Good Morning!

We’re Back! Unlike retail… Macy’s to shut down 150 stores, the FTC threatens to shutdown the Albertsons/Kroger merger citing higher potential consumer costs, German banks might be underestimating their potential loan losses for CRE, BREIT needs some positive returns, and Avison Young secures a restructure over the weekend bringing the headlines to a quick end. Inflation (PCE) is on the hot seat this week, retailers have been reporting earnings this week with Lowe’s expecting sales to drop this year as home improvement projects slow down, and Sony announced layoffs.

Stay tuned as we roll out the salary survey submission form later this week.

If you enjoy the newsletter, then help us out by sharing with friends and colleagues. Click the referral link below to share the newsletter, hit milestones, get rewards!

Interested in advertising? Then get in touch with us

Capital Markets

Market News

• All Eyes On Inflation Report This Thursday

  On Thursday January’s Personal Consumption Expenditures Index (PCE) will be released. Sticky inflation could impact timing of any rates cuts by the Fed along with Wall Streets estimates. Currently 63% of traders expect rate cuts by June, down from 98% at the end of January

• Lowe’s Beats Earnings Despite Falling Sales

  Lowe’s beat earnings estimates after cutting its forecast in November. The company reported $1.77 EPS beating consensus estimates of $168 EPS. Lowe’s said it had seen a pullback on pricier items and discretionary home projects. The company saw a 6.2% annual decline in comparable sales. Lowe’s anticipates sales to drop 2%-3% this year again. Home Depot also reported falling sales last week despite also beating earnings estimates

• FTC Sues To Block Kroger/Albertsons Merger

  The Federal Trade Commission sued to block a proposed merger between Kroger and Albertsons, saying the $25B deal would eliminate competition and lead to higher prices. The merger was originally agreed to in October 2022 with the original intent of competing with giants like Walmart, Amazon, and Costco. Both companies intend to challenge the agency, but the merger comes at a time when high inflation for food prices is fresh on everyone’s radar. Prices rose 11.4% in 2022 and 5% in 2023. The FTC argues the merger will further hurt consumers and cause additional financial strain

• Sony To Layoff 900 Workers From PlayStation Division

  On Tuesday morning Sony announced it would lay off around 900 employees from its PlayStation division, roughly 8% of its global workforce

CRE Headlines

• German Banks Worried About CRE Crash

  German banks say the vast majority of their property exposure is limited to domestic holdings. Experts argue that German accounting practices are shieling the rapidly changing values in CRE from impacting German banks. Valuations are updated less frequently than in the US or UK and occasionally waivers are issued on quarterly covenant breaches. With Germany holding the most CRE loans in the European Union the fear is that the amount they have set aside to cover loan losses is not enough, especially as the amount of non-performing loans grows.

• Macy’s To Close 150 Stores

  Macy’s reported a 1.7% annual drop in revenue in Q4 with both digital (4%) and in-store sales (5.4%) dropping. The company will look to modernize stores stores and as part of the strategy will close 150 underperforming locations, with 50 of them to close by end of 2024. The company also plans to open 15 Bloomingdale’s and 30 Bluemercury stores in the next three years, along with renovating 30 existing Bluemercury locations

• BREIT Liability to University of California Rises To $560M

  In January of 2023, UC Investments invested $4.5B in BREIT with the real estate giant promising 11.25% annual returns over a six-year period and potentially receiving a 5% incentive fee if the hurdle is met. BREIT posted a 0.5% loss for 2023, which has resulted in a $560M liability to UC. BREIT pledged $1B in shares to make up the difference if returns fell short

• Avison Young Turns Ship Around With New Capital

  This past Friday, S&P Global Ratings downgraded Avison Young’s credit rating to “Selective Default” from “CCC” and lowered a $325M senior secured loan to “D” from “CCC-”. The move came after a planned restructuring which Avison Young said “has reduced its financial obligations by more than half and has secured additional capital to advance its strategic goals.” The company had entered into an agreement that did not require them to make payments on its term loan. A press release stated the companies’ principals and management would retain a significant majority share in the company

Deals Deals Deals

Sales

• Industrial: Midtown National Group acquires two light industrial assets totaling 145K sf from Graham Street Realty for $22M in Aurora, CO. A $9M loan from Nationwide Insurance Co. financed the acquisition

• Retail: Forge Capital Partners and Sembler Co. acquired Palm Plaza, a Publix-anchored 133K sf center in Leesburg, FL for $18M. A JV between Crosspoint and Long Wharf Capital was the seller. The asset last traded for $14M in 2022

Debt

• Hospitality: X-Caliber Funding and CastleGreen Finance completed the refinance of the Fairmont Breakers Hotel & Spa in Long Beach, CA bringing the total to $122M in financing provided to the project

• Multifamily: Douglaston Development secured $125M in construction financing to build an eight-story, 158-unit affordable housing asset in Manhattan, NY

• Industrial: Ares Industrial Management has secured a $150M loan from Affinius Capital to acquire a six-property, 1.8M sf industrial portfolio spread across six states

Developments

• Data Centers: Prime Data Centers planning a $1.3B project outside of Austin, TX

• Office: Midway breaks ground on a CITYCENTRE Six, a 320K sf office development in Houston, TX. The building is scheduled for completion in 2026

• Hospitality: DSM Real Estate Partners and GarageCap to build a Hyatt-branded, 125-key hotel north of Atlanta, GA. Construction is expected to start in May

• Cold Storage: Americold, and Canadian Pacific Kansas City, plan to invest $127M in a 335K sf cold storage facility in Kansas City, MO. The company intends to begin construction in the first half of 2024

• Retail: Regency Centers to open a Whole Foods-anchored, 152K sf center in Cheshire, CT. The center is part of the larger Stone Bridge Crossing master-planned community

• Industrial: Jumbo Capital Inc., together with funds affiliated with Apollo Global Management, complete a 136K sf spec manufacturing facility south of Boston, MA

Distress

• Hospitality: CGI Merchant Group defaulted on its $285M loan form the Waldorf Astoria in D.C. earlier in February. The company then secured a $75M capital infusion from Mavik Capital Management to recapitalize the 269-key former Trump International Hotel. CGI originally bought and rebranded the hotel in 2022 for $375M

Leasing

• Office: Advent International signed a 10-year lease for 34K sf at RFR Realty’s 892K sf The Seagram Building in Manhattan, NY

• Office: Captions, an AI company, signs a 15K sf lease in Madison Capital and Lubert Adler Partners’ 71 Fifth Ave in in Manhattan, NY

Meme Summary

Interested in advertising? Then get in touch with us