Happy Thursday!

Big news following the Fed’s signaling of interest rate cuts in 2024. Markets reacted positively and the 10-year dropped. In real estate news, Whitestone REIT rejected a proposal by Erez Asset Management’s Chairman demanding a sale or liquidation of the company. D.C. could see its NBA and NHL teams relocate to Virginia. Apartment over-supply is expected in 2024. And funds focused on CRE secondaries are ready to deploy capital.

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Merch Spotlight

Capital Markets

Market News

• Fed Holds Rate, Indicates Three Cuts in 2024

  The FOMC kept the target Fed funds rate in the 5.25-5.50% range on Wednesday. The committee also indicate three rate cuts, which was less than the four the market had been pricing in, but more than what had been hinted at. Following the decision markets gained with the Dow Jones surpassing 37,000

  Fed Funds Target Rate

  

• Futures Rise Wednesday Night, All Major Indices Post Gains

  Futures for tied to the 30-stock Dow, S&P 500, and Nasdaq 100 gained 0.2%, 0.3%, and 0.4% after the Fed signaled multiple rate cuts in 2024. Some strategists predict the economy is now headed towards a soft landing and justify the recent stock rally. All eyes will be on the weekly jobless claims released at 8:30am ET along with November’s sales and imports data next

• U.S. 10-Year Treasuries fall below 4%

  Wednesday night the 10-year dropped below 4%, following news from the Fed and producer price data for November that showed less inflation than expected. Treasuries also benefited from a rally in gilts and bunds ahead of the Bank of England and European Central Bank meetings Thursday

• Median Asking Rents Decline 2.1% in November

  A report from Redfin showed asking asking rents of apartments that were available for new renters during November declined by 2.1% year-over-year. Note that the report did not show the median of what all renters are paying. Rents are still up 22.1% from November 2019 and only 4.2% below the peak in August 2022

• China’s Economy is Heading Into Deflation

  Chinese CPI was negative in November, with most of the decline in prices being driven by swings in more volatile food and energy. China's economy has struggled to recover from the government's zero-COVID lockdown policies with the country facing a massive housing bust, the rapid outflow of capital, and a loss of confidence among both domestic businesses and consumers who are uncertain about President Xi Jinping's commitment to economic growth

  Annual Change in China’s CPI

  

CRE Headlines

• Whitestone REIT Rejects Investor Proposal to Sell or Liquidate the Company

  Retail REIT Whitestone (NYSE: WSR) publicly rejects a proposal by Erez Asset Management’s Chairman, Bruce Schanzer, a shareholder of the REIT, demanding a majority change in the Board with the sole purpose of an immediate sale or liquidation of Whitestone. Bruce was was previously the CEO of Cedar Realty Trust. In his original letter he expressed interest in a sale of the Whitestone, stating that based on his diligence, could result in ~$16/share. WSR traded at nearly $11/share at the time of Bruce’s email. Bruce helped guide the sale of Cedar while CEO and emphasized it as the best way to realize returns for shareholders

  • In separate a news story, a Harris County judge dismissed the $25mm lawsuit from former Whitestone REIT CEO, James Mastandrea, against the company on Tuesday. Mastandrea is also a trustee of Pillarstone Capital REIT, which is 81.4% owned by WSR. The two REITs are involved in two separate lawsuits. Mastandrea was fired from WSR in early 2022 and proceeded to sue the company, the new CEO, and now ex-wife, who is the current COO

• Washington Wizards, Capitals announced a $2bn Relocation Plan to Alexandria, VA

  Ted Leonsis, owner of Monumental Sports and Entertainment which owns the Wizards and Capitals, and the Virginia Governor announced the $2bn relocation plan on Wednesday morning, stating they will work together to "create a world-class Entertainment District in Alexandria at Potomac Yard, pending legislative approval…”. Plans for the development include an arena for both teams, a corporate headquarters for Monumental Sports, a Monumental Sports Network media studio, a practice facility for the Wizards, a performing arts venue, an expanded esports facility, retail space, and residential buildings. The proposed new 9mm sf entertainment district would be developed by JBG Smith

• Apartment Oversupply Expected For 2024

  Across the U.S., 440,000 units are expected to be delivered in 2024, with over 900,000 currently in the pipeline. Overall vacancy is projected to rise, and rent growth decelerate as markets grow their inventories. CBRE projects national average rent growth to be 1.2% in 2024, with occupancy hovering over 94%

  Projected Multifamily Market Vacancy vs. Pre-Pandemic Averages

  

