10 Must Reads for the CRE Industry Today (Aug. 8, 2022)

The real estate industry breathed a sigh of relief as changes to carried interest were stripped out of the Inflation Reduction Act, reports The Real Deal. The FDIC plans to increase its scrutiny of CRE loans, according to American Banker. These are among today’s must reads from around the commercial real estate industry.

  1. Developers, rejoice: Carried-interest loophole is saved again “A spending bill passed by the Senate Sunday originally included a provision that required fund managers to hold on to investments for five years rather than the current three in order to garner that tax advantage. Though real estate industry experts didn’t see the proposal as the ‘final nail’ in the coffin, they did predict it could lead to complications in fundraising for developers and affect how they’d think about selling assets.” (The Real Deal)
  2. FDIC promises more scrutiny of banks' commercial real estate loans “The Federal Deposit Insurance Corp. plans to increase its scrutiny of banks' exposure to commercial real estate loans, citing uncertainty about the future of work and commerce in the wake of the COVID-19 pandemic. The agency said that its examiners will put particular attention on testing newer loans, as well as loans within subsectors and geographic areas that are experiencing stress, and those that are vulnerable because borrowers are paying higher interest rates.” (American Banker)
  3. Office Buildings On the Verge of a Midlife Crisis “Unlike ’80s pop culture, American office towers from the ’80s are hitting middle age without renewed appreciation, cultural cachet or much of a plan for their later years. The prognosis for aging gracefully becomes even less realistic with the pandemic’s reshaping of the office market, ruthlessly shrinking demand while focusing attention on a younger, hipper, more amenitized crowd of office towers.” (Commercial Observer)
  4. Country's Largest Brokerages Mark Uptick In Office Leasing Revenue As They Post Quarterly Gains “The return of office leasing is highly anticipated in the commercial real estate community as lease rates remain depressed in most major markets, especially for older buildings. Companies seeking to attract employees back to the office have drifted toward newer or recently redeveloped properties, keeping Class-A lease rates higher.” (Bisnow)
  5. Blackstone’s Giant Real Estate Fund Boasts a Strong Run. But Can History Repeat? “Though not publicly traded, it’s sold by major brokerage firms and financial advisors, with a relatively low minimum investment of $2,500. In just five years, Breit has become a lucrative part of Blackstone’s industry-leading real estate franchise, generating $1.8 billion in fees last year and $1 billion in the first six months of 2022.” (Barron’s)
  6. Los Angeles hospitality workers react to proposal that would require hotels to offer up vacant rooms to homeless people “At a city council meeting on Friday, hotel workers and industry players voiced opinions for and against the proposal, with several noting that staff members are not properly trained to provide the mental health and social services required to adequately address unsheltered individuals' needs.” (Insider)
  7. How One Grocery Chain in Pennsylvania Is Preparing for a Downturn “Amid an economic slowdown and high inflation, companies are trying to forecast shifts in consumer demand and recalibrate their business. A number of retail giants and consumer companies have issued profit warnings and projected falling sales in recent weeks as consumers start to pull back on spending. Small operators like Karns face particular challenges of managing growing costs and juggling competition from bigger peers.” (The Wall Street Journal)
  8. Boston mayors have had an open-door policy with real estate developers. Not Michelle Wu. “For more than three decades, big Boston real estate developers enjoyed an open door policy with the mayor’s office. Unfettered access flourished under Thomas M. Menino and continued under Martin J. Walsh and even during the brief tenure of Kim Janey.” (Boston Globe)
  9. Remote work is causing a massive shift in salaries around the country “Geography has long played a role in how workers are compensated: If you lived in Dallas or Minneapolis, you'd never earn the kind of paychecks offered in big cities like San Francisco or New York. But now, that's changing.” (Insider)
  10. Once Asking $63.75 Million, a Billionaires’ Row Condo Sells for 30% Less “In June, Mr. Barnett told The Wall Street Journal that, though the company had sold roughly $1 billion in units, the building would fall far short of its once projected sellout of more than $4 billion. When the building first launched sales in 2018, Extell faced a shifting market flooded with new condo inventory, and then the Covid-19 pandemic, inflation and the looming threat of a financial crisis.” (The Wall Street Journal)
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