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JPMorgan’s researcher analysts think Macy's real estate alone is likely worth $8.5bn, more than the $5.8bn offer it recently received. Choice Hotels goes hostile with its bid for Wyndham. Real estate giants lobby against the new Florida law which limits foreign investors from buying real estate. And European real estate funds launched after 2020, deliver negative returns. In broader news, inflation slowed in November with CPI coming in as expected, rent and housing were among the largest sources of inflation, turmoil in the airline industry, and oil prices continue to drop.

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Merch Spotlight

Capital Markets

Market News

• Inflation Slowed in November

  The consumer price index, rose 0.1% in November, and was up 3.1% year-over-year. Excluding food and energy prices, core CPI increased 0.3% month-over-month and 4% year-over-year. A 2.3% decrease in energy prices helped keep inflation in check

  U.S. CPI - YoY % Change through November 2023

  

• Rent Remains the Largest Source of Inflation

  Only four categories remain where prices are still rising by more than incomes. Rent, restaurant meals, personal care, and housing all remain above 5%, while earnings are growing at 4.0% annually. A number of categories have started to see deflation, with others are hovering in a more manageable 0%-3% range

  Annual Change in Prices by Category (As of November)

  

• Southwest Airlines Flight Attendants Reject New Contract

  Southwest’s nearly 19,000 flight attendants rejected a new contract over the weekend. The agreement included pay increases of 36% over five years and other quality of life improvements. The offer was rejected by 64% of those who voted. A major area of disagreement concerns boarding pay. Nearly all U.S. flight attendants are paid only once an aircraft door is closed, rather than during boarding and deplaning. Delta is the only U.S. carrier that pays cabin crew for boarding

• Oil Prices Drop Below $70 A Barrel Amid Concerns Fed Might Not Be Ready to Cut Rates 

  U.S. crude oil dropped nearly 4% oil on Tuesday after inflation data hinted the Fed may not have inflation under control according to analysts in the sector. WTI contracts for January dropped to $68.61 a barrel, while the Brent contract for February dropped to $73.24 a barrel. According to S&P Global, Oil demand next year is expected to be about one million barrels per day less than supply growth, which should continue to place downward pressure on price

CRE Headlines

• Macy’s Real Estate Is Worth Nearly $3bn More Than Investor’s Bid

  Arkhouse Management and Brigade Capital Management recently submitted a $5.8bn bid to acquire the shares of Macy's (NYSE: M) that they don't already own for $21 a share. JPMorgan’s equity researcher analysts, think Macy's real estate alone is likely worth almost $3bn more than the offer, pegging its real-estate holdings at about $8.5bn. Macy's owns roughly 320 of its 784 stores, including its flagship Herald Square building in New York City. JPMorgan said the flagship is worth at least $3bn itself

• Choice Hotels Launches a Hostile Takeover Bid for Wyndham Hotels & Resorts

  Choice Hotels said Tuesday offered Wyndham shareholders the same bid as it had previously to company management, $49.50 in cash and 0.324 shares of Choice common stock per Wyndham share. The exchange offer gives Wyndham shareholders the chance to choose to receive all cash, all shares or a combination of the two. The offer values Wyndham at about $8bn. In October Wyndham management rejected the unsolicited $8bn buyout offer calling the proposal “opportunistic” and stating the deal undervalued the company’s growth potential

• Real Estate Giants Lobby Against Florida’s Foreign Investment Law

  A group of real estate giants which includes Blackstone, Starwood, Lennar, and Related wants Florida to roll back a recently enacted law banning most Chinese investors, as well as investors of other nationalities, from acquiring real estate in the state. The group argues that “the technical language of Senate Bill 264 is much broader in scope than the publicly stated intent of the law, which could have unintended and negative consequences for investment in Florida” More than 30 states already have legislation generally aiming to limit foreign ownership of property. Some of that legislation applies specifically to farmland or land close to sensitive sites, but other legislation is more encompassing

• European Real Estate Fund IRR Performance Drops Further in Q3

  European real estate funds launched after 2016 have seen a larger impact to their IRR. Funds launched in 2015 and 2015 are now the best performing vehicles, while funds launched between 2005 and 2007 are still recording a negative IRR

  Year of Fund Closing vs. IRR

  

  Source: inrev.org

Deals Deals Deals

Sales

• Retail: First-Tek Inc. acquires a 173k sf retail center in suburban Chicago, IL from IRC Retail Centers, owned by funds managed by DRA Advisors. The center, Chestnut Court, was anchored by Ross Dress for Less and JOANN Fabric and Crafts

• Retail: Sterling Organization acquires Braemar Village Center, a 112k sf grocery-anchored shopping center, outside of Washington D.C. for $31mm from Regency Centers

• Hospitality:

• Multifamily: A fund advised by The DSF Group acquired a 225-unit multifamily asset outside of Boston, MA for $74mm from Fairfield and an institutional partner

• Industrial: Arden Group acquires a 35k sf industrial outdoor storage facility occupied by UPS in Chicago, IL, The seller has acquired the 3.6-acre site a year ago and leased it to UPS

• Office: Orion sells 955 American Lane, the former 178k sf Experian HQ office building, in suburban Chicago, IL to a private investor

Debt

• Multifamily: Woodmont Properties secures a five-year, fixed-rate loan to refinance a 443-unit, garden-style multifamily asset in Mercer County, NJ from Northwestern Mutual 

• Multifamily: Generation Housing Partners secures a $14mm HUD-insured construction loan from BWE to develop a 132-unit affordable housing project outside of Dallas, TX

Developments

• Mixed-Use: Tannos Development Group and Wolfgramm Capital are set to start work on a $750mm mixed-use project outside of Houston, TX. The project will feature 150k sf or retail, 200k sf of medical and office space, a 500-unit multifamily community, and a 150-key hotel

• Multifamily: HIC Land acquires a 2,600-acre land tract north of Savannah, GA in Hardeeville, SC for $36mm. The company will partner with D.R. Horton to develop a 20-year master-planned community, expected to break ground in 2024

• Multifamily: Vanbarton Group launches leasing at its office-to-residential conversion at 160 Water Street in New York, NY. The conversion involved full window replacement, new HVAC systems, replacement of the plumbing and mechanicals, and reimaging of previous dead space

• Industrial: Flint Development breaks ground on three distribution centers within Dorchester Commerce Park in Savannah, GA. The spec project will deliver 2.1mm sf by 2025

• Multifamily: Origin Investment and RISE partially deliver a $60mm, 297-unit multifamily community in Jacksonville, FL

• Life Sciences: NexCore Group to develop a 100k sf, $60mm life science project in Indianapolis, IN. The five-story building will feature two spaces for NexCore’s HATCHspaces platform and is scheduled to break ground next year

• Industrial: Constellation Real Estate Partners and Northwestern Mutual have acquired 10 acres to develop a 200k sf, two-building industrial project in the Dallas-Ft. Worth, TX area. The buildings are expected to be delivered in early 2025

• Industrial: Crawford Hoying and BGO Cold Storage are developing 179k sf cold storage facility in Columbus, OH. The project is expected to deliver in Q2 2024

Capital Raising

• Cold Storage: Saxum Real Estate and BGO, completed the recapitalization of a six -property, 1.5mm sf cold storage portfolio. The recap was composed of three separate transactions with PGIM Real Estate providing permanent debt in across three locations

Meme Summary

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