A weekend topic starting with Bisnow New York. "Cushman & Wakefield Vice Chair Joanne Podell, a veteran retail broker in New York City, speaks about the future of luxury strips like Fifth Avenue. 'There are two kinds of landlords,' she said. 'The landlords that are not overleveraged and the landlords that are really about to lose their buildings, unfortunately.'"

From Ms. Magazine on New York. "Midtown Manhattan as been called a 'ghost town' so many times that you’d expect to see tumbleweeds rolling through Bryant Park. Back in July, the New York Times declared that the commercial district was in a 'purgatorial phase zero' of reopening. Months later, things have not improved much. Occupancy rates on city hotels, like those in Midtown South tied to tourism and corporate travel, have plunged below 10 percent. And most significantly, the workers who once crowded sidewalks on their way to the office have stayed away."

"Commercial broker CBRE found that just 10 percent of Manhattan workers have returned as of Sept. 18. Similar scenes of silenced streets are playing out in downtown business districts across the U.S. and beyond as the fall pandemic inches towards record infection levels. But perhaps nowhere does the mass abandonment of the office seem so viscerally real as the heart of Manhattan."

"'People aren’t willing to take on risk now,' says Paimaan Lodhi, senior vice president of the Real Estate Board of New York. 'That’s the big question mark. At some point people will come back and do projects in New York City, but I’m not sure when that’ll be.'"

From Multi-Housing News. "While alternative lenders, including debt funds, finance companies and mortgage REITs, pulled back dramatically early on, many are back in the market and competing for borrowers in need of construction and bridge loans. Dan Palmier, CEO of UC Funds—which is privately financed by family offices and wealthy individuals, and has closed 18 to 20 multifamily deals during the health crisis. Of the deals underwritten during COVID-19, Palmier said 65 percent to 75 percent came from opportunities in the multifamily sector where the lender stopped funding construction loans on development projects that were anywhere from 20 percent to 95 percent built."

"On acquisitions, Crescit can go as high as 85 percent of cost, though typically that debt level is reserved for properties with turnaround situations and discounted payoffs. 'So we’re hoping that values are going to be over time much lower than that—that’s the whole play,' Joseph Iacono, CEO of commercial real estate alternative lender Crescit Capital Strategies explained. 'Once the property is stabilized, that will be closer to 65 percent to 70 percent of value.'"

From The Advocate in Louisiana. "Kimble Development, a local real estate developer with more than two dozen commercial sites across Louisiana in its portfolio, is now looking to sell some of those properties after it filed for Chapter 11 bankruptcy protection in September. More than a dozen properties, including several in Baton Rouge, are also in receivership after the company defaulted on its mortgage, which means those sites may also be sold. Kimble Development's mortgage dating back to 2014 was due in late 2019. The company owes at least $27 million to U.S. Bank when default interest is included."

From Bisnow on Texas. "Austin real estate investor Nate Paul, who has been facing a whirlwind of bad publicity about his interactions with Attorney General Ken Paxton in the wake of an FBI raid of Paul's home and business last year, is now facing the prospect of losing properties that made up his firm's $1B-plus real estate portfolio, KXAN out of Austin reports. Both men have been caught up in a yearlong saga involving federal authorities investigating a laundry list of criminal complaints, including bribery and corruption."

"Now, in the wake of the publicity storm, Paul's firm is facing signs of financial distress. The real estate investor, who was named to the Forbes '30 Under 30' list back in 2016, amassed a $1B-plus real estate empire under his World Class Capital Group firm, including the 717 Harwood skyscraper in Downtown Dallas. As recently as this week, a firm controlled by World Class that used an Austin shopping center to collateralize a loan landed in a lawsuit over the borrower's failure to make loan obligations, KXAN reports."

"The lawsuit follows on the heels of news reports from the Austin American-Statesman that assert Austin properties owned by Paul and World Class were recently sold in a Travis County foreclosure auction, according to KVUE. Paul's firm reportedly defaulted on more than $250M in debt by the end of October, according to the Austin American-Statesman."

The Puget Sound Business Journal in Washington. "It's going to take some time for the economy to recover from the Covid-19 crisis, the Downtown Seattle Association reaffirmed in an economic impact summary. It's full of dispiriting data — and even those points that show improvement, it is mediocre at best. Based on cellphone location data from Placer.ai, employee presence downtown during weekday office hours was down 82% year over year in October. At its lowest point in April, it was down 86%."

"This has been disastrous for small businesses. The Downtown Seattle Association (DSA) has tracked 214 permanent street-level business location closures in Seattle this year, with 152 downtown. (DSA said its tracking is not a complete inventory and can only assume most closures are Covid-related.) CoStar forecasts that for the first time since 2000, which is as far back as the company's data goes, the number of downtown renter households will decrease, with the number of occupied units falling by 1,488."

