Good morning. It's Sunday, August 9, and in this week's edition, we're covering CBRE's midyear call that cheap money isn't coming back this year and income now drives returns, a jobs report weak enough to slow the Fed but not enough to rule out a September hike, and the Milwaukee property we just closed - where the value doubled without us touching the building.
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Cheap money isn't coming back this year, per CBRE's midyear outlook. The firm expected the 10-year Treasury to dip below 4% by year-end - now it says the yield holds above 4%, with inflation running past 4% and the Fed's next move uncertain. Cap rates, once forecast to compress, are projected to sit flat through December. The market itself is fine: investment volume is still tracking a 16% jump to $605 billion, and industrial leasing is headed for a record 1 billion sq. ft. The takeaway is in the return math. With benchmark rates stuck, CBRE says income - not appreciation - drives total returns from here. If your deal only pencils on exit cap compression, it doesn't pencil. Buy the NOI you can grow, not the multiple you're hoping for.
"How One Man Sold Las Vegas to Wall Street": Niko Ludwig traces Steve Wynn from the 1993 Dunes implosion to the moment casinos became a Wall Street asset class - Michael Milken walking skeptical bond buyers onto the casino floor, raising $160 million in junk bonds, and Wynn's Golden Nugget turning $39 million in 1983 profits. A case study in how capital markets institutionalize a real estate niche. Watch here
"My Investment Plan To Make $100M In 2027": Ken McElroy, who owns over $1 billion in real estate, sits down with Tarl Yarber to lay out their playbook for the next 24 months - across cash, distressed acquisitions, debt, precious metals, and private businesses. The core argument: liquidity comes first, because lenders demand it and the best buying window in years only opens for investors who can move. Watch here
A weak jobs report took some pressure off the Fed, but a September rate hike is still on the table, reports the New York Times. Employers cut 23,000 jobs in July, prior months were revised down, and unemployment slipped to 4.1% only because people left the workforce. None of that matters much to this Fed - inflation has run above the 2% target for five years, and new chairman Kevin Warsh has made price stability his single mandate. Three voting members already dissented in favor of hiking when the committee held at 3.5-3.75% last week. Next week's inflation print decides September; markets pencil the first quarter-point hike for December.
CRE Impact: Borrowing costs are staying where they are, and the next move could be up. If your deal or refi only works when rates drop, it's time to rerun the numbers with today's rates - not the ones you're hoping for.
I told you a while back that some weeks the Deep Dive would be a deal we're working instead of a lesson. Last week you saw one under contract. This week, a quick win - one we just closed.
The property is 6242 N. 64th Street in Milwaukee - roughly 4.3 acres of industrial outdoor storage with a 13,950 SF three-bay maintenance shop and a paved, secured yard. In a dense part of town where outdoor storage is scarce, that setup works for a long list of users: logistics, equipment rental, a school bus terminal, construction laydown, etc. Which is why it went to multiple offers the moment it hit the market.
I lost it the first round. But I told the listing broker one thing: if anything falls apart, I'll go hard with earnest money day one.
It fell apart. The first buyer got nervous about environmental questions on a neighboring property and started slow-playing the broker on delivering earnest money. When the broker called me, my answer took ten seconds: no problem - $25,000, non-refundable, day one. I could commit that fast because I'd already done the work. While the first buyer stalled, I'd been on the phone with environmental firms I've worked with before, and I was confident the risk was manageable and we'd get clarity during diligence.
Then the less common move: I put another $75,000 hard in exchange for the seller letting us market the property for lease before closing. We hired the broker who does the most IOS deals in that market and started the lease-up while we were still in due diligence.
By closing day, we had run the environmental question to the ground with the WDNR - the Wisconsin Department of Natural Resources, the state agency that signs off on environmental cleanups. We had email confirmations in hand that the neighboring property is not a concern to us, and that the site's NFR letter is active and as good as new. On zoning, we hired the best zoning attorney in Milwaukee, who got us clarity and comfort on the outside storage use. And the property was leased - single tenant, NNN, $15,000 a month, cash flowing from day one. The value roughly doubled in the process.
Here's the part worth keeping. We didn't touch the building. No new roof, no repaving, almost no capex. The value-add was clarity - answering the environmental question, settling the use question with the city, and putting a tenant in place before we owned it. Sometimes doubling a property's value is renovation. And sometimes it's paperwork nobody else wanted to untangle.
This isn't a capital raise pitch. But if you'd like to participate in deals like this on the investor side, sign up here and I'll follow up with you personally.
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Until next Sunday.
Be well,
Saul
P.S. Missed my podcast with Danny Newberry? Here is the full episode.
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