A group of landlords in Westchester County on Thursday sued New York Gov. Andrew Cuomo over his executive order extending a moratorium
on evictions during the COVID-19 crisis, saying the measure violated
their contract and due process rights and amounted to an improper taking
of their property under the U.S. Constitution.
The lawsuit,
filed in White Plains federal court, seeks to nullify two provisions of
the May 7 order, which prohibit landlords from pursuing eviction
proceedings through Aug. 19 and give renters the option to put their
security deposit toward their rent payment.
“In doing so, the order has given carte blanche to tenants to
withhold rent without repercussion,” attorney Mark A. Guterman of
Lehrman, Lehrman & Guterman wrote in the 14-page complaint.
“Plaintiffs and all similarly situated landlords are precluded from
asserting their rights and obtaining relief to protect their property,
all the while remaining obligated to pay all of their own carrying costs
and other expenses, including taxes to the various governmental
divisions of New York State,” the filing said.
The lawsuit comes as renters across the state are feeling the squeeze
from the COVID-19 pandemic, which has led to widespread shutdowns and
caused an unprecedented increase in unemployment claims. According to a
recent survey
by the real estate group PropertyNest, 37% of New York City renters
said they would be unable to make rent in June, a figure that had more
than doubled from the month of May.
Cuomo’s order built on a similar measure in March that barred all
commercial and residential evictions through June. It did not cancel
rent payments altogether, and tenants are still responsible for making
up any missed payments to their landlord.
The new order, however, extended the moratorium another two months
for renters who qualified for unemployment benefits or are unable to pay
rent due to the pandemic. Under the order, landlords are also required
to apply tenants’ security deposits to unpaid rent at the request of
renters, though the deposits must be repaid in increments starting 90
days after their usage.about:blank
In Thursday’s filing, the landlords said the order allowed renters to
“unilaterally” violate leases without their consent and prevented them
from using security deposits to recover for damages to their property.
The plaintiffs said they had all signed one-year leases with tenants and relied on the rents as the “sole source” of income.
While the landlords acknowledged that the order was meant to prevent
struggling renters from being evicted, that goal could have been
achieved through “less intrusive” actions, such as permitting courts to
hear each individual case of non-payment on its merits or providing
tenants the means to afford their rent during the crisis.
The order, they said, “creates a palpable and immediate threat to
plaintiffs’ ability to maintain their ownership interest in their
properties and comply with plaintiffs’ own contractual and statutory
obligations by threatening the ongoing stream of rent.”
The governor’s press office did not respond Thursday to a request for comment.
The case, filed in the U.S. District Court for the Southern District of New York, is captioned Elmsford Apartment Associates v. Cuomo.
https://www.globest.com/2020/05/29/landlords-sue-over-cuomos-order-extending-eviction-moratorium-during-pandemic-296-217972/
Saturday, May 30, 2020
Times Sq. Developers Bet $Bs On Dense Experience Retail. Now What?
As the city that never sleeps has slumbered for the past three
months, its typically thrumming heart of tourism, Times Square, has gone
quiet.
Nearly all of the ostentatious storefronts along 42nd Street, Broadway and Seventh Avenue have closed their doors. The empty streets of “The Bowtie” are a stark contrast to the thriving experiential retail hub it was just a few months ago.
Roughly 380,000 pedestrians entered Times Square on an average day last year. Since the pandemic hit New York, its foot traffic is down 90%, according to the Times Square Alliance, which tracks pedestrians with a series of cameras and monitors.
Much of Times Square’s success has to do with its experience economy: since before commercial advertisements played on the sides of skyscrapers and major clothing stores rebranded their shops as experiential, Times Square has been an international marketplace for experience. From the Broadway theaters along its streets, to its many restaurants, to the blinding lights, people come to Times Square to experience the commercial grandeur of New York.
“It’s what people who have never been to New York think New York City is, and anyone who has been to New York has been there,” said L&L Holding Co. Managing Director David Orowitz, whose company is developing a $2.5B project in Times Square dubbed TSX Broadway.
Now, as the deadly coronavirus has kept the city on lockdown despite many other parts of the country beginning to reopen — and tourism expected to take years to recover fully — the experiential retail hub’s typically mobbed streets and stores have become a potential hazard, rather than a help, to its outlook.
“With the pandemic, all bets are off,” said Priya Raghubir, a professor of marketing at New York University’s Stern School of Business and an expert in consumer psychology. “Because an experience requires interpersonal proximity.”
Fifty percent of Times Square’s foot traffic comes from tourists, according to the Times Square Alliance. Tourism rates in New York City have risen every year for the past 10 years, peaking last year when 80.1 million visitors came to the five boroughs, according to a report from NYC & Co., a city entity that tracks tourism. Many stayed in New York City hotels, 20% of which are located in Times Square.
Now, the U.S. Centers for Disease Control and Prevention recommends postponing or canceling trips to New York City amid the crisis. Globally, tourism has taken a huge hit. Faced with stagnant business and dismal tourism projections for the rest of the year, the 452-room Times Square Edition, a piece of Maefield’s 20 Times Square property, once valued at $2.4B, closed its doors permanently only a year after its grand opening.
Over the past five years, experiential retailers have taken Times Square by storm and proved lucrative endeavors as online shopping increasingly ate into brick-and-mortar profits. Last year, the demand for spaces like this in Times Square kept going up. In fall 2019, Times Square had the second-highest asking rent in the city after Fifth Avenue, up 2% year-over-year at $1,889 per SF, according to the Real Estate Board of New York.
Major national retailers have their flagship locations in Times Square, branding their companies as experience-focused to hundreds of thousands of daily potential customers, while developers have broken ground on multibillion-dollar new experiential retail and hospitality projects. The hands-on, close-contact experiences made shopping in Times Square distinct, experts say.
In 2018, Levi’s moved into its 17K SF flagship store on Broadway between 45th Street and 46th Street at Vornado’s 1535 Broadway, which features customizable denim and accessories designed by local artists. Hershey’s Chocolate World expanded in 2017 at Maefield Development’s 20 Times Square, where store-goers can create their own wrapped Hershey’s bar. Krispy Kreme was set to open the doors of its new flagship, a 4,500 SF store at Vornado’s 1601 Broadway on the edge of West 48th, to customers who could watch the famous doughnuts be made via a glaze waterfall. McDonald’s opened its largest location, a 24-hour restaurant at 1528 Broadway with customizable order stations and menu items not offered anywhere else in the United States, a year ago.
While spaces for retail in other parts of the city lost value, developers have bet that retail space in Times Square will remain in high demand, even as several traditional retailers, such as Old Navy and Gap, have looked to move out.
New transactions before the Pandemic showed the real estate world was optimistic about the area’s future. In addition to TSX Broadway, L&L’s 550K SF hotel, experiential retail and entertainment project, Soho Properties is building a $350M, 234-room, Jimmy Buffett-themed Margaritaville Resort, which was set to open in the fall. Times Square has already taken a hit as a result of the virus.
CBRE’s Q1 report, which took into account the first two weeks of the city’s shutdown, showed asking rents had fallen 15.7% year-over-year in Times Square, from $1,955 to $1,647 per SF, pushing the average down below the $1,800 threshold for the first time since 2011. The report found that the rent prices were driven down in part by an “increasingly cautious market” and an uptick in retailers in the area looking to sublease their space.
When the city is allowed to reopen, it is unclear how these retailers can provide the same valuable experiences to the customers that show up.
“We’re always asked ‘What is the new normal going to be?’” Times Square Alliance President Tim Tompkins said. “The honest answer is it’s extremely difficult to say, because every week there seems to be a new set of facts and figures on how people are approaching this, not only in the 50 states but around the world.”
Retailers in Times Square have been drafting safety guidelines for their stores to go into effect once they are reopened. Nike Consumer and Marketplace President Heidi O’Neill told Good Morning America that its Niketown store between Fifth and Madison avenues will undergo strict cleaning procedures and create signs to help enforce social distancing. Beauty store chain Sephora has a Times Square location at the ground floor of Vornado’s 1535 Broadway. Before the coronavirus, the retailer’s signature was makeup available for customers to sample and try throughout the store. The company has released new guidelines that eliminate testers completely and implement a capacity re in the store. Sephora didn’t respond to a request for comment on how the new guidelines would impact its capacity levels at the Times Square location.
Tompkins said it is hard to predict the future because the best practices change every day.
“Some of the key variables are the levels of testing, degrees of pre-testing outside of retail venues, whether its with heat guns or something else,” he said. “A lot out there that is uncertain, everything is really speculative in terms of what the answer is.”
In addition to the intentional decrease in store capacity, tourism across the globe is expected to stay at unprecedentedly low numbers this year. Without tourists, The Bowtie is in for a painful year. When experiential retail does open at its full capacity again — likely once there’s a vaccine or effective therapy — it will be a slow recovery, Raghubir said.
“It will take a while for consumer confidence to build,” she said. “I would be surprised if it were to happen before 2022.”
Raghubir said a full recovery will take even longer.
“I fear that it will take time before consumers will be able to jostle each other in a crowd, which is so much a part of an experiential retail experience,” she said. “I think there is going to be fear holding people back.”
She predicts that companies that will make it are those that have the ability to absorb the cost of the loss that retailers in this area will face: the major chains like McDonald’s, Taco Bell — which signed a 4K SF lease for its alcohol-infused Cantina concept in Times Square this year — and the Apple Store.
With the city’s reopening expected to start in the next two weeks, the quintessential experience economy at the center of New York City will soon awaken, turn on its lights and reopen its experiential storefronts. Time will tell how it adjusts to the world that changed while it was asleep.
Orowitz believes that once the medical risk is over, the area and its experiential retailers will bounce back.
“A lot of people doing business in Times Square are going through a lot of pain now,” he said. “But I think that the infrastructure is there, the demand is still there, the people will still be there, and I think that when the health risk is gone, business will come back quickly.”
People will still continue to want to come to New York, he said, and that means a visit to Times Square.
“People are still going to want to be entertained, people are still going to want to come and interact and have experiences,” he said. “None of that changes, so the actual activities at the building don’t really change, because brands are still going to want to advertise to people through signs and stage and present experiences to them that they can only have in Times Square.”
https://www.bisnow.com/new-york/news/retail/times-squares-experience-
Nearly all of the ostentatious storefronts along 42nd Street, Broadway and Seventh Avenue have closed their doors. The empty streets of “The Bowtie” are a stark contrast to the thriving experiential retail hub it was just a few months ago.
