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10 Must Reads for CRE Investors Today (Feb. 28, 2023)

Real estate borrowers are looking for creative solutions when refinancing amid a volatile lending landscape, reports RE Business Online. Federal Reserve economists warned about CRE valuations taking a tumble. These are among today’s must reads from around the commercial real estate industry.

  1. Turning Malls into Neighborhoods “At a time when physical retail faces difficult competition from e-commerce, retail center owners increasingly see residential as both a new revenue source and a way to invigorate stores by putting potential consumers in close proximity. And for suburban malls and shopping centers that are in decline or already closed, demolishing and replacing them with apartment buildings and townhomes is a way to capitalize on what often are desirable locations in inner-ring suburbs or along major transportation corridors.” (Urban Land)
  2. Commercial Borrowers Seek Flexibility Amid Volatile Lending Landscape “Borrowers are looking for outside-the-box solutions to reshape their capital stacks, such that the impacts of numerous interest rate hikes can be minimized. For those that can afford to do so, the simplest solution is also the most effective: just sit tight.” (RE Business Online)
  3. Fed Economists Warn CRE Valuations Could Take A Tumble “Although the staff economists at the Federal Reserve say the U.S. financial system faces only moderate risks in the near future, they warn that serious economic pain may be ahead, including for commercial and residential real estate.” (Bisnow)
  4. CRE Prices Could Fall 40% This Year in an Adverse Fed Planning Scenario “In the severely adverse scenario, unemployment hits 5.6% by the end of Q1 2022 (which seems high, given numbers from January), quickly rises to 10% in the third quarter of 2024, and slows to 7.5% by Q1 of 2026. CPI is at 2.3% in 2023 Q1 (again, it seems low), drops to 1.3% at the end of this year, and by the beginning of 2026 is back to 1.6%.” (
  5. Non-Traded REITs had “The Best of Times and the Worst of Times” in January “In addition, Stanger reports that heightened levels of redemption activity continues. Net asset value REITs satisfied an estimated $4.6 billion of requests in the fourth quarter of 2022, equal to approximately 4.2% of net asset value at the beginning of the period. To date four NAV REITs sponsored by Blackstone (Blackstone Real Estate Income Trust), Starwood (Starwood Real Estate Income Trust), KKR (KKR Real Estate Select Trust) and RREEF (RREEF Property Trust) reported 2023 redemption requests exceeding monthly or quarterly limits.” (The DI Wire)
  6. Brookfield Sees $825M Wiped From Value Of Office Portfolio, But Shows Debt Market Is Open “The company had a total of $113B in assets at the end of 2022, including $66B of office and retail commercial properties, $20B of stakes in Brookfield funds and a disparate mix of hospitality properties and financial assets. The portfolio has $58B of debt secured against it.” (Bisnow)
  7. Architect Roundtable: Paving the Way for BIPOC Designers to Succeed “Multi-Housing News reached out to three female leaders in architecture and design to find out how they made their mark and what progress has been made in terms of diversity, equity and inclusion in this fairly hard to penetrate industry.” (Multi-Housing News)
  8. Ready Capital and Broadmark Realty Capital to merge and create company with equity capital base of $2.8 billion “Under the terms of the deal, Broadmark stock will be converted into 0.42733 shares of Ready Capital common stock, or a total of approximately 63 million shares of Ready Capital common stock. Based on the two stocks’ closing prices on Feb. 24, the deal implies an offer price of $5.90 per Broadmark share, equal to a premium of 41% or about 0.85 times tangible book value as of Dec. 31, 2022.” (Marketwatch)
  9. Office-to-housing conversions aren't happening in California. A new bill seeks to change that. “The bill, introduced this month, would make it easier for landlords to get past local red tape.” (Silicon Valley Business Journal)
  10. Bath & Body Works Backs Board in Potential Proxy Battle “The retailer on Monday said in a letter to shareholders that the looming proxy battle is based on misguided motivations and would be detrimental to shareholders. It added that it has taken “all reasonable steps to avoid a costly and distracting proxy contest” from Mr. Loeb, who said last week that his firm plans to nominate a candidate to the company’s board.” (The Wall Street Journal)
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