In December, Red Lobster admitted underestimating how much shrimp an individual can consume after an all-you-can-eat shrimp promotion led to a large third-quarter loss and a lot fewer shrimp in the ocean. This week, Applebee's also started fishing in dangerous waters.
Over the weekend, the "neighborhood" restaurant chain unveiled a 12-month, $200 "date night" subscription — which covers up to $30 of food and non-alcoholic beverages, valid for 52 visits. How the economics make sense is a little beyond us, but perhaps the Applebee's execs sense that after just a couple visits, most customers will realize the food is so bland no one will bother coming back.
HEDGE FUNDS
Two US Hedge Funds Racked Up Major Chinese Gains Last Year
American firms in China have seen better days – except maybe these two.
Last year, the Chinese operations of both Two Sigma and Bridgewater — two large US-based operations — posted massive gains, according to a Financial Times report over the weekend, besting even locals in an anemic economy.
Against the Grain
Bridgewater and Two Sigma had every excuse for poor performance in China last year. A collapse in the real estate market has dragged down the local economy writ large, and measures taken by the government in Beijing to stoke a rally among publicly traded companies barely made a dent. To put a sour cap on the year, Moody's downgraded the country's credit rating in December from stable to negative, citing the heavy debt loads carried by local governments. In total, the country's benchmark CSI 300 index fell nearly 12% in its last long slog through the old Gregorian (as a reminder, the S&P 500 leaped about 24% in 2023, while Europe's STOXX 600 index increased nearly 13%).
But by piling heavily into commodities, bonds, and other alternative investment vehicles — a strategy Bridgepoint especially rode — the two US firms were able to feast in an otherwise sleepy bear market:
Bridgewater's flagship China fund yielded a return of over 10% last year, sources told the FT, while Two Sigma's three major Chinese quant trading funds garnered a return of over 16%. According to public records, the 771 locally owned multi-strategy hedge funds in China saw an average return of just under 3%.
Sources also told the FT that Two Sigma's China arm roughly doubled its assets under management last year, while Bridgewater's saw an astounding four-fold increase in assets under management.
"Most Chinese funds only know how to make money in a bull market," Shenzhen Rongzhi Investment Consultant VP Zhang Zhongyu told the FT.
Bucking the Trend: To be sure, the two hedge funds proved the exception to the rule, not just vs. local Chinese competition, but against other Western firms looking to get a footing in China as well. "Certain funds that have a lot of money and are fairly aggressive can go in and try to make some money within the China market on a small scale," Andrew Collier, an analyst at GlobalSource Partners, an adviser on Chinese investments, told the FT. "That doesn't mean other [US] funds with a more established approach could follow suit." Blackrock's China unit, for instance, suffered losses across all of its eight stock-focused funds in 2023.
The "Rocket Fuel" For AI Could Be Worth 13 Amazons
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Urban doom loop or commercial real estate buy-low opportunity?
Property manager RXR and alternative-asset investor Ares Management think the darkest hour is nearly over for New York City's commercial real estate sector, as they partner to build a $1 billion fund to invest in distressed office buildings, the Financial Timesreported.
This One's Just Right
The pandemic made water cooler conversations a thing of the past as employees shifted to working from home with video calls and team management systems. Once-bustling skyscrapers became corporate liminal spaces. Even as infection rates waned, many businesses either adopted a hybrid work schedule or chose to not return to the office at all.
That meant nothing good for the value of the city's office-building inventory, and the future doesn't look much brighter. A joint study from New York University and Columbia University predicted that remote work will decrease office values in the city by nearly 50% by 2029 compared to pre-pandemic levels. And roughly $117 billion of commercial mortgages tied to US offices needs to be either repaid or refinanced this year, according to the Mortgage Bankers Association.
However, some of the city's biggest commercial real estate players are betting against that dour forecast:
RXR CEO Scott Rechler told the FT that his group and Ares are taking a Goldilocks approach to the office buildings they buy. If they're too new, both the cost and rents would be too high; too old, and they'd require extensive renovations and debt restructuring.
Craig Snyder of Ares said the two businesses are looking to identify what buildings will be "long-term winners" because "the broad, indiscriminate flight of institutional capital from the office sector has resulted in many high-quality properties trading down to historic lows."
Building up slowly: RXR and Ares aren't just playing a hunch on the city's office comeback. In the fourth quarter of 2023, the city's office leasing activity jumped by 27% from the previous quarter to 8.23 million square feet, The Real Deal reported. In December, Law firm Paul, Weiss, Rifkind, Wharton & Garrison signed a 20-year deal for 765,000 square feet at a building on 6th Avenue, making it the largest commercial real estate lease in the country all year.
Written by Griffin Kelly
MEDIA & ENTERTAINMENT
Musicians Could Be Next to Disturb Hollywood's Labor Peace
At least they'll be chanting in harmony on the picket lines.
The American Federation of Musicians (AFM) entered contract negotiations with the Alliance of Motion Picture and Television Producers this week, and if 2023 was any indication of how talks will go down, another Hollywood strike could be on tap after just a few months of labor peace.
Streaming Setbacks
Last year, movie and TV studios experienced the doubleheader of monthslong, simultaneous strikes from the Writers Guild Of America and the Screen Actors Guild, with both groups seeking better pay, stronger benefits, increased compensation from streaming, and clear protections from studios as they increasingly dabble with AI-generated content.
Now, the AFM, which represents roughly 70,000 musicians, is looking for the same:
Getting properly paid for work featured on streaming platforms is one of the union's biggest concerns. According to the AFM, musicians who record soundtracks make 75% less on streaming content because of lower residuals.
Union president Tino Gagliardi told CNN that the group is "prepared to do whatever it needs to get what we have to have, in order to make the lives of musicians better."
Record scratch: This wouldn't be the musician union's first strike, but it's been roughly 80 years since its most notable work stoppage. Back then, members were protesting major American record companies over royalty disputes, and tens of thousands of musicians stopped recording music from 1942 to 1944, marking it the longest strike in the entertainment industry's history. Attention spans were longer back then.
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Bucking the Trend: To be sure, the two hedge funds proved the exception to the rule, not just vs. local Chinese competition, but against other Western firms looking to get a footing in China as well. "Certain funds that have a lot of money and are fairly aggressive can go in and try to make some money within the China market on a small scale," Andrew Collier, an analyst at GlobalSource Partners, an adviser on Chinese investments, told the FT. "That doesn't mean other [US] funds with a more established approach could follow suit." Blackrock's China unit, for instance, suffered losses across all of its eight stock-focused funds in 2023. 
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