Hello Brick Brief readers, 

Happy Friday. Today we’re seeing rates hit new lows while demand stays soft despite improved affordability, AI modeling in real estate focus on local market fundamentals, and Davidson Kempner highlight dispersion as a source of selective opportunity

🏠 Rates Drop but Investors and Buyers Remain Cautious
Mortgage rates fell to 6.56% which lowered the typical monthly payment to $2,593, the lowest level since January. But despite the affordability shift, pending sales rose just 1.6% year over year while investor purchases fell 6% in the second quarter, marking the slowest spring since 2020 with sharp condo declines and widespread pullbacks in Florida.

🤖 BGO Uses AI to Uncover Local Market Edge
BGO is reorienting its $89B platform by training AI models on two decades of deal data to identify which local factors actually drive performance. Rather than following national trends, the models emphasize inputs like labor pools, logistics routes, and tax regimes, which led BGO to back overlooked markets like Las Vegas where cost advantages pushed rents well above expectations.

📊 Davidson Kempner White Paper Identifies Targeted Alpha
Davidson Kempner’s latest white paper argues that rising interest rates have triggered record dispersion in rent growth and cap rates across property types and regions. The firm sees selective opportunities for nimble capital to pursue recapitalizations, supply demand mismatches, and mispriced assets that broader strategies have missed.

30Y Mortgage: 6.45% (-4 bps) 

10Y Treasury Yield: 4.16% (-6 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 771.48 

30-day SOFR Average: 4.36%

Cooling job growth and rising jobless claims reinforce expectations for future rate cuts, leading to falling Treasury yields and downward pressure on mortgage rates

US private employers added 54K jobs in August – Hiring came in below forecasts, signaling a cooling labor market with softer wage gains (Bloomberg)

US jobless claims hit highest since June at 237K last week - Labor market shows further cooling as hiring plans weaken and job cuts climb (Bloomberg)

US trade deficit widened 32.5% in July to $78.3B on soaring imports – Tariffs and record inflows of capital goods, gold, and industrial supplies drove the gap, adding uncertainty to Q3 GDP growth (Reuters)

Fed’s Williams signals future cuts – The New York Fed chief said it will become appropriate to lower rates over time as the labor market cools and tariff-driven inflation proves less severe than feared (Bloomberg)

BGO, a $89B global real estate manager, is reshaping its investment strategy by embedding AI into its research process. After analyzing two decades of past deals, its models concluded that returns are dictated more by local market fundamentals than by property pricing or national economic cycles.

• The AI system ingests thousands of datapoints from demographics to logistics routes and backtests them against historical performance to identify what actually drove outperformance. Instead of relying on broad macro trends, BGO now leans on predictive local market models to guide decisions
• That approach led BGO to invest in an industrial project in Las Vegas with Northpoint Development. Traditional research flagged the market as average, but BGO’s model highlighted cost advantages compared with California’s Inland Empire. It underwrote rents at $5.88 per SF and ultimately achieved $9, validating the model’s thesis on location based savings
• The strategy highlights why AI modeling and regional expertise matter. Investors that focus only on national averages risk missing hidden drivers of local performance such as labor costs, taxes, or supply constraints
• This contrasts with national managers like Blackstone, which emphasize diversification and scale across multiple regions and sectors to balance risk. BGO is betting that a sharper model driven read on local markets can deliver superior alpha without sprawling diversification
• BGO has already extended this approach into Florida and the Rust Belt, where its AI models spotted overlooked demand drivers that traditional research missed
• Its lending arm uses the same framework on the downside, applying AI to stress test markets and assess risks more precisely before committing capital
• A lingering question is whether dynamic AI modeling could one day allow for smarter, more liquid pricing of real estate assets in the same way public markets value securities in real time

Takeaway: By putting AI at the center of its process, BGO is showing that future outperformance in real estate may come from better local market predictions rather than broad macro calls. Where traditional players lean on diversification, BGO is proving that granular modeling can uncover value in places consensus research overlooks.

Mortgage rates fell to 6.56%, pushing payments to $2,593, the lowest since January – Pending sales rose 1.6% YoY but prices and tight supply kept demand muted (Redfin)

Investor home purchases fell 6% in Q2 to ~52,000, the lowest spring since 2020 - Condos led the drop at 13% while investor share held at 17%, with pullbacks across Florida and gains in Seattle, San Francisco, and Portland (Redfin)

Multifamily demand surged as single-family faltered – Net absorption hit its strongest Q2 since 1993 with vacancy down to 4.3%, while single-family prices fell 6.2% amid record listings and weak sales (GlobeSt)

Families with school-age children now make up a sizable apartment segment - 18.3% of multifamily households include kids (~4M), with higher shares in Oxnard and Miami (GlobeSt)