• Investors Are Rapidly Funding CRE Secondaries Funds

  Investors are preparing for a year expected to be flush with opportunistic deals in the real estate secondary markets. Major PE firms have all recently launched funds that have secured commitments in the billions for investments in existing assets that can bring in fresh capital, change up ownership structure or extend financing timelines. However funds might have difficulty allocating capital after total volume of real estate secondaries deals in the first half of 2023 came in at $960mm, down 48.4% from first-half 2022 figures

Deals Deals Deals

Sales

• Multifamily: AvalonBay Communities bought two multifamily assets with 260 and 568 units in Dallas, TX for $83mm and $142mm. The two properties are estimated to carry cap rates in the mid-4% range

• Office: Tireco acquires 3 Hutton Centre Drive, a 200k sf office asset in Los Angeles, CA, for $29mm from Harbert Corporation and Cypress Office Properties. The asset last sold for $51mm in 2016 when it was acquired from TIAA

• Self Storage: Andover Properties acquires a 240-unit self storage facility located roughly 25 miles south of downtown Austin, TX

Debt

• Multifamily: Rockrose Development obtains a $293mm Fannie Mae loan with Wells Fargo as DUS Lender to refinance Lyra, a 590-unit multifamily asset in New York, NY

• Multifamily: Carthage Real Estate Advisors secures a $100mm bridge financing from Dwight Mortgage Trust for a 168-unit apartment building at 224 W. 124th St. in West Harlem in New York, NY

• Multifamily: Thrive Living secured a $69mm construction loan from JPMorgan Chase for a 376-unit affordable and workforce housing community development in Los Angeles, CA

• Multifamily: Hillpointe secures a two-year, floating-rate, $37mm bridge loan from Berkadia to refinance Pointe Grand Warner Robins, a 288-unit multifamily asset in Warner Robins, GA

Developments

• Retail: Regency Centers begins the redevelopment of the 280k sf former SunVet Mall on Long Island in New York. The mall is being rebranded to The Shops at SunVet and will be repositioned as a 168k sf, open-air shopping center with six outparcels, anchored by Whole Foods

• Multifamily: Thompson Thrift announced the development of The Junction at Rockledge, a 380-unit multifamily community outside Orlando, FL

• Multifamily: Wayfinder Real Estate and Read King Commercial Real Estate have broken ground on The Oak at Katy Park, a 348-unit multifamily project in suburban Houston, TX. Completion is projected for early 2025

• Multifamily: Sunflower Development Group is planning a 240-unit apartments and townhome community in Lenexa, Kansas. The development will sit on 16 acres and if approved could begin in late 2024.

• Multifamily: Republic Urban Properties has acquired a 19-acre site in Fairfield, CA, for the development of The Aviatrix, a single-family rental project spanning 188 units

• Student Housing: The Treo Group breaks ground on VOX Miami Phase II, a 13-story, 400-bed student housing development near the University of Miami campus

• Data Centers: DC BLOX has acquired 72 acres of land to build a two-building, 216MW data center campus in the Atlanta suburb of Conyers, GA

Distress

• Multifamily: A&R Kalimian Realty defaults on $225mm senior loan tied to The Aire, a 275-unit luxury multifamily tower at 200 W 67th St. in New York, NY. The loan was originally with JPMorgan and was transferred to LNR Partners for special servicing in June. There is also a $25mm subordinate loan on the property

• Hospitality: Stonebridge Hospitality Management paid $25mm the W Hotel Atlanta Downtown, a 237-key hotel. The asset was acquired via deed in lieu of foreclosure. The sale allowed Ashford Hospitality Trust to avoid avoid a public foreclosure auction. Ashford bought the Atlanta, GA hotel for $57mm in 2015

Capital Raising

• Retail: ExchangeRight fully subscribed Net-Leased Portfolio 63 DST, a $126mm offering featuring 511k sf of grocery, healthcare, and necessity-based retail tenants. The portfolio is structured to provide monthly distributions with a current annualized rate of 5.00%. The DST spanned 13 states and had a ~40% LTV, non-recourse, interest-only 5-year loan with a fixed-rate of 5.672%

• Hospitality: Atlantic Equity Partners Launches Fund II to decarbonize hospitality real estate. The new fund will target a fundraise of $150mm or more from LPs, with $25mm in capital already committed. The firm will deploy capital to acquire and sustainably redevelop and decarbonize hospitality real estate to capitalize on growing consumer demand for sustainable business practices

Leasing

• Industrial: Loloft, an Industrial coworking firm, signed a 52k sf lease with Workspace Property Trust at 4750 S. 44th Place in Phoenix, AZ

• Office: Best Choice Products, an e-commerce consumer products firm, signs a 53k sf lease a Granite Properties’ 100 Bayview in Newport Beach, CA

Meme Summary

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