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Good morning. The commercial real-estate meltdown is spilling over into the bond market, with defaults mounting in a once-secure segment of mortgage bonds.

📊 We had over 1,000+ responses to yesterday’s rent cap poll. Scroll to the bottom of the newsletter to see the final results.

Today’s issue is sponsored by Redwood Living—explore real estate investments in the Midwest BTR market.

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Market Snapshot

*Data as of 7/16/2024 market close.

mortgage bonds

TOGETHER WITH REDWOOD LIVING

New BTR Equity Deal Now Accepting Investors in the Detroit Market

Innovative, multifamily ground-up developer, Redwood Living, Inc. has a new investment opportunity located in Washington Township, Michigan—and it’s currently accepting investors!

Redwood Orchard Brook Three LLC will be the third phase of Redwood Washington Township, consisting of 66 single-story apartment homes, adding to an existing Greater Detroit Portfolio of over 2,000 units.

As of 7/11/2024, Redwood’s stabilized units in this area are currently 95.7% occupied. Investors can expect a 10% preferred pay rate, 20% in equity, plus depreciation benefits, long-term income potential, and potential future refinances for this deal. Get access to this deal today!

• Serving the nation: A proposed bipartisan bill includes a 20% tax credit for converting commercial spaces to housing, targeting old buildings in distress with a credit pool starting at $15B.

• Keeping PACE: Across the country, many states have created new C-PACE programs to give commercial property owners a new financing tool to blend down the cost of capital. (sponsored)

• The plot thickens: A recent FBI raid linked a KSK project at 280 East Houston St. with no permits to NYC Mayor Eric Adams’ campaign fundraising probe.

• Studio mega deal: Warner Bros. Discovery (WBD) sold Burbank Studios to an investor group for $375M, with plans for expansion and development.

• Historic move South: The Michelin Guide will start reviewing Texas restaurants in Dallas, Fort Worth, Houston, Austin, and San Antonio for the first time, a milestone for the Lone Star State.

• Nation of drivers: U.S. retail sales, excluding autos, rose by 0.4% in June, showing strong consumer activity despite some auto dealers being hurt by cyberattacks.

• Slowdown: Apartment rent growth underperforms expectations in the first half of 2024, with most markets seeing modest increases between 2% and 3%

• Billion-dollar default: Maximus Real Estate Partners defaulted on a $1.8B loan for Parkmerced in San Francisco, despite the property’s value falling recently by $700M.

• Foreclosure: Tides Equities loses Las Vegas apartment complex to lender Newpoint, with foreclosure on the property wiping out equity for both parties.

• More government: Landlords near Lake Tahoe can get up to $26K for renting homes to local workers for 3 years. The $1.25M "Rooted Renters" program targets vacant vacation homes.

• Moving forward: The LA Planning Commission approved Aragon Properties' 327-unit Echo Park apartment complex, which includes affordable housing, and is expected to be completed by 2027.

• Long arm of the law: Arbor Realty Trust (ABR) faces an FBI investigation over fraud allegations after foreclosing properties to avoid loan write-downs.

• Riding the Flo: Miami's industrial market saw 3.3MSF added in 2Q24, with 531 KSF of positive absorption in the quarter.

• Scoring big: KKR & Co Inc. (KKR) acquired Houston's Park 8Ninety, a 1.8MSF industrial park, from Artis REIT (ARESF) for $234M.

• IPO watch: IPOLineage Inc. aims for a $3.85B IPO, offering 47M shares at $70–$82 each, potentially valuing the firm at $19.2B.

• Hardware haven: Ace Hardware plans to open 200+ stores this year, reaching 5K domestic locations. They’ve opened 100 of those stores already YTD.

• Promotions prevail: Limited-time offers boost visits, with Placer.ai reporting that the casual dining sector saw 6% more sales with over a third of weekly visitors.

• Waterfront wealth: The now infamous Surfside condo at Four Seasons Residences sold for $14.5M, with the chairman of Gallagher Insurance likely making a big profit.

• Pickleball paradise: California Smash Pickleball and Social Club signed a 25.3 KSF lease for a new facility in El Segundo, CA, which will offer 10 indoor courts.

• Relocation: Elon Musk announced the relocation of SpaceX and X headquarters from California to Texas, citing dissatisfaction with state legislation regarding student privacy for transgender teens.

• Portfolio pitfalls: San Francisco's Zappettini family defaulted on $120M in CMBS loans for a 10-building portfolio near Google (GOOGL) as occupancies drop.

• Sales slowdown: Los Angeles saw just $440M in office sales in 2Q24, showing a less active market compared to pre-pandemic levels.

• Building makeover: RXR's Scott Rechler faces a $670M loan default on NY’s Helmsley Building and is exploring a possible office-to-residential conversion to prevent that from happening.

• Banking on Park Ave: J.P. Morgan Chase (JPM) is in talks to buy 250 Park Avenue from AEW Capital for $300M.

• Adapting to struggles: During the 2024 ALIS Summer Update’s "Views from the Boardroom" session, hotel executives around the country revealed what’s challenging them the most.

A MESSAGE FROM NEUTRAL

Neutral. Bigger than Us.

Neutral is pioneering a new standard in sustainable living, seamlessly integrating innovation, sustainability, community, and design into every aspect of the resident experience.

At Neutral, we are Redefining Sustainable Living Through Innovation.

📈 CHART OF THE DAY