A Real Estate Debt Crisis Spreads, Restaurant Bargain Offerings Change, and More

Commercial real estate is in trouble. The national vacancy rate is at a record 20 percent, and banks and property owners are already struggling with rising loan default rates. Now, commercial real estate bonds once considered rock solid–some are even AAA rated–are now being sold at huge discounts, or dumped as worthless. We take a look at why single-asset, single-borrower (SASB) bonds were once considered a safe, low-risk investment, and why that’s much less certain now. With an increasingly shaky financial support structure, what is next for the commercial property sector?

Here’s what else we’re keeping an eye on today:

• Big tech is playing hardball as it embraces AI. Meta, following a similar announcement by Apple, said it won’t make some aspects of its newest multimodal AI available to EU users, citing a “lack of clarity” from regulators. Is this an example of overregulation, or a growing caution over the effects of AI? It’s certainly a sign that big tech companies are all-in on AI if they’re prepared to deliberately shun the governing body of some 400 million people. Meanwhile, market leader OpenAI touts its new research on AI safety, but critics say it’s not good enough. 
• Olive Garden owner Darden Restaurants made a $605 million offer for the Tex-Mex chain Chuy’s just a year after it bought Ruth’s Chris Steak House. The move appears to reflect an observation Darden’s CEO made earlier this year about brands operating in an inflation-conscious environment. While consumer cost cutting is hurting traffic to fast-food chains, restaurants with higher quality offerings, rather than discounted deals, are faring far better. But diners still love a bargain, and premium burger chain Red Robin is hustling to offer the now de rigueur promotional items to increasingly stingy customers, with a twist. While maintaining prices on its higher end menu items–as Darden insists–it’s proposing the all-you-can-eat offers that got Red Lobster into trouble. The deal only applies to relatively inexpensive items customers love pairing with their main courses: garlic fries, steamed broccoli, salad, cream soda, floats, lemonade flavors, and certain desserts. It’s a marketing tactic that doesn’t cut into its premium priced entrees.
• How do you take a space station out of orbit? SpaceX, which won NASA’s $843 million contract to deorbit the International Space Station, announced its plan for taking the high-flying laboratory out of service at the end of the decade. The company said it will use a supercharged version of its Dragon spacecraft, with extra power to help guide the entire space station.
• NASA cancels its moon rover mission, citing cost overruns and launch delays. The Viper rover mission was supposed to launch in 2023, with a lander made by  Astrobotic Technology, a startup space company.
• The newly retired Cleveland Fed president Loretta Mester said that with inflation headed lower, U.S. interest rates are likely to follow.
• Offshore wind power hits some snags as the collapse of a turbine off Martha’s Vineyard shut beaches in neighboring Nantucket, while a major new project begins off the New York coast and New Jersey readies money for research in areas where wind farms are planned.
• California is the first state to get federal funds for a hydrogen energy hub as the transition from fossil fuels makes fitful progress.
• Artists are taking things into their own hands to protect their work from generative AI, fighting back with high-tech shields and lawsuits.
• The National Transportation Safety Board will hold hearings on Boeing’s January 737 MAX door incident, as the aircraft maker’s union workers vote to approve a strike mandate amid contract negotiations.
• Britain’s new government aims to regulate the most powerful AI models, in a new development over AI safety concerns. It may set a standard for future AI oversight.