| | | | | | | | | | In November, Bisnow wrote an obituary to distressed fundraising. After peaking in 2022, money raised to capitalize on pain in CRE has been on the decline for the last two years. In 2022, 13 funds were established, and $4B was raised across new and existing funds. Last year, just two funds were created with $240M raised. That’s because investors rarely found the opportunities they sought. Well, here comes Oaktree this week, raising the largest distressed debt fund ever at $16B. (It just edged out its own predecessor fund, which raised $15.9B.) Oaktree Opportunities Fund XII is focused on senior notes, rescue financing, loan portfolios and debtor-in-possession financings and has already committed $7B. The fund isn’t specific to CRE, and some of its early deals have been to bail out struggling tech and manufacturing companies. But it has also already put money into pension funds that invest heavily in property. | | | | For the real estate world, the focus on debt is clutch. Experts told us in November that part of the dearth of deals is that properties weren’t trading — but loan maturities were still looming. U.S. CRE landlords are facing down $1.5T of maturities this year alone. Double defaults are on the rise. Major players like Goldman Sachs, Madison Realty Capital and SL Green have been shifting their attention from building acquisitions to direct lending and loan purchases. “The real estate credit opportunity is here,” KKR wrote in September. — Jay Rickey, Kayla Carmicheal, Catie Dixon and Mark F. Bonner Not getting The First Draft in your inbox? Click here to sign up. Got any feedback or want to send us a mailbag letter? Email first...@bisnow.com. CRE News Quiz Aldi plans to open 225 new stores in 2025. Much of that growth will come from converting stores from two Southern staples it bought two years ago. What are those two chains? (Answer at the bottom.) On Our Radar 10-year Treasury yield surges after hot inflation report. The 10-year Treasury yield jumped 9 basis points to 4.627%, while the two-year yield rose 7 basis points to 4.363% after January's CPI report showed inflation unexpectedly rising 0.5% monthly and 3% annually. Core CPI increased 0.4% for the month and 3.3% YOY. The data is expected to further delay interest rate cuts. Fed Chair Jerome Powell reiterated his cautious approach yesterday on Capitol Hill — and today he goes before the House Financial Services Committee. Investors should keep an eye on Thursday’s producer price index and the new tariffs on steel and aluminum signed by President Donald Trump this week. The markets expect no further interest rate cuts until mid-2025. Some economists are even predicting none for the rest of the year. The CME Fed Watch shows a 97.5% chance the Fed holds steady at its next FOMC meeting in mid-March. DOJ orders real estate-related bribery case dropped against NYC mayor. Mayor Eric Adams was facing five federal charges tied to illegal foreign campaign donations and pressuring the FDNY to approve a $300M skyscraper for the Turkey Consulate. There have been loud calls for his resignation, but real estate leaders stayed firmly in his corner throughout the ordeal, citing stability and ongoing projects like the City of Yes zoning reform. That CRE loyalty remains strong today, Bisnow reports. Adams, who always denied any wrongdoing, called the decision a win for the city on Tuesday. Speculation swirls about whether his ties to Trump influenced the DOJ's move. Brookfield unveils €15B data center expansion in France. Brookfield's Data4 plans to invest €15B in French data centers, tripling capacity to 1.5 GW by 2030. Announced at the AI Action Summit in Paris this week, the expansion aims to position France as a leader in AI infrastructure. Brookfield, which acquired Data4 for $3.8B in 2023, is following private equity peers like Blackstone in aggressively expanding into the booming data center sector.
Today’s Deep Dive: 'We're Losing Assets': Unpaid Rents Pushing D.C. Affordable Housing Owners Into Distress | | | | Courtesy of Century 21 | | | | | | | | Directly across the Anacostia River from RFK Stadium, a complex of 51 three-story brick buildings has become the latest symbol of D.C.’s worsening housing crisis. E&G Group has owned Meadow Green Courts for more than 25 years, and most of its 435 units are reserved as affordable to low-income residents. The mission-driven housing provider has spent decades operating and preserving affordable housing in D.C., but it is now hanging on by a thread. The tenants at the 12-acre complex have racked up more than $6M in unpaid rent, an issue plaguing housing owners across the District. E&G principal Tom Gallagher said he and his partners have paid more than $4M out of their own pockets to pay the bills. But they have now run out of money. “My net worth has been wiped out,” he said. “My partners’ net worth has been wiped out. The liquidity has all been put into the properties.” Read the full story here. This Morning’s News OFFICE — Companies Enforcing 4-Plus Days Of RTO Are Using More Office Space Than Before The Pandemic (Bisnow): A recent study reveals that companies enforcing four or more in-office days per week have experienced a 1% increase in office space demand compared to prepandemic levels. Read more here.
RETAIL — Party City Offloads More Than 250 Leases, But Majority Go Unclaimed (Bisnow): Though Dollar Tree and Five Below have taken over dozens of Party City leases from the bankrupt retailer, nearly 700 stores have failed to procure interested takers. Read more here.
INDUSTRIAL — Mapletree Lists 4.7M SF (Green Street): A 2.4M SF Sun Belt industrial portfolio is listed for about $260M, Cushman & Wakefield is shopping last-mile warehouses in suburban D.C. that could fetch $120M, and a 1.8M SF industrial portfolio was put on the block last month by JLL that could command $340M. Mapletree has never sold a U.S. industrial property worth $25M or more. Read more here.
