Return-Path: Delivered-To: andrew@sterlingcal.com Received: from reseller401.webserversystems.com by reseller401.webserversystems.com with LMTP id GM/xDXA0qWbbXAcAchKAPA (envelope-from ) for ; Tue, 30 Jul 2024 13:44:00 -0500 Return-path: Envelope-to: andrew@sterlingcal.com Delivery-date: Tue, 30 Jul 2024 13:44:00 -0500 Received: from wfbtbtpz.outbound-mail.sendgrid.net ([159.183.183.62]:28694) by reseller401.webserversystems.com with esmtps (TLS1.2) tls TLS_ECDHE_RSA_WITH_AES_128_GCM_SHA256 (Exim 4.96.2) (envelope-from ) id 1sYrpH-0021sZ-0P for andrew@sterlingcal.com; Tue, 30 Jul 2024 13:44:00 -0500 DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=jefftaborgroup.com; h=content-type:from:mime-version:subject:to:cc:content-type:from: subject:to; s=s1; bh=yUS4+g3qIFLrALZCSe+Km8xBGKGFmM573N8ybU4kzZg=; b=JzhjG4JbM4Vow7TxFfYv8k8aGNTw/1Jrt9NvndnAzinyf+WcARxqzwwmZePen88pDT+Q fb8Qbaay2Be2+QzFPEAI17zLSu8BJPcrSL8OOD3R8jSyhs1YGOopml6TEKQj3srPTsnR6G Z9OexhmvGMaZFf8mfTqyJXELtQKOha3gWfP67E/HUr9s9Ct3FZbuyyUqMbUHPOHTknCOgO k0Ij7BAW9w1HZKX7RZD8/5meE/+fmDF+MVxZLyFeMcIZ1RVawRnr+fzrmDShoUA14QR1mb nskofl79IQPqT0RvUV1cw31pg63j9tIVZoAZA5aO0XBaWMcd0hBFaLCL7U4HkTQQ== Received: by recvd-78994dc6f7-72hgp with SMTP id recvd-78994dc6f7-72hgp-1-66A9345D-D 2024-07-30 18:43:41.545356542 +0000 UTC m=+77056.142554010 Received: from MjEzMTA1MDQ (unknown) by geopod-ismtpd-35 (SG) with HTTP id KeyWevlyQDmpIT22UpqBNA for ; Tue, 30 Jul 2024 18:43:41.480 +0000 (UTC) Content-Type: multipart/alternative; boundary=f06813ec4093486c26b31b9f2653c9690189cf9ffbf5b260d3056b7261ad Date: Tue, 30 Jul 2024 18:43:47 +0000 (UTC) From: Jeff Tabor Mime-Version: 1.0 Subject: Fortitude Message-ID: X-SG-EID: =?us-ascii?Q?u001=2E6XgS+aMGExnB1bqZZrdrz9qzQEbZ7BEjpKh5guDijZ5HYu1dYAKq1tDEG?= =?us-ascii?Q?Tygo2l3bpRSrRRtQO=2FYwkK2RsxQ5AzzZioKb7AH?= =?us-ascii?Q?CF=2FCpLHc4wguBzNhlldmyRj=2FOenU2QoxE+14Nxl?= =?us-ascii?Q?UCg2=2FaSPGmA8ICQtJvDtlpjNDho=2FDpP68nwnjae?= =?us-ascii?Q?28q4G9DYZMXWic+7c3nq3cUbBQ+xXKwHv57H+L2?= =?us-ascii?Q?ES0zcA7HqIOZsOWsuiLIHBs3f+qFZZEAGOFUJ7e?= =?us-ascii?Q?njhv?= X-SG-ID: =?us-ascii?Q?u001=2ESdBcvi+Evd=2FbQef8eZF3Bgjhw5cCthCzOxnqloGT0=2Fmk28hRtsn9eEjeg?= =?us-ascii?Q?8bnp+MYy6WrvN1CTaucf+MX+UZSkv1CHW0RWpw3?= =?us-ascii?Q?YX6IVNTGlYPElMEii9kQKG097D3pAKTY3oANVg6?= =?us-ascii?Q?amJCH9o1F=2Fm7clA=3D=3D?= To: Andrew Sterling X-Entity-ID: u001.hZHiB6kKM9UW5e2fAO4iNQ== X-Spam-Status: No, score=-3.4 X-Spam-Score: -33 X-Spam-Bar: --- X-Spam-Flag: NO --f06813ec4093486c26b31b9f2653c9690189cf9ffbf5b260d3056b7261ad Content-Transfer-Encoding: quoted-printable Content-Type: text/plain; charset=iso-8859-1 Mime-Version: 1.0

=20

Andrew,

The below i= s in today’s Wall Street Journal and I felt you would discover it of = interest.

