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They’re Worried That Banks Will File Foreclosures On Them, We’re Like Dogs Chasing Our Tails

A report from Bloomberg. “The commercial property market has largely been frozen as buyers and sellers struggle to agree on what buildings are worth. Transactions for apartments plunged 70% in the second quarter compared with a year earlier, according to Real Capital Analytics. Commercial real estate firm Jones Lang LaSalle Inc. is seeking buyers for more than $12 billion worth of apartment buildings. The push for investors comes as more and more renters struggle financially.”

The Wall Street Journal. “Some hotel owners are faced with property sales at discounted prices and expensive financing now that federal aid is poised to expire. Watermark Lodging Trust, a Chicago-based hotel owner with properties such as the Ritz Carltons in San Francisco and Philadelphia and the Seattle Marriott Bellevue, is the latest example of how financially strapped owners are raising money however they can. The real-estate investment trust sold the Hutton Hotel in Nashville, Tenn., for $70 million last month. The 250-room hotel was valued between $90 million to $100 million before the Covid-19 outbreak, according to people familiar with the matter. Watermark sold it for less than the $77.3 million it spent to acquire and upgrade the property.”

From Bisnow. “Data from hotel research company STRY cited by the travel news website AFAR shows that 2,069 of the nation’s 57,528 hotels are shut because of the crisis. More than 3,000 hotels that had been closed have since reopened their doors at a limited capacity. Lenders have ratcheted up credit standards, making it difficult for many companies to secure the financing they need to stay afloat, according to Hersha CEO Naveen Kakarla.”

“Getting deals done is also going to be a challenge since experts aren’t expecting the sector to rebound for another year or two as lenders tighten requirements for borrowers. ‘They have been more focused and have been insisting on pay downs and capital infusions to support the hotels,’ Karkala said. ‘In some cases, the owners can put that capital in, and in other cases, they cannot. I do think you will have lenders who will force the hands of some owners.'”

From KUTV in Utah. “Hank Van Orden and Ashley Dove, General Manager and Sales Manager of the Advenire, expected a banner year. Their new property in downtown St. George just opened this winter. Instead, the state shut down. And hardly anyone arrived. ‘It was like somebody turned off the spicket,’ says Orden. ‘It was a such a stark, overnight, one day to the next. here were nights where we were housing two or three people.'”

The Los Angeles Times in California. “California office spaces are expected to keep getting emptier and their rent prices will likely keep declining for years as the fallout of the pandemic persists, according to a new survey of commercial real estate developers and financiers. Last quarter, office leasing in Los Angeles County was at its lowest point since the Great Recession. And this month, a deal was struck to sell the U.S. Bank Tower in downtown Los Angeles for 34% less than the $650-million valuation it had in 2019.”

“And in California’s tight housing market, the market for multi-unit homes is likely to stay strong, the survey found. Three-quarters of respondents in Southern California said their plans in this area hadn’t changed. ‘It is hard to envision a scenario in which COVID-19 and its fallout could remedy the underlying housing affordability issues that California faced coming into 2020,’ Tim Hutter, a partner at Allen Matkins, said in the survey report. ‘In light of that ongoing concern, we expect demand for multi-family housing to continue to be high.'”

The Monterey Herald in California. “Housing advocates in Monterey and along the Peninsula are extremely worried about what is going to happen on Friday when the $600 federal contribution to jobless benefits expires, despite eviction moratoriums in place. Rhonda Navarro, the president of the Monterey Bay Chapter of the National Association of Residential Property Managers, said that while tenants have had evictions stayed, the same can’t be said of owners’ responsibilities, be it loans or other obligations.”

“‘They’re worried that banks will file foreclosures on them,’ Navarro said. ‘We’re wearing the same shoes as renters.’ She expressed that property managers are often caught in the middle in that they have a state-mandated fiduciary duty to owners but have a humanistic responsibility to renters. ‘We’re like dogs chasing our tails,”’ Navarro said.”

