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Student housing operators are optimistic about demand in markets where universities will hold face-to-face classes this fall, but have a gloomy outlook for markets where universities will shift entirely online.

Uncertainty looms over off-campus student housing operators in markets where universities have elected to go entirely virtual, says Sean Baird, director of the national student housing group with real estate services firm Colliers International. They do not know whether students will honor the leases they signed or what their final occupancy will look like for the upcoming academic year. They are looking at the upcoming school year through unfavorable lenses and expecting high vacancies.

For student housing owners in markets where universities are reopening in person, there is a great amount of optimism, says Baird. A number of these universities are re-evaluating their on-campus housing strategies by eliminating double, triple, and quadruple occupancy bedrooms, while also taking entire on-campus dorms off-line in order to use as housing for COVID-19 positive students to quarantine. That has created a surge in demand as more students are pushed into the off-campus housing market.

Nationally, the student housing pre-leasing level for the fall 2020 semester stood at 74.9 percent as of June 2020, according to Carl Whitaker, market analyst with RealPage Inc., a provider of property management software and services. That was about 500 basis points below the June 2019 reading. According to data provider Yardi Matrix, student housing pre-leasing level through June 2020 was 2.9 percent below last year’s levels, according to Doug Ressler, manager of business intelligence with the company.

Student housing operators are optimistic about demand in markets where universities will hold face-to-face classes this fall, but have a gloomy outlook for markets where universities will shift entirely online.

Uncertainty looms over off-campus student housing operators in markets where universities have elected to go entirely virtual, says Sean Baird, director of the national student housing group with real estate services firm Colliers International. They do not know whether students will honor the leases they signed or what their final occupancy will look like for the upcoming academic year. They are looking at the upcoming school year through unfavorable lenses and expecting high vacancies.

 

For student housing owners in markets where universities are reopening in person, there is a great amount of optimism, says Baird. A number of these universities are re-evaluating their on-campus housing strategies by eliminating double, triple, and quadruple occupancy bedrooms, while also taking entire on-campus dorms off-line in order to use as housing for COVID-19 positive students to quarantine. That has created a surge in demand as more students are pushed into the off-campus housing market.

Nationally, the student housing pre-leasing level for the fall 2020 semester stood at 74.9 percent as of June 2020, according to Carl Whitaker, market analyst with RealPage Inc., a provider of property management software and services. That was about 500 basis points below the June 2019 reading. According to data provider Yardi Matrix, student housing pre-leasing level through June 2020 was 2.9 percent below last year’s levels, according to Doug Ressler, manager of business intelligence with the company.

“We are well poised for the year as we are 90 percent pre-leased... We hope to further benefit from a supply reduction of over 55,000 on-campus beds in the markets we serve as a result of university plans to de-densify and hold quarantine beds offline,” says William Talbot, chief investment officer of American Campus Communities, a REIT that invests in dormitory housing. “Our leasing trends and consumer sentiment at this time make us cautiously optimistic that we are on a path that many would have considered a best-case scenario at the outset of this pandemic.”

Colliers data should that the lowest reported pre-leasing level for any student housing operator it tracks for fall 2020 was at 90 percent, while the highest was at 97.6 percent, according to Dorothy Jackman, executive managing director of the national student housing group with the firm. That represents roughly 360,000 beds nationwide.

“It’s worth noting that June 2020 saw a month-over-month increase of about 6 percent. That was about the same pace of increase in June 2019, which might indicate that pre-leasing is now back on track after the April and May hiccup,” says Whitaker. “As most schools have now announced either return to campus or some hybrid offering, both students and operators regained a little confidence, in turn boosting pre-lease figures.”

For example, the University of West Virginia, among other universities across the country, will implement a phased return in the fall on its Morgantown campus. That means the university will delay resident hall move-ins by a week and start of school by another two weeks, in order to spread out students’ arrivals, says Benjamin Modleski, president of Core Spaces, a student housing developer.

At the moment, only about 4 percent of universities nationwide plan on going fully online, while the other 96 percent will operate under some sort of mixed hybrid model of in-person and online instruction, according to Core Spaces research.

