- Banks Step Up U.S. Property Loan Tweaks to Limit Defaults “In recent weeks, banks have stepped up efforts to prevent such losses, according to commercial real estate (CRE) analysts and industry data. Lenders are offering borrowers loan extensions and modifications, selling derivatives to fix interest costs, and offering subsidized loans to investors to purchase defaulted loans, the analysts said. Their hope is that tiding over the current period would allow these properties to become profitable again and refinance in the future when interest rates fall, and data shows they are having some success.” (U.S. News & World Report)
- REITs Turn to JVs as Alternative Capital Source “REITs have been turning to joint ventures (JVs) for years as a means to extend their balance sheets, moderate leverage, execute on strategic endeavors, and earn fees to enhance returns. Today’s environment of tighter capital markets and market volatility, though, is expected to generate even more consideration of JVs across the REIT industry. Daniel LeBey, a partner at Vinson & Elkins, says there has been a pick-up in JV activity in the last two to three years, ‘which I think is at least in part a reflection of the difficult conditions in the public equity capital markets during that period.’ That appetite to establish JVs isn’t likely to diminish anytime soon.” (reit.com)
- Multifamily Rents Near Record High, Even as Supply Expands “U.S. multifamily rents have slipped since record highs about a year ago, but still remain relatively high despite an influx of new supply, according to a new report by Redfin. The median asking rent nationwide came in at $2,029 in June, up from $1,995 in May and $2,019 in June 2022, but down from a record high of $2,053 set in August 2022, according to the company. Expressed as percentages, rents gained 0.5% year-over-year in June, but were down in May 0.6% year-over-year.” (Bisnow)
- Sequoia Wealth Business Eyes Credit and Real Estate Investments Ahead of VC Split “Sequoia Capital’s $16.4 billion wealth-management arm is eyeing credit and real estate investments for the first time since the fund’s early days, and seeking to capitalize on a wave of investor interest in making private equity portfolios more liquid. Sequoia Heritage, as the little-known wealth unit is called, is plotting a different course from the venture capital firm as Sequoia Capital prepares to split up in response to US-China tensions.” (Bloomberg)
- Fidelity Partners with Brookfield to Launch Private Real Estate Investment Portfolio “Fidelity Investments Canada ULC is expanding its offerings with the launch of a new private real estate market portfolio. The company has partnered with Brookfield Asset Management for the new venture, with the latter investing in and managing a portfolio of “high quality” Canadian real estate assets on behalf of Fidelity. Fidelity will allocate the portfolio to a number of its private investment pools, and will continue to explore other opportunities for its utilization.” (Storeys.com)
- Empty Spaces and Hybrid Places: The Pandemic’s Lasting Impact on Real Estate “To what extent could real estate in superstar cities continue to suffer? In this research, the McKinsey Global Institute has modeled future demand for office, residential, and retail space in several scenarios.1 In those scenarios, demand for office and retail space is generally lower in 2030 than it was in 2019, though the anticipated reductions in our moderate scenario are smaller than those projected by many other researchers. Our analysis also shows that the ripple effects will be complex—for example, that certain kinds of cities and neighborhoods will be more heavily affected than others.” (McKinsey)
- How Valuation and Materiality Become Catalysts for CRE Litigation “An inescapable result of high interest rates and post-pandemic trends is downward pressure on commercial real estate valuations, especially in the office sector. Given commercial mortgage-backed securities and other deal structures in which control of the loan rests with the lowest priority interest that is in the money, reduced valuations will likely become the flashpoint for CRE litigation. Parties seeking to shift control their way in these disputes may seek to rely on the judicially made-up standard of materiality recently developed in pre-financial crisis residential mortgage-backed securities (RMBS) litigation, rather than the parties’ commercial understanding.” (Commercial Observer)
- Almost $80 Billion Needed for Repairs to New York City’s Public Housing “New York City’s public housing agency now needs more than $78 billion to repair or renovate aging kitchens, leaky pipes, faulty elevators and other problems over the next 20 years, officials revealed on Wednesday. That number has grown more than 70 percent since 2017, when the agency last calculated its needs. The new estimate adds another dimension to the daily complaints of the hundreds of thousands of New Yorkers struggling to live in the nation’s largest public housing system.” (The New York Times)