The Daily Cal in California. “Many apartments throughout Berkeley sit empty as a result of the COVID-19 pandemic, which has caused difficulties in the process of renting out new units and a severe loss of income to some landlords. ‘Property owners rely on prompt rental payments to meet their expenses for mortgage, taxes, maintenance, and to pay their employees and vendors,’ said the East Bay Rental Housing Association in a statement. ‘Indefinite delay of rental payments creates economic hardship.'”

From Bisnow on New York. “The Manhattan office leasing market has avoided the sublease spikes seen in other cities so far, but experts expect a fresh wave of subleases to hit the market in September. ‘There’s more coming,’ Savills New York and Tri-State Research Director Danny Mangru said. ‘It’s going to shift the market to a more occupier-friendly market. If you are on the other side, it’s not that great.'”

“‘I don’t think people have woken up to it … There will be a torrent,’ said Michael Colacino, president of tenant representation firm SquareFoot. ‘It takes a while to decide how to reconfigure your space for sublet … Everyone has had a lot of other things on their mind.'”

From Mansion Global on New York. “Manhattan’s high-end real estate market seems to have experienced a jolt from the Phase 4 reopening of the city last week, with 15 high-end homes going into contract during the week ending July 26, according to the weekly Olshan Realty report, which tracks homes at $4 million or more. And buyers on the high-end received significant discounts, with an 18% average discount from original ask to last asking price.”

“The second priciest apartment last week was just a smidge less expensive, asking $17 million. The five-bedroom apartment at Olympic Tower, with views of Central Park, was once asking as much as $33 million. The apartment’s been on and off the market since 2016.”

The Los Angeles Times. “Los Angeles Lakers center Dwight Howard has taken care of some business outside of the NBA bubble in Orlando, selling a penthouse in Washington, D.C., for $2 million. Howard, who spent last season with the Wizards, bought the massive apartment in a converted schoolhouse building in 2018 for $2.3 million, records show.”

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This Post Has 56 Comments

  1. ‘selling a penthouse in Washington, D.C., for $2 million. Howard, who spent last season with the Wizards, bought the massive apartment in a converted schoolhouse building in 2018 for $2.3 million’

    Eat yer crowz taxpayer.

  2. ‘They’re worried that banks will file foreclosures on them’

    And they will. Somebody like me will show up to tell you to GTFO.

    ‘Navarro said. ‘We’re wearing the same shoes as renters’

    Except the renters will stay and you GTFO.

  3. From the second Bisnow link:

    ‘Ultimately, he takes an “aggressive” view on how much office rents will decrease, and predicts they go down more than 25%. In a paper released in May, Moody’s Analytics predicted the severe economic hit could lead to a 20% effective rent drop in New York City this year, the biggest predicted drop of any city in the country.’

    “I’ve been in four major downturns in my career. When rents come down by a third, people come back in and start leasing,” he said. “New York has recovered … I am very optimistic about the city’s future. Cities don’t exist because they are comfortable, they exist because they are purposeful.”

    Again with the “NYC always bounces back”. Sometimes you just bounce. Maybe you guys should grow a spine and stand up to the people destroying your city.

  5. ‘It is hard to envision a scenario in which COVID-19 and its fallout could remedy the underlying housing affordability issues that California faced coming into 2020,’ Tim Hutter, a partner at Allen Matkins, said in the survey report. ‘In light of that ongoing concern, we expect demand for multi-family housing to continue to be high’

    These people are idiots. The ceiling is caving in and I’d bet they are starting more airboxes.

  6. ‘Their new property in downtown St. George just opened this winter. Instead, the state shut down. And hardly anyone arrived. ‘It was like somebody turned off the spicket,’ says Orden. ‘It was a such a stark, overnight, one day to the next. here were nights where we were housing two or three people’

    You are fooked Hank and Ashley. That’s a better way of putting it than abyss.

    1. Until I read that quote I forgot how rural people in the Rockies pronounce “spigot” as “spicket”. Funny it made it into print without being checked.

        1. For all “intensive purposes,” does it really matter?

          /s

          Hahah. I pacifically told you that it did.

      3. “Until I read that quote I forgot how rural people in the Rockies pronounce “spigot”

        Connecticut too.