Meanwhile, the pandemic has shifted the student housing industry in terms of design and operational use of amenities, according to Talbot. Students now prefer modern apartment and suite-style accommodations that more easily allow for better control over sanitization and physical distancing, he notes. Furniture, fixtures and equipment solutions will more than likely be updated to meet those needs.

“One of the biggest trends and future question marks that remains is whether universities plan to discontinue double, triple, and quad occupancy bedrooms into the future. If so, there will be a large uptick in rates in many markets where the off-campus housing was already in tight supply,” says Baird. “The resulting effects could be a surge in both on- and off-campus student housing development over the next few years and a replacement of aging, outdated housing.”

Source: National Real Estate Investor

KEY POINTS

Advanced economies have grappled with subdued inflation over the last decade. This means a gradual increase in prices, which is deemed healthy in economic terms, has failed to take place. As a result, central bankers have kept interest rates low since 2008 in an attempt to create price inflation. But, their actions did not push consumer prices to where they wanted.

Many market players believe this is unlikely to change in the wake of the coronavirus outbreak, citing the scale of the economic shock and a higher unemployment rate.

“With the US and global economies in the midst of one of the deepest recessions and output gaps on record, most investors we speak with have dismissed our call for higher inflation risks,” Morgan Stanley said on Sunday in a research note.

“However, it’s the fiscal response that’s really different this time,” the bank said, drawing a comparison to the 2008 crisis.

The investment bank believes the vast sums of money put into keeping people in work and supporting those that have been made unemployed could make a difference in driving up inflation.

The U.S. Congress is currently discussing a second round of $1,200 stimulus checks aimed at supporting Americans weathering the ongoing economic shock.

“Congress is now in the driver’s seat when it comes to the money supply with its fiscal programs… This is potentially more inflationary than appreciated, which means that back-end rates can rise,” Morgan Stanley said.

“Very few portfolios are prepared for such an outcome. Such shifts can happen quickly when they are so unexpected,” the bank added.

In June, the Federal Reserve estimated an inflation rate of 0.8% for 2020 and 1.6% for 2021. Its mandate includes controlling inflation at around 2%.

Source: CNBC

North America’s largest convenience store chain is about to grow even larger. 7-Eleven Inc. will make its biggest single-transaction expansion in its decades-long history with the acquisition of convenience store chain Speedway. 7-Eleven, a wholly owned subsidiary of Tokyo-headquartered Seven & i Holdings Co. Ltd. since 2005, will purchase the high-quality, 3,900-store portfolio from Marathon Petroleum Corp. in an all-cash transaction of $21 billion.

The collection of Speedway convenience store and retail gasoline station properties spans 35 states from coast to coast, and offers little overlap with 7-Eleven’s existing locations, while helping to diversify the convenience store giant’s presence in the Midwest and on the East Coast. Neither party has disclosed the size of the portfolio in land and square footage; however, Marathon’s criteria for Speedway sites is a minimum 1.5 acres and, according to statistics from the International Council of Shopping Centers, the stores range in size from 3,900 to 4,600 square feet each. Upon completion of the transaction, 7-Eleven, which currently operates more than 9,800 stores ranging in size from 2,400 to 3,000 square feet in North America, will boast a portfolio of nearly 14,000 stores across the U.S. and Canada, with a footprint in 47 of the U.S.’s top 50 most populated metro areas. The agreement dovetails with 7-Eleven’s six-point plan for increasing revenue, which includes the growth of its store base as well as its modernization.

The purchase will provide 7-Eleven with additional advantages, including the bolstering of the company’s financial profile, enhanced economies of scale and a positive financial impact involving $5 billion of net sale-leaseback proceeds, for starters. 7-Eleven will finance the Speedway acquisition with a $13 billion bridge loan and an $8 billion equity infusion from its parent company, Seven & i. For Marathon’s part, the company will pocket approximately $16.5 billion in after-tax proceeds, which will be directed toward repaying debt and returning capital to shareholders. The boards of directors of both companies have greenlighted the transaction by a unanimous vote. Pending customary closing conditions, the deal is on schedule to close in the first quarter of 2021. 7-Eleven plans to retain Speedway’s 40,000-member team.

