—— US New Home Construction Slows Sharply; Carvana Stock Soars on Debt Restructuring; Sovereign Wealth Funds Become PE’s Best Partners; Goldman Sachs Profit Plunges 58%; $24.8 Billion in US Office Buildings Distressed; Blackstone Nears $1 Trillion AUM; Kim Kardashian’s Skims Raises $270 Million
1. US New Home Construction Slows Sharply
According to data released today by the US government, new housing starts in June fell 8% to an annualized rate of 1.43 million units, with single-family homes seeing the most significant decline.
Compared to May’s 16% surge, the pace of construction slowed noticeably. The last time such a large drop occurred was in July 2022.
Economists stated that the slowdown was due to developers rushing to complete or sell existing projects. The good news is that demand for new homes remains strong due to the shortage of existing homes.
June’s drop marks the sharpest decline in new home starts in over a year as developers focus on clearing existing projects.
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2. Carvana Stock Soars on Debt Restructuring
Used car retailer Carvana announced today that it reached a debt restructuring agreement with its creditors, sending its stock surging by as much as 48% pre-market.
Carvana plans to sell $1 billion in new shares and eliminate 83% of its loans maturing in 2025 and 2027. This restructuring will save the company $430 million in annual interest expenses over the next two years.
Carvana’s major creditors include Apollo Global Management.
During the pandemic, Carvana aggressively expanded using leverage, but as used car prices fell, it faced a severe debt crisis.
Following the restructuring, Carvana will reduce its total debt by $1.2 billion.
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3. Sovereign Wealth Funds Become PE’s Best Partners
According to Global SWF data, in the first half of this year, Gulf sovereign wealth funds jointly invested $17.2 billion with private equity giants like KKR and Brookfield, up 24% year-over-year.
Elizabeth Todd, a partner at Ropes & Gray, explained that sovereign funds are attractive partners because they have substantial, flexible capital.
With high interest rates pressuring returns, private equity firms are reducing leverage in deals, leading to lower LBO returns. At the same time, sovereign funds are increasingly interested in private investments, creating a mutually beneficial dynamic.
Sovereign funds boost private equity returns, while PE firms benefit from lower funding costs.
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4. Goldman Sachs Profit Plunges 58%
Goldman Sachs reported today that its net profit plunged 58% in the second quarter, hit by a slump in investment banking, markdowns on real estate holdings, and goodwill impairments.
The critical profitability metric — return on equity (ROE) — fell to 4%, the worst among major banks.
Investors are hopeful that Q2 represents the trough for Goldman Sachs and that it will soon return to stable profit growth.
Goldman delivered the weakest revenue performance among major banks this quarter.
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5. $24.8 Billion in US Office Buildings Distressed
According to MSCI Real Assets, by the end of Q2, $24.8 billion worth of US office buildings had fallen into distress, surpassing troubled hotel and retail properties. Compared to Q1, distressed office property values rose 36%.
At the end of June, total distressed US commercial real estate rose 13% quarter-over-quarter to $72 billion, including $22.7 billion in retail and $13.5 billion in hotel properties.
Office property values fell 27% in the first half of the year, outpacing the 12% decline for all commercial real estate.
Even giants like Blackstone and Brookfield chose to stop paying interest on loss-making office assets.
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6. Blackstone Nears $1 Trillion AUM
Tomorrow, private equity giant Blackstone will report its latest quarterly results. Analysts expect its assets under management (AUM) to surpass $1 trillion.
Founded in 1985 with just $400,000, Blackstone evolved from pure buyouts into a powerhouse covering every corner of financial markets. Its AUM has doubled over the past five years.
CEO Steve Schwarzman said the firm once had just one private equity fund, but now offers 60 different investment strategies.
Reaching $1 trillion in AUM is a milestone few private equity firms could ever hope to achieve.
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7. Kim Kardashian’s Skims Raises $270 Million
Kim Kardashian’s apparel brand Skims has secured a new $270 million funding round, bringing its total capital raised to $670 million.
Investors in the round included D1 Capital Partners and Imaginary Ventures. Skims’ valuation reached $4 billion in this latest round.
Management said the funding would support new product categories and the development of physical retail stores. CEO Jens Grede revealed that Skims’ revenue could surpass $750 million this year.
Skims’ first permanent retail location is expected to open next year in Los Angeles, with plans for a major retail network expansion.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.