—— Brookfield Defaults on Two LA Office Towers; Sinochem to Sell Pirelli Stake; US Retail Sales Break Records; 40% of Global Workers Near Burnout; US Homebuilder Confidence Rises; Iranian Billionaire Bids for Spurs; Law Firms Embrace ChatBot Tech
1. Brookfield Defaults on Two LA Office Towers
According to Brookfield’s latest filing, the company will default on loans for two office buildings in Los Angeles, the second-largest city in the U.S., due to collapsing demand for office space.
The two properties are part of Brookfield’s DTLA Fund Office Trust Investor portfolio. Gas Company Tower and 777 Tower defaulted on loans of $465 million and $290 million, respectively. In November, Brookfield had warned that the two assets were at risk of default.
Filings show Brookfield had the option to extend the repayment deadlines for both loans but chose not to exercise it.
Barclays analyst Lea Overby noted that the DTLA fund’s decision to default could impact other debts in the portfolio.
In Q4 2022, vacancy rates for office buildings in downtown Los Angeles reached 22.7%, and surrounding properties have also seen sharp value declines.
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2. Sinochem to Sell Pirelli Stake
Sources revealed that China’s state-owned Sinochem Holdings is considering selling its 37% stake in Italian tire maker Pirelli as part of an effort to optimize its global asset portfolio.
Sinochem acquired the stake in 2015 in a deal worth $8 billion.
Potential buyers include private equity firms. Sinochem may sell part of the stake or gradually exit over time.
The Chinese government is reviewing assets held by large state-owned conglomerates like Sinochem and urging the divestiture of non-core holdings. Following the news, Pirelli’s stock fell 4.3% today.
The challenge: Pirelli’s net assets are $3.6 billion underwater. Its heavy debt and high acquisition financing costs make the sale more difficult.
Listed in Milan since 1922, Pirelli now sells more than tires—it’s expanded into high-tech sectors as well.
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3. US Retail Sales Break Records
According to data released today by the U.S. Department of Commerce, U.S. retail sales in January rose by 3% month-over-month, marking the highest growth since March 2021 and reversing the previous month’s 1.1% decline.
Excluding gasoline and automobiles, total retail sales rose by 2.6%, also a two-year high, though these figures have not yet been adjusted for inflation.
All 13 retail categories posted increases last month, with the biggest gains coming from motorcycles, furniture, and restaurants.
The report showed that auto sales rose by 5.9% in January, while gas station sales remained largely unchanged.
The latest report indicates that the U.S. economy had a strong start in early 2023, with consumers continuing to purchase various goods and services despite persistent inflation and surging borrowing costs.
Adjusted retail data that accounts for inflation will be released at the end of this month, which will offer a clearer view of the state of the U.S. economy.
All 13 retail categories posted gains, with department stores showing especially strong growth.
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4. 40% of Global Employees Near Burnout
Future Forum, a research group backed by Salesforce-owned Slack, released its latest workforce survey report this week.
The report found that over 40% of white-collar workers believe their jobs are pushing them to the brink of mental breakdown — the highest percentage since the pandemic began. While U.S. workers fare slightly better, the “burnout rate” is higher and rising faster outside the U.S.
Researchers at Future Forum pointed to economic uncertainty, fear of layoffs, and employers’ increasing pressure to return to the office as major sources of physical and mental stress for white-collar employees — with women and younger workers especially affected.
The report also noted that large employers use an average of 211 different software tools, increasing the burden on employees to continually learn new systems.
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5. US Homebuilder Sentiment Rises
According to the latest data from the National Association of Home Builders (NAHB), the homebuilder sentiment index rose by 7 points this month to 42, exceeding economists’ expectations of 37 and marking the largest increase since mid-2020.
The sentiment index has now reached its highest point in nearly five months, driven by optimism around future sales and an anticipated uptick in homebuyer traffic. After a difficult 2022 for the housing sector, builders are hopeful for a robust spring selling season.
Another dataset released this Wednesday shows that loan costs rose again last week, causing mortgage applications to decline by 5.5%. The Mortgage Bankers Association (MBA) reported that the average rate on 30-year fixed-rate mortgages increased by 0.21 percentage points to 6.39%, the largest four-month rise.
Mortgage rate volatility has decreased compared to previous months, and homebuyers are gradually returning to the market.
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6. Iranian Tycoon Bids for Premier League’s Spurs
Two people familiar with the matter revealed that Iranian billionaire Jahm Najafi is considering a $3.75 billion bid to acquire Premier League football club Tottenham Hotspur.
Najafi, chairman of MSP Sports Capital, is currently in talks with an investor consortium regarding the deal’s structure and is expected to meet with Spurs owner Joe Lewis and chairman Daniel Levy in the coming weeks.
Reportedly, MSP and its partners plan to purchase a 70% stake, while the remaining 30% would be acquired by investors from Abu Dhabi.
Tottenham currently has $750 million in net debt, meaning Najafi’s bid values the club’s equity at $3 billion.
In 2000, billionaire Joe Lewis and Daniel Levy acquired a 26% stake in Spurs for £21.9 million. Since then, they’ve helped the club strengthen its financial controls, build a new stadium, and secure participation in the Premier League.
Due to Tottenham’s long championship drought, fans have grown increasingly frustrated.
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7. Law Firms Adopt ChatBot Technology
Recently, Allen & Overy — one of the U.K.’s Magic Circle law firms — announced plans to deploy an AI chatbot to assist lawyers in drafting contracts, aiming to use the trending technology to benefit both employees and clients.
The London-based firm told the Financial Times that since November last year, it has been testing an AI tool named Harvey, focused on generating merger and acquisition documents and client correspondence.
Nearly 3,500 employees at the firm now have access to the tool. Allen & Overy is the first among the Magic Circle firms to adopt generative AI technologies.
Harvey is powered by GPT technology developed by OpenAI. The startup behind Harvey received a $5 million seed investment led by OpenAI last year.
ChatBot technology has recently become a hot topic, with Google and Microsoft leading the race to develop and enhance such tools.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.