Financial Pressures Drove Pandemic-Linked Migration, May Not Be Permanent

 One common narrative about the changing migration patterns of the last year is that fear of the coronavirus and new remote work models led people to move to greener vistas. However, a new survey from the Pew Research Center shows that financial stress drove most decisions to relocate, especially as the pandemic wore on.

In November, a third of respondents in the Pew survey said that financial reasons motivated their decision to move. Among this group, 17% of respondents cited job loss as the financial pain point, while 15% said that the financial pain point was something other than job loss. This is a significant increase from June when only 18% of respondents cited financial pressures as the reason for their move.

The trend was even more notable among those who moved with another adult. When isolating for this category, 36% of people who moved with another person cited financial reasons as the main motivator to move. This suggests that families faced more significant affordability challenges during the pandemic than single adults.

A high risk of contracting the coronavirus and moving to be closer to a family member also topped the list as reasons why some people decided to move, 14% and 17% respectively. College students moving due to campus closures was also among the most common reasons for migration to a new market, according to the survey.

Most migrants seem to be renting for the short term. In the survey, 14% of respondents said that they rented a home for the short-term, and 16% said that they rented a new home “for this period,” implying that they would reconsider the move following the end of the pandemic. Only 16% of respondents said they rented a new home on a long-term basis.

But the definition of long-term versus short-term is becoming blurred as we approach the year-mark of the pandemic. At this point, most migrants have not returned to their previous market, according to the survey. The research also shows that people are getting comfortable in their new market. According to Pew, 69% of respondents said they reside in a different home than where they lived initially when they moved. Of those surveyed, 40% are in a different community and 29% are living in the same community where they lived before but in a different home.

This trend isn’t new. Many people began migrating out of major metropolitan markets due to financial concerns prior to the pandemic. The events of 2020 only accelerated those migration patterns, and the sunbelt has been the favored region for movers.

https://www.globest.com/2021/02/08/financial-pressures-drove-pandemic-related-migration-and-it-may-not-be-permanent/

Single-Family Rentals Draw Apartment, Other Developers

 With single-family rentals outperforming multifamily in many cases, builders in other sectors are starting to take notice.

”The buzzword right now is build-for-rent,” says Michael Carey, senior director at Altus Group. “Companies are building out whole communities of build-for-rent [housing]. You’re seeing a lot of money pouring into that space.”

Ken Valach, CEO of Trammell Crow Residential, says his company has bought a site to build single-family rentals. “We’ve actually bought a site, but we haven’t started it yet,” Valach says.

Carey is taking note of apartment builders coming into the SFR space—something that wouldn’t have happened a decade ago. “We’re seeing a few apartment builders dip their toes in the market,” Carey says. “That makes sense with the shift from multifamily to single-family [during the pandemic].”

In the past, moving to the SFR space might not have made sense to organizations with professional management platforms.

“The technology wasn’t there,” Carey says. “They didn’t have the management systems down. It was too unwieldy to manage, but that’s not the case anymore.”

Many institutional investors are also partnering up with home builders to produce these single-family rental communities. Last month, as one example, Bloomberg reported that Lennar Corp. was seeking to raise $2 billion to develop thousands of single-family rental homes, citing unnamed sources.

“The home builders look at this as, ‘Hey, I have security here,’” Carey says. “They can sell all of the homes at one time, not one at a time. It takes that risk out of the timeframe as well. It compresses it for them.”

Sometimes, builders are also working on sites that don’t necessarily work for for-sale homes. These sites may be further out of a large metro where it is easier to buy land.

“It [rental underwriting] works in a lot of markets where land is cheap,” Carey says. “You keep hearing about a market like Phoenix. It is cheap there. In Jacksonville, Charlotte and some of these other prime markets, the land is still relatively cheap.”

In higher-priced markets, it’s harder to find land that works for single-family rentals.

“They’re not going to do this [buy land for rentals] in higher-priced markets,” Carey says. “What you’re seeing is that when you do scattered purchases, you can select your site relatively easily. So you can buy one at a time. You can get in that zip code and that school district that you want.”

In some cases, people are building rent detached homes in these closer-in suburbs. “Then you also see new construction of scattered homes,” Carey says. “So it’s really evolving.”

Valach says there are questions about the level of amenities to include in these SFR communities. While some developers would blow it out with apartment-style amenities, he thinks the basics, like a community pool and green space, might be enough.

“People aren’t looking for the fitness center,” Valach says. “They’re going to have their Peloton in their house.”

Renovations aren’t dead either. Even if single-family rental companies aren’t building new, some are refurbishing the homes they buy. Even if the home isn’t new, it feels new.

