At a time when most investors are nervous to embark on new deals, Amazon has charged ahead with plans to expand its footprint in the Big Apple. The e-commerce giant acquired the iconic Lord & Taylor flagship building in Midtown Manhattan from troubled co-working operator WeWork for $978 million, according to New York City Department of Finance records.
While at least a temporary recession is now all but a certainty, this deal was in the works long before COVID-19 became an immediate threat to the U.S., notes Eric Anton, associate broker in the New York office of brokerage firm Marcus & Millichap.
WeWork acquired the building for its headquarters in 2019 and announced a lavish, $438 million renovation project to reposition it to office space. But a failed attempt to go public followed, and the company never moved into the building.
Fannie Mae and Freddie Mac last week suspended foreclosures and evictions on single-family homes as the coronavirus continues to spread, but that policy will only help those living in a house, leaving many renters vulnerable to being evicted.
The Federal Housing Finance Agency announced Monday that Fannie and Freddie are moving to protect renters from being evicted if they’re unable to pay their rent due to the impact of the coronavirus.
Specifically, Fannie and Freddie will begin offering mortgage forbearance to multifamily property owners on the condition that they suspend all evictions for renters who can’t pay their rent because of the coronavirus.
Because Fannie and Freddie back the mortgages on multifamily properties, but have no contact with individual renters, the only way for the GSEs to provide relief to renters is by providing relief to the property owners themselves. Missed rent payments mean that multifamily property owners wouldn’t be able to make their mortgage payments and the entire property would go into foreclosure.
As a result of the GSEs’ action, property owners now have the ability to delay their mortgage payments if their property is negatively affected by the coronavirus national emergency.
According to the GSEs, property owners can delay their mortgage payments for up to 90 days by showing hardship as a consequence of COVID-19 and by gaining lender approval.
The condition the GSEs included — that property owners can’t use the forbearance option unless they agree to suspend evictions — should have a sizable impact on the market, considering how much of the multifamily market Fannie and Freddie support.
As the COVID-19 outbreak continues to rock the nation, the multifamily industry continues to grapple with the new reality while reducing risk and disruption for its residents, employees, and businesses. In a period where it’s anything but business as usual, it’s critical that industry stakeholders arm themselves with guidance and resources that will accurately inform important business decisions.
By now, apartment firms’ senior-level crisis teams should be in the throes of putting their COVID-19 response plan to work and adapting it as needed to the ever-changing circumstances. However, many questions continue to surface as apartment firms pick their way through these uncertain times. To assist companies in their efforts, the National Multifamily Housing Council (NMHC) offers this list of suggested apartment owner preparations and ongoing considerations.
Many of the major North American commercial real estate industries have stepped up to deliver guidance and resources to the industry on how to handle the continuing coronavirus outbreak.
Here is a centralized list with links to the resource pages and statements provided by those groups.
If you have links to additional resources to add to this page, please contact [email protected]
Statement on its upcoming 2020 Spring Conference, “The health and safety of our members and attendees is our top priority, and we are monitoring the COVID-19 (coronavirus) situation and guidelines set by the U.S. Centers for Disease Control and Prevention and the World Health Organization. We are working closely with the Rosen Shingle Creek resort to ensure that all appropriate measures are being taken to safeguard the well-being of our attendees, including the aggressive use of disinfectant cleaning procedures throughout the hotel, including the exhibit hall and meeting rooms, and the addition of more hand sanitizing dispensers readily available to all attendees.” (March 10)
(Bloomberg)—Some Seattle hotels saw occupancy rates fall below 10% last week, even before fresh guidance against public gatherings from the federal government presented a new challenge to the U.S. hospitality industry.
The data from the Downtown Seattle Association shows how bad things could get for hotel owners in cities where cases of the novel coronavirus were slower to arrive.
Travel restrictions and restaurant closures aimed at stopping the spread of the virus, along with a looming recession are all bad news for the hospitality industry, and even well-capitalized owners are going to blow through cash reserves quickly, Jonathan Falik, chief executive officer of JF Capital Advisors, said in an interview.
Billionaire investor Carl Icahn told CNBC on Friday he expects the U.S. commercial real estate market will crumble, much like the broader housing market collapse of 2008.
“You’re going to have this blow up, too, and nobody’s even looking at it,” Icahn said on “Halftime Report.”
Icahn said he is shorting the commercial mortgage bond market and it’s his “biggest position by far.”
Short selling is a bet against stocks or bonds, with shorts borrowing shares from an investment bank and selling them in hopes that the asset will lose value. If it does drop, shorts buy the shares back at a cheaper price and return them to the bank, turning a profit on the difference.
Icahn’s short is specific to credit default swaps, or “CDS,” which are assets that back mortgages of corporate offices and shopping malls. Icahn said the housing market bubble of 2008 has “happened all over again” due to loans made in 2012 to shopping malls and more.
This week was supposed to mark the opening of one of the biggest (and longest-planned) retail projects in U.S history—the American Dream Mall in the New Jersey. Parts of the property, including an indoor ski slope, have been opened for a few months. But on March 19, the American Dream’s developer, the Triple Five Group, intended to open the project’s retail section, water park and restaurants. With the new health guidelines coming into effect in New York and New Jersey, however, American Dream will remain closed until further notice.
This is a story that is playing out across the regional mall sector, which was already in a severely weakened state before coronavirus arrived in the United States. In many states and municipalities, including New York, New Jersey, California, Connecticut, Illinois, Massachusetts, Ohio and Washington, governments are requiring that businesses including restaurants, bars and movie theaters—the staple regional mall tenants—close their doors and only provide pick-up and delivery services if possible.
Meanwhile, a growing number of retailers, Apple, Urban Outfitters and Lululemon among them, have announced they are opting to close stores for the next few weeks out of concern for the safety of their customers and employees. Others, like Kate Spade and the Gap, have scaled back their operating hours. And there is expectation in the market that more retailers will follow their example. But as closings announcements accumulate, the publicly-traded chains’ stocks are getting hammered.
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.”
(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.