Features

InterFace Panel: Multifamily Lenders Have Reason to Kill Deals

by Taylor Williams July 25, 2023

By Taylor Williams HOUSTON — Industry professionals say that while the fundamentals that underlie multifamily properties in major Sun Belt markets are quite healthy, the broader conditions of the U.S. capital markets are so choppy and disruptive that lending volumes are depleted across the board. The dearth of deals isn’t exclusively attributable to the Federal Reserve raising interest rates, which has now happened 11 times in 17 months. The nation’s central bank is now targeting a short-term benchmark range from roughly 5.25 to 5.5 percent, the highest level since 2001. Underwriting standards are tightening as owners reckon with serious increases in property taxes and insurance, among other items. Major banks are scaling back their originations in favor of keeping more reserves on hand in anticipation of exposure to defaults on office loans that are coming due within the next 12 to 18 months. The wounds of the collapses of regional lenders Silicon Valley Bank and Signature Bank in March are still fresh, and the country is scarcely a year removed from what will assuredly be a heated and divisive presidential election. For debt providers, the combined effect of those factors is major reluctance to transact. Lenders and investors have largely shifted …

July 25, 2023

Features Single-Family Rental

Why the Single-Family Rental Market Remains an Unstoppable Force

by Jeff Shaw July 21, 2023

— By Mark Wolf, AHV Communities — As we approach the second half of the year, much has transpired across the economy, the real estate sector and the single-family rental (SFR) arena. We’ve witnessed the negative impacts of record inflation, slowed investment activity accompanying the Federal Reserve’s continued interest rate hikes and the second and third largest bank failures in U.S. history. With real estate lending now hampered across all asset classes, rippling effects are being witnessed across SFRs as well. Although make no mistake — the sector will emerge stronger. The single-family, build-to-rent (BTR) model is only about a decade old and was spawned following a global financial crisis. The few that introduced the concept of SFR communities purpose-built from the ground up will attest that the first several years in the business were challenging. BTR got off to a choppy start Convincing institutional capital of the merits of the business model proved an uphill battle. It wasn’t until just the past few years that investment in the BTR sector ultimately exploded, resulting in both an onslaught of new communitydevelopments, as well as multitudes of players joining the sector looking to capitalize on the opportunity. Unfortunately, many of these …

July 21, 2023

Features Georgia Industrial Loans Multifamily Office Retail Southeast Southeast Feature Archive

Lenders, Borrowers Are in a Holding Pattern Until Interest Rates Settle

by John Nelson July 19, 2023

The U.S. economic picture is an opaque one for lenders and borrowers alike as inflationary pressures persist and the massive swings in interest rates are still working their way through the economy. At its May meeting, the Federal Open Markets Committee (FOMC) raised the federal funds rate for a 10th consecutive time to a target range of 5 to 5.25 percent. The fed funds rate is the interest rate that U.S. banks charge each other to lend funds overnight. This time a year ago, the short-term benchmark rate was at a range of 0.75 percent to 1 percent. Raising the feds fund rate is the primary way that the Federal Reserve combats inflation, which was at a 3 percent annual rate in June, according to the Bureau of Labor Statistics’ Consumer Price Index (CPI). The CPI is at its lowest level in more than two years, which is generally viewed as a positive sign for economic stability, though the June figure is 100 basis points more than the Fed’s target inflation goal of 2 percent. Jason Scott, managing director and head of conventional loan production at Regions Bank, estimates that it can take six to eight months for each interest …

