A weekend topic starting with Bloomberg. "Regional players New York Community Bancorp Inc. and Signature Bank are becoming a case study for potential trouble from a sudden downturn in the Big Apple’s property sector, and their share prices are suffering. With retail and apartment vacancies rising and rents falling, and with the prospect of employers cutting their office space looming, the question is whether the hundreds of millions of dollars the banks have set aside for commercial-property loan losses will be enough."

"'It could be a two-, three-year window of things slowly working itself out,' said Jim Costello, senior vice president at property-research firm Real Capital Analytics Inc. 'There are going to be some price changes, but is it enough to get through to the lenders? That would have to be kind of severe.'"

"Banks are also trying to avoid another phenomenon from the last crisis: getting stuck with foreclosed-upon properties. 'It’s sort of a domino effect of, first you get some distressed debt, then it leads to a few distressed-property sales, everybody readjusts their pricing expectations on those distressed sales, and then lenders aren’t going to lend at the same prices from before,' said Costello. 'And we’re not even through that first step yet. It’s a whole chain of things and it just hasn’t happened.'"

The Wall Street Journal. "The operator of New York City’s historic Martinique hotel, one of Manhattan’s oldest, filed for chapter 11 protection, hoping for relief from rent payments and union obligations as the Covid-19 pandemic hammers the Big Apple’s lodging market. New York City’s hospitality market was sluggish even before the coronavirus began spreading this year as a glut in property development put pressure on room rates."

From Bisnow on New York. "After six months of upheaval for the New York City housing market, multifamily developers are adjusting to a new economic and cultural reality amid a public health crisis with no clear end date in sight. 'Here is the backdrop of where we are in New York City's multifamily world — and if you are standing up, you may want to sit down,' said Meridian Capital Group Senior Executive Managing Director Helen Hwang. 'Overall vacancy is at record high in decades. And that is not even accounting for the collection loss, and that the absorption figure is second-lowest in the country behind LA, and with about two to three months of concession, effective rents are down at least 15% to 25% for many apartments.'"

The Boston Globe in Massachusetts. "Some renters have avoided the eviction cliff — for now — by pushing the debt into their futures. Renters are taking on financial risk associated with borrowing from family and friends, using credit cards, or taking out loans to pay the rent. Families are shifting their food budgets toward the rent, with food pantry requests in Massachusetts up by as much as 931 percent."

"But for most families, even these sacrifices are not enough to scrape the rent together. In the week leading up to the CDC moratorium, the Eviction Lab research group at Princeton University found that new eviction filings were well above historical averages in the majority of cities without moratoriums. Even after evictions, landlords may never see the months of missing rent payments, which will result in a cascade of negative repercussions for property owners and communities. Without rental payments, small property owners, who lack access to credit to cover emergencies, are at increased risk of foreclosure and bankruptcy. "

The Akron Business Journal in Ohio. "The college student housing complex 22 Exchange in downtown Akron has a new owner and will soon be repurposed as a conventional apartment complex aimed largely at young professionals. Capstone Real Estate Investments principal Christopher Mouron said the new rents will be at 'an attractive price point.' Mouron said in July, before the sale concluded, that the complex could be converted into conventional residential housing because declining enrollment at the University of Akron indicated a student housing model appeared to no longer be viable. The property in March 2019 escaped foreclosure and a sheriff's sale."

From Multi-Housing News. "When it comes to securing multifamily construction loans across the nation, it is a lender’s market. Analogous to the ramifications of the Great Financial Crisis, financing companies have become extremely stringent about what projects they give the green light to finance. As a result of the challenges of securing debt with traditional lenders, private lenders are seeing an escalation in financing requests from multifamily developers. Since March, our originations team has seen an increase in construction loan requests from borrowers pursuing business plans that were easily financeable prior to COVID-19 but are now being called into question by traditional lenders and left unfunded."

The Des Moines Register in Iowa. "Developers of a troubled downtown skyscraper project allege Des Moines officials made 'flagrant breaches' in their development agreement, potentially torpedoing a plan to transform a tract on the southeast corner of Fifth and Walnut streets into a multipurpose showplace. In a cross-claim filed this week in Polk County Court, developers Justin and Sean Mandelbaum and their development entities for the project, known as The Fifth, are seeking $101 million in damages from the city. They also are asking for a temporary injunction blocking the city from reclaiming the property."

"Situated on the site of what was a deteriorated, city-owned parking garage, the $170 million project is slated to include a 40-story apartment and hotel tower; a theater and restaurant complex; and a 751-stall, 11-story parking garage that already is under construction. The city filed a notice of default against the developers in June for failing to meet construction deadlines. And last week, Bankers Trust Co. filed a foreclosure petition, alleging the Mandelbaums and 5th and Walnut Parking LLC had failed to make payments on a $48 million loan for the garage."

