Hello Brick Brief readers, 

Thank you for your continued support🙂 Today we’re seeing rate cuts fueling CRE investment, homebuilders offering incentives to clear Sun Belt inventory, and private capital snapping up discounted REITs.

💵 Fed Cuts Rates, CRE Poised for 15% Growth
The Fed lowered its benchmark rate 25 bps to 4–4.25% and signaled two more reductions this year as tariff-driven inflation persists. CBRE projects a 15% rise in CRE investment as cheaper capital fuels refinancing and deal activity, while high long-term rates keep investors focused on income-oriented strategies and selective gateway office leasing.

🏠 Homebuilders Confront Sun Belt Overbuild
Active listings jumped 22% YoY in August while single-family starts fell to a 2.5-year low as builders cut new projects. Overbuilt Sun Belt markets are prompting aggressive mortgage buydowns, cash at closing, and free upgrades to move excess inventory and attract price-sensitive buyers.

🏙️ Private Capital Targets Discounted REITs
Paramount Group opted for a $1.6B sale to Rithm to close the gap between its stock price and the value of its New York and San Francisco assets while resolving leadership turmoil that weakened investor confidence. The deal reflects a broader trend of private buyers acquiring REITs at steep discounts to net asset value, echoed by activist pressure on Sunstone Hotel Investors.

30Y Mortgage: 6.22% (+9 bps)

10Y Treasury Yield: 4.08% (+5 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 771.54 (-0.22%) 

30-day SOFR Average: 4.37%

Fed cuts rates 25 bps to 4–4.25% – Powell cites weakening labor market and signals two more reductions this year amid persistent tariff-driven inflation concerns (Bloomberg)

Cheaper capital boosts CRE investment and refinancing – Two more Fed cuts this year could further lift investor confidence (CBRE)

Rithm Capital agreed to acquire Paramount Group, an office landlord with a prime New York and San Francisco footprint, in a $1.6 billion all-cash deal that delivers a 38 % premium to Paramount’s May 16 closing price. The transaction reflects both the quality of Paramount’s portfolio and the challenges of remaining a public REIT amid weak office market sentiment.

🧱 New York Strength: Paramount owns a premier set of Class A towers in Manhattan where leasing demand and rent growth have been stronger than most U.S. markets. High-credit tenants and limited top-tier supply have kept occupancy and rent collections resilient.

🧱 San Francisco Headwinds: Its San Francisco assets remain high quality but face slower leasing velocity and elevated vacancy as tech downsizing and hybrid work continue to weigh on fundamentals. Paramount has maintained stable cash flow through long leases, but recovery is lagging New York.

🧱 Valuation Gap: Paramount’s board highlighted a persistent disconnect between its public market valuation and the intrinsic value of its assets. Exploring a sale was viewed as the most direct way to deliver immediate, full value to shareholders.

🧱 Executive Turmoil: Leadership departures and revelations of undisclosed CEO payments triggered an SEC investigation into compensation disclosures, eroding investor confidence and adding pressure to pursue a strategic exit.

🧱 Brick Brief Theme: This deal reflects a broader trend of subscale REITs trading at steep discounts due to limited scale, weak liquidity, and scarce growth capital, creating openings for private buyers to acquire high-quality assets at attractive valuations.

🧱 Rithm gains an immediate presence in top-tier urban markets and strengthens its asset-management platform. CEO Michael Nierenberg highlighted improving rent rolls, a more favorable rate environment and rising demand as key drivers for betting on an office recovery.

Takeaway: Paramount chose a sale to capture the value of its gateway-market portfolio while avoiding persistent market discounts and mounting governance issues. Rithm sees an opportunity to buy irreplaceable urban assets at a time when sentiment toward the sector remains cautious, positioning itself for long-term upside as office fundamentals stabilize.

Bipartisan lawmakers introduce Saving the American Dream Act – Bill directs five federal agencies to share data and craft strategies to lower mortgage costs, cut construction barriers, and expand affordable housing supply (Bisnow)

D.C. Council passes Rental Act – Bill reforms TOPA to exempt buildings under 15 years old and shortens eviction notice to 10 days, aiming to draw investment and address $1B in unpaid rent (Bisnow)

U.S. housing supply jumped 22% YoY in August – Active listings hit 1.4M as Sun Belt and western markets like Raleigh, Miami, and Las Vegas lead gains, giving buyers more leverage and choice (Zillow)

U.S. 30-year mortgage rate fell to 6.39%, lowest in a year – MBA reports 29.7% jump in total applications as refinancing surges 57.7% to highest since March 2022 (Reuters)