    2. ‘Continuing growth in St. George has put construction crews and resources in high demand, but the builders from PEG Development, which is overseeing the City View project, continue to work toward a tentative opening date around late November or early December’.

      https://www.stgeorgeutah.com/news/archive/2019/09/23/mgk-forthcoming-advenire-hotel-in-downtown-st-george-uses-pioneer-chic-building-style#.XyGgLy2ZM8c

      SoUtah would have fallen apart, economically, without the virus. The whole area is mostly overbuilt with higher density mixed use and multi-family monstrosities that previously may have worked in more populated urban areas but never should have been imagined for use in this rural, desert area.

      I’ve noticed that the 70% return to occupancy or 70% customer return and/or 70% of revenue return for local businesses has been the latest local media talking point around these parts for the last month or so.

      FYI:
      St George unemployment rates:
      Nov 2019 2.7
      Dec 2019 2.7
      Jan 2020 2.8
      Feb 2020 2.9
      Mar 2020 4.2
      Apr 2020 12.6
      May 2020 9.5
      https://www.deptofnumbers.com/unemployment/utah/st-george/

  7. “Last quarter, office leasing in Los Angeles County was at its lowest point since the Great Recession. And this month, a deal was struck to sell the U.S. Bank Tower in downtown Los Angeles for 34% less than the $650-million valuation it had in 2019.”

    It truly sux to HODL CRE investments at this juncture.

    1. The Utah article wails about how tax revenue is getting hammered. I’d guess CA is too.

      ‘The sun don’t shine on the same dog’s ass all the time.’ – Catfish Hunter.

      1. The Utah article wails about how tax revenue is getting hammered. I’d guess CA is too.

        It’s getting hammered everywhere.

        1. I was listening to the radio real early this AM. This guy was saying what I have observed. Some stuff is open, but business is way off. Playing footsie with the economy may make some people feel important and push agenda’s. But IMO they are playing with fire. We have several bubbles in RE and other things. Those are collapsing. But do we really need to crash everything? A business does actually produce things usually, creates jobs. Just snuff em’ all out, eh?

      2. The Utah article wails about how tax revenue is getting hammered. I’d guess CA is too.

        Which means anybody with anything worth taxing better be worried, because the taxman will be raising taxes grotesquely on everything.

        2. The State of Utah already attempted to increase sales tax on food earlier this year, which failed, although they can try again during the regular session.

          I imagine sales and property taxes will increase significantly, but they won’t touch income tax.

      3. “tax revenue is getting hammered.”

        Another reason I pumped (ok, slammed) the brakes on multi-family property investment. There’s simply no way to control taxes in the current political/fiscal environment.

        People think there’s a 3% cap on property tax increases Y-Y in Portland. In reality, it only caps increases on assessed value. It doesn’t protect you from “special assessments” and other ongoing grift.

  9. Clifton, VA Housing Prices Crater 14% YOY As Fairfax County Slips Deeper Into Foreclosures And Mortgage Defaults

    https://www.zillow.com/clifton-va/home-values/

    *Select price from dropdown menu on first chart

    As one Fairfax County broker lamented, “How can we possibly sell a resale house when builders are selling new houses for 20% and sometimes 30% less?”

    2. Interesting. Can you share where you’re seeing this? I looked through the sub-categories (price/tax history, monthly cost, etc) but don’t see it.

      It was only a matter of time. It’s public info here so I guess it saves you the effort of searching county sites or visiting county offices.

    3. “…I can see everyone’s mortgage in the nabe….

      URL? Please provide.

      To be able to dial in a street address and determine mortgage(s) balances would be immensely useful.

      It would allow to see how thin the ice really is out there.

      Gut feeling: Ice is a *lot* thinner than most realize.

    4. Zoom all the way in on the map until the Zestimates for all the houses appears. Click on a house that’s *not* for sale. Scroll down a little and you’ll see a box with “Estimated Net Proceeds.” Basically, it’s a calculator which estimates what you would profit if you sold the house for the Zestimate price. The calculator self-populates with an amount of what’s remaining on your mortgage, but then you can use the sliders to adjust.

      This feature is clearly targeted toward people who occasionally look up their own home on Zillow, e.g. “Hey FB! Look how much cash you would bag if you put your house on the market RIGHT NOW.
      Call your local Realtor (R) to list your home and rake in sweet equity!”

