News & Press

Below are press releases announcing; acquisitions, divestitures and industry news.

How Will Student Housing Operators Fare This Fall? The Answer Depends on Which Universities They Serve

Owners in markets where universities are reopening in person are seeing a surge in demand as students are pushed into off-campus housing.

Student housing operators are optimistic about demand in markets where universities will hold face-to-face classes this fall, but have a gloomy outlook for markets where universities will shift entirely online.

Uncertainty looms over off-campus student housing operators in markets where universities have elected to go entirely virtual, says Sean Baird, director of the national student housing group with real estate services firm Colliers International. They do not know whether students will honor the leases they signed or what their final occupancy will look like for the upcoming academic year. They are looking at the upcoming school year through unfavorable lenses and expecting high vacancies.

For student housing owners in markets where universities are reopening in person, there is a great amount of optimism, says Baird. A number of these universities are re-evaluating their on-campus housing strategies by eliminating double, triple, and quadruple occupancy bedrooms, while also taking entire on-campus dorms off-line in order to use as housing for COVID-19 positive students to quarantine. That has created a surge in demand as more students are pushed into the off-campus housing market.

Nationally, the student housing pre-leasing level for the fall 2020 semester stood at 74.9 percent as of June 2020, according to Carl Whitaker, market analyst with RealPage Inc., a provider of property management software and services. That was about 500 basis points below the June 2019 reading. According to data provider Yardi Matrix, student housing pre-leasing level through June 2020 was 2.9 percent below last year’s levels, according to Doug Ressler, manager of business intelligence with the company.

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Credit Unions are Making a Bigger Play for CRE Loans

Credit unions are an attractive option for borrowers who are seeing fewer lender bids, particularly from banks and debt funds.

Credit unions that have been working to grow market share in the commercial real estate lending space in recent years are taking advantage of open runway as other capital sources have pulled back in recent months. In fact, these institutions are willing to offer competitive terms and creative solutions.

“What we have seen from credit unions is that they are willing to finance property types that others aren’t doing,” says Pat Minea, executive vice president, debt and equity at NorthMarq. NorthMarq estimates that its financing activity with credit unions is about 50 percent higher this year compared to last year. Since March, the firm has closed more than two dozen financing transactions with credit unions as the lender for borrowers across the board involving multifamily, industrial, retail and office projects.

There are plenty of capital sources still willing to finance multifamily and industrial assets. Interest drops off, however, for office and retail properties with financing that has become tougher because of COVID-19.

“We are having to dig a little deeper to find the terms that borrowers want in the current climate, and credit unions are a great example of that alternative,” says Minea. “They are more receptive, for whatever reason, to doing these deals that, in today’s world, are a little more on the edge.”

For example, credit unions are still willing to finance single-tenant retail and unanchored retail properties. That may be because credit unions don’t have as large of a loan portfolio and potential concentration risk to that sector as other lenders might have, notes Minea.

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Facebook Office Outside Seattle Put Up for Sale by Developer

Block 16, a new 343,528-sq.-ft. property in Bellevue, Wash. is being marketed for sale.

(Bloomberg)—An office fully leased to Facebook Inc. in a Seattle suburb is up for sale, a sign that developers are ready to test demand after the pandemic put much of the commercial real estate market into a deep freeze.

Block 16, a new 343,528-square-foot property in Bellevue, Washington, is being marketed by Eastdil Secured, according to sales documents reviewed by Bloomberg News and two people familiar with the matter who asked not to be identified discussing the private process. The building may fetch between $325 million and $350 million, one of the people said.

Spokesmen for Wright Runstad & Co., the developer of Block 16, and Eastdil declined to comment.

The virus has put much of the commercial real estate market into a state of paralysis, with buyers and sellers unable to agree on price. Some deals have been scrapped and many potential listings have been pulled. In the second quarter, office building transactions in the U.S. plunged 71% compared with the same period a year earlier, according to data from Real Capital Analytics.

