Saturday, January 28, 2023
Market-Reporter
  • Home
  • Markets
    • U.S. Markets
    • Canada
    • Europe & Middle East
    • Emerging Markets
    • Asia
    • Latin America
  • Investing
    • Stocks
    • IPOs
    • Mutual Funds
    • ETFs
    • Bonds
    • Commodities
    • Currencies
    • Cryptocurrencies
  • Economy & Politics
    • Personal Finance
    • Spending & Saving
    • Retirement
    • Real Estate
No Result
View All Result
  • Home
  • Markets
    • U.S. Markets
    • Canada
    • Europe & Middle East
    • Emerging Markets
    • Asia
    • Latin America
  • Investing
    • Stocks
    • IPOs
    • Mutual Funds
    • ETFs
    • Bonds
    • Commodities
    • Currencies
    • Cryptocurrencies
  • Economy & Politics
    • Personal Finance
    • Spending & Saving
    • Retirement
    • Real Estate
No Result
View All Result
Market-Reporter
No Result
View All Result
Home Real Estate

COVID-19 aftereffects continue to drag on Chicago commercial real estate

MtR by MtR
June 25, 2021
in Real Estate
0


The Palmer House Hilton has reopened, but foreclosure looms. Gurnee Mills has won a reprieve from its lenders. The Civic Opera Building is in purgatory.

After a scary 2020 for commercial real estate investors, the fading pandemic and recovering economy are easing their worst fears of a prolonged and painful slump—and wave of foreclosures. But the market’s 2021 comeback won’t save all of real estate’s long-haulers, the properties that remain beset by debt woes caused or exacerbated by COVID-19.

The Chicago-area delinquency rate on a key category of debt, commercial mortgage-backed securities, or CMBS, fell to 11.2 percent in May, according to Trepp, a New York-based research and consulting firm. That’s an improvement from the peak of 14.0 percent in June 2020, but it could take years for the rate to return to its pre-COVID level of 2 to 3 percent.

“I don’t think we’re out of the woods yet,” says Tom Fink, senior vice president and managing director at Trepp.

That statement applies to some of the biggest properties contributing to the area’s high delinquency rate. The 1,635-room Palmer House, the city’s second-largest hotel, reopened June 17 after being closed due to the pandemic for 15 months. But its future remains a question as its owner, New York-based Thor Equities, tries to resolve two foreclosure suits totaling more than $410 million.

Gurnee Mills, the area’s third-biggest mall, with about 1.9 million square feet, is in a better spot. After defaulting on about $124 million in CMBS debt last year, the mall’s owner, Indianapolis-based Simon Property Group, negotiated a forbearance agreement with a loan servicer in December, protecting the property from a potential foreclosure suit.

In the West Loop, the owner of the Civic Opera building, Nanuet, N.Y.-based Berkley Properties, also is trying to work out a forbearance agreement after stopping payments on about $164 million in CMBS debt, according to public securities filings. Foreclosure is a still possibility.

The properties represent the three real estate sectors—hotel, retail and office—hit hardest by the pandemic. Hotels suffered massive losses last year as business and leisure travel came to a halt and occupancies plunged.

The CMBS delinquency rate for Chicago-area hotels jumped to 57.1 percent in October, largely due to the Palmer House’s troubles, and has declined only slightly since then, to 55 percent in May, according to Trepp. Local hotels with delinquent CMBS debt include the W Chicago City Center, the Marriott Chicago River North and the Hilton Orrington Evanston.

A rebound in tourist and business travel could lift many hotels out of the danger zone. The owners of some, like the Godfrey in River North, have already worked out loan modifications.

But lenders, after being patient with delinquent hotel owners during the pandemic, also could start demanding that borrowers do more to recapitalize their properties now that the market’s improving, says attorney David Neff, a partner at Perkins Coie who specializes in hotel bankruptcies and restructurings. If a hotel owner asks a lender to forgive some of its debt, the lender will require the borrower to invest more equity in the property, he said.

“I think you’re going to see lenders get more aggressive,” says Neff, who represents lender Wells Fargo in one of the foreclosure suits against the Palmer House.

Though he wouldn’t make any predictions about the Loop hotel’s fate, Neff says the hotel’s reopening is a positive step. A Thor spokeswoman declines to discuss the suits but says Thor “looks forward to a lively summer” at the hotel.

The recovering economy also is a good sign for retail landlords, which were crushed last year as retailers went bankrupt, closed stores or stopped paying their rent. The CMBS delinquency rate for Chicago-area retail properties rose as high as 29.6 percent in August, according to Trepp.

In an encouraging sign, retail delinquencies dropped to 11.9 percent in May. Owners of some big properties, like Yorktown Center in Lombard and North Riverside Park Mall, have negotiated loan modifications and averted foreclosure. Rather than seizing a big mall and bringing in another firm to fix it, many loan servicers and lenders would rather work out a deal with a mall owner that has the expertise to turn it around.

“People are trying to be rational about what they’re doing, because the alternative is to be a hard-ass and take a loss,” Fink says.

Still, the long-term outlook for retail is anything but bright. For many housebound consumers, the pandemic merely reinforced the convenience of online shopping, which had been taking big bites out of the brick-and-mortar retail sector for years. Though shoppers are returning to stores, e-commerce will remain a growing threat to shopping malls and other properties, one reason to expect more distress in the future.

