Net Lease News

B+E Weekly Newsletter

February 6 – February 12, 2024

MARKET

THREE REASONS WHY H2 WILL BE BUSIER | Globe St.

• Yields on Treasury Bonds have dropped sharply over the last 90 days. The yield on the 10-year bond is down more than 100 basis points since November. This is positive news for the industry, as the lower rates allow for more acquisitions to produce desired returns. In addition, this development will also make refinancing less challenging to borrowers than it was just three months ago.
• The second noteworthy development in the market is the considerable compression of risk premiums since early November. Lending spreads have tightened significantly since the fall, which has put additional downward pressure on lending rates. Ultimately, this will also allow more deals and refinancing to pencil out.
• Finally, sales have already started trickling in in some of the most distressed markets. This includes San Francisco, Chicago, and Baltimore office markets. While these sales are not at the desired levels, they are important as they represent important benchmarks for the markets. Specifically, once distressed market sales start and price discovery occurs, the markets become positioned for another wave of transactions. With bottoms forming in many markets, optimism for a forecast of higher transactions in the second half of 2024 is high.

CASH-FLUSH BUYERS DIP INTO DISTRESSED COMMERCIAL REAL ESTATE | The Wall Street Journal

• Turmoil in commercial real estate is sending jitters through regional banks and other lenders. But one group is pleased with the turbulence: investors sitting on piles of cash they raised to scoop up distressed properties. 
• Overall, global real-estate funds operated by private equity firms were sitting on $544 billion in cash as of the second quarter of last year, a record level and up from $457 billion at the end of 2022.
• Analysts expect that distress will keep rising in the years ahead as more owners need to refinance. More than $2.2 trillion in commercial mortgages are scheduled to mature between now and the end of 2027.

RETAIL

CHIPOTLE SPEEDS TOWARD EVEN GREATER HEIGHTS | QSR Magazine

• The brand posted same-store sales growth of 8.4% amid a somewhat choppy earnings season thus far for restaurants. But the main outlier was 7.4% transaction growth, which accelerated from mid-single digits in October and 4%+ in Q3. 
• Chipotle opened 121 restaurants in Q4, the most it’s ever put down, and 271 for the year, an unprecedented result. Of those 271, 238 included a Chipotlane and the brand expects 80% of its 2024 plan (285–315 new restaurant openings) to feature the channel.
• Chipotle ended 2023 with 3,437 units as revenue reached $9.9 billion, an increase of 13.4% versus 2022. Across the full fiscal calendar, comps climbed 7.9% on transaction growth of 5% and an average check lift of 2.9%.

SMOOTHIE KING FORECASTS 100 NEW LOCATIONS IN 2024 | Nation’s Restaurant News

• Smoothie King Franchises Inc., while privately held, has released some 2023 sales figures, saying it saw same-store sales increase by 11.5% and positive traffic growth for the year.
• The Dallas-based company, which ended the year with about 1,100 locations, is also forecasted to add 100 units in 2024. New markets are expected in Massachusetts, Minnesota, New Hampshire, and Utah.
• The company reported 189 new store commitments were added to the development pipeline in 2023, marking Q4 2023 as its largest signings quarter since 2017 with 39 franchise agreements and 20 area development commitments.