CONVENIENT ADVANTAGE

Convenience stores, like dollar stores, are among the segments of the retail sector that are keeping above water amid the COVID-19 pandemic. In the first week of May 2020, spending in convenience stores rose 3.2 percent from the same period in 2019, according to a report by

ResearchAndMarkets.com. While the number of trips declined, spending per transaction went on the upswing. “One reason for the increase in spending is that many customers are trying to avoid busy supermarkets and are less inclined to shop around and risk exposure to the virus. As a result, some consumers have decided that stocking up on pantry staples and hygiene products in their local convenience stores is a safe option,” according to the report.

Source: Commercial Property Executive

Evidence of distress in the commercial real estate realm is mounting. U.S. commercial real estate transaction activity plunged in the second quarter as the COVID-19 pandemic continues to cripple deal making. Real Capital Analytics (RCA) reports a 68% drop in transaction volume, the lowest level of a second quarter since the global financial crisis.

“There’s a lot of interest in distressed properties and loans and while they do exist, there's is still a real disconnect between buyers and sellers on what the price should be for those,” said Carol Faber, partner and co-chair distressed property practice at Akerman Law. “Owners still have a perception that their property is worth more, while opportunistic buyers are just looking for a great deal and aren’t inclined to buy anything until they feel the market has reached that point.”

Faber added that in many respects, it's still very much a wait and see. Despite a record number of loans going into special servicing and some lenders preparing to proceed with action, many are still trying to work with borrowers who have a possibility of overcoming the situation. As lenders begin to decipher which companies and borrowers have a better chance of making it out of the crisis, and which aren’t, that’s when more activity will kick off in the distressed market. Lenders in many jurisdictions are still not able to foreclose. Faber says when those restrictions end and lenders are able to enforce their rights, it will become more obvious which borrowers will be in a seriously distressed situation, which could result in a drop in pricing.

“We’re at a tipping point. There’s no way to quantify it yet, but there will be a lot of distressed loans and properties coming up. Certain industries will be more challenged, hospitality and retail mainly, and that's where there will probably be the most opportunities,” she said.

It’s clear the pain from the COVID-19 pandemic has not been experienced across all property types. RCA reported more than $30 billion in second quarter’s inflow of distress, with retail and hotel assets accounting for over 90% of that. Industrial represented less than 1% of all new distress, and Faber says student housing and office are still big question marks. The level of potentially distressed assets far outweighs that of outright distress and is distributed more evenly across property types. RCA says apartment assets accounted for more than 20% of potential distress in this quarter, while offices represented about 15%.

Growing opportunities

“The opportunities will not just be to buy distressed properties and restructure or buy a loan with an idea of potentially taking over the property if the loan is useful, but there will also be investment opportunities,” said Faber.

Borrowers who may need additional equity to survive may be looking to take in investors and partners, blowing the investing opportunities open much wider than just through buying real estate or loans.

“There will be a chance to invest into existing companies, where they won’t buy the company out, but rather invest, become partners and perhaps gain preferred equity.”

Faber adds that deals are still happening, but what is evident is that they are taking much longer to come to fruition, and there certainly aren’t as many. Certain sectors like industrial and multifamily are still doing well enough that lenders are willing to lend, buy and sell, and understand the value of those properties and how to underwrite those loans considering the uncertainty of the situation.

Source: Mortgage Professional America

After nearly a year of rumors, Facebook has changed its status to “In a Relationship” with Vornado Realty Trust at the Farley Post Office.

The social media giant inked a 730,000-square-foot deal to take the entire office portion of Vornado’s redevelopment of the landmarked former post office at 421 Eighth Avenue between West 31st and West 33rd Streets in Midtown, Vornado announced today.

 

A Vornado spokesperson did not immediately respond to a request for comment about the terms of the deal. It’s unclear who the brokers on the deal were.

