Month: September 2020

Debt Funds Like Blackstone’s Begin to Play a Bigger Role in CRE Lending as CMBS Steps Back

The lending market “is not cautiously pessimistic, it’s not cautiously optimistic. It’s just in a quiet place where it doesn’t know which direction to go,” says one source.

In the commercial real estate lending arena, many debt funds and smaller banks are stepping up during the coronavirus pandemic, while many CMBS lenders and big banks are stepping aside.

Although lenders as a whole haven’t given up on commercial real estate loans, a lot of them have tiptoed toward the sidelines. Debt funds and smaller banks will likely become increasingly active in commercial real estate lending to fill the void left by CMBS lenders and big banks, according to Omar Eltorai, lead market analyst at New York City-based commercial real estate platform Reonomy.

“Everybody is yield-hungry, and commercial real estate still has a pretty attractive profile. So, I think there’s going to be a lot of money chasing that exposure,” Eltorai says. “But where’s that money going to be coming from? I think it’s going to generally be from the lenders that have fewer headwinds and fewer restrictions.”

Because of the headwinds faced by many lenders, it’s no surprise that U.S. real estate deal volume tumbled 68 percent this August compared with last August, according to New York City-based data provider Real Capital Analytics Inc. (RCA).

“Before the pandemic, most borrowers had many financing options. Now, options are much more limited and lenders can be more selective,” says Rob Weil, principal at JDI Loans, the lending division of Chicago-based private equity real estate firm JDI Realty LLC. “Lenders now have the opportunity to use more conservative underwriting standards, or charge a premium if the lender is willing to expand the underwriting standards.”

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    Chinese Hotel Giant Eyes Foreign Deals as Global Brands Languish

    The Shanghai-based and U.S.-listed Huazhu Group is keeping an eye out for foreign acquisition targets.

    (Bloomberg)—China’s biggest hotel operator is looking to acquire foreign hospitality chains as the rapid recovery of the country’s domestic travel market puts it at an advantage to ailing global peers.

    While major hotel brands like Marriott International Inc. and Hilton Worldwide International Inc. remain hobbled by the halt in travel amid a resurgence of infections in Europe and the U.S., Shanghai-based Huazhu Group Ltd.’s business has bounced back to pre-pandemic levels. In the second quarter, Huazhu’s occupancy rate reached 69%, compared to Hilton’s 22% and Marriott’s 14%.

    With the virus largely eradicated in China, business travel has recovered and domestic leisure tourism is growing, buoyed by consumers voyaging locally since overseas vacations are near-impossible due to the government’s virus containment measures. China is the only major economy projected to grow in 2020, albeit at a slower pace than before, and this divergence with the rest of the world is starting to play out on the corporate landscape.

    Traveling Chinese

    While its global peers are cutting jobs and seeing revenue slide, the U.S.-listed Chinese operator has just raised HK$6.07 billion ($783 million) from a second listing in Hong Kong. It started trading on Nasdaq in 2010.

    “We won’t hesitate to take action if there are proper acquisition targets, as operators with global presences will face challenges in the next one or two years amid virus and geopolitical tensions,” said group president Jin Hui, in a Bloomberg interview last week. “With capital raised from the IPO, we are able to seek partnerships at any level.”

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      Remote Learning Sends Rent Prices Down in College Towns

      Rent prices in college towns have fallen this summer as colleges and universities across the country have opted for remote learning during the coronavirus pandemic, according to a Zillow analysis.

      “The drop throughout college areas stands out even in a rental market that has softened across the board since February with rent-price growth slowing and landlords offering more concessions,” Zillow says in a release.

      Data from The Chronicle of Higher Education and Davidson College show 44 percent of U.S. colleges and universities are operating fully or primarily online for the fall semester, while only 27 percent are offering classes fully or primarily in person.

      A new Zillow analysis shows that reduced demand in this largely remote environment is having a noticeable impact on rents in ZIP codes in which at least 20 percent of the population is college students, who make up about eight percent of the U.S. rental market in a typical year.

