Month: March 2020

Despite Pandemic Uncertainty, Rents Remain Strong in February

Trade slowdown and employment cuts expected in the coming weeks and months.

The national average rent was $1,468 in February 2020—up 3.2%, or $46, from February 2019, according to data compiled in RENTCafe’s monthly rent report.

February’s year-over-year rent growth matches the pace set in January, but falls just below last year’s 3.5% YOY growth rate. Out of the nation’s largest cities, Manhattan has the most expensive average rent at $4,208 per month, while Wichita, Kan., has the lowest at $655 per month.

While the effects of the COVID-19 pandemic are not yet present in official data, Yardi Matrix’s manager of business intelligence, Doug Ressler, anticipates that impact will manifest in the coming weeks.

“The economy still stands to benefit from ultra-slow rates. Home owners are refinancing while renters are seeing normalized rent growth, which reduces their monthly payments and allows them to spend in other areas,” Ressler says. “We haven’t seen the impact of the COVID-19 pandemic in official data yet, as February employment growth was very strong, jobless claims did not increase, and rent growth continued its steady increase. However, the coming weeks and months will likely come with employment cuts and a slowdown in trade.”

Click Here For The Full Article

    SUBSCRIBE TO OUR NEWSLETTER

    Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


    Picture: Pixabay

    Libor Plunge Risks Wreaking Havoc in $670 Billion CLO Market

    If three-month LIBOR sinks below 1 percent, it would be a major headache for the market.

    (Bloomberg)—Tumbling interest rates are throwing a wrench into the collateralized loan obligation market that could eventually lead to dust-ups between different stakeholders, market watchers say.

    At the heart of the issue is the plunging London interbank offered rate. Buyers of CLOs, which are tied to the gauge, are increasingly factoring the prospect of negative fixings into their due diligence as the Federal Reserve slashes its benchmark to near zero and three-month Libor sinks below 1%. While the likelihood of it going negative remains small, it would be a major headache for the $670 billion market that buys more than half of all leveraged loans.

    That’s because roughly one in five CLO tranches lacks any sort of Libor floor — thresholds that guarantee minimum payouts to debt investors should the reference rate plummet. If Libor were to eventually fall below the spread on these structures, the negative all-in coupon could mean CLO debt holders would in fact owe money back to the issuer. That may benefit buyers of the equity portions of the capital stack, but industry veterans say CLOs are simply not legally or operationally equipped to handle a reversal in cashflow.

    Click Here For The Full Article

      SUBSCRIBE TO OUR NEWSLETTER

      Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


      Picture: Pixabay

      Global Uncertainties Add to Multifamily’s Investment Appeal

      The apartment sector’s advantages include stability, flexibility and diversification.

      Global financial markets are reeling from the drastic steps governments are taking to fight the novel coronavirus COVID-19 pandemic. During the week of March 9, dramatic drops in the Dow Jones Industrial Average signaled the arrival of a bear market for U.S. equities, and European and Asian stocks have also taken a beating.

      In the face of uncertainty, individual and institutional investors are taking a closer look at commercial real estate, with a particular interest in the multifamily sector. Unlike office, industrial, retail and hospitality properties that are directly affected by an economic downturn, multifamily tends to be a more stable asset class.

      Because a multifamily property has larger base of tenants than an office or industrial building, an extra vacancy or two has relatively little impact on the overall rent roll or continuing income stream. Also, apartment leases are relatively short term, giving owners the flexibility to adjust rental rates up or down based on economic conditions.

      Click Here For The Full Article

        SUBSCRIBE TO OUR NEWSLETTER

        Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


        Picture: Pixabay

        Uncertainty Freezes Hotel Sales in Manhattan

        Hotel sales in the Big Apple had crashed to a halt even before coronavirus took a bite out of people’s travel plans and disrupted conventions and major events.

        Even before the novel strain of coronavirus (COVID-19) began spreading in New York City area, buyers and sellers of hotel properties had a hard time agreeing on prices. For example, no deals closed to buy or sell hotels in New York City’s borough of Manhattan in November, December and January, according to Real Capital Analytics, based in New York City.

        “Three months of no transactions is a rare event in Manhattan,” says Jim Costello, senior vice president for RCA.

        New York City has been one of the strongest markets for hotel rooms in the U.S. But developers finally opened enough new hotel rooms in 2019 to reduce the occupancy rate. The outlook for 2020 was uncertain. Developers planned to open even more new rooms with New York’s economy projecting continued growth. The outlook became uncertain in early March. As coronavirus spread across the U.S., major companies cut back on travel and event planners and conference organizers cancelled a growing list of public events. It’s taking a bite out of the hospitality sector already.

        Click Here For The Full Article

          SUBSCRIBE TO OUR NEWSLETTER

          Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


          Picture: Pixabay

          U.S. CRE Still a Top Pick for Foreign Investors, AFIRE Survey Indicates

          Before COVID-19 spread, foreign investors continued to view U.S. commercial real estate as a safe haven.

          Foreign investors continue to view U.S. commercial real estate as a solid investment, with multifamily and industrial properties remaining their favored picks, according to the results of the 28th annual survey conducted by the Association of Foreign Investors in Real Estate (AFIRE) and the James A. Graaskamp Center for Real Estate at the Wisconsin School of Business. Survey participants pointed to low interest rates, continued capital markets liquidity and the low U.S. unemployment rate as reasons for their confidence in the performance of U.S. real estate assets. (Since the initial survey was conducted before COVID-19 became an issue of global concern, the organizations are now conducting a follow-up survey on its potential impact on investment trends).

          In all, 72 percent of AFIRE’s survey respondents indicated that they viewed the overall U.S. commercial real estate market as being as attractive as it was in 2019. Eight percent of respondents view it as even more attractive investment option than before, while 19 percent indicated it was less attractive this year than the last.