- More Fed Rate Hikes Ensure a Continued Lack of New Retail Space “he virtual standstill in new retail center construction will remain in place for at least another year. That’s the prediction of JLL’s president of retail advisory services Naveen Jaggi following news that the Federal Reserve Board—which passed on an interest rate increase in June—planned another hike in the rate this month that would lift it into the 5.25%-5.5% range.” (Chain Store Age)
- London’s Canary Wharf Takes Brunt of Real Estate Pain “Three decades ago, London remade a derelict shipping yard at Canary Wharf into a forest of glass-and-concrete skyscrapers in a bid to mimic U.S. financial hubs. Now the 128-acre banking district east of central London is suffering a problem also plaguing U.S. cities: emptying office buildings. Last month, HSBC Holdings, the U.K.’s largest financial firm, said it was leaving its 1.1-million-square-foot headquarters, known as the HSBC Tower, for a smaller building in central London.” (The Wall Street Journal)
- CRE Lobby Leads Charge Against Chicago Transfer Tax Hike “Chicago’s commercial real estate players are banding together to oppose a proposal backed by Mayor Brandon Johnson to more than triple the city’s transfer tax on $1 million property sales. The charge being led by groups such as the Building Industry Association of Greater Chicago and the Neighborhood Building Owner’s Alliance follows this month’s publication of a wide-ranging report by the progressive new mayor’s transition team outlining recommendations to pave a path forward for the proposal.” (The Real Deal)
- E.P.A. Proposes Tighter Limits on Lead Dust in Homes and Child Care Facilities “The Biden administration on Wednesday proposed to strengthen requirements for the removal of lead-based paint in homes and child care facilities built before 1978 to try to eliminate exposure to lead, which can damage the brain and nervous system, particularly in children. If finalized, the Environmental Protection Agency estimates that the regulation would reduce exposure to lead for as many as 500,000 young children per year.” (The New York Times)
- WeWork Among First Still Active in Russia After Ukraine Invasion “Flexible office giant WeWork is among 400 multinational companies still active in Russia more than 500 days after the country invaded Ukraine, data from U.S. and Ukrainian academics showed. Jeffrey Sonnenfeld, Yale School of Management senior associate dean and Lester Crown professor in management practice, and Steven Tian, Yale Chief Executive Leadership Institute director of research, wrote in an article in Fortune magazine that WeWork has been downgraded in their analysis of companies with a presence in Russia because it still operates in the country despite previously saying it would pull out.” (Bisnow)
- The Luxury Tower Built for New York’s Elite Still Sits Half Empty “At the luxury glass-and-limestone tower 35 Hudson Yards, approximately 50% of the units were still unsold as of the last week of June, more than four years after sales launched, according to an analysis by The Wall Street Journal based on sales recorded with the city’s Department of Finance. Related is slashing prices and offering incentives at the condominium, such as covering buyers’ taxes and closing costs, local agents said. Recorded sales at 35 Hudson as of late June had closed for an average of 30% less than the original prices filed with the New York state Attorney General’s office, and active listings were discounted by up to 50%, the analysis shows.” (The Wall Street Journal)
- What Shall We Eat? The Food Halls of America “Over the past ten years, food halls have experienced a significant rise in popularity. Analysts and developers consider the platform a safe investment and cultivate fresh restaurant ideas while functioning as a community center. There are more than 300 food halls in the US, with an additional 145 slated for development in 2023. Analysts predict that food hall expansion will increase by 45% in the coming years. Redeveloping mixed-use and industrial spaces with a sizable footprint has seen the most traction with food hall operators. Landlords must be diligent when adding food hall leases to their tenancies. In addition to ensuring there are no surprises in retrofitting the space to accommodate ‘back of house’ prep for kitchen, catering and delivery, they must also consider how the look and feel of the product seamlessly integrate with its existing space design.” (Colliers)
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