Good Morning!

Net lease investment volume dropped sharply in 2023, CMBS delinquency climbs in February, the Midwest sees solid rental growth in 2023, and a rating agency thinks the largest U.S. banks can handle their office CRE exposure. In broader markets, your dad’s favorite at-home gym equipment provider files for bankruptcy, Target beats earnings and positions itself for growth, credit card late fees get capped at $8, and Santander is laying people off in its retail business

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Capital Markets

Market News

• Bowflex Files For Bankruptcy

  The company best known for late-night TV commercials showing its at-home gym equipment during the 90’s filed for Chapter 11 and said Johnson Health Tech would “acquire substantially all of the assets” for $37.5M in cash. BowFlex blamed its bankruptcy on the “post-pandemic environment and persistent macroeconomic headwinds”

• Target Planning Growth

  Target beat analysts estimates despite same-store sales being down year-over-year. The company did so after implementing a $2B cost-cutting program. The company’s CEO said Target will spend 2024 opening new stores, remodeling existing locations, introducing private-label brands, and unveiling a membership program with various perks

• Credit Card Late Fees To Be Capped at $8?

  The Consumer Financial Protection Bureau unveiled a new rule on Tuesday that it said would cap late fees that banks charge customers at $8 per incident. The role was originally proposed last year after the agency reviewed market data related to the 2009 Card Act. Regulations tied to that law granted issuers the ability to charge ever-increasing amounts of late fees

• Santander Cuts Roughly 320 Jobs

  The Spanish bank announced U.S. layoffs of about 320 which will primarily impact its retail operations as it shifts to a digital platform this summer. The layoffs account for roughly 2.4% and 2.7% of Santander’s U.S.-based workforce

CRE Headlines

• S&P Says Nine Largest U.S. Banks Can Handle Their Office CRE Exposure

  A recent analysis from S&P Global Ratings, which reviewed Q4 filings, noted JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Bank of New York Mellon Corp. (BK), Citigroup Inc. (C), Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), Wells Fargo & Co. (WFC) and State Street Corp. (STT) and Northern Trust Corp. (NTRS), can handle their exposure to office real estate. The rating agency notes that office loans are a small portion of the overall loan portfolio of banks. The company expects nonperforming and delinquent loans to remain low but continue to inch higher as the credit cycle normalizes

• Net-Lease Investment Volume Fell By 51% in 2023

  In 2023, net-lease investment volume fell by 51% from 2022 to $38B, while total commercial real estate volume fell by 52% to $ 348B. Industrial and retail claimed a 78% combined share of Q4 2023 volume, while office shrunk to 23% (rounding). The average net-lease cap rate increased by 60bps year-over-year in Q4 to 6.4%. While sale-leaseback activity was down 21% in 2023, it accounted for 17% of all net-lease transactions. This was up from 11% in 2022, and 15% in the five years prior to the pandemic

  Net-Lease Transaction Volume by Asset Class

  

• CMBS Delinquency Rate Climbs to 4.71% In February

  CMBS delinquency climbed to 4.71%, up from 4.66% in January. Office lead the pack at 6.63%, followed by retail at 6.03%. For reference, the last peak in delinquency rate was in June 2020 when the rate hit 10.32% during the height of the pandemic

  CMBS Delinquency By Asset Class

  

  Source: Trepp

• Multifamily Rent Growth Strong in Midwest Cities

  Data from RealPage shows Midwest logged strong rental growth in 2023 with smaller markets like Madison and Fargo seeing rents climb 6%, and larger markets like Chicago and Cincinnati with 3.6% rent growth

  2023 Effective Asking Rent Growth

  

Deals Deals Deals

Sales

• Mixed-Use: Fertitta Entertainment Inc., acquired River Oaks District, a 13.9-acre, mixed-use property in Houston, TX from JPMorgan Chase & Co. for $450M. River Oaks District includes 303K sf of luxury retail, 279 luxury apartments and 67K sf of office space

• Office/Multifamily: Community Three and Whitaker Investment Corporation has nabbed $96M of construction financing from Kennedy Wilson for an office-to-multifamily conversion project in Alexandria, VA. The three office assets will be converted to 169 rental units, 65 condos, and retail space

• Industrial: Lovett Industrial and Heitman LLC have acquired Diamond Hill Distribution Center, a 720K sf, four-building industrial park in Norfolk, VA

• Retail: Second Horizon Group acquires Chicago Ridge Mall, a 592K sf mall in Chicago, IL. from Starwood  

• Multifamily: The Victor, a 232-unit multifamily community in Fresno, CA traded for $30M. The buyer assumed the existing 3.94% interest loan. The loan had three years of interest-only payments remaining

• Office: Level Asset Capital acquired Tower Office Plaza, a 72K sf office property in Temecula, CA for $14M from Providence Real Estate Group

Debt

• Multifamily: JDL Development and Wanxiang America secure a $160M construction loan from Argo Real Estate, Bsafal and Taconic Capital Advisors for a 95 residential condo unit project north of Palm Beach, FL

• Hospitality: Marx Development secures a $133M loan from Madison Realty Capital to complete a 51-story, 379-key Aloft hotel in New York, NY’s Hudson Yards

• Multifamily: Slate Property Group and Grobman Gross Properties secured a five-year, fixed-rate, $97M loan from Apollo Global Real Estate Management to refinance a 166-unit, luxury multifamily building in Queens, NY

Developments

• Data Centers: Microsoft acquires 124 acres for $466M outside of Washington D.C. The land is located near QTS data centers, and land owned by Amazon and Google for data center development

• Data Centers: Digital Realty and Mitsubishi Corporation form a new JV for the development of two fully pre-leased $400M data centers in Dallas, TX

• Retail: Urban Story Ventures will redevelop a 160K sf shopping center outside Chattanooga, TN. The company plans call for renovations to existing suites and new construction

• Multifamily: LandSouth Construction has broken ground on Sora Vista Apartments, an upscale multifamily development in Tampa, FL

• Industrial: Alliance Industrial breaks ground on Connor Lane Business Park, a 171K sf, two-building, industrial project in northeast Austin, TX

• Multifamily: A.J. Khair Construction, Inc. secured JV equity for its 42-unit multifamily development in Los Angeles, CA

Distress

• Office: The $28M loan on 20 W 37th St in New York, NY was sent to special servicing

On The Market

• Industrial/Office: Essex Capital lists 500 10th Ave, a 250K sf industrial building, in New York, NY’s Hudson Yards neighborhood for sale

Leasing

• Office: Sidley Austin LLP, a law firm signs a 118K sf lease at Granite Properties and Highwoods Properties’ 23Spings 626K sf office tower development in Dallas, TX 

• Industrial: National Millwork, a door supplier, signs a 7-year, 101K sf lease at Dalfen Industrial’s Turnpike Logistics Center in West Palm Beach, FL

Meme Summary

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