"The city's actions, they say, resulted in Bankers Trust refusing to extend the maturity date of the loan, precluding them from securing any alternative financing, as 'no lender would or could provide financing to a project under the cloud of the city’s erroneous and absurdly aggressive default notices.'"

The Real Deal on Florida. "The ultra-luxury Faena House condo, an oceanfront Miami Beach tower, has a big lawsuit on its hands. The condo association is suing the developer, general contractor and subcontractors for a laundry list of alleged construction defects at the 17-story building, including a broken elevator in the penthouse, missing art, cracking in the concrete and chalky paint."

"It’s not uncommon for condo associations to sue the developer, contractors and subcontractors after the developer hands off control of the association to the unit owners. Last month, the Aria on the Bay condo association filed suit against affiliates of the Melo Group, Arquitectonica and other firms that worked on the 53-story condo tower north of downtown Miami."

From Multi-Housing News on Florida. "The co-living sector has expanded in the past few years as more and more people stopped seeing it as a way of living suitable for students, but rather a way of connecting with one another. Despite short-term concerns about the need for social distancing, people are still looking at co-living as a viable alternative. 'It’s all driven by an oversupply of traditional luxury apartments targeted at high earners,' said Ryan Shear, managing partner at PMG. The company recently opened Society Las Olas, a 34-story co-living development in Fort Lauderdale, Fla."

The San Diego Reader in California. "No talk of the economic fallout from the covid-19 pandemic is complete without a nod to the commercial real estate market. Travel is down, particularly business travel. Occupancy rates at hotels have plummeted. Areas such as downtown, where hotels rely heavily on conventions, have been hit hard. Owners of apartment buildings are contending with missed rent payments from legions of tenants whose livelihoods have been damaged by the state’s reaction — overreaction, many say — to covid-19."

"'I will tell you that the best minds in real estate are struggling over these questions, with no clear consensus,' says Stath Karras, the executive director of the Burnham-Moores Center for Real Estate at the University of San Diego. 'Would you pay historic values? No. But is there a price at which you would buy, say, a shopping center that’s having issues? Sure. That’s why you are seeing distressed asset funds starting to build up, with the thought that in the current environment, there may be opportunities to buy. Shopping centers, hotels. Hotels are getting slaughtered, and yet there are funds to buy distressed hotels.'"

"The hospitality industry has been hit even harder than retail, Karras says. On a national level, the weekly hotel occupancy rate just hit 50 percent for the first time since mid-March, according to STR, a data research firm serving the hospitality industry. STR data shows the local hotel occupancy in San Diego rate peaked at 79 percent in 2018, then dropped to 77 percent in 2019. In May, San Diego Tourism Authority data showed that average countywide occupancy rates dropped to as low as 24 percent among hotels that had remained open."

"The multi-family residential market — apartments — is in good shape, although the pressing need for more housing is tempered by the high unemployment rate and the inability of some tenants to pay their rent. 'Everyone needs a place to live,' Karras says. 'The big issue here is: now that government subsidies are starting to wear off, what are collections going to look like?'"

"No surprise, then, that multi-family housing 'is flying off the shelves,' says Tim Lopez of KW Commercial in Carlsbad, who has been dealing with commercial real estate for more than 30 years. Adding to the frenzy is the fact that some landlords are panicking because tenants aren’t paying their rents and evictions are on hold. 'In a market like here, there’s blood in the water,' he says. 'And that’s when sharks feed.'"

"A new report by the market research journal Visual Capitalist found that nationwide, the default rate among hotel and retail properties funded by commercial mortgage-backed securities debt soared 792 percent between May and June. 'Ratings agencies are growing increasingly nervous about the… business side of the residential mortgage-backed securities market that touched off the 2008 global financial crisis.'"

"Lopez isn’t overly concerned. 'People want to own commercial property in Southern California. I don’t think it’s ever going to be a bad buy. I think a lot of it is overpriced, and one reason for that is that buyers aren’t necessarily looking at cash flow, they’re looking at depreciation, where they can take a tax break.'"

The Globe and Mail in Canada. "Major landlords are ramping up incentives to lure new tenants after the COVID-19 epidemic crushed demand for rental housing. The pandemic has brought out a higher level of competition to entice a weaker flow of tenants, including in Toronto and Vancouver, where incentives are rarely needed. 'Once the incentives start, they do become common, as rental providers have to compete more with each other, and eventually tenants start to expect them,' said Shaun Hildebrand, president at real estate consulting firm Urbanation."

