicago, IL

• Office: Travelers Insurance signs a 42k sf, 66-month lease at Buchanan Street Partners’ Gateway Corporate Center in Los Angeles, CA

• Mixed-Use: Crescent Heights lands Whole Foods to anchor its Miami Beach, FL development

• Office: MedStar Medical Group expands its footprint to 31k sf at St. John Properties’ 810 Bestgate Rd in Annapolis, MD

• Office: Orveon, a cosmetics brand, signed a six-year lease for 23k sf in Stawski Partners’ 579 Fifth Ave office in New York, NY

Meme Summary

Merch Spotlight