Prospective CRE Targets

[Parsad]

Might as well start a thread on ideas for this sector as it starts to get hit next year!  

 

First pandemic, then interest rates, now lack of capital for debt renewals.  Cheers!

 

https://finance.yahoo.com/news/1-5-trillion-wall-debt-200000766.html

[Ulti]

 

Sentiment toward multifamily housing also remains much more positive as rents continue to rise, one reason why Blackstone Real Estate Income Trust had a positive return in February even as rising numbers of investors lodge withdrawal requests. The availability of agency-backed loans will help owners of those properties when they need to refinance.
 

it will be interesting to see if this area holds up for the next few years… Being in west palm beach right now… I think the low tax sunbelt areas will continue to do well.

[Ulti]

https://www.cnbc.com/2023/04/09/the-coming-commercial-real-estate-crash-that-may-never-happen.html

[CorpRaider]

Yeah, seems like no one ever considers the boring extend + pretend.  To be fair would be a turrible news story.

[Parsad]

17 hours ago, Ulti said:

https://www.cnbc.com/2023/04/09/the-coming-commercial-real-estate-crash-that-may-never-happen.html

 

https://www.cnn.com/2023/04/10/business/commercial-real-estate-banks-offices/index.html

 

Cheers!

[dealraker]

Guys-guys-guys...just buy Brookfield damn-it.  Bruce is and surely will be out-and-about with his overly simplistic spoon fed verbage vividly describing to you that they (you know....that yard sale of entities) only own trophy properties and all is well.  Maybe time for some creative distributable funds from operations or a sale, maybe half sale to somebody and itself, of something above IFRS (that surely means all things are worth far above IFRS).

 

Oh lord, I woke up on the cynical side of life today!  I'm looking for yet another article on New York office tragedy that includes an upbeat sentence or two about a floor or so at 660 5th avenue, the Kush-Kush bailout (for West nukes in Saudi).

Edited April 10, 2023 by dealraker

[Ulti]

3 hours ago, dealraker said:

Guys-guys-guys...just buy Brookfield damn-it.  Br

Or maybe just follow Sam Zell

[Spooky]

3 minutes ago, Ulti said:

Or maybe just follow Sam Zell

 

What's he been up to?

[Ulti]

From a month ago …. Inflation higher for longer and they have been prepping for more than a year 

[Ulti]

https://podcasts.apple.com/us/podcast/what-commercial-real-estate-stress-means-for-banks/id1056200096?i=1000608157614

[Ulti]

https://www.semafor.com/article/04/11/2023/leaning-towers-office-building-loans-are-looking-shaky

[LC]

What is the end game for office here?

 

Conversions to residential? That works in a handful of marquee locations, but not for the majority.

 

And I imagine it's incredibly expensive: https://www.nytimes.com/2022/12/27/business/what-would-it-take-to-turn-more-offices-into-housing.html

Quote

In Washington, D.C., just one in about 20 office buildings is a good candidate for housing conversion, said Josh Bernstein, chief executive of Bernstein Management, which owns and operates both residential and commercial real estate. The conversion alone might cost about $400 or $500 per usable square foot, Mr. Bernstein added, and would in many cases be more expensive than building a new development.

 

And office buildings look like crap. Character-less panes of mirrored glass and uniform windows. 

 

Thoughts and prayers that corporate tenants return? Well why would they? It's been almost 3 years of nationwide work-from-home or semi-WFH. I don't see that changing. It's cheaper, arguably more efficient, and well liked by most employees.

 

And look at the cities themselves - they are blown out with crime and homelessness. Know anyone dying to move to SF these days? I don't.

 

Someone way smarter than me has a great opportunity on their hands if they can figure out a (cheap) way to revitalize old office bldgs and make it a cultural part of urban life. 

[Ulti]

LC on top of all that getting thru local zoning greasing palms etc….sounds like an extremely difficult situation 

[Parsad]

Unfortunately article has a paywall:

 

https://www.wsj.com/articles/houston-apartment-owner-loses-3-200-units-to-foreclosure-as-multifamily-feels-the-heat-fb3d0e75?siteid=yhoof2

 

I think someone on here posted once before on how to get past them.

 

Cheers!

[Gamecock-YT]

4 hours ago, LC said:

What is the end game for office here?

 

Conversions to residential? That works in a handful of marquee locations, but not for the majority.

