Good Morning!

The FDIC awarded Santander a 20% equity interest in a JV of roughly $9bn Signature Bank loans backed by rent-controlled assets in New York City. Loan origination is down big in 2023. Construction starts are also down compared to 2022. And Moody’s downgrades BXP. The current stock rally took a dive on Wednesday. Wells Fargo has workers at a NM branch vote to unionize. Citi continues its layoffs. And overdraft fees continue to surprise people who overdraft their accounts.

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Merch Spotlight

Capital Markets

Market News

• Stocks Nose-Dive to End Recent Rally

  All three major U.S. stock indexes veered ended 1.3% to 1.5% below Tuesday's close on Wednesday. Some traders said the market selloff could have been aggravated by large purchases of near-term put options on the S&P 500, including put contracts that would guard against a drop below the 4,755 level on the index by the end of the session. Put options convey the right to sell shares at a fixed price in the future and at times options-linked hedging activity can heighten volatility

• Wells Fargo Employees at Albuquerque, NM Branch Vote to Unionize

  Wells Fargo employees at its Albuquerque, NM branch voted to join a union on Wednesday, making Wells Fargo the first major U.S. lender to have a unionized workforce. The employees at that branch voted 5 to 3 in favor of joining the Communications Workers of America's Wells Fargo Workers United. At the same time, bank employees at the Bethel, AK branch withdrew from the unionization effort

• Many Americans Surprised by Overdraft Fees

  A survey by the Consumer Financial Protection Bureau found that only 22% of households that were charged an overdraft or nonsufficient fund fee within the past year expected their most recent overdraft. The report also found just 10% of households with more than $175,000 in income were charged an overdraft or an NSF fee in the previous year, compared with 34% of households making less than $65,000

• Citigroup to Close Global Distressed-Debt Business

  Citi has decided to close its global distressed-debt group, which trades the bonds and other securities of companies in or approaching bankruptcy. The group employs about 40 people. The bank is exiting businesses with poor returns to bolster the bank’s odds of hitting performance targets set by the new CEO

CRE Headlines

• Santander Bank Wins Minority Stake in Signature Bank Rent-Controlled Loan Portfolio

  The FDIC awarded Santander a 20% equity interest in a JV of roughly $9bn loans backed by rent-controlled assets in New York City. Santander had a $1.1bn bid. The FDIC will retain the remaining 80% stake in the JV. This news comes after the FDIC had announced last Friday that a partnership backed by Related, The Community Preservation Corporation (CPC), and Neighborhood Restore HDFC had acquired a 5% equity interest in $5.8bn of Signature Bank loans also backed by rent-controlled multifamily assets. The transaction marks the final step in the FDIC’s plan to offload about $33bn of commercial-property loans held by Signature Bank

• Construction Starts Hit 10-Month Low

  Total construction starts fell 15% in November, according to Dodge Construction Network. Nonresidential building starts decreased 29% in November to a seasonally adjusted annual rate of $345bn. Residential building starts declined 6% in November to a seasonally adjusted annual rate of $359 billion. Single family starts increased 1%, while multifamily starts fell 19%. Year-to-date through November 2023, total residential starts were down by 14%, with single-family starts dropping 15% and multifamily starts by 12%

• CRE Loan Origination Volume Drops to $2.5bn in Q3

  According to Trepp, commercial mortgage origination volumes for bank-held CRE loans fell in the Q3 by $2.2bn across all property sectors. Multifamily and lodging loans saw the largest quarter-over-quarter decreases in origination volume. The quarterly multifamily loan origination volume fell just over 50% to $1.1bn in Q3 from $2.2bn in Q2, and the quarterly lodging loan origination volume dropped just under 50% to $0.1bn in Q3 2023 from $0.2bn. Underwriting terms also took a hit as average LTVs fell for every asset class and the average term for multifamily fell to 5 years from 10 years, while average office loan terms fell to 3 years

  CRE Loan Origination Volume

  

• Moody's Downgrades Boston Properties' Credit Rating

  Boston Properties’ (NYSE: BXP) senior unsecured debt rating was lowered to Baa2 by Moody’s Investors Service. The downgrade by Moody's is defined as "subject to moderate credit risk." Moody’s also changed the outlook for its ratings assigned to the REIT from "negative" to "stable" citing BXP’s modest lease expiration schedule, its portfolio quality, long track record, and its liquidity and capital access

Deals Deals Deals

Sales

• Retail: Prada buys its 69k sf store at 724 Fifth Avenue in New York, NY for $425mm. Eastdil Secured brokered the deal

• Retail: Srinivas Chavali acquires Dulles Town Center, a 1.2mm sf mall outside of Washington D.C. for $46mm from New York Life. New York Life had previously acquired the mall via foreclosure from Lerner Enterprises during the pandemic

• Multifamily: Weidner Apartment Homes acquires a 400-unit multifamily community in Charlotte, NC for $82mm from Waterton. The asset previously traded for $61mm in December 2018

• Industrial: Tribek Properties sells RiverWest, a 610k sf two-building industrial portfolio outside of Charlotte, NC in Belmont, for $70mm to LBA Logistics

Debt

• Industrial: Scannell Properties and Manulife secure $463mm in financing for a 13-property industrial portfolio across eight market. Oxford Properties Group provided the financing. Nearly all the assets in the portfolio were built on a speculative basis and are currently 50 percent leased

• Senior Living: Ziegler announces the successful pricing of Westminster-Canterbury on Chesapeake Bay's $423mm Series 2023A and 2023B Bonds. The bond’s proceeds will be used to fund the construction of a 22-story, 226-unit independent living multifamily community and a 5-story parking garage

  • The 2023A Long-Term Bonds total $258mm with a weighted maturity of 27.2 years and a yield of 6.69%.

  • The 2023B Tax Exempt Mandatory Paydown Securities SM, total $165mm and feature a blended average yield of 5.61% with a maturity of 3.8 years

• Multifamily: An affiliate of Rockrose Development secured a $293mm, five-year Fannie Mae loan from Wells Fargo for Lyra, a 590-unit apartment building in Manhattan’s Hudson Yards neighborhood

• Multifamily: Scape North America secured a $178mm loan from Madison Realty Capital to refinance a 415-unit mixed-use multifamily asset near Fenway Park in Boston. MA

Developments

• Mixed-Use: St. John Properties Inc. plans a redevelopment of Harrisburg Mall, a 1mm sf regional mall in Harrisburg, PA. The company plans to build Swatara Exchange, a mixed-use development consisting of 14k sf of single-story office space, 50k sf of retail space, and two retail pad sites, and nearly 200k sf of single-story office/industrial flex space

• Gaming: PENN Entertainment has broken ground on the $185mm Hollywood Casino Joliet at RockRun Collection in Joliet, IL

• Data Centers: Vantage submits plans for a $96mm, 243k sf, 32MW data center in San Antonio, TX

• Hospitality: Merritt Development Group and Phoenix Development Partners are seeking to build a $60mm, 175-key Residence Inn by Marriot in San Antonio, TX. Construction is expected to start in Q3 2024

Distress

• Hospitality: Urban Network Capital Group and Vertical Developments have secured a $25mm construction loan from Rok Lending for a Visions at Brickell Station, an 111-unit boutique condo-hotel development in Miami, FL’s Brickell district

Leasing

• Office: Amazon will not renew its 209k sf lease at 1800 Ninth Tower in Seattle, WA. JPMorgan Investment Management acquired the 316k sf asset in December of 2019 for $206mm

Meme Summary

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