      Softening college towns rental market

      “The softening rental market across the country is starker in college neighborhoods as pandemic-mandated campus closures and opportunities to complete courses online have provided motivation for young people to move back home,” said Zillow senior economist Cheryl Young in the release.

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        Why You Should Consider Multifamily Investing

        If you’re a real estate investor at any level, you know the value of time and money. You likely got into this space for the sole purpose of creating a passive income for yourself and your family. But how much time and effort are you spending on your investments and is there a way to become more efficient?
        The answer is YES! There is absolutely a way to become more efficient and make more money at the same time. This is where multi-family housing comes in to the picture. It is definitely worth considering and we will discuss how and why a little later in this article.

        What is Multi-Family Housing?

        Multi-Family housing is just a fancy word for apartments and condominiums. It is basically a structure or a community full of buildings that have “units” where families live. Multiple families living in the same building… hence the term “multi-family”.

        Why is Multi-Family Housing a More Efficient Investment?

        There are a variety of reasons why this is a more efficient investment. As I said in the beginning, if you know the value of time and money, you’ll be interested to know how to maximize both.

        It Has Higher Returns Than Other Types of Property

        Multi-family real estate has had the highest average annual returns for more than 25 years. It has outperformed industrial, retail, hotel and other investments. In fact, between 1992-2017, it produced 9.75% returns for its investors.
        Smart investors consistently look for options that will produce high returns and put their money to the best use possible. Some investors are more risk-averse than others, but multi-family is usually a safe investment for all the reasons we will discuss in this article. It’s a smart decision and housing will always be a need, regardless of what is happening in the economy or the world.

        The Market Share is Increasing

        Studies show that both millennials and baby boomers are increasingly becoming renters rather than homeowners. For millennials in particular, homeownership is often out of reach due to the steady increase in home prices. For baby boomers, it is likely the desire to spend time traveling or doing leisure activities, rather than house and yard work.
        Regardless of the reasons for renting, both of these generations represent a large portion of the marketplace. Millennials are the largest generation in U.S. history and if the majority of them are renters, the multi-family real estate business will continue to grow.

        It Is More Agile Than Commercial Investments

        Due to the fact that multi-family housing enjoys shorter-term leasing agreements, owners and investors can adjust pricing more quickly as the market changes. For example, rent on an apartment will typically be 6-months, 12-months or even 18-24 months. Conversely, on office space and other commercial structures, the lease agreement could be 5, 10, 20 years or longer.
        Because of the shorter-term leases, landlords can increase the rent more often and more quickly to adjust when the market changes and they need more cash flow. Other commercial investors do not enjoy this same level of agility.

        Property Management is Much Easier on a Single Property

        Multi-family structures are an extremely efficient form of investing because you can attract renters all in one place, rather than having 20 independent houses all over town. Chances are very good that you only have one mortgage for the whole property, along with one fee for landscaping, grounds keeping, insurance and potentially a property manager. It is much more time-efficient to operate in this capacity because you only have one location to deal with.


        When buying, selling and renting your various properties, you would need to work with a ton more people on single-family homes than you would with a multi-family property. With individual homes, you would likely need to work with 20 different sellers and 20 different inspectors at 20 different addresses! With a multi-family property, it’s one seller, one inspector and one address for the same 20 renters.
        The buying and selling process is more streamlined in this scenario, which saves a ton of time for the investor. Once the purchasing process is complete, it’s all about getting the units rented out and the cash flow coming in.


        You can also consider the increased efficiency from a marketing standpoint. If you own 20 individual single-family homes and you have to market them individually, that can be really time consuming, not to mention expensive. You need a different landing page for each one, different photos, different descriptions, etc. If they are in different neighborhoods, you will also need different marketing strategies based on the target audience.
        With a multi-family structure that has 20 units inside, you can be much more efficient. Yes, you still need 20 renters and you still need to market the units, but it takes a lot less work. You can have one landing page, one description, one gallery full of photos and so on. Renters who are looking for homes in your area will be able to see all that you have to offer in one spot, which is convenient for them, as well.
        If you own and operate the structure, you can also brand it however you like. Whether you’re interested in forming an LLC or your own brand of apartment or condo, you have the ability to do that. If not, that’s okay too.