“They fix these homes up, and they maintain them very well,” Carey says. “There used to be this negative connotation with an SFR. We’re not seeing that anymore.”

https://www.globest.com/2021/02/05/single-family-rentals-draw-apartment-single-family-developers/

Thor Equities nabs financing for Amazon warehouse in Brooklyn

 Joe Sitt’s Thor Equities is one step closer to bringing Amazon to Brooklyn’s Red Hook neighborhood.

Thor Equities nabbed $76 million construction financing and a $155 million joint venture equity recapitalization for its warehouse property at 280 Richards Street, according to the Commercial Observer. The warehouse is 100 percent pre-leased to Amazon.

Funds managed by Apollo Global Management provided the seven-year construction loan. The joint venture equity recapitalization was provided by a foreign entity, according to the Observer.

The e-commerce giant signed a 20-year deal with Thor last year for 311,796 square feet.

Thor initially planned to build a 800,000-square-foot office development at the site. Known as “Red Hoek Point,” for the name Roode Hoek given the area by the Dutch who settled there in 1636, the project was pegged to include retail and a waterfront esplanade. But in 2019, the developer dropped that plan in favor of turning the property into a last-mile warehouse.

That might have been a wise move, given that the neighborhood’s City Council member, Carlos Menchaca, killed a similar rezoning bid by Industry City the following year.

Prior to the pandemic, New York-based Thor was in the process of shifting its core business from retail to industrial. In 2019, Sitt’s firm started a new business, ThorLogis, to purchase and develop logistics properties.

Amazon is expanding rapidly in New York as demand for e-commerce has exploded in recent years. Last year, the tech company signed a 975,000-square-foot warehouse lease at the Matrix Global Logistics Park in Staten Island.

https://therealdeal.com/2021/02/02/thor-equities-nabs-financing-for-amazon-warehouse-in-red-hook/

COVID-19 has pummeled already-stressed NYCHA

 The Citizens Budget Commission, a respected fiscal watchdog group, is out with a new report looking at how the pandemic has slammed the New York City Housing Authority. The public-housing agency, the city’s largest landlord, has been in crisis for years now, and COVID hasn’t helped.

First, the outbreak gave another shock to NYCHA’s tenuous fiscal situation. Pre-pandemic, the agency expected to end 2020 with a $91 million surplus — cash to hire more staff to close its work-order backlog, catch up on deferred maintenance and proceed with its court-ordered reorganization. But collapsing rent collections — almost two in five tenants owe at least one month’s rent — will cost an estimated $72 million.

Countering COVID risks also made “the agency’s operations more costly and more difficult to fix,” the CBC notes. Only major federal relief for pandemic-related expenses enabled NYCHA to end 2020 with a balanced budget.

Plus, the crisis slowed vital work such as mold remediation, pest control, waste management and lead-paint issues, likely adding to future costs. The CBC predicts that the growing backlog of work orders and maintenance leaves NYCHA looking at an ever more nightmarish workload this year.

Hence such signs of trouble as the heat and hot water outage at the 21-building, 4,000- resident Ingersoll Houses in Brooklyn during a recent January cold blast.

Just before the lockdown, Bart Schwartz, the federal monitor overseeing NYCHA, reported that over 100,000 public-housing units hadn’t been inspected for lead paint, and 55 percent of the inspected were contaminated. In The Post’s Nolan Hicks’ exclusive reporting, experts said that meant that lead contamination was likely throughout the entire system.

The woes go beyond COVID: NYCHA projects saw spikes in violent crime as shootings rose 103 percent in 2020, while murders jumped by nearly 50 percent.

There’s some good news: NYCHA’s basic management abilities greatly improved, and it achieved important reforms to union work rules.

But now as before, moving much of the system into the Section 8 Rental Assistance Demonstration program is urgent. Local officials must not stand in the way of this needed conversion.

Sadly, it seems clear that the Biden administration won’t deliver any funding to cover the estimated $40 billion repair bill: Too many other local interests have the political pull to get higher priority.

The authority’s chairman, Greg Russ, has his work cut out for him as he strives to shrink the agency’s footprint and make it financially sound. We wish him success.

https://nypost.com/2021/02/06/covid-19-has-pummeled-already-stressed-nycha/

NY Losing Construction Labor As Recovery Lags US

 Much like the rest of its economy, the construction labor force in New York City has been hit harder than the rest of the country over the past year. The city faces a slower recovery and some of the jobs it has lost may never return, presenting challenges for an industry that was already facing labor concerns before the coronavirus pandemic.

