—— Brookfield Defaults on $161M Loan; New York Again Becomes the World’s Wealthiest City; Goldman Misses Fixed Income Boom; China’s Q1 GDP Exceeds Expectations; EQT Sells Inland Empire Warehouse; Nearly Half of Americans Use Buy Now, Pay Later; Big Four U.S. Banks Write Off $3.4 Billion in Bad Loans
1. Brookfield Defaults on $161 Million Loan
According to regulatory filings, prominent office landlord Brookfield Corp. has defaulted on $161 million in commercial mortgage loans tied to multiple office buildings, primarily due to rising vacancy rates driving down property values. Most of the buildings are located in Washington, D.C.
At present, special servicers are in discussions with Brookfield over possible next steps.
According to data from Green Street, office property values have fallen 25% over the past year. In March, a total of 4.8% of office CMBS were taken over by special servicers, up from 3.2% a year earlier.
Not long ago, Brookfield also defaulted on loans tied to two office buildings in Los Angeles.
Brookfield spokesperson Kerrie McHugh stated that the company prioritizes asset quality and that 95% of its properties are classified as Class A offices, with the defaulted assets representing only a small portion of its global portfolio.
Compared to a year ago, office property values in downtown Washington, D.C. have plunged 36%.
______
2. New York Again Becomes the World’s Wealthiest City
According to a new report from investment migration consultancy Henley & Partners, New York was home to 340,000 millionaires last year, making it once again the world’s wealthiest city.
Trailing New York were Tokyo, the San Francisco Bay Area, London, and Singapore.
Among the world’s 50 richest cities, the United States accounts for 10, while China has 5 on the list.
Between 2021 and 2022, the number of high-net-worth individuals in New York grew by 40%, a trend comparable to that in Singapore.
In the billionaire rankings compiled in the report, Silicon Valley and San Francisco lead with 63 billionaires, followed by New York, Beijing, Los Angeles, and Shanghai.
Compared to a decade ago, the number of millionaires in Russia’s capital Moscow has plunged 44%.
______
3. Goldman Misses Fixed-Income Opportunity
According to a statement released by Goldman Sachs today, the bank’s fixed-income trading revenue fell 17% in Q1, making it the only major bank in the industry to post a decline in this area. However, equities trading performed better than expected, softening the overall blow.
In addition, Goldman offloaded $4.9 billion of Marcus debt, allowing it to release $440 million in reserves. The bank’s overall net income beat expectations but was still down 19% year-over-year.
This morning, Goldman shares fell 3.1%. Year-to-date, the stock is down 1.1%, underperforming the S&P 500 Financials Index, which is down 2.9%.
Goldman failed to capitalize on a fixed-income boom and is currently the only bank in the sector to report declining trading revenue.
______
4. China’s Q1 GDP Beats Expectations
According to the latest data released today, China’s GDP rose 4.5% year-over-year in the first quarter, beating economists’ expectations and marking the fastest growth in a year.
In March, China’s total retail sales surged 10.6% year-over-year, also the highest since June 2021.
The positive data lays a solid foundation for the government’s full-year GDP target of 5% and highlights China and India as major global growth engines this year.
Citi and Société Générale have raised their full-year GDP growth forecasts for China to 6.1% and 6%, respectively.
Industrial output remains below pre-pandemic levels, and real estate investment continues to shrink, though housing sales are gradually recovering.
______
5. EQT Sells Inland Empire Warehouse
On April 7, a project company affiliated with real estate investment firm EQT Exeter sold a 596,000-square-foot warehouse in Riverside, California.
The property’s tenant, High Tech Logistics, acquired the asset — known as Alessandro Commerce Center — in a transaction valued at $78 million.
Société Générale provided $70 million in acquisition financing for the deal.
Since the 2009 recession, average industrial rents in the Inland Empire region have risen by 291%. In Q1 2023, local average rents hit $3.09 per square foot, up 25% year-over-year.
While the region’s industrial vacancy rate is just 2.8%, it is still up 1 percentage point from the previous quarter, largely due to the addition of 8.6 million square feet of new supply.
There are currently 30.9 million square feet of industrial space under construction in the Inland Empire.
______
6. Nearly Half of Americans Use “Buy Now, Pay Later”
According to data from the U.S. Bureau of Labor Statistics, grocery prices rose 8.4% in Q1. An increasing number of Americans now rely on “Buy Now, Pay Later” services to purchase necessities like groceries.
A new survey from LendingTree Inc. finds that nearly half of Americans have used apps such as Klarna. 20% used them to buy groceries, and 27% used them to bridge the gap until their next paycheck.
The “Buy Now, Pay Later” industry surged during the pandemic. In 2021, the top five U.S. providers issued $24.2 billion in loans, compared to just $2 billion in 2019.
The option allows consumers to split payments without interest and has become a popular alternative to credit cards in a high-interest environment.
______
7. Big Four US Banks Write Off $3.4 Billion in Bad Loans
According to recent data, the four largest U.S. banks wrote off a total of $3.4 billion in consumer bad debt in Q1, a 73% increase year-over-year, as more borrowers failed to make timely payments.
Bank executives believe current write-offs merely represent a return to pre-pandemic norms, now that government stimulus has ended.
Bank of America CFO Alastair Borthwick told reporters that the firm’s loan portfolio is showing no signs of stress.
BoA’s loan loss provisions came in lower than expected, thanks in part to reserve releases tied to corporate bonds. However, the bank still had to set aside an additional $360 million, driven by a rise in consumer loan balances.
The BoA CFO maintains that consumer spending remains relatively healthy.
______
This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.