        What if I Can’t Afford a Multi-Family Structure?

        If you’re not yet in a place where you can afford to purchase a multi-family housing structure on your own, that doesn’t mean you’re completely out of the game. It just means that you need to do some other forms of investing and saving more cash until you get there. You can develop a basic strategy for building your portfolio and go from there.
        There are also some key considerations when it comes to getting approved to buy a multi-family structure vs a single-family home. I recommend talking to your lender before assuming it’s not possible for you. Many banks will approve the purchase of a multi-family property much more quickly than a single-family home.


        Because multi-family units have a track record of producing a steady cash flow from month to month. Even if the property has a few vacancies, it is highly likely that the renters in the other units provide more than enough cash to cover the expenses of owning the building. When a lender looks at all of these details combined, they see a much lower risk and are more likely to lend the money.
        If your lender says no, don’t fret! Investing in multi-family housing doesn’t always mean owning the structure. It could mean other forms of investing where you purchase shares in someone else’s projects.

        Investment Apps

        One of the strategies that is growing in popularity and making investing more accessible is the creation of real estate investment apps. YES! There’s an app for that!
        If you’re thinking I’m crazy, just hear me out for a second. Real estate is an industry that is highly dependent on data, location and money. What is the one device that you probably already use for all of those things? You guessed it – your phone.
        You probably use your phone for GPS, real estate searches, internet browsing/research and you might also log into your bank accounts from your phone. If you’re comfortable using it for all of these things, why not download an app that will help you do them all at the same time?

        Not All Real Estate Apps Are Created Equal

        Depending on what type of investor you are, there will be different apps that will help you accomplish your goals. There are apps specifically designed for certain aspects of real estate investing such as commercial structures or fix-and-flip homes. There are other apps that are more general and all-inclusive. Which one will work for you really depends on your area of interest.
        Fundrise is a great option if you’re looking for an all-in-one solution. It gives you access to both residential and commercial investments, but requires a certain investment level for each tier. You have to choose a tier when you open your account: core, advanced or premium. The three tiers have minimum investment requirements of $1,000, $10,000 and $100,000, respectively.
        This app functions more like a traditional investment account at a financial institution. You invest the money and they choose the investments. This is excellent for investors who are okay with giving control of their money to someone else. But if you want full control, this one is not for you.
        Yieldstreet is another app that gives investors access to investment options that used to be reserved for hedge funds, crowdfunding investors and ultra-wealthy people. With this app, you will have access to commercial and residential properties. The residential properties are mostly multi-family, high-producing entities.
        This is a great option if you have a little cash to invest, but not enough to purchase an entire building. You can start here and as your investment grows, you can save up to purchase that investment property.
        Property Fixer is an excellent resource for investors who like to fix-and-flip both single-family and multi-family residences. It can help you do a full analysis of the property while onsite, rather than trying to create spreadsheets and such when you get back to the office. It will include things such as buying and holding costs, projected return on investment and mortgage calculators.
        If you upgrade to the pro version, you can create portfolios, brand your PDF files and send them to clients or investors right from the app. It also lets you itemize expenses and upload photos for a complete package related to a single property.
        Ten-X is almost like an auction site. It will help you find the best deals on commercial properties in your area. Both buyers and sellers use this app, which also has a robust web presence. It his highly data-driven to help you make the best choices for your investment portfolio.
        However, this is an online sales mechanism. So, if you’re in a place where you’re not quite ready to buy yet, you’ll be better off going with an app that lets you invest or buy shares, rather than the whole property.

