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- 🚦The Hard Corner
🚦The Hard Corner
Happy Thursday!
We're your go-to source for the latest news in the retail and finance sector of commercial real estate. Every other week, we'll provide you with a concise and insightful roundup of the key stories shaping our markets.
This edition highlights the latest market shifts, including a rise in the 10-year Treasury yield to 4.05%, and the dramatic implosion of the Tropicana in Las Vegas, paving the way for a new stadium. We also explore key trends in commercial real estate, from growing debt to evolving retail dynamics, offering insights on developments that could impact investment strategies.
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📉 Market Spotlight
S&P 500 Current: 5,785.39 2 Weeks Ago: 5,722.26 | 10 Year Treasury Current: 4.05% 2 Weeks Ago: 3.79% |
1 Month SOFR Current: 5.02% 2 Weeks Ago: 5.25% | WSJ Prime Rate Current: 8.00% 2 Weeks Ago: 8.00% |
*Data from 10/09/2024
đź“° Featured News
Tropicana Implosion Signals Next Wave of Las Vegas Development
In a city known for its high-stakes transformations, the iconic Tropicana hotel-casino was reduced to rubble in a dramatic implosion early Wednesday morning, making way for a new era of Las Vegas development. This latest demolition will clear the way for a $1.5 billion stadium, which will become the new home for Major League Baseball’s former Oakland Athletics, now preparing for their next chapter in Sin City.
The Tropicana, opened in 1957, was one of the last remaining Rat Pack-era properties. Its fall marks the end of a series of vintage hotel-casino demolitions that have transformed the Strip over the past 30 years. The 23-story structure was brought down with 2,000 pounds of explosives in a carefully choreographed implosion at 2:30 a.m., to the amazement of thousands of onlookers watching from nearby hotel rooms and millions more online.
Bally’s Chairman Soo Kim reflected on the historical significance of the Tropicana, calling it a "pioneer of the Strip" that helped shape the city’s entertainment legacy. Its replacement—a ballpark-anchored, mixed-use complex featuring retail and a hotel-casino—represents the future of Las Vegas, as the city embraces new entertainment possibilities.
Tropicana Las Vegas when it opened in 1957. (Las Vegas Convention and Visitors Authority)
Shifting from the Past to the Future
The Tropicana’s implosion is just the latest in a long line of iconic Las Vegas hotels to meet the wrecking ball. In recent decades, the gambling capital has seen the dismantling of Rat Pack-era properties, including the Sands, Stardust, and Desert Inn, making room for modern mega-resorts. Analysts note that while the Tropicana’s fall might be one of the last major demolitions, Las Vegas’ thirst for development remains strong.
Michael Petrivelli, director of market analytics for CoStar Group, pointed out that the likelihood of seeing as many demolitions in the next 20 years is low, but not impossible. “Never say never in Las Vegas,” he remarked, referencing the city’s ever-changing landscape.
As Las Vegas continues to reimagine itself, demand for hotels remains high. Last year, Harry Reid International Airport saw a record 57.6 million passengers, and that number is expected to rise to 65 million in the coming years. With such growth, the city is expanding its capacity to accommodate visitors, including plans for a supplemental airport 30 miles south of the city.
However, with the recent closures of both the Tropicana and the Mirage (now being transformed into a Hard Rock Hotel), the city has lost 4,600 hotel rooms, the largest reduction in the Strip’s inventory in over a decade. Analysts believe it will take years for Las Vegas to rebuild its hotel supply to previous levels. For now, new hotel construction is mainly focused on limited-service properties in areas beyond the Strip, including Henderson and the airport vicinity.
The Tropicana, a fixture on the Las Vegas Strip since 1957, was the latest of several vintage hotel-casinos imploded over the past 30 years (CoStar)
Sports and Entertainment Drive Future Growth
The Tropicana’s implosion is just one part of a larger trend reshaping the Vegas Strip. In recent years, the city has increasingly leaned into sports and entertainment, with the arrival of the NFL’s Raiders, the NHL’s Golden Knights, and an annual Formula One race. The Sphere, a new high-tech arena resembling an eyeball, has become a must-see attraction.
