Month: October 2020

Affordable Housing Developers Build War Chests to Buy Properties

Some buyers that want to keep properties affordable are hoping to snap up assets that otherwise might be converted to market rate units if they fall into other investors’ hands.

Affordable housing advocates are tired of losing bidding wars that result in losing some of the nation’s already stretched supply of workforce apartments.

During the recovery from the Global Recession, developers with a mission to create and preserve affordable housing struggled to buy older apartment buildings with an aim of keeping the rents reasonable enough for low-income families to afford. They are trying to prevent the same thing from happening in the current cycle, with the economic crisis caused by the coronavirus likely to trigger another wave of property sales.

“In the last recession, a lot of private equity buyers swept in and picked up affordable housing properties,” says Kimberly Latimer-Nelligan, president of Low Income Investment Fund (LIIF), a national, nonprofit community development financial institution (CDFI) with $900 million in assets under management. “We plan to make sure the mission-driven organizations have access to capital to compete with investors who are going to take those properties to market-rate rents and displace all those residents.”

To prepare this time, developers and investors dedicated to preserving affordable housing are now raising capital to make sure that they can successfully bid for properties, including affordable housing communities where existing restrictions on raising rents are nearing their ends. Affordale housing investors are also looking to buy older class-B and class-C apartment properties that have never been in official affordable housing programs as well as smaller properties with just a few apartments.

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    With Prices Down $200 Per Room, NYC Hotels Brace for More Pain

    October is often New York hotels’ busiest month. Last week, occupancy was hovering under 40 percent.

    (Bloomberg)—The Midtown Hilton has been closed since March. Same for The Edition, a brand new Times Square boutique. You can get a room at the Pierre, just don’t expect the full-suite of white-glove services that have made the hotel a Manhattan landmark since 1930.

    Autumn in New York, a season so inviting that it inspired a jazz standard, is grim this year, with the city’s tourism market among the worst in the U.S. The pandemic has canceled live events like Fashion Week and the New York City Marathon, repelled business travelers and international visitors and blown gaping holes in a tourism market that generates $70 billion in economic activity in a typical year.

    Things are better now than they were in March, the worst month in memory for the city’s hotel industry, but they’re still historically bad. At this point, more than 200 of New York’s roughly 700 hotels are closed, at least temporarily.

    Across the U.S., the coronavirus is pushing hotels to the brink, putting 870,000 hotel employees out of work and raising the prospect that thousands of hotels may never reopen. It will take years for the industry to recover.

    “Next year is going to be far worse than any year we’ve ever had except this one,” said Lukas Hartwich, an analyst at real estate research firm Green Street. “It’s going to be 2022 before we get back to where we were during the worst part of the last recession.”

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      Are You Making Any Of These 5 Rental Property Management Mistakes?

      Here are 5 rental property management mistakes that Keepe, the on-demand maintenance company, sometimes sees at rental properties.

      Managing a rental property can be challenging even for the most experienced property managers. As a property manager, you need to ensure that your tenants, workers, contractors, and your properties are in good shape.

      If you are a property manager managing 1 or 100 rental properties, here are five rental-property management mistakes from Keepe that you want to avoid.

      No. 1: You Don’t Have A Screening Process in Place

      As a property manager you are most likely to deal with all kinds of tenants­.

      When you rent your property to a destructive or troublesome tenant, you are sure to lose money and deal with problems every day. One sure way to save yourself of these issues is to have a detailed formal tenant-screening process that helps you select the right kind of tenants for your rental.

      No. 2: You Don’t Have A Reliable Contractor When Issues Happen

      Your tenants want the best service and quick solutions to their maintenance problems.

      Not having a dedicated and reliable handyperson you can call immediately will likely affect your tenant satisfaction and retention rates.

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        Some Multifamily Borrowers are Struggling to Find Small Balance Loans

        Terms are becoming more stringent on the financing deals that are closing amid the COVID-19 crisis.

        Amid the broader challenges facing the commercial real estate market, many investors who own smaller apartment buildings are struggling to find financing in the current climate.

