Good morning, and welcome back to another workweek. There is a new dawn for professional football in the New York metropolitan. The Giants and Jets both have winning records for the first time since 2015. Let that sink in for a minute…

In today’s email: 

⚖️ U.S. Treasury sets new tax credit to boost affordable housing

🏢 Blackstone swings a $750M refi for a Boston office tower

📈 Q2 2022 CMBS loan liquidations were higher than ever

MARKET SNAPSHOT

NEW LEGISLATION

Treasury’s New Tax Credit Rule Expands Affordable Housing

The U.S. Treasury amended a 2018 law passed by Congress that governs how many units an affordable housing property must set aside for residents earning less than the area’s median income (AMI).

The old rule: Under the 2018 law, a property would qualify for affordable housing tax credits if a) at least 20% of units were available to residents earning 50% of AMI, or b) at least 40% of units were available to residents earning 60% of AMI.

The amendment: The issue with the old rule was that anyone making 61% or more of AMI would be forced out of their unit. The Treasury’s new regulation allows for at least 40% of units to meet an average of 60% AMI, meaning tenants slightly above the 60% threshold could still qualify.

THE TAKEAWAY

Helping renters nationwide: The new regulation is the latest in the Treasury’s year-long push to funnel more money, including COVID-19 rescue funds, into affordable housing project loans. The Federal Finance Housing Agency will also provide an extra $6B in “forward commitment” financing to Fannie Mae (FNMA) and Freddie Mac (FMCC) annually.

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Looking for an affordable housing investment opportunity? The Greater Cincinnati Portfolio is comprised of 8 properties totaling 323 units. The Portfolio is 99% supported by Project-Based Section 8 HAP contracts, making all tenant rents across the portfolio heavily subsidized by the federal government and providing a stable stream of revenue when fully leased.

Strong, Growing AMI: Hamilton County, OH saw a 16.04% increase in its AMI bringing the number to $99,100 and has experienced an average growth rate of 5.96% over the last five Years. Accompanied with the income growth, the Gross LIHTC Rent saw a 14.85% increase to an average of $1,338, indicating strong potential for continued growth.

CMBS WEEKLY

$781M of CMBS Loans Liquidated in Q2 (up from Q1)

Costar Group takes a look at the notable commercial mortgage-backed securities (CMBS) plays that happened last week.

This week’s winner: Blackstone Group (BX) closed on a $750M refi for the 704K SF, 21-story Boston office tower, according to SEC filings. The Center for Life Science, which averaged 100% occupancy over the past 5 years, was financed by Morgan Stanley Bank (MS) and Citi Real Estate Funding (C).

Calling it quits: Despite Blackstone’s big win, overall CMBS loan losses rose in Q2 to $780.9M from 38 liquidated loans. The largest loss came from the liquidation of a $107.1M loan on One AT&T Center in St. Louis. Meanwhile, China’s Dajia Insurance Group wants to sell nearly $1B of U.S. luxury hotels that carry $390M in CMBS debts.

THE TAKEAWAY

Loans in trouble: In the first half of 2022, 77 CMBS loans were liquidated, adding up to $1.44B in total disposition balance. Additionally, Q2 loan losses had a weighted average loss severity of 53.5%, up from 50% in Q1. Loss severity is the amount lost on a property after a foreclosure and short sale.

• Ultra-lux living: Hotel chains like Mandarin Oriental and The Four Seasons are competing to list the priciest LA condo. This year’s record-holder? A $21.5M West Hollywood Pendry condo. 

• Your way right away: Burger King’s (QSR) new CEO wants to put the old fast food mainstay back on the map with a $400M overhaul that includes advertising and restaurant remodeling.

• Dirty dealings: The Pinnacle Group was forced to cough up $480K after failing to disclose that condos converted from rent-stabilized units in Forest Hills, NY needed gas line repairs.

• White-collar fantasy: Brooklynites happily pay $1,000 a night to stay at a converted farmstead in Hudson Valley, NY, where they get the chance to gather eggs from hens and chop firewood.

• Stay away, please: Florida Gov. Ron DeSantis proposed new legislation that would prohibit foreign buyers in eight blacklisted countries from buying land near U.S. military bases.

Deals & Dealmakers

• Inaugural fun: Declaration Partners, backed by billionaire David Rubenstein of the Carlyle Group, raised $240M for its first-ever real estate fund.

• Oasis in the sand: Petros PACE Finance, the largest C-PACE provider in the U.S., closed a record $153M in C-PACE financing for its $820M, 580-acre Black Desert Resort project in Utah.

• Multifamily moves: Merchants Capital just closed on $180M for its new Tax Credit Equity Fund X, which will be invested into 18 affordable housing properties with 2,400 homes in 12 states. 

• Deal of the day: Our Next Energy (ONE) signed a multi-year lease with Ashley Capital for a new EV battery plant. ONE intends to invest $1.6B into the facility and create 2,000 jobs.

• Dreaming bigger: Oak Street Real Estate is looking to raise $4B for its latest triple-net lease fund. Pennsylvania SERS has already committed $75M to Real Estate Capital Fund VI.

Hurricane Ian’s Toll on Fort Myers Apt. Market Considerable, but Longer-Term Fundamentals Should Remain Solid

Nearly Half of Multifamily Inventory in That Part of Florida Has Been Built Since 2010

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.