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Borrowers Begin to Walk Away From Troubled Loans


Growing Number of Hotel, Retail Properties Are Likely to End up in Lenders’ Hands



By Mark Heschmeyer                July 9, 2020                    CoStar News

A growing number of borrowers large and small are willingly opting to give their properties over to lenders. They can potentially write off the loss and reduce their outstanding debt.

The trend, as evidenced in the latest special servicer commentary on loans packaged in commercial mortgage backed-securities, suggests any economic recovery from the coronavirus pandemic could be drawn out, particularly in the hospitality and retail sectors.

More than $1.3 billion in loans is currently in some stage of a mutually agreed-upon transition from borrowers to lenders, according to a CoStar analysis of servicer and bond rating agency reports. Under an action known as deed in lieu of foreclosure, a borrower agrees to sign over the deed to a property to the lender in place of continuing to make loan payments.

“We’re in very unchartered territory here,” Ann Hambly, a 35-year veteran of the CMBS industry and CEO of 1st Service Solutions, which works with borrowers on strategies to pay back loans, told CoStar in an interview. “I’ve had about five deeds-in-lieu over the past 30 days. That’s a big number. I don't think I ever saw that in the 2008, 2009, 2010 downturn because people then would prefer to work it out.”

Instead, borrowers are now saying they have sunk all the money they want to spend on a loan and are ready to walk away, she said.

The prospect of a quick rebound is typically the deciding factor when it comes to holding properties or folding on them, according to Hambly, who gave an example using retail.

Borrowers on properties anchored by necessity retailers such as grocery stores could be OK in the long run and just need some temporary debt relief, she said. But borrowers on properties reliant on department stores and movie theaters — sectors going through potentially permanent changes — may decide now is as good a time as any to walk away.

Most of the deeds in lieu that Hambly is seeing now are in the sector. And CoStar research shows two of the largest loans currently considering a transition over to lenders are for hotels.

Last month, Colony Capital confirmed it was willing to give up control of a portfolio of 48 hotels to a receiver after missing April and May payments on a $780 million loan securing the properties. Colony is 90% owner of the portfolio, which includes the Residence Inn near New Jersey's Newark Liberty International Airport, in a joint venture with Chatham Lodging Trust. Traditionally, receivers are appointed to manage properties and turn over cash flow to the lender pending either a sale or foreclosure.

Also last month, Blackstone Group skipped a payment on a $274 million hotel loan secured by four Club Quarters hotels in Chicago, Philadelphia, Boston and San Francisco that it acquired in 2016.

The New York City private equity firm said it’s considering all options regarding the loan.

“This is a very small investment that had been written down prior to COVID-19 as a result of unique operational challenges,” a Blackstone spokesperson said in an email. “We will continue to work with our lenders and the hotel management company to create the best possible outcome under the circumstances for all parties, including the employees.”

Hotels make up a small portion of Blackstone’s global real estate holdings valued at $324 billion. In the company’s first-quarter earnings call, it noted about 80% of its portfolio comprises logistics, residential assets and high-quality office properties, with logistics being the most dominant theme.

It’s not just hotels showing up as potential deed-in-lieu transfers. Bahrain-based Investcorp International owns a shopping mall and office property that servicers noted could end up with lenders.

A $65 million loan on the Southland Mall in Miami transferred to special servicing in April. According to the servicer’s note, the borrower initially asked for debt relief but has since made the decision that the property would be unsustainable at its current debt level. The servicer is said to be determining the optimal workout strategy that achieves the highest recovery. 

Investcorp officials didn’t return requests for comment on the Southland Mall nor on a $47 million loan on One Westchase Center, a 466,159-square-foot office building in Houston.

The servicer note on that loan said the borrower would like to transition the property to the lender due to pending loan maturity in October and because of COVID-19’s impact on the Houston economy.

Other loans currently identified in servicer notes and bond rating agency reports as potentially going back to lenders were for smaller loan amounts and various property types.

It’s likely, though, that the total amount of such loans could be much larger than indicated as not all servicers provide specific commentary on loan workouts. In addition, the amount could go higher as borrowers face continued disruption from the pandemic.

U.S. Mortgage Rates Fall to Record Low 3.03% for 30-Year Loans


By Craig Giammona           July 9, 2020                       Bloomberg News

Mortgage rates in the U.S. hit a record low for the sixth time since the coronavirus outbreak began roiling financial markets.

