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Good morning. A record $957B in CRE loans will mature in 2025, but lending activity is expected to rebound, with MBA projecting $583B in new loans.

Today's issue is sponsored by Pacaso—disrupting the $1.3T vacation home market with an innovative co-ownership marketplace.

Market Snapshot

*Data as of 02/12/2024 market close.

DEBT WALL AHEAD

TOGETHER WITH PACASO

Zillow’s Co-Founder Has a New Idea

Early investors made billions backing Zillow before its IPO.

Co-founded by Spencer Rascoff, it scaled to a $16B valuation with institutional capital and acquisitions – like Austin Allison’s $125M startup. 

Now, Spencer and Austin have a new idea that firms like SoftBank are supporting.

They’ve teamed up again on Pacaso, disrupting the $1.3T vacation home market with a co-ownership marketplace. And with $100M+ in gross profits and rapid expansion into markets like Paris, Cabo, and London, the model is scaling fast.

Unlike Zillow, you can invest alongside top VCs while Pacaso is still private. Become a Pacaso investor for $2.70 before 2/27.

*Disclaimer: This is a paid advertisement. See full disclosure at the bottom of the newsletter.

• Sustainable real estate tax credits: Learn how to benefit from Section 48, 45L, and 179D credits for energy-efficient buildings, new construction, and energy-saving improvements. (sponsored)

• Steel tariffs: A new 25% tariff on steel and aluminum imports could raise construction costs by 3–10%, particularly for high-rise and government projects reliant on imported materials.

• Inflation rises: Consumer prices rose 3% YoY, delaying potential Fed rate cuts as higher costs for used cars, insurance, and eggs fueled inflationary pressure.

• Credit surge: Brookfield Asset Management raised $29B in Q4, with credit becoming its largest growth driver, contributing $20B in new capital, largely through Oaktree funds.

• Dividend cut: Ares Commercial Real Estate (ARES) slashed its dividend by 40% amid a $35M annual loss, addressing underperforming loans and rising high-risk loan balances.

• Powell on rate cuts: Fed Chair Jerome Powell signaled no urgency to lower interest rates, citing a strong economy and inflation still above the 2% target.

• Insurer levy: California is imposing a $1B assessment on insurers to support the FAIR Plan after LA wildfires caused $75B in insured losses, potentially raising homeowner premiums statewide.

• Rent drop: Austin saw the steepest rent decline in the US, down 16% YoY, as a construction boom increased supply. Similar trends were seen in Tampa, Jacksonville, and Salt Lake City.

• Mobility down: A new book argues that restrictive zoning laws and housing regulations have eroded America’s once-thriving culture of relocation, worsening affordability and economic opportunity.

• Rents decouple: Remote work has weakened the link between job growth and apartment rent hikes, as higher earners relocate independently of local employment trends.

• Affordable crisis: Mounting unpaid rent and delayed evictions have pushed landlords to the brink, with foreclosures threatening to reduce the city's affordable housing stock.

• Senior housing play: Welltower (WELL) invested $2.4B in senior housing assets in Q4, capitalizing on mortgage distress, with plans to continue acquisitions through 2025.

• Nvidia partner: CBRE Group (CBRE) will provide AI data center consulting as an Nvidia (NVDA) solution adviser, helping enterprises scale AI-ready colocation capacity amid surging power demands.

• Warehouse leased: RJW Logistics Group has leased a nearly 1 MSF speculative warehouse in Joliet, IL, completed in late 2023 by CenterPoint (CNP), bolstering the region’s strong industrial market.

• Industrial hub grows: Meridian (MBRK) completed a 1 MSF+ speculative logistics facility in Winchester, VA, strengthening the Shenandoah Valley’s emergence as a key manufacturing corridor.

• San Jose revamp: Hines plans to transform three blocks of vacant downtown San Jose storefronts into Paseo Place, a pedestrian-friendly retail hub ahead of major 2026 events.

• Long Island mall: Simon Property Group (SPG) plans a multimillion-dollar renovation of Smith Haven Mall, adding new tenants, modernized interiors, and an outdoor plaza.

• Refinancing gap: The US office sector faces a $131B refinancing shortfall through 2028, with Class B and C properties at higher risk as lender forbearance delays distress.

• Refinancing gap: CBRE reports a $131B refinancing shortfall in the office sector by 2028, affecting nearly 25% of loans from 2017–2023.

• Tower sale: A major downtown Denver office tower at 1225 17th Street is under contract for $132.5M, with closing expected later this month.

• Recap deal: Baywood and Dolphin Capital secured a $36M Synovus Bank loan and sold a 52% stake to Süzer Group in a $99M recapitalization of the Moxy Miami Wynwood hotel.

A MESSAGE FROM INVESTNEXT

InvestNext Raises $15M Series B to Power Investment Management Innovation

Detroit-based real estate investment management platform InvestNext has secured $15M in Series B funding led by Beringea. The platform serves 1,600+ GPs and 70,000+ investors across 105,000 active investments globally while maintaining an industry-leading 96% customer retention rate. 

With this funding, InvestNext will accelerate platform development to help real estate firms navigate growing regulatory complexity and strengthen investor loyalty in the midst of an increasingly competitive environment.

*Disclaimer: This is a paid advertisement. See full disclosure at the bottom of the newsletter.

📈 CHART OF THE DAY