Developers are already eyeing future projects, including potential venues for NBA and Major League Soccer teams. Las Vegas has positioned itself as a prime candidate for league expansions, continuing to diversify its offerings beyond gambling.
What Remains
Despite the rapid changes, some Las Vegas icons, like the Flamingo, which opened in 1946, remain standing. Instead of being razed, these historical venues are being renovated. Caesars Entertainment, the Flamingo’s owner, recently announced an overhaul of the property, set to include new dining and entertainment options.
As Las Vegas looks to the future, the city’s skyline will continue to evolve, with more mixed-use developments and entertainment venues expected to spring up along the Strip. Yet, for many, the implosion of the Tropicana marks the end of an era—one that helped transform Las Vegas into the world’s entertainment capital.
🚦 The Hard Corner Picks
Moderate Growth in CRE Debt During Q2: New commercial mortgage debt increased by $31.4 billion, pushing the total to a record $4.69 trillion. (This one is good)
Rate Cuts Offer Little Relief to Struggling Commercial Landlords: High leverage and floating-rate debt push owners to the brink amid tightened lending.
10-Year Treasury Yield Volatility Persists Amid Economic Uncertainty: Unstable economic factors keep long-term rates in flux as markets grapple with inflation and labor shifts.
Rate Cuts Offer Minimal Relief for Overleveraged Commercial Property Owners: High debt and floating-rate loans push CRE investors toward foreclosure despite falling interest rates
Fed Official Signal Potential for More Aggressive Rate Cuts Ahead: Balancing recession risks and inflation, the Federal Reserve eyes further economic intervention.
U.S. Commercial Property Prices Show Signs of Recovery in August: Industrial sector growth as optimism for market rebound amid interest rate cuts.
Riskiest Real Estate Bonds Outperform Nvidia with 170% Returns: Junior bonds surge amid interest rate cuts, but analysts warn of peaking valuations.
Community Banks Prove Resilient Despite High CRE Loan Exposure: Strong Profitability and asset quality shine amid regulatory concerns and loan loss provisions.
US Investment-Grade Bonds Deliver 5.8% Return in Best Quarter of 2024: High-grade bonds near longest winning streak since 2019 after early-year declines.
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đź›’ The Retail Corridor
Quick-Service Restaurants Surge in Expansion Amid Rising Consumer Demand: Starbucks leads new openings as Americans spend big on food away from home.
Inland Real Estate Trust Considers Sale of $1.4B Shopping Center Portfolio: Nontraded REIT, owning over 7 million square feet, evaluates strategic options for future.
Tempur Sealy Aims to Sell 180 Stores to Secure $4 Billion Mattress Firm Acquisition: Manufacturer addresses FTC antitrust concerns with strategic divestiture plan.
Navigating the Menu: Pricing Strategies Shaping Restaurant Visits in 2024: An in depth analysis of how leading chains adapt to rising prices in the dining landscape.
Amazon Expands Logistics Footprint with $91M Warehouse Purchase Near Denver Airport: E-Commerce giant acquires 625,000-SF facility and adjacent land amid national industrial market slowdown.
Fed chair Powell advocates for gradual rate cuts to maintain economic stability: Central bank leader confident in soft landing strategy, urges patience ahead of upcoming meeting.
Emerging Trends: Overlap of QSR and Fast-Casual Dining in the Net Lease Market: Foot traffic insights reveal distinct consumer behaviors and demographics amid rising popularity.
The Corner Store Comeback: Neighborhood Retail Thrives Post-COVID: Zoning reforms and evolving shopping trends fuel revival of small-scale retail in urban areas.
STNL Cap Rates Rise for Tenth Consecutive Quarter in Q3: Retail, office, and industrial sectors experience modest increases amid sustained high interest rates.
Editor’s Note
We dedicate significant effort into crafting a newsletter that balances information with engagement, but let's be honest – newsletters aren’t our day job. Marhilus Ventures is a diversified investment firm, involved in real estate, finance, and business investments. Our niche? Retail assets, hence "The Hard Corner." Specializing in middle-market value-add properties, both single and multi-tenant, we strategically invest capital through direct equity, joint venture equity, and debt structures across the United States.
Go Check out our investment criteria, if you have anything that may be of interest, shoot it over. We appreciate it!