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11 Midweek Must Reads for Real Estate Investors (July 12, 2023)

Commercial Observer looks at the details of giving back an underwater commercial building back to the lender. The CLO market looks primed for a reset, reported Bloomberg. These are among today’s must reads for investors from around the commercial real estate industry.

  1. Inside the Room: How Handing Back Keys on Commercial Real Estate Works “For much of the past six months, commercial real estate’s beleaguered office sector has been dogged by negative news, with some of the industry’s most prestigious names either struggling to refinance formerly performing properties, defaulting on commercial mortgage-backed securities (CMBS) loans worth hundreds of millions of dollars, or attempting to hand back the keys to underwater office buildings to lenders.” (Commercial Observer)
  2. CLO Market Set for $20 Billion Reset Spree in Sign of Thawing “A type of refinancing transaction is becoming more popular in the $1.3 trillion market for collateralized loan obligations, a sign the industry is healing as concerns over surging inflation and a potential recession abate. Known as resets, these transactions can extend the life of CLOs for years. In the past they’ve made up as much as a third of annual issuance, according to data compiled by Bloomberg. But last year’s sharp deterioration in credit conditions all but put the deals on ice.” (Bloomberg)
  3. The Big City Rebound and its CRE Implications “The pandemic established new commercial real estate winners and losers by sector and geography. In the aftermath, with a population shift back to big cities, the dynamics dictating CRE market movement shuffled the cards once more, reasons Moody’s Analytics Senior Economist Ermengarde Jabir. The COVID-19 era of 2020-21 witnessed a population migration away from urban centers, particularly in Northern states, Jabir said. But since 2022, many metros considered pandemic losers have enjoyed a net positive population inflow. New York City has seen a modest gain in residents, Miami and Houston have witnessed large increases, and Seattle, San Francisco, Los Angeles and Chicago have watched out migration decline.” (Commercial Property Executive)
  4. U.S. Borrowers Look for Bank Replacements “To be able to copy & paste content to share with others please contact us at [email protected] to upgrade your subscription to the appropriate license.” (PERE)
  5. Ashford Hospitality Trust Looks to Hand Lenders Back the Keys on 19 Hotels “Ashford Hospitality Trust, a REIT that concentrates on upper upscale, full-service hotels said it is “most likely” that it would hand back the keys to lenders on 19 hotels. ‘The company believes it’s in the best interest of its common and preferred stockholders to not make the required paydown of approximately $255 million,’ it said, adding that would save an additional $80 million in expected capital expenditures in the properties through 2025.” (
  6. Beyond the Numbers: Twelfth District Commercial Real Estate Executives Forecast a Mixed Outlook “During the roundtable discussion, the executives noted that these differences in asset class performance continue to define commercial real estate. There is also considerable regional variation. For example, the participants noted that with respect to office and retail properties, markets that have experienced business in-migration, such as Charlotte, Nashville and Miami are doing relatively better than markets such as New York and Los Angeles, where office properties are struggling to attract tenants. The executives all pointed to downtown urban office space as the weakest performing asset class. This is especially true for older office space (10+ years old), where there is “negative demand” for these properties, meaning more tenants moved out than moved in.” (Federal Reserve Bank of San Francisco)
  7. Major Project in West Chelsea Bets That Large Offices Have an Important Future “A massive conversion project in West Chelsea is set to test whether large offices can still find takers in a work-from-home world where corporate tenants are downsizing.” (Crain’s New York Business)
  8. Republican Eyes Sweet Home for FBI Headquarters in Alabama “Republicans have a new idea for how to take Washington politics out of the FBI: Take the FBI out of Washington and send it to Huntsville, Ala. House Judiciary Committee Chairman Jim Jordan (R., Ohio), who has accused the bureau of overzealously investigating former President Donald Trump and his allies, wants to strip the bureau of funding for a new headquarters, people familiar with the matter said, unless it relocates to the midsize Alabama city a 700-mile drive from the nation’s capital.” (The Wall Street Journal)
  9. Medical Offices a Hidden Healthy Gem in New York’s Real Estate Market “In the now desperate search for professions resistant to working from home, medical is having a moment. Keeping New Yorkers healthy and upright is becoming more of a dominating presence in the New York area in the days of the pandemic as well as after the pandemic. Health care service providers grew their occupancy by 16 percent in the region between 2019 and 2023, as both workforces and patient demand grew, according to a survey from brokerage CBRE.” (Commercial Observer)
  10. Bosses Push Back on Workers Who Resist Office Returns: ‘They Will Need to Show Up’ “Hundreds of Wall Street Journal readers—many of them bosses and team leaders—responded to our story on the workers who say ‘it’s not my responsibility’ to save the office economy. These bosses say employees who insist they are more productive while working from home are missing the larger picture: Team productivity is taking a hit. The purpose of an office is to create a dynamic environment where people feed off one another’s energy, bond on a personal level and explore ideas in unstructured ways, many company leaders said. Remote work can’t provide those kinds of casual interactions that build culture and camaraderie, they say, which means it is worse for the organization and, in many cases, individual careers, too.” (The Wall Street Journal)
  11. Where Does New York City Office Furniture Go When No One Wants It? “More than three years after the coronavirus pandemic began, about half of the office space in the New York City metro area in June was occupied, according to Kastle Systems, a security-card company tracking activity in office buildings. The hollowing out of the city’s cubicles has raised existential economic and cultural questions, but also a big logistical one: What do you do with all that office furniture?” (The New York Times)
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