Sunday Summary: Anyone Bring Up Signature Bank or Immigration at Thanksgiving?
As we were shaving yesterday morning we nicked our cheek — and out came gravy.
Yes, we’re still full from Thanksgiving. And, yes, we’re still not talking to Uncle Irv thanks to that ill-advised decision to go around the table and ask everyone to give their “most controversial take of 2023.”
Why do we mention things like, say, the immigration crisis and how landlords are responding and expect a calm, reasonable conversation on Thanksgiving? These things always turn into a nuclear-level family squabble. Better to stuff your gob with turkey, mashed potatoes, cranberry sauce, and pumpkin pie and fall asleep on the couch. So that’s what the good folks at Commercial Observer largely did.
But even in the mists of tryptophan we couldn’t help but think back on another controversial real estate take that was uncovered a few days earlier.
On Monday, Nov. 20, it was revealed that an affiliate of Related Companies had been handed one of the sweetest plums in the real estate orchard. The Wall Street Journal reported that the developer, along with the nonprofit Community Preservation Corporation and Neighborhood Restore, had been chosen by the FDIC as the winning bidder for a portfolio of billions of dollars worth of Signature-backed loans.
The Journal further said that Related was paying less than 70 cents on the dollar for the loans.
While the name Related was always one of the obvious contenders, the discount raised immediate eyebrows.
Commercial Observer quickly began calling around and discovered multiple parties that had bid 80 cents on the dollar — or more! And we’re not talking about bush league amateurs whose bid could be discarded as wishcasting. Among those who had beaten Related’s number were Brookfield Asset Management and Tredway, which had teamed on a bid; Skylight Real Estate Partners, which made a bid with Rithm Capital; and Brooksville and Sabal, which had also gone in together on a bid. And those are just the ones CO could ID.
“My guess is that the fact that Related is teaming up with the Community Preservation Corporation and Neighborhood Restore is the reason the FDIC is choosing Related,” opined former Signature real estate head George Klett in CO. “This is a political consideration instead of a financial one.”
And, beyond the lost capital of the cheaper bid, the deal disappointed many in the real estate business who had hoped that the Signature sale would offer some clarity on how to price their own assets.
“This is not good for New York City because other banks are now going to have to mark their books to market,” a source told CO.
Speaking of Related…
The other Related (the Florida one) also had a pretty good pre-Thanksgiving.
Casa Bella Residences by B&B Italia, the 56-story condo that Related Group is building with Alta Developers, managed to nail a $240 million loan from Cain International to begin construction in Miami’s Arts & Entertainment District.
We were thinking about Florida because we also saw last week that Starwood launched a new “Starwood Solutions” platform out of its Florida office, from which it will be offering its trusty Starwood expertise on restructuring, portfolio valuations, underwriting and due diligence, and a host of other real estate consulting services.
“There has never been a better time to launch this vertical — one we hope will become our eighth business line,” said Starwood’s Jeffrey DiModica on the company’s third-quarter earnings call.
We’d say that Starwood should go out and celebrate at the forthcoming Moon Thai & Japanese restaurant or Rosemary’s in Wynwood, but we don’t know if anyone will be hungry no matter when they open after everything we ate Thursday.
Lose-Lose in La La Land
For a second we thought that landlords might have caught a big break in Los Angeles — a town that has no love for landlords, to say the least.
It was looking somewhat positive earlier this month when L.A. lawmakers allowed at least some increases for stabilized apartments when they voted to lower the cap on rent.
It sounded like a moment to break out the Champagne for landlords. But before anybody gets too happy, the University of Southern California’s Lusk Center for Real Estate threw some cold water on our general expectations (and just before the holiday, too).
According to its 2023 USC Casden Real Estate Economics Forecast, multifamily rents are expected to rise in the next two years throughout Southern California, but, “What’s concerning is the coming tidal wave of maturing debt in commercial real estate. Refinancing loans at nearly double the original interest rates will be difficult,” said Moussa Diop, associate professor of real estate at the USC Sol Price School of Public Policy, who wrote the report.
Well, at least there was some interesting activity in L.A. Travelers Insurance took a sizable 42,000-square-foot lease at Gateway Corporate Center in Diamond Bar; Tejon Ranch Company managed to bag a $160 million unsecured revolving credit facility with AgWest Farm Credit; and Onni Group unveiled a proposal for two 36-story apartment buildings at 601 North Brand Boulevard in Glendale.
Shop ’til you drop
Of course, between Thanksgiving and today was Black Friday, the start of the holiday shopping season.
We’ve seen some interesting developments in suburban shopping. Rents in suburban markets such as Westchester County have been up to $29.32 per square foot for Class A properties, as compared to $23.42 nationally (per Newmark). And a lot of urban brands like Cava and Sweetgreen are finding that the suburbs are ripe for expansion.
Moreover, big boxes like Ross Dress For Less, TJ Maxx, Nordstrom Rack and World Market have been taking space.
Something to keep in mind as you elbow your way through the competition in the run up to Christmas and Hanukkah. (Provided, of course, you don’t want to make it easy and just give Bezos your money now.)