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New York construction jobs declined 5.5% from December 2019 to December 2020, according to the U.S. Bureau of Labor statistics. Construction job loss nationally was 1.9% over the same period.

 

New York City's construction industry's recovery has stagnated, however. It lost roughly 19,000 construction jobs year-over-year in December, a rate that was unchanged from September. Statewide numbers improved over that same time period, from 38,000 jobs lost in September to 22,400 in December, according to the New York State Department of Labor.

“The fact that there was a severe outbreak in New York City early on led to particularly strong tightening of activity,” Association of General Contractors of America Chief Economist Ken Simonson said. “[This] affected construction sites directly but was also devastating to many businesses, some of which would otherwise have gone ahead with new construction and found that they didn’t have the revenue flow that they had expected and that the demand was no longer there.”

In 2020, construction activity in the city hit its lowest point since 2012, according to the Real Estate Board of New York. Nonresidential construction starts fell 24% in the New York metro area between 2019 and 2020, according to Dodge Data & Analytics, which equates to $5.4B less being spent on new projects.

"Moving forward, New York’s recovery could lag the rest of the nation,” Dodge Data & Analytics Chief Economist Richard Branch told Bisnow in a statement.

There are a number of factors working against a quick recovery of these jobs, Simonson said, including a decline in population in recent years coupled with New York City’s reliance on tourism and the exodus of “knowledge workers” out of the city amid the work-from-home revolution.

A meaningful job recovery may not occur for another year and a half, Building and Trades Council of Greater New York President Gary LaBarbera said. 

“Some trades are faring better than others," he said. “No one has a crystal ball … 2021 could shape up to be a lean year until we catch up.” 

The decline in new starts not only propelled a wave of recent layoffs starting in December but also pushed down the cost of labor, United Service Workers Union Construction Division Director Kevin Barry told Bisnow this week. 

“Prices are in the toilet,” he said.

Many construction companies are barely turning a profit on any of their projects, but bid at the low price to buy themselves some time and keep their workers employed, Barry said. He predicted around 70% of the decline in jobs were prompted by the pandemic directly, the other 30% stem from contractors not finding new projects to bid on. 

Tony Bond, the CEO and president of Boston-based Bond Brothers Inc., a construction company that works on projects throughout the Northeast, said for a typical commercial project before the pandemic, the going average was four to five contractors bidding.

“Anything more than that, you’re like ‘why am I looking at this thing,’” he said. “We’re seeing a lot more jobs out there with 10 to 12 contractors, and on one public infrastructure bid we just saw, there were 33 contractors bidding on the project.”

Bisnow/Kelsey Neubauer

Mixed-use development project construction site on the corner of Second Avenue and 40th Street in Manhattan in November 2020.

While the economy has begun to recover this year, construction jobs may continue to drop throughout the winter as fewer projects than normal get started.

“Unfortunately, we haven’t hit complete bottom,” Bond said. “I don’t think we’re going to go much lower, but I think we’re going to be in this situation where things are going to erode for a little bit, I don’t think it’s going to be as drastic as it has been."

Infrastructure projects may be New York City’s saving grace. With the $306B state building plan laid out in Gov. Andrew Cuomo’s State of the State address last month, experts and industry leaders say that an influx of work could come from the public sector, helping to prop the industry up. 

There have been indicators that the industry is turning a positive corner, Eastbound Construction CEO Alex Elkin said. Lender and buyer interest has significantly increased in recent months, he said. Much of this activity is around “supportive infrastructure,” he said, including affordable housing, homeless shelters and expansions of health care facilities. 

“[The pandemic] literally froze construction activity in New York City for a certain period of time … it’s unavoidable that the consequences are catastrophic,” Elkin said. “[But,] from what we are seeing from indicators right now, it is all looking very, very positive.” 

A sluggish recovery could push unemployed workers out of the industry toward other sectors or cities. The last time the construction industry faced this much job loss was between 2006 and 2011, when 2.2 million jobs, or 30% of the nation's overall construction labor force, was lost, Simonson said. The nation lost half that many between February and April last year, and while the bounce back was quicker, the lingering losses could last, he said. 

“Some people will leave to work in other construction markets, others will leave the industry and perhaps get jobs elsewhere, and some will just drop out of the workforce,” Simonson said. “I am afraid it’s likely as we go through 2021, we’ll see a drop-off in nonresidential construction employment … These could be permanent job losses.” 

As workers leave the workforce, it makes it harder for the companies in New York City to operate at the same level as they once did.

