Federal authorities are out in force lately.

TD Bank is reportedly looking at $3B in penalties and a cap on how much it can grow in the U.S. under a settlement agreement with the Office of the Comptroller of the Currency and the Treasury’s Financial Crimes Enforcement Network over TD Bank’s apparent failure to limit money laundering by drug cartels. 

TD Bank is also expected to plead guilty to criminal charges brought by the Justice Department after it was discovered a Chinese criminal organization was laundering millions of dollars in fentanyl sales through the bank, including by bribing employees. 

The federal government has made a crackdown on money laundering a focus for the last three years, and much of the attention has been on real estate. FinCEN released new guidance in February for residential brokers to flag suspicious all-cash property purchases, and a rule targeting commercial real estate is on its way.

The government is already moving to seize more properties that may have been purchased with ill-gotten funds (such as seizing the former Mongolian prime minister’s New York real estate in March), and it is cracking down on funds that accepted dirty money (such as making Sefira Capital forfeit $29M in assets for not flagging suspicious sources of its investors’ capital).

In other regulator crackdown news this morning, the Federal Trade Commission is forcing Marriott International and Starwood Hotels & Resorts to improve their data security after finding they didn’t have reasonable safeguards, which allowed three large data breaches from 2014 to 2020. In a separate settlement, Marriott is paying $52M to 49 states and D.C. over similar allegations of lax data security.

And one enforcement action is coming to an end: Freddie Mac is taking Meridian off its blacklist, allowing those brokers to resume business with the GSE next year. Meridian was banned from doing Freddie deals after an investigation uncovered some brokers were falsifying financials to get their clients bigger loans. 

The mortgage broker overhauled its controls, including hiring its first chief risk officer and implementing policies requiring brokers to get internal approval for certain deals. For its part, Freddie is requiring extra due diligence for Meridian loans. Fannie Mae still has Meridian on its blacklist.

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

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On Our Radar

• Hurricane Milton mowed through Florida overnight. Millions of people are without power, and search and recovery efforts are underway after the storm pushed upward of 15 feet of storm surge across the region, churned out at least 116 tornado warnings and destroyed the roof of the Tampa Bay Rays’ stadium. The next few days are pivotal as first responders, residents and business owners assess the damage and take stock of what’s left — and what’s next. The 2024 hurricane season was predicted to be one of the worst on record, and sadly, after a slow start, no one is feeling that pain more than Florida. This year has now tied with five other years for the most hurricanes to make landfall in Florida in a single season. 

• Inflation climbed unexpectedly, and jobless claims jumped after Hurricane Helene. The consumer price index rose 0.2% in September, pushing annual inflation to 2.4%, slightly above expectations. Core inflation increased 0.3%, bringing the yearly rate to 3.3%. Food prices were a key driver, rising 0.4%, while shelter costs increased 0.2%. Jobless claims spiked to 258,000, the most since August 2023, reflecting Hurricane Helene’s impact. Despite the inflation uptick, markets are betting on a Fed rate cut in November as officials see signs of easing price pressures.

• Catastrophe bonds face major losses after Hurricane Milton. Milton’s projected $100B in damage could trigger heavy losses for catastrophe bond investors, similar to Hurricane Ian’s $60B impact in 2022, Business Insider reports. Cat bonds, which transfer weather risks to investors for high returns during calm seasons, are now under pressure. The Stone Ridge Reinsurance Risk Fund dropped 7% this month, while the Pioneer Cat Bond Fund is down 2%. Despite improved reinsurance terms post-Ian, Milton’s severity could still deal a major blow to the sector.

• A word from Bisnow on the last few weeks of storms … We hope everyone who was in Hurricanes Milton’s and Helene’s paths is safe. We know these are hard times. Please let us know what you are seeing out there and how you and yours — and your businesses — are faring. Write to us at firstdraft@bisnow.com.

Today’s Deep Dive: As Data Centers Zap Power, Some Pols Ponder The Unthinkable: Pulling The Plug

Texas loves to talk about how business-friendly it is. 

But it turns out even Texas has limits — and data centers are testing them. 

It mostly comes down to power — the electric kind. Demand on Texas’ self-contained grid, which has already infamously struggled, is set to nearly double over the next six years. Data centers are a major part of that, especially as Texas has become the crypto mining capital of the U.S.

“I’m more interested in building the grid to service customers in their homes,” Texas Lt. Gov. Dan Patrick said on social media platform X after the Electricity Reliability Council of Texas presented new and startlingly higher demand projections.

“We want data centers, but it can’t be the Wild Wild West of data centers and crypto miners crashing our grid and turning the lights off.”

Read the full story here.

This Morning’s News

DATA CENTERS — OpenAI Says Microsoft Can’t Keep Up (Bisnow): OpenAI is moving beyond its relationship with Microsoft to build its own data centers. The parent of ChatGPT said Microsoft is moving too slowly to meet its needs. A partnership inked between the two firms last year mandates Microsoft remains OpenAI’s exclusive cloud infrastructure provider. Get background about the partnership and how OpenAI is moving forward without the tech giant.