        Many of the banks these sorts of investors rely on to finace deals have become more cautious in the pandemic—especially because smaller apartment buildings are more likely than larger properties to have residents hurt by the crisis that are falling behind in rent. Facing potential distress on existng loans, some banks are lowering origination volumes and hesitating to make new loans. Meanwhile, for the deals that are getting done, terms are becoming more stringent.

        “They are cautious… They make the loan-to-value ratio much lower,” says Richard Katzenstein, senior vice president and national director of Marcus & Millichap Capital Corp., working in the firm’s offices in New York City.

        Some owners of small properties work with lenders that offer programs like Freddie Mac’s Small Balance Loan program, or CMBS lenders—but all multifamily lenders are being extra careful in the crisis.

        Local banks still lead with small balance loans

        Community banks remain the most important source of financing for apartment investors with tiny portfolios. These apartment companies also tend to own smaller buildings and rely on the same bank they use for everyday financial needs to also arrange small balance apartment loans.

        Overall, banks, thrifts and credit unions provide a third ($124.1 billion) of the $364 billion of multifamily mortgages originated in 2019. The size of their average apartment loan was just $2.7 million, according to the Mortgage Bankers Association. Commercial banks remain the biggest players.

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          Trump Tax Saga Shines Spotlight on Benefits of CRE Ownership

          Depreciation, debt write-offs, tax credits and other measures are among the tax avoidance benefits inherent in the sector.

          It may seem like a lifetime ago, but before news of the ongoing COVID-19 outbreak involving President Trump, White House staffers, Republican politicians and others, the New York Times stirred up a political firestorm surrounding President Trump’s personal finances with a new investigation revealing a staggering amount of business losses over the past two decades. The headline grabber was that he paid just $750 in personal federal income taxes in 2016 and 2017 and nothing in 11 of the 18 previous years. Additionally, the article said he claimed a total of $1.4 billion in losses from his core businesses for 2008 and 2009 and collected a $72.9 million refund for the 2010 tax year.

          The article is just another chapter in the ongoing saga of President Trump’s personal tax returns, which he has chosen not to release to the public as most political candidates have done in recent decades. The New York Times piece amplified earlier reporting it had done in 2019 alleging that President Trump had reported $1.17 billion in losses from 1985 to 1994. As with those findings, the new revelations have put the tax benefits of commercial real estate ownership firmly in the spotlight.

          President Trump has said publicly that he has paid millions in taxes, including property and payroll taxes. At the same time, he also has been candid in admitting he has utilized tax credits, deductions and real estate depreciation to offset income. For example, the Trump Organization received $40 million in Federal Historic Tax credits for its 2014, $200 million renovation of the Old Post Office just blocks from the White House into the 272-room Trump International Hotel on Pennsylvania Avenue.

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            5 Ways to Highlight Every Rental Property’s Most Sellable Features

            Here are 5 ways to highlight every rental property’s most sellable features from Keepe, the on-demand maintenance company.

            Each property has its own special features that make it unique, and it is these features that attract new tenants and therefore must be showcased in the best possible light.

            While this can be tricky, there are ways to do it that don’t require outsourcing expensive professionals and a large budget.

            In fact, these five ways to highlight the sellable features of rental properties will help you attract the right tenants easily.

            No.1: Showcase the Sellable Features of Your Rentals

            Quit focusing on what you don’t have, and highlight the amenities and features your rental property or apartment does have. Even if your unit is a little older or not as newly built as some of the competition in your neighborhood, you can still attract quality renters.

            If you have something neighboring residents don’t — think a parking garage in San Francisco or an elevator in NYC — make sure those are prominent features on your listing. Hone in on what your property offers and speak to its strengths. Make sure tenants know what makes your property unique, even if it’s something simple like hardwood flooring.

            No. 2: Quality Photos Makes the Difference

            There’s no need to be, or hire, a professional photographer; smartphones these days typically come with expert-quality cameras. Using your smartphone or even an inexpensive digital camera will allow you to capture depth and field with high resolution.

            Check out the latest devices if yours isn’t quite up to date. It’s a worthwhile investment that will have you capturing the top features like a pro.

