Good Morning All!

CLO’s are back in the news, with a new report estimating that up to three fourths of 2021 and 2022 CLOs would not meet refinancing criteria in 2023. In a surprise to no one, CRE borrowing is down for 2023. C-PACE loans are a hot alternative to traditional construction loans at the moment. Norway’s sovereign wealth fund takes a loss in Q3, with real estate taking a 3.3% decline. Mortgage rates pull back but remain above 8%. The U.S. deficit continues to grow. And car payment delinquencies are up. The good news is that Blackstone’s QTS is investing $1.5bn into Ohio.

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Capital Markets

Market News

• Norway’s $1.4tn sovereign wealth fund loses $34bn (2.1%) in Q3 across all assets, the fund still outperformed its benchmark index by 0.17%. The fund reported a quarterly loss of 3.3% on unlisted real estate investments (CNBC)

• GM withdraws earnings guidance amid impact from auto strikes. The car manufacturer said the labor strikes have cost roughly $800mm due to lost vehicle production. On Monday the United Auto Workers union expanded its labor walkouts at Stellantis pulling workers out of the the RAM truck plant (Yahoo)

• Mortgage rates pullback after hitting new high last week. 30-year rates remain above 8% (Investopedia)

  30-Year Mortgage Average

  

• U.S. deficit grows from $1.4tn for the fiscal year ending in September 2022 to $1.7tn in 2023. The figure for 2022 included a roughly $400bn in student debt forgiveness, a figure which was excluded in 2023 after the Supreme Court struck it down (CNN)

• Jaime Dimon slams central banks for getting financial forecasts wrong 18months ago. The JPMorgan CEO voiced doubt on central bank’s ability to manage fallout of rising inflation and slowing global growth. He also slammed government for large fiscal spending (Bloomberg)

• Car payment delinquencies are hitting their highest since 1994. The amount of subprime borrowers at least 60 days past due on their loans rose to 6.11% in September. Borrowers with credit scores over 750 are locking in rates of 5.07% and 7.09% for new and used cars. Meanwhile borrowers with scores below 640 are getting rates of 14.18% and 21.38% on average (NYPost)

CRE Headlines

• New report reveals roughly three quarters (72.9%) of CRE CLO transactions issued in 2021 and 2022 would not meet refinance requirements as. Even if the assets were to meet original net cash flow projections they would fail to meet 2023 fixed-rate debt yields expectations (BusinessWire)

• Commercial and multifamily mortgage borrowing and lending is expected to drop to $442bn in 2023 down 46% from $816bn in 2023. The Mortgage Bankers Associate expects the figure to increase in 2024 (connectcre)

• East Coast gateway apartment markets are outperforming West Coast gateway markets despite East Coast seeing an increase in supply. YoY rent growth for September was 2% or better across East Coast markets while national growth was 0.1% (RealPage)

  Annual Apartment Rent Growth

  

• C-PACE (Commercial Property Assessed Clean Energy) financing is growing in relevance as it is priced similarly to construction financing. The benefits when compared to a traditional construction loan are a long-term, fixed-rate, non-recourse structure that allows for projects to reach stabilization. Once prominent with smaller developers, this loan type is now getting interest from institutional borrowers. Their are restrictions on C-PACE loans which include not being able to lend more than 100% of state-guided eligible proceeds, not being able to lend more than 20%-35% of an asset’s stabilized value, and limitation based on lender’s own internal underwriting (connectcre)

Deals Deals Deals

Sales

• Retail: Longpoint Realty Partners acquires a 181k sf grocer-anchored retail center in Miami, FL from MetLife Investment Management for $49mm (CommercialObserver)

• Multifamily: Becovic Management Group acquires a 154- unit condo deconversion in Chicago, IL for $31mm (connectcre)

• Industrial: AIDS Healthcare Foundation acquires a 54k sf distribution center from Shultz Properties for $20mm in Los Angeles, CA (CommercialObserver)

• Retail: Newscastle Properties acquires a 90k sf Whole Foods-anchored retail center in Las Vegas, NV (REBusinessOnline)

Debt

• Industrial: Majestic Realty secures $43mm loan from PGIM Real Estate to develop a 373k sf industrial asset in California’s Inland Empire (Commercial Observer)

Developments

• Data Centers: QTS is planning to develop four data centers totaling more than 1mm sf and 200MW in Columbus, OH suburb. Total investment is expected to be around $1.5bn (DCD, Bisnow)

• Life Sciences: Alexandria Real Estate Equities to open a $202mm, 325k sf, life sciences campus in Houston, TX (commercialsearch)

• Retail: Scheels to open a 240k sf location north of Austin, TX and anchor the CedarView development (PRNewswire)

• Industrial: Zenith Industrial Outdoor Storage to develop a 20-acre outdoor storage facility in Clearwater, FL. The asset will feature an automatic gate, lighting, fencings, and a surface solution (commercialsearch)

• Multifamily: Greystar delivers a 220-unit build-to-rent community in suburban Minneapolis. The project broke ground in 2022 (MHN)

• Multifamily: Cityview completes a 123-unit multifamily building in Los Angeles, CA. Construction began in February 2021. The developer has previously obtained a $45mm construction loan from City National Bank (MHN)

Distress

• Office: The $275mm loan on 805 Third Ave in New York, NY has now gone 30 days delinquent as reported by Trepp. The loan is split amongst three CMBS pieces which run through 2024, 2026, and 2029 (Trepp)

• Mixed-Use: A $66mm loan backing Kingswood Center in Brooklyn is up for sale. Wells Fargo had previously filed a foreclosure notice against the loan and its sponsor, Urban Edge Properties (CommercialObserver)

• Office: The $35mm loan tied to 252 West 37th St. in New York, NY has been transferred to a special servicer. The 160k sf office building is owned by Eretz Group. The DSCR had dropped to 0.88 (Bisnow)

Capital Raising

• Data Centers: Principal Asset Management closes $315mm data center fund dedicated to acquiring European data centers (DCD)

Leasing

• Industrial: Saddle Creek logistics signs a 570k sf lease at Fundrise’s industrial campus outside of Phoenix, AZ (commercialsearch)

Meme Summary