Hello Brick Brief readers, 

TGIF😅 Today we’re seeing the Fed pressure on two fronts, private capital continuing to gobble up REIT’s, and housing activity (surprisingly) improving in July.

🦅 Fed Faces Pressure on Two Fronts
Fed officials remain split heading into September as services inflation and tariff-driven cost pressures push against calls for easing. At the same time, jobless claims have climbed to their highest since 2021, signaling a softer labor market that keeps the risk of over-tightening on the table.

🏢 Private Capital Targets Subscale REITs
Dream Residential’s $354M sale to Morgan Properties highlights a wave of private buyers scooping up undervalued REITs. Elme Communities’ liquidation and Plymouth Industrial’s takeover interest from Sixth Street show how smaller platforms are being forced into exits while private capital gobbles up fundamentally solid assets trading cheaply in public markets due to limited growth prospects.

🏠 Housing Activity Improves but Confidence Fragile
Lower mortgage rates and softening prices lifted existing-home sales modestly in July, but contract cancellations hit a record 15.3% as buyers backed out under cost pressures. With demand tilting toward lower-cost options like manufactured housing, the pipeline of 500K new apartments in 2025 will test affordability further in high-growth Southern markets.

30Y Mortgage: 6.62% (+1 bps) 

10Y Treasury Yield: 4.32% (+3 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 764.95 (-0.30%) 

30-day SOFR Average: 4.35%

The Fed is facing an attack from two fronts as services inflation and tariff-driven price pressures make a case against easing, while rising jobless claims and a softening LEI highlight growing risks to the labor market and broader economy 

Fed’s Goolsbee warns on rising services inflation – Calls September FOMC a live meeting while hoping the spike is a blip (Bloomberg)

Fed officials split on September cuts – Cleveland’s Hammack warns inflation is rising and opposes easing, while Boston’s Collins signals openness if labor market weakens (WSJ)

Fed’s Schmid signals no urgency to cut – Kansas City president cites inflation near 3% and solid labor market, urging caution ahead of September meeting (Reuters)

Jobless claims rise by 11K to 235K – Continuing claims hit 1.97M, highest since 2021, signaling softer labor market even as PMI data points to stronger business activity (Reuters)

US business activity accelerates in August – S&P Global Composite PMI rises to 55.4, driven by strongest manufacturing orders in 18 months, while tariffs push input and output prices to multi-year highs (Reuters)

The Conference Board’s Leading Economic Index fell 0.1% in July – Consumer pessimism and weak new orders outweighed strength in stocks and jobless claims, keeping growth signals negative (ConferenceBoard)

Insight: Markets are now pricing September rate cut odds more rationally ahead of Fed Chair Powell’s speech today. With the Fed weighing a softer labor market against early signs of rising inflation, I expect Powell to remain noncommittal and continue to take a wait-and-see stance until August data shows whether inflation is truly accelerating.

Morgan Properties agreed to acquire Dream Residential REIT for $354 million, taking private a portfolio of 15 garden-style apartment complexes with 3,300 units across Dallas, Cincinnati, Oklahoma City, and Tulsa.

• The all-cash deal values units at $107K per door and gives shareholders $10.80 per share, a 60% premium to February’s price when Dream began a strategic review.
• Dream launched that review after its stock languished below NAV since its 2022 IPO. Shares never hit the $13 target price and trailed peers even as earnings held steady.
• The board unanimously backed a sale as the cleanest way to deliver value. Public markets were unwilling to close the gap between Dream’s share price and the underlying real estate.
• This ties directly to the theme I introduced in Wednesday’s edition of the Brick Brief: private capital is gobbling up undervalued subscale REITs that public markets are overlooking due to their poor growth prospects. Limited size, weak liquidity, and scarce growth capital make these companies prime targets.
• Elme Communities chose to liquidate rather than keep struggling with subscale disadvantages, while Plymouth Industrial has drawn buyout interest from Sixth Street. Both highlight how scale has become a dividing line in REIT valuations.
• Affiliates of Dream will exit as external asset managers and receive a $7M termination payout. Distributions will be suspended after November if the deal closes as planned.

Takeaway: Dream’s sale is another example of the a new Brick Brief theme: private buyers are targeting overlooked subscale REITs. With Elme liquidating and Plymouth in M&A talks, public markets are pushing smaller platforms toward exits while private capital steps in to capture fundamentally solid portfolios trading below intrinsic value.

Improving affordability from lower rates and softer prices is bringing some buyers back, but high cancellations show confidence remains fragile, keeping demand tilted toward lower-cost segments like manufactured housing

Existing-home sales rise 2% MoM in July to 4.01M – Activity up 0.8% YoY as easing mortgage rates and slowing prices improve affordability, though sales remain depressed (WSJ)

Homebuyers cancel contracts at record pace in July – 58K deals, or 15.3% of pending sales, fell through as high costs and economic uncertainty cooled demand (Bloomberg)

Mortgage rates fall to 10-month low at 6.58% – Typical monthly payment drops to $2,614, down $224 from May peak, as affordability improves though existing-home sales remain weak (Redfin)

Manufactured housing outperforms CRE – 7.4M units, 5.2% vacancy, 5.13% cap rate, and 1.39% delinquencies highlight affordability-driven resilience (GlobeSt)

U.S. apartment construction tops 506K units in 2025 – Over 52% of new supply is in the South, led by Texas (81K) and Florida (62K), while New York remains the top metro with 30K units and Austin leads cities with 15K (RentCafe)

