Northmarq Merger, Crowdfunding In Danger, Nvidia Watch, Presented By Peloton for Business

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The First Draft

‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌      May 22, 2024 One company has overwhelmingly conquered the AI spotlight this year: Nvidia. Later today, the chipmaker whose technology is so crucial to support artificial intelligence development worldwide — and is one of the most important drivers of the red-hot data center market — will report its Q1 earnings at 5 p.m. ET. All eyes will be on what Nvidia has to say about chip demand and where its orders stand. If Nvidia delivers a positive report, analysts believe it will further boost the trillions of dollars expected to pour into AI and data center development in the coming years — and even immediately help lift the entire stock market into further positive territory. As Bisnow Data Centers Reporter Dan Rabb wrote in February: “Big Tech’s AI arms race is already driving a surge in demand for data center leasing and development, and Nvidia’s earnings add to a growing body of evidence that this wave is still expanding. But they also reveal a rapidly evolving AI ecosystem, creating tremendous uncertainty as to exactly how these trillions of dollars in anticipated development spending will reshape the data center landscape — and who stands to benefit.”  Of course, Nvidia is not the only player in this space. The industry has been experiencing an AI-driven demand boom since late 2022 when the launch of OpenAI’s ChatGPT-3 kicked off a flood of investment in AI from tech giants like Google, Amazon, Meta and Microsoft that account for more than half of Nvidia’s data center sales. Before AI, cloud growth was already pushing data center demand to new highs, dropping vacancy rates in major markets into the low single digits as developers raced to keep up. The AI arms race was additional fuel on the fire. (This demand has created 99 problems as well.) The big question today isn’t if that growth continues — it’s how far it can go and how quickly. — Mark F. Bonner, Kayla Carmicheal, Catie Dixon and Jay Rickey Not getting The First Draft in your inbox? Click here to sign up. Got any feedback for us? Email first...@bisnow.com.    On Our Radar This week’s economic calendar is housing-heavy. Existing home sales fell 1.9% in April, according to a National Association of Realtors report released this morning. There were 4.1 million starts last month, below expectations. But applications to refinance home loans are at a nearly two-year high, the Mortgage Bankers Association reported yesterday. The weekly mortgage rate report from Freddie Mac drops every Thursday, and the market is hoping to see the downward trend of the last few weeks continue. Tomorrow will also bring the new home sales data from the Census Bureau. Toll Brothers reported Q2 results yesterday. Its revenue and deliveries are up 6% year-over-year, and it is increasing its revenue and earnings guidance. CEO Douglas Yearley Jr. said the positive results are due to overall demand improvement as well as a strategy shift to luxury and spec housing, which have proven to be resilient. The injunction hearing over Graceland’s foreclosure was this morning, and a judge in Tennessee has blocked the effort to put Elvis’ iconic home-turned-tourist attraction on the auction block tomorrow. It’s a wild saga — catch up here — and the courts will still need to determine if the loan note collateralized by Graceland is fraudulent. A conversation with Baltimore Mayor Brandon Scott: Bisnow will host a free webinar with the mayor Friday about the city’s economic recovery efforts after the Francis Scott Key Bridge collapse. More info here. Alfred Hitchcock's North by Northwest is being rereleased in AMC theaters today for its 65th birthday. Obviously, the crop duster scene is reason enough to go. Today’s Deep Dive: The Music Has Stopped For Once-Booming Real Estate Crowdfunding Platforms Bisnow/created with assistance by DALL-E Crowdfunding’s future is hazy.  The investment vehicle, which pulled in $17B in 2021, is facing its first major downturn. None of the five largest online CRE crowdfunding platforms has more than a handful of active offerings. Investors have been, or fear, they will be wiped out — and the crowdfunding platforms themselves are in danger of going under. “I don’t see how they can stay in business because they make money off fees from listing deals,” said Ian Ippolito, an active crowdfunding investor and the founder of the Real Estate Crowdfunding Review. “If they’re not listing deals, they can’t continue on.” Bisnow’s Jarred Schenke and Jon Banister spoke to crowdfunding investors, analysts and platform execs about how the sector is trying to weather a major inflection point. \.   This Morning's News Northmarq Merging With Morrison Street Capital (Bisnow): Northmarq is expanding its lending capabilities by merging with Morrison Street Capital and NBS Real Estate Consulting. The blended company will launch larger vehicles. Learn about the deal. Amazon Warehouses Hit The Sales Block (Green Street): Two Amazon-anchored warehouses are up for bid: a 1.5M SF property in central Pennsylvania that is expected to go for $225M and a 1.2M SF warehouse outside of Phoenix expected to bring in $127M. As Amazon renews its leasing activity, these opportunities are expected to increase. Read more about the properties. CIBC Offloads U.S. Office Loans (Financial Post): CIBC has struck deals to sell $316M of its U.S. office loans at a discount, showing buyers are there for office — at the right price. Learn about CIBC's strategy to weather the market. Walmart Expands Neighborhood Markets (Grocery Dive): Walmart is making its Neighborhood Market stores larger to better integrate e-commerce and fresh grocery delivery services. Two new prototype stores in Florida and Georgia are serving as pilots. Get into the details of Walmart's expansion plans. Retail Challenges Due To Venture Capital Shortfall (CoStar): Some retailers are reevaluating their