So, more details are out on Block 37. Work from the awesome team at Crain's is that apparently Muvico walked from its anchor lease at the property but offered to come back at better (read: cheaper) terms. In other words, it looks to me like the old tenant cramdown.Freed, not wanting to lose the deal and presumably sensing it could still make money, takes the deal to Bank of America. Why? Because the lender as a rule in deals like this has the right to approve major leases or material modifications to existing leases. Sometimes there will also be specific criteria under which the borrower...
Block 37: foreclosure, receivership and all that
Is this a classic case of no good deed going unpunished? Or is it just a lender enforcing its rights, albeit at an awkward time.Bank of America, as the lead lender, is foreclosing on the retail portion of the long-awaited and oh so troubled Block 37 in downtown Chicago and will be in court this afternoon to have CBRE appointed as a receiver to keep the project going, including finishing construction. Unless there are some defenses sitting out there that we'll hear about, legally they presumably have that right, and even though Freed says construction could grind to a halt, surely the loan documents...
Kiosks -- for all you microretailer wannabes out there....
Here's a neat little piece about renting kiosks in the LA Times. I don't really remember seeing them in malls as a little kid, but installing them made so much sense. By putting them in what was once common area of the center you essentially create found money. (There are also common area carts, which is a slightly different beast; contact me if you want to know more.)It can also be a win-win for both parties. As the article says, kiosks can be a cheaper way for beginning retailers to get into the business, perhaps with a cheap(er) and short(er) term lease. And for landlords, while the rent...
Statistics on lender recovery by sector
Here is an interesting story citing a study by Real Capital Analytics showing that lenders might expect to recover about 60% of their investments on defaulted commercial loans that have been liquidated, with varying numbers by sector. Is that an incentive to renegotiate deals, extend and maybe pretend, or to look to sell the notes, take the 60% and run?The 60% is before costs and fees, by the way. I think it might be a sign that everyone is going to have to take a hit in this market. But we knew that already. My one quibble with the study has nothing to do with the methodology of RCA but...
CRE "failures:" A ripple, a wave or a tsunami?
Ask around. I have. Today's Journal has a story stating that Peter Cooper Village and Stuyvesant Town is in imminent danger of default (well, meaning two to four months), and that will be "signaling the beginning of what is expected to be a wave of commercial-property failures."It could be. We keep reading and hearing about the coming crash. But then you have Harvey Green telling us that the shoe hasn't dropped and will stay on the foot, albeit unlaced. (H/T to Jeff Vinzani for pointing this out to me via Twitter.) Green's take is that lenders needs to get a little more to the center. (I...
What a difference a year or two makes - random thoughts
Just a few quick observations and thoughts on the real estate market on a rainy Thursday:My nephew works at a bank and he tells me anecdotally that only 25% of mortgage loan applications are being approved. Is that tight underwriting, a lack of desire to loan, lack of capital, or something else?On a related note, lenders are really taking underwriting seriously. While it can be a pain, I think that is a good thing so long as the lender is actually doing deals.I'm looking at the October issue of ICSC's monthly magazine, Shopping Centers Today. At a mere 54 pages, it is a tiny fraction of the...
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trends
What has me worried
Yesterday we saw some optimism about cap rates and interest spreads that made me feel good. But what still has me worried?1. The dollar. We keep printing money and are running obscene deficits in the hopes that it will bring back the economy. Is the the 1970s (or even the New Deal) all over again, albeit on steroids? Remember, we are not out of the woods yet. And this story about the allegedly planned demise of the dollar as a reserve currency really spooked me. Maybe a weak dollar might encourage foreign investment in CRE in the US -- I understand that -- but that does not necessarily make...
Lamentable or not -- we lost. What next?
Losing the 2016 Olympics seems like a big bust for some people, including in the CRE industry. Yes, we lost a lot of potential public and quasi-public projects because the IOC decided to send the 2016 Olympics to Rio. By the way, does anyone seriously believe the 80,000 seat Olympic Stadium could have been built for $397.6 million? We all know on-budget Soldier Toile....err....Field and Millennium Park were. But this post is not about second guessing. Instead, where do we go from here? Infrastructure improvements, to me, seem to be the most important thing to concentrate on. Let's assume...
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Chicago
Cap rate spreads - making sense?
I really like this analysis by David Lynn posted at NREI. Why? Because it makes sense to me.At one point, the numbers were insane. People buying deals at a 4 cap with the unfounded expectation that the bubble would go on and on and on smelled of tulips in Rotterdam. And yes, the frost came.But look at the charts now, if you happen to be a chart person. Add in your risk premium and real estate is slowly starting to make sense again. Buy at a 10, sell at a 8 is the maxim I have mentioned here before. And as the caps reach reasonable levels, real estate's making sense again. That is the beauty...
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cap rates
Get a life? Insurance that is, for a CRE loan....
What do you think of these thoughts from Chris Vittetoe, now of HFF? (I have done deals with HFF in the past and like the way they work, by the way.)He tells us 80% of life insurers -- an old, traditional way of getting good size deals done before the CMBS boom -- are in the market. Of course, your LTVs are at 65% but decent rates, and then some aren't really back if you read this sentence: "We just met with one lender that has allocated $30 million for LA County for the rest of the year. That is $30 million for all real estate assets including office, retail and so on." That is one decent...