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13 Must Reads for Real Estate Investors (Oct. 2, 2023)

Hits to CMBS and CLOs are bad news for the commercial real estate financing landscape, reports Commercial Observer. Active managers increased allocations to the healthcare, residential and data center sectors in the second quarter, according to Nareit analysis. These are among the must reads from the real estate investment world to kick off the week.

  1. Hits to CMBS and CLOs Are Bad News for Commercial Real Estate Financing “If someone working in commercial real estate finance had fallen asleep in September 2019, a la Rip Van Winkle, they might have woken up assuming that two of the staid pillars of lending — commercial mortgage-backed securities (CMBS) and collateralized loan obligations (CLOs) — were as solid and useful as they had been the night they turned in.” (Commercial Observer)
  2. Actively Managed Real Estate Fund Tracker: 2023Q2 “In the second quarter of 2023, active managers increased allocations by over one percentage point in the health care and residential property sectors and by almost one percentage point for data centers. All three sectors’ shares were up year over year as well in the second quarter. All three were also overweight in their share of fund assets under management compared to their share of the FTSE Nareit All Equity REITs Index.” (Nareit)
  3. Dissolving Trump’s Businesses Likely to Be Hit With Barrage of Legal Questions “Rather than putting properties owned under business certificates tied to alleged fraud under a receiver who would liquidate them, former President Donald Trump and his associates are likely to appeal the ruling and could wind up settling with New York State Attorney General Letitia James to keep his company afloat, according to real estate attorneys. Either way, Trump and company are almost certain to pocket the money from an ultimate selloff of his properties.” (Commercial Observer)
  4. Investors who sold S.F. properties are coming back — to buy the same buildings they offloaded “At the height of San Francisco’s tech boom in 2018, a real estate private equity firm run by one of Hong Kong’s richest families sold an office campus located on the city’s waterfront to America’s largest private landlord. They earned a whopping $245 million from the deal.” (San Francisco Chronicle)
  5. Inside former Fannie Mae CEO’s plan to fix housing “Citing the period from 1972 to 1974, apartment developers delivered 2.2 million units to 24 million rental households, Frater said. From 2020 to 2022, as concerns about oversupply increase, 1 million units are being delivered to 44 million rental households.” (Multifamily Dive)
  6. Signs Of Distress Growing In NYC Office Market, But ‘The Worst Is Yet To Come’ “The weeks since Labor Day have brought an influx of actions from keys being handed back to lenders to UCC foreclosures and credit downgrades that experts say represent a meaningful shift in the way struggling office buildings are being handled.” (Bisnow)
  7. Office Conversions Surge “Office conversions this year are likely to more than double the recent annual average, with an estimated 100 such projects scheduled for delivery, according to a new report from CBRE. This boom, from an average of 41 completions annually during 2016–22, according to the firm’s study, is largely driven by more incentives and other support from state and local governments.” (Commercial Property Executive)
  8. Toys R Us is planning a brick-and-mortar comeback in the U.S., with up to 24 new flagship stores “The toy retailer’s parent company, WHP Global, announced what it called the ‘Air, Land and Sea’ expansion on Friday. Toys R Us aims to start opening the up to two dozen flagship stores as early as next year in partnership with Go! Retail Group. The company plans to roll out the locations in ‘prime cities’ that complement its current retail footprint, WHP said.” (CNBC)
  9. Private Real Estate Benefitting From Tighter Lending Standards “These funds raise money with multi year holding periods so are less affected by the change in the funding environment at least in the short and intermediate-term. Another factor in the real estate market is that many regional banks are pulling back from extending credit given their balance sheet concerns. Overall, it’s a risk for the broader economic outlook but a unique opportunity for private real estate investors.” (Nasdaq)
  10. How China’s Property Crisis Is Testing Its Too-Big-to-Fail Banks “The scale of China’s property problems — enormous levels of debt, an oversupply of apartments and consumers increasingly wary of buying — means the government could be forced in the coming years to spend huge sums of money bailing out banks.” (The New York Times)
  11. SFR Investors Test Build-To-Rent Waters As Well Of For-Sale Homes Dries Up “Single-family rental investors have spent the last few years capitalizing on the nation’s growing need for housing by scooping up thousands of individual homes and turning them into rentals. But as it becomes more difficult to amass inventory, some are looking to create homes where there weren’t ones before.” (Bisnow)
  12. CoStar lawsuit accuses Homesnap founder of stealing trade secrets “The commercial real estate giant is seeking to stop Homesnap founder Guy Wolcott from marketing a new data-transfer platform, which CoStar alleges is 'a copycat' of its own tech.” (Inman)
  13. Redfin, the Online Real Estate Broker, Leaves a Powerful Realtor Group “The online brokerage, based in Seattle, said it was not yet able to fully extricate itself from the national realtors group, known as N.A.R., because of the group’s influence in the industry. But Redfin announced on Monday that, effective immediately, it would require many of its 1,800 brokers and real estate agents to cancel their memberships and cease paying dues, which often amount to hundreds of dollars per year for each member.” (The New York Times)
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