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.”
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.
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.
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.
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.