“We are delighted to welcome Facebook to The Farley Building, a property like no other in New York City,” Steven Roth, the chairman and CEO of Vornado, said in a statement. “Facebook’s commitment is a further testament to New York City’s extraordinary talent and reinforces New York’s position as the nation’s second tech hub.”

Vornado’s nearly $1.03 billion redevelopment of the nearly 100-year-old Farley Building calls for adding 120,000-square-feet of retail along with the office space. It will also include the Moynihan Train Hall as part of the state-backed project to expand Penn Station which is across the street.

The redevelopment — which Related Companies is a five-percent partner in — is expected to open in phases starting at the end of 2020, according to Vornado.

Facebook has been in talks to take the office portion of the property since last summer and beat out Apple for the space, as Commercial Observer previously reported.

Despite the coronavirus pandemic and Facebook CEO Mark Zuckerberg’s announcement that up to half of its staff would work remotely in the future, the talks never broke down and the deal was originally slated to close on Memorial Day, as CO reported.

“Facebook first joined New York’s vibrant business and tech community in 2007,” Robert Cookson, the vice president of real estate for Facebook, said in a statement. “Since that time, we’ve continuously grown and expanded our presence throughout the city. The Farley Building will further anchor our New York footprint and create a dedicated hub for our tech and engineering teams.”

The Farley space will be the second massive office that Facebook will have in the area. In November, Facebook signed a lease for more than 1.5 million square feet across three buildings in the nearby Hudson Yards.

It’s also reportedly in talks to take over Neiman Marcus’ 188,000-square-foot retail space in Hudson Yards to convert into office use, which Neiman Marcus said last month it would ditch as part of the department store’s bankruptcy proceedings.

It’s unclear if the Farley Post Office deal impacted those discussions.

Source: Commercial Observer

KEY POINTS

As the coronavirus pandemic casts a long shadow over the U.S. economy, retail bankruptcies are approaching their highest number in a decade.

Le Tote, owner of Lord & Taylor, and Tailored Brands, parent company of Men’s Wearhouse, filed for bankruptcy Sunday. They’re the latest retailers pushed to the brink by the pandemic.

The additions bring the total retail bankruptcy filings so far this year to 43, according to tracking by S&P Global Market Intelligence.

With five months left in the year, there have already been more retail bankruptcies this year than in the past eight years, according to S&P Global. There were 48 filings by retailers in 2010, according to S&P Global, following tremendous tumult and financial strain across the industry during the Great Recession.

In 2008, 441 retailers filed for bankruptcy, according to S&P Global.

The pandemic has compounded challenges that some retailers faced even before Covid-19 began to spread across the country. Some, such as Lord & Taylor and J.C. Penney, were having trouble reaching new customers as e-commerce brands won more of young shoppers’ attention and dollars. Others, like Neiman Marcus, were saddled with debt.

Jan Kniffen, a retail consultant and former executive at The May Department Stores, which was eventually folded into Macy’s, said for many of the retailers, the pandemic only sped up their likely appearance in bankruptcy court.

Yet the coronavirus pandemic quickly pushed them over the edge. Shelter-in-place orders temporarily shuttered stores for weeks. Americans’ spending habits changed, as people coped with pay cuts and job losses or had less of an appetite for new clothing because of working from home and attending few social gatherings.

The pandemic could also weaken a typically busy shopping season for apparel retailers: back-to-school. Families’ shopping lists could be shorter or have different kinds of items, such as laptops and headphones, as school districts plan for staggered schedules or remote learning.

More bankruptcy filings are expected. The coming months will also reveal which of the bankrupt companies will find a way to survive through new ownership or restructuring — and which ones will be forced to permanently close stores and liquidate inventory.

Kniffen said other retailers are at risk, including women’s apparel stores J.Jill, Chico’s and Francesca’s and experiential toy retailer Build-A-Bear.

“If you’re heavily indebted, if you’re mall-based, if you’re selling something people aren’t buying now because of Covid and if you’re not an essential retailer, you’re at risk,” he said.

Here are some of the biggest retail bankruptcies so far this year, in order by the date of filing.

