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10 Midweek Must Reads for Real Estate Investors (July 19, 2023)

The volume of commercial real estate loan distress rose in 70% of the country’s largest metropolitan areas in June. The Wall Street Journal looks at how a record-breaking land sale in Miami came apart. These are among today’s must reads from around the commercial real estate industry.

  1. The Real Cost of New York City Office Real Estate “The city’s mega-office landlords are panicking, pivoting, and shedding what’s worthless. One opens his books.” (Curbed)
  2. CRE Loan Distress Up 70% of Largest Metro Areas in June “Of the 50 largest metropolitan statistical areas (MSAs) tracked by CRED iQ, 35 markets, or 70 percent, exhibited month- over-month increases for June in the percentages of distressed commercial real estate loans. Notable markets with the largest increases in distress included Minneapolis (plus 10.6 percent), Washington,D.C. (plus 2.5 percent), and Charlotte, N.C. (plus 2 percent). Of the markets with comparatively higher levels of CRE distress to the prior month, the average increase was approximately 61 basis points.” (Commercial Observer)
  3. U.S. Public Pensions Invest Record $1.6 Trillion in Alternative Assets “US public pensions have boosted their exposure to private equity to $622 billion, the highest in at least two decades, as part of a push for higher investment returns, according to a new report by the Equable Institute. Private equity makes up 13% of the state and local retirement plans’ investments as of 2022, compared to 11% the prior year, according to the nonprofit research group, which cited the latest data available. Overall, alternative assets — like private equity, hedge funds and real estate — make up about a third of pensions’ portfolios, amounting to a record $1.6 trillion invested, according to the report released Tuesday.” (Bloomberg)
  4. Corporate SFR Owners Dealing with Volatility After Profitable Rent Hikes “Single-family rental homes, which tend to be scattered assets, have provided their owners more stable rents over the last four years than build-to-rent homes, which tend to be more concentrated, according to a report by John Burns Research and Consulting. Both classes of single-family assets, as well as multifamily assets, responded to the 2021 surge in household formation by raising rents. BTR and apartment rents went up quickly, while SFR, whose owners tend to be long-term, noncorporate investors, raised rents at more historically normal rates, according to the report.” (Bisnow)
  5. Record Miami Land Sale Collapses Amid Commercial Real Estate Slowdown “The collapse of a record Florida land sale leaves a billion-dollar hole of prime waterfront real estate in downtown Miami. In the spring, Genting Malaysia, a Southeast Asia casino operator, cut a deal to sell the 15.5-acre assemblage for $1.2 billion in what would have been the most expensive Florida land sale on record. That deal collapsed in June when the buyer, a group led by Miami developer Terra, was unable to agree on terms and timing with Genting, which has owned the property for more than a decade, according to a joint statement.” (The Wall Street Journal)
  6. San Diego City Employees Sets $100 Million Pacing Plan for Non-Core Real Estate “San Diego City Employees' Retirement System's board on July 14 approved a plan to commit a. total of $100 million to non-core real estate in fiscal year 2024, which started July 1. Officials at the $10.5 billion pension fund plan to make three to four new commitments of $50 million to $75 million in sector-specific strategies such as residential, logistics, health care, self-storage, data centers, hospitality or neighborhood/community retail. Pension fund officials also plan to make commitments of $25 million to $50 million to structured real estate debt.” (Pensions & Investments)
  7. Real Estate Bets on Eric Adams “New York City Mayor Eric Adams’ latest $1.3 million fundraising haul got a boost from several real estate heavyweights — signaling continued support from an industry that’s enjoyed a friendly relationship with City Hall. Marc Holliday, chairman and CEO of the development firm SL Green, gave the maximum $2,100 to Adams’ reelection bid during the latest filing period, according to the Campaign Finance Board. Stephen Green, founder of the company, gave another $2,100. The firm, which is the city’s largest commercial landlord, is one of several developers and gaming giants competing in the high-stakes race for a New York City-area casino license. It’s a process the mayor has a key role in.” (Politico)
  8. CrowdStreet Responds After Nightingale Funds Fiasco “The crowdfunding platform's safety measures are being questioned after it did not hold investors money in escrow.” (The Real Deal)
  9. Starwood Defaults on $212.5 Million Atlanta Office Mortgage “Barry Sternlicht’s Starwood Capital Group is in default on a $212.5 million mortgage backed by an Atlanta office tower, another sign of mounting distress in US commercial real estate. The mortgage on Tower Place 100, in the Georgia capital’s Buckhead district, matured on July 9 and Starwood failed to refinance or pay off the debt, according to a filing.” (Bloomberg)
  10. Ashley Butts, Daughter of Inglewood Mayor, Guilty of Conspiracy in Beating a Landlord “A jury found Ashley Butts, 37, guilty of conspiring to have her landlord assaulted. She faces two to five years in state prison.” (Los Angeles Times)
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