          Those who view U.S. commercial real estate as being more attractive pointed to the market meeting investor yield expectations and being considered a safe haven for capital, healthy property fundamentals and lower hedging costs.

          Click Here For The Full Article

            SUBSCRIBE TO OUR NEWSLETTER

            Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


            Picture: Pixabay

            Life Insurance Companies Look for More Multifamily Investments

            Life investors tend to favor existing, well-managed communities.

            Life insurance companies and their affiliates like to finance and sometimes invest in multifamily projects. To find out about the appeal, challenges, and limitations of the various arrangements, Multifamily Executive caught up with Sean O’Connell of Securian Asset Management, who is affiliated with Minnesota Life and Securian Life. Securian Financial serves as a lender to multifamily owners and does not own any properties, but O’Connell responded to some questions about how the equity investment side works as well.

            MFE: Why do life insurance companies invest in multifamily properties?
            O’Connell:
            The multifamily sector is one of four primary sectors that insurance companies target for their commercial mortgage investments. Others being office, industrial, and retail. Historically, the multifamily sector has had minimal defaults. The life insurance industry has long duration liabilities, hence long-term, fixed-rate loans are a good match for these liabilities. Some insurance companies invest in the space as equity investments, both for existing properties or new development.

            Click Here For The Full Article

              SUBSCRIBE TO OUR NEWSLETTER

              Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


              Picture: Pixabay

              Looking at HUD’s New Financing Opportunity for Multifamily Investors

              HUD has permanently relaxed its three-year rule for Section 223(f) mortgage refinancing applications.

              On March 2nd, HUD relaxed its three-year rule for Section 223(f) refinancing mortgage loan applications.

              The three-year rule required that properties be seasoned for three years from certificate of occupancy before being eligible for a HUD 223(f) mortgage loan application. HUD temporarily waived this rule during the recession from 2009 to 2013, but has now permanently changed the rule. Section 223(f) insures mortgage loans for the purchase or refinancing of existing multifamily properties.

              We will need to see if HUD’s 2020 multifamily accelerated processing (MAP) guide affirms the approach. In the meantime, the just released Mortgagee Letter states that multifamily real estate investors now have the ability to apply for long-term HUD financing for multifamily properties without having to wait three years for the property to season. Under the relaxed rule, HUD offers borrowers the ability to secure permanent, non-recourse fixed rate debt at low interest rates.

              Click Here For The Full Article

                SUBSCRIBE TO OUR NEWSLETTER

                Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


                Picture: Pixabay

                Foreign Investment in Multifamily Lower In 2019

                Single asset deals from foreign investors increased last year.

                A recent report by CBRE documents the level of foreign investment in U.S. multifamily properties and reveals a 27.3% drop in portfolio deals in 2019. Last year clocked in with a total of over $10 billion as compared with 2018, which was over $14 billion and off the charts.

                The firm discounts the fall and instead points at a different and a more positive data point—the numbers for single asset deals as opposed to portfolio transactions. “For single-asset deals—a better measure of investment momentum because of less volatility from year to year—inbound capital increased by 3.8% to $6.1 billion,” per the report.

                Most of the incoming money came from the usual suspect, Canada, which accounted for more than half of the inbound multifamily investment volume. Bahrain, Israel, the Netherlands, and the United Kingdom rounded out the top five.

                Click Here For The Full Article

                  SUBSCRIBE TO OUR NEWSLETTER

                  Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


                  Picture: Pixabay

                  U.S. housing market is missing 3.3 million homes, Freddie Mac says

                  The shortage increases by about 300,000 a year as homebuilding lags

                  America’s housing market is undersupplied by 3.3 million units, and the shortage is getting worse every year, Freddie Mac said in a report on Friday.

                  “New housing supply is not keeping up with rising demand,” said Sam Khater, Freddie Mac’s chief economist, who said the shortage is increasing by about 300,000 units a year as homebuilders fail to keep up with demand.

                  Oregon is the most under-supplied state, followed by Colorado, Florida, and California, Khater said. The next two states are a bit of a surprise: Minnesota and Texas, where land shortages are not an issue.

                  “More than half of all states have a housing shortage, and the shortage is no longer concentrated in coastal markets but is spreading to the middle of the country in more affordable states like Texas and Minnesota,” Khater said.

                  Click Here For The Full Article

                    SUBSCRIBE TO OUR NEWSLETTER

                    Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


                    Picture: Pixabay

                    KKR’s Fast-Growing Warehouse Arm Lands $894 Million in New Debt

                    Alpha Industrial Properties secured a $690 million CMBS loan and a $204 facility from an affiliate of Invesco Ltd.

                    (Bloomberg)—KKR & Co. has refinanced its U.S. warehouse business, Alpha Industrial Properties, with $894 million in new debt.

                    KKR’s platform, which has made 40 acquisitions since May 2018, raised $690 million in commercial mortgage-backed securities in a transaction led by JPMorgan Chase & Co., according to Roger Morales, the firm’s head of commercial real estate acquisitions in the Americas. It also raised $204 million in a separate facility from an affiliate of Invesco Ltd.

                    “We have a lot of conviction in the sector’s drivers and expect to be significant investors in the asset class across a number of our real estate strategies,” Morales said in an interview.

                    Warehouses have become a hot asset as consumers increasingly embrace the convenience of e-commerce. Real estate-focused private equity funds have been vying with the largest real estate investment trusts for large portfolios of the properties.

                    Click Here For The Full Article

                      SUBSCRIBE TO OUR NEWSLETTER

                      Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


                      Picture: Pixabay
                      Scroll to top
                      error: Content is protected !!