“For better or worse, construction is a people game,” Bond said. “If you don’t have the right people, and if you can’t keep them gainfully employed, they will move on. And if you lose your people, you basically lose the essence of your business.” 

https://www.bisnow.com/new-york/news/construction-development/nyc-construction-jobs-took-a-harder-hit-than-us-overall-in-2020-107625

CoreLogic to be Acquired for $6B

 Stone Point Capital and Insight Partners will acquire global property information, data and analytics firm CoreLogic for about $6 billion, signaling an end to a competitive sale process initiated last summer by activist investors from Cannae Holdings and Senator Investment Group.

CoreLogic announced today that its Board of Directors had unanimously approved a definitive merger agreement with the two firms in which they acquire all of its outstanding shares for $80 per share in cash.  That accounts for an equity value of approximately $6 billion. In a statement, the firms said that value represents a 51% premium to CoreLogic’s unaffected share price in June.

The Wall Street Journal had previously reported that a deal was nearing, but noted that the outcome is surprising given that much attention had focused on other firms, including CoreLogic’s main competitor CoStar Group and private equity firm Warburg Pincus LLC.  The fight over CoreLogic’s future began in June, when Cannae and Senator offered $7 billion for the company, including debt. Bloomberg previously reported that CoreLogic’s board rejected the proposal, as well as a second offer at $66 a share, saying that it undervalued the company. 

“This is a significant milestone for CoreLogic and a very positive outcome for our shareholders who will receive exceptional value for their shares in cash with a high degree of regulatory certainty and a closing expected in the near term,” CoreLogic Chairman Paul Folino said in a statement.  “The transaction is the culmination of our Board’s extensive review of strategic alternatives, which included engaging with numerous potential buyers.”

Financing for the deal will come in the form of both committed equity financing provided by funds managed by Stone Point Capital and Insight Partners and committed debt financing provided by J.P. Morgan Securities LLC. The firms expect the deal to close in the second quarter of 2021,  subject to shareholder and regulatory approvals.

The acquisition comes on the heels of another CRE data provider acquisition in December, when private equity firm Thoma Bravo announced it would acquire RealPage in a $10.2 billion, all cash deal.  It signals further consolidation in the CRE service sector, a trend that’s expected to continue in 2021. In December, Joseph Ori,executive managing director of Paramount Capital Corp., predicted that the industry will see more consolidation as the larger and well-capitalized firms gobble up their smaller competitors.

“The same consolidation will occur with the data analytics firms and look for the large software firms to be key buyers of the larger data analytic firms,” he wrote weeks before the RealPage deal was announced.

https://www.globest.com/2021/02/04/corelogic-to-be-acquired-for-6b/

Macerich's Largest Shareholder Uses Short-Squeeze Bump To Sell Entire Stake

 The Macerich Co.'s brief dalliance with Reddit's army of retail investors had a major effect on its ownership structure.

Macerich's largest shareholder, the Ontario Teachers' Pension Plan, sold its 16% stake in the company for around $500M on Jan. 27, Bloomberg reports. In several trades over the course of the day, OTPP sold 24.56 million shares at an average price of $20.25, according to a 13D filing with the Securities and Exchange Commission.

A Jan. 27 post on the Reddit forum r/WallStreetBets declaring Macerich "the next Gamestop" caused a spike to nearly $26 that day. Just as they did with GameStop and AMC, the day traders who populate the forum noticed that a large portion of shares in Macerich were held by short positions and led a campaign to buy and hold enough shares to financially damage the hedge funds that had taken the short positions.

Unlike with GameStop, Macerich's gains proved fleeting. Though the retail landlord's stock value at the close of trading on Feb. 1 was only slightly lower at $14.01 than its $14.25 value at the end of trading on Jan. 22, the portion of its public shares held by short positions stayed over 56%, according to Seeking Alpha.

Part of what dragged Macerich's value back down could have been OTPP hitting the eject button while the market was briefly hot. When the Canadian pension fund first invested in the mall owner in 2014, its 11% stake was worth over $1.2B, and its willingness to take over a 50% loss on that initial bet could have signaled to the market at large a lack of faith in Macerich's long-term prospects, a Green Street adviser told The Real Deal.

While those who continue to hold GameStop point to its growing e-commerce presence and other indicators to justify their position beyond animus toward hedge funds, pure real estate companies like Macerich have much less ability to pivot away from shopping malls, even the best of which have experienced a collapse in value in the past few years.

Macerich's preliminary Q4 earnings, released on Feb. 1, may have lent credence to pessimists, as it projected a $190M loss for the quarter and funds from operation of 45 cents per share, below analysts' estimates of 57 cents a share. 

https://www.bisnow.com/national/news/capital-markets/macerich-gamestop-frenzy-largest-shareholder-sells-107579