The future is uncertain for the office market, too. The CMBS delinquency rate for local office properties has edged up but is still relatively low, just 3.8 percent in May. The question is what happens in the coming years: Will demand for office space decline as more professionals work from home in the post-pandemic era? No one knows right now, but Fink is bracing for higher delinquencies.

“Office is going to be a slow burn,” he says.

Just one big downtown property, a 487,000-square-foot office building at 401 S. State St., fell into foreclosure last year, and its owner handed the building over to its lender. Rialto Capital, the loan servicer overseeing the Civic Opera Building, has not ruled out a foreclosure suit against the 915,000-square-foot tower at 20 N. Wacker Drive, according to public filings.

Though Berkley, the owner of the Civic Opera Building, stopped making mortgage payments, the property’s problems are mostly temporary, says Brian Whiting, president of Chicago-based Telos Group, the building’s leasing agent. Two co-working tenants, Bond Collective and TechNexus, had a hard time making rent payments as people stopped coming into the office, but their business is coming back, Whiting says. He’s confident Berkley will be able to work out an agreement with Rialto.

“There are amicable discussions going on between the lender and the landlord,” he says.

Investors that seek out distressed properties could find some compelling opportunities in the future. The volume of distressed deals has been pretty low so far, but it’s still early, says Jim Costello, senior vice president at Real Capital Analytics, a New York-based research and consulting firm.

But the deals will require different skills than those employed after the recession of 2008-09, he says. Many properties that ran into trouble then suffered from financial distress: They were simply carrying too much debt that financial pros restructured.

This time around, more properties are suffering from operational distress—not enough cash flow. It takes a different person to solve those problems, Costello says.

“It’s not the financial sharpshooter,” he says. “It’s the people who understand the cost of rebar.”



Source link

Related articles

Investment in overseas real estate surges : The DONG-A ILBO

August 11, 2022

Global anxiety over Chinese real estate crisis

August 10, 2022

Related Posts

Investment in overseas real estate surges : The DONG-A ILBO

by MtR
August 11, 2022
0

Ms. Kim in her 50s plans to go on a field survey to New York to see a studio condominium...

Global anxiety over Chinese real estate crisis

by MtR
August 10, 2022
0

The world’s second largest economy might have a real estate crisis looming. If that reverberates over to it’s globally-wired-in financial...

Health Care Real Estate Company Names New GC Ahead of Possible IPO

by MtR
August 10, 2022
0

Irvine, California-based real estate investment trust American Healthcare REIT has hired a new general counsel, less than a month after...

A day in the life of a Blackstone real estate associate

by MtR
August 10, 2022
0

Day in the life: Serena, Real Estate Management Associate at Blackstone, London Serena graduated from Cambridge University with a degree...

Boardwalk Real Estate: Q2 Earnings Snapshot

by MtR
August 10, 2022
0

CALGARY, Alberta (AP) _ Boardwalk Real Estate Investment Trust (BOWFF) on Tuesday reported a key measure of profitability in its...

Load More
  • Trending
  • Comments
  • Latest

Bank of England tells ministers to intervene on digital currency ‘programming’

June 21, 2021

Tips for checking smoke alarms during daylight saving time

March 12, 2022

GLOBAL MARKETS-U.S. stocks follow Europe up; Treasury yields rise, dollar firm

July 9, 2021

What will Durham County education bonds pay for? A full list

July 8, 2022
African currencies week ahead: Zambia's kwacha seen on back foot, Kenyan shilling up – Business Recorder

African currencies week ahead: Zambia's kwacha seen on back foot, Kenyan shilling up – Business Recorder

0
Maxum Foods releases Global Dairy Commodity Update for June

Maxum Foods releases Global Dairy Commodity Update for June

0
Letter: Perpetual bonds can help states fight hunger

Letter: Perpetual bonds can help states fight hunger

0
United Kingdom ETFs Are Riding the Re-Opening Momentum

United Kingdom ETFs Are Riding the Re-Opening Momentum

0

Investment in overseas real estate surges : The DONG-A ILBO

August 11, 2022

U.S. inflation CPI report, Wall Street, currencies

August 10, 2022

Alberta oil production set new record in first half of 2022

August 10, 2022

Industrial Lubricants Market to Reach $71 Billion by 2027.

August 10, 2022

Recent News

Investment in overseas real estate surges : The DONG-A ILBO

August 11, 2022

U.S. inflation CPI report, Wall Street, currencies

August 10, 2022

Alberta oil production set new record in first half of 2022

August 10, 2022

Categories

  • Asia
  • Bonds
  • Canada
  • Commodities
  • Cryptocurrencies
  • Currencies
  • Emerging Markets
  • ETFs
  • Europe & Middle East
  • IPOs
  • Latin America
  • Mutual Funds
  • Personal Finance
  • Real Estate
  • Retirement
  • Spending & Saving
  • Stocks
  • U.S. Markets
  • Privacy & Policy
  • About Us
  • Contact Us
  • Advertise with us

© 2021 Copyright Market-Reporter

No Result
View All Result
  • Home
  • Markets
    • U.S. Markets
    • Canada
    • Europe & Middle East
    • Emerging Markets
    • Asia
    • Latin America
  • Investing
    • Stocks
    • IPOs
    • Mutual Funds
    • ETFs
    • Bonds
    • Commodities
    • Currencies
    • Cryptocurrencies
  • Economy & Politics
    • Personal Finance
    • Spending & Saving
    • Retirement
    • Real Estate

© 2021 Copyright Market-Reporter