July 19, 2023

Features Office

JLL Report: Central Business Districts Will Evolve in Light of Vacant Offices

by Jeff Shaw July 17, 2023

It will likely surprise no one, given the wealth of coverage on the issue of reduced office usage, that office vacancy is the top challenge currently facing central business districts (CBDs) worldwide, according to a recent report by JLL. Long and costly commutes, property obsolescence, competition from other submarkets and unstable demand are the other top hurdles for CBDs. Far from pessimistic though, the report — The Future of the Central Business District — says that CBDs can and will adapt to the new landscape, with government officials and commercial real estate players holding the power to “unlock the future potential of CBDs.” Hybrid work presents a hindrance According to research presented in the report, roughly 60 percent of workers “expect flexible arrangements” when it comes to their presence in their offices, with hybrid working arrangements (comprising schedules that are partly remote and partly in-office) becoming increasingly popular. Workers, the report states, now spend an average of 2.3 days of the week remotely, and office vacancy in the United States sits at 20.2 percent. Aside from the implications for the office sector, the woes of which are well documented, the absence of workers from offices translates to reduced foot traffic in retail …

July 17, 2023

Features Heartland Feature Archive

APTC: Here’s How to Improve Your Chances of Successfully Appealing Excessive Property Taxes

by Kristin Harlow July 13, 2023

By Jerome Wallach, The Wallach Law Firm Owners of large commercial real estate portfolios typically have internal staff to deal with assessed property values and the resultant taxes on a regular basis. But what about owners of small- or medium-value properties? How can a taxpayer, without knowledgeable staff or outside assistance, determine whether their assessment is fair or if they should seek an adjustment? And if seeking a reduction seems appropriate, going it alone through discussion with the assessor may be productive. Any such informal review or discussion should be the result of careful consideration and preparation. The following points are essential in that review and will help the taxpayer build and present a strong case for a reduced valuation. Getting started A government representative, usually the county collector, issues a property tax bill based on the value the county assessor has placed on the taxpayer’s real estate. The property owner may launch an appeal to contest that assessed value. However, in many states, the tax bill arrives after the due date for appealing the assessor’s valuation. Owners should review their property’s assessed value each year. Begin the process as soon as the assessor posts new values to its website, …

July 13, 2023

Features Retail

New Breed of Food Halls Goes Beyond Dining

by Hayden Spiess July 11, 2023

Deciding where to eat out is a conundrum familiar to many an American consumer. The plethora of food-and-beverage concepts now dotting the retail landscape complicate the question. Food halls embody a sort of paradox — they act as a microcosm of all this variety, while simultaneously removing the need to select a single restaurant. As Michael Morris, chief executive officer of Food Hall Co. puts it, consumers “can come in with various different dietary restrictions or desires and find something for everyone.” Nearly five years ago, founders Jack Gibbons and Randy DeWitt of Front Burner Restaurants (also known as FB Society) were approached by a Plano, Texas, developer interested in establishing a food hall. This resulted in the company’s first location — Legacy Food Hall — and the genesis of Food Hall Co. itself. A food hall located at Fifth and Broadway in Nashville, dubbed Assembly Food Hall, has since joined the portfolio, and though the company’s footprint currently stands at two, Morris says this won’t be the case for long. Everything’s Bigger in Texas One aspect of Food Hall Co.’s locations that distinguishes them from other food halls is their sheer size. While Morris says that the typical food …

July 11, 2023

Affordable Housing District of Columbia Features Loans Multifamily Seniors Housing Southeast Southeast Feature Archive Student Housing

Rising Interest Rates Take Toll on Fannie, Freddie Deal Volume

by John Nelson July 7, 2023

The multifamily divisions of Fannie Mae and Freddie Mac are off to a slow start this year as the government-sponsored enterprises (GSEs), their network of lending partners and multifamily borrowers contend with rising interest rates. Fannie Mae’s volume of new multifamily business totaled $10.2 billion in the first quarter of 2023, which is a 36 percent decrease from the same period a year earlier when the agency closed $16 billion. Freddie Mac closed $6 billion in new multifamily business in the first quarter, a year-over-year decrease of 60 percent. Seasoned agency lending professionals all point to elevated borrowing costs as the primary reason for the two agencies closing less business thus far in 2023. “The rapid increase in rates across the board has really been a shock to the industry,” says Vic Clark, senior managing director and head of conventional multifamily production at Lument. At its May meeting, the Federal Open Markets Committee raised the federal funds rate to a target range of 5 to 5.25 percent. The fed funds rate is the interest rate that U.S. banks charge each other to lend funds overnight. This time a year ago, the short-term benchmark rate was at a range of 0.75 …

