Sunday Summary: Landlords for Elizabeth Warren!

“We know that reducing policy restraint too soon or too much could result in a reversal of the progress we have seen on inflation,” said Fed Chairman Jerome Powell. “At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment.”

For those who think that only rich and powerful landowners would decry such caution, consider this: Progressive icon Sen. Elizabeth Warren took to X a day later, when fresh jobs numbers came out showing the unemployment rate ticked up to 4.3 percent, to advocate immediate action.

“Fed Chair Powell made a serious mistake not cutting interest rates,” she wrote. “He’s been warned over and over again that waiting too long risks driving the economy into a ditch.

“The jobs data is flashing red,” she added.

“Powell needs to cancel his summer vacation and cut rates now — not wait six weeks.”

We’re not sure we could think of a landlord, or a broker, or a board member for a REIT who would have phrased it any differently. Well, everybody’s been waking up next to odd political bedfellows of late. Call this the latest such iteration.

’Tis the season

We’ve got about another week left of earnings calls, but there were some big ones last week.

KKR (KKR) came out of the gate with a doozy: The company has raised $32 billion over the second quarter, and they closed about $10 billion in deals. (They’re off to a pretty strong start for the third quarter, too. The firm bought 540 Fulton Street in Brooklyn from Jenel Real Estate for $240 million.)

Newmark (NMRK) certainly had reason to be chipper: Revenue shot up 8.1 percent annually to $633.4 million. Investment sales were up 18 percent for the firm over the quarter, fees grew a whopping 46 percent for mortgage brokerage and debt placement, and they did another $208.6 million in leasing and brokerage services.

But not everybody has such unadulterated good news.

Ares Capital reported $48 million in unrealized losses and said profits dipped from $331 million last year to $322 million.

Revenue also declined by 5 percent at Cushman & Wakefield (CWK), according to their second-quarter earnings call, mostly due to a drop in business in their capital markets and valuation and services business. However, C&W saw a nice 2 percent bump in leasing.

But sometimes it’s all about managing expectations. Despite the fact that BXP (formerly Boston Properties) saw revenue fall from $292.8 million to $278.4 million, this was actually better than expected, with the company having closed 73 leases for an approximate 1.3 million square feet of space.

And, while Arbor Realty Trust’s earnings couldn’t exactly be called good (they reported an income of $47.4 million, compared to $76.2 million during the same period last year), they also beat expectations, especially given that Arbor has been embroiled in an FBI investigation about its lending practices and disclosures.

Deals, deals, deals!

Stalled interest rates and earnings calls might provoke a round of fingernail chewing, but plenty of firms are looking to start deploying serious capital.

Last week it was reported that Blackstone is in the process of making a $2 billion purchase of Retail Opportunity Investment Corporation’s 10.7 million square feet of shopping centers around the country.

In Florida, the Alger family is selling a whopping 797 acres of land near Homestead to the Miami-Dade Land Company for $56 million.

Certain firms are making big plays in terms of office expansion, like BlackRock, which is taking yet another 50,000 square feet at Related Companies’ 50 Hudson Yards.

Football GOAT Tom Brady signed a lease for an 8,415-square-foot office at Terra’s The Well office building in South Florida. (Just don’t tell Nikki Glaser where she can find him.)

And money is going out the door. Ari Rastegar’s Rastegar Property Company secured a $31.7 million construction loan for a planned community of 1,000 single-family homes, 1,400 apartments, and a school and commercial space in Kyle, Texas.

Plus, Hines managed to get its hands on $142 million from Kennedy Lewis to buy 242 acres of land in Loudoun County, Va., with the plan of building 1,000 homes.

Be it ever so humble…

Yes, there was some notable multifamily and SFR activity. And we’re not exactly surprised.

Housing is in a weird spot. On the one hand, throughout much of the country rents have begun to soften. The demand that hit such highs over the pandemic has begun to come down.

This year approximately 560,000 multifamily units will hit the market. Which is a large number.

But, because the financial markets have essentially gone into hibernation since the Fed started raising interest rates, few things have gotten in the ground over the last year. The number of units to be delivered is expected to plummet to 350,000 next year, and to 328,000 in 2026. So, within two years the national housing market will probably switch from overabundance to scarcity. For those who can get the financing, it might be a good time to start building.

Of course, the issues are slightly different in New York City.

Rents in Manhattan have not softened. In fact, they increased in June. But vacancy has also increased,.Plus, there’s only so much rents can go up.

“I think the prices are definitely at what I call a breaking point,” said the Corcoran Group’s Gary Malin. “And, although the rental market is robust, there’s still a higher vacancy rate than you would normally see at this time of year. It’s over 2 percent [in Manhattan and Brooklyn] and the reason for that has nothing to do with lack of demand or desire. It has everything to do with pricing.”

Building in New York City involves its own set of unique problems. Aside from higher labor and land costs, the lack of affordable housing incentives has really hurt development. In 2022, when 421a was still in effect, the city offered some 35,640 multifamily permits, according to an Avison Young analysis, but last year there were only 12,492 permits issued.

It’s enough to make you give up on New York and move to New Jersey.

And, indeed, if you did that, there’s some pretty snazzy development underway in Jersey City.

If you’re looking for something to read on this leisurely Sunday afternoon, check out the interview with Kushner Companies’ Laurent Morali and Nicole Kushner Meyer who discuss their $1 billion project in the Garden State. (And, for the record, Meyer is the wife of Observer Media Chairman Joseph Meyer.)

See you next week!