A very pleasant Thursday to all!

Slow activity yesterday so expect a smaller deal sheet. The market awaits the Fed’s remarks today for guidance on interest rate policy. Distressed real estate is at a 10-year high with a large amount of troubled assets on the verge of joining in. Insurance premiums on coastal hospitality properties are nearly double on average from non-coastal counterparts. Life Sciences landlords have hopes for a recovery but not until rates stabilize. 10-year rose to nearly 5% yesterday and the market draws comparisons with Black Monday on the anniversary of the infamous stock market crash.

Please help us out by sharing this newsletter with work friends and any other CRE professionals. If you have feedback then feel free to fill out the feedback form or slide into the DMs on Instagram (@propmemo_ra)

Interested in sponsoring? Then get in touch with us

Capital Markets

Market News

• 10-year Treasury rose to nearly on 5% on Tuesday. Strategists cited Fed keeping rates high to fight inflation, an economy that continues outperforming, swelling government deficits, and bond term-premium as reasons for soaring rates (CNBC)

• Fed to give remarks at 12pm ET on Thursday which give clarity on long central bank’s strategy going forward. Recent remarks have hinted at keeping rates just high enough to fight inflation but not trigger vast unemployment (CNN)

• Biden Administration to invest $3.5bn into improving the U.S. electric grid. The investment will be joined with a $4.7bn investment from the private sector. The funding will go towards 58 projects across 44 states (CNBC)

• Pandemic net worth grew by 37% from 2019 to 2022 for most families. However those without exposure to stocks and real estate were disproportionately impacted. (CNBC)

• Blackstone sees 12% drop in quarterly profit. The giant’s fee-related earnings dropped by 5% as the company cashed out of less deals. Higher interest rates have reduced transaction volume as uncertainty in the market remains (Yahoo)

• China sells out of U.S. securities and bonds at high rates in August. Many speculate this sale is to defend a weakening Yuan by increasing dollar reserves (Yahoo)

• Wall Street warns of “Black Monday” on 36th anniversary. Black Monday was a global stock market crash that occurred on Monday October 19, 1987 where both the Dow and S&P dropped by over 20%. Many point to vast differences this time around which would prevent a similar sell-off from occurring including improved circuit breakers which would prevent such a crash and a stock rally that has largely been concentrated in a few stocks (MorningStar)

CRE Headlines

• Distressed real estate in the U.S. is at a 10-year high with $80bn in Q3. Buildings in bankruptcy, repossessed, or in the process of liquidation increased by $5.6bn in Q3. Office assets accounted for 41% of the total. The amount is still less than half of what it was in the financial crises, but there is another $216bn in potentially troubled assets with delinquent payments or slow lease-ups, with apartments making up a third of the at-risk properties (Fortune)

• Insurance premiums for hotels in coastal markets saw large YoY increases in 2022 ranging between 10%-30% on average. Properties with high risk of property damage also saw a large variance in premiums when compared to low risk. The price difference was in the realm of $1,000/unit/year (Trepp)

• Investors are confident demand for Life Sciences will returns but are not making predictions when. With higher interest rates VC firms slowed their investment in life sciences companies which has hampered demand for space. Now VC firms want promising results before investing more capital, especially since many potential tenants are in pre-revenue stages (Bisnow)

Deals Deals Deals

Sales

• Multifamily: Barings and Foulger Pratt acquire a 172-unit BTR community outside of Raleigh, NC for $50mm (CommercialObserver)

• Industrial: JV between Greenmont Group and Tryperion Holdings acquired a 450k sf industrial property north of Hartford, CT for $18mm. Thorofare Capital provided a $15mm loan (connectcre)

Debt

• Hospitality: Citigroup and Deutsche Bank lend $410mm to fund two, Four Seasons resorts in south Florida (CRENews)

Developments

• Multifamily: 400 Lake Shore Drive will soon begin construction in Chicago, IL. Related Midwest provided details on their schedule. The two-tower project will begin with the development of the northern tower which will rise 72-stories and house 635-unit for rent (Urbanize)

• Industrial: Stonemont Financial and The Davis Cos. complete a 1.2mm sf and a 1.5mm sf distribution buildings in Savanah, GA. The buildings are fully leased to the same tenant, a national home retailer (REBusinessOnline)

• Mixed-Use: St. John Properties acquires an 82-acre site for $10mm South of Washington D.C. to build a 635k sf mixed-use business park (commercialsearch)

• Industrial: Timber Hill Group and Champion Realty Advisors signed a build-to-suit lease for 57k sf with Mainfreight, a logistics company, in suburban Chicago, IL (connectcre)

Distress

• Retail: Brookfield’s $260mm loan on Pembroke Lakes Mall in South Florida watchlisted and credit downgraded (TheRealDeal)

• Mixed-Use: BridgeInvest has scheduled a foreclosure auction for 18 parcels in Atlanta, GA formerly owned by Newport RE. The lender had previously provided a $75mm loan for development of the sites (Bisnow)

• Office: Lenders have appointed a trustee to undertake the foreclosure of Uptown Tower in Dallas, TX formerly owned by Pillarstone Capital REIT. The REIT defaulted on the $16.5mm loan in August (Bisnow)

Capital Raising

• PropTech: HqO, a company that uses real estate insights, raises $50mm in series D funding to launch its Rex platform. The round was lead by Koch Real Estate Investments, and brought total funding to $200mm (GlobeNewswire)

Leasing

• Industrial: Smart Warehousing renews 190k sf industrial lease in Plainfield, IN with Nuveen Industrial (connectcre)

• Industrial: Unimacts, a solar energy parts provider, signs a 64k sf lease outside of Houston, TX at BAUER Group’s Northstar Industrial Park (REBusinessOnline)

• Office: M Financial Group signs a 52k sf lease at The Quad, a 364k sf office and retail development in Dallas, TX (REBusinessOnline)

• Office: Sony Music signs a 45k lease in Miami, FL’s Wynwood district. The 299k sf building is owned by Sterling Bay (Bisnow)

Meme Summary