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San Francisco building permits hit 13-year low in 2023, Georgia’s power grid needs an upgrade and could cause a pause on tax breaks for data centers, and banks are turning to sale-leasebacks to boost their cash. Jobless claims fell last week, California minimum wage hikes being passed to consumers, ECB is cautious about rate cuts, and McKinsey places 3,000 consultants under review after receiving “concerns” ratings

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Capital Markets

Market News

• US Applications For Unemployment Fall Again

  Americans filing for jobless claims fell during the week ending February 3rd despite more layoff announcements from high-profile companies recently. Applications for unemployment benefits fell by 9,000 to 218,000 the Labor Department reported Thursday morning

• California Minimum Wage Hikes Mean Higher Consumer Costs

  Fat Brands chairman Andy Wiederhorn noted that consumers will have to pay for voting to raise minimum wage from $15 to $20 per hour. Restaurants with more than 60 locations nationwide will be required to pay a $20 per hour minimum wage in California, with an exemption for those that make and sell their own bread. The increase will take effect on April 1st

• European Central Bank Cautious With Rate Cuts

  The ECB is being patient with its cutting interest rates in hopes to keep inflation from coming back. The bank sees a resilient labor market and rising price expectations in services, along with higher costs associated with shipping disruptions in the red sea have the bank concerned inflation could return if cuts are made too soon

• McKinsey Places 3,000 Staffers Under Review

  McKinsey & Co. issued performance warnings to roughly 3,000 consultants who were deemed to be underperforming. The consultants have a three month window to improve their performance or risk being counseled to seek employment elsewhere. The percent of consultants receiving a “concerns” rating appears consistent with prior years but is noteworthy after the company saw a 60% increase in staff since 2018

CRE Headlines

• Georgia Could Pause Data Center Tax Breaks Over Power Grid Concerns

  Georgia politicians are looking to suspend tax breaks for data center operators while the state’s power grid is expanded. The move comes after Georgia Power said it needed to build more infrastructure to provide an additional 3,400MW of power to meet demand. The utility company pinned 80% of increased demand on the state’s data centers. Georgia has provided an exemption from the state’s sales tax since 2018 for data center operators with exemptions extended through 2033

• Retail Bank Locations On The Rise For Large Banks, Sale-Leasebacks On The Rise For Regional Banks

  JPMorgan and Bank of America are increasing their retail bank footprint in a turnaround from prior years where locations were being shutdown. JPMorgan plans to open 500 new branches and BofA plans to enter nine new markets and four new states. Meanwhile, smaller regional banks are turning to sale-leasebacks to monetize their real estate in the wake of rising distressed CRE loans. With banks holding nearly 75% of CRE loans the need for additional sources of capital has risen. Bank sale-leasebacks accounted for $15M in volume in 2022, $125M in 2023, and has already hit $43M in January alone

• San Francisco Building Permits Hit 13-Year Low

  The city of San Francisco issued 1,136 home building permits in 2023, a 13-year low. The decline comes from higher construction costs and increased interest rates. The current permit-issuance puts the city far off pace to hit its state-mandated goal of building over 82,000 homes by 2031. Since 2001, the city has averaged 2,476 permits, peaking in 2018 when permits hit 5,200

Deals Deals Deals

Sales

• Industrial: Rexford Industrial Realty acquired 5000 & 5010 Azusa Canyon Rd., a 234K sf, fully-leased, two-building portfolio in Los Angeles, CA for $84M. The deal represented a 5.4% cap rate

• Retail: JBL Asset Management acquires a 249K sf Publix-anchored shopping center in Orlando, FL for $40M from Site Centers 

• Multifamily: SEB Development sells a 104-unit apartment building in multifamily building in Tacoma, WA for $31M

• Industrial: A JV between BKM Capital Partners and BMA Capital Corp. has acquired a 141K sf industrial campus in Portland, OR for $25M from Stockbridge Group

• Retail: Alamo Group and Covenant Real Estate Group acquired a 120K sf shopping center in Walla Walla, WA for $25M from Zelman Development Co. The asset was financed with a $15M loan from A10 Capital

• Hospitality: Legacy Ventures has entered an agreement to acquire Dillard House, a 100-acre resort with 92 guest rooms in Rabun County, GA. The company plans to spend $20M in property improvements

Debt

• Student Housing: Scion Student Communities secures a $380M credit facility to refinance 11 student housing assets in Philadelphia, PA. The Fannie Mae-backed facility was a JV between The Scion Group, General Investment Corporation of Singapore and Canada Pension Plan Investment Board

• Hospitality: Crescent Real Estate secures an $85M in financing for two hotels in Denver, CO. The deal includes a senior loan from Benefit Street Partners and a mezz loan from The LCP Group and Ares Management

• Multifamily: A Regional Fund specializing in workforce housing secures a $20M loan to acquire a 326-unit apartment community in Clinton Township, MI. The loan consisted of a three-year term, no recourse, interest-only payments and a 75% LTC

Developments

• Multifamily: High Street Residential to develop a 350-unit apartment community in Atlanta, GA’s Perimeter Summit. The company acquired the four-acres development site for $12M

• Data Center: Tract acquires a 517-acre site in Reno, NV for a potential data center campus development

Meme Summary

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