— 77% of Americans Bearish on Economic Outlook; Apple Extends Chip Supply Deal With Qualcomm; J.M. Smucker Acquires Twinkies Maker; NYC Rezones Brooklyn Industrial Zone; Warner Bros. Sells and Leases Back Studio Lot; Citadel Halts Manhattan Expansion Plan; U.S. Banks May Lose $200 Billion
1. 77% of Americans Bearish on Economic Outlook
According to Bloomberg’s latest Markets Live Pulse survey, more than half of the 526 participants believe that in 2024, U.S. GDP growth’s key driver — personal consumption — will begin to decline.
Another 21% think the post-pandemic surge in personal consumption will end by the end of this year, due to high interest rates and the depletion of savings accumulated during the pandemic.
However, this summer’s U.S. stock market rally presents a sharp contrast with these survey results. If consumer spending shrinks over the coming quarters, the stock market could face a notable downturn.
Only 23% of survey participants are optimistic about the short-term U.S. economic outlook.
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2. Apple Extends Chip Supply Deal With Qualcomm
Today, semiconductor giant Qualcomm announced that it has extended its chip supply agreement with Apple for another three years, beyond the original expiration date at the end of this year.
The news triggered speculation that Apple’s in-house chip development has encountered delays. Qualcomm’s stock rose more than 8% today.
Qualcomm primarily manufactures modems, which are essential components for mobile connectivity and phone calls. Apple remains Qualcomm’s largest customer, accounting for nearly 25% of its revenue.
Financial terms of the new deal were not disclosed, but Qualcomm said the structure is similar to the 2019 agreement.
Since the iPhone 12 series, Qualcomm chips have supported 5G connectivity.
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3. J.M. Smucker Acquires Twinkies Maker
U.S. food and beverage giant J.M. Smucker Co. announced today that it has agreed to acquire Hostess Brands Inc., maker of the iconic snack Twinkies, for $5.6 billion.
Hostess shareholders will receive $34.25 per share in cash and stock. Excluding $900 million in debt, the deal offers a 22% premium.
In June, a Goldman Sachs report warned that the food industry may face slowing growth, with Campbell Soup Company and J.M. Smucker appearing particularly vulnerable.
For food conglomerates, constant innovation or acquiring other brands is key to retaining consumers.
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4. NYC Rezones Brooklyn Industrial Zone
After over a year of planning meetings, the NYC Department of City Planning (DCP) announced last Wednesday that it will rezone the industrial area surrounding Crown Heights in Brooklyn.
Under the new zoning, the area could see up to 4,000 new residential units built, including 1,200 affordable housing units.
The industrial zone currently contains small manufacturers, abandoned buildings, and converted loft apartments. Over the past 15 years, some developers have received rezoning approvals to convert factories into residences.
The DCP aims to rezone more buildings to boost housing development and alleviate the housing shortage.
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5. Warner Bros. Sells and Leases Back Studio Lot
Warner Bros. recently sold its Warner Bros. Ranch studio lot for $175 million to Worthe Real Estate Group and Stockbridge.
Athene Annuity and Life Company, along with a subsidiary of private equity giant Apollo Global Management, provided $480 million in financing for the acquisition and redevelopment.
Worthe plans to develop 926,000 square feet of space, including sound stages, dining halls, warehouses, and 320,000 square feet of office space.
Beginning in 2025, Worthe and Stockbridge will lease the renovated property back to Warner Bros.
The Warner Bros. Ranch spans 30 acres and is located at 3701 West Oak Street.
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6. Citadel Halts Manhattan Expansion Plan
According to the New York Post, hedge fund giant Citadel has paused its plan to lease 400,000 square feet of office space at 280 Park Avenue in Manhattan.
Several existing leases at 280 Park are set to expire by the end of this year, which means landlords SL Green and Vornado could lose key revenue streams.
If Citadel had proceeded, the deal would have accounted for about one-third of the building’s leasable area.
The specific reason for halting negotiations was not disclosed, but current market conditions may have played a role.
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7. U.S. Banks May Lose $200 Billion
Kyle Bass, founder of Hayman Capital Management, said in a Bloomberg TV interview that the shift in work patterns and the struggling office property market could result in losses of $200–250 billion for U.S. banks.
With total U.S. bank equity at $2 trillion, this would wipe out 10% of the industry’s equity capital.
Bass noted that multifamily and industrial properties remain resilient, but office real estate is under the most pressure. He predicted that outdated, low-quality office buildings will need to be “bulldozed” to restart the market.
Canadian investor Vincent Chia, who shares this view, has been buying old office buildings, demolishing them, and profiting from selling the cleared land.
Bass famously predicted and profited from the 2008 financial crisis.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.