The average for a 30-year fixed loan was 3.03%, the lowest in almost 50 years of data-keeping by Freddie Mac. The previous record was 3.07%, which held for a week. Rates have plunged as the Federal Reserve holds its benchmark rate near zero and buys mortgage bonds as part of its plan to stimulate the economy.

Analysts have argued that rates could dip below 3% this year.

Low borrowing costs have fueled demand for homes, even with the pandemic battering the economy. Americans stuck at home have been looking to trade up for more space, while a shortage of available inventory has helped prop up prices.

Social-distancing measures kept some buyers and sellers on the sidelines in recent months, but the market is bouncing back, according to Lawrence Yun, chief economist at the National Association of Realtors.

“The residential market has seen a swift rebound of activity as numerous states have begun to ease mandatory stay-at-home orders,” Yun said in a statement.

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Brooks Brothers, Hurt by Casual Fridays and Coronavirus, Files for Bankruptcy


The 202-year-old maker of business suits, and one of the last with U.S. factories, joins other apparel brands in bankruptcy court

By: Suzanne Kapner and Soma Biswas         July 8, 2020     The Wall Street Journal

Brooks Brothers dressed the American business class in pinstripes for more than 200 years and survived two world wars and the shift to casual dressing. But it was no match for the coronavirus pandemic.

The closely held company, which is owned by Italian businessman Claudio Del Vecchio, filed for bankruptcy protection in Wilmington, Del., on Wednesday. One of the few brands to make clothes domestically, it plans to halt manufacturing at its three U.S. factories on Aug. 15 and will use the bankruptcy process to search for a new owner. 

Brooks Brothers joins a parade of U.S. retailers seeking relief in bankruptcy court since March, including Neiman Marcus Group Inc., J.Crew Group Inc. and J.C. Penney Co.JCPNQ -5.73%.  Economic fallout from Covid-19 has also pushed high-profile companies in other industries into bankruptcy, including Hertz Global Holdings Inc. HTZ -1.35% andChesapeake Energy Corp. CHKAQ 

Mr. Del Vecchio blamed the pandemic for the company’s current troubles, saying in an interview on Wednesday that temporarily closing stores during the lockdowns greatly reduced revenue, yet the company still met its contractual obligations to workers, suppliers and other vendors. He said he wished that the government had provided a lifeline to larger retailers the way it did to small businesses.

“Through every era, we had challenges, but we were confident we would be able to manage through them,” he said. “Retailing has been changing a lot in the last four to five years, and we were in the process of adapting to that new environment. When coronavirus came, there was really no way to sustain things.”

While it seeks a buyer and restructures its debts, Brooks Brothers said it has secured a $75 million debtor-in-possession loan from WHP Global. WHP, backed by Oaktree Capital and BlackRock, is a brand-management firm that owns the Anne Klein and Joseph Abboud apparel brands.

Brooks Brothers was facing challenges before the health crisis forced nonessential retailers to temporarily close their stores. The company had about $1 billion in revenue in 2019, and about a quarter of its sales came from ecommerce. It has 500 stores around the world and roughly 200 in North America, after deciding to close about 50 locations because of the pandemic.

Corporate America had turned increasingly casual, and fewer men were buying suits. Once people started sheltering at home, they turned to even more casual attire, such as sweatpants.

As people begin to head back to the office, it isn’t known whether they will return to a more formal way of dressing.

“I’ve seen a growing trend toward more casual dress partly because that’s how our clients are dressing,” said Quyen Ta, a partner in law firm King & Spalding LLP’s San Francisco office. “I’ve met with general counsels of public companies who are in hoodies.”

Brooks Brothers hired the investment bank PJ Solomon last year to explore strategic options, including a possible sale, according to people familiar with the situation. It also received a $20 million loan from liquidation firm Gordon Brothers, these people said. The loan was from the firm’s financing arm, which is separate from the division that handles liquidations, one of the people said.

Brooks Brothers is expected to attract buyers, other people familiar with the situation said. Authentic Brands Group LLC, a licensing company that owns the Barneys New York and Sports Illustrated names, is a potential suitor, they said.

Other sellers of men’s work attire have also struggled since the pandemic. Tailored BrandsInc., TLRD -1.55% parent of Men’s Wearhouse and Jos. A. Bank, said in June that it has taken several steps to conserve cash, such as taking longer to pay landlords and suppliers. The company reported a 60% decline in sales in the quarter ended May 2. Last week, Tailored Brands skipped a bond interest payment.