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              Las Vegas Tops U.S. in Rise of Apartment Tenants Not Paying Rent

              Last month, 10.6 percent of the city’s apartment tenants missed a rent payment, more than double the rate of a year earlier.

              (Bloomberg)—With Covid 19 tanking tourism, Las Vegas saw the biggest jump in apartment tenants who have stopped paying rent.

              In September, 10.6% of Vegas tenants missed a rent payment, up from 4.1% a year earlier, the largest increase in the U.S., according to data on the top 50 metropolitan areas from RealPage Inc. New Orleans, also heavily dependent on tourism, had the highest overall share of people not paying, at 12.9%, up from 8.6%.

              Tenants are most likely to stop paying in areas with the hardest-hit economies, including expensive cities from Los Angeles and Seattle to New York, where unemployment benefit payments aren’t enough to cover high rents and living expenses.

              “There’s more stress in hospitality-focused and expensive markets,” said Greg Willett, chief economist at RealPage. “The wild card in everything is what happens in the economy and what happens in the economy is dependent on what happens with the pandemic.”

              Across the U.S., rent payments have remained relatively stable, with 7.8% failing to pay in September, up 1.5 percentage points from a year ago, according to the National Multifamily Housing Council.

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                Institutional Investors Bet on Manufactured Housing as Occupancy, Rents Continue to Grow

                Property fundamentals in the sector remain very strong, making it an attractive long-term investment bet.

                There has been stable occupancy and rental collections in 2020 despite the pandemic. As a result, some investors are now betting big on manufactured housing communities.

                In the second quarter of 2020, investment sales of manufactured housing communities totaled $821 million, a 12 percent increase compared to the fourth quarter of 2019 and a 23 percent increase over the first quarter of 2020, reports commercial real estate services firm JLL. At the same time, valuations in the sector have continued to increase and cap rates have been compressing. Price per pad in the second quarter averaged $50,792, up 6.6 percent from the first quarter of 2020 and 26 percent year-over-year. During the same time period, prices on multifamily assets have declined by 5.3 percent from the first quarter of 2020 and 0.86 percent year-over-year, according to a JLL report on manufactured home communities. Cap rates on manufactured housing communities averaged 5.84 percent nationally, down seven basis points year-over-year.

                “The manufactured housing community sector has overall continued to drive year-over-year occupancy gains, often through investments into new and used inventory to support manufactured home sales and rental programs,” says Scott Belsky, senior vice president and JLL valuation advisory national practice lead for manufactured housing. “Additionally, the stability and growth of homesite rents have generated positive net operating growth even through the pandemic, which has allowed values to remain stable or even rise in some areas due to continued investor interest driven by the sector’s lack of volatility and even rent growth prospects.”

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                  Retailers have started paying rent again but are still fighting with their landlords

                  Less than a third of retail companies paid at least 75% of June rent, according to a study by the National Retail Federation and the investment bank PJ Solomon.

                  Month by month, retailers are starting to pay more rent as states lift shutdown orders and consumers become more comfortable venturing out to shop during the coronavirus pandemic. But negotiations, sometimes heated, continue between tenants and landlords.

                  In some cities and popular shopping districts, commercial rents are still sky high. Tensions keep brewing, as mall and shopping center owners grapple with retailers looking to close stores permanently, downsize or try to rewrite contracts in their favor. And the pressures are likely to roll into 2021, with the start of the year typically drawing a fresh wave of retail store closures as companies reevaluate their brick-and-mortar footprints after the holidays.

                  Less than a third of companies paid at least 75% of June rent, according to a study released Thursday by the National Retail Federation and the investment bank PJ Solomon. By July, the number of rent payers had almost doubled to 65%, it said. The study polled 48 C-level executives at retailers with at least 10 stores and more than $100 million in sales in 2019, from July 15 to July 28.

                  The survey also found that 73% of retailers that missed payments are planning to pay back at least half of the rent owed since a nationwide shutdown began in March. More than half of respondents said they were able to get some sort of rent relief from their landlords, with deferrals into late 2020 or 2021 being the most likely concession.

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