Bank OZK Downgraded?!, Presented By Peloton for Business

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The First Draft

‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌              Bank OZK, far and away the largest U.S. construction lender, took a gut punch this morning. Citigroup revised its rating from buy to sell this morning and slashed its price target from $57 to $37 a share, sending Bank OZK’s stock spiraling 15% as of 11 a.m. ET. "We have newfound but substantial concerns with what we believe to be OZK's largest individual loan (totaling $915M), a multi-use project in Atlanta ('Echo Street West'; $135M loan) and life sciences construction lending in general," Citigroup analyst Ben Gerlinger said. That $915M loan is to the Research and Development District on San Diego’s waterfront — the largest life sciences development in the country. That project by IQHQ is months away from delivery and has no tenants locked in.  Other life sciences megacampuses are suffering similar fates. The sector has rapidly cooled after a hot streak in the wake of the coronavirus that brought all the developers to the yard.  There are still pockets of strong demand in the space — Eli Lilly’s record $5.3B investment announced last week shows weight-loss drugs are still going strong, and a looming patent cliff and wave of IPOs could spark a bit of activity — but all in all, the real estate industry got over its skis.  It may take a few years to work through the record pipeline and reach supply/demand balance again and there may be some investors who lose big with their exuberance for the life sciences sector. As for Bank OZK, its CEO, George Gleason, told Bisnow earlier this month he intends to grow the bank “as big as it can be while maintaining discipline.” It has a reputation as a stable bank that takes reasonable risks and brings in consistent profit.  It seems unlikely today’s news will cause any major strategy shift, but so far Bank OZK hasn’t issued any statement. — Mark F. Bonner, Catie Dixon, Jay Rickey and Kayla Carmicheal Not getting The First Draft in your inbox? Click here to sign up. Got any feedback for us? Email first...@bisnow.com.  Can you do us a favor? Add us to your contacts or safe senders list to ensure you receive The First Draft. Not sure how to do that? Here are some quick instructions. Thanks for making sure we keep our news 100% free to read!         On Our Radar The Dow began the day more than 400 points down. The sell-off comes as Wall Street braces for the Federal Reserve’s Beige Book at 2 p.m. ET. The report compiles the economic conditions of the Fed’s 12 districts and is a critical data set used to set interest rate policy.  Several retailers will report quarterly results today: Dick's Sporting Goods, American Eagle Outfitters and Chewy. Abercrombie & Fitch shares spiked 10% this morning as the apparel retailer reported double-digit sales growth. Additionally, after the close, investors will have their eyes on Salesforce, C3.ai and HP. Interest rate hikes are still a possibility. Among other things, Federal Reserve Bank of Minneapolis President Neel Kashkari pointed to stress within CRE as a risk for the U.S. economy. Kashkari expects “big losses” in real estate and said there will likely be surprises in where the losses take place. Frustratingly, he didn’t elaborate on that point. Beth Hammack has been named the next president of the Cleveland Fed, where she will be a voting FOMC member. Hammack, 52, was once seen as the next potential CFO at Goldman Sachs.  Meanwhile, how about some positive economic news? Wall Street economists are anticipating a “friendly” U.S. inflation report on Friday. The Metropolitan Area Employment and Unemployment released its April data this morning. Unemployment rates were higher year-over-year in 305 of the 389 metropolitan areas the Bureau of Labor Statistics tracks. Among metros larger than 1 million people, Nashville had the lowest unemployment rate in April at 2.2%, and Las Vegas had the highest at 5.2%. Negro League records were just incorporated into Major League Baseball. As of today, John Gibson is now the all-time career leader with a .372 batting average, surpassing Ty Cobb’s long-held record of .367. This Morning's News Here Are Lendlease’s Assets Up For Grabs (Bisnow): Lendlease is winding down its development efforts in all markets but its home of Australia, which means a slew of major projects and sites will get new owners. Its exit will come in three buckets: some land will be sold immediately, its JV development projects will be sold or transferred to its investment management business and the large projects it is master developing will be handed over to new developers. Bisnow broke down what projects fall into what category. Get the breakdown. EQT Exeter's Industrial Acquisition (EQT Exeter): EQT Exeter is set to acquire a 5M SF industrial assemblage in Minneapolis from Prologis. Get into the details of the acquisition.     Wikimedia Commons/Anthony92931         TJX's Global Expansion (Construction Dive): Off-price retailer TJX plans to expand its global store count by potentially more than 1,300 additional stores, beginning with 141 net new locations this year. Browse the retailer's growth plans. Dollar Tree's New Leases (Seeking Alpha): Dollar Tree has secured leases for 170 locations formerly occupied by 99 Cents Only Stores. See where Dollar Tree is sprouting. A Blueprint For Urban Revitalization (CBRE): CBRE reports that vibrant mixed-use districts are crucial for urban renewal. Office vacancies are lower in these districts and prices are higher. Read about what the districts entail. Debt-Free Landlords Are Becoming A Priority (Avison Young): There's a noticeable shift among tenants toward landlords who are free of debt burdens, according to Avison Young. Tenants are putting debt status as one of the first RFP line items. Get into details about the shift. Office Demand Is Worse In High-Cost Cities (CoStar): Cities with higher living costs — a median home price over $600K — are seeing a higher drop-off in office demand. Why demand is dissipating. Today’s Deep Dive: RTO Effort Gets Unlikely New Ally As SEC, FINRA Step Up Security Safeguards         Unsplash/Jacky Chiu         Good news, office investors: Financial regulators are on your side for once.  