Return-Path: Delivered-To: andrew@sterlingcal.com Received: from reseller401.webserversystems.com by reseller401.webserversystems.com with LMTP id EDJMNfkA82YftQMAchKAPA (envelope-from ) for ; Tue, 24 Sep 2024 13:12:09 -0500 Return-path: Envelope-to: andrew@sterlingcal.com Delivery-date: Tue, 24 Sep 2024 13:12:09 -0500 Received: from o13.ptr1224.officeinteractive.com ([168.245.9.66]:59556) by reseller401.webserversystems.com with esmtps (TLS1.2) tls TLS_ECDHE_RSA_WITH_AES_128_GCM_SHA256 (Exim 4.96.2) (envelope-from ) id 1stA1A-0011A9-2q for andrew@sterlingcal.com; Tue, 24 Sep 2024 13:12:09 -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=6Kn7PBf4OY7nWVqspAi2mmhuqmALRMl4ZogwplSgBaI=; b=BEeQ0S34jzScWlkZRTccFOLrkuc5K9vx8Ow2iUC/fgpocZhxoW4lpMrYOlwHLoeNVhK3 6Yy11mSfVGSrA+uAEPrRG5szfdxExdhF9IpAiC7S5Lp9ogTdQxJlTZwQ5cddZzof45BLTD WfigK/FWm2EHVj2VK0mNftGKR/aJatnLajPfVG//L20WYq0z91cvaXimPXbD5sdH20XRkr q14ob+6y06zTDBtgZ7zUa0ZZlMwrZl0nkDaJGI3ZER4gD1j4hMPeuqL/5N8lynUvo2kRhv qCVLeJKhAE7wyYgp3NBP2U6WANxgrCfNAodebjvewnYqNXnN8BzwKbl1VtZIvDjQ== Received: by recvd-d66cff667-9t457 with SMTP id recvd-d66cff667-9t457-1-66F300EB-42 2024-09-24 18:11:55.594161159 +0000 UTC m=+1037723.222402860 Received: from MjEzMTA1MDQ (unknown) by geopod-ismtpd-10 (SG) with HTTP id dTNzu2WfR-ekTILEgU-gwg for ; Tue, 24 Sep 2024 18:11:55.522 +0000 (UTC) Content-Type: multipart/alternative; boundary=f6d4aaaf5f706de017fa4a447abc8b4b5be6b71ff4560fb88372deb903a7 Date: Tue, 24 Sep 2024 18:11:57 +0000 (UTC) From: Jeff Tabor Mime-Version: 1.0 Subject: The Rate Cut Wont Save These Real-Estate Owners Message-ID: X-SG-EID: =?us-ascii?Q?u001=2E6XgS+aMGExnB1bqZZrdrz9qzQEbZ7BEjpKh5guDijZ5HYu1dYAKq1tDEG?= =?us-ascii?Q?Tygo2l3bpRSrRRtQO=2FYwkK2RsxQ5H9aTlmLaeps?= =?us-ascii?Q?oiXBo2ZXRxNlRpg=2FzbC3t9y6PbMdZGJVa8L59Wz?= =?us-ascii?Q?oFh9oiz7l4nrFzkpj5qzVbAnoti5BTZBqqyyC6L?= =?us-ascii?Q?8m4htv60+8ebIT85RTbX77ofGFePkKK57+dy0Tt?= =?us-ascii?Q?3F5PNqc1tnXzqsbU09kSDpdspbKco3LlXrqzfIt?= =?us-ascii?Q?WXbE?= X-SG-ID: =?us-ascii?Q?u001=2ESdBcvi+Evd=2FbQef8eZF3BjFCAdcw9oriNzt62PI4tSSZLxBzVihvv+NXn?= =?us-ascii?Q?ekIT5iwFto4VfvknrFzU4OAy+V7uwN1eGvdSnIn?= =?us-ascii?Q?KbintWkyhqCGAp+nchgkxfDsHgNBJB1q27iuyc5?= =?us-ascii?Q?Lfrcro6YdTiHpFA=3D=3D?= To: Andrew Sterling X-Entity-ID: u001.hZHiB6kKM9UW5e2fAO4iNQ== X-Spam-Status: No, score=-4.4 X-Spam-Score: -43 X-Spam-Bar: ---- X-Spam-Flag: NO --f6d4aaaf5f706de017fa4a447abc8b4b5be6b71ff4560fb88372deb903a7 Content-Transfer-Encoding: quoted-printable Content-Type: text/plain; charset=iso-8859-1 Mime-Version: 1.0

=20

Good morning, Andrew.