"There were more than 50,000 purpose-built rental unit completions across the country in 2019, according to the Canada Mortgage and Housing Corp. – the highest tally in decades. Plenty more supply is on the way. But since COVID-19 hit Canada, rental demand has been slammed by restrictions on immigration, remote learning at universities and rampant job losses that have affected household finances."

"Park Property Management, which has roughly 8,750 units spread across 72 buildings in Ontario, is offering incentives in Toronto and in places where student demand has dried up, such as Waterloo. Incentives are a 'newer thing' for the company, said senior vice-president Margaret Herd, with one month of free rent being a common offer. 'People are shopping around now,' said Ms. Herd. 'It’s like when you get a sale on a car.'"

"The Toronto market is undergoing a massive shakeup. Out of 50 purpose-built apartment complexes in the city tracked by Urbanation, 29 have offered incentives during the third quarter. This includes free parking, one or two months of free rent, and move-in bonuses of up to $1,500."

"'I’d say it’s been more than 10 years since we’ve seen incentives to any meaningful level in Toronto,' Mr. Hildebrand said. Another factor in Toronto, Ms. Herd said, is that tighter restrictions on short-term rentals (such as Airbnb) are forcing some investors to find long-term tenants, contributing to a recent surge of new supply in the city. 'If you want to live downtown, there’s an awful lot [of units] available,' she said."

"In Alberta, rental demand has been tepid for years because of economic weakness, and the market is no stranger to incentives. Still, the pandemic has added another complication, forcing many landlords to increase their offerings. The province has 'seen discounting and incentives pretty much across the board, and we have certainly adopted the same approach to remain competitive,' Minto Apartment REIT chief executive Michael Waters said in an August earnings call."

"The company’s website shows three buildings in Edmonton that are offering three months of zero rent. A Minto spokesperson said that, depending on the property and market conditions, signing bonuses are on offer for lease renewals."

The Sydney Morning Herald in Australia. "Billionaire retailer Solomon Lew has blasted efforts by Myer management to restructure its board and said the company is headed for administration in a further escalation of tensions between the struggling department store and its shareholders. Mr Lew told The Age and The Sydney Morning Herald that this week's move to cut two directors and reduce board fees was a 'drop in the ocean' in the context of Myer's $172 million loss earlier this month."

"Myer chairman Garry Hounsell made the changes following pressure from Myer's second-largest shareholder Geoff Wilson, but Mr Lew said his issues with the board were not to do with fees but rather with their contribution, 'or lack thereof,' to running the business. 'The ship is sinking. What does it matter if you pay the captain a bit less on the way to the bottom?' he said."

"Mr Lew also said he believed he was sold a dud when he invested $101 million in Myer in 2017, which gave the businessman an 11 per cent stake in the retailer that is today worth just $20 million. 'When we invested nearly three years ago, and I think we invested on information that wasn't correct,' Mr Lew said."

"The veteran retailer also would not comment on whether he planned to call an extraordinary general meeting to force change at Myer, and said he believed administration may be the most likely outcome for the beleaguered merchant. 'The banks have now got control of Myer, so Blind Freddie can see what's going to happen,' he said."

The Australian Financial Review. "Vacancy rates have surged to record highs in the Melbourne and Adelaide CBDs, while regional areas enjoyed the tightest rental markets on record as renters move away from the city, according to SQM Research. At the same time, official figures show house prices fell 2.6 per cent in Sydney and 2.8 per cent in Melbourne in the June quarter, while attached dwelling prices fell 1.4 per cent in Sydney and 1.0 per cent in Melbourne. One in 10 rental apartments in the Melbourne CBD sat empty in August as the lockdown took its toll – up from 8.8 per cent the previous month."

"Vacancies in Adelaide jumped to 8.4 per cent, up from 7.6 per cent in July, taking the total number of empty rentals to 804. Sydney and Brisbane CBDs fared slightly better with vacancy rates falling to 12.9 per cent and 11.4 per cent respectively. In July, Sydney vacancy rates sat at 13.2 per cent and Brisbane at 13 per cent."

"Australian Bureau of Statistics figures show the mean price of a NSW home fell almost $20,000 in the past quarter to $871,800, down from $891,400 in the previous quarter. In Victoria, the mean price fell from $754,300 to $736,800 over the quarter. 'The number of residential property transactions fell substantially in the eight capital cities during the June quarter 2020, due to the effects of COVID-19 on the property market,' head of prices statistics at the ABS, Andrew Tomadini, said."