July 7, 2023

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How Future-Proof Is Your Multifamily Property’s ISP?

by Sarah Daniels July 6, 2023

Technology, like commercial real estate, becomes increasingly vulnerable to the need for replacement and updates over time. Just as multifamily landlords can update properties by periodically replacing outmoded flooring and fixtures to suit the latest occupier preferences, technology must also keep up with the latest trends. For the best renter experience, multifamily properties need Internet connectivity that will serve residents as their technological needs grow and their tolerance for frequent outages diminishes. Disruptions associated with repairs or network upgrades can threaten customer satisfaction and renewal rates. Unfortunately for many landlords who rely on traditional telecommunications lines for their properties’ Internet, modern usage is straining older infrastructure. Booming wireless technology use is gobbling up bandwidth to connect everything from consumers’ phones and laptops to fitness monitors, smart TVs and other household appliances. As a vice president of product catalog who has worked for over a decade at broadband service provider Pavlov Media, John Danner understands the problem of limited Internet bandwidth all too well. He is eager to see technological improvements that will replace these old systems. “The old copper infrastructure can’t meet the requirements of the next generation of wireless connectivity,” explains Danner. “With fiber-optic connections, the sky is the …

July 6, 2023

Features Retail

Investment Sales Outlook: Unanchored Retail Continues to be a Strong Long-Term Option

by Taylor Williams June 29, 2023

By Jeff Enck, senior vice president, SRS Real Estate Partners Throughout the world of retail investment sales, reality is setting in. Buyers and sellers of unanchored retail shops are adjusting to lingering market uncertainty, which, at least for now, seems to be here to stay. Over the past 12 to 18 months, the Federal Reserve has doused the white-hot, inflation-powered economy with buckets of interest rate hikes, increasing the effective federal funds rate from .08 percent at the beginning of 2022 to 5.08 percent today. Based on the central bank’s latest public signals, it doesn’t appear that interest rates are coming back down anytime soon. But it’s important to note that, historically speaking, they are not significantly high. Debt Challenges Continue Insurance companies, credit unions and relationship-driven lenders are financing the majority of retail deals in the market today. Typical bank loans, however, have slowed significantly as some institutions are either inactive or face rates are too high to meet debt service coverage ratios. Some private investors are buying with all cash or closing with cash plus lines of credit. A recent example of a “new normal” deal involves a life insurance company loan on a purchase transaction of a $15 …

June 29, 2023

Features Office

Brokers, Architects Pursue Solutions to Office Market Woes

by Kristin Harlow June 28, 2023

There’s no denying the office sector is undergoing a critical period marked by myriad challenges. The question is, how will it all turn out? Currently, the inventory of U.S. office space is 5.56 billion square feet — and will likely reach over 5.68 billion square feet by the end of the decade. But today’s “flexible” workforce will only require 4.61 billion square feet to accommodate its needs, according to a Cushman & Wakefield report titled “Obsolescence Equals Opportunity.” “The U.S. will end the decade with 1.1 billion square feet of vacant office space, 740 million square feet of which qualifies as normal or natural vacancy and 330 million square feet of which qualifies as excess vacancy attributable to remote and hybrid strategies,” the report states. “The overall level of vacancy will therefore be 55 percent higher than was observed prior to the pandemic.” Those numbers are jarring, but opportunists say the office sector just needs to evolve and adapt, much like the retail market has done. “Just as retail didn’t die in the years following the e-commerce boom, the office sector is not in danger of demise,” states the Cushman & Wakefield report. “Recognizing the challenges and opportunities head-on with …

June 28, 2023

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