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15 Midweek Must Reads for Real Estate Investors (May 24, 2023)

Private equity funds have stepped up their loan offerings, including for mortgage and construction loans, reported Reuters. The Wall Street Journal explained why even perfectly creditworthy property owners may opt to let some of their assets default. These are among today’s must reads from around the real estate universe.

  1. Top Property Owners Are Creditworthy—They Might Default Anyway “In some situations, powerful owners will be less willing to support a property through a rough patch than a small landlord. Family owners, in particular, may tolerate being out of pocket for a time if they plan to hang onto a building long term. The consequences of a foreclosure can be more severe for small borrowers. Heavyweights should be able to get another loan at a good price, even after a default. If a property is no longer hitting the return hurdle that the likes of Brookfield needs to satisfy its limited partners, they may decide to cut their losses.” (The Wall Street Journal)
  2. Private Equity Steps Up Lending as U.S. Banks Pull Back “The turmoil facing U.S. regional banks has prompted some lenders to step back, leaving space for investors such as asset managers, private equity (PE) funds and insurers to lend more. Non-bank lenders with deep pockets have invested in credit assets for years, but the regional banking crisis could supercharge their expansion into areas such as providing consumer car loans and mortgages, or financing the construction of buildings, according to industry executives.” (Reuters)
  3. April 2023 Reported Nontraded REITs Sales Down 43.2% from March 2023 “Blue Vault received April 2023 sales totals for eleven nontraded REIT program offerings as of May 19, 2023. Sales reported by those eleven NTRs totaled $211.3 million, down 43.2% from $372.0 million in March, and down 65% Y-O-Y from the $607.4 million in sales in April 2022. FS Credit Real Estate Income Trust led the reporting REITs with $64.3 million in April, down 41.2% from $109.4 million in March. Next was Apollo Realty Income Solutions with $33.8 million in sales, down 19.6% from $42.0 million in March. Ares Industrial REIT raised $28.7 million, down 22.0% from $36.8 million in March.” (Blue Vault)
  4. Manulife Acquires Controlling Interest in Data Center Company “Manulife Investment Management entered into an agreement to acquire a controlling interest in a data center company with assets across three regions. The company will make the acquisition of the controlling interest in Serverfarm on behalf of its Manulife Infrastructure Fund II and its affiliates. The details of the transactions were not disclosed. The acquisition is expected to close in the third quarter of 2023, subject to customary closing conditions.” (Commercial Property Executive)
  5. Slow Return to Work Pummels Office Stocks “Share prices for some of the largest office landlords have dropped to near historic lows, reflecting a sluggish return-to-office rate and a rise in the number of investors betting that these stocks will keep falling. SL Green’s share price closed at $22.54 on Friday. That is barely above the New York office firm’s 1997 initial-public-offering price and a fraction of its post-global-financial-crisis peak of more than $140 in 2015. Vornado Realty Trust, which owns marquee office buildings in San Francisco, Chicago and New York, closed at $13.13 a share on Friday. Vornado’s share price topped $67 as recently as 2020.” (The Wall Street Journal)
  6. Office Lease Expirations Hamper CMBS Loans “CRED iQ examined major lease expirations for CMBS office collateral for the near-term, 18-month horizon, as well as the next 10 years. Downsizing and non-renewal by office tenants is a contributing factor to headwinds facing the office sector, which has been plagued by changing employee-employer workplace dynamics and tenants’ need to shed space, reduce real estate costs and rightsize physical footprints during a period of economic uncertainty.” (Commercial Observer)
  7. Expanding into Industrial: Diversifying for Long-Term Success “Attracted by the industry’s resiliency and long-term growth potential, real estate companies continue to expand into the industrial sector, despite the recent downtick in demand and investment activity. By diversifying their portfolios and tapping into industrial’s relative resistance to economic distress, these businesses are capitalizing on the sector’s appeal and betting on its long-term prospects.” (Commercial Property Executive)
  8. ICSC Roundup: Free Space Experiment, Real Estate’s New Darling, TV Show Pop-Ups “There are plenty of strategies retail landlords and property owners deploy in trying to attract tenants that will not only fill vacant space, but will help enhance the property as a whole. For Southern California-based Pacific Retail Capital Partners, it even means giving some space away for free. At its retail properties across the United States, the real estate investment firm has found success with its Taste for the Space, a contest among local restaurateurs and operators in which prospective tenants compete to win a leasing package that includes up to a year of free rent, turnkey dining space, and an investment of as much as $50,000 to put toward its business.” (CoStar News)
  9. Commercial Real Estate Brokers’ Confidence Sinks to All-Time Low “New York commercial brokers — faced with a complex array of market challenges — are gloomier about their prospects than they have been at any point in the last six years. The Real Estate Board of New York’s Real Estate Broker Confidence Index report for the first quarter of the year showed the current confidence index for commercial brokers was at -74.7 in Q1, down from -45.6 in the last quarter of 2022. That number represents the lowest confidence level since REBNY started running the survey in Q3 2017.” (Bisnow)
  10. Thinking Inside the Box: Data Centers Offer Creative Revenue Streams for Some Stressed Office Buildings “Commercial real estate owners and managers are under more pressure than ever to show creativity and uncover new sources of revenue as office occupancy continues to underperform its pre-pandemic levels. Few options are off the table, from community-oriented flex space to rooftop restaurants and party venues. Add to this mix data centers, which are increasingly seen as a potential path to office building profitability.” (Forbes)
  11. Crow Holdings Capital Revitalizes Niche Retail Portfolio for $1.8Bn “The Dallas-based manager has formed a JV with a global sovereign wealth fund to acquire around $750m in additional assets.” (PERE)
  12. Suburb Sues Namdar for Control of Stratford Square Mall “Bloomingdale is gunning to take over Stratford Square Mall from landlord Namdar through eminent domain — a tactic seldom used by local governments to wrest control of such a large commercial asset. The DuPage County suburb already spent more than $5.6 million to buy former department stores and land near the mostly deserted shopping center, and has now filed a condemnation lawsuit against Great Neck, New York-based Namdar Realty Group, which owns the mall’s interior and the JCPenny box, the Daily Herald reported.” (The Real Deal)
  13. Harlan Crow Says He’s ‘Put Away’ His Controversial Hitler Paintings, Even Though He Insists There’s Nothing Wrong with Displaying Them “GOP megadonor Harlan Crow says he has ‘put away’ his infamous Hitler paintings, but he wouldn't say whether the Nazi memorabilia was off display permanently and said he doesn't see anything wrong with having them out, The Atlantic reported. At a 2015 fundraiser Crow planned for Marco Rubio, Crow said, according to the Atlantic, Democratic National Committee Chair Debbie Wasserman Schultz called the display ‘the height of insensitivity and indifference,’ the Jewish Journal reported at the time.” (Insider)
  14. NY Architects Rank Best of New York Buildings “New York architects rank their favorite and least favorite city buildings.” (The Real Deal)
  15. What’s Next for Nordstrom’s Huge S.F. Space? Readers Have Their Say “From housing to skate parks to satellite college campuses, readers share ideas for the future of a soon-to-empty retail icon.” (San Francisco Chronicle)
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