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10 Midweek Must Reads for the Real Estate Investor (Oct. 11, 2023)

Real estate managers’ assets under management fell by 2.9% during the year ended June 30, reported Pensions & Investments. S&P might downgrade Brookfield Real Estate to junk status because of its high maturing debt loan, according to Bisnow. These are among today’s must reads from around the commercial real estate industry.

  1. Country Garden Caves to Debts as China’s Real Estate Crisis Worsens “The embattled property developer Country Garden said on Tuesday it was unable to repay a loan and expected to miss upcoming overseas debt payments as a result of plunging sales from China’s spiraling property crisis. The announcement, made on the Hong Kong Stock Exchange, is effectively a statement from Country Garden, once China’s largest homebuilder, that it is likely to default with roughly $187 billion in liabilities. Country Garden is one of the biggest causalities of China’s imploding real estate market, which has sent Evergrande, another giant property developer, into bankruptcy.” (The New York Times)
  2. Hit by Rising Rates, Real Estate Managers’ AUM Falls “Real estate managers were hit with rising interest rates, falling valuations and declining fundraising in the year ended June 30, resulting in their worldwide assets under management dropping by 2.9% to $1.9 trillion, Pensions & Investments’ annual real estate money manager survey shows.” (Pensions & Investments)
  3. Private Credit and the New Kings of Wall Street “The world of corporate loans is changing. As higher interest rates have some banks stepping back from lending, private-credit fund managers are stepping in to finance one jumbo loan after another for U.S. companies. The shift is accelerating a trend more than a decade in the making. Hedge funds, private-equity funds and other alternative-investment firms have been siphoning away money and talent from banks since a regulatory crackdown after the 2008-09 financial crisis. Lately, many on Wall Street say the balance of power—and risk—has hit a tipping point.” (The Wall Street Journal)
  4. S&P Mulls Downgrading Brookfield to Junk Status, Citing Debt “S&P Global Ratings put Brookfield Property Partners on a negative watch, meaning the ratings agency might downgrade the real estate giant to junk status, citing its “substantial” maturing debt amid high interest rates and downward pressure on property values. ‘While we acknowledge that BPY's sizable liquidity position and consistent execution of asset sales mitigate the risk of the company not being able to pay its fixed charges over the near term, BPY has one of the weakest financial risk profiles within our North America real estate coverage, given elevated leverage and thin interest coverage,’ S&P said in a statement.” (Bisnow)
  5. SL Green President Mathias Steps Down After 25 Years “Longtime SL Green president Andrew Mathias is stepping down as the city’s largest office landlord struggles with demand and balance sheet challenges. Mathias, who’s been with the company for nearly 25 years, will leave when his current contract is up at the end of the year, SL Green announced Tuesday morning.” (The Real Deal)
  6. PGIM Real Estate Arm Launches AI Research Lab “The real estate division of PGIM, the $1.3tn US-headquartered asset manager, has launched an innovation lab, partnering with University College London and other global institutions to develop new technologies. The lab, RealAssetX, will tap more than 50 years of data from PGIM Real Estate — as well as from third parties — to develop new technologies that can be rolled out across the sector.” (Financial News)
  7. RentCafe: Solo Renters Surge Nationwide “The number of solo renters is on the rise around the country, according to a new study from RentCafe. Between 2016 and 2021, the number of renters living alone increased by 1 million, reaching 16.7 million and becoming the fastest-rising renter group during those five years. Who’s living alone? Baby boomers and millennials account for the largest shares of solo renting, while very few Gen Zers are going it on their own since a renter living alone needs an extra annual income of $8,600 compared with an average renter.” (Multifamily Executive)
  8. Here's What We Do and Do Not Know About the Effects of Remote Work. “Broadly, the portrait that emerges is this: Brick-and-mortar businesses suffered in urban downtowns, as many people stopped commuting. Still, some kinds of businesses, like grocery stores, have been able to gain a foothold in the suburbs. At the same time, rents rose in affordable markets as remote and hybrid workers left expensive urban housing. mothers have generally benefited from the flexibility of being able to work remotely — more of them were able to stay in the work force. But remote work also seems to bring some steep penalties when it comes to career advancement for women.” (The New York Times)
  9. Evolution in Real Estate Joint Ventures “Following up on Ropes & Gray’s recent article in Institutional Real Estate Americas, on this podcast, private capital transactions partner Sarah Schaffer Raux joins real estate and investment transactions partner David Kaye and counsel Pete Scherer to discuss the emerging trend of institutional real estate investors looking beyond traditional real estate joint ventures to create expanded relationships with their operating partners, often through the use of hybrid investment structures.” (Ropes & Gray)
  10. Times Square Goes from Deserted to Bustling “Times Square has found its groove heading into the crucial holiday season, with new businesses opening, hotel sales picking up and retail rents again on the rise. The entertainment district recently recorded its 180th business opening since the pandemic, surpassing the 179 closures that resulted from Covid-19 turning one of the U.S.’s most heavily trafficked districts into a ghost town. Restaurants have proliferated. Companies ranging from fast-food joints such as Taco Bell and Raising Cane’s to the more upscale Mermaid Oyster Bar and the French-Caribbean fusion lounge S’Aimer have opened Times Square locations since the pandemic.” (The Wall Street Journal)
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