 

And I imagine it's incredibly expensive: https://www.nytimes.com/2022/12/27/business/what-would-it-take-to-turn-more-offices-into-housing.html

 

And office buildings look like crap. Character-less panes of mirrored glass and uniform windows. 

 

Thoughts and prayers that corporate tenants return? Well why would they? It's been almost 3 years of nationwide work-from-home or semi-WFH. I don't see that changing. It's cheaper, arguably more efficient, and well liked by most employees.

 

And look at the cities themselves - they are blown out with crime and homelessness. Know anyone dying to move to SF these days? I don't.

 

Someone way smarter than me has a great opportunity on their hands if they can figure out a (cheap) way to revitalize old office bldgs and make it a cultural part of urban life. 

 

What was the end game of housing in 07/08? It gets cheap enough that someone buys it and sits on it until the trend turns and companies start wanting CRE again. I think back to Dan Gilbert buying a bunch of buildings in downtown Detroit after the GFC, eventually it was revitalized and became a trendy place to be. As always, it's just about getting the timing right. 

 

But talking about residential conversions, if things get bad enough then I think you'll see the feds and local governments incentivizing conversions. 

 

Same as it ever was.  

[LC]

Not sure I agree. The difference is this: Despite home prices crashing in 07/08, fundamental demand never dropped. People still need to live somewhere.

 

Today, many corporations don't need office space. Fundamental demand may have shifted.

[Gregmal]

Maybe VNO can get tax credits for letting homeless people live in their empty office space…

[Spekulatius]

Did anyone find one bonds worth looking at. With the crash in CRE bonds, that may be the way to invest about this. Supposedly, there is some double digit debt out there. Maybe Reit debt ?

 

FWIW, I think WFH is a bubble that pops in the next recession. I think it’s already happening as I write this. Even though, hard to not see a 20% surplus of office space that eventually need to be converted to other uses though.

Edited April 12, 2023 by Spekulatius

[changegonnacome]

2 hours ago, Spekulatius said:

FWIW, I think WFH is a bubble that pops in the next recession.

Spot on -  the people showing up in the office will have a demonstrably higher ‘survival rate’ in downsizings.

 

WFH policy ‘maximizers’ will be the first on the chopping block…..an interesting measure of this would be the office occupancy data that gets released by control/access system operators….keep an eye on the Monday & Friday office occupancy levels rise as the economy deteriorates….this would be an excellent real time employee ‘fear’ index.

[ValueArb]

6 hours ago, changegonnacome said:

Spot on -  the people showing up in the office will have a demonstrably higher ‘survival rate’ in downsizings.

 

WFH policy ‘maximizers’ will be the first on the chopping block…..an interesting measure of this would be the office occupancy data that gets released by control/access system operators….keep an eye on the Monday & Friday office occupancy levels rise as the economy deteriorates….this would be an excellent real time employee ‘fear’ index.

 

Speaking as a software engineer,  I'd love to return to the office because I miss working among my team-mates and the work relationships that developed. But ... only if I have a private office with a door.

 

The open floorplan fad was killing productivity and creativity, and companies can get much better productivity from remote workers if they manage them well. I think the office ship has sailed in software development. Very few of my compatriots will be willing to go back to commuting, if forced they'll just take another remote job and the talent will (continue) to flow to remote work companies.

[Ulti]

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/alt-new/pdf/core-real-estate-trust-fund-1-termsheet.pdf
 

looks like the gold rush is starting 

[Ulti]

https://cre.moodysanalytics.com/insights/cre-trends/q1-2023-preliminary-trend-announcement/

[Red Lion]

22 hours ago, Ulti said:

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/alt-new/pdf/core-real-estate-trust-fund-1-termsheet.pdf
 

looks like the gold rush is starting 

Perhaps fidelity can raise more money than BREIT but do they know what to do with it? 

[Ulti]

4 hours ago, RedLion said:

Perhaps fidelity can raise more money than BREIT but do they know what to do with it? 

Buy AIV for 15-20 haha

[Spekulatius]

I wonder of the best way to play commercial RE are the brokers and leasing service providers like JLL, CBRE and maybe lower quality CWK. I also looked at NMRK but can's live with their shady (imo) accounting adjustments. JLL looked pretty cheap but CBRE seems to be the highest quality. With those service providers, you don't need to bet on a certain class of RE and even if office goes down the tubes, they will eventually have to figure out what to do with all these  buildings at which point these brokers will get involved.

 

Does anyone have an opinion on these RE brokers ?