Happy Wednesday!

KBS REIT III has warned investors it is at risk of defaulting on loans and seizing to exist. Multifamily distress expected from floating rate loan maturities in 2024. The Midwest has surprising basic apartment amenity requests. And NYC unveils a new affordable housing financing program. Holiday spending was up this year, but more in line with pre-pandemic spending. Mortgage rates hover near 7%, similar to Q2 2023. JPMorgan profits benefit from bank turmoil earlier this year. And pizza deliveries are about to get more expensive (The most devastating news of 2023, possibly 2024)

Slow deals day today, expect a limited number of transactions this week as most will be out of office (“OOO” for those of you unfamiliar with acronyms)

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Capital Markets

Market News

• Holiday Spending Up 3%

  According to Mastercard, from November 1st through Christmas Eve, U.S. retail sales rose by 3.1%, excluding automotive sales. This year's increase was in line with spending trends from 2011-2019. Consumers spent more on apparel and food, while sales of electronics and jewelry were lower year-over-year

• JPMorgan Earns Nearly 20% of All U.S. Bank Profits

  JPMorgan’s U.S. banking division earned 18% of the banking industry’s total through Q3 2023, beating out rivals BOA and CITI. The trend puts the bank on track for a record share of the industry’s profits that it has not seen since 2009. The record number is in part due to recent acquisitions from early year banking turmoil

• 30-Year Mortgage Rates at Lowest Levels Since May

  30-Year mortgage rates are hovering at their lowest since May 2023 at 7.07%

  30-Year Mortgage Rate

  

• Pizza Hut Lays Off Over 1,200 California Delivery Drivers Ahead of Minimum Wage Hike

  Pizza Hut is set to lay off more than 1,200 delivery drivers in 2024, ahead of a new California law that boosts the fast-food minimum wage by $4 to $20 per hour. Pizza Hut franchises are preparing to shift to third-party apps for deliveries. Southern California Pizza Co., is also planning to lay off 841 drivers

CRE Headlines

• KBS REIT III At Risk of Default

  KBS REIT III, an office non-traded REIT, has warned investors it is at risk of defaulting on loans and seizing to exist, with roughly $1.7bn in loans maturing in the next 12 months. Since September 2022, KBS said it has lost around $350mm in property value stemming from high borrowing costs and ownership in markets like San Francisco

• Multifamily Distress Opportunities in 2024

  Since 2018, nearly half of all loans originated have had a floating rate structure. Multifamily loans have made up 66% of total loan originations in that same time period. Multifamily makes up roughly 52% of all floating rate debt originated since 2018. 56% of floating rate apartment debt originated since 2018 has a 0 to 3 years term meaning loans are starting to mature in a high interest rate environment and will create opportunities for rescue capital

  

• Midwest Renters Rank Desired Features and Amenities

  Findings from the 2023 NMHC and Grace Hill Renter Preferences Survey Report revealed the top 10 most desired apartment features and amenities in 2023. The lists were as follows:

  Top 10 Apartment Features (% of Respondents Desired)

  

  Top 10 Apartment Amenities (% of Respondents Desired)

  

• NYC Unveils New Affordable Housing Program

  The New York City Department of Housing Preservation and Development unveiled a new mixed-income financing program Tuesday aimed at helping projects where at least 70% of the units are affordable submit proposals to qualify for an Article XI tax abatement and city subsidy. Financing sources do not rely on other sources of public funding, like LIHTC. Proposals may include homeless-set aside units, supportive housing units, and a mix of income-restricted units

Deals Deals Deals

Sales

• Multifamily: Tishman Speyer acquires Union West, a 357-unit luxury multifamily tower in Chicago, IL’s Fulton Market. Zom Living sold the asset for $128mm

• Office: Harbor Associates and F&F Capital Group acquire Westwood Terrace, a 165k sf office asset in Los Angeles, CA, for $45mm from a partnership controlled by Goldman Sachs. The asset last sold for $93mm in 2018

• Retail: A foundation run by Sperry Commercial acquires the retail portions, approximately 146k sf of retail and 900 parking spaces, of Marina City in Chicago, IL for $30mm from Pebblebrook Hotel Trust

• Retail: Publix acquires Matt Town Center, a 81k sf shopping center in Atlanta, GA for $30mm from Retail Planning Corp. Publix anchored the property and 95% leased at sale

• Office: CTO Realty Growth (NYSE: CTO) sells Sabal Pavilion, a 121k sf office asset in Tampa, FL, for $22mm to a Virginia-based real estate company. CTO provided a $15mm, 7.5% fixed-interest, 179-day loan to the buyer. CTO acquired the asset for $27mm in 2020

• Industrial: Rexford Industrial sells a 39k sf small bay industrial park for $11mm near Los Angeles, CA

• Self Storage: Silver Star Properties acquires two self storage facilities in Houston, TX from Harrison Street Real Estate Capital via 1031 exchange. The sale is part of Silver Star Properties’ pivot toward the self storage sector

Developments

• Mixed-Use: Pebb Capital secures a $173mm construction loan from Monroe Capital and JPMorgan for a mixed-use development in Delray Beach, FL. The project will feature 28k sf of retail and 180k sf of office, and is scheduled for completion in summer 2024

• Data Centers: Meta receives approval from a Rosemount, a city outside Minneapolis, MN, to develop a 750k sf data center on 280 acres of land. Meta plans to invest roughly $700mm for the project

• Data Centers: Involta acquires a 24.5-acre site with an existing data center in Green Bay, WI, and plans to create a 20MW campus

Leasing

• Office: Valon Technologies signs a 14k sf lease at Gordon Property Group’s 860 Broadway in Midtown Manhattan

Meme Summary

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