Good morning and happy Friday. We’ve got a BIG announcement coming on Monday about our Referral Program. In the meantime, here’s what we’ve got for you today. 

One of NYC’s top property sales team leaves Cushman & Wakefield for rival Newmark Group amid a tough office building market. Dreamscape Cos. raised $850M to fund more hospitality and gaming projects. Meanwhile, Arnaud Karsenti and 13th Floor Investments created a $300M fund targeting growing and distressed Sun Belt properties.

Read why we may see more borrowers “hand back the keys” in 2023 as Vornado Realty Trust is forced to walk away from major projects.

Listen to what failing to raise the debt ceiling could mean for the US economy, and what the government should do about it.

POACHED

Two of Cushman & Wakefield’s Top Brokers Leave For Rival Newmark

Super-brokers Doug Harmon and Adam Spies have pulled off a daring leap from Cushman & Wakefield (CWK) to rival Newmark (NWMRK), marking the biggest talent shake-up since the commercial market slowdown.

Changing sides: Douglas Harmon and Adam Spies will join two other Newmark executives to co-head NWMRK’s US capital markets business, according to CEO Barry Gosin. Competition among brokerages is ramping up as CRE sales shrink—and an infusion of top-shelf talent could give the firm the edge it desperately needs. Last year, Newmark placed fifth in transactions, trailing CWK by $1.2B.

Reading the rap sheet: Harmon and Spies are no slouches, having been involved in deals worth over $250B since the 90s. Noted transactions of theirs include Google’s 2018 acquisition of the Chelsea Market building for $2.4B and the sale of two luxury apartment towers just last year for $850M. Their team is known for big office deals, but they’re just as comfortable facilitating multifamily transactions.

➥ THE TAKEAWAY

Newmark vs. New York: The pandemic may have put a dent in the volume of office building deals, but that hasn’t stopped Newmark from keeping their eyes on the prize. Despite the slowdown, the firm has been raking in solid sales in multifamily housing and niche assets. With the hiring of Douglas Harmon and Adam Spies, the legendary duo of New York’s capital markets realm, from Cushman & Wakefield, Newmark is setting itself up for a game-changing play when the property sales market picks up steam and debt markets start doling out more loans. It’s a bold move, but one that could pay off big time.

EMPIRE EXPANSION

Rio Casino Owner Raises $850 Million, Forms REIT for More Deals

New York-based Dreamscape Cos. have been high rollers lately, raising $850M to renovate the Rio Hotel and Casino to invest in similar lux gaming properties.

American pastime: Dreamscape bought the Rio from Caesars Entertainment (CZR) for $516M in 2019. Encouraged by recovering foot traffic and leisure travel, CEO and founder of Dreamscape Eric Birnbaum disclosed that he has created a REIT to manage the 2.5K-room resort. He’s also created a property management company to lock down more gambling and entertainment properties.

Money trail: According to Birnbaum, most of the money raised will be placed in the REIT with a small portion earmarked for the management company. Investors in the financing round included pension funds, insurance companies, and a few high-net-worth individuals. Meanwhile, Raymond James Financial Inc. (RJF) secured the equity portion of financing as Wells Fargo (WFC) arranged the debt.

➥ THE TAKEAWAY

Return to RnR: Dreamscape Cos. and Birnbaum are making a big, directional bet on consumers desiring a return to leisure travel. The numbers are certainly in their favor. Last year saw record gambling revenues, and if the pattern persists, they could have quite an opportunity on their hands, especially if they expand their brand.

SUN BELT SNIPING

Arnaud Karsenti Launches a $300M Fund to Target Sun Belt

As the Sun Belt continues to heat up, Arnaud Karsenti is launching a $300M fund that targets distressed assets in the region, with about a third allocated to those impacted by high-interest rates.

Taking a load off: This is 13th Floor’s fifth fund so far, but it’s the first one focused on both growing and distressed markets. Of the $200M raised so far, Karsenti posits that a third could go to properties facing difficulties in an expensive lending market. The money could be deployed for acquisitions or joint ventures with distressed owners facing challenges.

