MBA: CRE Mortgage Debt Hits $4.7T, Office Delinquencies Climb

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Good morning. Commercial mortgage delinquencies saw an uptick in Q2 2024, according to the Mortgage Bankers Association's latest report.

Today’s issue is brought to you by PACE Loan Group—a national lender offering owners non-recourse, long-term, fixed-rate C-PACE financing.

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• Fight another day: Steward Health Care is nearing a bankruptcy settlement with Medical Properties Trust (MPT) that would transfer $395M and over a dozen hospitals to new operators.

• Got loans? Sand Capital is actively purchasing loans collateralized by commercial properties throughout the US, focusing on retail assets like strip, power, and grocery-anchored centers. (sponsored)

• Unexpected trends: August inflation readings were below expectations at 2.5%, but core inflation remains higher than expected at 3.2%, while energy was down to 4.0%.

• Investment exodus: Equity investment in Opportunity Zone projects dropped by nearly 70% in 2Q24, from $1.3B to $446M YoY, reflecting ongoing investor caution.

• Risky riches: High-yield municipal bonds backed by luxury real estate projects are delivering 7.2% returns, outperforming investment-grade bonds by over 5%.

• Rate drop frenzy: Mortgage rates fell to 6.29% last week, stimulating a sudden frenzy of homebuyer activity as the 30-year rate dropped a full 14 bps.

• Fund of the day: Lone Star Funds closed a $2.7B commercial real estate fund, Lone Star Real Estate Fund VII, that will target Europe, North America, and Japan.

• Buyout boost: Blackstone (BX) is selling $1.05B in commercial mortgage bonds to fund its $10B acquisition of AIR Communities, adding to a previous $2.95B CMBS sale.

• Warm invitation: Invitation Homes invested $216 million in build-to-rent projects over 60 days, backed by a new $3.5 billion credit facility, as part of its $1 billion expansion plan for 2024.

• Pricey purchase: Chicago's Waterton purchased the 310-unit Avant at the Arboretum in Lisle for $77.5M, or around $250K per unit. Seller JVM made a tidy $8.9M profit on the sale.

• Multifamily bargain: Advanced Real Estate paid $62M for the 210-unit Canvas LA in Temple-Beaudry or a little less than $300K per unit.

• Affordable advancement: Pittsburgh aims to require 10% of new multifamily units to be affordable housing, priced for families earning 50% of the area median income.

• Desert power: KBC Advisors completed Empire 101, a 153.15 KSF industrial project in Peoria, Arizona, with 21 dock doors, 32" clear heights, and parking for 144 vehicles.

• Warehouse wars: Trade group NAIOP is urging members to ask California Governor Newsom to veto a bill restricting warehouses over 250 KSF, citing potential economic bottlenecks.

• Tampa tanking: The Tampa Bay industrial market is struggling, as net absorption drops 75%, vacancies rise to 7.1%, and rents decline.

• Luxury expansion: According to JLL data, luxury retailers are snapping up prime storefronts and expanding despite limited space, with over 360 KSF leased from 2023 to 2024 alone.

• Denver splash: Bridge33 Capital continues its acquisition spree with a nearly $100 million purchase of a Denver-area retail portfolio, following Site Centers' broader asset offloading.

• Office trends unveiled: Business leaders increasingly view office space as a value driver rather than just a cost center, with many planning to expand footprints despite hybrid work trends.

• Midtown bargain: Joshua Zamir's firm is set to buy 60% leased 360 Lexington for $65M, a huge discount from its prior $180M sale price in 2019.

• Legal leasing spree: Unsurprisingly, New York City leads global law firm leasing with 1.4 MSF, reflecting growing demand for high-quality offices.

• Artful oasis: Motel One partners with ALP.X and Büschl Group for an 8-story, 214-room hotel and condo project in South Florida’s Wynwood.

• Extended stay shuffle: Clearview Hotel Capital purchased the Residence Inn Seattle East/Redmond from Blackstone (BX) for $34M, or $190K per room.

📈 CHART OF THE DAY