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LIBOR vs SOFR Nicholas Ahonen/Shutterstock

12 Must Reads for the CRE Industry Today (Oct. 6, 2021)

U.S. companies are beginning to switch from LIBOR to SOFR as an interest rate benchmark, reports The Wall Street Journal. Forbes looks at 2021’s wealthiest real estate tycoons. These are among today’s must reads from around the commercial real estate industry.

  1. U.S. Companies Pick Up Adoption of LIBOR Alternative SOFR “Major U.S. companies are dumping the London interbank offered rate ahead of a year-end deadline for abandoning the troubled short-term interest-rate benchmark. Sports-vehicle maker Polaris Inc. recently selected Wall Street’s preferred alternative, the Secured Overnight Financing Rate, as its new benchmark rate to provide inventory financing to vehicle dealers as part of a business it runs with Wells Fargo & Co. Polaris Chief Financial Officer Bob Mack said the company favors SOFR over other options because it is widely accepted by regulators.” (The Wall Street Journal)
  2. As Opportunity Zone Window Closes, the Case for Investment Is Stronger Than Ever “The opportunity clock is ticking. As a critical deadline in the qualified opportunity zone program approaches on December 31, 2021, investors are finding the potential tax benefits of the program increasingly attractive — in no small part because capital gains tax rates are almost certain to go up in the weeks ahead. Just to recap, the opportunity zone program was created as part of the Tax Cuts and Jobs Act of 2017 to incentivize private capital investments in low-income communities.” (Forbes)
  3. Foreign Capital’s Ongoing Push into U.S. Secondary Markets “For many investors in commercial property, safety and a heightened consideration of downside risk reign supreme. For others, yield takes priority. For global real estate investors dabbling in U.S. real estate a year and half into the pandemic, both are certainly in play. Overseas investors have been finding a cohesion of safety and relatively strong returns on their investments in U.S. secondary markets, as they’ve mostly pulled back from making flashy bets in core coastal markets, where global players have historically focused the bulk of their attention.” (Commercial Observer)
  4. ‘The Devil in the Details’: How CRE Discovered New Revenue in Edge Data Centers “Owners of office space and other commercial properties are looking to edge data centers to boost revenue and draw tenants.” (Bisnow)
  5. Business Travel Slump Undercuts Hotels as Vacation Season Ends “U.S. hotel owners are bracing for another quarter of sluggish business travel, hoping that this year’s surge in leisure travel can carry over into the fall and holiday season. Overall, the strength of leisure travel looks unlikely to offset the falloff in corporate business and group travel this year. Hotel data and analytics firm STR is projecting that about 1 billion U.S. hotel rooms will be booked this year, up from 829 million in 2020, but still below the record year of 2019, when guests booked 1.3 billion rooms.” (The Wall Street Journal)
  6. Chinese Developer Fantasia Can’t Pay its Debts. That’s Stoking Real Estate Fears “A Chinese developer of luxury apartments missed $315 million in payments to lenders on Monday, sparking fears that financial strains in the country's outsized property sector are spreading beyond the troubled Evergrande conglomerate. Fantasia Holdings, a Shenzhen-based developer, missed repaying $206 million worth of bonds that matured Monday, the company said in a stock exchange filing. It is now assessing ‘the potential impact on the financial condition and cash position of the group,’ it added.” (CNN Business)
  7. The Richest Real Estate Billionaires on the Forbes 2021 400 List “The group of real estate tycoons on this year’s Forbes 400 list of richest Americans is as notable for those who didn’t make the cut as for those who did: Donald Trump, with an estimated net worth of $2.5 billion, fell short of the $2.9 billion cutoff to make it into the 400 richest Americans. The former president isn’t the only one to have fallen from the ranks in 2021. Five fellow New York real estate billionaires as well as Silicon Valley developers Richard Peery and John Arrillaga also dropped off The Forbes 400 list. Collectively, the 24 real estate tycoons on this year’s list are worth $122 billion, nearly $4 billion less than the 32 in real estate were worth in 2020.” (Forbes)
  8. Parking’s Back as an Office Amenity Post-COVID “It makes perfect sense. If you’re trying to avoid a contagious disease, drive your own car to work. Even if that stranger on the train or the bus is wearing a mask, as just about all transit systems require, you don’t know their vaccine status, and just to stay on the safe side … There’s evidence that more and more people are following this logic.” (Commercial Observer)
  9. SoHo Catered to Free-Spending Tourists. What Happens Without Them? “As New York climbs out of the depths of an economic free-fall, it has notched some major milestones lately. In-person classes have resumed at the city’s schools, Broadway theaters have reopened and 300,000 municipal workers have returned to their offices for the first time in 18 months. But on SoHo’s cobblestone streets, the economic scars have not yet healed, a sign of how vulnerable New York is to a contagious disease that has unraveled an urban economy built on face-to-face interactions in offices, restaurants and stores.” (The New York Times)
  10. Hollywood in Middletown? $1.3B ‘Super-Development’ Planned “An out-of-town developer is planning a massive ‘super development’ along the banks of the Great Miami River in Middletown, which will go before city council members this month.” (Cincinnati Business Courier)
  11. JPMorgan Is Saying It’s Banning Unvaccinated Staff and Will Soon Deduct Extra Pay for COVID-19 Tests and Health Insurance “JPMorgan said it's banning business travel for unvaccinated employees, Bloomberg first reported. The bank also said it would deduct extra pay from unvaccinated staff to cover COVID-19 tests.” (Insider)
  12. Manhattan Apartment Sales Surge to Three-Decade High “More apartments were sold in Manhattan in the third quarter than at any other time in the last 32 years, in the latest sign that New York City real estate is set for a faster-than-expected recovery, according to new market reports. There were 4,523 closed sales of co-ops and condos in Manhattan in the third quarter, exceeding the record set in the middle of 2007, when 3,939 sales were recorded, according to Jonathan J. Miller, an appraiser and the author of a new report by the brokerage Douglas Elliman.” (The New York Times)
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