        Private Brokers

        If apps aren’t your thing, you can always sit down with a private investment broker and ask about your options. Much like the apps listed above, many brokers can offer access to a variety of properties that you wouldn’t otherwise be privy to. They can help you manage your investments and choose the right properties in areas that are increasing in value.
        When talking to a broker, be sure to consider their minimum investment amounts, fee schedules and limitations. How much control will you have over your own money vs how much they will control it for you. Only you can make the decision on how much control you want to relinquish to a broker.


        Multi-family real estate is an excellent investment for both beginners and seasoned professionals. It has historically produced higher returns with lower risk than many other options. For this reason, it is an excellent way to diversify your investment portfolio with peace of mind.
        Whether you choose to invest by purchasing a building, or through an app or brokerage, you can feel good about your decision. As the market for multi-family housing continues to grow, your investments should too.

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        Apartment Developers Scout Adaptive Reuse Possibilities

        That math will become easier for developers if more distressed properties become available at a steep discount.

        It’s too soon for most developers to sign a contract to buy a failed hotel—but apartment developers are watching and waiting for prices to drop to buy other property types damaged by the economic crisis to redevelop into multifamily buildings.

        Even before the crisis, apartment developers were eager to buy well-located properties like old office towers and empty malls that they could transform into apartments. The chaos of the pandemic caused most of these developers to pause and wait for new opportunities, such as distressed hotels available at a discount.

        “There is just little interest on the part of developers to jump into anything like that at the moment,” says Jim Costello, senior vice president for data firm Real Capital Analytics, based in New York City. “Assets are not being sold at substantial discounts … yet.”

        Hotels may be the fastest conversions to apartment

        However, at least a few redevelopers have leapt to buy hotel properties—6 percent of hotel assets bought in the second quarter of 2020 were acquired with the intent to redevelop or convert the properties to a new asset class, according to Real Capital. This rate of purchase for redevelopment was twice the average rate seen in a second quarter between 2014 and 2019.

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          Mall owners Simon, Brookfield set to rescue JC Penney from bankruptcy in $800 million deal

          U.S. mall owners Simon and Brookfield are close to finalizing an $800 million deal to rescue J.C. Penney from bankruptcy.

          U.S. mall owners Simon Property Group and Brookfield Property Partners are close to finalizing an $800 million deal to rescue the embattled department store chain J.C. Penney from bankruptcy, avoiding a total liquidation and saving about 70,000 jobs and 650 stores, Joshua Sussberg of the law firm Kirkland & Ellis said Wednesday.

          Simon and Brookfield will pay roughly $300 million in cash and assume $500 million in debt, Sussberg said during a court hearing.

          Wells Fargo has also agreed to give Penney $2 billion in revolving credit once the transaction is completed, leaving the retailer with $1 billion in cash, he said. Penney plans to seek approval from the bankruptcy judge for this rescue deal early next month.

          Meantime, the hedge funds and private equity firms that have financed Penney’s bankruptcy are set to take ownership of some stores and the retailer’s distribution centers, in exchange for forgiving some of Penney’s $5 billion debt load. Penney’s lenders, led by H/2 Capital Partners, are going to own those assets in two different real estate investment trusts, or REITs, Sussberg said.

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            Become a Master Strategist: Today’s Key for Successful Landlords

            Being successful landlords and property managers in today’s environment involves some key strategies, including your eviction process, that veteran landlord David Pickron sets out.

            By David Pickron

            I have always had a lead foot. It is hard to admit, but with my hard-charging personality, I just want to get where I am going… fast.

            As a young man, to prevent countless tickets, I purchased a radar detector that allowed me to sense a police officer before he or she could see me. Police departments realized they were being outsmarted by this technology and needed to make a change, so they started using a different band that most consumer radar detectors did not have at the time.

            The private market reacted as it always does, and soon you could buy a radar detector that included the new bands used by law enforcement. This produced a battle between radar-detector companies and police, with one making a move, only to be met with a counter move by the other.

            Evictions tug of war

            We find ourselves in a similar tug-of-war when it comes to evictions, where the CDC has now made a move to stop all evictions nationwide until Dec. 31 in an attempt to limit COVID-19 spread through homeless shelters or crowded family shelters.