"During the second and third quarters, downtown lost an estimated 1,750 apartment households. For context, the previous worst quarter on record showed an occupancy decrease of only 42 units. Downtown apartment vacancy rates are expected to rise from 5.1% at the end of 2019 to 11% at the end of 2020, with rents down 8.3% year over year. Apartment vacancy is expected to peak at 17.2% by 2022. (The figure includes new units; not including new units, vacancy is expected to peak at 12.5%.)"

"CoStar expects downtown office vacancy rates will reach 10% by the first quarter of 2021 and remain at that level for several years. This is up from a low of 4.9% in the third quarter of 2019, the lowest since 2000. Total hotel revenue downtown has been down more than 90% nearly every day since mid-March. From April through July, hotel monthly revenue was down 95% each month compared with the same month in 2019. In the most recent monthly data available (October), revenue was down 87%."

"Restaurant revenues are falling again. By March 16, daily restaurant revenue in the city had dropped by about 80% from comparable days the previous year. In the following weeks, revenue recovered to be down between 40% and 45% year over year. The most recent Rally for Restaurants data ending Nov. 29, showed revenue was down 60% from the 2019 baseline."

The Marina Times in California. "'The easy story has been to say ‘real estate plunges as everyone flees cities,’ but the reality is nuanced,' said Matt Fuller, a past president of the San Francisco Association of Realtors. But '2020 has been the year of getting off the fence and procrastinating no more.'"

"Inventory remains high. According to Fuller, in October the number of sales across the city was up slightly year-over-year (550 sales in 2019, 608 in 2020) but the big change for buyers was that the number of active homes for sale during the same month went from 739 in 2019 to 1,097 in 2020 — a massive increase."

"The median price for a single-family home in October was $1,637,550, down 0.8 percent from last year, and the median price for a condo or loft during the same period was $1,177,000, down 12.5 percent from 2019. What can we expect going forward in San Francisco? Fuller offers some insight."

"'In the past, a strong rental market virtually guaranteed a seller could always rent their home at a profit if they couldn’t get their desired sales price,' he said. 'But with rents down, will the inability to cover costs with market-based rents encourage sellers to reduce prices? Or will sellers take a long-term view and a short-term loss, banking on San Francisco’s historic trend of underbuilding homes and overbuilding jobs?'"

From Bloomberg on Canada. "Canada’s hottest housing markets are slowing down as unsold condos pile up with more people fleeing dense downtown living for the suburbs. In Vancouver, which has Canada’s most expensive real estate, home sales slid 17% on an unadjusted basis compared with a month earlier, the Real Estate Board of Greater Vancouver said."

"The recent slowdown is a sharp reversal from the months after the initial pandemic lockdown ended and pent-up demand, fueled by low mortgage rates, pushed prices to new heights. In the City of Toronto, the number of condos listed for sale doubled in November compared to the same month last year, causing average prices to fall 3% according to the TRREB data. The benchmark price for an apartment in Vancouver registered a 1% decline in November from the previous month."

From Toronto Storeys in Canada. "According to the newest report from RBC, the entire country saw strength in its housing market throughout November, except for in one area — downtown condos in large urban areas. Condo listings have skyrocketed 194%. As the report concludes, it’s 'no wonder downtown Toronto condo prices are beginning to soften.' At the same time, the month saw market conditions tightened in many single-family market segments, resulting in double-digit year-over-year increases in selling prices for detached houses, semi-detached houses, and townhouses."

"According to John Pasalis, President at Realosophy Realty: 'I think we are at the point where people don’t truly appreciate how insane a 24% increase in house prices really is. It’s a big problem when policy makers have raised absolutely zero concerns about the rapid acceleration we are seeing in Toronto’s housing market.'"

The University of Texas News. "Much has changed in the U.S. financial system since the most recent financial crisis. But one thing hasn’t changed, according to a new study from a financial researcher at The University of Texas at Austin: potential for fraud in asset-backed securities. Without stronger penalties to discourage it, widespread concealment and falsification of information could potentially lead to another crash."

"In the study, John Griffin, a finance professor in the McCombs School of Business at UT Austin, found that the role of fraud has been underestimated in the home mortgage meltdown of 2007-2009. He synthesized more than 80 papers, along with legal settlements by 11 banks with the U.S. Department of Justice, to document its scale and its effects."

"'A lot of academics think that conflicts of interest and fraud are things the media like to talk about, but they’re not of major economic importance,' he said. 'This paper and all the research that it summarizes says the opposite. That they did play a major role in the financial crisis. Checks and balances are supposed to be in place, but a lot of them don’t work.'"

"The biggest fraud potential, Griffin said, is no longer with home mortgages. It’s with other kinds of securitized assets, such as commercial mortgages. For collateralized loan obligations (CLOs), a kind of security backed by business loans, he’s found evidence that the underlying loans are riskier than the CLOs’ ratings reflect. Such weaknesses can be hidden by a strong economy but get exposed in a weak one, he said — such as during a sudden pandemic."

"'The coronavirus is a different cause, but it may have the same effect, revealing the same forces that were at work in the pre-financial-crisis period,' Griffin said. 'Market corrections have a way of revealing fraud and structural problems.'"