Editors’ Weekly News Roundup, August 14th – August 18th
It’s big news when a major developer launches a large-scale construction project, and apparently even bigger news when it suspends work. The top story on Connect CRE this past week, Lendlease Stops Construction on $1.2B San Francisco Tower, reported that the firm has paused its Hayes Point residential project over current market conditions.
The mixed-use tower includes a sizable office component along with residential condominiums. A Lendlease spokesperson told the San Francisco Business Times that progress would be halted “until markets normalize and we’re able to bring in early tenancy commitments, or capital partners, or both.” Readers in both California and nationwide made this our most-read story for the week ending August 19.
Our second most-read story this past week summarized a Wall Street Journal report on a growing trend: price capitulation. Property owners are starting to cut their asking prices to meet the demands of buyers, a trend that’s coinciding with institutional plans to go bargain-hunting.
As Property Owners Begin Yielding on Price, Funds Get Ready to Pounce detailed fundraising efforts by Goldman Sachs, Cohen & Steers, BGO and others to bankroll the acquisition opportunities they anticipate. They’re expecting to be able to scoop up assets from beleaguered owners at a fraction of the price they would have had to pay a few years ago.
That increasing activity in the equity markets coincides with decreased volume on the debt side of the equation. In CBRE Sees Q2 Slowdown in Lending Momentum, CBRE reported that its Lending Momentum Index, which tracks the pace of closings on commercial loans the company originated, declined by more than half from a year ago. The story ranked third in our top five for the past week.
Rachel Vinson, president of debt & structured finance, U.S. for capital markets at CBRE, cited “choppy markets” as the cause of the slowdown. “Borrowers who have to transact in the current environment are turning to shorter-term fixed loans until stability returns,” she said. “Costlier credit with tighter terms continues to encourage many to sit on the sidelines.”
A breaking news story from the grocery sector was the past week’s fourth most-read story. ALDI to Acquire Winn-Dixie, Harveys Supermarket from Southeastern Grocers reported that the U.S. arm of the Germany-based multinational retailer would acquire 400 stores, mainly in Florida.
In deal information that was not reported in the breaking news story, the sale of the Harvey and Winn-Dixie chains was accompanied by ALDI acquiring all Southeastern Grocers stock. Headquartered in Jacksonville, FL, Southeastern Grocers is also selling its Fresco y Más operations to a separate buyer.
The past week’s top five was rounded out with a story about another tower. This one, though, was on the East Coast and the story was about a tenant’s demand for more office space. RXR was the beneficiary of Davis Polk & Wardwell LLP’s expansion in Largest NYC Office Lease 2023: Davis Polk Takes 700K-SF at 450 Lex Ave.
The law firm’s commitment to RXR’s 450 Lexington Ave. comes at a cost. RXR and its partners will spend more than $300 million on capital improvements to the Midtown Manhattan office tower.
An office lease of more than 700,000 square feet on the one hand, and suspension of work on an office and residential project on the other, certainly conveys mixed signals. The U.S. economy similarly is a mixed bag of positive and negative indicators, and in the latest edition of Weekender, you can read about a commentary on the outlook from John Beuerlein, chief economist at Northmarq’s parent organization, Pohlad Companies.