brick-and-mortar expansion plans due to a lack of venture capital. That could mean fewer retail tenants on the market for space. Check out some of the ways retail is pivoting. CRE’s First South Asian CRE Group (Bisnow): New industry association South Asians in Real Estate launched earlier this month in Chicago, coinciding with Asian American, Native Hawaiian and Pacific Islander Heritage Month. Its creators said South Asians are a minority within a minority but are one of the fastest-growing groups in CRE. Get to know the group. Courtesy of Jaime Campanelli Photography Macy's Real Estate Strategy Pays Off (CoStar): Macy's efforts to streamline its real estate holdings have led to improved sales and raised profit expectations. Its plan to shutter 150 locations and generate $750M from property sales means it will have the funds to invest in its remaining 350 locations. Here's what worked for Macy's. Canada Pension Fund Reduces Real Estate Investments (Bloomberg and Financial Post): The Canada Pension Plan Investment Board is lowering its real estate exposure, particularly in office properties. Profits aren’t behind the transactions — it sold a Manhattan tower for $1. Get into the details with some background of the fund's holdings. U.S. CMBS Risks Rise Due To Tight Debt Coverage (S&P Global): The margin for error on debt service coverage has decreased, heightening performance risks for U.S. CMBS. Loans are increasingly being structured with DSC near 1.0x. Dig into the numbers. Subaru Moves Its Central Operations Hub To Texas (Bisnow): Subaru of America is moving its central operations hub from Chicago to the Dallas metro in early 2025. It is adding 200K SF to an existing training and distribution facility, bringing its North Texas footprint to 506K SF and making it the largest Subaru office in the U.S. outside of its HQ in New Jersey. Read about the relo. Party City Unveils New Store Format (Retail Dive): Party City is set to reopen stores with a new format focused on enhancing the shopping experience, especially in its balloon and party supplies sections. Join the party with more about the retailer's updated format. Charles Kushner, Fort Partners Reportedly Funneled Cash To Surfside Politicians (Bisnow): Kushner Cos. and Fort Partners financially backed three politicians seeking reelection in Surfside, Florida. Those candidates lost, and the new mayor and vice mayor are now looking at reversing zoning changes the prior administration made amid accusations the developers received special treatment. Read about the donations. Inside Penn State’s $700M Stadium Renovation (Penn State University and State College): Penn State University has approved a $700M renovation plan for Beaver Stadium. It will be able to host a college football playoff this year. Watch the announcement and learn about the new Beaver Stadium. Courtesy of Jordan Muscato Houston Starts Mitigating Up To $7B In Derecho Damage (Bisnow): Thousands of smashed windows are just the start of $5B to $7B in damage done to Houston by last week’s derecho. Repairs have begun, but nearly a week later, glass is still falling in Downtown Houston and 70,000 people remain without power. Learn about the toll. Post-Pandemic Real Estate Boom Repercussions (WaPo): States in the Mountain West are grappling with legislative responses to the challenges arising from the real estate boom fueled by the pandemic, including issues related to property taxes and housing affordability. Discover the details about the West's new challenges. NYC Trophy Buildings Face Downgrade Risks (Morningstar): New York City's high-value commercial properties lead the recent list of debt watched for potential downgrades. Learn more about it. Embattled Chinese Developer Sells Giant London Site For A Third Time (Bisnow): R&F has sold Vauxhall Square, a partially built 1.4M SF mixed-use property in London, for the third time in two years. It keeps losing money every step of the way, repeatedly selling for less than it paid. Get the backstory. Seattle Condo Includes Luxury Car In Sales Pitch (BNN Bloomberg): A condominium in Seattle is offering a $1.7M McLaren as an incentive in an attempt to spur urban revival and attract high-end buyers. Get into the promotion. D.C.'s Commercial Real Estate Woes Blamed On Government Policies (NYT): Businesses in Washington, D.C., are pointing fingers at federal policies for the high vacancy rates. More than two-thirds of federal workers are still remote at least some of the time. Discover the policies causing concern. Global Self Storage Rejects Takeover Bid (Global Self Storage and Etude): Global Self Storage's board has unanimously rejected an acquisition proposal from Etude Storage Partners, despite the offer being at a significant premium. Read more here and here. Wild Turkey Expands Corporate Campus With Visitor Experience (Wild Turkey): Wild Turkey has opened the “Jimmy Russell Wild Turkey Experience,” a modernized visitor center in Kentucky designed to attract bourbon enthusiasts and celebrate its heritage. Read more here. Massachusetts Faces Potential $1B Tax Revenue Loss (BNN Bloomberg): Massachusetts could lose up to $1B in tax revenue as wealthy residents move to lower-tax states, posing a significant risk to state finances. Nearly 100,000 residents making more than $19B in gross income are expected to leave by 2030. Read more here. Consumer Spending Under Scrutiny (CoStar): As economic conditions tighten, there are growing concerns about how long consumers can maintain current spending levels, especially with the backdrop of economic uncertainty. Dig into the worries. Retail Earnings Indicate Economic Pressures (CoStar and Yahoo! Finance): Both Lowe’s and Target report declines in recent sales, highlighting the challenges retailers face as inflation impacts consumer purchasing behavior. Lowe's saw a decline in sales, while Target's earnings missed expectations due to cautious consumer spending. Read more about Lowe's and Target. *** 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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