Roughly 380,000 pedestrians entered Times Square on an average day last year. Since the pandemic hit New York, its foot traffic is down 90%, according to the Times Square Alliance, which tracks pedestrians with a series of cameras and monitors.
Much of Times Square’s success has to do with its experience economy: since before commercial advertisements played on the sides of skyscrapers and major clothing stores rebranded their shops as experiential, Times Square has been an international marketplace for experience. From the Broadway theaters along its streets, to its many restaurants, to the blinding lights, people come to Times Square to experience the commercial grandeur of New York.
“It’s what people who have never been to New York think New York City is, and anyone who has been to New York has been there,” said L&L Holding Co. Managing Director David Orowitz, whose company is developing a $2.5B project in Times Square dubbed TSX Broadway.
Now, as the deadly coronavirus has kept the city on lockdown despite many other parts of the country beginning to reopen — and tourism expected to take years to recover fully — the experiential retail hub’s typically mobbed streets and stores have become a potential hazard, rather than a help, to its outlook.
“With the pandemic, all bets are off,” said Priya Raghubir, a professor of marketing at New York University’s Stern School of Business and an expert in consumer psychology. “Because an experience requires interpersonal proximity.”
Fifty percent of Times Square’s foot traffic comes from tourists, according to the Times Square Alliance. Tourism rates in New York City have risen every year for the past 10 years, peaking last year when 80.1 million visitors came to the five boroughs, according to a report from NYC & Co., a city entity that tracks tourism. Many stayed in New York City hotels, 20% of which are located in Times Square.
Now, the U.S. Centers for Disease Control and Prevention recommends postponing or canceling trips to New York City amid the crisis. Globally, tourism has taken a huge hit. Faced with stagnant business and dismal tourism projections for the rest of the year, the 452-room Times Square Edition, a piece of Maefield’s 20 Times Square property, once valued at $2.4B, closed its doors permanently only a year after its grand opening.
Over the past five years, experiential retailers have taken Times Square by storm and proved lucrative endeavors as online shopping increasingly ate into brick-and-mortar profits. Last year, the demand for spaces like this in Times Square kept going up. In fall 2019, Times Square had the second-highest asking rent in the city after Fifth Avenue, up 2% year-over-year at $1,889 per SF, according to the Real Estate Board of New York.
Major national retailers have their flagship locations in Times Square, branding their companies as experience-focused to hundreds of thousands of daily potential customers, while developers have broken ground on multibillion-dollar new experiential retail and hospitality projects. The hands-on, close-contact experiences made shopping in Times Square distinct, experts say.
In 2018, Levi’s moved into its 17K SF flagship store on Broadway between 45th Street and 46th Street at Vornado’s 1535 Broadway, which features customizable denim and accessories designed by local artists. Hershey’s Chocolate World expanded in 2017 at Maefield Development’s 20 Times Square, where store-goers can create their own wrapped Hershey’s bar. Krispy Kreme was set to open the doors of its new flagship, a 4,500 SF store at Vornado’s 1601 Broadway on the edge of West 48th, to customers who could watch the famous doughnuts be made via a glaze waterfall. McDonald’s opened its largest location, a 24-hour restaurant at 1528 Broadway with customizable order stations and menu items not offered anywhere else in the United States, a year ago.
While spaces for retail in other parts of the city lost value, developers have bet that retail space in Times Square will remain in high demand, even as several traditional retailers, such as Old Navy and Gap, have looked to move out.
New transactions before the Pandemic showed the real estate world was optimistic about the area’s future. In addition to TSX Broadway, L&L’s 550K SF hotel, experiential retail and entertainment project, Soho Properties is building a $350M, 234-room, Jimmy Buffett-themed Margaritaville Resort, which was set to open in the fall. Times Square has already taken a hit as a result of the virus.
CBRE’s Q1 report, which took into account the first two weeks of the city’s shutdown, showed asking rents had fallen 15.7% year-over-year in Times Square, from $1,955 to $1,647 per SF, pushing the average down below the $1,800 threshold for the first time since 2011. The report found that the rent prices were driven down in part by an “increasingly cautious market” and an uptick in retailers in the area looking to sublease their space.
When the city is allowed to reopen, it is unclear how these retailers can provide the same valuable experiences to the customers that show up.
“We’re always asked ‘What is the new normal going to be?’” Times Square Alliance President Tim Tompkins said. “The honest answer is it’s extremely difficult to say, because every week there seems to be a new set of facts and figures on how people are approaching this, not only in the 50 states but around the world.”
Retailers in Times Square have been drafting safety guidelines for their stores to go into effect once they are reopened. Nike Consumer and Marketplace President Heidi O’Neill told Good Morning America that its Niketown store between Fifth and Madison avenues will undergo strict cleaning procedures and create signs to help enforce social distancing. Beauty store chain Sephora has a Times Square location at the ground floor of Vornado’s 1535 Broadway. Before the coronavirus, the retailer’s signature was makeup available for customers to sample and try throughout the store. The company has released new guidelines that eliminate testers completely and implement a capacity re in the store. Sephora didn’t respond to a request for comment on how the new guidelines would impact its capacity levels at the Times Square location.
Tompkins said it is hard to predict the future because the best practices change every day.
“Some of the key variables are the levels of testing, degrees of pre-testing outside of retail venues, whether its with heat guns or something else,” he said. “A lot out there that is uncertain, everything is really speculative in terms of what the answer is.”
In addition to the intentional decrease in store capacity, tourism across the globe is expected to stay at unprecedentedly low numbers this year. Without tourists, The Bowtie is in for a painful year. When experiential retail does open at its full capacity again — likely once there’s a vaccine or effective therapy — it will be a slow recovery, Raghubir said.
“It will take a while for consumer confidence to build,” she said. “I would be surprised if it were to happen before 2022.”
Raghubir said a full recovery will take even longer.
“I fear that it will take time before consumers will be able to jostle each other in a crowd, which is so much a part of an experiential retail experience,” she said. “I think there is going to be fear holding people back.”
She predicts that companies that will make it are those that have the ability to absorb the cost of the loss that retailers in this area will face: the major chains like McDonald’s, Taco Bell — which signed a 4K SF lease for its alcohol-infused Cantina concept in Times Square this year — and the Apple Store.
With the city’s reopening expected to start in the next two weeks, the quintessential experience economy at the center of New York City will soon awaken, turn on its lights and reopen its experiential storefronts. Time will tell how it adjusts to the world that changed while it was asleep.
Orowitz believes that once the medical risk is over, the area and its experiential retailers will bounce back.
“A lot of people doing business in Times Square are going through a lot of pain now,” he said. “But I think that the infrastructure is there, the demand is still there, the people will still be there, and I think that when the health risk is gone, business will come back quickly.”
People will still continue to want to come to New York, he said, and that means a visit to Times Square.
“People are still going to want to be entertained, people are still going to want to come and interact and have experiences,” he said. “None of that changes, so the actual activities at the building don’t really change, because brands are still going to want to advertise to people through signs and stage and present experiences to them that they can only have in Times Square.”
https://www.bisnow.com/new-york/news/retail/times-squares-experience-
Thursday, May 28, 2020
Carve Out for Vacant Properties in Opportunity Zones Gives More Leeway
If the fallout from COVID-19 continues, there is little doubt that
the number of abandoned and foreclosed properties will likely increase.
To show how the CRE environment will change, Newmeyer Dillion Partner Mike Krueger points to restaurants. The ones that are allowed even to open will have fewer customers.
“If you had a big 8,000 square foot restaurant that allowed you to have 150 customers at one time, the most you’re going to have is likely going to be half of that because you’re going to have spacing requirements and you’re going to have certain limitations,” he says. “Then you’re also going to have limitations on how food is going to be prepared. You will no longer have chefs in the kitchen working shoulder to shoulder.”
He says the space equation will be “turned on its head.”
“That is why I believe we’re going to see massive vacancies in
commercial real estate,” he says. “Those vacancies aren’t going to be
restored anytime soon. They’re going to be repurposed.”
Krueger says an increase in abandoned properties could present an opportunity for Qualified Opportunity Fund (QOF) investors in Qualified Opportunity Zone Businesses (QOZBs). In its third round of guidance, the Treasury Department included a special carve-out for vacant property that could allow investors to avoid the requirement to “substantially improve” properties. That provision could potentially save QOF investors time and millions in development fees.
Combined with the IRS’ recent announcement that the deadline to close on QOZBs can be extended to mid-July, the carve-out could give QOF investors new investment opportunities in today’s COVID-19 landscape.
“The vacancy requirements are easier now,” Krueger says. “The
property has to be vacant for three years, or if the property was vacant
in April 2018, it just has to be vacant for one year.”
A property actually doesn’t have to be 100% vacant to qualify. It just means that no space more than 20% has been occupied during that time. “You can have a 10,000-square-foot apartment complex,” Krueger says. “As long as no units are rented out that take up more than 2,000 square feet, that’s technically a vacant building.”
Since the building is considered vacant, it can be purchased with an Opportunity Zone Fund. “As long as that apartment building is an Opportunity Zone, you can acquire that even though you’re not making any improvements to it,” Krueger says. “It’s a vacant property under the regulations of a qualified opportunity property.”
After purchasing the property, the fund can rent out all of the spaces without spending money to upgrade it. “It was vacant for the minimum period that now qualifies as original use, and original use is one of the elements to qualify your property as a qualified Opportunity Zone business,” Krueger says.
https://www.globest.com/2020/05/27/a-carve-out-for-vacant-properties-in-ozs-allows-them-to-avoid-certain-requirements/
To show how the CRE environment will change, Newmeyer Dillion Partner Mike Krueger points to restaurants. The ones that are allowed even to open will have fewer customers.
“If you had a big 8,000 square foot restaurant that allowed you to have 150 customers at one time, the most you’re going to have is likely going to be half of that because you’re going to have spacing requirements and you’re going to have certain limitations,” he says. “Then you’re also going to have limitations on how food is going to be prepared. You will no longer have chefs in the kitchen working shoulder to shoulder.”
He says the space equation will be “turned on its head.”
