National Cheat Sheet: $9.4 billion in commercial loans defaulted in May, industrial market rents surge … & more

By Jeff Vasishta | June 16, 2017 05:15PM

Clockwise from left: Boston’s Millennium Tower, L.A. apartment construction and an Aldi grocery store.

Decade-old commercial loans aren’t getting paid

Risks that banks and borrowers took in the salad days of 2007 are coming back to haunt them. About $9.4 billion dollars in roughly 790 loans that were due for maturity in May went unpaid, according to the Wall Street Journal. The defaults occurred in part because riskier loans from a decade ago cannot be refinanced in today’s stricter lending climate. Also, e-commerce has decimated retail, making refinancing tough. Almost 18 percent of commercial mortgage securities loans that were due over the last year were delinquent. [TRD]

US industrial market rents soar in light of short supply and tenant demand

Landlords in retail and residential real estate may be singing the blues, but those in the industrial sector have reason to celebrate. According to a new JLL report, industrial rents hit an all-time high and are set to keep rising as demand swells. Consumer spending and increased e-commerce sales are among the main drivers for the industry. Annual net absorption grew 11.9 percent to 58.4 million square feet. Philadelphia, Dallas and Atlanta led the sector. Those three markets combined contributed 34 percent of the total US industrial rental space. [JLL]

The Fed announces plans to raise rates and shed assets

In a sign of a strengthening economy, the Federal Reserve has announced that it will raise short-term interest rates. Fed Chair Janet Yellen also said the Fed will start to sell off some of the $4.5 trillion in bonds and other securities that were acquired to bolster the economy after the 2008 financial crisis, shedding $10 billion in assets from its portfolio now, with an increase on the amount every quarter. [TRD]

Mortgage delinquencies down to a decade low

Credit a growing economy or stricter post-crash lending practices, but residential mortgage delinquencies dropped in March to the lowest level in the last 10 years. The report for CoreLogic states that all areas of delinquencies, from 30 days to foreclosure, were down 4.4 percent. [Housing Wire]

Data center REITs Digital Reality and DuPont Fabros join forces in $7.6 billion merger

If there was any doubt about the value of data center real estate investment trusts, the merger of San Francisco’s Digital Realty and Washington D.C.-based DuPont Fabros, in an all-stock transaction worth $7.6 billion, should dispel any questions. The deal, which is expected to close in the second half of 2017, will see DuPont Fabros shareholders receiving 0.545 Digital Realty shares for each DuPont share they own. The new merged company will be worth $34.3 billion according to its investor report. [Globe Street]

European discount grocery giant Aldi plans major US expansion

Having been at the forefront of the discount grocery boom in Europe, German chain Aldi announced plans this week to open almost 900 new stores and refurbish hundreds more within the U.S., according to the Wall Street Journal. Aldi said it expects to have a total of 2,500 U.S. locations by 2022. [Wall Street Journal]

As retail continues to flounder, tenants look to slash leases

In another indication of retail sector’s fragility, a Bloomberg report finds that tenants in malls are looking to decrease the length of their leases. Corporate bankruptcies leading to thousands of store closures have cut lease renewal requests to only a year or two, down from five to 10. “Retailers are now struggling to figure out how many stores they actually need,” Andrew Graiser, head of A&G Realty Partners said. [Bloomberg]

The U.S. needs to build more apartments to meet demand

The U.S. will need to build 4.6 million new apartment homes in all price points by 2030, according to a new report commissioned by the National Multifamily Housing Council and the National Apartment Association. Currently there are 39 million people living in apartments and the industry is fast approaching being over capacity, the report states. The news augurs well for the construction industry, as a minimum of 325,000 new apartment homes need to be built per year to meet demand, according to the study. From 2012 to 2016 only 244,000 apartments were delivered. [Globe Street]

In a move to expand its infrastructure business, CBRE buys a majority stake in Caledon Capital

Toronto-based Caledon Capital Management has sold a majority stake in its company to CBRE. The new company will be called CBRE Caledon Capital Management when the deal closes later this year. Caledon specializes in private infrastructure and private equity investments, managing about $7 billion in assets. [TRD]

High-end home sellers offer sweeteners to encourage brokers to sell for more

Home owners are tweaking broker incentives in order to get them to move multimillion-dollar properties for higher numbers. Some changes include decreasing a broker’s commission and instead offering a percentage of the margin between the asking and sales price. In New York City, most sellers pay around six percent commission. [TRD]

Some major market highlights

A manufacturing space, hotels and a car showroom make the biggest deals of May in NYC

New Jersey-based Matrix Development group’s purchase of a manufacturing building in Staten Island was the biggest real estate deal in May, according the The Real Deal’s analysis of Department of Building filings. The developer plans to use it as part if its 200-acre industrial park. Three out of the top 10 filings were for hotels, and a Coney Island car showroom was also on the list. [TRD]

Brookfield buys a major stake in California Market Center in a deal valued at $440 million

One of L.A.’s biggest apparel showrooms, California Market Center, which was sold to Jamison Realty in 2004 for $135 million, has a new controlling partner in Brookfield Office Properties. They bought into the CMC in a deal valued at almost $440 million. Brookfield plans to develop creative office spaces in the 1.8 million-square foot center. Brookfield is the largest Class A office landlord in Downtown L.A. [TRD]

Boston bumps up to third place in top US investment cities

Boston now only trails New York and Los Angeles as a top U.S. city for foreign investors. In 2016, it was tied with Seattle for fifth, according to the Association of Foreign Investors in Real Estate. A series of high profile sales — such as the Godfrey Hotel, the Millennium Tower and the $500 million redevelopment partnership at Pier 4 in the Seaport — have spiked Boston’s numbers. [Bisnow]