Good Morning!

CMBS is Back! Macerich secures a $710mm CMBS loan to refinance Tysons Corner Center, a 1.8mm sf shopping center. Prime retail corridor leasing was dominated by apparel tenants in 2023. Office foot-traffic is finishing the year strong in Manhattan with 70% of pre-pandemic levels. Toll Brothers expects home demand to continue in 2024 with tight supply. Job openings come in lower than expected, Moody’s downgrades outlook on China’s credit rating, and the A.I. boom is leading to jumps in water usage to cool data centers.

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Merch Spotlight

Capital Markets

Market News

• U.S. Job Openings at Two-Year Low

  On Tuesday the Bureau of Labor Statistics estimated 8.7mm jobs available in October, the lowest since March 2021 and close to the average of 7mm seen pre-pandemic. Economists had forecasted 9.3mm job openings for October. This follows a trend of cooling labor data after the economy added only 150,000 jobs in October

• U.S. Treasury Taunts Economists Who Said High Unemployment Was Needed to Curve Inflation

  Janet Yellen called out economists who had predicted high unemployment on Tuesday. The U.S. Treasury Secretary boasted the economy’s resilient labor market data and consumer demand, as inflation data seems to cool

• A.I. Boom Leading to Increased Water Consumption

  A researcher at University of California’s Riverside published a study showing how every 10 to 50 prompts in ChatGPT require half a liter of water (17oz). Water is used to keep the servers in large data centers cool and running, with companies like Microsoft and Google reporting large increases in water consumption as they ramp up AI use. Microsoft and Google reported 1.7bn and 5.6bn gallons of water used in 2022, with Google reporting a 21% increase from the year before

• Moody’s Cuts China’s Credit Outlook to Negative

  Moody’s downgraded its outlook on China’s government credit rating to negative from stable. The rating agency expects possible bailouts and fiscal stimulus to support distressed local governments and contain the spiraling debt crisis among the country’s real estate developers. Long-term ratings on the country’s sovereign bonds remained at “A1”

CRE Headlines

• Toll Brothers Reports Lower Home Sales, Encouraged by Lower Mortgage Rates

  The home builder reported Q4 earnings of $445.5mm, $4.11 per share, compared to $640.5mm, $5.63 per share, in Q4 2022. EPS beat consensus estimates of $3.72 a share. The company CEO praised their strategy of offering homes at lower price points as home buyers continue to be impacted by low inventory. He expects lower rates and lower inflation to fuel demand in the future

• Manhattan Office Building Visitation Rate at 70% of Pre-Pandemic Levels

  The Real Estate Board of New York released a study showing office visitation rates were at 70% of pre-pandemic levels for October, the highest since early 2020 when employees began to work from home. The study examines cell phone activity to detect office traffic. Class A+ buildings saw 74% visitation rate while Class A/A- and B/C saw a 70% visitation rate

• Prime Retail Corridor Leasing Dominated by Apparel and Luxury Tenants

  Apparel retailers accounted for 48% of all prime retail corridor leasing in 2023, with athleisure tenants accounting for 21% of apparel leases. Luxury retailers also grew their space within prime retail corridors as foot traffic recovered, relying on in-store offerings that can’t be replicated at home. Foot traffic across most major cities has returned to near pre-pandemic levels, with markets like Miami, Boston, and Chicago exceeding those levels

• Social Media Fueling Renter Fraud

  Camden Property Trust CEO claims to have been personally affected by renter fraud after having his identity stolen and used to apply for a rental at one of the company’s competitors. Scammers are becoming increasingly common, as internet=based real estate crimes rise from $213mm in 2020 to $397mm in 2022 according to the FBI. With many banking on lengthy eviction process to move-in and live rent free. Online communities on social media are fueling would-be scammers with knowledge and tutorials on how to fraudulently apply with forged documents

Deals Deals Deals

Sales

• Multifamily: Mid-America Apartments acquires a 352-unit luxury apartment community in Charlotte, NC for $107mm from Wood Partners

• Multifamily: Mosaic Residential acquires a 318-unit multifamily community in Houston, TX from ECI Group

• Multifamily: Passco Companies acquires a 278-unit multifamily community in St. Louis, MO from Invesco Real Estate

• Data Centers: NTT acquires two office assets in suburban Chicago, IL for $27mm. The company plans to demolish the building on 12-acre site at 1200 and 1250 N. Arlington Heights Road in Itasca to develop data centers

• Retail: LS Property Investments acquires a102k sf grocery-anchored shopping center in Allentown, PA for $18mm from Joshi Hotel Group. The asset last traded in 2012 for $16mm

Debt

• Retail: Macerich secures a $710mm, 6.6%-fixed rate, CMBS loan with interest-only payments during its five-year term to refinance Tysons Corner Center, a 1.8mm sf shopping center in the Washington D.C. area. Deutsche Bank, along with Bank of Montreal, Goldman Sachs and JPMorgan Chase, originated the CMBS loan

• Multifamily: M&B Development secures a $20mm construction loan from Parkview Financial for a 108-unit multifamily project in Philadelphia, PA

Developments

• Office: Hines opens Salesforce Tower in Chicago, IL. The 1.2mm sf office tower is the third phase of the Wolf Point Development

• Industrial: Hines and Key Group announce plans to develop a 3mm sf industrial park in outside of NASA’s Kennedy Space Center near Orlando, FL

• Multifamily: Crescent Communities opens Novel West Midtown, a 340-unit apartment community in Atlanta, GA

• Industrial: Dai Nippon Printing Co. announced plans to build a $233mm EV battery pouch manufacturing facility north of Charlotte, NC. The project is expected to be completed by 2026

• Mixed-Use: Shvo gets final approval to build a six-story, mixed-use development in Miami, FL. The asset will feature 170k sf of office, 17ksf or retail, 181 parking units, and five top floor residential condo units. The site was acquired in 2022 for $39mm

• Multifamily: Lincoln Avenue Communities break ground on a 142-unit affordable housing project in Manchester, NH, outside of Boston, MA. The development is expected to be delivered in 2025

Distress

• Office: Coretrust Capital Partners’ Pasarroyo office complex in Los Angeles, CA is going to foreclosure auction this month to pay for its $271mm outstanding debt. The office complex consists of 600k sf of office and 40k sf of retail

• Office: New York investors Isaac and Billy Shalom hit with $50mm foreclosure suit from loan servicer LNR for One North State Street in Chicago, IL

• Office: Entity which owns Uptown Tower, a 253k sf office tower, in Dallas, TX files for bankruptcy to avoid foreclosure. The asset is owned by Pillarstone Capital REIT and Whitestone REIT

Capital Raising

• Diversified: Ares Management raises $3.3bn for its Landmark Real Estate Fund IX which will seek to acquire seasoned assets at attractive discounts to market value via LP interest acquisitions, GP-led fund and portfolio recapitalizations along with preferred equity and other structured investments

Leasing

• Industrial: CSW Industrials’ RectorSeal signs a 240k sf lease at Tejon Ranch Company and Majestic Realty Company’s 480k sf facility in north of Los Angeles, CA

• Industrial: AstraZeneca signs 198k sf lease at Matan’s 700 Progress Way in Gathersburg, MD outside of Washington D.C.

• Industrial: Power Solutions, an electrical contractor, signs a 94k sf lease St. John Properties’ Arcadia Business Park in Fredrick, MD outside of Washington D.C.

Meme Summary

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