I thought you would discover the below article in today&rsquo= ;s Wall Street Journal of interest.

A mere half a point d= rop in interest rate is not going to help many of these office landlords wh= en their low interest loans get reset much higher when they come due within= the next twelve months. You will see a lot of horse trading…which, = if you play your cards right, will only be good for your firm, Andrew.
<= /span>
Have a great week!

Sincerely,

Jeffrey A. Tabor – Founder/CEO
Jeff@JeffTaborGroup.com
JeffTaborGroup.com
(80= 0) 507-6673
RE License # 01015287

Connect with me on LinkedIn= : Jeffrey A. Tabor=

The Rate Cut Won’t Save These Real-Est= ate Owners

Many commercial-property owner= s borrowed too much when rates were super cheap and are struggling to hold = on to assets they need to refinance

=

Commercial real-estate owners are cheering a= s interest rates finally start to fall. Yet relief is coming too late for m= any highly indebted property investors like the owners of 145 South Wells, = an office tower in downtown Chicago.

Daniel = Moceri, a building-security entrepreneur turned developer, and his partners= completed the 20-story tower in January 2020. The developers leased the to= p floors to an up-and-coming co-working company. They installed a rooftop t= errace and golf simulator to attract more tenants. Then the pandemic hit, d= rying up demand for offices.

By the e= nd of 2023, the co-working company had left the building. The interest rate= for the loan backing the property shot up to more than 10%. Moceri, who di= dn’t respond to requests for comment, lost the property to lenders in= July.

Many owners of apartment build= ings, hotels and other real estate took advantage of rock-bottom rates a fe= w years ago, loading up on debt when borrowing was cheap. After rates soare= d starting in early 2022, they missed payments and had to hope their credit= ors would extend deadlines.

Now, the = Federal Reserve has come to the rescue for some borrowers. It cut short-ter= m rates by a half-percentage point last week and is widely expected to foll= ow with more. Commercial mortgage rates have been falling for weeks in anti= cipation of a Fed move.

The rate cut = is welcome news to a commercial-property market that has struggled with sin= king valuations, stalled sales and difficulties refinancing. More than $2.2= trillion in commercial-property debt is coming due between this year and 2= 027, according to data firm Trepp.

In= terest-rate projections show central-bank officials penciled in the equival= ent of another four cuts of a quarter point next year. Many analysts expect= that most lenders and owners will be able to hold on until rates come down= enough to refinance.

= “This wil= l help a lot,” said Tom Shapiro, president of developer and investor = GTIS Partners. “It makes people feel better about a soft landing.&rdq= uo;

But the Fed’s deliverance won’t be = enough for some of America’s most highly leveraged property owners. L= enders that have been willing to extend their loans have run out of patienc= e.

Banks, partly under pressure from re= gulators, are clearing more bad loans off their books through lender-induce= d selloffs, said Chad Lavender, an executive at the Newmark commercial-real= -estate company. And other lenders think they might be better off taking co= ntrol of a property rather than continuing to let borrowers miss payments.<= /span>

“As rates come in and values improve, = the incentives to wait diminish,” said Richard Mack, chief executive = of Mack Real Estate Credit Strategies, a commercial-property lender.=

The value of commercial real-estate loans i= n foreclosure nearly tripled between January and August this year to reach = $19.2 billion, according to an analysis of securitized property loans by CR= ED-iQ.

Other measures of debt distress also rose du= ring the period. Landlords who took out floating-rate loans, which shot up = with prior interest-rate increases, are “getting clobbered most,&rdqu= o; said Mike Haas, CEO of CRED-iQ.

Multifa= mily owner losing properties

Tides Equities, a pr= ivately held company based in Los Angeles, is one of the biggest apartment = landlords in the Southwest. The company emblazoned its name on more than 10= 0 properties, an unusual move for apartment owners, which tend to operate b= ehind the scenes rather than flash their brand. Along roadways leading out = of cities such as Phoenix and Dallas, the Tides signs became a sight as com= mon as Arby’s or Pizza Hut.