List of Recent BK Filings:

Investment deals are thinning out across the country and companies are holding off on making major leasing decisions, forcing commercial real estate brokers to work harder than ever before to find new ways to stay afloat.

“Of course it’s a worry, but most brokers are used to volatility in their income," said Colliers International Executive Vice President Julie Taylor, who works in the firm’s retail services group in San Francisco. “Granted, this is feeling a lot like 2009, and it’s very painful to see your pipeline reduced so dramatically and the number of active deals reduced so dramatically, but it's not the first time I’ve been through a cycle.”

With a dearth of leasing, Taylor is working to lock down more rent arbitrations and consulting work. Much of her time has been doing “triage” for existing clients, she said, and supporting those that are being rocked by the crisis. That doesn’t always result in an immediate commission, so the pressure is on to get creative and find new ways to generate cash flow.

“It’s incumbent on brokers, if they want to survive and stay relevant, to figure out how they can create benefits for their clients,” she said. Brokers across the country are fighting for a piece of a shrinking pie.

Nationally, investment sales plunged in the second quarter, dropping nearly 70% to a total of $35B in closed transactions, per CoStar data. In marquee markets like New York City, the decrease was even more severe; investment sales were down 80% in Q2 year-over-year last year.

The city’s office leasing market, after record-shattering years, dropped to its lowest level in a decade. Boston Properties CEO Owen Thomas described the market as “in discovery mode” on the company's earnings call Wednesday, saying transaction volumes for office assets are down 66% from the first quarter.

There is already some evidence brokers are being seen as expendable in the deal process. Last week, SL Green Director of Leasing and Real Property Steven Durels told investors on the company’s second-quarter earnings call that most of its renewal deals in the last two to three months have been done without the participation of brokers.

“So there's been a lot of capital savings on those deals,” he said. But that kind of comment doesn't give Savills Senior Managing Director Wendy Feldman Block, a D.C.-based tenant representative, any cause for concern. “I’ve had no pushback from any landlords — they are coming together to figure out the best practices. They are not doing it in silos. We are all going through something that no one could have ever imagined,” she said. “Most landlords know that in a down market, the most important people in their world are the brokers."

Of course, the pressure is on, she said. Much of her work is doing "handholding" with clients as they navigate the pandemic. Holding hands isn't as lucrative as locking down big transactions, but now is the time for brokers to build trust and relationships and show their creativity, she said. “You are going to have to think of different approaches,” she said. “I don’t see anyone saying, ‘This is going to hell in a handbasket’ … But if this continues until next summer, who knows?”

 Brokerage hasn’t been unscathed by the job losses across the country. JLL, Eastdil Secured, Marcus & Millichap have all let people go. In New York City, MHP Real Estate Services closed its office leasing arm in May. Taylor said that over time, commission structures may need to change to reflect the work brokers are doing on more flexible deals, like percentage rent.

“The brokers who have been around for a long time have a pretty good book of business, they have learned to weather the storm,” said Madison Marquette Southeast Region President Bill Weghorst, who is based in Atlanta. “But I think there is a whole new fresh crop of brokers that have been in the business less than five years that don’t have clients and are being fed by the older brokers," he added. "As there are fewer transactions, they will be less likely to need younger brokers' help on smaller deals.”

Some brokers have been zeroing in on parts of the business that have remained healthy. Colliers International Atlanta Chairman Bob Mathews said the facilities management side of the business is surging. “I’m very bullish on that side of the business," he said. "The transaction side is going to have to recover." Compass Vice Chair Adelaide Polsinelli is shifting her approach, too.

Much of the investment sales broker's work now is advisory, and she is focused on deals outside of New York City, which she described as a “saving grace.” “Most of the last three months was spent fixing deals that fell apart because of the pandemic," she said. "But you can’t sit still like a deer in the headlights. This is when you have to be an innovative entrepreneur.”

In the second quarter, there were only 18 deals closed in Manhattan over $10M, the lowest quarterly total going back to 2009, JLL New York Investment Sales Chairman Bob Knakal said. He has used the extended slow period to catch up on research projects he hadn't had time to tackle, he said, but is also working to push as many deals across the finish line as possible.

