Let’s start the week with some good news, shall we? 

First of all, REIT performance is up. The S&P U.S. Equity All REIT Index rose 1.3% last week, as 13 of the 18 property types posted gains. That’s a bit below the 1.6% the overall S&P 500 rose but is an improvement since the sector has struggled for the last two-plus years. 

And last week was huge for dividend increases — seven REITs raised their dividends, the most in a single week in more than a year, according to Hoya Capital. One bright spot was cannabis REITs. There are two, and both raised their quarterly dividends by a sizable amount, Innovative Industrial by 4% and NewLake Capital by 5%.

Fifty REITs have increased their payouts this year, while only nine have reduced them.

It’s also worth noting that mortgage REITs are doing surprisingly well. The Mortgage REIT Index matched the S&P with a 1.6% increase of its own, and three mortgage REITs are increasing their dividends.

And if you’re sick of all the headlines about CRE being a giant risk to the health of the banking industry, this one’s for you: Morningstar says the problem is overblown. 

Yes, banks’ exposure to real estate is above comfortable thresholds. And yes, falling values, particularly in the office market, are putting strains on property loans. But wait … “Altogether, this scenario leads to some frightening figures that don't take an important factor — time — into account,” Morningstar reports. 

Maturities are spread out over years, giving the market time to recover, interest rates to come down and deals to get struck.

Morningstar also said all the bank exposure analysis is done with the Federal Financial Institutions Examination Council Central Data Repository's database, but looking at banks' filings with the Securities and Exchange Commission shows that office accounts for 4.3% of banks’ overall loan portfolios. 

All in all, the situation may be slightly less dire than feared. Happy Monday, y’all! 

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

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This Morning’s News 

Build-To-Rent Boom Keeps Booming (RealPage): Roughly 84% of the 119,445 BTR units under construction as of May were in the South and West regions of the United States. Get more data.

Cricket Expansion … In the U.S.? (NYT): Franchise owners in Major League Cricket are planning dedicated stadiums for the world’s second most popular sport in cities across the U.S. Dig into the trend.

Thompson Thrift's Goes High-End (CoStar): Thompson Thrift raised $250M for its sixth development fund. The capital injection will finance Class-A multifamily development projects. Look into the investment strategy.

Today’s Deep Dive: LGBTQIA+ Bars Find Resurgence As Queer Culture Shifts, Comes Under Threat

After nearly two decades of decline, the number of bars and restaurants catering to members of the LGBTQIA+ community is ticking back up.

This shift has occurred despite a challenging, sometimes dangerous landscape for queer communities in particular and an uncertain playing field for the broader economy and real estate industry. 

The Human Rights Campaign last year declared a state of emergency for the LGBTQIA+ community because of a spike in anti-LGBTQIA+ legislation.

But gay bars are expanding even in states passing those kinds of laws, and the number of these establishments grew by 10% nationwide from 2021 to 2023.

“Our queer spaces across the country are incredibly important,” said Danielle Spring, co-owner of Femme, a lesbian restaurant and bar in Worcester, Massachusetts.

“I’m in my 40s, and when we were growing up, we didn't have safe spaces. We invite our patrons to come as they are, no matter how they identify,” Spring told Bisnow Bay Area Reporter Stacey Corso. “We provide the space for them. Anyone who walks in the door, we embrace them.”

Read the full story here.

Synergy's David Greaney On Buying Office Right Now (Bisnow): David Greaney of Synergy Investments is buying downtown office buildings, flying counter to broader market skepticism. Greaney emphasizes the long-term value of prime office locations and the potential for adaptive reuse and redevelopment. Read the in-depth interview.

Condominiums Hit Hard By Spike in Insurance Costs (WSJ): Condominium owners and associations are facing a steep rise in insurance premiums, with some seeing costs double or even triple. Factors driving the surge include increased claims from natural disasters, rising construction costs and changes in underwriting practices. Read the report.

NFL’s Chiefs Relocating? (AP): Kansas lawmakers are actively working to lure the Kansas City Chiefs about 25 miles west across the state line from Missouri by authorizing state bonds for stadium construction. See where the money would come from.

New Platform To Operate Express, Bonobos In U.S. (Phoenix): A new operating platform called Phoenix, led by WHP Global and involving Simon Property Group and Brookfield, has received court approval to acquire and operate the U.S. operations of Express and Bonobos. This move aims to stabilize and grow these retail brands post-bankruptcy. Discover more about what this means for the brands.

Home Swapping Is Becoming A Thing (BNN Bloomberg): Inflation, frustration with short-term rental regulations, remote work and growing hotel rates are all contributing to the growth of an often overlooked segment of the travel industry: home-swapping. Read more here.

Prologis Launches First Battery Storage Project (Bisnow): Prologis has unveiled its inaugural battery storage project in Texas, addressing the surging demand for reliable power solutions. The facility, located in a key industrial area, is designed to enhance energy resilience and support the grid during peak usage times. This initiative is Prologis' entry into the energy storage market, aiming to provide sustainable power solutions for its extensive property portfolio. Discover more about this project.

Developer's Banking Info Exposed (The Star): One of Canada's largest builders had its banking information posted online by the city of Toronto, which has been subject to several data breaches lately. The city's public library recently endured a months-long cyberattack, and hackers recently targeted the Toronto Zoo. Read more about the attack.

Wells Fargo Faces Multimillion-Dollar Losses With Bilt Partnership (WSJ): Wells Fargo is reportedly losing millions of dollars through its partnership with rental rewards proptech company Bilt. The losses are attributed to the higher-than-expected redemption rates of Bilt's credit card points, which can be used to pay rent. See what went wrong.

Madison Capital, Coastal Investment Launch Car Wash Venture (Coastal): Madison Capital Group and Coastal Investment Co. have launched a new venture called Go Wash It, which aims to modernize the car wash industry with advanced technology and customer-centric services, targeting key markets for expansion. Learn more about car washes as an asset class.

Apartment Management Company To Pay $330K In Fraud Settlement (The Spokesman-Review): A Spokane-based apartment management company has agreed to pay nearly $330K to settle federal fraud allegations. The claims involved falsifying records to unlawfully obtain housing subsidies, leading to a federal investigation and subsequent legal action. Read more about the case and its implications.

Sports Replace Historic Vegas Properties (Seeking Alpha): "The Las Vegas Strip will look a little different soon, with the iconic Mirage only a few weeks away from being closed and the area around the former Tropicana Las Vegas property already being cleared out to make room for a major league baseball stadium," the story says.

Evergrande's Legal Scrutiny (The Globe and Mail): A law firm handling China Evergrande's liquidation is investigating potential claims against the developer’s service providers like auditor PwC as it looks to recoup creditors’ money. Get the global implications.

McDonald's Halts AI Drive-Thru Test (Restaurant Business): Amid industry concerns about order accuracy when using AI, McDonald's is ending its AI experiment with IBM at restaurant drive-thrus. Read more here.

BPDA Approves Net-Zero Emissions Requirement (Bisnow): The Boston Planning & Development Agency has approved a zoning regulation requiring all new developments to achieve net-zero carbon emissions. The regulation affects all major new construction and renovation projects, setting a new standard for environmental responsibility in urban development. Learn more about the implications of this policy.

Houston Airports Launch Autonomous Air Taxis (Wisk): Houston airports are partnering with Wisk Aero to introduce autonomous air taxis to the region, marking a significant advancement in urban air mobility. This initiative aims to provide efficient and eco-friendly transportation options to enhance regional connectivity. Explore the details of this high-flying project.

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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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