Good Morning All!

SITE Centers announces spin-off of convenience portfolio into Curbine Properties Corp, (“CURB”), Cushman CEO announces goals of further reducing their debt load, WeWork is rumored to be filing for bankruptcy, the estimated gap debt funding leaks into the multifamily sector, and CMBS delinquency rates continue to grow in October. In broader markets, The Fed is expected to announce their rate strategy today. ARM grow as they offer lower initial rates to homebuyers. And Wells Fargo thinks housing is headed to a 1980’s style recession.

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Capital Markets

Market News

• The Federal Reserve will meet today and announce its decision on rate policy. Its expect there will be no change in rates despite inflation remaining high and the economy growing at a solid pace, as there are already signs of an equities sell-off in the market. The market will look for future guidance in the Chairman’s message (CNBC)

• Federal Jury orders National Associate of Realtors and franchises of HomeServices and Keller Willaims to pay $1.8bn in damages to the sellers of more than 260k homes in Missouri, Kansas, and Illinois. The lawsuit stemmed from agents having to join NAR to gain access to local databases where buyer’s agents can see what fees sellers are offering on their listing. Sellers argue this leads to higher prices as buyer’s agents steer clients to listings that offer compensation (Axios)

• Well Fargo warns of a 1980’s-style recession for the US housing market as interest rates remain high and the Fed signals for elevated rates for a longer period of time. In the 1980’s, the Fed’s aggressive policies to combat inflation drove interest rates on 30-year mortgages to 19%, which prompted homebuilders to send the chair, Paul Volcker, a piece of lumber with the writing “Help! Help! We Need You. Please Lower Interest Rates.” (Yahoo) (See Meme Below)

• Buyers turn to adjustable rate mortgages to afford homes. With the average 5/1 ARM at 6.77% vs. the average 30-year fixed rate mortgage at 7.86% last week, borrowers are finding savings in these loans. ARM loans increased to 10.7% of all applications, but total applications were down 12% YoY (CNBC)

CRE Headlines

• WeWork considering filing for bankruptcy according to WSJ and Reuters. On Tuesday the company had agreed with creditors to temporarily postpone payments on some of its debt. Shares fell by 40% in after-hours trading (BBC)

• Cushman & Wakefield to focus on reducing debt by $200mm in 2024. Cushman’s CEO hinted that non strategic business lines could be sold, especially those non essential to long-term growth. The company’s CFO noted the company was on track to meet its goal of cutting $130mm from its budget (Bisnow)

• CBRE estimates gap in debt funding for office and multifamily is growing. The gap arises when borrowers are forced to refinance at an LTV lower than the original loan or when the asset value has fallen since the loan was originated. CBRE estimates the funding gap for office is $83bn and $22bn for multifamily for loans maturing between 2023-2026 (CBRE)

  Debt-Funding Gap by Maturity Year

  

• SITE Centers announces spin-off of convenience portfolio into Curbine Properties Corp, (“CURB”). CURB will be the first REIT focused on the convenience sector. The median asset size as of Sept 30th, 2023 was 20k sf, with top 5 tenants as a % of ABR including Starbucks (2.3%), Darden (2.0%), JPMorgan (1.4%), Verizon (1.3%), and Chipotle (1.2%) (BusinessWire)

• Toyota to invest an additional $8bn into its battery plant located 60 miles outside of Raleigh, NC. The total investment represents nearly $14bn and would create nearly 5k jobs (Axios)

• CMBS delinquency rate rose by 24bps in October to 4.63%. The delinquency rate was highest in the retail and office sectors with 6.55% and 5.75%. Industrial delinquency jumped from 0.30% to 2.56% after a single $930mm loan was not repaid following its balloon date. Debt service costs on this industrial loan surged to almost 10% on the loan from 2.55% in 2022 (Trepp)

  Delinquency Rate by Property Type (% 30 Days+)

  

Deals Deals Deals

Sales

• Office/Mixed-Use: Mirae Asset Global Investments and Transwestern sell 2.2mm sf Office mixed-use portfolio. The portfolio consists of 2m sf of dedicated office space for State Farm, 42k sf of medical office, and a 200k sf multifamily building. The buyer is a real estate company owned by former Phoenix Suns owner, Robert Sarver. The portfolio last traded for $825mm in 2016 (commercialsearch)

• Retail: Continental Realty Corp acquires a 292k sf lifestyle retail center in Costa Mesa, CA via its Continental Realty Opportunistic Retail Fund I, a close-ended fund with $261mm raised since 2001 (REBusinessOnline)

• Multifamily: RPM in a JV with Madison Marquette acquires a 211-unit luxury multifamily community in the Dallas-Ft. Worth, TX area from Carleton Cos. and M.R. Development. The asset was financed by a $32mm loan from Pacific Coast Capital (MHN)

• Multifamily: Positive Investments acquires a 138-unit multifamily asset in Pomona, CA for $36mm from a private seller (CommercialObserver)

Debt

• Industrial: Crow Holdings Capital secures a $102mm construction loan to develop a 700k sf logistics center in suburban Philadelphia, PA from Bank OZK (CommercialObserver)

• Industrial: Crow Holdings Capital and Panattoni Development Co. obtain $252mm in construction financing to develop 2.2mm sf across three industrial assets south of Seattle, WA. PCCP LLC provided the financing (commercialsearch)

• Multifamily: Related Companies and Panepinto Properties close on a $58mm acquisition loan from JPMorgan for land in Jersey City, NJ with plans to build a $600mm, 750-unit residential tower (CommercialObserver)

• Multifamily: Landmark Companies secures $42mm in bridge debt from Pennybacker Capital for a 270-unit luxury multifamily community in Forth Worth, TX, with proceeds being used to stabilize the asset (CommercialObserver)

• Senior Housing: Volker Development Inc. secures $11mm in 9% tax credit equity from Keybank Community Development and Investment to finance the construction of a 49-unit affordable senior housing community (REBusinessOnline)

Developments

• Data Centers: DC BLOX breaks ground on $1.2bn, 180-MW data center facility in Atlanta, GA. The first move-ins are expected in Q3 of 2025 (commercialsearch)

• Industrial: Parklane Development Group and Miramar Industrial Partners complete a 1.2mm sf spec industrial center outside of Phoenix, AZ. The asset features 40-foot clear heights, 202 dock doors, and parking for 914 cars and 250 trailers (REBusinessOnline)

Leasing

• Office: U.S. Bancorp renews 447k sf lease in Minneapolis, MN with Piedmont Office Realty Trust’s 936k sf 800 Nicollet Mall office building (commercialsearch)

• Office: GE Vernova, GE’s energy business, signed a 77k sf lease through 2036 at 600 Galleria Parkway in Atlanta, GA owned by Piedmont Office Realty Trust. The lease is a downsize from its 256k sf space in 4200 Wildwood owned by Workspace Property Trust (Bisnow)

• Office: Ro, a telehealth startup, signs a 10-year, 35k sf lease at 625 Avenue of the Americas in New York, NY (CommercialObserver)

• Office: Noble 33, an upscale restaurant operator, to relocate HQ to Wynwood in Miami, FL, following opening of various restaurants in the next two years. The company did not provide details on where and when it plans to relocate its HQ (Bisnow)

Meme Summary

Merch Spotlight