“There are people who feel the political headwinds are stacked against them, they’d rather sell [in New York City] and purchase property in a more business-friendly environment," he said. "That is happening more frequently than we would like. “On the buy side, there are people who are motivated and on lookout in New York City because they believe it will prevail, just as it has prevailed every time in the past.” Steven Westreich, who runs his own Manhattan-based investment sales firm, Westbridge Realty Group, said his approach to the new normal is rooted in the old school: working the phones.

His focus has been “soft prospecting” rather than anything “hardcore,” he said. Since June 15, he said the team has signed a deal every week, though he acknowledges there has been a considerable decrease in investor appetite in the city. “Coming out of the lockdown, everybody wanted to sit down and brainstorm and come up with a strategy, and I told all my guys in the office ‘don’t overthink this, stop trying to be a fortune teller, go back to hitting the phones … let’s just drum up [business],'” he said. “If we don’t make deals, we don’t make money.”

Source: Bisnow

When Debra Harris moved into Battery Park City, her goal was to move there with her daughter, who was commuting from Washington Heights to a Lower Manhattan elementary school at the time since Harris also worked in the neighborhood.

In 1997, she scored an affordable apartment at 225 Rector Place in the neighborhood; she had "struck gold," as she put it.

"Moving into Battery Park City...filled so many needs and so many voids for me as a teenage mother," said Harris, who had her first child in her late teens. "It was a goal that I set for myself to make a difference in my daughter's life and my son after that."

But more than two decades later, the affordability agreement is ending, just as NYC faces dual health and economic crises due to COVID-19.

Harris, 52, knew the deal—originally set to expire in 2005 and later extended to November 2019, April 2020, and now, the end of the month—would end. She lined up an apartment to sublease for her and her husband, which fell through after the pandemic spurred a "domino effect.”

"Trying to find another apartment after the sublet fell through was impossible, because everything was shut down. Everything," said Harris, who lives in a two-bedroom apartment set to by rise by nearly five times the current rent to $7,800 monthly come August 1st. "We're just trying to see if we can stay here another year.” Her hours as a transcriptionist have been reduced and her husband lost work in the tourism industry during the pandemic.

Ann Stenson, the tenant association leader who moved in when the building was first erected in the mid-1980s, said some tenants moved out in anticipation of the affordability program ending. About two dozen families remain. But the pandemic has changed everything.

"In one way or another, everyone's plans have been upended," said Stenson, 73. "People who signed a lease and had health risks and really didn't want to move. They just felt like there was too much risk involved in moving."

The apartment was stabilized at a below-market rent since 1985 with The Related Companies, which had developed the property with a loan from the New York State Housing Finance Agency. Under the deal, 20 percent of the apartments were to be kept affordable for families making less than 80 percent of the area median income, which today would be less than $81,920 for a family of three.

Stenson’s mid-1980s lease shows rents would increase at the same rate as apartments under rent stabilization laws. One tenant paid about $521 for a one-bedroom when the building first opened. Another paid $1,100 when they first moved in about 15 years later at the building in Battery Park City, once intended to be an emblem of affordability that has become among the priciest neighborhoods in the city.

In the 80/20 program the building was constructed under, the state's housing finance agency provides the tax-exempt financing to develop affordable apartments and, for some developers, property tax breaks through the 421a program. In New York State, about 93 developments across 6,600 units were earmarked as below market-rate rents under the program, mostly in Manhattan, as of September 2018, according to a state comptroller report. But like on Rector Place, when the incentives end, the apartments' affordability lifts.

Over the years, the affordable apartments in the building have dwindled after developer Yair Levy bought the building in 2005 to convert it into condos. He was later convicted of defrauding the building’s reserve fund and had to default on a $165 million mortgage. By 2012, Related had bought the property again, listing 181 condos for sale at the time.