Krueger says an increase in abandoned properties could present an opportunity for Qualified Opportunity Fund (QOF) investors in Qualified Opportunity Zone Businesses (QOZBs). In its third round of guidance, the Treasury Department included a special carve-out for vacant property that could allow investors to avoid the requirement to “substantially improve” properties. That provision could potentially save QOF investors time and millions in development fees.
Combined with the IRS’ recent announcement that the deadline to close on QOZBs can be extended to mid-July, the carve-out could give QOF investors new investment opportunities in today’s COVID-19 landscape.
A property actually doesn’t have to be 100% vacant to qualify. It just means that no space more than 20% has been occupied during that time. “You can have a 10,000-square-foot apartment complex,” Krueger says. “As long as no units are rented out that take up more than 2,000 square feet, that’s technically a vacant building.”
Since the building is considered vacant, it can be purchased with an Opportunity Zone Fund. “As long as that apartment building is an Opportunity Zone, you can acquire that even though you’re not making any improvements to it,” Krueger says. “It’s a vacant property under the regulations of a qualified opportunity property.”
After purchasing the property, the fund can rent out all of the spaces without spending money to upgrade it. “It was vacant for the minimum period that now qualifies as original use, and original use is one of the elements to qualify your property as a qualified Opportunity Zone business,” Krueger says.
https://www.globest.com/2020/05/27/a-carve-out-for-vacant-properties-in-ozs-allows-them-to-avoid-certain-requirements/
Alternative Metrics That Predict Which Cities Will Fare Best in the Pandemic
Commercial real estate investors are trying to stay ahead of the
pandemic with predictions about which sectors and which markets are best
positioned to withstand its negative impact. One common calculation to
find these resilient cities is to not only look at their economic
statistics but more importantly also cull health data and the impact of the stimulus.
But there are more ways to slice and dice the available data. New research from Nuveen Real Estate has ranked the top 50 cities and their expected performance through the end of 2020.
Its model found that cities with higher concentrations of industries such as technology, life sciences and telecommunications, as well as those that are less reliant on the energy sector and government employment appear poised for relative outperformance.
The five most highly-ranked MSAs in its analysis are San Jose, Nashville, Raleigh, Washington, DC and Salt Lake City.
In contrast, the five lowest-ranking are Detroit, Louisville, Buffalo, Oklahoma City and New Orleans.
As it came up with its rankings, Nuveen weighed alternative data that could be instructive for other real estate investors.
Clearly these sectors have all been severely hurt by the COVID-19 shutdowns and can expect to continue to see disruptions. High unemployment in these areas will negatively impact all real estate values across sectors, including housing, office and alternatives, as overall consumption and investment will be lower in these areas, Nuveen says.
Small businesses are at risk during the pandemic, as many operate in the lodging, retail and entertainment sectors and most are not well capitalized, according to Nuveen. “A prolonged economic shutdown of three months or more will cause many small businesses to close if not given financial assistance,” it said.
And despite the billions of dollars the federal government and the Fed has put in place for small business relief, there is no guarantee that lending will be given to all businesses in need, Nuveen said. “These programs could put major strains on the banking sector and could be undone by bureaucracy.” It notes that cities such as Miami, New York and New Orleans have a high proportion of small business employment, and will underperform if these programs do not succeed.
“The coronavirus pandemic will put a strain on state and local governments, particularly their fiscal budgets,” Nuveen wrote. “Given that state and local governments have to maintain balanced budgets, they will almost certainly lay off government employees in order to cut expenses and maintain fiscal solvency.”
State and local austerity measures can have a negative effect on the local economy, especially in areas where government employees make up a large portion of the workforce, it also noted. “Additionally, states and localities with weak fiscal health, especially those that rely on income and sales taxes from cyclical industries, will be more likely to incur large deficits during this pandemic.” Cities with weak fiscal health and higher dependence on government employment include Sacramento, San Diego, Inland Empire, New York and Chicago. These will likely see the most consequential fiscal impacts from the COVID-19 pandemic, Nuveen said.
https://www.globest.com/2020/05/27/alternative-metrics-that-predict-which-cities-will-fare-best-in-the-pandemic/
But there are more ways to slice and dice the available data. New research from Nuveen Real Estate has ranked the top 50 cities and their expected performance through the end of 2020.
Its model found that cities with higher concentrations of industries such as technology, life sciences and telecommunications, as well as those that are less reliant on the energy sector and government employment appear poised for relative outperformance.
The five most highly-ranked MSAs in its analysis are San Jose, Nashville, Raleigh, Washington, DC and Salt Lake City.
As it came up with its rankings, Nuveen weighed alternative data that could be instructive for other real estate investors.
High Employment Concentration in Certain Industries
One was the concentration of exposure to leisure and hospitality, retail, transportation and public utilities, and tourism and entertainment.Clearly these sectors have all been severely hurt by the COVID-19 shutdowns and can expect to continue to see disruptions. High unemployment in these areas will negatively impact all real estate values across sectors, including housing, office and alternatives, as overall consumption and investment will be lower in these areas, Nuveen says.
Many Small Businesses
Nuveen also found that cities with more small businesses could also be at risk.Small businesses are at risk during the pandemic, as many operate in the lodging, retail and entertainment sectors and most are not well capitalized, according to Nuveen. “A prolonged economic shutdown of three months or more will cause many small businesses to close if not given financial assistance,” it said.
And despite the billions of dollars the federal government and the Fed has put in place for small business relief, there is no guarantee that lending will be given to all businesses in need, Nuveen said. “These programs could put major strains on the banking sector and could be undone by bureaucracy.” It notes that cities such as Miami, New York and New Orleans have a high proportion of small business employment, and will underperform if these programs do not succeed.
Fiscal Problems
Nuveen’s model also determined that cities with fiscal problems and a reliance on government employment were also poised to suffer in the aftermath of the pandemic.“The coronavirus pandemic will put a strain on state and local governments, particularly their fiscal budgets,” Nuveen wrote. “Given that state and local governments have to maintain balanced budgets, they will almost certainly lay off government employees in order to cut expenses and maintain fiscal solvency.”
State and local austerity measures can have a negative effect on the local economy, especially in areas where government employees make up a large portion of the workforce, it also noted. “Additionally, states and localities with weak fiscal health, especially those that rely on income and sales taxes from cyclical industries, will be more likely to incur large deficits during this pandemic.” Cities with weak fiscal health and higher dependence on government employment include Sacramento, San Diego, Inland Empire, New York and Chicago. These will likely see the most consequential fiscal impacts from the COVID-19 pandemic, Nuveen said.
https://www.globest.com/2020/05/27/alternative-metrics-that-predict-which-cities-will-fare-best-in-the-pandemic/
Tuesday, May 26, 2020
Sale Leasebacks on the Rise As Owners Seek Cash
As the realities of COVID-19’s impact on the economy become
clearer, businesses are looking to strengthen their capital reserves for
immediate needs and other core activities.
A growing number of retailers, logistics firms and other corporate real estate users are selling their assets for an influx of cash. By using leasebacks, they are able to retain possession of their facilities.
“They lease the asset to a third-party buyer, then they lease that back under a traditional long-term triple-net operating lease,” says Jeff Berryhill, a principal at Stonemont Financial Group. “The objective is to be able to redeploy that capital for a higher and better use.”
Right now, there are a lot of places where these sellers can put that capital. “The question is, with all the other opportunities they have to deploy capital, whether that is to pay down debt, make acquisitions or invest in technology or people, should they also own that real estate?” Berryhill says. “So, I think the sale/leaseback transaction is getting a lot of interest in the market right now.”
The sale/leaseback financial arrangement may also be able to provide
the tenant with more favorable rent terms thanks to record-low interest
rates.
“I think all companies are being forced to think more strategically about their capital,” Berryhill says. “It’s easy to get complacent when it’s a good market. In times like these, you have to sit down and look at all the places you’re deploying capital and make decisions.”
Stonemont has been advising multiple retailers on potential transactions, particularly on distribution centers, and is currently under contract on at least one leaseback expected to close soon.
Recently, there have been several other leasebacks, including a $725 million sale of four distribution centers owned by Big Lots, a transaction in Texas involving a manufacturing facility for frozen pie maker SatisPie and a warehouse and distribution center in Chicago for a manufacturer.
“You see a lot of trades in the news,” Berryhill says.
Interested buyers run the gamut from private equity groups, institutional funds and even REITs, though stock prices have hurt their ability to make acquisitions.
“REITs are interested even though they’ve got issues of their own right now, given that their cost of capital is increasing and their stock prices have been beaten up,” Berryhill says. “They’ve traditionally been players in the space to the extent they have capital. They can still probably be competitive, but they have to go raise new capital today to make acquisitions.”
While due diligence on these leaseback sales is more challenging with the COVID-19 shutdowns, Berryhill says it is not impossible.
“It’s a little more cumbersome,” Berryhill says. “You have to give yourself a little bit more time, but we still had a lot of success getting vendors out to assets to do traditional due diligence reports.”
https://www.globest.com/2020/05/26/sale-leasebacks-on-the-rise-as-owners-seek-cash/
A growing number of retailers, logistics firms and other corporate real estate users are selling their assets for an influx of cash. By using leasebacks, they are able to retain possession of their facilities.
“They lease the asset to a third-party buyer, then they lease that back under a traditional long-term triple-net operating lease,” says Jeff Berryhill, a principal at Stonemont Financial Group. “The objective is to be able to redeploy that capital for a higher and better use.”
Right now, there are a lot of places where these sellers can put that capital. “The question is, with all the other opportunities they have to deploy capital, whether that is to pay down debt, make acquisitions or invest in technology or people, should they also own that real estate?” Berryhill says. “So, I think the sale/leaseback transaction is getting a lot of interest in the market right now.”
“I think all companies are being forced to think more strategically about their capital,” Berryhill says. “It’s easy to get complacent when it’s a good market. In times like these, you have to sit down and look at all the places you’re deploying capital and make decisions.”
Stonemont has been advising multiple retailers on potential transactions, particularly on distribution centers, and is currently under contract on at least one leaseback expected to close soon.
Recently, there have been several other leasebacks, including a $725 million sale of four distribution centers owned by Big Lots, a transaction in Texas involving a manufacturing facility for frozen pie maker SatisPie and a warehouse and distribution center in Chicago for a manufacturer.
“You see a lot of trades in the news,” Berryhill says.