Your office space rent likely represents your second great= est business expense…requiring the person negotiating its lease term= s to have an extremely high pain threshold and a relentless attitude in goi= ng up against any tough landlord…which leads me to reference the fol= lowing email excerpt I received this past week on behalf of a large law fir= m I am representing in lease renewal negotiations. This was sent to me afte= r I exclaimed I could better their deal even further:

= “Ok we are just a little worried since we really don’t want= to move because at our age this will likely be our last office and with th= e great deal that you’ve already crafted we are very pleased. But a b= it more icing on the cake is always nice. So work your magic.”

Perhaps one day, Andrew, we can discuss what res= ults I can obtain with your office lease as well. After all, there is a lot= of truth to the saying “It is hard to beat a guy who is unwillin= g to give up!” Unfortunately, for most tenants, their real estat= e brokers give up way, way too easily!

Sincerely,<= br>

<= td style=3D"width: 67.2987%;">Jeffrey A. Tabor – Founder/CEO
Jeff@JeffTaborGroup.com
JeffTaborGroup.com=
(800) 507-6673
RE License # 01015287

Connect with me on L= inkedIn: Jeffrey A. = Tabor

Surge in Commercial-Property Foreclosu= res Suggests Bottom Is Near

Lender portfoli= os of foreclosed and seized office buildings, apartments and other commerci= al property grew 13% in the second quarter

The slow return of workers to office buildings has helpe= d push commercial-property distress to near historic levels

Banks and other lenders are seizing control of distressed c= ommercial properties at the highest rate in nearly a decade, a sign that th= e sector’s punishing downturn is entering its next phase and approach= ing a bottom.

In the second quarter, = portfolios of foreclosed and seized office buildings, apartments and other = commercial property reached $20.5 billion, according to data provider MSCI.= That is a 13% increase from the first quarter and the highest quarterly fi= gure since 2015.

Defaults and other k= inds of distress have been steadily building in the commercial-property mar= ket to near historic levels because of high interest rates and the slow ret= urn of workers to office buildings. Until recently, though, many lenders ha= ve been reluctant to take over properties in hopes of a recovery and to avo= id the expense and losses of foreclosure actions.

“Lenders will do everything in their power to avoid that= ,” said Jade Rahmani, an analyst at Keefe, Bruyette & Woods.

But distress is working its way through t= he financial system after more lenders conclude that obsolete office buildi= ngs won’t recover their former value, even when interest rates declin= e.

That is leading to sales of forecl= osed properties and distressed mortgages. It is also bringing an increase i= n short sales, where lenders and borrowers work together to unload troubled= property for whatever they can get.

= It is possible that commercial-property values could deteriorate even furth= er if the U.S. economy falls into recession and companies start laying off = workers and want less office space.

B= ut in previous downturns, comparable surges in foreclosure activity has sig= naled the approach of a market bottom. Once lenders seize a property, they = are typically quick to sell it, a process that helps determine values of pr= operties after long periods of sluggishness in the sales market.

Office is by far the most troubled property cla= ss. In the second quarter, the volume of office property seized in foreclos= ures and other actions was up about $5 billion from the second quarter of 2= 023, MSCI said. Apartment buildings, which have been hit hard by the increa= se in interest rates and the crush of new supply, had a $975 million increa= se during the same period.

KKR Real E= state Finance Trust recently seized a five-building Silicon Valley complex = owned by a venture of Goldman Sachs and TMG Partners. The KKR unit, which h= eld a $200 million mortgage on the property, took title at the end in June = in a deed in lieu of foreclosure transaction and is expected to start marke= ting it soon after upgrades.

Numerous= office buildings have sold at steeply discounted prices in the struggling = office market in Washington, D.C. That has made it hard for lenders with ou= tstanding loans to keep distressed loans on their books for their original = values.

In the district, State Farm Life Insurance = recently conducted a foreclosure sale of an office building a few blocks fr= om the White House for $17.6 million, more than 70% below what the owner ha= d paid in 2010.

“Lenders a= re more dispassionate about values and that’s a sign of a cycle movin= g” toward a bottom, said Matt Pestronk, a developer who has purchased= two discounted office buildings in the district for conversion to resident= ial.

