Term Sheet: No near-term rate relief seen; Apollo’s $400m hotel loan; CMBS delinquencies jump

The Federal Reserve is expected to follow a higher-for-longer interest rate strategy; Apollo Global finances QIA's acquisition of the Park Lane hotel in New York; the jury is still out on the impact of the SEC's new rules for private fund advisers on the commercial real estate space; and more in today’s Term Sheet, exclusively for our valued subscribers.

They said it

“We’ll raise the bar for one of New York City’s signature industries and breathe new life into a key waterfront site” 

Michael Franco, president of Vornado, told the Wall Street Journal on Wednesday. He was speaking about the New York-based real estate investment trust’s partnership with Blackstone to build the city’s first production studio complex on Pier 94 – a sign of the times for niche asset classes

What’s new

Apollo Global Management: provided $400 million in financing for the acquisition of New York’s Park Lane Hotel (Source: Real Estate Capital USA)

Digging in its heels
The Federal Reserve chair Jerome Powell underscored last week at the central bank’s annual Jackson Hole Economic Symposium that there are no plans to cut interest rates until inflation is reduced to its 2 percent target, citing the continued strength of the US economy. This means the Federal Reserve will likely maintain a hawkish stance on monetary policy for the near-term, according to advisory Newmark’s 2Q 2023 Capital Markets report, released last week. “The Federal Reserve has been clear that it does not anticipate any rapid reduction in rates, a message that financial markets have resisted taking to heart,” the report stated.

Apollo’s Park Lane play
Apollo Global Management, via Athene Annuity and Life Company, provided $400 million of financing for the Qatar Investment Authority’s acquisition of New York’s Park Lane Hotel from Mubadala Investment Company for $622.9 million. The financing on the luxury hotel at 36 Central Park South replaces an existing $425 million loan from Deutsche Bank and proves the mantra commercial real estate market participants regularly echo today: that financing is available for the right projects. The seller, New York-based Witkoff Group, acquired the property for $660 million in 2013.

Watch this space
The Securities and Exchange Commission last week adopted new rules for private fund advisers investing under the Investment Advisers Act of 1940. The widely anticipated rules put into place requirements that include requiring private fund advisers to publish quarterly reports and annual audits of each of their funds to increase transparency for investors. The ultimate impact on commercial real estate is not yet clear, per a release from the NCREIF PREA Reporting Standards Committee. NCREIF, the Chicago-based trade association for real estate investment fiduciaries, will be working to figure out the full impact and will release guidance and best practices in the coming weeks.


The song remains the same
AEW Capital Management last week released a report stating that Europe’s key real estate markets face a €93 billion debt funding gap in the 2023 to 2026 period. The analysis, published this week by affiliate Real Estate Capital Europe, expands on a January report from the Boston-based investment management company that aimed to provide concrete metrics around the expected funding gap. The report also tackled another topic – the health of the European banking system.

“We posed the question: does Europe have a systemic banking issue? Based on our analysis, we think that it probably does not,” said Hans Vrensen, head of research at strategy for the region at AEW. While focused on Europe, Vrensen’s conclusions are likely to resonate with US lenders and borrowers.

Data snapshot

Delinquency jump
The US commercial mortgage-backed securities delinquency rate increased to 4.16 percent in August, with a 23-basis point month-over-month increase, according to data from New York rating agency KBRA.


NewPoint expands origination team 
NewPoint Real Estate Capital this week added two senior origination professionals to its team. The Irvine, California-based commercial real estate finance company hired Laurie Morfin as a senior managing director and David Bleiweiss as a managing director. The duo joins from Bellwether Enterprise and Berkadia, respectively.

Borrower’s corner

Working with sellers
Tourmaline Capital Partners, which is building a portfolio of class A offices, has been able to get some deals done, despite a choppy capital market for the sector, by working with sellers. “Seller financing is what is facilitating some of the deals we are doing,” said Brandon Huffman, managing principal of the Philadelphia-based firm, in a story posted this week on Real Estate Capital USA. If seller financing is not an option, Tourmaline is able to take a different tack. “This means we will price the asset a lot differently and take the more expensive debt,” he said.

Today’s Term Sheet was prepared by Randy Plavajka, with Anna-Marie Beal and Samantha Rowan contributing