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              Blackstone to Boost Mobile-Home Bet With $550 Million Deal

              The firm is in negotiations to acquire about 40 mobile home parks, most in Florida, from Summit Communities.

              (Bloomberg)—Blackstone Group Inc. is pouring more cash into mobile-home parks, a corner of the commercial real estate market that is holding up in the pandemic.

              The alternative asset manager is in exclusive talks to acquire roughly 40 parks from Summit Communities for about $550 million, according to people with knowledge of the matter. The majority of the properties are located in Florida, said some of the people, who requested anonymity because the transaction isn’t public.

              Real estate investment trust Sun Communities Inc. was among the bidders for the Summit portfolio, some of the people said.

              Blackstone is set to make the investment through a vehicle known as Blackstone Real Estate Income Trust, or BREIT, and plans to spend money upgrading the properties, including shared facilities such as swimming pools, one of the people said.

              “Though our investments in this asset class are very limited, we are proud to partner with a best in class operator and plan to invest significant capital into these communities – which are largely occupied by seasonal residents and retirees – to create high quality housing in places where people want to live,” a representative for Blackstone said in a statement.

              The deal, which isn’t final and may still fall through, comes after Blackstone invested in mobile-home parks earlier this year. The New York firm paid around $200 million for seven parks, mostly in Florida and Arizona, owned by Legacy Communities, according to people familiar with that deal.

              Representatives for Summit, Sun and Legacy didn’t immediately respond to requests for comment.

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                Campus Outbreaks Have Muddied the Picture for Student Housing

                Operators are experiencing big variances in occupancy rates for the fall semester.

                Off-campus student housing operators have endured a rocky month as many universities around the country that brought students back for the fall semester suffered immediate COVID-19 outbreaks. That caused some schools to send students back home. It also led to other schools watching the carnage at the early openers to change their own plans for in-person classes.

                One example of that was Michigan State University, which at the last minute scrapped plans to bring students back and instead has opted for online instruction.

                “Effective immediately, we are asking undergraduate students who planned to live in our residence halls this fall to stay home and continue their education with Michigan State University remotely,” said Michigan State president Samuel Stanley in an August 18 letter to students.

                So once again, the novel coronavirus is tearing up plans for the fall 2020 semester. Michigan State joins colleges like the schools in the University of California system, which had already announced that they would not hold class in person.

                According to the latest tracking by the Chronicle of Higher Education and Davidson College’s College Crisis Initiative, just 2.3 percent of the 3,000 higher education institutions being tracked are fully in person for the fall semester. Another 19 percent are primarily in person, 16 percent are taking a hybrid approach, 27 percent are conducting classes primarily online and 6 percent are fully online. In addition, 24 percent of the institutions were still finalizing their plans. Those numbers have moved a lot from just a month ago.

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                  9 retailers that are avoiding the industry’s shakeout and opening stores

                  The coronavirus pandemic has upended the retail industry and pushed dozens of companies into bankruptcy.

                  But there are still pockets of growth, with a number of retailers looking to open additional stores.

                  Altogether, as of Friday, retailers have announced 7,707 store closures and 3,344 store openings so far this year, according to a tracking by Coresight Research.

                  While much of the turmoil in the industry has stemmed from apparel chains and department store operators, the expansion finds itself in a number of other categories: beauty, home goods, discount and grocery chains.

                  Here are 9 retailers opening more stores in 2020 and beyond.

                  At Home

                  Market capitalization: $966 million
                  Stock performance year-to-date: +173%

                  At Home Chief Executive Lee Bird said earlier this summer the company could grow from the 219 locations it has today to more than 600 shops nationwide, building on the momentum it has seen at its stores and online during the coronavirus pandemic. While shoppers have curtailed spending on apparel and other accessories, more are shopping for furniture and other items to spruce up their homes. Companies like Wayfair and Pottery Barn have benefited from the trend as well.

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