      I looked at my own house, and the number is about 5% off. I looked at a friend’s house which I know is paid off, and they said she owed money. So it’s not an exact number by any means. Maybe Zillow is just estimating the remaining mortgage by taking the known sale date and sale price and assuming a 30-year mortgage and consistent payments?

      1. The calculator self-populates with an amount of what’s remaining on your mortgage, but then you can use the sliders to adjust.

        I have empirically verified that number is made up.

        1. Which kind of defeats the purpose of trying to entice owners to list their house, doesn’t it? The owner would look at it and say — “hey wait, I don’t owe that amount. So how would I net the amount they’re saying?”

          I guess realtors think we’re as stupid as they are. Heh, I can confirm. I once dated someone who was dumb as a post (didn’t last long). He eventually became a realtor.

    5. I think not. It makes assumptions then makes estimates. I checked some properties I know about and saw that some of the assumptions are wrong.

      1. They’re always hoping for a fed backstop… Yet prices fell 40%+ during the last minor correction.

        Oooooph.

        Ontario, CA Rental Rates Plunge 14% YOY As San Bernardino County Housing Prices Crater

        https://www.zillow.com/ontario-ca-91762/home-values/

        *Select prices from dropdown menu on rental chart

        As one broker explained, “In this business, we lie more than we tell the truth. We’re paid liars.”

      2. They’re always hoping for a fed backstop… Yet prices fell 40%+ during the last minor correction.

        Right, but the FED learned from their last approach that it wasn’t enough, so now they’ve gone “Unlimited QE.” When you have a printing press, there is nothing you can’t paper over. The only question is what will happen long term. A large amount of people think hyperinflation, so they’re piling into hard assets like real estate, gold, etc. This is playing right into the FED’s hand, because the FED wants them to spend their cash.

        1. the FED wants them to spend their cash

          The Fed wants them to pay interest. It’s what makes their world go round.

  12. ‘Many apartments throughout Berkeley sit empty as a result of the COVID-19 pandemic, which has caused difficulties in the process of renting out new units and a severe loss of income to some landlords. ‘Property owners rely on prompt rental payments to meet their expenses for mortgage, taxes, maintenance, and to pay their employees and vendors…Indefinite delay of rental payments creates economic hardship’

    Student housing is recession proof – not.

  16. Transactions for apartments plunged 70% in the second quarter compared with a year earlier, according to Real Capital Analytics.

    Is that a lot?

  17. And this month, a deal was struck to sell the U.S. Bank Tower in downtown Los Angeles for 34% less than the $650-million valuation it had in 2019.”

    Please join me in observing a moment of silence for all those dear departed Yellen Bux.

  18. The Keynesian fraudsters at the Fed are vowing to keep up the easy money policies. There’s a shock. I hope I live to see post-collapse tribunals dealing out long-overdue justice to these gold collar criminals.

    https://www.reuters.com/article/us-usa-fed/fed-repeats-pledge-to-keep-u-s-interest-rates-low-idUSKCN24U2VB

    (Reuters) – The Federal Reserve on Wednesday repeated a pledge to use its “full range of tools” to support the U.S. economy and keep interest rates near zero for as long as it takes to recover from the fallout from the coronavirus outbreak, saying the economic path will depend significantly on the course of the virus.

    1. I hope I live to see post-collapse tribunals dealing out long-overdue justice to these gold collar criminals.

      They will have flown away on their Gulfstreams by the time that happens

  20. ‘Unsurprisingly, the retail sector saw the most pessimism, with the current recession tripling down on the struggles the sector was already facing before the pandemic. Panelists in the Bay Area and Southern California believe retail properties will generate significantly lower, if any, returns in 2023 compared to present times. Two-thirds saying they will not develop new retail properties in the next year, which is expected to lead to plummeting property values. The negative outlook comes down to loss of household income and shelter-in-place policies reducing demand and the increased comfort with online shopping.’