Employees are leaving offices 13-30 minutes earlier under RTO mandates – Reducing productivity and pushing companies to favor transit-accessible locations for stronger attendance (Bisnow)

Civic Entertainment Group signs a 27K SF office lease expansion in NoMad, New York, NY – The seven-year deal with GFP Real Estate doubles its footprint across 440 Lafayette Street and 740 Broadway (CommercialObserver)

Sharp CRE repricing from rate hikes sparks record dispersion – Divergence in rent growth and cap rates across sectors and regions creates selective opportunities (DavidsonKempner)

Structurally higher cap rates reshape investment landscape – Outperformance depends on targeting supply-demand gaps, recapitalizations, and overlooked assets with nimble capital (DavidsonKempner)

Insight: Davidson Kempner believes that in a high-rate environment, rising construction costs and stalled development limit new supply, allowing sectors with strong demand to drive above-average rent growth for longer. Recent news has reported that policy shifts have also raised construction (labor constraints) and material costs, which will further constrain new development and extend existing supply imbalances in those same high-demand sectors.

Subscriptions boost visits at Topgolf, Dave & Buster’s, and Chuck E. Cheese – Long-term growth hinges on turning traffic into higher food, beverage, and event revenue (Placer.ai)

JLL projects hotel deals to rise in late 2025 – CEO Kevin Davis says narrowing spreads, investor turnover, and expected Fed cuts will drive activity into 2026 (CoStar)

Affinius Capital provides $132M refinancing for the 814K SF Lower Bucks Logistics Hub in Langhorne, PA – Foxfield Real Estate and a New York partner secured the loan for the two-building industrial portfolio (CommercialObserver)

Prime Group secures a $156M refinancing for three self-storage properties in Brooklyn, Queens, and the Bronx, NY – Affinius Capital and 3650 Capital provided the loan covering 7,200 units across the outer-borough portfolio (TheRealDeal)

Guardian acquires $497M multifamily portfolio in Oregon and New Mexico – The 15-property, 3,050-unit deal is Guardian’s largest transaction to date and one of the biggest U.S. deals of 2025 (IREI)

Four Peaks Multifamily Partners acquires the 297-unit Harvest Station Apartments in Broomfield, CO for $85M from Hamilton Zanze – The property last sold for $67M in 2016 (TheRealDeal)

Aurec Capital acquires Sheepshead Bay multifamily in Brooklyn, NY for $53M – The 105-unit luxury rental at 2450 Ocean Avenue includes amenities such as a gym, pool, and yoga room (TheRealDeal)

Sack Capital Partners and Las Palmas Housing acquire the 164-unit Fountain Park Apartments in San Jose, CA for $52M – The $317K per unit deal adds to Sack’s 3,000-unit portfolio (TheRealDeal)

Harvest Properties and Stockbridge Capital acquire Clearview Business Park in San Mateo, CA for $102M – The 22-acre GoPro-leased office site will be converted into 225 homes with affordable unit (TheRealDeal)

Sioni Group buys Manhattan office building in New York, NY for ~$50M from Billionaire Ortega’s Pontegadea – The deal reflects a 57% discount from the $115.5M Pontegadea paid in 2006 (Bloomberg)

Granite Properties sells the 100 City View office tower in Atlanta, GA to OA Development for $50M – The 91% leased property highlights renewed investor appetite in the Cumberland submarket (TheRealDeal)

Host Hotels sells the 454-room Washington Marriott at Metro Center in Washington, D.C. for $128M to T2 Hospitality – The deal ranks among the city’s largest hotel sales this year and includes $114M in seller financing (Bisnow)

The Kutzer Company lists the Pasadena Whole Foods property for $76M in Los Angeles, CA – The 77K SF grocery asset generates $3.8M NOI with a 5% cap rate and 10 years left on lease (TheRealDeal)

Shorenstein acquires Park Place at Bay Meadows in San Mateo, CA for $175M – The 258K SF office and retail complex was sold by J.P. Morgan and is fully leased to tenants including Zynga and Essex Property Trust (TheRealDeal)

Nomura relaunches its U.S. commercial real estate platform with ex-Barclays leaders – The move rebuilds its CMBS and warehouse financing business after a 27-year exit (Bisnow)

Madera Residential and Sixth Street launch a Sunbelt multifamily JV targeting Texas and the Southeast - First move recaps six Class A Houston communities totaling 1,967 units, with a plan to buy discounted assets (GlobeSt)

Savanna and Summit Properties acquire New York office building for $50M after Westbrook Partners defaulted on a $120M Wells Fargo loan – One of Manhattan’s steepest office discounts (CommercialObserver)

BGO uses AI-driven data models to pinpoint undervalued markets – The $89B firm leverages its system to backtest past deals and guide future investments with local market fundamentals (CNBC)