Due for a storm: South Florida has seen a population surge since the beginning of the pandemic, but according to some experts, it’s now due for some distress. Many are still optimistic, claiming leasing will remain healthy and act as a bulwark against deep discounts. The biggest challenge is the bid-ask gap. Since borrowing is so expensive, buyers are unwilling to settle for higher asking prices.

➥ THE TAKEAWAY

Wait-and-see game: Eight interest rate hikes and counting have dampened the mood everywhere, even in South Florida, cooling the feverish market for the time being. Karsenti and 13th Floor are biding their time, preparing to pounce on opportunities if prices go back up and sellers list more properties. Presently, the firm believes everyone is waiting for the next round of deal activity to make their moves

• Starwood sinks: Starwood Capital Group (STWD) and associates are feeling the crunch after buying nearly 1K homes at peak prices has backfired during the market slump.

• By the skin of their teeth: Hudson Bay Capital Management has entered a $1B financing agreement with $225M upfront for Bed, Bath & Beyond (BBBY) to save off bankruptcy.

• BezosVille: Amazon (AMZN) has committed $25M to begin construction of public-private housing across Washington State.

• Overshooting: Analysts expect 500K US apartments will be built in 2023. However, some experts believe this figure may be too optimistic.

• Back to the drawing board: After announcing global office exits costing $500M, Google (GOOGL) has begun rethinking its plan to build its Downtown West Village.

• Stuffed to the gills: US port activity peaked before slowing down at the end of 2022. East Coast ports have grown while West Coast ports have shrunk.

• Looking ahead: REITs struggled in 2022, but private real estate markets fared better, and new data suggests this trend could continue for private benchmarks.

• Imitation is flattery: New York governor Kathy Hochul is looking to states like CA, MA, and CT to inform her increasingly ambitious affordable housing plan.

• State of the Union: What do retail sales mean for the broader economy? And while sales were up 3% from December to January, is that good enough for the Fed?

• Not so stable: New data shows a decline in the number of registered rent-stabilized apartments across NYC, with nearly 1 in 10 units losing their status.

• Higher borrowing costs: A $271M CMBS loan on Blackstone’s Manhattan multifamily portfolio has been transferred to special servicing

💼 Talent Collective

In partnership with Bullpen

Looking for a new role? CRE Daily has partnered with Bullpen to bring hand-selected, CRE freelance jobs to our readers. Join today for access to the below roles, as well as several other freelance openings.

• Senior Associate, Investment

💰 Hourly (Remote) 📍 Western US + Texas

• Underwriter, Capital Markets

💰 Hourly (Remote) ❗️ Hospitality expertise

• Marketing Specialist

💰 Hourly (Remote) ❗️ Multifamily and Student Housing emphasis

Looking to hire? Connect with Bullpen

📰 Deals & Dealmakers

• Rolling into the shop: Hyundai has paid $275M in cash for a 108 KSF office/showroom space in Manhattan in a deal brokered by Newmark Group Inc.

• Partnering up: Actor Ryan Reynolds is partnering with Toronto-based real estate group The Remington Group in a bid to purchase the Ottawa Senators hockey club.

• Through troubled waters: Transactions have slowed in the net lease market, but there are still opportunities for buyers and sellers to come out ahead.

• Building up Beantown: Boston mayor Michelle Wu is directing $67M in funding to 17 affordable housing projects across eight neighborhoods.

• Moving the mall: Unibail-Rodamco-Westfield (URW) has offloaded a 1.2 MSF San Diego shopping mall to Bridge Group Investment and Steerpoint Capital.

• Industrial empire: Westcore Properties acquired a two-building, 242.32 KSF industrial property in Denton, TX for $32M.

• On the continuum: The Continuum Company bought a vacant waterfront site in Miami’s Northbay for $35M from B Developments, and intends to build it into luxury condos.

• Why not refi? A10 Capital has provided Rose & Berg Realty Group with a $113M loan to refinance ‘Gateway at Wynwood,’ a 220K office/retail space in Miami.

📈 Chart of the Day

While much has been said about institutional investors taking over single-family properties, smaller investors still dominate the market in places like Phoenix.

😎 Offering-MEME-Orandum

You share. We listen. As always, send us feedback at [email protected].