But before the coronavirus pandemic, 20 rental apartments remained affordable. They were purchased in 2013 by real estate investment company Ven One, where landlord Neil Kukreja is a managing partner. He also owns another two units at the 23-story building on Rector Place near South End Avenue.

Kukreja extended the affordable leases three times since November, until the end of July, to account for stay-at-home policies during the COVID-19 pandemic, he said in an interview.

"I am losing $3,000 [on] every unit, every month in a negative cash flow from what I'm paying the common charges and what I'm paying for taxes to what they're paying me," he told Gothamist. "We knew we were gonna lose [money] until November 2019. We agreed to that. We made a business decision based on that. But we didn't agree to go forever."

The tenants, who formed the Rector Square Affordable Housing Group, are asking for their current affordable leases to be extended one more year to account for the risk of moving during the pandemic, especially for seniors and people with underlying health conditions. Cooper Square Committee,

Mobilization for Justice, and Councilmember Margaret Chin are working with the group on its demands.

“With the coronavirus pandemic still raging, protest activities continuing, a moratorium in place and the difficulties with finding and moving into a new apartment with many businesses still closed, and a city wide housing crisis, we are hopeful that you will offer an extension of their leases further to July 31st, 2021 and set the rent increase according to the Rent Guidelines Board,” Chin wrote to Kukreja June 15th. “In the meantime, my office is working [on] exploring any rent subsidy programs or tax abatement that can apply to these units.”

Kukreja says all 22 apartments have been signed over to a new lease-holder for a corporate tenant, which will use the apartments for housing for employees.

Kukreja also questions whether all tenants should qualify for affordable housing. Five requested to stay in the building paying market rate, and two asked to purchase a unit for $725,000, according to Kukreja's count (the deals never came to fruition). He wrote in a letter to Chin’s office July 17th, “many of the current tenants have strong financials with good current job standing in senior management positions and have been working even during the pandemic.”

Chin, who represents Chinatown, Battery Park City, and Lower Manhattan, said in a statement, "My demand has been clear from the start: extend 225 Rector rent-stabilized tenants’ leases by at least a year."

"Seniors and 9/11 survivors with underlying health conditions shouldn't be forced out onto the streets in the middle of a global pandemic. The fact that these vulnerable residents are fighting tooth-and-nail just to stay in their homes to weather through this crisis shows how shamefully this public health emergency is being played down," Chin said.

Kukreja says the leases are not rent-stabilized and he has not benefited from any incentive to keep the apartments below market-rate.

Rents in the affordable apartments are all around $1,400 to $1,600. Market-rate studios to two-bedrooms range from $3,800 to $7,800 a month, according to a letter Kukreja sent to Stenson in November.

But Elda Luisi, 75, another tenant who’s lived in the building 18 years, says she can’t pay that much.

“When you’re in your 50s, you have no imagination about what’s going to happen in your 70s,” said Luisi.

She’s applied for the city’s affordable housing lottery dozens of times. She didn’t qualify for one apartment because she had too much in savings. Another was on the ninth floor with an elevator known for frequently breaking down. Now, she’ll have to put her belongings in storage and live with friends or family.

“I should’ve started earlier, but it never occurred to me that it was going to be this hard to find an apartment,” Luisi said. “It never occurred to me that it would be this dramatic because it has been two years that I’ve been applying, from 2017.”

The fight to keep these apartments affordable comes as NYC faces an economic crisis from the coronavirus that has put at least 1.2 million people in New York State out of work. According to one analysis, 46 percent of New York State renters are unable to pay rent, putting them at risk of eviction.

"I was all set to move at the beginning of May," said Daniel Stein, 76, who has various health conditions that put him at risk of coronavirus, including lung disease he attributes to 9/11. "I had arranged a storage unit and so on and then the pandemic happened, even before that. The place that I was going to go to is no longer able to [let me move in]."

"Without that in hand, I'm not sure where I'll go," said Stein, who moved to the building in 2003. "Right now, it's all up in the air."

Harris, the mother of two who moved to Rector Place in the late 90s, added that the affordable apartments house a higher share of people of color than is typical for the neighborhood.