SUSTAINABILITY — CBRE Bets On Clean Energy With New Acquisition (CBRE): CBRE acquired NRG's renewable advisory group to enhance its sustainability services and target clean energy opportunities for its real estate clients. The combined division includes over 1,000 employees. Get more details about the deal.

HOTELS — Strategic Hotels Secures $1.6B Refi (CO): Strategic Hotels refinanced its U.S. luxury hotel assets with a $1.6B loan led by Deutsche Bank and Bank of America. The assets are valued at $4B. The refi is for nine hotels across four states.

OFFICE — Office Woes Drive Spike In Special Servicing Rate (Trepp): Special servicing rates for all five major property types increased in September, led by the office sector, which surged 67 basis points to 12.58%. Access the latest office report.

FINANCE — Harrison Street Fund Eyes $7B In Buying Power (Multihousing News): Harrison Street's latest opportunistic real estate fund closed with $2.5B in equity, giving it over $7B in purchasing power for new investments. Here's what the fund is going towards.

RETAIL — MCB Raises Offer To Buy Whitestone REIT (Bisnow): Baltimore-based MCB Real Estate has made a second attempt to buy Houston-based shopping center owner Whitestone REIT, this time for $15 per share all cash. It had offered $14 per share in June but was rebuffed by Whitestone, and the new price is an 11.4% premium to Whitestone’s last trading share price. Here's what you need to know about the potential acquisition.

MULTIFAMILY — Multifamily Demand Rebounds (CoStar Group): Q3 saw 176,000 multifamily units absorbed, the highest number since the third quarter of 2021. This was just under the 178,000 new units that delivered in Q3, the smallest supply-demand gap in three years. Dig into the numbers.

HOUSING — Asking Rents Edge Up 0.6% YOY (Redfin): Year-over-year rents may have increased, but month-over-month rents were down 0.2%, according to Redfin. Asking rents fell across all bedroom counts for the second time in three months, which hadn’t happened in more than four years prior to July. See how the major U.S. metros stack up.

INDUSTRIAL — Vacancy Growth Slows In Q3 (CoStar): The Q3 U.S. industrial vacancy rate increased from 6.49% to 6.63%, the smallest vacancy increase since late 2022. Dive into CoStar's data.

FINANCE — German Bank Cuts U.S. Office Loans After Crisis (BNN Bloomberg): PBB is scaling back on U.S. office loans. The U.S. accounted for about 12% of its $31.7B performing real estate loans as of June. Read more here.

RETAIL — Ghost Of Spirit Halloween Visits Christmas Spirit (Bisnow): Tim Burton would be proud: In a page straight out of The Nightmare Before Christmas, Spirit Halloween is looking to turn some of its pop-up Halloween shops into Christmas stores. Its initial pilot program encompasses 10 Spirit Christmas stores, mostly in the Northeast, with most opening in November and operating through the holidays. It's the most wonderful time of the year.

SFR — Renters Want Pet Policies Over Space (Point 2 Homes): A new survey shows pet accommodations are more valued than extra space by single-family home renters. See what other amenities renters are looking for.

DEVELOPMENT — NFL Teams Eye Domes (Bloomberg): Of the NFL's 32 teams, 10 play in climate-controlled stadiums with a roof. Several more, including in Cleveland and Chicago, are planned, as owners seek all-weather, all-season usability for their multibillion-dollar venues. Take a look at renderings for the Browns' new stadium.

HOUSING — Airbnb Crackdown Fuels Shadow Market Boom (New York Post): The home-sharing crackdown in NYC has created an underground market, with startups jumping in to meet demand. One of the startups, Ohana, which has raised money from former Airbnb execs, has recruited more than 1,200 hosts and cleared more than $2M in rent payments. Have you heard of HostU or Friendbnb?

ESG — Walmart Expands Solar Projects (Walmart): Walmart is investing in 3M SF of clean energy projects spanning multiple states and 74 sites. The commercial rooftop projects are under construction and expected to start producing energy this year and next. Learn more about the projects.

RETAIL — 7-Eleven Parent Restructuring to Block Takeover (Costar): 7-Eleven parent Seven & I is splitting into two entities to fend off a hostile bid from Circle K’s parent company, Couche-Tard. Couche-Tard had reportedly increased its offer to buy the company to $47B, a 21% increase over its earlier offer. Read more here.

LEGAL — Bribery Scandal In Atlanta's Permitting Department (Bisnow): Three Atlanta city planning employees allegedly accepted thousands of dollars in bribes to fast-track permit applications. The Office of the Inspector General, which referred the issue to the district attorney for potential criminal charges, did not name the properties, but Bisnow dug through records to uncover them. Discover what we found.

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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.