    “There will be economic carnage; when big events like this happen, it washes over the landscape like a tidal wave and even some good economic decisions become a casualty, but then things kind of resettle and we will get back to our base patterns,” said John Tipton, partner, real estate development at Allen Matkins.’

    https://www.mpamag.com/commercial/californian-developers-pessimistic-on-state-of-cre-market-229289.aspx

  21. Any thoughts on how far the dollar will be allowed to drop before intervention to stop it?

    Business News
    July 28, 2020 / 4:07 AM / a day ago
    King dollar’s decline ripples across the globe
    Saqib Iqbal Ahmed, Ira Iosebashvili

    (Reuters) – An accelerating decline in the U.S. dollar is reverberating around the world, adding fuel to a global momentum rally that has boosted prices for everything from technology stocks to gold.

    The U.S. dollar index, which measures the greenback against six other major currencies, is down around 9% from its March highs and is on track for its worst month since 2011, pressured in part by expectations that the United States will take a bigger hit to growth than other economies from the coronavirus pandemic.

    Because of the dollar’s central role in the global economy, a sustained selloff in the greenback could buoy a broad market rally driven by expectations of continued economic stimulus from the world’s central banks and governments.

    At the same time, further dollar weakness would likely be an unwelcome development for economies such as Europe and Japan, as their own rising currencies threaten to weigh on growth and efforts to spark inflation.

    “The weaker dollar is almost becoming a self-fulfilling prophecy, with gains for risk assets seeing the dollar weaken further, fueling additional gains,” said Michael Brown, senior analyst at payments firm Caxton.
    …

  22. Chicago Tribune columnist refuses to apologize to colleagues peeved over George Soros piece: ‘I will not bow’

    By Brian Flood | Fox News
    Published 7 hours ago

    Longtime Chicago Tribune columnist John Kass refused to apologize to liberal colleagues who accused him of writing an “anti-Semitic” piece about billionaire George Soros, saying the “American tradition” of free speech has been “swept away” by cancel culture.

    @John_Kass
    My response to the #GeorgeSoros bs and #cancelculture in newsrooms:
    I will not apologize for writing the truth about Soros.
    I will not bow to those who’ve wrongly defamed me. Ever.
    But I do thank readers and friends who stood by me.

    “The angry left-handed broom of America’s cultural revolution uses fear to sweep through our civic, corporate and personal life. It brings with it attempted intimidation, shame and the usual demands for ceremonies of public groveling,” Kass wrote. “It is happening in newsrooms in New York, Philadelphia, Los Angeles. And now it’s coming for me, in an attempt to shame me into silence.”

    https://www.foxnews.com/media/chicago-tribune-columnist-colleagues-george-soros

    1. Longtime columnist

      In other words, he probably reached his F-U number years ago and he could quit tomorrow and never work again. He’s daring them to cancel him. Good for him. This culture is really bad for younger people who can’t afford to be canceled. We need the wealthy people to call their bluff.

  23. Follow up-to yesterday’s NY City CRE discussion. Today all the local news is about how the Police arrested someone by plainclothes officers. In the future, I think criminals should be contacted via Facebook and invited to pick up any court orders at their leisure.

  24. The Financial Times
    Coronavirus business update 30 days complimentary
    Coronavirus pandemic
    Coronavirus deaths jump in Florida, Texas and California
    Fatalities on the rise after surge in cases across US sunbelt region in recent weeks
    Florida’s death toll from Covid-19 is the seventh-highest among US states since the pandemic began
    © Bryan R Smith/AFP/Getty
    Peter Wells in New York 37 minutes ago

    The US coronavirus death toll increased at its fastest pace in weeks on Wednesday as Florida, California and Texas all reported large rises in fatalities, raising new concerns about the severity of a wave of infections that has swept across the populous US sunbelt region.

    Over the past 24 hours, 197 people died in California, the biggest-ever increase. Florida registered 217 fatalities, a record high for the second day in a row. Last week, both states overtook New York — the epicentre of the virus’s early wave — as the US states with the highest number of coronavirus cases.

    California now has the third-highest number of fatalities among US states, with 8,715, behind only New York (25,132) and New Jersey (13,923). Florida ranks seventh among US states, with a total of 6,457 deaths.

    Coronavirus cases in Texas also passed 400,000 on Wednesday, while the number of deaths increased by 313 to 6,190.
    …

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