Good Morning to all and welcome back!

This is a shortened week but packed with info as the market awaits the release of the PMI survey reports and the Fed’s Beige Book which should help provide insights into the decisions which might come from the FOMC’s meeting in two weeks. Key themes that continue to resurface are a slowdown in consumer spending and the possibility of a prolonged high interest rate environment. Distressed funds continue to sit on dry powder (around $205bn to be specific) and REIT mergers start to pick up as KSL announces the acquisition of Hersha (NYSE: HT). The KSL / Hersha deal adds to the list of recent mergers announced which include the Kimco / RPT and Global Net Lease / Necessity Retail REIT deals. NYC hotels see occupancy increase in July and in a move that’s sure to further boost hotel occupancy, NYC moves to enforce regulations on Airbnb beginning this week.

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Capital Markets

Market News

• This week the latest PMI (Purchasing Managers’ Index) surveys from S&P Global and ISM will be released, along with the Fed’s Beige Book. (Quick Econ recap: The PMI measures the direction of economic trends in manufacturing with PMI > 50 representing expansion, PMI < 50 contraction, and 50 = no change. The Beige Book is a qualitative report produced by the 12 district banks which provides commentary on current economic conditions and is published 2 weeks before the next FOMC meeting) (Investopedia)

• Goldman cuts U.S. recession outlook to 15% in the next 12 months, after previously putting the probability at 20% (Reuters)

• Shoppers have started to spend less on large home improvement items like appliances and furniture after 3 years of unprecedented demand (Yahoo)

• Banks struggle to keep wealthy customers as they shift money into money market accounts in search of higher yields (Yahoo)

• Emerging market central banks are looking to maintain high interest rates and pushing back against a quick policy reversal that would have them cut rates quickly (Bloomberg)

• Credit card delinquency rates are up to 8.9% for borrowers with credit scores between 300 to 600 in July, up from 7.5% a year prior. Borrowers with a score between 661 and 780 had a rate of 0.1%, unchanged from a last year (Morningstar)

CRE Headlines

• CIBC is reducing its exposure to U.S. office real estate after missing earnings forecasts due to increases for bad loan provisions (Reuters)

• NYC hotel occupancy jumps to 86% in July, up from 76% in 2022 (Bisnow)

• Increase in power costs is reshaping where data centers are developed (Bisnow)

• There are estimates of up to $205bn in dry powder set aside for distressed assets (GlobeSt)

• Rent index decreased by 0.1% in August, signaling a potential cooldown in rents (GlobeSt)

• Starting today NYC will begin enforcing a law which requires landlords to register any potential Airbnb rentals with the city. Short-term rental platforms will not be allowed to process transactions with unregistered rentals (abc7)

• Detroit Mayor seeking to pass a law which would increase taxes for vacant land and buildings in an effort to spur development (Urbanize)

Deals Deals Deals

Sales

• KSL Capital Partners to acquire Hersha Hospitality Trust (NYSE: HT) for $1.8bn in $10 per share all-cash transaction (HT)

• Harbor Capital buys 198k sf industrial asset in San Antonio, TX from Becknell Industrial (CommercialSearch)

• Eagle Property Capital and Belay Investment Group sell 361-unit multifamily community in Tampa, FL. The asset was purchased for $4.3mm in 2016 (REBusiness)

• Oliver Washington 88, LLC buys The Oliver, a 30-unit mixed-use asset in Culver City, CA, for $29.3mm from Washington Marcasel Apartments, LP (connectcre)

Debt

• RSE Capital Partners refinances $32mm loan on 270-unit apartment community north of Austin, TX. KeyBank Real Estate Capital was the lender on the transaction (REBusiness)

• Woodinville Hotel Partners obtained a $52mm construction loan for a 164-key resort in Woodinville, WA. The hotel will be a part of a 20-acre master-planned community. The loan was originated by HALL Structured Finance (REBusiness)

• New Hope Housing secures $25mm construction loan from Amegy Bank to develop 135-unit affordable housing project in Houston, TX. Construction is scheduled to being in October (REBusiness)

Developments

• Cordova Real Estate Ventures, Riverside, and Live Oak, break ground on $250mm industrial park development in Cedar Park, TX. Phase I will see 3 buildings totaling 272k sf developed (REBusiness)

• PIH Health Inc. is seeking developers to partner with in order to develop 5.7 acre site adjacent to Good Samaritan Hospital in downtown Los Angeles (Urbanize)

Distress

• MF1 Capital has filed to foreclose on Rockstar Capital’s Houston multifamily asset after syndicator defaulted on $51mm loan (TheRealDeal)

Capital Raising

• Waypoint Residential obtains $14mm in preferred equity from FCP for the development of a 240-unit multifamily asset in Charlotte, NC (REBusiness)

Leasing

• Alvarez & Marsal, a Connecticut-based PE firm, signed a 10k sf lease in West Palm, FL with 300 Banyan Blvd. a mixed-use development under construction by Brand Atlantic and Wheelock Street Capital (CommercialObserver)

Meme Summary