Net Lease News

B+E Weekly Newsletter

February 13 – February 19, 2024

MARKET

STICKY INFLATION STICKS IT TO AN EARLY FED RATE CUT | GlobeSt.com

• The Consumer Price Index was up 0.3% month-over-month in January 2024 on a seasonally adjusted basis. Over the last 12 months, it was 3.1%. That’s down from the 3.4% of December 2023.
• While the current levels of inflation are gratifying compared to what we saw one year ago, it is too strong to warrant an interest rate cut at the next FOMC meeting. 
• 3-4 interest rate cuts are plausible for 2024, but don’t expect the first cut to arrive until at least May since the Fed noted they want to have “greater confidence” in inflation’s downward trajectory. 
• In response to the inflation data, yields jumped up 14bps in the belly of the curve, and stock future indicate a lower open.

INDUSTRIAL

INDUSTRIAL SECTOR SET FOR 2024 TRANSFORMATION | Commercial Search

• The industrial sector, which has been on a hot streak for several years, experienced a significant cooling-off in 2023. Looking ahead to 2024, a period of stabilization and normalization in the sector is anticipated.
• In 2024, rent growth is expected to slow and vacancy rates to rise due to a surge in new supply. Although Mexico overtook China as the top U.S. trading partner in 2023, coastal port markets, particularly in Southern California, continued to lead in rent growth.
• This slowdown is seen as a positive development for the industry, as it helps prevent the risk of overbuilding. In the past two years, there were more than 500 million square feet of new industrial space delivered, which was historically high for the sector.

RETAIL

THANKS TO $400M PLAN, BURGER KING SEES GUESTS RETURNING TO RESTAURANTS | QSR Magazine

• The chain reported low-single-digit traffic growth in Q4, which was the first positive increase since Q2 2021. Also, U.S. same-store sales rose 6.4 percent, lapping 5 percent growth in the year-ago period.
• Given strong early results from the tech and equipment additions, the chain is shifting $50 million from the remodel bucket into the refresh bucket. So now, it’s $100 million on refreshes and $150 million on remodels.
• With the extra investment, Burger King expects the refresh program to touch more than 6,000 U.S. restaurants, or roughly 90 percent of the U.S. footprint. The incremental refresh dollars will be given to “A” and “B” franchisees who are using funds to improve the drive-thru and digital experience.

INSPIRE BRANDS CONSIDERS IPO FOR $20B | Nation’s Restaurant News

• Roark Capital, a major backer of Dunkin’ parent company Inspire Brands, has been in talks with potential advisors to possibly take the brand public in late 2024 or 2025. The anonymous source for Bloomberg said the company could be valued at $20 billion.
• Inspire Brands acquired Dunkin’ Brands in late 2020 for $11.3 billion and subsequently took the brand private.
• The Dunkin’ purchase made Inspire Brands the second-largest restaurant company in the country, following Yum Brands, which is a publicly-traded company.

BLACKSTONE ANNOUNCES GROWTH INVESTMENT IN 7 BREW | Blackstone

• Blackstone today announced a growth equity investment in 7 Brew Coffee, the next-generation drive-thru beverage business. Blackstone’s investment seeks to help enable 7 Brew to accelerate its already-rapid expansion across the U.S., in collaboration with its premier franchise partners.
• Since 7 Brew began operating its first coffee “stand” in Rogers, Arkansas in 2017, the company has been committed to serving custom drinks while cultivating kindness and joy with every drink. Today, 7 Brew is a leading franchisor recognized as QSR Magazine’s “Breakout Brand of 2023.”

POPEYES SETS SIGHTS ON 800 NEW LOCATIONS, AND A LOT MORE WINGS | QSR Magazine

• Restaurant Brands International last Thursday became the latest group to outline a massive growth agenda. In this case, the Burger King, Popeyes, Firehouse Subs, and Tim Hortons owner shared it would reach 40,000 restaurants, $60 billion in systemwide sales, and $3.2 billion in adjusted operating income by 2028. That suggests average annual same-store sales growth of 3 percent-plus, over 5 percent net unit growth, and systemwide sales expansion north of 8 percent.
• Among the growth levers awaiting RBI is the potential of Popeyes, a brand it acquired in March 2017 for $1.8 billion. At the time, the deal was significant for RBI because it secured a serious stake in chicken, which remains one of the hottest growth areas in food service.
• Popeyes projects to grow its U.S. and Canada base from nearly 3,400 stores in 2023 to more than 4,200 by 2028, or a net growth of some 800 venues.

SHELL TO ACQUIRE BREWER OIL COMPANY’S RETAIL ARM | C-Store Dive

• Shell has agreed to acquire the retail arm of Brewer Oil Company, which includes 45 convenience stores and fueling stations in New Mexico, according to a Feb. 9 announcement.
• About 450 Brewer employees will join Shell, according to the announcement. The deal is expected to close by the end of the first fiscal quarter of 2024, subject to regulatory clearance and closing conditions.
• This will officially mark Shell’s first company-operated convenience stores in New Mexico as the oil giant continues to build its C-store footprint across the U.S.