Good Morning All!

Another day, another REIT merger, Realty Income announced on Monday a $9.3bn acquisition of Spirit Realty (not the Halloween store). This marks the second merger announced on Monday following Healthpeak and Physicians Realty. Nontraded REITs are poised to give back $20bn in redemptions in 2023. CBRE acquires an investment banking unit. Regional banks report an increasing number of nonperforming loans. And $343bn of multifamily loans are poised for maturity between now and 2025.

Please help us out by sharing this newsletter with work friends and any other CRE professionals. If you have feedback then feel free to fill out the feedback form or slide into the DMs on Instagram (@propmemo_ra)

Interested in sponsoring? Then get in touch with us

Capital Markets

Market News

• The national debt now sits above $33tn with the figure growing as politicians on both parties continue to neglect the US fiscal situation. The US Treasury issued new debt and is forced to pay higher rates to attract buyers on new notes due to an unsustainable debt load. An announcement from the Treasury in July surprised investors with an additional $274bn in planned borrowing, a revised figure from just two months earlier (Yahoo)

• United Auto Workers reaches tentative deal with GM, effectively ending the six-week strike against the big three automakers (Ford, GM, Stellantis). Pay for veteran workers will rise by 33% and GM will give $2,500 in five payments to retirees through 2028 (Reuters)

• Pharmacy staff at CVS and Walgreens launch a three-day walkout demanding better working conditions and more staff for stores. The walkout stems from pharmacy staff complaining about having to fill prescriptions, deal with patient appointments, and conduct immunizations (Reuters)

• Mortgage rates drop 20bps from recent high (Investopedia)

  30-Year Mortgage Rate Average

  

• Morgan Stanley gives each of its three CEO contenders a special bonus worth $20mm (60% in performance stock units and 40% in restricted stock units). Despite Ted Pick being announced as the successor, all three contenders were given bonuses with the performance stock units having a performance period between 2024 and 2026 and the RSUs vesting in January 2027 (NYPost)

• FTX founder Sam Bankman-Fried has old tweets, interviews, and public communication used against him in his fraud trial in Manhattan. The former crypto firm mogul opted to testify in his own defense (NYTImes)

CRE Headlines

• Realty Income (NYSE: O) to acquire Spirit Realty (NYSE: SRC) in an all-stock transaction with an enterprise value of ~$9.3bn. Once completed, the merger is expected to result in an enterprise value of approximately $63bn. SRC owners will receive 0.762 shares of O per common share of SRC. The transaction is expected to be over 2.5% accretive to Realty Income’s AFFO per share (RealtyIncome)

• Nontraded REITs to give back $20bn in redemption requests by end of 2023. Investors are asking for their money back as a result of decreasing property valuations. Despite a spike in redemptions requests, Sponsors are meeting redemption request demand and replacing capital with large reserves held (Bisnow)

• CBRE buys investment banking team from Sera Global and acquires UK office developer Candour (CBRE, bdaily)

• 15 out of 18 regional banks analyzed with assets between $50bn to $250bn reported an 80% YoY increase in nonperforming loans in Q3, an 8% increase over Q2. The KBW Nasdaq Bank Index fell on Friday by 2.3% indicating mounting worries over the future profitability of the industry. With regional banks having more proportionate exposure to commercial real estate than their larger counterparts, regulators are beginning to worry about regional banks with elevated CRE exposure (Yahoo)

• Multifamily construction starts are down 60% in Q3, with only 57k units underway, the lowest since 2012. A lack of construction financing, permitting delays, and projects no longer being economically feasible were some of the main causes for the pullback according to developers. Vacancy has also increased to 7.8% in Q3, up from 6.5% a year prior, with the average national asking rent dropping to $1,805/unit in Q3, down from $1,817/unit in Q2 (Trepp)

• As part of the UAW deal, Ford announced plans to invest $400mm in Chicago-are factories. The investment is expected to focus on the Torrence Avenue factory which produces Explorer SUVs (connectcre)

• Multifamily loans have become a significant concern for lenders as $343bn out of the $1.5bn total loans is set to expire between 2023 and 2025. Of the loans expiring in the next two years permanent loans make up $151bn, CMBS $130bn, construction $52bn and the rest is made up of bridge debt, lines of credit, bonds, and other loan types (MHN)

  Multifamily Loan Types - Loans Maturing between 2023-2025

  

Deals Deals Deals

Sales

• Multifamily: MG Properties acquires a $95mm, 316-unit luxury multifamily asset in Denver, CO from Morgan Group and LaSalle Investment Management. The asset was financed with a $54mm Freddie Max loan (MHN)

• Retail: Brixton Capital sells a 127k sf Las Vegas, NV shopping center for $36mm to an undisclosed buyer. Brixton acquired the asset from Kimco five years ago for $29mm. Anchors for the center include Sprouts Farmer’s Market, Petco, Hobby Lobby, and ULTA Beauty (commercialsearch)

Debt

• Cold Storage: FreezPak Logistics, and partner BG Capital, secure a $76mm construction financing package from Bank of OZK and PGIM to develop a 282k sf cold storage facility outside of Houston, TX (CommericalObserver)

• Industrial: Matan Companies secures a five-year, nonrecourse, $34mm loan to acquire a 321k sf distribution facility in Richmond, VA from Mesa West Capital (CommercialObserver)

• Hospitality: PACE Loan Group provides an $11mm C-PACE loan for the construction of a 65-key hotel outside of Joshua Tree National Park in California (REBusinessOnline)

Developments

• Multifamily: Alpine Start Development breaks ground on a 261-unit multifamily asset outside of Fort Worth, TX. The development is expected to be completed in late 2024 (REBusinessOnline)

• Industrial: Epsilon Advanced Materials to build a $650mm, 1.5mm sf EV battery plant in Brunswick County, NC (commercialsearch)

• Multifamily: WestStone Group opens a 219-unit single family rental community in Phoenix, AZ that will be managed by Mark-Taylor (MHN)

• Industrial: Keystone Construction developing a 131k sf manufacturing facility in St. Louis. MO for Tubular USA (REJournals)

• Data Center: Hunter’s Ridge obtains land rezoning from rural to industrial on a 127-acre parcel north of Richmond, VA and plans to develop eight data centers, with the first two totaling 900k sf (DCD)

• Data Center: Google submits plans for a data center project in Kansas City, MO that would potentially consist 1.4mm sf of buildings developed over four phases (DCD)

Capital Raising

• PropTech: Funnel Leasing, a renter management software, raises $32mm in a Series B-2 round. RET Ventures and Trinity Partners led the round along with a group of owner-operators co-investors (FunnelLeasing)

• Cut Carbon Bond: PACE Equity, in partnership with Calvert Impact Climate, Inc, closed on the initial offering of the Cut Carbon Note. The green bond allows investors to contribute to developments funded by C-PACE loans. The partnership raised $30mm of the $400mm available (connectcre)

Leasing

• Office: Iconiq, a wealth manager, signs 70k sf lease at 360 Park Ave South in New York, NY. The 440k sf office building recently underwent a $100mm redevelopment by Boston Properties (NYPost)

• Office: Weill Cornell Medicine signs 300k sf lease renewal in George Comfort & Sons and Cannon Hill Capital Partners’ 575 Lexington Avenue in New York, NY (CommercialObserver)

Meme Summary

Merch Spotlight