Let’s start with some good news this morning: Publicly traded REITs saw their returns improve by 5.3% in May, a welcome relief after April’s losses. The FTSE Nareit All Equity REITs Index is still down 4.3% year-to-date, but that’s a huge improvement over the 9.1% decline it posted a month earlier.

Now the bad: Moody’s is considering downgrading the debt ratings for six U.S. regional banks because of their CRE exposure. It put First Merchants Corp., F.N.B. Corp., Fulton Financial Corp., Old National Bancorp, Peapack-Gladstone Financial Corp. and WaFd on review for downgrade.

And finally, the (carbon) neutral: The Department of Energy released a new definition of a zero-emissions building Thursday: It’s highly energy-efficient, free of on-site emissions from energy use (i.e., is all-electric) and powered solely by clean energy. 

Various sustainability-focused associations applauded the definition as practical and unambiguous, including the USGBC, which is developing v5 of LEED and said it will align its certification to this guidance. 

See y’all on the flip side of the weekend.

— Mark F. Bonner, Catie Dixon, Kayla Carmicheal and Jay Rickey 

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On Our Radar

• The U.S. overachieved on jobs in May, but unemployment is creeping up. That’s the lowdown from the jobs report this morning, which showed the U.S. added 272,000 jobs to nonfarm payrolls — significantly more than the 180,000 economists expected. Meanwhile, the unemployment rate ticked up to 4% from 3.9% the month prior.

• Sen. Elizabeth Warren’s message to Fed Chair Jerome Powell: “Get with the program.” She is among a growing chorus of U.S. lawmakers publicly calling for the Fed to follow in the ECB’s footsteps and cut rates. 

• The 51st Daytime Emmy Awards are at 8 p.m. ET. After all these years, it’s somehow still Days of Our Lives vs. The Bold and the Beautiful vs. General Hospital.

• Bon Jovi's 16th studio album, Forever, comes out today. Gen Zer Kayla didn't know the band was still around. Should we collectively take her down, Dead or Alive?

• The Killers' album Hot Fuss turns 20 today. Hey millennial, Smile Like You Mean It, because this is classic rock now.

• The Stanley Cup Final begins Saturday at 8 p.m. ET, with the Edmonton Oilers taking on the Florida Panthers. Canada may get the interest rate cuts, but analysts think the U.S. team will take this victory.

This Morning’s News

KKR REIT Implements Strategy To Stabilize NAV (Investment News): KKR's REIT is taking steps to stabilize its net asset value amidst market fluctuations. It is infusing $50M into KKR Real Estate Select Trust, and some of its affiliates have committed to cancel up to 7.7 million shares in 2027 if needed to support an NAV of $27 per share. It is at $25.56 now. Learn how KKR investors are getting creative. 

Meridian Appoints Chief Risk Officer Post-Blacklist (WSJ): After being blacklisted by Fannie Mae and Freddie Mac, Meridian has named a new chief risk officer to bolster its risk management strategies. Melissa Martinez joins from CoreLogic. Get the details behind the new hire.

Today's Deep Dive: With Billion-Dollar Storms Bearing Down, Property Owners In High-Risk States Search For Insurance Options

Severe weather is ripping through the balance sheets of property owners as insurance costs are set to double by 2030 — if you can get it at all. Some insurers are already walking away from high-risk areas. 

“The rise in cost to insure real estate is not going away anytime soon, realistically,” said Tim Coy, senior research leader for commercial real estate at Deloitte.

Climate change and inflation have been a double whammy for property insurance costs, and no relief is in sight. Searching for solutions, property owners are turning to alternatives like risk-pooling or insurers of last resort. 

These strategies can allow owners to keep doing business in popular states like California, Florida and Texas, but they come with uncertain costs and degrees of effectiveness.  

Read the full story here.

Smart Glass Maker Gauzy Underwhelms In IPO (CTECH): Gauzy hit the Nasdaq with a disappointing valuation of $244M and raised $75M in its IPO. It was aiming for a $500M valuation. Read more about the IPO.

Real Estate Investors Face Losses from Wall Street-Fueled Bets (Bloomberg): Personal real estate investors who went through syndicators are facing significant financial losses from high-risk CRE ventures. Multifamily is the highest risk with more than $56B of potential distress. Read more about the syndication fall-out.

NBA Finals Brings Another Big Boost To TD Garden Businesses (Bisnow): The bull run for Boston’s Bruins and Celtics are great news for bars and restaurants around TD Garden, which see traffic and sales tick up with every playoff game. See what has bars cheering. 

Brookfield REIT Expands Portfolio (Brookfield REIT): Brookfield REIT has acquired three residential properties valued over $150M in the Sun Belt. Learn about the buildings.

Blaze Pizza Relocates HQ To Atlanta (Restaurant Dive): Blaze Pizza is set to move its headquarters to Atlanta, aiming to tap into the city's vibrant business environment and workforce. See how the chain's growth plans fit in.

Toyota Subsidiary Shuts Down Largest U.S. Plant (IEN): Toyota will close its largest plant in the U.S., leading to the loss of 1,300 jobs. The facility for Hino Motors Manufacturing in Marion, Arkansas, opened in 2006 and accounts for 70% of the company’s U.S. workforce. Get more details about the facility.

A Pickleball Court In Every Development (The Sports Facilities Cos.): More than 90% of community planners and facility developers are putting pickleball courts into their feasibility studies as the demand for pickleball facilities has reached a new all-time high in 2024. Learn more in the report.

Federal Realty Sells Iconic Santa Monica Property (Federal Realty Investment Trust): Federal Realty Investment Trust has sold its Third Street Promenade portfolio, a prime eight-building retail property totaling 185K SF in Santa Monica. The sale brought in $120M of proceeds. Here are the property's specs.

Philly's One-Time Most Expensive Office Building Fails To Sell At Auction (Bisnow): The former GlaxoSmithKline building in Philadelphia’s Navy Yard once set a record for the most expensive Philadelphia office sale ever completed, but it failed to attract a minimum bid in an auction this week. Get the details on the failed auction.

Hotels’ Inflation Impact Is Bifurcated (CoStar): Hoteliers across the U.S. are grappling with rising inflation, which puts additional pressure on their profitability as costs outpace revenue growth. Upper-tier properties have seen demand improve 2.1% and RevPAR rise 1.8% this year, but lower-quality. Discover more challenges hotels are faced with. 

New Multifamily Proptech Partnership (SKBM Smart Technology): SKBM Smart Technology joined forces with PropTech IQ to drive the adoption of property technology in the multifamily sector. Uncover how the JV plans to innovate the multifamily sector.

U.S. Home Equity Nears Record High (CoreLogic): CoreLogic reports that U.S. homeowners' equity reached near all-time highs in the first quarter, highlighting continued strength in the housing market despite economic headwinds. Homeowners with mortgages saw equity increase 9.6% annually, $1.5T worth of gains. Delve into the numbers behind the findings.

GM's Secret Sales Strategy: Costco Partnership (CNBC): General Motors leverages a unique partnership with Costco to boost sales of its new electric vehicles. Will it work?

TJX Cos. Ventures Into Mexico (Seeking Alpha): TJX Cos. is expanding into Mexico through a joint venture with Grupo Axo, aiming to capture a new market with its off-price retail model. Learn more about the expansion.

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The First Draft is produced by Director of Newsletters Jay Rickey, Managing Editor Catie Dixon, Editor-in-Chief Mark F. Bonner and Deputy Newsletter Editor Kayla Carmicheal, with an assist from ChatGPT. We’d love your feedback! Email us at firstdraft@bisnow.com. 

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