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Good morning. Banks are quietly scrubbing bad CRE loans off their books, signaling a shift from survival mode to slow-motion cleanup.

Today's issue is sponsored by PACE Loan Group—a smart way to finance your commercial real estate project.

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Market Snapshot

*Data as of 04/08/2024 market close.

BREAKING RECORDS

TOGETHER WITH PACE LOAN GROUP

LA office receives $22.4M in C-PACE to refinance construction costs

A creative Class-A office in Los Angeles, California received a $22.4 million C-PACE loan from PLG to refinance energy efficiency and resiliency improvements completed during construction.

The non-recourse loan amortizes over 30 years, and proceeds were used to recapture part of the developer’s original investment, creating liquidity for the owners and their capital stack.  

The C-PACE financing qualified by retroactively reimbursing for construction measures including building envelope, seismic retrofits, elevators, lighting, plumbing, HVAC, irrigation, and stormwater mitigation.  

*This is a paid advertisement. Please see the full disclosure at the bottom of the newsletter.

• Save thousands on property taxes: Ownwell helps multifamily investors cut taxes and increase NOI through expert appeals. No upfront fees. Just savings. (sponsored)

• Yield volatility: The recent dip in the 10-year Treasury yield offers short-term financing relief for CRE, but widespread economic uncertainty and recession fears are tempering optimism across the sector.

• Trade retaliation: The EU plans to impose 25% counter-tariffs on select US goods starting in May, responding to President Trump’s steel and aluminum duties while sidestepping a broader trade escalation. 

• Safe haven?: CRE could serve as a stable investment refuge amid escalating tariff tensions, but refinancing challenges and recession risks may still spoil the party. 

• Shed reform: NYC has approved new rules to reduce the time unsightly sidewalk scaffolding can remain in place, aiming to improve streetscape aesthetics and public safety.

• GSE outlook: Walker & Dunlop CEO Willy Walker believes privatizing Fannie and Freddie wouldn’t significantly impact borrowing costs, so long as implicit government guarantees remain in place. 

• REIT resurgence: Despite tariff-related headwinds and a tough capital environment, major apartment REITs are ramping up construction in 2025, betting on a lighter supply pipeline and stronger returns by 2027. 

• Big bounceback: NYC’s multifamily market is on track for a $10B year, with investor confidence rebounding and Manhattan poised to retake the lead from Brooklyn.

• Space race: After a decade of shrinking floor plans, US apartments are finally growing again, with cities like San Francisco, Queens, and Marietta leading the charge toward roomier rentals. 

• Aging population: Senior housing demand hit a record high in Q125, with occupancy climbing to 87.4%, but new supply is failing to keep pace as development slows to its lowest level since 2009.

• Port pressure: The Port of LA expects a 10% cargo drop as sweeping new tariffs spark a slowdown in imports, threatening jobs and supply chains across SoCal. 

• Site upgrade: Unbound Development has purchased a 100 KSF Chandler, AZ warehouse for $14.1M, planning to reposition the site for industrial outdoor storage (IOS).

• Data delay: Virginia Gov. Glenn Youngkin has effectively shelved a bipartisan bill that would have imposed new environmental oversight on large data center developments, delaying reform until after his term ends.

• Big reopening: Big Lots is staging a comeback with the phased reopening of 219 stores across multiple states, starting April 10, after being acquired from bankruptcy. 

• Shopping slowdown: US shopping centers led retail’s 1Q slowdown, posting the largest negative net absorption as elevated costs, rising vacancies, and sluggish demand curb new development. 

• Plano play: Head Capital Partners has sold the 140 KSF Independence Square retail center in suburban Dallas to Fidelity Investments.

• Minimal impact: The termination of 679 federal office leases, totaling 7.8 MSF, is expected to have only a minor effect on the national office market, with localized impacts in DC and surrounding areas. 

• Nonprofit pinch: Federal budget cuts are threatening the stability of NYC’s nonprofit office sector, as canceled contracts and funding slashes cast uncertainty over one of the city's quieter CRE tenants. 

• Clean build: Toronto-based proptech startup Adaptis has raised $4M in seed funding to expand its AI-driven carbon management platform for buildings across Canada and the US.

• Border blues: Hotels in US border towns like Bellingham, WA, are feeling the sting of rising tensions with Canada, as travel demand plummets due to tariffs and tough political rhetoric.

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📈 CHART OF THE DAY