Interested buyers run the gamut from private equity groups, institutional funds and even REITs, though stock prices have hurt their ability to make acquisitions.
“REITs are interested even though they’ve got issues of their own right now, given that their cost of capital is increasing and their stock prices have been beaten up,” Berryhill says. “They’ve traditionally been players in the space to the extent they have capital. They can still probably be competitive, but they have to go raise new capital today to make acquisitions.”
While due diligence on these leaseback sales is more challenging with the COVID-19 shutdowns, Berryhill says it is not impossible.
“It’s a little more cumbersome,” Berryhill says. “You have to give yourself a little bit more time, but we still had a lot of success getting vendors out to assets to do traditional due diligence reports.”
https://www.globest.com/2020/05/26/sale-leasebacks-on-the-rise-as-owners-seek-cash/
Friday, May 22, 2020
Homeowners in COVID-19 related forbearance rise to 9.0% of mortgages
As of May 19, 4.75M homeowners,
or 9.0% of all mortgages, are in COVID-19 mortgage forbearance plans,
according to Black Knight’s McDash Flash Forbearance Tracker.
Still active forbearance volumes rose only by 93K
during the past week, down 70% from the first week of May and down 93%
from the first week of April.
Of the 4.25M homeowners in forbearance at the end of April, almost half made April’s payment, while 54% didn’t.
As of May 19, only 21% in forbearance made May
payments, “which could lead to another sharp increase in the national
delinquency rate for May if those payments are not received before the
end of the month,” said Black Knight CEO Anthony Jabbour.
UPB of loans in forbearance adds up to $1.04T.
Estimated monthly principal and interest advances
on active forbearance plans is $5.8B, while estimated taxes and
insurance advances adds up to $2.1B, Black Knight says.
https://seekingalpha.com/news/3577153-homeowners-in-covidminus-19-forbearance-rise-to-9_0-of-mortgagesThursday, May 21, 2020
Chrysler Building is getting an observation deck
It’s the Chrysler Building’s time to shine.
The Art Deco skyscraper, built in 1928, is getting a brand-new observation deck.
The Landmarks Preservation Commission (LPC) unanimously approved building owner RFR Realty’s proposal for a glass-walled viewing platform that will be open to the public.
Alongside architecture firm Gensler, RFR presented renderings of the space and details of their plans on Tuesday at an LPC meeting held via Zoom.
The building, located at 405 Lexington Ave. between 42nd and 43rd streets, is 77 floors. The deck will be located on terraces that surround the 61st floor, just above the silver eagles that jut out from the tower at every corner.
There is no timeline for the opening. An RFR rep reached for comment late Wednesday night declined to comment. “We are not releasing information,” the spokesman wrote in an email.
RFR bought the famed building across the street from Grand Central Terminal in March of 2019 for $150 million — chump change, in skyscraper terms. (The previous majority owner, the Abu Dhabi Investment Council, paid $800 million for the Chrysler in 2008.)
“I see the building as a Sleeping Beauty: It needs to be woken up and revitalized,” RFR chief Aby Rosen told Page Six last year in an exclusive interview, hinting that he hoped to resurrect a version of the private party palace Cloud Club.
Rosen also said he wanted to bring back an observation deck; the last one, dubbed the Celestial, closed in 1945 after about 15 years in operation on the 71st floor. He’s also expressed interest in opening restaurants, retail and a food hall at the Chrysler.
During the LPC meeting Tuesday, RFR and Gensler outlined how the restoration and creation of the observation deck would add 8-foot-tall glass panels on the south and north terraces, modify existing doors to make them accessible to the public, and remove and replace existing windows.
To win support from the commissioners, RFR and Gensler took pains to show that the glass walls of the observation deck would be practically invisible from street level.
It’s all part of a return to the Chrysler’s glory days. The tower once had the rollicking Cloud Club on its 66th through 68th floors. It opened in 1930 as a prohibition-era speakeasy.
As The Post’s Steve Cuozzo describes in his history of the building, Cloud Club regulars included such moguls as E.F. Hutton, Pan Am founder Juan Trippe, publisher Condé Nast and Walter Chrysler himself.
Power lunches consisted of Dover sole, black-bean soup and “No. 18” pink grapefruit, which was “huge, huge, more than twice as big as any grapefruit in a supermarket,” according to a Florida agricultural official.
The Cloud Club shuttered in 1979.
But — presuming a post-pandemic city with public spaces that teem with energy once again — a new party atop the Chrysler Building may just be getting started.
https://nypost.com/2020/05/21/the-chrysler-building-is-getting-a-61st-floor-observation-deck/
The Art Deco skyscraper, built in 1928, is getting a brand-new observation deck.
The Landmarks Preservation Commission (LPC) unanimously approved building owner RFR Realty’s proposal for a glass-walled viewing platform that will be open to the public.
Alongside architecture firm Gensler, RFR presented renderings of the space and details of their plans on Tuesday at an LPC meeting held via Zoom.
The building, located at 405 Lexington Ave. between 42nd and 43rd streets, is 77 floors. The deck will be located on terraces that surround the 61st floor, just above the silver eagles that jut out from the tower at every corner.
There is no timeline for the opening. An RFR rep reached for comment late Wednesday night declined to comment. “We are not releasing information,” the spokesman wrote in an email.
RFR bought the famed building across the street from Grand Central Terminal in March of 2019 for $150 million — chump change, in skyscraper terms. (The previous majority owner, the Abu Dhabi Investment Council, paid $800 million for the Chrysler in 2008.)
“I see the building as a Sleeping Beauty: It needs to be woken up and revitalized,” RFR chief Aby Rosen told Page Six last year in an exclusive interview, hinting that he hoped to resurrect a version of the private party palace Cloud Club.
Rosen also said he wanted to bring back an observation deck; the last one, dubbed the Celestial, closed in 1945 after about 15 years in operation on the 71st floor. He’s also expressed interest in opening restaurants, retail and a food hall at the Chrysler.
During the LPC meeting Tuesday, RFR and Gensler outlined how the restoration and creation of the observation deck would add 8-foot-tall glass panels on the south and north terraces, modify existing doors to make them accessible to the public, and remove and replace existing windows.
To win support from the commissioners, RFR and Gensler took pains to show that the glass walls of the observation deck would be practically invisible from street level.
It’s all part of a return to the Chrysler’s glory days. The tower once had the rollicking Cloud Club on its 66th through 68th floors. It opened in 1930 as a prohibition-era speakeasy.
As The Post’s Steve Cuozzo describes in his history of the building, Cloud Club regulars included such moguls as E.F. Hutton, Pan Am founder Juan Trippe, publisher Condé Nast and Walter Chrysler himself.
Power lunches consisted of Dover sole, black-bean soup and “No. 18” pink grapefruit, which was “huge, huge, more than twice as big as any grapefruit in a supermarket,” according to a Florida agricultural official.
The Cloud Club shuttered in 1979.
But — presuming a post-pandemic city with public spaces that teem with energy once again — a new party atop the Chrysler Building may just be getting started.
https://nypost.com/2020/05/21/the-chrysler-building-is-getting-a-61st-floor-observation-deck/
Wednesday, May 20, 2020
Fannie, Freddie to need over $200B capital buffer under new plan
In preparation to free Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) from U.S. government control, their regulator is proposing that the mortgage giants be required to hold a capital buffer of hundreds of billions of dollars, a move that could affect mortgage interest rates.
The Federal Housing Finance Agency re-proposed a rule that outlines how much capital that would have to retain against their assets as fully private companies.
Based on their September 2019 asset totals, the companies would have to have a combined total of ~$240B, Bloomberg reports.
The new proposal preserves the mortgage risk-sensitive framework of the 2018 proposal, while increasing the quantity and quality of the Enterprises’ regulatory capital and reducing the pro-cyclicality of the aggregate capital requirements, according to the FHFA statement.
“We must chart a course for the Enterprises toward a sound capital footing so they can help all Americans in times of stress,” said FHFA Director Mark Calabria. “More capital means a stronger foundation on which to weather crises.”
Tuesday, May 19, 2020
Fannie, Freddie ease forbearance rule to allow new mortgages
Fannie Mae (OTCQB:FNMA +6.0%) and Freddie Mac (OTCQB:FMCC +6.8%) issue temporary guidance on
the eligibility of borrowers who are in forbearance, or have recently
ended their forbearance, to refinance or buy a new home.
The guidance allows borrowers to refinance or buy a
new home if they are current on their mortgage (i.e., in forbearance
but continued to make their mortgage payments or reinstated their
mortgage).
They’re also eligible to refinance or buy a new
home three months after their forbearance ends and they have made three
consecutive payments under their repayment plan, or payment deferral
option or loan modification.
“Homeowners who are in COVID-19 forbearance but
continue to make their mortgage payment will not be penalized,” said
Director Mark Calabria. “Today’s action allows homeowners to access
record low mortgage rates and keeps the mortgage market functioning as
efficiently as possible.”
The FHFA is also extending Fannie and Freddie’s
previously announced ability to purchase single-family mortgages in
forbearance. The GSEs are now able to buy forborne loans, with note
dates on or before June 30, 2020, as long as they are delivered to the
enterprises by Aug. 31, 2020 and where only one mortgage payment has
been missed.
The previous policy was set to expire on May 21, 2020.
https://seekingalpha.com/news/3576053-fannie-freddie-ease-forbearance-rule-to-allow-new-mortgagesMonday, May 18, 2020
Covid-19 Impact Survey Sees Short-Term Rentals Vital to Economic Recovery
New data released today from a nationwide survey
by Rent Responsibly, the Vacation Rental Management Association (VRMA),
and AirDNA highlights the importance of reopening short-term vacation
rental activity on the country’s economic recovery efforts.
“Just as short-term rentals play an important role in the economic health and diversity of many communities around the country, we believe reopening short-term rentals will go a long way in supporting our country’s economic recovery,” said Megan Cohen, Interim Executive Director of VRMA.
The report reflects the responses of more than 1,400 short-term rental owners, hosts and managers around the U.S. who are currently dealing with the unprecedented disruption brought on by the COVID-19 pandemic. Survey results confirm that short-term vacation rentals are extremely important to individuals, with a majority of survey respondents (88%) indicating they are dependent on the revenue. The survey also showed that we are running out of time to save many of these businesses, with 85% of managers having already reduced salaries and laying off or furloughing staff.
