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Nine Must Reads for Real Estate Investors Today (April 13, 2023)

More cities are trying to incentivize office-to-residential conversions, although the actual pace of conversions remains low. Warren Buffet told CNBC he saw no reason for investors to panic about commercial real estate. These are among today’s must reads from around the commercial real estate industry.

  1. More Cities Giving Away Money For Office-To-Resi Projects As Threat Of Obsolescence Grows “The pace of office conversions accelerated across the U.S. last year, according to CBRE, but the process has only taken a minuscule bite out of supply thus far. The 218 conversions completed across the U.S. from 2016 to 2021 combined with the 217 projects in the pipeline in 2022 amount to about 2% of the national office stock.” (Bisnow)
  2. Warren Buffett on commercial real estate: People who lend too much money should take losses “Berkshire Hathaway’s Warren Buffett joins ‘Squawk Box’ from Tokyo to share his thoughts on the health of the commercial real estate market, and why there is no reason for investors to panic.” (CNBC)
  3. A New Way to Push People Back to Offices: Tying Pay to Attendance “The law firm Davis Polk & Wardwell LLP, whose clients include some of Wall Street’s biggest banks and other companies, has told staffers that those who don’t adhere to the firm’s policy to spend at least three days a week in the office could see their bonuses reduced.” (The Wall Street Journal)
  4. Real Estate Entrepreneur's Latest Move Eyes $3 Trillion US Farmland Market “The move by Macfarlan Capital to invest in U.S. agricultural farmland, of which the firm owns about 20,000 acres in Montana, with plans to add to the portfolio with multiple purchases this year, comes as lawmakers are pushing for more scrutiny of foreign investors buying U.S. agricultural land.” (CoStar)
  5. The Cap Rate Spread’s Underlying Message “Whenever there is a shock to the market, reported cap rates lag the reality on the street by several quarters. In order to make prudent decisions, the savvy investor should instead be looking at the spread between reported cap rates and the 10-year Treasury yield (cap rate spread). This is an estimate of the risk premium involved with multifamily investments and also an early indicator of future cap rate movements.” (Multi-Housing News)
  6. What is Ashkenazy worth? Mezz lender sues to find out “The lawsuit alleged Ashkenazy had breached a personal guarantee by failing to pay down $40 million in debt by November 2018. Ashkenazy had paid just $30 million, the suit claimed, resulting in a default that left him liable for the $10 million balance and an additional $10 million in penalties. A state Supreme Court judge ruled in the lender’s favor, ordering Ashkenazy to fork over $20 million plus interest.” (The Real Deal)
  7. Online Shopping’s Fast-Delivery Race Is Slowing Down “That kind of patience reflects what may be the fastest-growing trend in online commerce, as many shoppers begin to back away from demands for urgent delivery that have fed a race among online retailers and parcel carriers to fill orders in just a day, within an hour and even faster.” (The Wall Street Journal)
  8. Student Housing Rents Reach Record Highs “Pre-leasing for the next academic year is setting records as well, according to a new report from Yardi Matrix. As of March, 69.7% of beds at 200 universities surveyed by Yardi were pre-leased for the fall term, up 7.8% over a year ago in the sector's best performance of any March.” (Bisnow)
  9. Bank of America clients have yanked $451 million from real-estate stocks as commercial property becomes investors' newest worry “Bank of America's clients pulled $451 million from real-estate stocks last week as troubles in the commercial property sector heat up. ‘Outflows from real estate were the largest since July 2021 amid concerns around commercial real estate,’ bank's strategists led by Jill Carey Hall wrote in a Tuesday note.” (Insider)
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