Small banks, those with assets under $1= 0 billion in particular, have picked up the foreclosure pace. In the first = quarter, the total amount of seized commercial properties they owned was up= by about $125 million to $943 million, the largest quarterly increase sinc= e 2000, according to bank-data consultant Matthew Anderson.

Even if the market is approaching a bottom, pain in the comm= ercial property industry is expected to be prolonged. Much depends on wheth= er the Federal Reserve begins to cut interest rates, a move that many expec= t in the fall.

Sig= nature Bank, which had a high exposure to commercial property, failed last = year, leading to its assets being sold late last year by the Federal Deposi= t Insurance Corp.

This year investors have m= ade large cash infusions into other banks with large volumes of commercial = real-estate loans, such as First Foundation and New York Community Bancorp,= whose shares dropped more than 3% on Thursday after it disclosed another q= uarterly net loss and girded for further trouble in commercial real-estate = lending.

Many creditors are also se= eing a sharp increase in problem loans, which is often a precursor to forec= losures. Blackstone Mortgage Trust, which has a high exposure to office loa= ns, last week cut its dividend and reported that it was increasing its loss= reserves by 19% to over $900 million.

So far, foreclosures and other property seizures remain far below the leve= l during the 2008-09 financial crisis. The total amount of foreclosed and s= eized properties held by lenders soared to more than $45 billion in 2013, m= ore than double today’s amount, according to MSCI.

<= p>The level might not ever reach that height in this down= turn because office-building owners have been more likely to capitulate and= walk away from their properties than they were during the financial crisis= . Back then, interest rates were lower, and many owners believed that their= buildings would recover, so investors tried to hold on to them.
These days owners increasingly are giving up, r= ecognizing that demand levels for their buildings won’t return. Many = are simply working with their lenders on short sales, which typically aren&= rsquo;t counted as foreclosures.
Inde= ed, the volume of commercial-property sales that involved lender participat= ion soared 83% in the first and second quarter of 2024 from the two previou= s quarters, according to Ten-X, one of the biggest auctioneers of commercia= l property online.
“This cycle, a lot o= f investors believe office values are challenged,” said Nicholas Seid= enberg, managing director at the real-estate investment banking firm Eastdi= l Secured. “They’re saying: ‘Hey, I’m going to just= walk away and not fight.’”

If you would like to unsubscribe, please click here

= Jeff Tabor Group=A0| 501 W. Broadway, Suite 800=A0| San Diego=A0| CA | 9210= 1

--f06813ec4093486c26b31b9f2653c9690189cf9ffbf5b260d3056b7261ad Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset=iso-8859-1 Mime-Version: 1.0

=20

Jeffrey A. = Tabor – Founder/CEO
Jeff@JeffTaborGroup.co= m
JeffTaborGroup.com
(800) 507-6673
RE Licens= e # 01015287

Connect with me on LinkedIn: Jeffrey A. Tabor
<= /span>

Surge in Commerc= ial-Property Foreclosures Suggests Bottom Is Near

Lender portfolios of foreclosed and seized office buildings, apartme= nts and other commercial property grew 13% in the second quarter
=

<= span style=3D'font-family: "Times New Roman", Times, serif; font-size: 15px= ;'>The slow return of workers to office buildings has helped push commercia= l-property distress to near historic levels

= Banks and other lenders are seizing control of distressed commercial proper= ties at the highest rate in nearly a decade, a sign that the sector’s= punishing downturn is entering its next phase and approaching a bottom.

In the second quarter, portfolios of fo= reclosed and seized office buildings, apartments and other commercial prope= rty reached $20.5 billion, according to data provider MSCI. That is a 13% i= ncrease from the first quarter and the highest quarterly figure since 2015.=

Defaults and other kinds of distress= have been steadily building in the commercial-property market to near hist= oric levels because of high interest rates and the slow return of workers t= o office buildings. Until recently, though, many lenders have been reluctan= t to take over properties in hopes of a recovery and to avoid the expense a= nd losses of foreclosure actions.

&ld= quo;Lenders will do everything in their power to avoid that,” said Ja= de Rahmani, an analyst at Keefe, Bruyette & Woods.

= But distress is working its way through the financial sys= tem after more lenders conclude that obsolete office buildings won’t = recover their former value, even when interest rates decline.=

That is leading to sales of foreclosed properties = and distressed mortgages. It is also bringing an increase in short sales, w= here lenders and borrowers work together to unload troubled property for wh= atever they can get.

