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A Goldman research piece highlights costs are still prohibitive in most cases for office-to-residential conversions, Silverstein’s former CEO launches a new firm, young global talent keeps moving, and a burger chain is expanding its small footprint 800 sf at a time. Inflation came in higher on a monthly basis, EA announces more layoffs, the U.S. Government avoids a shutdown again, and Wendy’s is no longer going to implement surge pricing for its burgers

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Capital Markets

Market News

• Inflation Comes In at 2.8%

  The core Personal Consumption (PCE) Index came in at 2.8% over last January. The annual increase is the lowest since March 2021 when annual inflation came in at 2.2%. monthly core PCE rose 0.4%, above the 0.1% increase in December. This marks an increase over the last two months where the annualized monthly rate had come in below 2%, the Fed’s long term inflation target

  Change In Core PCE

  

   

• Electronic Arts Announces A 5% Reduction In Force

  EA, the video game developer, announces job cuts that could impact roughly 670 employees. The company said it would try to shift employees to new projects or roles but layoff conversations have already begun and are expected to finalize in April

• Government Shutdown Avoided, Again

  House and Senate leaders on Wednesday reached a bipartisan deal to avert a partial government shutdown ahead of a Friday deadline. The House will vote on a temporary funding bill, followed by the Senate on Thursday. The bill will fund agencies through March 8 and March 22 when additional voting will take place for six full-year appropriation bills

• Wendy’s Will Not Test Surge Pricing For Burgers

  Wendy’s stated it has no plans to test surge pricing after getting roasted by social media. The CEO had made statements to investors earlier this month stating the burger chain could start testing dynamic pricing as early as 2025

CRE Headlines

• Goldman Analysis Shows Cost of Office-to-Resi Conversions Is Still Too High

  An analysis by Goldman Sachs’ research team looked at available office assets and current office-to-residential conversion costs and found only about 0.8% of US office inventory is currently priced at a level that would make a conversion financially feasible. The analysis took into account office assets that would no longer function as office assets and performed a DCF to arrive at their results. The analysis found office assets still need to drop more in price to be viable targets. In many cases new construction on vacant lots is a far cheaper alternative to conversions. In dense urban areas where vacant lots are limited and office values have dropped significantly, while housing demand has remained high the numbers tend to make more sense. Cities like San Francisco, Los Angeles, and Seattle where office values and occupancy have plummeted while housing supply remains constrained have the highest number of viable target assets

  Share of Office Inventory Priced Below Breakeven Costs 

  

• Former Silverstein CEO launches Infinity Global Real Estate

  The firm plans to work nationally in development, acquisition, financing and fund management and will partner with Island Capital Group to find deals. While at Silverstein, Marty Burger started a debt platform which he plans to replicate at Infinity. The plan is to finance both construction and acquisitions across senior and mezz debt. or preferred equity. The firm will initially focus on NYC but will look at major U.S. markets

• Global Talent Migration, The New Normal?

  Talent migration across borders has risen post-pandemic and continues to be on the rise especially among younger workers. Younger talent is driven to higher-cost labor markets and major cities as they seek better career opportunities and higher wages, along with lifestyle considerations. In the two years post-pandemic the percentage of people looking to relocate rose from 6.1% to 9.5% globally, with regions like South America seeing a spike in willingness to relocate

• Smalls Sliders To Open 22 Phoenix Locations

  The mini-burger franchise backed by Drew Brees, is looking to open 22 franchises in Phoenix, AZ. The Purple Square Management is looking to open the first location in the state by mid-2025 and already owns over 250 of the franchises nationwide. The buildings are under 800 square feet and are drive-thru only, allowing development on sites under an acre in size

Deals Deals Deals

Sales

• Industrial: Centerpoint Properties acquires a 547K sf, four-building industrial portfolio in Los Angeles, CA for $197M from JPMorgan Asset Management

• Cold Storage: Platform Ventures acquired a 400K sf cold storage facility south of Fort Worth, TX from Yukon Ventures and Saxum Real Estate. The asset reportedly cost $50M to develop

• Multifamily: Veritas Investments acquires two apartment buildings in Seattle, WA for $18M. The 58-unit portfolio was sold by Mayfield Investment Company 

Debt

• Industrial: Ares Management secures a $150M loan for a six-property, 1.8M sf industrial portfolio from Affinius Capital. The 10-year loan will finance a portfolio spanning NJ, KY, NC, TX, FL, and GA built between 2021 and 2023 with 41% occupancy at closing

• Retail: A private investor secures a $96M loan via Marcus & Millichap Capital Corporation to refinance three retail centers in Los Angeles, CA. The loan terms consisted of a 65% LTV, five-year term, interest-only, and a fixed 5.77% interest rate

• Multifamily: Bridge Investment Group secures a $81M Freddie Max Optigo Loan to refinance a 397-unit apartment building outside Los Angeles, CA. Greystone and BMO Bank worked in conjunction to secure the loan

• Multifamily: Ming’s Garden Realty secures a $60M, two-year, floating-rate, bridge loan from Slate Property Group and LibreMax Capital to complete the construction of a 143-unit residential condo project in Queens, NY

• Multifamily: Madison Communities secures a $36M construction loan from United Bank along with preferred equity from Forum Investment Group for the acquisition of a 240-unit apartment asset in Savannah, GA

Developments

• Industrial: StarPoint Properties nears completion of a two-building, 157K sf, spec industrial development in Denver, CO

• Industrial: Lovett Industrial, together with PCCP LLC, break ground on two-building, 785K sf distribution industrial park in suburban Houston, TX

Distress

• Retail/Office: Farpoint Development and MCZ Development are under contract to acquire The North Avenue Collection, a 200K sf office and retail development at 939 W North Ave in Chicago, IL, for $20M. The deal will represent a sizeable loss for Principal Financial Group which acquired the asset for $89M in 2004

• Office: The $59M loan on Alliance HP’s One Financial Plaza, a 274K sf office tower in Fort Lauderdale, FL, was moved to special servicing after the owner was unable to secure a loan extension

Leasing

• Office: Kilpatrick Townsend & Stockton LLP, a law firm, signs a 10-year, 27K sf lease at Rudin’s 950K sf Times Square office high-rise in Manhattan, NY

Meme Summary

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