Posted on 01/30/2024 8:12:46 AM PST by Kaiser8408a
Will The Dream Warriors at The Federal Reserve fix this impending disaster? Or will this be a Nightmare on Constitution Avenue, where the mausoleum-like Federal Reserve building are located?
A Blackstone-owned Manhattan office tower with a $308 million mortgage is being marketed at a discounted rate of $150 million, representing a 50% reduction. The special servicer, Midland Loan Services, has enlisted Jones Lang LaSalle Inc. to facilitate the sale of the tower at 1740 Broadway. The bundled debt, included in a commercial mortgage-backed security, is marked with a 50% discount. In April, the tower was appraised at $175 million, a substantial 71% decline from its $605 million valuation in 2014 when the mortgage originated.
To put this into perspective, a new report by the Mortgage Bankers Association data, shows $117 billion in CRE office debt needs to be repaid or refinanced this year. Much of this debt is concentrated in major cities such as Manhattan, San Francisco, Chicago, and Los Angeles.
Compounding (or CONFOUNDING) the problem is the near 20% office vacancy rate.
Here is Fed Chair Jerome Powell who replaced now Treasury Secretary Janet Yellen.
(Excerpt) Read more at confoundedinterest.net ...
Somewhat surprising that (CRE) it’s only 20% unoccupied…..
How did those lockdowns work out?
We are China. All of our economic numbers are made up. The reality is always worse than they say.
Offices can be “occupied” by tenants who either don’t pay their rent or have a heavily discounted rate.
The numbers that matter are actual rents collected.
It has to be higher than that in San Francisco. Downtown is dead weekdays.
They must consider the illegals being housed as occupied spaces.
It's way more than that.
In commercial real estate, space is considered "occupied" if it has a lease in place and the tenant is paying the rent on a timely basis -- even if the space has been empty since the COVID fiasco began. The space goes from "occupied" to "vacant" when the lease expires and it goes on the market for prospective new tenants.
What we are seeing now is the expiration of leases and decisions by the tenants not to renew them. More and more companies -- including many that have tried to impose strict "return to office" orders in the last couple of years -- are going to see the wisdom of closing down (or dramatically downsizing) their offices entirely.
This is only going to get worse for commercial space in major cities even as everything else pretty much returns to normal.
The large office buildings could be converted to residential use.
Converting them to mega apartments would be cheap and profitable.
Trying to add 200 units of affordable housing in an office building over a two-year conversion period is stupid when twelve buses with 55 invaders each are arriving nearby daily.
The right way is to stop the invasion.
Dear Asylum Applicant:
The danger you face in your homeland is far less than that of a typical American homeless person.
¡Adios!
Judge
Of course its mostly in the most expensive cities.....the places people are fleeing. ie the blue crap holes that have out of control crime and which are flooded with drug addled bums crapping on the sidewalks. Who in their right mind would want to live in a place like that?
Perhaps leased. Occupied I suspect is quite less.
They aren’t getting those employees back. Everyone who returns to an office will face a pay-cut for transportation, food, and parking. By facilitating online work, they irretrievably broke the in-office model. All those white-collar jobs though are going away anyway once AI implementation is streamlined.
“space is considered “occupied” if it has a lease in place and the tenant is paying the rent on a timely basis”
I would want to drill a lot deeper into those stats to make sure exactly when delinquent rent changes the occupancy status.
I would also want a full audit of actual lease payment receipts.
Landlords/owners have been know to play a lot of silly games with these numbers.
In this game you trust nobody.
We will experience our own “Evergrande” on our own shores.
CRE is a cancer on our urban economies. “Escape from New York” is not that much of a stretch these days.
QOZ = Qualified Opportunity Zones
I have not seen any articles about these entities. But the 2017 Tax Act created them. Individuals with capital gains can/could reinvest money in QOZ property and eventually get capital gains taxes deferred and/or reduced and/or forgiven.
I am not an expert on these techniques, but understand enough to realize the benefits/risks. Sort of like a 1031 exchange.
There is at least one QOZ in each of the 50 states. And they are typically in “economically” underdeveloped/disadvantaged areas. So Oakland/San Jose is an example. San Francisco not on original list, but LOL - maybe they can get on there for the next round.
Anyone seen articles on QOZs in last few months? Maybe some here have invested in them?
It is a lot more than 20.. and leases are coming due. Closer to 50 % once all the leases burn out
Here is an article on CT QOZs:
https://www.ctinsider.com/hartford/article/Why-are-investors-not-using-Hartford-s-17350647.php
I always joke that Hartford CT is where developers go to die.
;-)
It is a lot more than 20.. and leases are coming due. Closer to 50 % once all the leases burn out
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