<= span style=3D"font-family: Times New Roman, Times, serif;">It is possible t= hat commercial-property values could deteriorate even further if the U.S. e= conomy falls into recession and companies start laying off workers and want= less office space.

But in previous d= ownturns, comparable surges in foreclosure activity has signaled the approa= ch of a market bottom. Once lenders seize a property, they are typically qu= ick to sell it, a process that helps determine values of properties after l= ong periods of sluggishness in the sales market.

Office is by far the most troubled property class. In the secon= d quarter, the volume of office property seized in foreclosures and other a= ctions was up about $5 billion from the second quarter of 2023, MSCI said. = Apartment buildings, which have been hit hard by the increase in interest r= ates and the crush of new supply, had a $975 million increase during the sa= me period.

KKR Real Estate Finance Tr= ust recently seized a five-building Silicon Valley complex owned by a ventu= re of Goldman Sachs and TMG Partners. The KKR unit, which held a $200 milli= on mortgage on the property, took title at the end in June in a deed in lie= u of foreclosure transaction and is expected to start marketing it soon aft= er upgrades.

Numerous office building= s have sold at steeply discounted prices in the struggling office market in= Washington, D.C. That has made it hard for lenders with outstanding loans = to keep distressed loans on their books for their original values.

In the district, State Farm Life Insurance recently conduct= ed a foreclosure sale of an office building a few blocks from the White Hou= se for $17.6 million, more than 70% below what the owner had paid in 2010.<= /span>

“Lenders are more dispassionate about values and that&rs= quo;s a sign of a cycle moving” toward a bottom, said Matt Pestronk, = a developer who has purchased two discounted office buildings in the distri= ct for conversion to residential.

Small bank= s, those with assets under $10 billion in particular, have picked up the fo= reclosure pace. In the first quarter, the total amount of seized commercial= properties they owned was up by about $125 million to $943 million, the la= rgest quarterly increase since 2000, according to bank-data consultant Matt= hew Anderson.

Even if the market is approachi= ng a bottom, pain in the commercial property industry is expected to be pro= longed. Much depends on whether the Federal Reserve begins to cut interest = rates, a move that many expect in the fall.

Signature = Bank, which had a high exposure to commercial property, failed last year, l= eading to its assets being sold late last year by the Federal Deposit Insur= ance Corp.

This year investors have made lar= ge cash infusions into other banks with large volumes of commercial real-es= tate loans, such as First Foundation and New York Community Bancorp, whose = shares dropped more than 3% on Thursday after it disclosed another quarterl= y net loss and girded for further trouble in commercial real-estate lending= .

Many creditors are also seeing a sh= arp increase in problem loans, which is often a precursor to foreclosures. = Blackstone Mortgage Trust, which has a high exposure to office loans, last = week cut its dividend and reported that it was increasing its loss reserves= by 19% to over $900 million.

This mo= nth, the delinquency rate of office loans converted into securities increas= ed to above 8% for the first time since November 2013, according to Trepp, = citing data as of last week.

So far, = foreclosures and other property seizures remain far below the level during = the 2008-09 financial crisis. The total amount of foreclosed and seized pro= perties held by lenders soared to more than $45 billion in 2013, more than = double today’s amount, according to MSCI.

The level might not ever reach that height in this downturn beca= use office-building owners have been more likely to capitulate and walk awa= y from their properties than they were during the financial crisis. Back th= en, interest rates were lower, and many owners believed that their building= s would recover, so investors tried to hold on to them.

These days owners increasingly are giving up, recognizin= g that demand levels for their buildings won’t return. Many are simpl= y working with their lenders on short sales, which typically aren’t c= ounted as foreclosures.
Indeed, the v= olume of commercial-property sales that involved lender participation soare= d 83% in the first and second quarter of 2024 from the two previous quarter= s, according to Ten-X, one of the biggest auctioneers of commercial propert= y online.
“This cycle, a lot of investo= rs believe office values are challenged,” said Nicholas Seidenberg, m= anaging director at the real-estate investment banking firm Eastdil Secured= . “They’re saying: ‘Hey, I’m going to just walk awa= y and not fight.’”

If you would like to unsubscribe, please click here

= Jeff Tabor Group=A0| 501 W. Broadway, Suite 800=A0| San Diego=A0| CA | 9210= 1

--f06813ec4093486c26b31b9f2653c9690189cf9ffbf5b260d3056b7261ad--