Still, some building owners are choosing to move forward with sales, betting they can generate enough buyer interest for well-located buildings with high-quality tenants. In the marketing documents, Eastdil emphasizes that Block 16 is fully leased to Facebook “through June 2033, providing 12+ years of stable, investment-grade cash flow.”

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How the eviction crisis across the U.S. will look

The impending eviction crisis will hurt some states more than others.

An unprecedented eviction crisis will soon hit the U.S.

On Friday, the federal moratorium on evictions in properties with federally backed mortgages and for tenants who receive government-assisted housing expired. The Urban Institute estimated that provision covered nearly 30% of the country’s rental units.

White House economic adviser Larry Kudlow said on Sunday that he would extend that moratorium, but these tenants are now unprotected from eviction. At the same time, some 25 million Americans will stop receiving the $600 weekly federal unemployment checks by July 31.

And most of the statewide eviction moratoriums are winding down.

The proceedings have resumed in more than 30 states.The moratorium in Hawaii and Illinois end this week, and in August, evictions will pick up in New York and Nevada.

By one estimate, some 40 million Americans could be evicted during the public health crisis.

“It’s like nothing we’ve ever seen,” said John Pollock, coordinator of the National Coalition for a Civil Right to Counsel.

In 2016, there were 2.3 million evictions, Pollock said. “There could be that many evictions in August,” he said.

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Distress Mounts in U.S. Property Market Frozen by Pandemic

Investment sales of U.S. commercial properties fell by 68 percent year-over-year in the second quarter, according to RCA.

(Bloomberg)—The U.S. commercial real estate market is showing ever greater signs of stress, but there are still few deals to be had.

Transactions fell 68% in the second quarter across all property types compared with 2019 as potential buyers and sellers remained far apart on the prices of buildings, according to data released Wednesday by Real Capital Analytics.

The paralysis set in despite near-record amounts of capital ready to be deployed by some of the world’s biggest real estate investors.

“The buyer and seller expectations are not aligned,” said Simon Mallinson, an executive managing director at RCA. “Sellers aren’t being forced to the market because there’s no realized distress and buyers are sitting on the sidelines thinking there’s going to be distress.”

Industrial Strength

Second-quarter sales plunged 70% for apartments, 71% for offices, 73% for retail and 91% for hotels, according to RCA. Industrial property transactions were a brighter spot. Sales dropped only 50% in the second quarter, as online shopping thrived and manufacturers leased space to avoid supply chain disruptions.

For markets to function, there needs to be some agreement on what assets are worth. But the surging coronavirus outbreak is fueling uncertainty, making the outlook for commercial property just as cloudy as it was in March when lockdowns put the economy into deep freeze.

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U.S. Airlines Face the End of Business Travel as They Knew It

Half the respondents in a survey of Fortune 500 CEOs said trips at their companies would never return to what they were before Covid-19.

(Bloomberg) — U.S. airlines hammered by the catastrophic loss of passengers during the pandemic are confronting a once-unthinkable scenario: that this crisis will obliterate much of the corporate flying they’ve relied on for decades to prop up profits.

“It is likely that business travel will never return to pre-Covid levels,” said Adam Pilarski, senior vice president at Avitas, an aviation consultant. “It is one of those unfortunate cases where the industry will be permanently impaired and what we lost now is gone, never to come back.”

At stake is the most lucrative part of the airline industry, driven by businesses that accepted — however grudgingly — the need to plop down a few thousand dollars for a last-minute ticket across the U.S. or over an ocean. While millions of customers fly rarely, road warriors are constantly in the air to close a deal, depose a witness or impress a client. Business travel makes up 60% to 70% of industry sales, according to estimates by the trade group Airlines for America.

That’s under threat in the wake of an unprecedented collapse in passengers that started four months ago. Half the respondents in a survey of Fortune 500 CEOs said trips at their companies would never return to what they were before Covid-19, according to Fortune magazine.

Even industry leaders such as Delta Air Lines Inc. Chief Executive Officer Ed Bastian are bowing to the inevitable.