Zillow believes mortgage rates have little room to fall – Reduced Fed buying of mortgage-backed securities limits declines, keeping buyer demand and housing activity muted (Zillow)

U.S. single-family housing starts fell 7% in August to near a 2.5-year low – Inventory glut and soft demand push builders to cut back as permits drop to the lowest since March 2023 (Reuters)

Builders boost sales with incentives – Reduced mortgage rates lead promotions, while cash at closing, flex cash, free appliances, and upgrades help move abundant new-home inventory in top ZIPs like Celina TX and Ponte Vedra FL (Realtor.com)

Insight: Sun Belt homebuilders are slowing new starts while using mortgage buydowns and buyer perks to clear swollen inventories and hold prices steady. Lennar’s Q3 earnings later today will shed light on how national builders are managing the pullback and sustaining sales momentum.

Beach college towns dominate college-town home prices – Santa Barbara nears $2M and Boca Raton about $823K, while Dayton remains lowest around $137K (Redfin)

U.S. office projects face longer build times – Pandemic disruptions and market pressures have sharply extended construction periods and delays, especially for large towers like Boston’s South Station Tower (CoStar)

U.S. office occupancy hits post-pandemic high of 55.8% – Peak Tuesday reached 65.3% and Class A+ weekly average rose to 79.9% (KastleSystems)

CBRE forecasts 15% CRE investment growth – Elevated long-term rates limit cap rate compression, keeping focus on income-driven strategies (CBRE)

Weaker labor market may restrain leasing – Flight-to-quality and gateway office demand are expected to drive moderate growth through 2026 (CBRE)

Four sale-leaseback deals over $100M closed in Q2 2025 – Transactions totaled $761M, led by Nissan’s $343M industrial sale-leaseback to North Haven Net REIT (IREI)

Hotel revenue managers and owners clash on recovery goals – Managers urge moving past 2019 benchmarks as costs rise and demand softens, calling 2025 the industry’s ‘new normal’ (CoStar)

Hotel construction lags across the Northeast – Top metros average only 1.5% of rooms under development versus 2.4% nationally, with New York a standout at 5.7% (CoStar)

North Development secures $220M financing for Domus Brickell Center condo tower in Miami, FL – 35-story, 579-unit short-term rental-friendly project includes $180M in C-PACE funding and a $40M mortgage (TheRealDeal)

Beach Point Capital supplies $113M construction loan for 278-unit Aquino San Jose multifamily in San Jose, CA – Project will include a fitness center, coworking space, and sauna (CommercialObserver)

Rithm Capital agrees to acquire office REIT Paramount Group for $1.6B – Deal gives Rithm 13.1M SF of NYC and San Francisco offices at a 38% premium to Paramount’s May 16 closing price (Bloomberg)

Security Properties acquires five-property multifamily portfolio in Seattle, WA for $401M – 903-unit purchase from Washington Holdings includes The Hayes Stone Way, Carter on the Park, Heron Flats & Lofts, Liza Eastlake, and The Hemlock (GlobeSt)

Pontegadea agrees to acquire Atlas Plaza retail complex in Miami, FL for nearly $110M – 20K SF Miami Design District property is fully leased to tenants including Rolex (CommercialObserver)

Isaac Schwartz acquires 970 Franklin Avenue development site in Brooklyn, NY for $54.3M – Approved for a 10-story, 355-unit residential project totaling nearly 290K buildable SF (CommercialObserver)

Mapletree Investments sells Collington Industrial Park in Upper Marlboro, MD to Equus Capital Partners for $103M – Six-building, 577K SF warehouse portfolio is 90% leased to tenants including food manufacturer KMD (CommercialObserver)

GreenPoint closes $1B debut real estate fund – Inaugural vehicle targets value-add and opportunistic property investments across the U.S (PERE)

$300M CMBS loan backed by 1.1M SF mixed-use complex The Factory in Long Island City, NY sent to special servicing – Property owned by Atlas Capital Group faces rising expenses and declining revenue ahead of loan maturity (CommercialObserver)

Shorenstein’s office tower in Philadelphia, PA enters receivership – 37-story nearly 1M SF asset reappraised at $181M down 36% with a $222.9M loan unpaid and occupancy near 69% (Bisnow)

Thrive Capital leads $34M Series B investment in Samara – Airbnb-backed startup builds prefabricated backyard homes called accessory dwelling units, expands factory capacity and targets multifamily housing growth (Bisnow)