—— WeWork Restructures Debt via Fundraising; U.S. Private-Sector Job Gains Beat Expectations; 30-Year Mortgage Rates Rise for Fourth Week; Ken Griffin Warns of Inevitable Hard Landing; U.S. Housing Shortage Hits 6.5 Million; Silvergate Short Sellers Earn $780 Million; Adobe Unveils New San Jose Office Tower
1. WeWork Restructures Debt via Fundraising
Sources reveal that WeWork, the long-struggling coworking company, is in talks with California-based real estate software firm Yardi Systems to secure several hundred million dollars in funding.
Since last year, WeWork and Yardi have collaborated on multiple projects. If the deal goes through, WeWork could use the funds to restructure its existing debt and establish a capital buffer sufficient to sustain operations for years.
WeWork’s largest external investor, SoftBank, does not plan to join the new investment round but is willing to assist in restructuring the company’s debt.
Following the announcement of potential funding, WeWork shares rose by around 5%.
If WeWork secures several hundred million dollars in funding, it will be able to repay debt and maintain sufficient operating capital.
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2. U.S. Private-Sector Job Gains Beat Expectations
According to data jointly released by the ADP Research Institute and Stanford Digital Economy Lab, U.S. private-sector employment rose by 242,000 in February, exceeding economists’ forecast of 200,000.
The largest hiring increases came from travel accommodation and financial services sectors, with small businesses employing more than 50 people also making significant contributions.
Despite the Federal Reserve’s aggressive rate hikes to tame inflation, labor demand remains high, and layoffs have largely been confined to the tech and financial sectors. The service sector, which faced severe labor shortages during the pandemic, is now hiring again.
Economists expect Friday’s Department of Labor report to reinforce the strength of the job market and persistently low unemployment. Fed Chair Jerome Powell has stated that only when the job market and wage inflation ease will overall inflation improve.
February’s stronger-than-expected private job gains present a challenge for the Federal Reserve.
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3. 30-Year Mortgage Rates Rise for Fourth Week
According to new data from the Mortgage Bankers Association (MBA), 30-year fixed mortgage rates rose by 8 basis points to 6.79%, the highest level since mid-November.
However, MBA’s index tracking home loan applications increased by 7.4%. For the week ending March 3, the refinance index also saw an uptick.
On Tuesday, Fed Chair Jerome Powell signaled that the central bank may continue to raise interest rates, potentially at a faster pace than previously expected.
Mortgage rates are rising partly due to continued Fed hikes and partly due to increased homebuyer demand.
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4. Ken Griffin Warns of Inevitable Hard Landing
Citadel founder Ken Griffin said in an interview with Bloomberg on Tuesday that the Fed has limited tools to fight inflation and that the current rate hikes are akin to performing surgery with a dull blade, setting the stage for an economic recession.
As early as 2020, Griffin predicted that the U.S. would be plagued by persistent inflation. He advised Powell to speak less about inflation because even slightly dovish remarks tend to boost the stock market, which complicates the Fed’s efforts.
According to Bloomberg, Griffin, 54, has a net worth of $36.7 billion.
Griffin believes the market tends to misinterpret Powell’s statements, creating challenges for the Fed.
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5. U.S. Housing Shortage Hits 6.5 Million
According to new data from Realtor.com, from 2012 to 2022, the U.S. added 6.5 million more households than single-family homes, highlighting the severity of the housing supply shortage. Even when including multifamily units, the shortage still stands at 2.3 million homes.
Over the past decade through 2022, the U.S. added 15.6 million households but started only 13.3 million new housing units. Of the 11.9 million completed units, 8.5 million were single-family homes and 3.4 million were multifamily residences.
Though multifamily properties help address affordability and supply issues, their average construction time of 15 months is double that of single-family homes.
If homebuilding and household formation continue at current rates, the shortage of millions of homes may never be resolved.
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6. Silvergate Short Sellers Earn $780 Million
Shares of Silvergate Capital, a crypto-friendly bank, have plunged 98% from their November 2021 peak. According to S3 Partners, investors who shorted Silvergate have earned $780 million in total, including $180 million just in the past week.
Roughly 85% of the company’s publicly traded shares are currently sold short—the highest short interest in the entire U.S. market.
In 2021, cryptocurrency and related stocks soared, but the collapse of major firms like FTX in November 2022 ushered in a crypto winter.
Today, Silvergate shares dropped another 12%, hitting a new all-time low.
Last month, George Soros’ family office disclosed a short position against Silvergate.
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7. Adobe Unveils New San Jose Office Tower
Recently, software giant Adobe Inc. officially opened its new San Jose office building, The Founders Tower.
The 18-story building is Adobe’s fourth major office tower and accommodates up to 3,000 employees across 1.25 million square feet.
In today’s statement, Adobe said that while the new building offers ample amenities, the company continues to support hybrid and flexible work arrangements.
Adobe’s Chief People Officer Gloria Chen told Bloomberg that the company is committed to avoiding mass layoffs.
At the end of last year, Adobe laid off some employees in its software sales department, but future hiring will be more cautious. Although the new tower can hold thousands of workers, the company is not necessarily planning to expand its headcount.
While other tech giants are cutting back on real estate, Adobe is investing in a luxurious new office building.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.