Founded in 1818, Brooks Brothers, which pioneered ready-made suits, came of age along with the nation. It started selling its clothes before the Erie Canal opened and the California Gold Rush began. Its clothes have been worn by dozens of U.S. presidents, including Abraham Lincoln and Theodore Roosevelt, as well as tycoons ranging from the Astors to the Vanderbilts.

It introduced the first button-down-collar shirt in 1896, an idea a grandson of the founder got from watching a polo match in England. He noticed that the players’ collars didn’t flap in the wind, because they were buttoned down. It popularized other looks such as the reverse-stripe “repp” tie, a take on Britain’s regimental neckwear, as well as Harris Tweed and the Shetland sweater.

Robert Herbst, a 62-year-old lawyer, remembers his father taking him to buy a Brooks Brothers shirt, tie and blue blazer when he was about 7 years old. Later, when he joined the law firm White & Case LLP, he bought his first Brooks Brothers suit.

“It was the uniform,” said Mr. Herbst, who lives in Larchmont, N.Y., and is now the general counsel of several small companies. “Brooks Brothers was a way of life,” he said. “It represented a traditional, old-line way of dressing.”

Mr. Herbst said that although he has a closet full of Brooks Brothers suits he has been dressing more casually in recent years. “I used to wear suits five days a week, and that’s very rare now,” he said.

Even as other retailers moved production overseas, Brooks Brothers continued to manufacture a small portion of its suits, ties and shirts in three U.S. factories—in Haverhill, Mass., Garland, N.C., and Long Island City, N.Y. The factories produce roughly 7% of its finished goods, mainly suits, ties and some shirts.

As the move to dress more informally gained steam through the 1990s and 2000s, Brooks Brothers tried to adapt. In 2016, it introduced Golden Fleece, a line of casual clothes that included sweaters, jackets, sport shirts and slacks. But it faced competition from many upstarts. Today, tailored clothes account for about a fifth of its sales, with casual sportswear making up the rest, according to a spokeswoman.

Brian Ouellette of Clyde Hill, Wash., bought his first Brooks Brothers suit when he entered the PaineWebber & Co. training program in 1995. “My attire today is much more casual,” said the 48-year-old, who started his own company in 2010 that coaches financial advisers. “I’ll wear French cuff shirts with shorts and loafers in the summer.”

Brooks Brothers was acquired by the British retail chain Marks and Spencer GroupMAKSY 1.51% PLC in 1988. It was sold in 2001 to Retail Brand Alliance Inc., which was controlled by Mr. Del Vecchio, whose father founded Luxottica Group SpA, the Italian eyeglass maker. It changed its name to Brooks Brothers Group Inc. in 2011. 

Restoring Brooks Brothers has been a passion of Mr. Del Vecchio, who became enamored of the brand while growing up in Italy, according to a 2015 interview on the company’s website. Brooks Brothers was the first store he visited when he came to the U.S. at the age of 25. “As a frequent customer, I thought there were ways I could improve on quality,” Mr. Del Vecchio said in the interview.

He upgraded the fabrics, overhauled the supply chain and introduced new lines, including Black Fleece, a collection created by avant-garde designer Thom Browne that was discontinued in 2015. He also pushed the company to expand internationally. In 2001, Brooks Brothers’ only international market was Japan. Today, it has a presence in more than 70 countries.

Mr. Del Vecchio said he was unsure what he would do after Brooks Brothers is sold. “For now, I want to ensure a long life for this company.” he said.

Ann Taylor Owner Ascena Prepares Bankruptcy to Cut Debt, Stores

By: Eliza Ronalds-Hannon and  Katherine Doherty       July 7, 2020     Bloomberg News

Ascena Retail Group Inc., the owner of mall brands that occupy almost 3,000 stores in the U.S., is preparing to file for bankruptcy and shutter at least 1,200 of those locations, according to people with knowledge of the plan.

The company, which owns brands such as Ann Taylor and Lane Bryant, could enter Chapter 11 as soon as this week with a creditor agreement in place that eliminates around $700 million of its $1.1 billion debt load. Lenders including Eaton Vance Corp. would assume control of the company, said the people, who asked not to be identified discussing a private matter.

Ascena has experienced years of financial losses amid a boom in online shopping and slowdown in foot traffic at malls. The bankruptcy filing would allow the company to keep some of its brands operating while it shutters or sells others, the people said. Catherines and Justice are among the chains it’s considering to close or sell, they said. The plan is not final and certain details could change.

Mahwah, New Jersey-based Ascena didn’t provide a comment. The company is getting advice from restructuring lawyers at Kirkland & Ellis and investment bank Guggenheim Securities. A representative for Guggenheim declined to comment, while spokespeople for Kirkland and Eaton Vance didn’t immediately return messages seeking comment.