Some of th= ose signs are about to come down. Around a dozen Tides buildings have enter= ed foreclosure or a similar process this year. A handful already have been = turned over to lenders. Analysts have flagged other Tides buildings for inc= ome that is too low to cover debts.

L= ike many new entrants to Sunbelt real estate during the past decade, Tides = bought dozens of low-rent buildings with floating-rate debt. In pitches to = investors, the company said it could make renovations, then increase rents,= sometimes by hundreds of dollars a unit.

Then interest rates skyrocketed. More recently, rent growth declined= in some of the cities where Tides invested. Tides told its investors last = year that its tenants were struggling to pay the company’s higher ren= ts.

Tides didn’t respond to req= uests for comment for this article. In an interview with The Wall Street Jo= urnal in 2023, Tides Equities co-founder Sean Kia said, “The math equ= ation has really just changed for a lot of investors and a lot of landlords= .”

At one now-foreclosed prop= erty in Austin, Texas, Tides in early 2022 took out nearly 91% of the apart= ment complex’s value in a floating-rate loan, putting the company at = high risk for default, Morningstar said in a report that year. The ratings = company also noted that Tides “relies heavily on continued rent appre= ciation” and that market weakness would increase the risk of failure.=

An affiliate of lender Rialto Capita= l Advisors took back the property from Tides this month.

<= p> The layered troubles across Tides’ many buildings have ma= de it difficult for the company to land rescue money, even as rates start t= o come down.

Hotels worth less than their = debt

Hotel owner Ashford Hospitality Trust viewed= floating-rate debt as a safe option. When economic times were bad and hote= l room rates fell, interest rates would also likely decline, the company re= asoned.

The last few years proved to be an e= xception. When the pandemic pummeled the hotel business, rates initially we= nt down. But in 2022, before the hotel business had fully recovered, rates = were rising again. By the summer of the following year, Ashford’s int= erest rate on a portfolio of 14 hotels scattered across the country had abo= ut doubled to reach nearly 9%. The value of the hotels had shrunk to less t= han the total debt.

Lower rates alone= wouldn’t have been enough to save the hotels, said Stephen Zsigray, = Ashford’s chief executive. The company had to choose between defaulti= ng or making payments on properties already underwater—“essenti= ally ‘throwing good money after bad,’” he said.

Other commercial owners remain hopeful that th= e Fed’s rate cut can keep them holding on just a bit longer. Property= lenders are anticipating where rates might be months from now to make deci= sions. Once the dust settles, lenders might also be more forgiving of landl= ords than in years past, said Michael Lavipour, an executive at lender Affi= nius Capital.

“No one could have predicted th= e pandemic and the sort of fallouts associated with it,” Lavipour sai= d. “Lenders don’t think it’s the [borrower’s] fault= .”

Jeff Tabor Group=A0| 501 W. Broadway, Suite 800= =A0| San Diego=A0| CA | 92101

Unsubscribe<= /a> | =20

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=20

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

Connect with me on LinkedIn: Jeffrey A. Tabor

The Rate Cut Won&= rsquo;t Save These Real-Estate Owners

Man= y commercial-property owners borrowed too much when rates were super cheap = and are struggling to hold on to assets they need to refinance

<= /span>

Commercial real-estate owners are cheering as= interest rates finally start to fall. Yet relief is coming too late for ma= ny highly indebted property investors like the owners of 145 South Wells, a= n office tower in downtown Chicago.

Daniel M= oceri, a building-security entrepreneur turned developer, and his partners = completed the 20-story tower in January 2020. The developers leased the top= floors to an up-and-coming co-working company. They installed a rooftop te= rrace and golf simulator to attract more tenants. Then the pandemic hit, dr= ying up demand for offices.

By the en= d of 2023, the co-working company had left the building. The interest rate = for the loan backing the property shot up to more than 10%. Moceri, who did= n’t respond to requests for comment, lost the property to lenders in = July.

