Blackstone Pauses $1.3 Billion CMBS Debt Sale

A consortium of banks including Morgan Stanley and Bank of America were set to sell the bond, backed by mortgage debt from over 60 industrial properties across 13 states.

Blackstone Pauses $1.3 Billion CMBS Debt Sale

A consortium of banks including Morgan Stanley and Bank of America were set to sell the bond, backed by mortgage debt from over 60 industrial properties across 13 states.

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Good morning. Welcome to the weekend edition of CRE Daily.

  • 📰 Feature: Blackstone pauses $1.3B CMBS deal

  • Catch up: The most-read stories from the week

  • 👍️ Reviews: Best Commercial Real Estate Data Sources for 2024

  • 📈 Chart: Q1 2024 office market availability rates

Today’s issue is brought to you by Calvera Income and Growth Fund.

CMBS MARKET

Blackstone Pauses $1.3 Billion CMBS Deal Amid Market Surge

Blackstone's $1.28 billion CMBS refinancing deal for 62 industrial properties has been withdrawn due to unattractive pricing and widening spreads.

What happened: Morgan Stanley Capital, along with Barclays Capital Real Estate, Bank of America, Goldman Sachs, and JPMorgan Chase, pulled the offering backed by Blackstone's portfolio. Analysts attribute this to an oversaturation of CMBS deals in recent months, which has increased borrowing costs and made investors more selective, reports CoStar News.

Zoom in: This year has seen a significant surge in CMBS offerings, with 47 single-borrower deals totaling nearly $30 billion, compared to 12 deals worth $6.3 billion at the same point last year, says CoStar. One-third of this year's volume was issued in May alone, creating an unsustainable pace, according to Alan Todd, CMBS strategist for Bank of America Securities.

Waiting game: Blackstone has been a major player in the CMBS market, refinancing over $15.5 billion in properties this year. The decision to pause the deal reflects a strategic move rather than a necessity, as the portfolio has 15 months of maturity remaining on an existing loan.

Market frenzy: The issuance of private label CMBS deals has surged, reaching $42.8B YTD, an 80% increase compared to the same period in 2023. This increase has contributed to financial pressures on banks and concerns about the riskiness of CRE debt, especially with recent spikes in CMBS special servicing rates.

➥ THE TAKEAWAY

Big picture: The withdrawal is seen as a positive sign of investor sentiment. Alan Todd notes that the heavy issuance volume led to pricing levels that didn't meet expectations, prompting Blackstone and Morgan Stanley to wait for more favorable conditions. This selectivity indicates investors are becoming more selective about what they're willing to invest in and when.

TOGETHER WITH CALVERA PARTNERS

How Many Units Do You Own?

Why is this question so often asked in the multifamily industry?  It’s not a good measure of success.

An individual with a 200-unit portfolio in the high-cost Bay Area is likely worth more than a syndicator who did joint ventures to amass 10,000 units. The apartment industry is so large and diverse that different strategies in different markets can all be successful. There are much more relevant questions you can ask to quickly assess a multifamily investor.

⏪ Weekend Wrap-Up

Catch up on the most clickworthy stories of the week.

  • Foreign investors: Interest from international investors in U.S. commercial real estate has plummeted to its lowest level since 2011.

  • Retail Renaissance: US shopping centers are experiencing a revival as vacancy rates drop to 5.4%, their lowest level in two decades, with demand surpassing supply.

  • Life science surge: Life science properties have grown into a top institutional alternative asset, making up over 6% of holdings and boasting 12.2% annual returns.

  • Expanding markets: Tishman Speyer has entered the South Florida industrial market by purchasing Rock Lake Business Center, a 35-acre industrial park in Pompano Beach, for $100.2 million.

  • More space: Blackstone (BX) will expand its NYC HQ lease by 30% at 345 Park Ave, occupying 28 floors as its workforce grows by 50%.

  • Dining out: Once viewed as dead-end investments during the pandemic, restaurants have become a leading force in retail real estate as Americans dine out more than ever.

  • Stockyards revamp: Fort Worth may spend up to $1B revamping its famous Stockyards to include 300KSF of commercial space, 295 multifamily units, 3 hotels, and 1.3K parking spaces, just in case.

  • Fed forecast: The Federal Reserve anticipates only one rate cut for the rest of 2024, revising its terminal rate projection to 5.1%.

  • Deeply distressed: CRE distress hits a new record for the third consecutive month, up 14 bps to reach 8.49% in May. Special servicing is at 8.09%, while delinquencies are up to 5.8%.

  • Housing: Amazon (AMZN) commits another $1.4B to affordable homes, aiming to build 14K units in Seattle and Nashville. They e-commerce giant has pledged $3.6B so far.

  • The BIG Short: Short sellers betting against Arbor Realty Trust are finding their trade more costly and less profitable than expected despite challenges in multifamily.

  • ReWorked: WeWork emerged from bankruptcy, renegotiating 190 leases and exiting 170 locations, with John Santora replacing David Tolley as CEO.

  • Heartland shift: Industrial activity is shifting increasingly to the Midwest, with an estimated $27B spent since the start of COVID-19.

  • Viva las vacancy: After a record-setting 2021, Las Vegas apartment market sales volumes have dropped sharply to Great Recession levels, with only $50M traded in 2024.

  • Fire sale: A well-known Manhattan office building was just sold for 67% less than its 2018 price, as more and more office properties sell for less than their outstanding mortgages.

  • Discount sale: Dollar Tree (DLTR) is still considering selling off or spinning off Family Dollar, a chain with nearly 8K stores nationwide. Here’s who could step up to purchase.

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