With 16.7% of all short-term vacation rentals in the U.S. located in the state of Florida, according to Key Data, VRMA and its members welcomed Governor Ron DeSantis’ announcement on Friday, May 15 that counties would be able to apply to reopen their rental activity.
“With thousands of homeowners and small businesses hanging in the balance, we want to thank Governor DeSantis and his staff for their engagement and for taking this important first step to open the vacation rental industry and restart the thriving small business economy in the great State of Florida,” said VRMA President Toby Babich.
Many Floridians whose businesses rely on short term rentals are looking forward to re-opening their properties to guests. Ashley Horsley, CEO of 360 Blue in Destin, says she has been “preparing to ensure that guests feel safe when they arrive at a home that I manage. We have taken apart and rebuilt nearly every process in our company to adapt to the safety and health concerns.”
In an effort to aid in the reopening process, VRMA recently released new cleaning and sanitation guidelines for professional short-term vacation rental managers similar to that issued by the U.S. Travel Association and Vrbo. These guidelines are part of the VRMA & VRHP SafeHome campaign, which empowers members to adopt and execute safe travel standards that conform to — and, in many cases, exceed — those that are mandated nationally, statewide or locally. The SafeHome initiative encourages all vacation rental management professionals to openly communicate with guests and employees about the precautions they are taking to help keep them safe and healthy.
“We are glad that our voice has been heard and that we are playing a role in ensuring that properties can once again welcome visitors and guests through our SafeHome campaign and we look forward to continuing to lead efforts to promote the highest health and safety standards within the travel industry,” added Babich.
https://www.marketscreener.com/news/COVID-19-Impact-Survey-Highlights-Short-Term-Rentals-Importance-to-Economic-Recovery-in-Florida–30629167/
“Just as short-term rentals play an important role in the economic health and diversity of many communities around the country, we believe reopening short-term rentals will go a long way in supporting our country’s economic recovery,” said Megan Cohen, Interim Executive Director of VRMA.
The report reflects the responses of more than 1,400 short-term rental owners, hosts and managers around the U.S. who are currently dealing with the unprecedented disruption brought on by the COVID-19 pandemic. Survey results confirm that short-term vacation rentals are extremely important to individuals, with a majority of survey respondents (88%) indicating they are dependent on the revenue. The survey also showed that we are running out of time to save many of these businesses, with 85% of managers having already reduced salaries and laying off or furloughing staff.
With 16.7% of all short-term vacation rentals in the U.S. located in the state of Florida, according to Key Data, VRMA and its members welcomed Governor Ron DeSantis’ announcement on Friday, May 15 that counties would be able to apply to reopen their rental activity.
“With thousands of homeowners and small businesses hanging in the balance, we want to thank Governor DeSantis and his staff for their engagement and for taking this important first step to open the vacation rental industry and restart the thriving small business economy in the great State of Florida,” said VRMA President Toby Babich.
Many Floridians whose businesses rely on short term rentals are looking forward to re-opening their properties to guests. Ashley Horsley, CEO of 360 Blue in Destin, says she has been “preparing to ensure that guests feel safe when they arrive at a home that I manage. We have taken apart and rebuilt nearly every process in our company to adapt to the safety and health concerns.”
In an effort to aid in the reopening process, VRMA recently released new cleaning and sanitation guidelines for professional short-term vacation rental managers similar to that issued by the U.S. Travel Association and Vrbo. These guidelines are part of the VRMA & VRHP SafeHome campaign, which empowers members to adopt and execute safe travel standards that conform to — and, in many cases, exceed — those that are mandated nationally, statewide or locally. The SafeHome initiative encourages all vacation rental management professionals to openly communicate with guests and employees about the precautions they are taking to help keep them safe and healthy.
“We are glad that our voice has been heard and that we are playing a role in ensuring that properties can once again welcome visitors and guests through our SafeHome campaign and we look forward to continuing to lead efforts to promote the highest health and safety standards within the travel industry,” added Babich.
https://www.marketscreener.com/news/COVID-19-Impact-Survey-Highlights-Short-Term-Rentals-Importance-to-Economic-Recovery-in-Florida–30629167/
WeWork’s valuation dropped to $2.9B
SoftBank (OTCPK:SFTBF, OTCPK:SFTBY) valued WeWork (WE) at $2.9B as of March 31, based on a discounted cash flow method.
WeWork’s private valuation rose as high as $47B before the failed IPO, which slashed the figure to $7.3B at the end of last year.
Last fall, SoftBank took 80% control of WeWork with a $5B bailout package following the failed IPO.
SoftBank later pulled out of a $3B tender offer, sparking a legal battle with a special committee of WeWork’s board.
Earlier today, SoftBank reported a record $18B annual loss for its Vision Fund with nearly $10B of the total coming from WeWork and Uber.
U.S. homebuilder confidence rises in May
Confidence among U.S. single-family homebuilders rose in May, potentially signaling that the worst of the economic downturn was probably over as the country gradually reopens after lockdowns to slow the spread of the novel coronavirus.
The National Association of Home Builders/Wells Fargo Housing Market Index rose seven points to 37 this month after a record plunge in April. The closure of nonessential businesses in mid-March to limit the spread of COVID-19, the respiratory illness caused by the virus, led to record job losses in April and a collapse in manufacturing output and retail sales.
Other indicators have also hinted at a rebound in housing activity, with mortgage applications rising in recent weeks. Still, homebuilder confidence remains low, suggesting the housing market recovery will be slow amid record unemployment.
“As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen,” said NAHB Chief Economist Robert Dietz. “However, high unemployment and supply-side challenges including builder loan access and building material availability are near-term limiting factors.”
The survey’s measure of current sales conditions rose six points to 42. Its gauge of sales expectations in the next six months jumped 10 points to 46. The prospective buyers index increased eight points to 21 this month.
Confidence increased among homebuilders in the Midwest, South and West, but fell in the Northeast.
Saturday, May 16, 2020
Florida governor eases ban on vacation rentals — but not for New Yorkers
Florida may be easing its ban on vacation rentals — but New Yorkers need not apply just yet.
Florida Governor Ron DeSantis is allowing counties to submit plans to reopen vacation rentals for short-term stays that were shuttered by a March 27 executive order to stop the spread of COVID-19.
But the welcome mat for the gradual reopening does not extend to vacationers from the Big Apple, the epicenter of the coronavirus pandemic in the US.
“If you tell me you’re going to rent them out to people from New York City, I’m probably not going to approve that, OK?” the governor said Friday, according to a report.
“If you’re saying that you’re going to rent it out to people in other parts of Florida or something that would be manageable, if there’s ways in there that clearly you have an eye to safety, then I’m fine.”
Starting Monday, counties can submit vacation-rental reopening plans to the Florida Department of Business and Professional Regulation for approval, DeSantis said at a Jacksonville press conference in which he outlined the first phase of reopening the state’s economy.
https://nypost.com/2020/05/16/florida-gov-eases-ban-on-vacation-rentals-but-not-for-new-yorkers/
Florida Governor Ron DeSantis is allowing counties to submit plans to reopen vacation rentals for short-term stays that were shuttered by a March 27 executive order to stop the spread of COVID-19.
But the welcome mat for the gradual reopening does not extend to vacationers from the Big Apple, the epicenter of the coronavirus pandemic in the US.
“If you tell me you’re going to rent them out to people from New York City, I’m probably not going to approve that, OK?” the governor said Friday, according to a report.
“If you’re saying that you’re going to rent it out to people in other parts of Florida or something that would be manageable, if there’s ways in there that clearly you have an eye to safety, then I’m fine.”
Starting Monday, counties can submit vacation-rental reopening plans to the Florida Department of Business and Professional Regulation for approval, DeSantis said at a Jacksonville press conference in which he outlined the first phase of reopening the state’s economy.
https://nypost.com/2020/05/16/florida-gov-eases-ban-on-vacation-rentals-but-not-for-new-yorkers/
Searches for ‘homes for sale’ rebound 54%
We know that apartment searches have rebounded, but now home searches have, too.
According to a study from LendingTree, Google searches for the term “homes for sale” have increased from their 2020 lows in each metro that was analyzed.
The average lowest search-interest value in 2020 for all 50 metros was about 56. By the end of April, that number grew by 54%, to 86.
“There are probably people who think there are going to be bargains in the marketplace,” LendingTree Chief Economist Tendayi Kapfidze said. “They might be anticipating that there will be fewer buyers competing because many people have had a disruption to their incomes or are uncertain about the outlook for their jobs. The low-interest rates also make it an attractive time.”
The metros that saw the largest increases in searches were Tucson, Arizona; Rochester, New York; and Jacksonville, Florida. These areas, on average, had search-interest values spike 126.57% from their 2020 lows, bringing their search-interest values up to 90, 81 and 100, respectively.
The smallest growth in searches was seen in Indianapolis, Louisville, Kentucky and Nashville, Tennessee. The popularity of the search term rose by 17.6% on average in those areas, with current search-interest values of 63, 65 and 78, respectively.
Month over month, Tucson, Arizona, New Orleans and Miami had the largest growth. Search-interest values in these metros grew an average of 84.46% from the end of March to the end of April, LendingTree said.
The smallest month-over-month gain was seen in Indianapolis, San Diego and Buffalo, New York. Coincidentally, Indianapolis is the only metro in this report to see a decline in search-interest values, as month over month search-interest value was down by 1.56%, from 64 to 63.
According to a study from LendingTree, Google searches for the term “homes for sale” have increased from their 2020 lows in each metro that was analyzed.
The average lowest search-interest value in 2020 for all 50 metros was about 56. By the end of April, that number grew by 54%, to 86.
“There are probably people who think there are going to be bargains in the marketplace,” LendingTree Chief Economist Tendayi Kapfidze said. “They might be anticipating that there will be fewer buyers competing because many people have had a disruption to their incomes or are uncertain about the outlook for their jobs. The low-interest rates also make it an attractive time.”
The metros that saw the largest increases in searches were Tucson, Arizona; Rochester, New York; and Jacksonville, Florida. These areas, on average, had search-interest values spike 126.57% from their 2020 lows, bringing their search-interest values up to 90, 81 and 100, respectively.
The smallest growth in searches was seen in Indianapolis, Louisville, Kentucky and Nashville, Tennessee. The popularity of the search term rose by 17.6% on average in those areas, with current search-interest values of 63, 65 and 78, respectively.
