Good Morning!

Multifamily prices dropped by 1.4% in January, San Francisco is the only major multifamily market to see occupancy growth, pension funds like REITs, and spec office suites become a valuable tool for landlords in Charlotte. Powell is set to speak to the House at 10am ET, at the same time Nikki Haley is expected to formerly withdraw her presidential bid, and a Microsoft engineer reports graphic tendencies from Microsoft’s AI generated images based on certain prompts

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Capital Markets

Market News

• Powell To Tell Lawmakers Rate Cuts Likely At Some Point This Year

  Fed Chair Jerome Powell to testify before House Lawmakers at 10am ET. This meeting comes two weeks before the next Fed meeting, where rates are expected to remain stagnant once again. In a copy of his prepared remarks Powell said “If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,"

• Microsoft Engineer Alarmed By AI Generated Explicit Images

  A Microsoft engineer who does not directly work on Microsoft’s AI team, but tests the technology on his free time, found vulnerabilities in Microsoft’s AI service, Copilot. CNBC recreated explicit images which were generated when entering certain prompts. Essentially the AI tool would demonize or sexualize certain activist or political groups. The results prompted the engineer to report the issue internally before turning to the FTC

• Nikki Haley Drops Out, 2024 Election Set For Biden vs. Trump

  The departure of Haley will leave Trump as the default Republican candidate. The former president beat the candidate in her home state of South Carolina, where she was a former governor. She is expect to announce her resignation at 10am ET

• Fidelity International To Cut 1,000 Jobs Globally

  The fund manager is planning to cut 1,000 jobs in 2024, or 9% of its workforce. The cost reduction program is expected to save the company $125M a year. The move comes after a new CEO was appointed last week and a strategy shift with a focus on highest value for clients

CRE Headlines

• Multifamily Prices Continue To Drop

  Multifamily property prices fell 1.4% month-over-month in January, the fifth consecutive decline and the 16^th decline in the last 18 months. This index was down 9.2% year-over-year. The chart shows that multifamily property prices are falling both relative to the pre-pandemic trend and also in absolute terms

  Value-Weighted CoStar Commercial Repeat Sales Indexes

  

  Source: CoStar, ATTOM

• San Francisco Only Multifamily Market To Record Occupancy Growth

  San Francisco (SF) was the only major U.S. multifamily market to record occupancy growth in the past year. National occupancy dropped to 94.1% in January, while SF occupancy reached 95.4%. The only major markets to record higher occupancy were New York, Newark Milwaukee, and Anaheim

  Best Annual Occupancy Change Across Major Markets

  

• Share Of Pension Funds Investing In REITs Grows

  An analysis by NAREIT using Preqin data showed pension plans are increasing their investment in alternative assets via REITs. Over 1,800 pension plans reported having an allocation to real estate in January, with 733 of those plans having REIT allocations. While pension plan total assets have increased approximately 19% in the last five years, pension plan total assets with REIT exposure have increased by 37%. This has resulted in the asset-weighted share of pension plans using REITs in their real estate strategy to increase from 60% in January 2020 to 69% (😎) in January 2024

  Share of Pension Plans With Real Estate Exposure Via REITs

  

• The Rise Of Spec Office Suites In Charlotte

  In Charlotte, landlords are increasingly offering turnkey solutions via speculative suites to tenants, shifting build costs and timelines back to the landlord. Rather than provide tenants with a tenant improvement allowance and allowing them to manage the build out, some landlords are taking a proactive approach and creating move-in ready spaces which can be quickly occupied and reduce the leasing timeline, eliminate build-out costs for tenants, and can offer flexibility in lease terms. Spec suites do tend to most relevant in smaller spaces with shorter leases, and carry a higher rental rate. In 2023, 17.3% of new office leases signed in Charlotte were spec suites

  Charlotte Historic Breakdown by Office Lease Type

  

  Source: Cushman & Wakefield

Deals Deals Deals

Sales

• Multifamily: NexPoint Residential Trust, Inc. completes the sale of a 734-unit multifamily asset in Houston, TX generating net proceeds of $49M. The asset was acquired in 2016 for $85M. The deal generated a 5.36% cap rate, 22.14% levered IRR, and a 2.98x MOIC

• Multifamily: A 188-unit Napa Valley, CA, two-building apartment portfolio trades for $47M

Debt

• Multifamily: Bridge Investment Group secured a $81M nonrecourse, fixed-rate loan through Freddie Mac for a 397-unit multifamily asset Inland Empire, CA

• Multifamily: CEDARst Cos. secures $44M CMBS loan via Citigroup for the refinancing of Duncan Apartments, a 260-unit apartment asset in Chicago, IL

Developments

• Retail/Hospitality: The Tennessee Titans have broken ground on their new $2.1B facility. The 1.8M sf stadium is expected to be completed in 2027

• Industrial: Titan Development breaks ground on a 197K sf industrial asset northeastern San Antonio, TX. The distribution project is expected to be completed in Q4

• Office/Multifamily: Shea Properties is seeking to convert a 124K sf office asset in Denver, CO to a 143-unit multifamily community. The asset has been vacant for five years

• Life Sciences: Beacon Capital Partners proposes a 321K sf lab building in Boston, MA’s seaport district

Leasing

• Office: Crowell & Moring, a law firm, signed a 50K sf lease at Irvine Company’s 1.3M sf 300 North LaSalle in Chicago, IL

• Retail/Office: The National Museum of Mathematics signed a 27K sf short-term lease at 11 East 26th St in New York, NY. The group is planning for permanent 35K sf home by end of 2025

• Office: Fiserv, a tech company, signs a 170K sf lease at Urban Innovations’ 298K sf office asset in Milwaukee, WI

• Industrial: AA Heritage Solutions has signed a 111K sf lease at Denholtz Properties’ 219K sf industrial asset outside Savannah, GA

Meme Summary

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