Dallas-Fort Worth Emerges as a Leading Market in Built-to-Rent Housing

Plus: Burger King eats up its biggest franchisee in a $1B acquisition.

Dallas-Fort Worth Emerges as a Leading Market in Built-to-Rent Housing

Plus: Burger King eats up its biggest franchisee in a $1B acquisition.

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Good morning. New single-family built-to-rent developments are booming in the South, particularly in Dallas-Fort Worth. Meanwhile, Burger King plans to spend $500M to remodel 600 restaurants in a $1B acquisition of its biggest franchisee.

Today’s issue is brought to you by Viking Capital.

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Dallas-Fort Worth Emerges as a Leading Market in Built-to-Rent Housing

Texas's built-to-rent (BTR) sector is heating up, with Dallas-Fort Worth (DFW) emerging as the second-largest market in the U.S., closely following Phoenix.

Super South: According to Northmarq, DFW holds the #2 spot in the U.S. built-to-rent market, with Phoenix in the lead. Houston took 3rd place, while Austin came in 6th. Surprisingly, the South accounted for 61% of single-family BTR starts in the first three quarters of 2023.

Shifting strategy: The steep increase in mortgage rates has cooled the traditional housing market but conversely fueled the BTR sector. As a result, builders such as D.R. Horton, Lennar, and Embrey have shifted their focus from home sales to investing billions into developing rental communities.

Between the lines: While BTR is booming, it's not without its challenges. The sector has seen a slowdown in construction starts, likely continuing into 2024. However, the market benefits from a previous construction surge, with a 35% increase in SFR home deliveries compared to the previous year. Texas markets, particularly DFW, Houston, and Austin, collectively absorbed 5,000 units in the initial three quarters of 2023, reflecting the robust demand.


What they are saying: Northmarq's report reveals that rising capital costs are challenging the single-family build-to-rent (BTR) market, signaling its first major uncertainty. Despite this, the sector is increasingly integral to the housing market, finding balance amid high-interest rates and property shortages. This is leading to more potential buyers renting. As of Q3 2023, there's a significant $828 difference between average mortgage payments and single-family rental costs, typically $2,000 to $2,500 monthly.


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✍️ Editor’s Picks

  • Half-full or half-empty? High costs and falling prices hit CRE hard. But more deals are expected this year–for up to $570B in new equity by 2025.

  • Rusty dreams: A decrepit ocean liner facing eviction from Philly’s piers is denied access to an NYC pier for a potential hotel conversion project.

  • Debt distress: A beleaguered hospitality firm faces default on a $97M loan for a 544-room Hilton hotel in San Francisco.

  • Going once, going twice: CRE foreclosure auctions are becoming more common as distress ramps up. However, auctions often lack bidders and properties rarely end up with new owners.

  • Tax battle royale: Chicago's push for a transfer tax on property sales prompts more fundraising and spending from opponents, with both sides gearing up for the March referendum.


  • Capitalizing on Cali: Cityview acquired six apartment buildings in LA and West Hollywood for $63M, helping recapitalize their recently closed discretionary fund.

  • Refi of the day: Greystone provided a $40.3M Freddie Mac loan to refinance a 432-unit multifamily property in Crown Point, Indiana.

  • Homeless crisis: Chicago faces a $10B affordable housing shortage with 120K units needed, compounded by rising rents and property taxes.


  • In the name of industry: SL Industrial Partners appoints Range Commercial Partners to oversee leasing of a 3.3MSF industrial development in Prince George, VA.

  • Being choosy: CapRock Partners acquires a new industrial facility in Phoenix for a cool $20M, expanding their portfolio in the Valley.

  • New record: In 4Q23, the Greater Boston industrial market saw robust leasing activity, with over 11.84MSF leased, comparable to previous record-breaking years.


  • Retail space squeeze: Retailers face a crunch in finding space as in 2024, with the tightest conditions on record.

  • Return to seller: Barry Sternlicht of Starwood Property Trust's (STWD) LNR Partners, is selling a defaulted $125M loan on a struggling retail condo.

  • Groundbreaking growth: Developers break ground on a $1.2B Wyld Oaks mixed-use project in Apopka, FL, with retail, hotels, residences, and office space.

  • Welcoming the world: Buc-ee's plans to build a 74KSF travel center in Brunswick, GA, with 120 fueling stations and a store.


  • Collateral crisis: About 217MSF of office leases with expiration dates in the next two years pose a significant rollover risk.

  • Revitalizing cities: Renters in American cities are returning to urban areas as companies resume in-office work and homeownership becomes less attainable/

  • Shrinking appetites: Yelp (YELP) is listing 18KSF of its San Francisco HQ for sublease, downsizing its office space by 78%.

  • Discount gem: Silicon Valley’s office market shows signs of recovery with Sunnyvale Park Place offered at a 26% discount by Goldman Sachs (GS) and Hines.

  • Expiration D-day: U.S. office vacancies reach an all-time high, with approximately 217MSF of office space set to expire in 2024 or 2025.

  • Heading South: BH Properties, a CA investor, purchased the Parkway Centre IV in Plano, TX, a 153.24KSF office building near Willow Bend Mall.


Burger King to Buy Carrols Restaurant Group for $1B

Burger King to Acquire Largest Operator Carrols Restaurant Group for $1 Billion

Carrols owns just over 1,000 Burger King stores (QSR)

Burger King (QSR) announced its acquisition of Carrols Restaurant Group (TAST), its largest franchisee, for around $1B. The big move is part of Burger King's plan to accelerate its“Reclaim the Flame” comeback strategy. 

Reclaiming that flame: Carrols owns 1,022 Burger Kings and 60 Popeyes stores in 23 states, generating over $1.8B in sales over the past 12 months. Burger King aims to remodel about 600 of those stores using approximately $500M of capital, funded by Carrols' operating cash flow, to enhance the customer experience. The deal is expected to close in Q2.

By the numbers: QSR is willing to bet on Burger King thanks in part to a 7.2% increase in same-store sales, supported by a 4.2% rise in average check size and a 2.9% uptick in traffic. Specifically, same-store sales surged by 9.3% and 10.1% at Burger King and Popeyes locations respectively throughout 2023.

Remodeling plan: Over the next five years, Carrols' operating team will run the 600 redesigned restaurants in partnership with Burger King. The franchisor also plans to re-franchise most of its portfolio to new and existing smaller franchisees, while retaining approximately 200 restaurants for itself.


The Return of The King: Burger King's acquisition of Carrols reflects the brand's commitment to accelerating growth and enhancing customer experiences. Through this major acquisition, Burger King will add over 1,000 stores to its portfolio, supported by $500M in capital investment. By partnering with Carrols' operating team, Burger King aims to create new and compelling experiences for guests.


Delinquency Rates for Commercial Properties Increased in Fourth-Quarter 2023

In Q4 of 2023, commercial property mortgage delinquency rates rose, as reported by the Mortgage Bankers Association. Jamie Woodwell, head of MBA's commercial real estate research, noted that commercial real estate market challenges led to higher delinquency rates for office property loans (6.5%) and lodging-backed loans (6.1%). Retail property loan delinquencies remained stable but high since the pandemic's start, while multifamily and industrial property loans saw slight increases in delinquencies but remained comparatively low.

Woodwell mentioned that although long-term interest rates have decreased from their peak, many loans still confront high rates, valuation uncertainties, and fundamental changes in some properties. He emphasized that varying circumstances for each loan and property will impact how the market manages maturing loans this year.

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