Month over month, Tucson, Arizona, New Orleans and Miami had the largest growth. Search-interest values in these metros grew an average of 84.46% from the end of March to the end of April, LendingTree said.
The smallest month-over-month gain was seen in Indianapolis, San Diego and Buffalo, New York. Coincidentally, Indianapolis is the only metro in this report to see a decline in search-interest values, as month over month search-interest value was down by 1.56%, from 64 to 63.
Searches for “homes for sale” rebound 54%
Friday, May 15, 2020
Low Income Housing Properties Have History of Riding Out Recession
The COVID-10 crisis is leading to economic uncertainty and it is
predicted will result in an economic recession. Yet, according to
studies, the low-income housing sector won’t be greatly affected and
will recover quicker than other real estate categories.
Skeptical? Let’s take a look at the historical data.
According to a recent report by Novogradac, a national accounting and consulting firm, occupancy rates and rental income at low-income housing tax credit properties recover quickly after economic downturns. Their survey, containing more than 1000,000 individual properties indicates that the national occupancy rates for two-bedroom LIHTC properties for residents at or below 60 percent of the area median income never dropped below 95 percent from 2009-2019 (the period studied). And starting in 2009 there was a gradual increase through 2019.
Additionally, rent receipts for LHITC two-bedroom apartments were not dramatically affected by the great recession either. In fact, in early 2008 the national rent for those unites increased by at least 1.5% nine times in 12 years.
What does this mean for managers of LIHC properties? It’s a sigh of relief and a hint of optimism rooted in historical data.
Novogradac’s data is echoed by the national nonprofit affordable housing organization Enterprise’s historical data which also shows an increase in median total revenue per unit for every year starting in 2005.
Why is the Great Recession an indicator for LIHTCs?
The reason is simple. History has shown that affordable rental housing becomes more important during a recession and if the Great Recession is an indicator, a majority of LIHTC properties will remain occupied and financially viable. Simply put after the dip there will be growth.
What does this mean and why does this matter?
It means, based on historical data, that low-income tenants living in units in LIHTC properties can retain their affordable housing units at restricted rents during times of economic slowdowns.
But there is still uncertainty playing out in the affordable housing financing space. Specifically, construction financing. Brian Eisendrath, vice chairman and managing director of CBRE, said in a recent webinar that although agencies have had a great deal of appetite and financing of these types of assets. These assets are often rented to tenants that don’t have significant cash reserves. “So, what we’re seeing is the delinquency rates during the Coronavirus and downturns have in general been higher for these assets.”
https://www.globest.com/2020/05/15/lihtc-properties-have-a-history-of-riding-out-a-recession/
Skeptical? Let’s take a look at the historical data.
According to a recent report by Novogradac, a national accounting and consulting firm, occupancy rates and rental income at low-income housing tax credit properties recover quickly after economic downturns. Their survey, containing more than 1000,000 individual properties indicates that the national occupancy rates for two-bedroom LIHTC properties for residents at or below 60 percent of the area median income never dropped below 95 percent from 2009-2019 (the period studied). And starting in 2009 there was a gradual increase through 2019.
Additionally, rent receipts for LHITC two-bedroom apartments were not dramatically affected by the great recession either. In fact, in early 2008 the national rent for those unites increased by at least 1.5% nine times in 12 years.
Novogradac’s data is echoed by the national nonprofit affordable housing organization Enterprise’s historical data which also shows an increase in median total revenue per unit for every year starting in 2005.
Why is the Great Recession an indicator for LIHTCs?
The reason is simple. History has shown that affordable rental housing becomes more important during a recession and if the Great Recession is an indicator, a majority of LIHTC properties will remain occupied and financially viable. Simply put after the dip there will be growth.
What does this mean and why does this matter?
It means, based on historical data, that low-income tenants living in units in LIHTC properties can retain their affordable housing units at restricted rents during times of economic slowdowns.
But there is still uncertainty playing out in the affordable housing financing space. Specifically, construction financing. Brian Eisendrath, vice chairman and managing director of CBRE, said in a recent webinar that although agencies have had a great deal of appetite and financing of these types of assets. These assets are often rented to tenants that don’t have significant cash reserves. “So, what we’re seeing is the delinquency rates during the Coronavirus and downturns have in general been higher for these assets.”
https://www.globest.com/2020/05/15/lihtc-properties-have-a-history-of-riding-out-a-recession/
Construction Finance Gets Harder to Secure Especially for Affordable Housing
The Bozzuto Group has a multifamily project coming up that could be
ready to break ground in the next 60 or 90 days, according to president
and CEO Toby Bozzuto. As it works to secure financing, “we have seen
the debt market be very, very reticent to do anything,” Bozzuto told
listeners in a recent CBRE webinar. “Candidly, I understand we’re all
trying to build a castle on quicksand. I mean, we’re trying to figure
out where the bottom is and I’m optimistic. I do think things are
getting better and will get better every single day, but there’s just
some uncertainty in the market right now.”
Unfortunately that uncertainty is also playing out in the affordable housing space, a market that has huge demand as well as strong interest on the part of developers.
A two by four doesn’t know if it’s in a luxury high rise or an affordable dwelling building, Bozzuto said. “So, as the construction market continues to rise, it is very, very difficult for any developer to provide quote unquote affordable housing unless it’s subsidized in one, one form or another. So, I see the future of this just even more complicated and murky because prices have just escalated now going straight since 2009 till today.”
Construction financing in general has gotten more difficult to secure, according to Brian Eisendrath, vice chairman and managing director of CBRE, who also participated in the webinar.
“The banks are the major provider of construction financing and
they’re still there actually to service their best clients. So, you can
still obtain construction financing. It just looks a little bit
different than it used to.”
Eisendrath said they want to focus on having moderate leverage and being able to exit the loan. And with uncertainty on lease-up and rental levels, leverage levels are declining and there are more hurdles in place post-closing from a performance perspective.
There have been changes with other lender categories as well, Eisendrath continued. For instance, the life insurance companies have the pick of the litter right now. “For example, deals that are in lease up, less appetite for that today, whereas two months ago there would have been a lot of bidding on a transaction like that on new construction class A.
Leverage is down a bit with the life companies, Eisendrath also said. “Maybe the old 60–65% is now 50–55% and the rates are up. They’ve instituted floors and the floors, they vary quite a bit, but they’re up in the plus or minus upper threes to 4% range.”
As for affordable housing finance specifically, Eisendrath pointed out that the agencies have had a great deal of appetite and financing these types of assets and will continue to do so. “At the same time, these assets are often rented to tenants that don’t have significant cash reserves. So, what we’re seeing is the delinquency rates during the Coronavirus and downturns have in general been higher for these assets.”
https://www.globest.com/2020/05/15/construction-finance-gets-harder-to-secure-especially-for-affordable-housing/
Unfortunately that uncertainty is also playing out in the affordable housing space, a market that has huge demand as well as strong interest on the part of developers.
A two by four doesn’t know if it’s in a luxury high rise or an affordable dwelling building, Bozzuto said. “So, as the construction market continues to rise, it is very, very difficult for any developer to provide quote unquote affordable housing unless it’s subsidized in one, one form or another. So, I see the future of this just even more complicated and murky because prices have just escalated now going straight since 2009 till today.”
Construction financing in general has gotten more difficult to secure, according to Brian Eisendrath, vice chairman and managing director of CBRE, who also participated in the webinar.
Eisendrath said they want to focus on having moderate leverage and being able to exit the loan. And with uncertainty on lease-up and rental levels, leverage levels are declining and there are more hurdles in place post-closing from a performance perspective.
There have been changes with other lender categories as well, Eisendrath continued. For instance, the life insurance companies have the pick of the litter right now. “For example, deals that are in lease up, less appetite for that today, whereas two months ago there would have been a lot of bidding on a transaction like that on new construction class A.
Leverage is down a bit with the life companies, Eisendrath also said. “Maybe the old 60–65% is now 50–55% and the rates are up. They’ve instituted floors and the floors, they vary quite a bit, but they’re up in the plus or minus upper threes to 4% range.”
As for affordable housing finance specifically, Eisendrath pointed out that the agencies have had a great deal of appetite and financing these types of assets and will continue to do so. “At the same time, these assets are often rented to tenants that don’t have significant cash reserves. So, what we’re seeing is the delinquency rates during the Coronavirus and downturns have in general been higher for these assets.”
https://www.globest.com/2020/05/15/construction-finance-gets-harder-to-secure-especially-for-affordable-housing/
Thursday, May 14, 2020
IKEA’s shopping malls arm Ingka Centres plans U.S. entry in major play
IKEA’s shopping malls business, one of the world’s biggest, is looking to enter the United States in the next couple of years and is in talks to snap up central properties in major cities, its boss told Reuters.
Gerard Groener, managing director of Ingka Centres, which has 45 shopping centres in Europe, Russia and China, said his company was in several negotiations for inner-city real estate.
New York, Los Angeles, San Francisco and Chicago locations are high on its wish list, he added.
It may appear an unlikely time to be planning expansion, as COVID-19 lockdowns in North America, Europe and elsewhere have deeply depressed the retail market, with little certainty about how and when consumer demand will rebound.
However the pandemic also presents opportunities in the squeezed commercial real estate market.
“We are in a very active search. Maybe it’s a good time to buy now. I’d say it’s more a buyers’ market than a sellers’ market currently in the U.S.,” Groener said in an interview.
“So hopefully we can be successful now, with the timing.”
In the United States, Ingka Centres would be taking on mall giants such as Simon Property Group (SPG.N), General Growth Properties (BPY.O) and Westfield (URW.AS).
Groener said that, in all, Ingka Centres was looking to enter 45 large cities across all its existing markets and the United States, alongside IKEA stores.
To that end the company is in talks, which are at various stages, to buy properties such as old post offices, department stores or existing malls to convert, he added.
In January, it made its first-ever acquisition of an existing mall location, that of Kings Mall in London, which Groener said would hopefully open in April 2021.
The company had overall tenant sales of 6.7 billion euros ($7.2 bln) last year, with big tenants include Inditex’s (ITX.MC) Zara, H&M (HMb.ST), Fast Retailing’s (9983.T) Uniqlo and Auchan.
Over the past month 15 of 38 centres closed due to the pandemic have gradually reopened, starting in China last month, with shoppers returning quickly in most locations.
