Good morning, and happy Friday. Let’s dive in! 

In today’s email: Hackman Capital Raises $1.6B For Media Property Fund. How 2 Real Estate Fund Pros Are Balancing Sticky Inflation and Rising Rates. And Chartres Lodging is Giving New Life to its New York City Hotel Portfolio.

LA-based Hackman just raised $1.4B in commitments and $200M in equity for HCP Studio Fund, which will focus on owning and operating major studios.

Wait…studios? You read that right—Hackman invests in production studio properties. As an example, it recently bought Kaufman Astoria Studios in Queens and the Radford Studio Center in LA. These studios have been around forever, hosting production for shows like Seinfeld.

But in this economy? At a glance, a $1.6B raise for a fund that invests in major production studios in very specific markets—namely LA, NY, Toronto, Vancouver, and London—sounds like a risky proposition, given the current economy. Yet Hackman couldn’t disagree more. “The demand has exceeded the supply in almost every market right now.”

THE TAKEAWAY

The new streaming era: Remote and hybrid work aren’t the only major trend to come out of the pandemic—how people view entertainment has changed drastically, too. Streaming giants like Netflix (NFLX), Amazon (AMZN), and Disney (DIS) all need more production space. So do the thousands of popular content creators on streaming sites like YouTube (GOOG) who need more studio space as their audience grows.

Brian Jones and Steve Shigekawa head the nearly $1B Neuberger Berman Real Estate fund (NREAX), which focuses on REITs. Here’s how they invest, and how they’re managing the current market cycle.

Focusing on the fundamentals: The pair’s top-down and bottom-up approach to investing has resulted in a high conviction portfolio of 35–40 holdings at any time. They focus on the net asset value of REIT properties (40% weight), funds from operations (40%), dividend yields (10%), and ESG (10%). 

Losing their winning streak: For most of their careers as portfolio co-managers, NREAX outperformed its peers as well as the FTSE Nareit All Equity REITs Index. On a 5-year basis, they’re in the top 15% when it comes to performance. Not so this year. NREAX is down 32.7% YTD, placing them well behind the majority of their peers.

THE TAKEAWAY

The 5-year plan: NREAX recently added Iron Mountain (IRM) and Realty Income (O) to their holdings. IRM is a records-management provider that owns document storage warehouses. They’re also expanding into data center services, a growing trend for many CRE owners. Realty Income helps NREAX hedge against inflation with net-lease rentals that help the fund pass on rising costs to renters.

San Francisco-based Chartres Lodging just bought the Muse Hotel at 130 West 46th Street for $49.5M, adding to its growing NYC hotel portfolio.

Deal details: The seller, investment firm Barings, bought the 200-room Theatre District hotel in 2006, after which it was managed by Kimpton Hotels and Restaurants Group until this year. The hotel was also renovated in 2020 by Kraig Kalashian Architecture & Design.

Diversified portfolio: Chartres already owns a dozen brand-name hotels across the country, including a Hilton DoubleTree (HLT) and the Inn of Chicago. Chartres owned several hotels in NYC, but sold off the Novotel Times Square and the Radisson Lexington. 

THE TAKEAWAY

Doubling down: The Muse Hotel is currently the firm’s only NYC property, and marks their re-entry into the NY hospitality market. The purchase coincides with an upswing in NY hotel occupancy rates, which rose dramatically from 57% in February up to 83% by the end of Q2. Clearly, Chartres expects that tourism and travel in coastal, gateway cities like NYC will recover.

• Political tensions: The British manager of Russian oligarch Oleg Deripaska’s NY properties has been arrested. He has been indicted for allegedly violating U.S. sanctions.

• Social Security relief: This week, Social Security payouts may see their biggest bump since 1981. That’s because payments are adjusted annually to account for inflation, which is at 8.1%.

• DTC post-mortem: Over the past decade, VCs happily invested in direct-to-consumer brands like Allbirds, Glossier, Away, and Farmer’s Dog. But as it turns out, DTC wasn’t very sustainable.

• Lead by example: As the back-to-office movement grows, many workers complain that their bosses get to work remotely while the rank-and-file are forced to go back into offices. Why is that?

• Lawsuit update: The two former Cushman & Wakefield brokers who got sued for going over to JLL have been banned from U.S. deals for 14 days by a Dallas district judge.

Deals & Dealmakers

• Dallas hospitality: Partners Group and Trinity Investments just inked a deal with Marriott International (MAR) to convert the Four Seasons Dallas into The Ritz-Carlton Las Colinas by 2024.

• Forever young: Forever 21 announced that it plans to open 14 new retail stores nationwide, mainly in outlet centers across the East Coast.

• Netflix flexes: Netflix (NFLX) just outbid three competitors for a 300-acre plot on a former army base in NJ, where the streaming giant plans to build a movie-production facility.

• Student housing JV: Harrison Street and Trinitas are partnering up to the tune of $450M to develop four student housing projects that will boast 3,390 beds across campuses nationwide.

• Partnership of the day: Blackstone (BX) will invest $500M in Resolution Life and help it raise $2.5B in a move that could result in $60B worth of new insurance policies for Blackstone.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.