Good Morning All!

Starting off the week with news of Kroger & Alberstons planning to sell 400 stores in connection with their merger. Construction starts and CRE lending are on the decline in 2023. Illinois gets approval for an EV battery manufacturing facility and opens a Casino all in the same week. Research paper highlights the difficulty of office-to-resi conversions by highlighting markets and assets with feasible conversions. In the broader market Germany continues to experience effects of the Russia-Ukraine war as its manufacturing-dependent economy is impacted by rising costs in power. Rising cost of borrowing is starting impact fintech companies. Consumers remain resilient due to savings and low debt amounts despite news of rising credit card debt. And in a surprise to no one, companies which mentioned “AI” in their earnings have traded better than peers who did not mention “AI” over the course of 2023.

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Capital Markets

Market News

• Investors are earning up to 5% on their cash savings thanks to high interest rates (CNBC)

• S&P companies that cited “AI” in second quarter earnings outperformed companies that did not cite “AI”. Companies which cited “AI” in second quarter earnings calls rose 13.3% since December 31st, while companies that did not cite “AI” rose by 2.3% (Morningstar)

• Roughly 146,000 auto workers set to go on strike this week if major auto makers do no meet wage demands (46% increase over 4 years), various benefit changes, and union representation for workers in battery factories (AP)

• Germany set for prolonged recession as manufacturing activity drops due higher energy costs in the wake of Russia’s invasion of Ukraine (CNBC)

• Household debt-to-income is near 20-year low, implying consumer spending could remain high despite rising credit card interest rates (Biz)

• U.S. Secretary Janet Yellen feels confident in soft landing for economy after latest inflation and jobs data (thebrusnwicknews)

• Fintech companies could be in trouble as the cost of borrowing outpaces interchange fees (credit and debit card transaction fees) (techcrunch)

CRE Headlines

• Kroger and Albertsons plan to sell 400 stores to C&S Wholesale Grocers in connection with their $24.6bn merger. The plan aims to help the merger pass regulatory clearance and avoid infringing on antitrust laws. There are no planned store closures connected with the merger according to Kroger (FoxBusiness, Reuters)

• Construction starts in Q2 fell rapidly as financing continues to impact industry (GlobeSt)

• Bank lending likely to continue retreating from CRE. After SVB’s closure, CRE loan originations were down 53% in Q2 (Bisnow)

• Gotion High-Tech Co, to build $2bn EV battery plant in Manteno, IL. The manufacturer will be eligible to receive $213mm in tax benefits over 30 years, $125mm in capital funding from IL Reimaging Energy and Vehicles incentive package, and additional property tax abatements over 30-year span (Reuters)

• Bally’s opens temporary casino in Chicago after passing test run by state regulators. Bally’s to send $135mm in upfront fees to the Gaming Board within 30 days of opening to fund statewide infrastructure programs (cbs)

• Working paper shows only 6 cities (New York, San Francisco, San Jose, Denver, and D.C.) have financially feasible environments for office-to-residential conversions (Bisnow)

Deals Deals Deals

Sales

• Office: Hines and Oaktree Capital Management sell 405k sf Raytheon campus to local family investor for $77mm in Orange County, CA. The partnership purchased the asset in 2012 for $50mm (CommercialObserver)

• Multifamily: Northland buys 344-unit community outside Atlanta, GA. The community was comprised of 38 buildings on 46 acres (REBusinessOnline)

Debt

• Office: Worther Real Estate Group and Stockbridge secure $480mm loan for the redevelopment of Warner Bros. lot into offices and soundstages in Burbank, CA. Athene Annuity and Life Co. funded the loan (Bisnow)

• Multifamily: Pinnacle secures $48mm in funding for 100-unit affordable housing development in Hollywood. FL. Funding included tax credit equity financing and construction debt from Bank of America, tax-exempt-bonds issued by Broward County Housing Finance Authority, $10mm in gap financing from Broward County, permanent loan from Citi, $1mm from City of Hollywood, and $6.6mm from Florida Housing Finance Corp (REBusinessOnline)

• Multifamily: Walker & Dunlop source $36mm Fannie Mae loan for Grower Housing Development Fund Corp. for 251-unit affordable housing refinance in Brooklyn, NY (REBusinessOnline)

Developments

• Industrial: Reyes Coca-Cola Bottling planning to invest $500mm to develop 620k sf manufacturing campus in Rancho Cucamonga, CA (commercialsearch)

• Industrial: Pratt Industries, a recycling and packaging company, plans to invest $120mm into new 496k sf manufacturing facility in Conyers, GA (REBusinessOnline)

• Industrial: Panattoni, PGIM, begin construction in Seattle, WA industrial campus with construction of 243k sf building (commercialsearch)

• Multifamily: Bridgeview Multifamily to develop 360-unit project in Denton, TX. Construction is expected to begin summer 2024 (REBusinessOnline)

Capital Raising

• Industrial: NW1 Partners raises £650mm in equity for development of an outdoor industrial storage portfolio across the U.S. and U.K. (Bisnow)

• Industrial: Standard Real Estate Investments provided Trammell Crow with a $150mm equity investment for Woodridge Industrial Center a 217k sf logistics facility in suburban Chicago, IL (TrammellCrow)

Leasing

• Office: Dr. Reddy’s Laboratories relocates and signs 53k sf lease in Princeton, NJ with Nuveen Real Estate (commercialsearch)

• Industrial: Wartsilla North America signs 42k sf lease in Houston, TX with building owned by Panattoni (CommercialObserver)

Meme Summary