Groener said that in China, footfall at its Beijing and Wuxi centres in April was at 67% and 81% respectively of the levels seen a year earlier. In Wuhan, the epicentre of the outbreak, visitor rates were slower to pick up.
He added there were little change to vacancy rates compared with before the crisis when Chinese centres had waiting lists and vacancy rates in Europe were around 4%.
Where closures have been called upon by authorities in various countries, Ingka Centres has relieved all tenants from paying rent altogether. In the subsequent restart phase, some tenants have negotiated temporary rent reductions, he said.
Centres in Russia, Italy, Portugal, Spain, Britain and Slovakia remain temporarily closed. In Russia, he said, the plan was to reopen gradually from May 15, starting in St Petersburg.
Ingka Centres’ move into city locations comes alongside furniture giant IKEA’s strategy shift towards smaller albeit more accessible inner-city stores with more digital and other services.
Along with its rivals, Ingka Centres has also increased the share of restaurants and entertainment at its centres in recent years to adapt to consumers’ online shift and a tougher retail landscape.
“We plan to build mixed-use facilities that we call meeting places and that have a wide range of facilities and services,” Groener said, adding activities could range from healthcare and education to festivals and events, besides retail and food.
One of the China projects underway will be a first to include adjacent residential and office space. The site is due to open in April 2020, Groener said, after its construction was delayed a few months due to the pandemic.
Groener said a loyalty scheme app in China launched in 2017 and connected to social media WeChat, sporting services such as virtual reality centre navigation, online restaurant queuing and cinema ticket purchases, now had 1.5 million members.
Boosting a more basic loyalty scheme in Russia to similar levels would be the main digital investment this year, he said.
https://www.reuters.com/article/us-ikea-ingka-centres-exclusive/exclusive-ikeas-shopping-malls-arm-ingka-centres-plans-u-s-entry-in-major-play-idUSKBN22Q2MF?il=0
New York, Los Angeles, San Francisco and Chicago locations are high on its wish list, he added.
It may appear an unlikely time to be planning expansion, as COVID-19 lockdowns in North America, Europe and elsewhere have deeply depressed the retail market, with little certainty about how and when consumer demand will rebound.
However the pandemic also presents opportunities in the squeezed commercial real estate market.
“We are in a very active search. Maybe it’s a good time to buy now. I’d say it’s more a buyers’ market than a sellers’ market currently in the U.S.,” Groener said in an interview.
In the United States, Ingka Centres would be taking on mall giants such as Simon Property Group (SPG.N), General Growth Properties (BPY.O) and Westfield (URW.AS).
Groener said that, in all, Ingka Centres was looking to enter 45 large cities across all its existing markets and the United States, alongside IKEA stores.
To that end the company is in talks, which are at various stages, to buy properties such as old post offices, department stores or existing malls to convert, he added.
CHINA BOUNCING BACK
Ingka Centres is a division of Ingka Group, which owns most IKEA furniture stores world-wide. Its centres, all anchored by an IKEA store, operate under brands such as MEGA in biggest market Russia and LIVAT in China.The company had overall tenant sales of 6.7 billion euros ($7.2 bln) last year, with big tenants include Inditex’s (ITX.MC) Zara, H&M (HMb.ST), Fast Retailing’s (9983.T) Uniqlo and Auchan.
Over the past month 15 of 38 centres closed due to the pandemic have gradually reopened, starting in China last month, with shoppers returning quickly in most locations.
Groener said that in China, footfall at its Beijing and Wuxi centres in April was at 67% and 81% respectively of the levels seen a year earlier. In Wuhan, the epicentre of the outbreak, visitor rates were slower to pick up.
He added there were little change to vacancy rates compared with before the crisis when Chinese centres had waiting lists and vacancy rates in Europe were around 4%.
Where closures have been called upon by authorities in various countries, Ingka Centres has relieved all tenants from paying rent altogether. In the subsequent restart phase, some tenants have negotiated temporary rent reductions, he said.
Centres in Russia, Italy, Portugal, Spain, Britain and Slovakia remain temporarily closed. In Russia, he said, the plan was to reopen gradually from May 15, starting in St Petersburg.
DIGITAL INVESTMENT
Ingka Centres, which had a leasable area of 4 million square-metres globally and 480 million individual visits in the year through August 2019, is working on three new out-of-town centres in China, and two in India. However it has no plans for more new out-of-town sites at present, Groener said.Ingka Centres’ move into city locations comes alongside furniture giant IKEA’s strategy shift towards smaller albeit more accessible inner-city stores with more digital and other services.
Along with its rivals, Ingka Centres has also increased the share of restaurants and entertainment at its centres in recent years to adapt to consumers’ online shift and a tougher retail landscape.
“We plan to build mixed-use facilities that we call meeting places and that have a wide range of facilities and services,” Groener said, adding activities could range from healthcare and education to festivals and events, besides retail and food.
One of the China projects underway will be a first to include adjacent residential and office space. The site is due to open in April 2020, Groener said, after its construction was delayed a few months due to the pandemic.
Groener said a loyalty scheme app in China launched in 2017 and connected to social media WeChat, sporting services such as virtual reality centre navigation, online restaurant queuing and cinema ticket purchases, now had 1.5 million members.
https://www.reuters.com/article/us-ikea-ingka-centres-exclusive/exclusive-ikeas-shopping-malls-arm-ingka-centres-plans-u-s-entry-in-major-play-idUSKBN22Q2MF?il=0
Wednesday, May 13, 2020
Freddie Mac and Fannie Mae to allow 12 months mortgage payment deferral
The Freddie Mac (OTCQB:FMCC) COVID-19 Payment Deferral solution
returns a homeowner’s monthly mortgage payments to its pre-COVID amount
by adding up to 12 months of missed payments, including escrow
advances, to the end of the mortgage terms without accruing any
additional interest or late fees.
This will help borrowers keep their mortgage
payment current following their hardship when other options — such as
reinstatement, or a repayment plan — are not viable, Freddie said.
The COVID-19 Payment Deferral solution is
effective July 1, 2020, at which time servicers must begin evaluating
homeowners with resolved COVID-19 related hardships for eligibility.
Loan servicers will reach out about 30 days before
the initial forbearance plan is scheduled to end to determine which
Freddie Mac assistance program is best or if additional forbearance is
needed.
https://seekingalpha.com/news/3574126-freddie-mac-and-fannie-mae-to-allow-12-months-mortgage-payment-deferralMonday, May 11, 2020
80% of Apartment Renters Paid Rent in First Week of May
The National Multifamily Housing Council’s Rent Payment Tracker
found that more people made a full or partial rent payment in the first
six days of May compared to the same period in April, despite the
ongoing economic hardships related to coronavirus.
By May 6, 80.2% of apartment households had paid at least some rent, according to the NMHC’s survey of 11.4 million professionally managed apartment units across the United States.
That’s 1.5 percentage points lower than the share who paid rent in the first six days of May 2019, and just over two percentage points higher than the share who paid in the first six days of April 2020.
NMHC President Doug Bibby said he expects the payment rate to
continue to rise during the rest of May as financial assistance reaches
renters’ bank accounts.
NMHC is calling on Congress to provide $100 million in direct renter assistance in its next pandemic relief package, Bibby said, warning that the pandemic has strained many renters’ finances.
“We are in uncharted waters and will be watching this closely over the course of the month as millions of households will not be able to access unemployment benefits, and those who have may find that they are not enough to cover rent plus all the other financial pressures caused by this crisis,” Bibby said. “Those benefits will also likely fall short in high-cost areas.”
While many building owners have suspended evictions, waived late fees and otherwise moved to help renters stay in their apartments, government assistance is needed, said David Schwartz, chairman of NMHC and chairman and CEO of the Chicago-based real estate investment and property management company Waterton.
Bibby said apartment owners have $1.6 trillion in outstanding mortgage debt, and a rent gap could lead to a “cascading effect.”
“If they can’t cover their debt, we might see a wave of multifamily foreclosures that could rival the single-family foreclosures that occurred during the Great Recession,” he said.
The NMHC survey includes a variety of market-rate properties around the country. The pandemic may have caused some technical issues with historical comparisons in places where shelter-in-place orders closed offices or otherwise delayed payment processing.
The tracker is powered by Entrata, MRI Software, RealPage, ResMan and Yardi.
https://www.globest.com/2020/05/11/80-of-apartment-renters-paid-rent-in-first-week-of-may
By May 6, 80.2% of apartment households had paid at least some rent, according to the NMHC’s survey of 11.4 million professionally managed apartment units across the United States.
That’s 1.5 percentage points lower than the share who paid rent in the first six days of May 2019, and just over two percentage points higher than the share who paid in the first six days of April 2020.
NMHC is calling on Congress to provide $100 million in direct renter assistance in its next pandemic relief package, Bibby said, warning that the pandemic has strained many renters’ finances.
“We are in uncharted waters and will be watching this closely over the course of the month as millions of households will not be able to access unemployment benefits, and those who have may find that they are not enough to cover rent plus all the other financial pressures caused by this crisis,” Bibby said. “Those benefits will also likely fall short in high-cost areas.”
While many building owners have suspended evictions, waived late fees and otherwise moved to help renters stay in their apartments, government assistance is needed, said David Schwartz, chairman of NMHC and chairman and CEO of the Chicago-based real estate investment and property management company Waterton.
Bibby said apartment owners have $1.6 trillion in outstanding mortgage debt, and a rent gap could lead to a “cascading effect.”
“If they can’t cover their debt, we might see a wave of multifamily foreclosures that could rival the single-family foreclosures that occurred during the Great Recession,” he said.
The NMHC survey includes a variety of market-rate properties around the country. The pandemic may have caused some technical issues with historical comparisons in places where shelter-in-place orders closed offices or otherwise delayed payment processing.
The tracker is powered by Entrata, MRI Software, RealPage, ResMan and Yardi.
https://www.globest.com/2020/05/11/80-of-apartment-renters-paid-rent-in-first-week-of-may
Sunday, May 10, 2020
The Waldorf Astoria’s big gamble
At a launch event
for the refurbished Waldorf Astoria in early March, Douglas Elliman
sales director Dan Tubb stood in front of a wall of screens flickering
with black-and-white photographs of the hotel’s famous guests.