Office occupancy averages 52.3% – Peak Tuesday 61.7% and Friday low 33.7%; LA up to 49% and Houston 60.3%; Class A+ averages 72.1% with 88.5% peak (KastleSystems)

U.S. law firm leasing hits 5.9M SF in H1 2025 – Strongest first half since 2018 with NYC leading at 29% of volume and renewals driving nearly 60% of deals (CommercialObserver)

AI startups lease 3.1M SF in Bay Area in 2025 – Private firms drive 700% surge since 2020, reviving San Francisco’s office and R&D markets (ConnectCRE)

Massumi + Consoli leases 23K SF at 1133 Avenue of the Americas in New York, NY – Law firm relocates from Penn 1 to Durst’s Midtown tower, five times larger than prior space (CommercialObserver)

BraunHagey & Borden leases 20K SF at 200 Madison Avenue in New York, NY – Law firm relocates from Flatiron to Midtown East, expanding from 8.5K SF to a full floor in George Comfort & Sons’ tower (CommercialObserver)

J&J invests $2B in North Carolina manufacturing – Expansion with Fujifilm Diosynth adds 120 jobs as drugmakers boost U.S. production ahead of potential 250% tariffs (Reuters)

Port-adjacent warehouse rents drop 4.8% YoY – LA asking rents fall 20% from 2023 as absorption lags 2M SF against 27M SF deliveries, pushing vacancy toward 8% in 2026 (Bisnow)

CRE transactions reach $115B in Q2 2025 – Up 3.8% YoY from $110.8B, driven by strong gains in multifamily and office deals (IREI)

U.S. cap rates fall 9 bps in H1 2025 – Broad-based declines across sectors suggest yields have peaked and compression may follow (CBRE)

Tariffs weigh on CRE outlook – Over half expect lower 2025 sales volumes, with multifamily strongest and office weakest (CBRE)

Best Buy traffic stabilizes in H1 2025 – Same-store visits down 1.2% YoY in Q2 as BOPIS pickups and product launches drive momentum ahead of holiday season (Placer.ai)

Costco, Dollar General, Dollar Tree visits up 37–46% since 2019 – Walmart’s share slips from 55.9% to <50% as Dollar General passes Target in traffic (Placer.ai)

Walmart loyalty steady at ~50% monthly returners – Dollar General frequency rising, Target loyal share up from 20.1% to 23.6%, Costco trips stable (Placer.ai)

Walmart beat Q2 earnings expectations but missed on revenue and raised its full-year outlook. Management noted that tariff-impacted costs are continuing to drift upwards, though consumer behavior has remained steady. Sales of private-label products, often a signal of trade-down activity, were flat year over year, suggesting customers have not yet shifted spending patterns despite higher costs (CNBC)

Blackstone upsizes debt to $1B+ for Aligned Data Centers – Facility expansion follows $600M loan last year and will fund five gigawatts of new capacity across the Americas (Bloomberg)

Benefit Street Partners provides $340M construction loan for Nashville, TN tower – Giarratana to build 60-story Paramount with 360 apartments and 140 condos, completing in 2028 (TheRealDeal)

Tyko Capital provides $285M construction loan for condo-hotel in West Palm Beach, FL – Terra and Sympatico to build 146 condos and 110 hotel rooms, 70% of condos presold (CommercialObserver)

Siguler Guff and BSP provide $114M loan for BTR projects in TX and SC – HMF Americana to deliver 575 units under its Cottage Green brand (CommercialObserver)

Affinius Capital provides $92M construction loan for 190-unit multifamily in Los Angeles, CA – Helio Group to build Aston Residences in Culver City with retail and amenities (CommercialObserver)

Wells Fargo provides $460M refi loan for national retail portfolio – Bridge33 Capital refinances 12 assets across nine states totaling 4.1M SF, 91% leased (CommercialObserver)

Morgan Properties will acquire multifamily REIT Dream Residential for $354M – Deal takes 15-property, 3,300-unit U.S. portfolio private at ~$107K per door, giving shareholders a 60% premium (Bisnow)

David Werner buys $100M office in New York, NY at 50% discount – Acquisition of 440 Ninth Ave. from Taconic and Nuveen marks steep drop from $269M paid in 2018 (Bloomberg)

Property Reserve (Mormon Church) buys Boca Raton, FL apartments for $153M – Clarion Partners sells 384-unit Del Ola complex built in 2012–13 for $397K per unit (TheRealDeal)

Bozzuto and Invesco acquire Northern Virginia multifamily for $147M – Greystar sells 454-unit Ashton at Dulles Corner in Herndon, VA (CommercialObserver)

Bondholders face $488M loss on New York, NY office – Worldwide Plaza’s value cut to $345M from $1.7B leaves top CMBS tranche with 20% losses and wipes out $435M of junior debt (Bloomberg) 

Related Cos. loses $64M Santa Clara, CA site – BrightSpire takes control of 9-acre parcel slated for 950-unit multifamily project after foreclosure (Bisnow)

Financial firms rethink CRE amid AI – 75% plan reskilling and 50%+ update workplaces, prioritizing talent and flexibility over location and cost (GlobeSt).

Modular construction hits 9% of multifamily starts – Market projected to grow 4.7% annually to $11.3B by 2029 as Resia, Greystar, and Ginosko expand in-house production with 40% faster builds and up to 50% lower costs (Bisnow)