Summer Edition 2: News You Can Use | |
|
The Henley Group brings you a roundup of what's happening now.
We hope you’re finding ways to stay cool in this persistent heat. CRE news revealed the same, strategies for resilience and adaptability as June closed.
Credit agencies drew criticism for mis-rating over $100 billion in CRE debt. Bonds were still rated AA despite significant payment defaults, 1047 Broadway, NYC is a case in point.
On the flip side, KKR's $2.1 billion investment in multifamily focused on high-quality assets across populous states like CA and NJ, signaled confidence in the sector's rebound.
While the self-storage market showed positive month-over-month rent growth in major metros, it remains challenged by high interest rates and an uncertain economy.
Here's a closer look at the national scene by sector.
| |
Ongoing gyrations are expected by sector as CRE remains under regulatory scrutiny against a backdrop of economic instability. | |
|
OFFICE
- The market is struggling from new absorption lows and high CMBS delinquency rates (currently 5.35%), contrasting with ongoing demand in prime locations nationwide.
- Brookfield Asset Management's acquisition of BGO's Washington, DC 290,000 sf office property via deed-in-lieu of foreclosure epitomizes ongoing restructuring efforts amid lease rollover risks and maturing CMBS loans. Brookfield purchased the note from Citibank back in April for $0.43 on the dollar, a whopping 59% below the 2018 purchase price.
- Similarly, State Farm Life Insurance purchased a 123,000 sf office building in DC for $0.37 on the dollar, nearly 73% below the purchase price.
- In NYC, Stahl Corporation's $750 million refinancing of a major office tower (formerly occupied by JPMorgan Chase) reflected financial restructuring amid tenant turnover with a predicted Debt Service Coverage Ratio (DSCR) of 1.8.
| |
|
RETAIL
- Retail has seen a surge in leasing activity, reaching its fastest pace in 20 years.
- The retail and consumer packaged goods (CPG) industries are poised to harness the power of AI to enhance operational efficiency, elevate customer and employee experiences, and drive growth in an effort to anticipate potential trends that could change the retail game.
- Despite an 11% delinquency rate in retail loans, strategic acquisitions like Pine Tree's purchase of The Fountains shopping plaza in FL underscored confidence in retail's resilience and adaptability.
| |
|
LODGING
- Hotels are stabilizing post-pandemic, supported by refinancing activities to capitalize on renewed market confidence.
- Upscale properties like the Soho Grand and the Roxy Hotel have been desirable to lenders, highlighting a preference for distinctive designs and amenities that cater to luxury travelers.
- Hotels have transformed themselves post-COVID far more quickly than expected by implementing strategies in 10 months vs what was thought to take 10 years.
- Some major enhancements include: smart room tech (self-streaming, wireless charging, smart controls, mobile/keyless entry, etc.); green building design and management; changing workforce solutions (Gen Z, unionization, gig workers, etc.); alternative accommodations (co-living, co-working, Airbnb, etc.), and hotel tech (AI-based pricing, contactless check-in, and robot room service).
| |
|
INDUSTRIAL
- Driven by high tenant demand for urban logistics and infrastructure development, industrial properties have demonstrated robust growth.
- There's been a significant rise in leasing activity, landing quarterly increases above historical averages.
- Despite municipal tax hikes in certain markets, industrial properties have maintained strong financial performance, showing substantial increases in per-unit revenues and Net Operating Income (NOI).
- Recent transactions, such as Koozie Group's $36 million industrial portfolio sale financed by a $21.5 million loan, highlighted investor confidence and strategic interest in the sector's stability and growth potential.
| |
|
RESIDENTIAL
- The residential sector is witnessing significant investment in amenity-rich living spaces, incorporating high-tech features and smart-home technology as standard offerings.
- Developments like Fairfield Residential's Richmond Highway project in DC include quartz counters, French doors, and community amenities, reflecting a trend towards upscale living experiences.
- Responding to broader dynamics in urban development and evolving market conditions, the same real estate development included 42 affordable housing units to cater to a wider income demographic.
| |
|
Sources:
Hollander, Jordan (June 22, 2024) 100 Hotel Trends You Need to Watch in 2024 & Beyond. Hotel Tech Report
The Rundown – June 24-June 28, 2024. The TreppWire Podcast
CRE Daily – June 24-June 28, 2024. CRE Daily
Commercial Mortgage Alert – June 28, 2024 Commercial Mortgage Alert. A Green Street News Title
| |
Don't wait until the last minute to reach out. We are here to lend an ear, strategize, and collaborate with you about possible outcomes and pathways to success. | |
|
We are expert CMBS Borrower Advocates with extensive experience partnering with clients to catalyze loan resolutions. Dedicated to service excellence and outstanding outcomes, we have worked out over $14 billion in CMBS deals to date. We are proud of the deep relationships The Henley Group has forged with Special Servicers for 15 years. Our unique skill set, patient negotiating style, and understanding of Special Servicing allow us to get results that may not be available to you.
| |
David Goldfisher
(617) 320-0284
| |
Tammy Goldfisher
(617) 512-1135
| |
David Arthur
(617) 719-1087
| | | | |