Marilyn Monroe, Winston Churchill and
John F. Kennedy — all of them were part of the landmark’s storied
history. Now, Tubb said, buyers could have their own piece of that
legacy.
But outside the Park Avenue hotel, which
is offering 375 residential condos for sale on the upper floors, a
public health crisis was beginning to unfurl. The coronavirus had
wreaked havoc in China and spread across the world, overwhelming health
care systems and killing thousands. Within weeks, the number of cases in
New York had surged, shutting down schools and confining millions of
people to their homes.
The Waldorf’s highly anticipated sales launch
— already challenged by the luxury market’s oversupply problem and the
state’s new mansion tax — was plunged into unpredictable territory.
“It’s kind of unfortunate that they
opened when they did,” said Donna Olshan of the boutique residential
brokerage Olshan Realty. “It would have been better had they not gone to
the market.”
By March 16, the project’s sales gallery was shut down.
“In consultation with each of our
respected developer clients, we have decided to promote social
distancing by physically closing,” a spokesperson for Douglas Elliman
said, adding that virtual tours are now available.
Two days later, Andrew Miller, CEO of
Dajia US, the Waldorf’s primary sponsor since last year, defended the
timing. “Market and buyer enthusiasm for the project is incredibly high,
yet we know and respect that people are likely focused on global events
at the moment,” he said, noting that sales had launched to the
brokerage community in late February.
As the fast-spreading coronavirus batters the city’s already weak luxury market, it’s unclear if the Waldorf will emerge unscathed.
Olshan noted that the condominium-hotel
hybrid was far from alone in its vulnerability to the pandemic. “Every
property will be hit now,” she said. “No property is going to escape.”
With an opening slated for 2022, many in
the industry are optimistic about the building’s chances. Some 75 units
have been released for sale at prices ranging from $1.7 million for a
studio to $18 million for a four-bedroom.
“Assuming the world gets back to normal
sometime in the near future, I think the Waldorf will do very well,”
said Nancy Packes, who tracks condo sales and believes the available
units are reasonably priced. “The building itself is spectacular.”
Confidence in crisis
Before the pandemic, the Waldorf was facing another big hurdle: a glut of luxury inventory.
Large condominiums filled with unsold
units reflect the challenges in today’s market: Foreign buyers are
harder to come by, deals take longer, and discounts are the new normal.
Experts predict the city’s unsold inventory will take up to 10 years to
sell.
But Dajia’s Miller said he is confident
foreign and domestic buyers will embrace what the Waldorf is offering,
despite the conditions.
“I think a lot of people have been
waiting for something that inspires the urgency to buy now,” he said.
“Something that feels unique and irreplaceable, and fundamentally
special.”
Dajia was established by the Chinese
government in 2019 to handle the assets of the original developer,
Anbang Insurance Group, which had been taken over
by regulators in 2018. Known for its aggressive track record of foreign
investment, Anbang had paid $1.95 billion for the Waldorf in 2015 and
poured $1 billion into renovations.
The hotel portion of the building will
include 375 rooms operated by Hilton. Above them, the residential units
will be sweetened by access to 50,000 square feet of private amenities,
including a spa, a 25-meter pool, a game room, an enclosed “winter
garden” and four private bars.
Miller said the Waldorf’s sales team is
available seven days a week for virtual showings. Like its peers across
the city, it has had to adapt to an entirely new way of doing business —
and fast. Contract activity at the Waldorf is unclear, though Miller
reports getting thousands of inquiries from all over the world.
“Given the international renown of
Waldorf Astoria New York, we have already completed virtual appointments
for international buyers who have purchased sight unseen,” he said.
Banking on legacy
The Waldorf famously started life as two Fifth Avenue
hotels — owned by feuding relatives — which were later joined together.
It was sold to developers of the Empire State Building in 1929 and
demolished. The second iteration, which occupies a full block between
East 49th and East 50th streets, was the world’s largest hotel when it
was built in 1931.
A beacon of opulence, the Waldorf over
the years earned a reputation for drawing dignitaries and celebrities
including Frank Sinatra, Sophia Loren and Elizabeth Taylor. While units
were not for sale, the hotel rooms were treated as long-term residences
for many guests, including Monroe, who moved into a suite in 1955, about
the same time that her romance with the playwright Arthur Miller began,
and former President Herbert Hoover, who lived there for some three
decades.
After Anbang purchased the building, it brought on the architecture firm Skidmore, Owings & Merrill to work on the overhaul, which has been underway since 2017.
Given the hotel’s decorated heritage, the
work has been a balancing act between honoring the building’s original
Art Deco design and bringing in modern touches.
“This is both an exterior landmark and an
interior landmark — two distinct designations in New York, so it’s the
highest degree of difficulty,” said Skidmore’s Frank Mahan, who noted
that his team worked closely with the Landmarks Preservation Commission
on the project.
A separate entrance will be created for
residents, to separate them from hotel traffic. “The Spirit of
Achievement,” a winged statue by Icelandic artist Nina Saemundsson
installed above the entrance when the hotel opened 89 years ago, has
been brought indoors while work is ongoing but will eventually return to
its original location.
Waldorf team members hope to create the
impression that the building is accessible to a wide swath of buyers —
setting it apart from luxury towers where the barrier to entry is
several million dollars — though they acknowledge the Waldorf’s price
points are still inaccessible for most.
Inside the model two-bedroom — a
relatively modest offering compared to some of the larger units —
soundproofing insulates the space from the usual city drone, and the
room’s color palette is mostly muted: polished marble countertops, gray
couches and bronze detailing. Interior designer Jean-Louis Deniot said
the restrained atmosphere was intentional.
“It doesn’t have really a predefined
style apart from the fact that, yes, it’s to remind you that you are
part of the Waldorf Astoria,” he said.
In the bathroom, tiles feature a Waldorf-patterned motif.
“Everything in the apartments in the
Waldorf Astoria is very bespoke,” said Tubb, who left Corcoran Sunshine
last August to market sales at the building for Elliman. “You’re not
going to go out and find something on the shelf somewhere else. It’s all
custom.”
Weathering turbulence
Anbang has been through an upheaval since its record-breaking deal to buy the storied hotel.
In February 2018, it was seized by the Chinese government as part of a crackdown on companies
spending heavily on foreign assets. Three months later, Anbang’s chair,
Wu Xiaohui, was sentenced to 18 years in prison for defrauding
investors.
After regulators took over the firm, it
was dismantled, and several of its foreign assets were sold. Those
remaining were taken over by Dajia.
The developer’s gamble is not only that
it can draw buyers to the iconic building, but that it can re-create the
glory of the hotel. At the moment, though, the industry is in survival
mode, struggling to navigate the swift and brutal economic fallout of
the coronavirus pandemic. At some establishments in the city, occupancy
reportedly dropped as low as 15 percent, and at least one — Ian
Schrager’s Public on the Lower East Side — shut its doors. The long-term
effects remain unknown.
“For the near term, hotel occupancy will
be decidedly lower than before the pandemic started, and as for many
businesses it may be as long as two years before ‘business as usual’ is
conducted here and around the world,” said Barry LePatner, founder of
construction law firm LePatner & Associates.
There were also some positive signs in
the sales market, early on. Between March 9 and March 22, there were 35
contracts above $4 million signed in Manhattan, according to market
reports by Olshan Realty. But halfway through that period, in-person
showings were prohibited by the state, and contracts dropped as low as
two in the week ending March 29.
At the Waldorf, with so many units to
move, the redevelopment was always going to be risky. But Stephen
Kliegerman, president of Halstead Development Marketing, said big
projects typically plan for longer sellouts and a degree of
unpredictability.
With that, come pitfalls.
“Large-scale projects become very
difficult to plan out over time because you may be going through
shifting economies and shifting marketplaces,” Kliegerman said.
In late February, Dajia’s two-year period
of regulatory control ended, but the company is still looking to
offload foreign assets. Since the outbreak of the coronavirus, at least
one deal — to sell a $5.8 billion portfolio of U.S. hotels — has been thrown into peril, according to Bloomberg.
Miller declined to comment on the report
but said there were no plans to sell the Waldorf. “I’m pleased — and
occasionally a bit surprised — that that never came up as a real
option,” he said.
“Everyone at Anbang and at the regulatory
commission and now Dajia understood that the Waldorf Astoria is
something unique and special,” Miller explained. “Having embarked upon
this journey to restore and reimagine the building, it was an obligation
of everyone to see it through.”
https://therealdeal.com/issues_articles/the-waldorf-astorias-big-gamble/Will insurers cover coronavirus-related business losses? We may soon find out
A business insurer’s position that it isn’t required to cover coronavirus-related losses is set to face a legal litmus test.
A Las Vegas-based company with a CNA Financial’s subsidiary’s policy
filed a class-action lawsuit against the company in a Chicago federal
court on Monday, according to Crain’s.
The company, Vegas Image, owns a distributor of gambling-themed candy
and toys. The company argues that its policy doesn’t explicitly rule
out losses “from the spread of viruses.”
Conversely, CNA Financial CEO Dino Robusto claimed on Monday that all the company’s policies “have exclusion barring coverage for viruses.”
“Our property policy exclusionary language does not provide coverage for COVID-19, and as such we never collect a premium for it,” he said during a conference call.
Vegas Image wants the court to order CNA to cover losses for all parties that hold its same policy. The outcome could have wider implications for other insurers and policyholders.
Some insurance policies explicitly cover events like coronavirus. Many insurers began excluding pandemic and disease coverage following the SARS epidemic of the 2000s, when many paid millions out in claims.
https://therealdeal.com/2020/05/09/will-insurers-cover-coronavirus-related-business-losses-we-may-soon-find-out/
Conversely, CNA Financial CEO Dino Robusto claimed on Monday that all the company’s policies “have exclusion barring coverage for viruses.”
“Our property policy exclusionary language does not provide coverage for COVID-19, and as such we never collect a premium for it,” he said during a conference call.
Vegas Image wants the court to order CNA to cover losses for all parties that hold its same policy. The outcome could have wider implications for other insurers and policyholders.
Some insurance policies explicitly cover events like coronavirus. Many insurers began excluding pandemic and disease coverage following the SARS epidemic of the 2000s, when many paid millions out in claims.
https://therealdeal.com/2020/05/09/will-insurers-cover-coronavirus-related-business-losses-we-may-soon-find-out/
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