Good Morning!

Pennsylvania Real Estate Investment Trust filed for Chapter 11 bankruptcy for the second time in three years. Brookfield is unhappy with the auction process for Signature Bank’s loans. Office vacancy remains above pre-pandemic in all but 6 markets. And one firm predicts distressed deals could finally be coming to the multifamily market next year. In broader markets, big news today with the release of CPI, slowing toy sales are leading to layoffs, Ford is cutting down on production of its electric F-150, and more consolidation in the energy sector.

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Capital Markets

Market News

• Inflation Expected to Have Cooled, CPI Report Out Today

  November's Consumer Price Index (CPI) will release today at 8:30am ET, with inflation expected to be around 3.1% according to estimates from Bloomberg. Core inflation, excluding food and gas, is expected to be 4.0% over last year

• Toy Maker Hasbro Cutting 1,100 Jobs, Roughly 20% of Workforce

  Hasbro said Monday it is cutting about 1,100 jobs, or 20% of its workforce, after a slowdown in sales following a pandemic boom. Toy sales have been down 8% between January through August 2023 in the U.S. The job cuts are part of a cost cutting measure to save $300mm annually by 2025

• Ford Cuts 2024 Planned Production of Electric F-150

  Ford will cut planned production of its all-electric F-150 Lightning pickup roughly in half next year amid slower than expected EV demand and persistently high prices and interest rates. Ford recently said it would match production to demand, as the company canceled or postponed $12bn in upcoming EV investments 

• Occidental Petroleum to Buy CrownRock in $12bn Deal

  Occidental Petroleum has agreed to buy energy producer CrownRock in a cash-and-stock deal valued at $12bn. The acquisition will increase Occidental’s acreage in the Permian basin and boost its production in the region by about 170,000 barrels of oil equivalent per day

CRE Headlines

• PREIT Files for Chapter 11 Bankruptcy

  Pennsylvania Real Estate Investment Trust filed for Chapter 11 bankruptcy for the second time in three years. The REIT hopes to emerge as a private company and shed or extend part of the $880mm in debt. On Sunday, nearly $1.1bn of the company’s debt matured. Nearly all of the company’s lenders approved the restructuring. As part of the new reorganization, existing preferred and common shares will be canceled, and the company will no longer be publicly traded after it emerges from bankruptcy. A total payment of $10mm will be made to existing shareholders

• Rising Office Vacancy Plaguing All Markets

  Office markets like Los Angeles, San Francisco and Manhattan have saw a rise in vacancy due to corporate relocations and sticky work from home policies that began during the pandemic. However many high-growth Sun Belt markets have also seen an uptick in office vacancy. The reason for the uptick has been robust supply deliveries. Over the past five years, inventory has grown by 16% in Austin and more than 8% in Salt Lake City, Charlotte, San Jose and Nashville. Of the markets tracked by CBRE, only 6 had lower office vacancy when compared to 2020

  Market Vacancy Change Since Q1 2020 (bps)

  

• Multifamily Fund Manager Predicts Opportunities Will Arise from Distress In the Sector in 2024

  A Chicago-based multifamily investment group predicts interest rates will stay high in 2024 causing prospective home buyers to remain renters, and developers to sit on the sidelines for new projects as financing conditions remain tricky. Rents in the multi space are expected to moderate and elevated insurance premiums to remain. The group expects distress in the multi space will occur in Q3 2024 as variable-rate bridge loans mature. The group also expects consolidation across the CRE sector

• Brookfield Threatening Legal Action Over Auction Process for Signature Banks Loans

  Brookfield is bidding on $4.4bn of loans tied to affordable housing buildings in New York, NY. The FDIC is selling equity interests in these loans as part of the auction of assets owned by Signature Bank. Despite the auction not being completed yet, a likely winner has already been selected based on numerous sources including Newmark. This has upset Brookfield as its bid was higher than the reported winning bid. In a letter to the FDIC Brookfield allegedly wrote its intent to launch a formal protest if the winning bid ends up being lower than their bid 

Deals Deals Deals

Sales

• Office: Citadel, Vornado seeking to buy the air rights for up to 525k sf from St. Patrick’s Cathedral in New York, NY for $164mm. The air rights would allow for a new office development at 350 Park Avenue

• Multifamily: Decron Properties acquires a 240-unit luxury multifamily community in San Diego, CA for $126mm. The transaction was the upleg in Decron’s 1031 exchange where the downleg were two asset sales totaling $172mm

• Self Storage: Blumenfeld Development Group, in two separate transactions, acquires a 159k sf self storage asset in Flushing, Queens, NY for $72mm and a second 102k sf self storage asset in Woodside, Queens, NY for $51mm

• Multifamily: Weinstein Properties acquires Alexan Summerhill, a 315-unit multifamily asset in Atlanta, GA, from Trammell Crow Residential and PGIM Real Estate

• Office: Kennedy Wilson sells 400 and 450 North Brand Boulevard, a 441k sf office asset in Los Angeles, CA, for $60mm. The asset was acquired in 2017 for $144mm

• Retail: RK Centers acquired 1600 Commons, a 65k sf grocery-anchored center, in Fort Lauderdale, FL for $38mm, nearly $11mm less than its previous sale

• Retail: Kemper Properties acquires Hilltop Commons, a retail center in Derby, CT, from DLC Management and Hutensky Capital Partners for $33mm

• Retail: The Festival Companies acquired Komar Desert Center, an 80k sf retail center in La Quinta, CA, shadow-anchored by Costco from Capital Hall Partners for $26mm

Debt

• Multifamily: A JV between Alexander Development Group, The Bluestone Organization, and investors advised by JP Morgan Asset Management secure a $93mm loan from Otera Capital to refinance 42 Broad Street West, a 249-unit multifamily asset in Mt. Vernon, NY

• Office: Accesso Partners secures a CMBS loan extension on IDS Center, a 1.42mm sf office asset, in downtown Minneapolis, MN

Developments 

• Multifamily: The Dinerstein Companies and PCCP obtained $85mm in construction financing from Affinius Capital and Simmons Bank to develop a 394-unit multifamily community in Mesa, AZ

• Multifamily: Catalyst Asset Management obtains a $75mm construction financing package from Dwight Mortgage Trust to develop a 321-unit multifamily asset in Fort Meyers, FL

• Multifamily: TM Real Estate Group delivers a 240-unit luxury multifamily project outside of Miami, FL. The project was financed with a $44mm loan from Principal Financial Group

• Multifamily: Sudberry Properties breaks ground on The Brynn, a 200-unit multifamily asset in San Diego, CA

• Industrial: Becknell Industrial completes a 527k sf spec distribution facility in Columbus, OH. The 40-foot clear height development was financed with a $32mm loan from Old National Bank

Capital Raising

• Diversified: Blackrock raises €774mm for Europe Property Fund VI, a value-add real estate fund focused on student housing, multifamily, logistics, and data centers across the UK, Germany, France, Spain, and the Nordics

Leasing

• Industrial: Logisteed America renews a 106k sf lease at LaSalle Investment Management’s 198k sf two-story industrial facility at 2551-2561 Allan Drive in Elk Grove, IL, a suburb of Chicago

• Office: Solomon Partners signs a 15-year, 71k sf lease at Mitsui Fudosan America’s 1251 Avenue of the Americas, in New York, NY

• Office: OptiVia Solutions, an ATM designer, signs a 12k sf lease in Cromwell Business Park in Baltimore, MD

Meme Summary

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