In an attempt to increase cybersecurity among banks, the Financial Industry Regulatory Authority has reenacted pre-Covid policy, and the Securities and Exchange Commission is eyeing new guidelines that are already driving major financial institutions to call workers back to the office.  The main thrust is the return of  “disclosure, regulation and inspection” of home offices in an attempt to prevent the hacking of sensitive information. Now, these organizations say they aren’t trying to get bodies back into the office — “FINRA has seen recent statements from firms stating that new, stringent rules from FINRA will require them to bring their workforce back to the office full time. This is incorrect,” FINRA said.  But Citi has since called 600 employees back to the office full-time, HSBC summoned 530 staff members and Barclays announced it is looking to get thousands in-person five days a week. Read the full story here. Who Plotted To Sell Graceland? (NYT): An identity thief has emerged as the potential culprit in the curious case of attempted foreclosure fraud involving Graceland, the famed estate of Elvis Presley. Unravel the details about the mysterious crime. Blackstone Offloads Hawaiian Resort (Blackstone): Blackstone Real Estate has sold Turtle Bay Resort in Hawaii for $725M to Host Hotels & Resorts after purchasing the property in 2018 for $332M. Learn more about the sale. SteelWave's Digital Token Real Estate Fund (TRD): SteelWave has launched a $500M real estate fund that incorporates digital tokens, claiming to be among the first to create a coin backed by CRE assets. More on the latest CRE blockchain development. Trump Sells Private Jet To CRE Exec (New York Post): Former President Donald Trump has sold his private jet to an Iranian-American real estate developer and GOP megadonor for $10M. Learn more about the buyer. Cushman & Wakefield Adds JLL Exec (Cushman & Wakefield): Cushman & Wakefield has appointed David Bukovac as the global head of Integrated Facilities Management. Prior to joining Cushman & Wakefield, Bukovac was global operations director at JLL. Discover more about the new exec. Equity Residential's Outlook (Seeking Alpha): Equity Residential says sustained high demand and pricing power in East Coast markets will push its 2024 revenue and FFO to the higher end of its guidance ranges. Get into the details of their prediction.         Bisnow/Olivia Lueckemeyer         Significant CRE Damage From North Texas Storms (Bisnow): Severe thunderstorms tore up property around the Dallas metro on Tuesday, days after tornadoes came through the area. Hundreds of thousands are without power. See the storm damage. 27-Acre Sports Arena Coming To Vegas (LVXP): LVXP has chosen AECOM to design an NBA-ready arena on the Las Vegas Strip. The arena will anchor LVXP’s planned mixed-use development, which includes a luxury resort and casino. Find out the plans for the arena. Northeastern University Expands To NYC (BNN Bloomberg): Boston's Northeastern University is set to add a New York City campus through a merger with a private Upper East Side college, including the assumption of its valuable real estate. Learn about the Huskies' southern migration. Restaurant Industry To Add 525,000 Jobs This Summer (Nation’s Restaurant News): The restaurant industry ranks second behind construction for creating summer jobs. If the National Restaurant Association is correct with its projection, this will be the first time the industry has added 525,000 jobs in consecutive summers. Discover the data behind the estimate. Sam Ash Music Stores To Be Leased Post-Bankruptcy (A&G Realty Partners): A&G Realty Partners says it will offer leases for 27 Sam Ash music store locations across 12 states, subject to bankruptcy court approval. Here's the real estate up for sale. CRE Billionaire's New Titanic Expedition (Complex): A U.S. real estate billionaire is planning a voyage to the Titanic site, aiming to demonstrate a safe approach to submersible expeditions following OceanGate’s Titan tragedy in 2023. Learn more about the deep-sea voyage. Sila REIT Approved For NYSE Listing (Sila Realty Trust): Net Lease Healthcare REIT Sila has received the green light to list on the New York Stock Exchange. Trading is expected to commence under the ticker symbol “SILA” on June 13. Get more on Sila's listing. Chicago's Downtown Revival Plan (WSJ): Chicago has introduced the most generous subsidies in the U.S., aiming to attract businesses and residents back to the city center. Read more about the Windy City's plan. Final CHIPS Act Funds Going To Smaller Firms (CNBC): The $6B remaining from the Biden administration’s CHIPS Act award money for semiconductor manufacturers will focus on "smaller awards to smaller companies—dozens of them, up and down the supply chain." Who is getting the funding? Government Issues Federal Guidelines For Carbon Offsets (NYT): The U.S. government introduced new guidelines for carbon offsets, seeking to standardize and improve the criticized climate tool. Here's how the guidelines will impact the industry. *** 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 ChatGPT. We’d love your feedback! 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