CONSTRUCTION — Tariffs Shake Up Construction Costs (CoreLogic and Bloomberg): Builders could face up to a 10% increase in material prices. Prices for household fixtures like appliances, lighting and cabinetry could grow by 10-20%. New tariffs on Chinese steel could alter project budgets by double-digit percentages. Read more here and here.
| | | | | | | | Pexels/cottonbro studio | | | | | | | | SENIOR HOUSING — Demand Likely To Eclipse Supply By 360,000 Units (Bisnow): The U.S. senior housing sector is facing a significant shortfall, with projections indicating a need for over 560,000 new units by 2030 to accommodate the aging baby boomer population. But there are fewer than 200,000 units expected to be added during this period. Read more here.
OFFICE — Vornado Declares WFH Era Over, Sees 'Landlord’s Market' (Crain's and CoStar): Vornado CEO Steve Roth says remote work fears are fading and demand for office space is rebounding. Read more here and here.
FINANCE — Mesirow Launches Platform For Small Financing (Alternatives Watch): Mesirow's new single-asset single-borrower platform provides CMBS financing for transactions starting at $50M. Read more here.
OFFICE — Kilroy Realty Facing 1.5M SF Slate Of Office Leases Expiring In 2 Years (Bisnow): Kilroy reported 708K SF in leasing activity in Q4, the highest since 2019. However, the company has 67 leases amounting to about 715K SF set to expire in 2025, followed by 74 leases totaling 1.9M SF in 2026. The company anticipates an average occupancy rate between 80% and 82% for 2025, a slight decrease from 2024. Read more here.
ENTERTAINMENT — Philadelphia Eagles Consider Building New Stadium (Bisnow): The lease on Lincoln Financial Field, home of the Super Bowl-winning Philadelphia Eagles, is up in 2032, and team owner Jeffrey Lurie is debating moving the team. The stadium opened in 2003 and is one of the oldest in the NFL, and its lack of a roof prevents it from hosting major events. Read more here.
REITs — Ashford Refi Secures Some Hotels, Leaves Others At Risk (CoStar): A loan to pay off debt secured by 16 hotels with 4,145 rooms in 11 states leaves 14 hotels at risk, subject to foreclosure or sale. The REIT is scheduled to report earnings in two weeks. Read more here.
CMBS — Special Servicing Rate Retreats (Trepp): Loans in special servicing rose by $843M, but the balance of all outstanding CMBS loans also increased by $9.5B. Read more here.
MULTIFAMILY — Cambridge Eliminates Single-Family Zoning (Bisnow): Cambridge City Council voted to allow apartment buildings up to four stories on any lot citywide. On lots of 5,000 SF or more, developers can build up to six stories if 20% of the units are designated as affordable housing. This reform aims to increase housing supply and affordability in the city. Read more here.
| | | | | | | | Flickr/Federalreserve | | | | | | | | INSURANCE – Powell Warns Of Mortgage Market Freeze (Yahoo Finance): "There are going to be regions of the country where you can’t get a mortgage” in 10-15 years, Fed Chair Jay Powell predicted in yesterday's testimony to Congress, pointing out that banks and insurance companies are already pulling out of high-risk coastal and fire-prone areas. Read more here.
HOUSING — Affordable Housing Demand Remains High (Moody's): The vacancy rate in affordable housing was 2.7% in Q4 despite a 17.1% expansion in inventory over the last five years. Class-A inventory has grown by 21.6% over that same time period; the national vacancy rate for Class-A properties is now 7.6%. Read more here.
HOUSING — JPMorgan Forecasts 3% Home Price Growth (JPMorgan): The bank projects modest home price appreciation in 2025. Read more here.
INVESTMENT — Foreign Investment In U.S. CRE Set To Rise (CO): A report from Savills forecasts $542B in U.S. CRE investment, a 39% jump. Read more here.
TARIFFS — Foxconn Says It Can Adapt To U.S. Tariffs (Seeking Alpha): "If we don't manufacture here, we can do it there, so the impact is not too great," said Foxconn Technology Chairman Young Liu, who added that tariffs won't be good for the world economy. Read more here.
INVESTMENT — InvestNext Raises $15M Series B (InvestNext): InvestNext has focused on building digital solutions for real estate investing. Read more here.
RETAIL — Retail Sales Dip In January, Show YOY Strength (Chain Store Age): Core retail sales were down 1.27% month-over-month in January, but up 5.72% year-over-year. Read more here.
RETAIL — Kroger Merger? Ahold Delhaize CEO Leaves The Door Open (Morningstar): The parent company of Giant and Stop & Shop didn’t rule out a merger with Kroger when asked about it on the company’s quarterly call with analysts. Read more here.
FINANCE — China Property Crisis Enters New Phase (Bloomberg): Chinese bankers have halted most lending to real estate projects outside major cities and international creditors are losing patience. Read more here. *** So You’ve Come For An Answer Winn Dixie and Harvey’s Supermarket. Aldi bought the grocers, which combined had about 400 locations across the South, in 2023. It is now converting 220 of them to Aldis — 100 of them this year and the rest through 2027 — and is selling back 170 to their former owner. Do you think you have a harder CRE news question? Email us. Take your best shot and we may feature you and your question in this space. *** The First Draft is produced by Director of Newsletters Jay Rickey, Managing Editor Catie Dixon, Editor-in-Chief Mark F. Bonner and Deputy Newsletter Editor Kayla Carmicheal, with an assist from AI. We’d love your feedback! Email us at first...@bisnow.com. | | | | | | | | | | | | | | | | | | | | | |
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