Many owners of apartment buildi= ngs, hotels and other real estate took advantage of rock-bottom rates a few= years ago, loading up on debt when borrowing was cheap. After rates soared= starting in early 2022, they missed payments and had to hope their credito= rs would extend deadlines.

Now, the F= ederal Reserve has come to the rescue for some borrowers. It cut short-term= rates by a half-percentage point last week and is widely expected to follo= w with more. Commercial mortgage rates have been falling for weeks in antic= ipation of a Fed move.

The rate cut i= s welcome news to a commercial-property market that has struggled with sink= ing valuations, stalled sales and difficulties refinancing. More than $2.2 = trillion in commercial-property debt is coming due between this year and 20= 27, according to data firm Trepp.

Int= erest-rate projections show central-bank officials penciled in the equivale= nt of another four cuts of a quarter point next year. Many analysts expect = that most lenders and owners will be able to hold on until rates come down = enough to refinance.

<= span style=3D"font-family: Times New Roman, Times, serif;">“This will= help a lot,” said Tom Shapiro, president of developer and investor G= TIS Partners. “It makes people feel better about a soft landing.&rdqu= o;

But the Fed’s deliverance won’t be e= nough for some of America’s most highly leveraged property owners. Le= nders that have been willing to extend their loans have run out of patience= .

Banks, partly under pressure from regulators, are clearing more= bad loans off their books through lender-induced selloffs, said Chad Laven= der, an executive at the Newmark commercial-real-estate company. And other = lenders think they might be better off taking control of a property rather = than continuing to let borrowers miss payments.

“As rates come in and values improve, the incentives to wait dimi= nish,” said Richard Mack, chief executive of Mack Real Estate Credit = Strategies, a commercial-property lender.

The value of commercial real-estate loans in foreclosure nearly trip= led between January and August this year to reach $19.2 billion, according = to an analysis of securitized property loans by CRED-iQ.

<= p>Other measures of debt distress also rose during the period. Landlord= s who took out floating-rate loans, which shot up with prior interest-rate = increases, are “getting clobbered most,” said Mike Haas, CEO of= CRED-iQ.

Tides Equities, a privately held company base= d in Los Angeles, is one of the biggest apartment landlords in the Southwes= t. The company emblazoned its name on more than 100 properties, an unusual = move for apartment owners, which tend to operate behind the scenes rather t= han flash their brand. Along roadways leading out of cities such as Phoenix= and Dallas, the Tides signs became a sight as common as Arby’s or Pi= zza Hut.
Some of those signs are about to co= me down. Around a dozen Tides buildings have entered foreclosure or a simil= ar process this year. A handful already have been turned over to lenders. A= nalysts have flagged other Tides buildings for income that is too low to co= ver debts.
Like many new entrants to = Sunbelt real estate during the past decade, Tides bought dozens of low-rent= buildings with floating-rate debt. In pitches to investors, the company sa= id it could make renovations, then increase rents, sometimes by hundreds of= dollars a unit.
Then interest rates = skyrocketed. More recently, rent growth declined in some of the cities wher= e Tides invested. Tides told its investors last year that its tenants were = struggling to pay the company’s higher rents.
Tides didn’t respond to requests for comment for this = article. In an interview with The Wall Street Journal in 2023, Tides Equiti= es co-founder Sean Kia said, “The math equation has really just chang= ed for a lot of investors and a lot of landlords.”
<= p>At one now-foreclosed property in Austin, Texas, Tides = in early 2022 took out nearly 91% of the apartment complex’s value in= a floating-rate loan, putting the company at high risk for default, Mornin= gstar said in a report that year. The ratings company also noted that Tides= “relies heavily on continued rent appreciation” and that marke= t weakness would increase the risk of failure.
An affiliate of lender Rialto Capital Advisors took back the prop= erty from Tides this month.
The layered troub= les across Tides’ many buildings have made it difficult for the compa= ny to land rescue money, even as rates start to come down.

Hotels worth less than their debt
“No one could have predicted the pandemic and the sort of fa= llouts associated with it,” Lavipour said. “Lenders don’t= think it’s the [borrower’s] fault.”

Jeff Tabor Group=A0| 501 W. Broadway, Suite 800= =A0| San Diego=A0| CA | 92101

Unsubscri= be | =20

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