Real Estate Industry Alerts Tracker - August 21, 2020 Issue
California Eviction Moratorium to End on September 1, 2020
On August 13, 2020, the Judicial Council of California voted to lift the moratorium on evictions and foreclosure filings on September 1st – approximately two weeks later than was initially planned. The two-week extension provides the state’s lawmakers with much needed additional time to provide new protections for the millions of Californians that are unable to pay their monthly rent and mortgage payments. According to The Aspen Institute, approximately four million renters in the state may face eviction by the end of September. Governor Newsom and legislative leaders are currently negotiating a long-term solution that is planned to be in place when the current protections end on September 1, 2020.Additional information may be found here.
Amazon Moving Forward with Pre-Pandemic Office Expansion Plans in New York and Other Locations
While the pandemic has changed the expansion plans of most companies, this week Amazon said that it plans to hire 3,500 white-collar employees across the U.S. In accordance with the company’s pre-pandemic expansion plans, 2,000 of the new-hires will be based in New York. This is welcomed news as many office towers continue to remain empty with employees continuing to primarily work from home. Most of the tech giant’s New York office employees will be working from the Lord & Taylor building on Fifth Avenue that it purchased from WeWork back in early March. Amazon is expecting that its employees will begin working in the building in 2023. Dallas, Denver, Detroit, Phoenix, and San Diego are some other locations where Amazon is planning to expand offices.Additional information may be found here.
Heard Around the Industry
400 CMBS Loans Granted Relief in July: Trepp’s recent analysis of remittance comments revealed that about 400 CMBS loans (totaling $16.6 billion) were granted some form of lender relief as of July. The hotel and retail sectors accounted for the vast majority of lender forbearances, with hotel loans accounting for approximately two-thirds of the forbearances granted and retail loans accounting for 25%. Only a few industrial, multifamily and office loans were approved for forbearance, and mixed use properties accounted for only 5% of forbearances granted. Of the 400 loans granted relief, nearly 250 loans had $25 million or less in outstanding debt and 26 had an outstanding balance of $100 million or more.
Additional information may be found here and here.
Apartment Construction Down 12% From Last Year: According to Yardi Matrix, a firm that provides research and reports on multifamily, office, and self-storage properties nationwide, only 114 new apartment building projects containing 50 or more units are expected to be completed this year. This represents a 12% decrease as compared to 2019. The decrease is attributable to the slower pace of construction during the pandemic caused by shortages of available construction crews, funding and permit issues, as well as temporary bans on construction projects in certain states. Thirteen of the twenty most active large metropolitan areas are expected to complete fewer units this year as compared to last year, with only seven areas projected to build more units this year.
Additional information may be found here and here.
Hotel Delinquencies Surge as the Industry Faces a Wave of Foreclosures: A report compiled by Trepp shows that 23.4% of CMBS hotel loans were delinquent for 30 days or more as of July. This represents the highest percentage on record and is in stark contrast to 2019 when the percentage of delinquent hotel loans was only 1.34%. As of July, $20.6 billion in hotel CMBS loans were delinquent 30 days or more, as compared to $1.15 billion in delinquent loans as of December 2019. The report also noted that the highest volume of delinquent hotel loans during the 2008 financial crisis was $13.5 billion, meaning that the current percentage of delinquent loans is 53% higher than the highest level during the 2008 financial crisis.
A copy of the Trepp report may be found here and additional information may be found here.
Majority of Investment Demand from 1031 Exchanges: The majority of transaction volume in the commercial real estate market during the pandemic has been coming from 1031 exchange purchases. In an interview with GlobeSt.com, Dwight Kay of Kay Properties and Investments noted that while many non-1031 buyers were taking a “wait and see” approach to try to purchase at a discount, 1031 buyers were more willing to pay market rates in order to avoid the 40% plus tax rate they would incur without the exchange transactions. This has facilitated the stabilization of transaction volumes and pricing during the pandemic.
Additional information may be found here.
Landlords Stand to Lose up to $21.5 Billion in Rental Payments as Evictions Moratoriums are Lifted: With less unemployment benefits to cover livings expenses and the lifting of eviction bans in most jurisdictions across the country, Stout Risius Ross, a global advisory firm, estimates that more than 40% of all U.S. apartment renter households may face eviction over the next several months. 40% of apartment renters in the U.S. roughly translates to about 17.3 million households, and by Stout’s estimation, 11.6 million evictions will be filed over the last four months of 2020. The advisory firm also estimates that this grim forecast of mass evictions will result in approximately $21.5 billion in lost rental revenue for landlords, which will inevitably lead to many landlords, especially smaller property owners, losing their properties for failure to pay property taxes or mortgage loan payments.
Additional information may be found here.
Washington D.C. Ranks First in Tech Office Leasing in Q2: According to a recent CBRE report covering office leasing for tech companies, the D.C. region ranked first in the country in the second quarter with 1,445,528 square feet in leasing activity. This represents a 55% growth for the region as compared to the same period last year, and almost double the tech office leasing activity in San Francisco for the second quarter of this year.
Additional information may be found here.
Grants Made Available to Small New Jersey Landlords: New Jersey Landlords of properties containing three to ten units are eligible for grant funding if they did not receive full rent between April and July, 2020. The Small Landlord Emergency Grant Program, a federally funded program, is being overseen by the New Jersey Mortgage and Finance Agency (NJMFA). The $25 million in grant funds were received via the CARES Act. Winners will be randomly chosen via computer, and the grant amount will depend on the number of units for low and moderate income tenants as well as the amount lost. There is no cap on the amount landlords can receive from the program, however landlords must forgive outstanding rent and fees accrued since April 2020, in order to be eligible. Vacation and seasonal rental properties are not eligible for the program. Landlords will not be required to repay the funds, unless the State of New Jersey determines they falsified information. Applications will be accepted through August 26, 2020 at 1 P.M. and winners will be posted on the NJMFA website.
Additional information may be found here and the application may be found here.