“That has changed,” she said. “Overall, it would be a shame for Battery Park City overall to dismantle New York City being the melting pot that it has always been.”

Source: Gothamist

Industry groups have responded to a proposed bill that will help distressed CMBS borrowers remain current on their loans.

Congressional Representatives Van Taylor (R-Texas), Al Lawson (D-Fla.), and Andy Barr (R-Ky.) have officially introduced into Congress H.R.7809, which would direct the Secretary of the Treasury to stablish a HOPE Preferred Equity Facility to guarantee certain financial investments of commercial borrowers affected by COVID-19, and for other purposes. The proposed legislation has been referred to the House Committee on Financial Services for review. The bill was sponsored by Taylor and co-sponsored by Lawson and Barr.

According to reporting from the Wall Street Journal, "the bill would set up a government-backed funding vehicle that businesses could tap to stay current on their mortgages. It is meant in particular to help those who borrowed in the $550 billion market for mortgages that are packaged into bonds and sold to Wall Street."

Additionally, "banks would extend money to help these borrowers and the facility would provide a Treasury Department guarantee that banks are repaid. The funding would come from a $454 billion pot set aside for distressed businesses in the earlier stimulus bill," according to the WSJ's reporting.

The National Law Review published details on a draft version of the bill on July 12. It spells out criteria for how borrower eligibity would be determined as well as how financial instituions could be reimbursed by the Federal Reserve when participating.

The bill comes at a time when delinquencies on CMBS loans have rapidly mounted and borrowers have found it challenging to navigate their relief options from lenders. The hotel and retail industries, crippled by COVID-19 shutdowns, have been particularly affected. Delinquency rates on CMBS loans secured by hospitality and retail properties soared to 24.3 percent and 18.07 percent, respectively, according to the most recent data from Trepp. 

Industry trade groups were quick to react to the proposed bill.

The CRE Finance Council voiced tepid support for the measure, but also said it needed refinement.

“We are deeply appreciative of the efforts that Rep. Taylor and Rep. Lawson are making to support commercial real estate – an industry that has been consistently overlooked in COVID government relief efforts and facilities,” said Lisa Pendergast, executive director of CREFC. “Like many, the hotel and retail industries are in a dire situation and need immediate and specific policy attention in order to sustain the thousands of jobs and investment dollars that are a vital thread in the fabric of our U.S. economy. Recent legislation, including the CARES Act, HEROES Act, and HEALS Act does not address the commercial real estate industry's primary concerns. Federal Reserve facilities support the flow of credit to households and businesses, but unfortunately not the asset-backed businesses that support and create jobs.”

Meanwhile, the International Council of Shopping Centers (ICSC) voiced its approval for the HOPE Act.

“We applaud Congressmen Van Taylor (R-TX), Al Lawson (D-FL) and Andy Barr (R-KY) for outstanding leadership in introducing the Helping Open Properties Endeavor (HOPE) Act, which is the type of solution needed to help prevent widespread foreclosures that could destabilize the US economy. As our nation continues to combat the virus, the bill would provide temporary relief plan for commercial real estate (CRE) borrowers," ICSC President and CEO Tom McGee said in a statement.

The American Hotel & Lodging Association (AHLA) also expressed its support for the bill.

“With record low travel demand, thousands of hotels can’t afford to pay their commercial mortgages and are facing foreclosure and the harsh reality of having to close their doors permanently," AHLA President and CEO Chip Rogers said in a statement. "Tens of thousands of employees are faced with losing their jobs permanently. Other small businesses that depend on these hotels to drive local tourism and economic activity will likely face a similar fate. Before the pandemic, one out of every 10 jobs in the U.S. depended on travel and tourism. It’s imperative we get back to those levels once this crisis is behind us.... The hotel industry supports The HOPE Act to give struggling small business hotels an opportunity to keep their doors open and avoid foreclosure. We urge Congress to quickly pass this legislation to keep hotels open for business and position America’s tourism industry to survive and recover when the public health crisis subsides.”

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Ian Grusd, CCIM, SIOR

Chapter Past President

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