Good Morning All!

In a potential move to renegotiate its debt, WeWork has announced it is withholding payments on its debt. Rising interest rates and competing investment vehicles with high returns are driving an increase in redemptions for European Real Estate funds. Discounted payoff inquiries are on the rise for CRE loans as borrowers look to find ways to deal with maturing leases. Job openings came in higher than expected triggering fears of another rate hike and with it a stock market sell-off. Banks increase their reserves in anticipation of a possible downturn and VIX get inverted. And lastly, healthcare workers prepare to go on strike for one the largest healthcare companies.

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Capital Markets

Market News

• Job openings increased to 9.6mm for the month of August, an increase of 690k from July, and above the estimated 8.8mm expected by the Dow Jones. The majority of openings came from professional and business services (509k). Finance and Insurance roles made up 96k of the new openings. Stocks fell after the report, as the increase in job openings could be a trigger for the Fed to increase rates (BLS, CNBC)

• Average 30-year mortgage rates were back up to 7.98% today after dropping sharply at the end of last week (Investopedia)

• The Cboe Volatility Index (known as the VIX) became inverted as traders priced in more volatility now than in the future. The inverted VIX has occurred twice in the past year and both times has predicted market bottoms (moneycontrol)

• Home prices in the Midwest grew in July but the region is the only affordable to the National Association of Realtors’ affordability index. The index represents whether or not an average family can qualify for a loan on a typical house (Yahoo)

• 75k healthcare workers for the largest U.S. non-profit private healthcare company, Kaiser Permanente are poised to strike today. The workers’ union contract expired over the weekend and workers are pushing for better staffing levels and wage increases to adjust for inflation (TheGuardian)

• Banks are increasing reserve coverage to counter a possible recession. Banking reserve coverage as a portion of nonperforming loans has grown to 225% as of Q2 (Morningstar)

CRE Headlines

• European Real Estate Funds are facing increased amounts of redemption requests as a result of competition from bank accounts and other investments offering competitive returns. The wave of redemptions is creating pressure to sell assets to fund investor payouts (Bloomberg)

• WeWork withholds making interest payments, roughly $95mm, as part of its strategic plan the company said. The company has a 30-day grace period to make payments, and is most likely seeking to renegotiate corporate debt terms. The company said it had enough liquidity on hand to make payments ($205mm in cash, and $475mm in its credit line)
  (Bisnow, WeWork)

• Discussions on discounted payoffs (DPOs) are on the rise according to industry experts. Discounted payoffs happen when a lender agrees to repayment on the loan for less than the outstanding balance. Typically these happen when the borrower has a buyer or lender lined up who is willing to buy or lend on the asset at the DPO price (Bisnow)

• Infinium Logistics acquires three new EV fleet charging hubs, FleetHubs, for £40mm in London. The fund has deployed £120mm of the £500mm it raised in 2022. The firm has the world’s first EV fleet charging real estate fund (propertyeu)

• Multifamily construction spending is on the rise. The Census Bureau’s report on construction spending showed a 0.6% MoM increase on multifamily construction and a 1.7% MoM increase on single-family residential (YieldPro)

Deals Deals Deals

Sales

• Office: A JV between Parkway Property Investments and Midway acuired Post Oak Central and CityWestPlace in Houston, TX. The acquisition totals over 3mm sf of office space between both campuses. The assets had previously been valued at nearly $350mm (commercialsearch)

• Industrial: Longpoint Realty Partners buys a 276k sf industrial park in Los Angeles, CA for $80mm. The asset is made up of 15 buildings (CommercialObserver)

• Multifamily: Related Cos. acquires a 320-unit affordable housing community in Miramar, LF for $48mm (CommercialObserver)

• Marina: Bradford Marine buys 223k sf Roscioli Yachting Center for $44mm in sale-leaseback from OneWater Marine (TheRealDeal, Yahoo)

• Retail: Arbor Plaza sells a Denver. CO-area 96k sf retail center for $20mm. Essex Financial Group arranged the acquisition financing for the buyer which consisted of a $13mm, 10-year, fixed-rate loan (commercialsearch, ShoppingCenterBusiness)

• Industrial: Phoenix Investors acquires a vacant 923k sf industrial asset in St. Cloud, MN from Electrolux Group. The seller had previously used the building as a freezer manufacturing facility (commercialsearch)

• Office: Interra Capital Group acquires Memorial Pointe, a 227k sf office building in Houston, TX. The asset is positioned along Houston’s energy corridor (RealtyNewsReport)

Debt

• Retail: CBL Properties and Horizon Group Properties obtain a $79mm loan to refinance a 405k sf Atlanta, GA - area retail center. The non-recourse interest-only loan, with a fixed-rate of 7.85% replaces a $69mm loan (commercialsearch)

• Hotels: A JV between Highgate and Rockpoint secures a $17.3mm recap from Seven Hills Realty. The new loan is secured by a 130-key Home2 Suites Hotel in Scottsdale, AZ (ReBusinessOnline)

Developments

• Mixed-Use: Trammell Crow and affiliate High Street Residential get the approval to from the Los Angeles City Planning Commission to build a 2.2mm sf development in North Hollywood Station. The 16-acre development would be subdivided into nine lots for residential, retail, and office uses (Urbanize)

• Industrial: AEW Capital Mangement and Stream Realty Partners complete a 360k sf logistics center in the Atlanta, GA area. The front-load facility features 36-foot clear heights, 68 dock doors, and 2 drive-in ramps (commercialsearch)

• Office: Alexandria Real Estate Equities to open Moderna’s 461k sf global HQ building in Cambridge, MA ahead of schedule in November. The building will serve as the corporate HQ and also house Moderna’s R&D operations (REBusinessOnline)

• Multifamily: NRP Group and nonprofit Marshall Heights Community Development proposed an all-affordable 127-unit multifamily project in D.C.’s Navy Yard. (Bisnow)

Distress

• Office: Societe Generale is pursing a foreclosure on 161 N Clark in Chicago, IL for $237mm after previously taking the $230mm note to market. The 49-story asset was purchased by CBRE Global Investors on behalf of Korean investors in 2017 from Tishman Speyer (TheRealDeal, REJournals)

Capital Raising

• PropTech: AI Clearing, a construction progress tracking and control software services company, raised $14mm in its Series A funding round. The round was led by Prudence, FJ Labs, Tera Ventures, Inovo, and Innovation Nest (GlobeSt)

Leasing

• Office: NRG Energy signs 245k sf lease at Brookfield’s 51-story 3 Houston Tower in downtown Houston, TX. Brookfield recently spent an estimated $200mm to renovate its downtown Houston properties (RealtyNewsReport)

• Office: Shell sings a 142k sf lease in New Orleans, LA office development. Shell’s Gulf of Mexico operations HQ will occupy the future office building underdevelopment by Cypress Equities and Lauricella Land Co. (REBusinessOnline)

• Office: Elite World Group, a fashion talent management firm, signed a 18k sf lease at Starrett-Lehigh Building in the Hudson Yards neighborhood in NYC. The building is owned by RXR (CommercialObserver)

• Office: DPR Construction signs a 16k sf lease in Boston, MA to a building owned by Boston Properties. The buildings sits in Boston Properties’ 957k sf Bay Colony Campus (Bisnow)  

Meme Summary