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Good morning. Despite supply dominating headlines, apartment demand in the U.S. has surged impressively in the second quarter of 2024.

Today’s issue is brought to you by 10 East—a membership-based investment firm focused on private market exposure.

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Market Snapshot

*Data as of 7/08/2024 market close.

Apartment Market

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• Uncovering schemes: CRE mortgage fraud is on the rise as interest rates climb and defaults go up, leading to more regulatory scrutiny of property financials.

• Evolving landscape: CRE pros expect office valuations to drop, housing inventory to improve, retail and data center demand to stay strong, and more in 2H24 and beyond.

• Funding: Lone Star Funds completed its $5.3B LSF XII opportunity fund, which will target distressed assets across various markets.

• RIP: Brandon Miller, managing partner at Real Estate Equity Corp and known for NYC projects, passed away at the age of 43.

• Spying saga: Move Inc. has sued CoStar (CSGP), alleging a former Realtor.com employee leaked confidential info to boost Homes.com, prompting the legal battle.

• Engineering expansion: Private equity is increasingly investing in engineering firms amid a surge in infrastructure spending, with $4.5B spent last year.

• Distressed valuations: In mid-2024, distressed property valuations have fallen by 43%, with properties under $5M seeing a 51% devaluation.

• Hospitals into housing: Sphere Investments is expanding its portfolio beyond medical centers into senior living and workforce housing with a $300M fund.

• Rent control: Rent control policies harm rental housing providers, with 93 cents out of every dollar needed for operating costs.

• Development drama: Logan Anjaneyulu’s Afton Oaks Residences LLC filed for bankruptcy on a 500-unit San Antonio project with assets ranging from $10M to $50M.

• Real estate rewind: Onni Group secured $300M in debt on three multifamily properties in a $1B deal across LA and Chicago, with a 6.21% fixed interest rate.

• Grand opening: The 120-unit Douglas at Sunrise Complex in Puyallup, WA, opened with 1K units and a low vacancy rate below 7% amid strong renter demand in the Pacific Northwest.

• Military maneuvers: Lendlease is selling its 40K-unit US military housing portfolio for 480M AUD to a Guggenheim Partners affiliate, Omaha Beach Investment Holdings LLC.

• Back on the ballot: California’s Proposition 33 seeks to repeal statewide rent control restrictions, igniting debate among tenant rights groups and property owners.

• Rethinking warehouses: By 2027, Gartner forecasts half of warehouse companies will switch to AI vision systems from scanning-based methods, enhancing efficiency.

• Deal of the day: Investor confidence rises in Baltimore with EQT Exeter acquiring a 6-building industrial portfolio totaling 900 KSF for $140.5M.

• Burgeoning empire: The Inland Empire’s industrial sector is experiencing remarkable growth, with 17.5 MSF of new space, 45 facilities, and $709M in transaction volume.

• Winter wins: Demetree Global purchased Hannibal Square in Winter Park, FL, for $55.3M, offering mixed-use space with retail, office, and residential units.

• Changing hands: The Park at Cross Creek, a 39.35 KSF retail center in Malibu, CA, sold for $80M to a private investor.

• Doubling down: Boston Properties (BXP) plans to boost its Reston Town Center office space from 645 KSF to 930 KSF.

• Old vs. new: New office buildings maintained occupancy rates better after the pandemic than older buildings (10 years or older), which lost almost 420 MSF.

• Office bargain: IMC Equity Group acquired Sawgrass Technology Park in Sunrise, FL, for $49M, a 35% discount from the property’s previous sale.

• Rebirth of a city: Philadelphia’s office investment market is finally showing signs of recovery, with a potential deal involving a large multifamily developer in the pipeline.

• Tower twist: Hillcrest Real Estate requested financial aid from the City of LA to build a 395-room tower in Studio City.

• Mid-market momentum: Hotel deal volume is expected to increase with a focus on mid-market and extended-stay properties, while the luxury segment remains tight.

📈 CHART OF THE DAY