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Coronavirus pandemic cuts rent growth to a decade low

Single-family rents grew just 1.7% annually in May on a national level, according to CoreLogic.

Back in February, just before the coronavirus hit the U.S. economy with a vengeance, rent growth for single-family homes had hit its highest pace in four years. Barely three months later, that growth plummeted to a decade low.

Single-family rents grew just 1.7% annually in May on a national level, according to CoreLogic. That’s the slowest growth rate in nearly a decade and a little more than half the growth these 12 million rental homes were seeing the year before. Single-family rentals make up 35% of all rental housing in the U.S., and these homes are valued at more than $2.3 trillion.

“Single-family rent growth slowed abruptly in May as the nation felt the full impact of the economic crisis caused by the pandemic,” said Molly Boesel, principal economist at CoreLogic. “Some metro areas, especially those that depend on tourism, were hit hardest by job losses. With unemployment rates predicted to remain high through the end of the year, we can expect to see further easing in rent growth as the economy struggles this year.”

The slowdown in rent growth was most severe at the high end of the rental market, while lower-priced rentals saw rents going up more markedly. That is likely because the demand for high-end rentals has dropped more dramatically than demand for lower-priced properties.

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Uptown Villas Tampa

Harborside Partners, along with Dreamstone Investments and Brick Street Capital, have just closed on 90 units in Tampa, Florida for a purchase price of $6.28 million. This acquisition will further establish our footprint in Uptown Tampa by bringing our total portfolio in this neighborhood to 149 units.

How Will Subchapter 5 of the Bankruptcy Code Impact Landlords?

Landlords need to educate themselves about the new Subchapter 5 bankruptcy rules as a precedent-setting case plays out in Texas.

Recent revisions to the U.S. Bankruptcy Code might open the door to headaches and heartaches for landlords that rent to small businesses.

In August 2019, Congress created what’s known as Subchapter 5 of the Bankruptcy Code. Subchapter 5 is designed to streamline the Chapter 11 bankruptcy process for small businesses and slash their legal bills, according to Robert Dremluk, a partner in the New York City office of law firm Culhane Meadows Haughian & Walsh PLLC who specializes in bankruptcy cases.

Subchapter 5 went into effect this February. A month later, Congress tweaked Subchapter 5 as part of the federal CARES Act, aimed at helping the U.S. recover from the coronavirus pandemic. A major change in Subchapter 5 that will be on the books till next spring raises the cap on secured and unsecured debts for a small business to qualify for Chapter 11. The threshold jumped from a little over $2.7 million to $7.5 million. “The idea was to create an easier path for companies to reorganize,” Dremluk says.

Legal observers say the re-engineered Subchapter 5 could invite even more small businesses to file for Chapter 11 bankruptcy reorganization and, therefore, entangle more landlords in bankruptcy proceedings.

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Apartment Investors Begin to Navigate COVID-19 Deal Landscape

The properties hitting the market today tend to be smaller. Investors are holding onto stabilized assets if they can and distressed deals haven’t hit the market yet.

Verde Capital Corp., a private equity and investment management company, is negotiating a sale of several hundred apartments in Northern New Jersey. A buyer has agreed to pay $75 million, or roughly $250,000 per unit for the property, which Verde owns in partnership with a local real estate family.

“That’s the exact price we would have sold it for a year ago,” says Jacob Reiter, president of Verde Capital Corp., based in Conshohocken, Penn. He expects the sale to close in fall 2020 after several months of due diligence.

Deals like this illustrate there are signs of life in the market to buy and sell apartment properties, despite the economic crisis caused by the spread of the novel coronavirus. But deal volume remains down significantly year-over-year and buyers and sellers are continuing to navigate the re-set in property values resulting from the massive economic disruptions of recent months.

In May 2020, investors paid a total $3.1 billion to buy apartment properties in the U.S. That roughly one-fifth of the amount they spent in the same period the year before, according to data from Real Capital Analytics (RCA), a data firm based in New York City. It’s also even less than the $3.4 billion that investors spent in April.

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