Ascena shut its shops in mid-March as the coronavirus outbreak spread, and began to re-open locations in early May as state authorities lifted restrictions. Customer traffic is much lower than normal at the revived stores, the company said in an update on the impact from Covid-19 on its business.

Like other retailers, the company cited a slump in sales tied to the closures. The company’s earnings and cash flow have been “significantly reduced” despite efforts to preserve liquidity, Carrie Teffner, Ascena’s interim executive chair, said in the update.

Ascena previously failed to sell two of its chains amid the losses and signs that creditors were losing confidence in its prospects. In September management discussed divesting Catherines and Lane Bryant, which specialize in plus-size women’s apparel, Bloomberg reported.

— With assistance by Lauren Coleman-Lochner

WeWork Scrapping Baltimore Lease, Days After Ditching New York Deal, Shows Market Pressure


Co-working Firm Enters Agreement With Armada Hoffler to Terminate 69,000-Square-Foot Accord

By Michael Cobb and Bryce Meyers       July 7, 2020         CoStar Analytics

The June completion of Wills Wharf brought yet another high-quality office building to Baltimore’s waterfront. However, the 12-story property in the growing Harbor Point development is now without its anchor tenant: WeWork.

Armada Hoffler Properties, the owner of the Harbor Point development, said Tuesday it came to a mutual agreement with WeWork to terminate its 69,000-square-foot lease at 1201 Wills St. WeWork had been committed to Wills Wharf for upward of two years. In fact, its deal represented the largest new office lease signed in southeastern Baltimore in the past five years and would have marked WeWork’s first location in the market. 

But the coworking giant has been scaling back its expansion plans as the coronavirus pandemic has largely kept office workers home and in turn pummeled an industry with a communal workspace model that is at odds with the new era of social distancing. That has led WeWork to get out of several lease agreements of late.

Just days ago, WeWork said it reached a deal to terminate its full-building lease with Columbia Property Trust at 149 Madison Ave. in New York. And in early June, the company canceled a lease in Germany that represented one of its largest lease agreements in Europe.

The terminated leases are part of a larger strategy by WeWork to reassess its global real estate footprint after years of relentless expansion. The company grew rapidly using venture capital funding from groups including main investor SoftBank Group Corp., the Tokyo-based firm that spearheaded the round of funding that pushed WeWork's valuation to $47 billion — a record high for a real estate-focused startup. 

The New York company quickly saw its valuation fall, however, after an ill-fated initial public offering last year revealed questionable business practices and a lack of a clear path forward to profitability. The company’s review of its global operations has only accelerated in recent months as efforts to contain the pandemic forced offices to close and raised new questions about the viability of coworking in general.

WeWork's new CEO, Sandeep Mathrani, said in May the company may exit or restructure about 20% of its global leases as it looks to rightsize its business and optimize its portfolio. WeWork declined to comment beyond a statement it issued.

For Baltimore, the canceled WeWork deal means that the emergence of net-new office demand has once again evaded Charm City. This is a trend that has been well documented in recent years, particularly within city limits. 

Despite those woes, the Baltimore market’s office vacancy rate is still in good standing, at least when compared with its own historical norms. Yet, asking rents declined last year and have continued to do so year-to-date. Those declines are likely to be further exacerbated in the coming months and quarters as the pandemic affects businesses and corresponding office footprints.

Prior to the termination announcement, the new Wills Wharf building had been about 55% leased to a tenant roster that also included Ernst & Young, Bright Horizons and digital marketing company Jellyfish Group. With the top two floors now back on the market, the 236,000-square-foot building is just over 25% leased.

“With its prime waterfront location in Harbor Point, we are in active negotiations to lease the balance of the building, inclusive of the 69,000 square feet that WeWork was to occupy,” Louis Haddad, president and CEO of Virginia Beach, Virginia-based Armada Hoffler, said in a statement. 

Armada Hoffler developed Wills Wharf as part of Harbor Point, a larger project in the Inner Harbor that includes more than 325,000 square feet of office, retail and a boutique-style Canopy by Hilton hotel. JLL’s team in downtown Baltimore handles leasing at Wills Wharf.

Lender halts funding for Helmut Jahn-designed skyscraper on Michigan Avenue, putting project in doubt

By Ryan Ari         July 7, 2020      The Chicago Tribune


A Helmut Jahn-designed skyscraper along South Michigan Avenue is on hold at least until September and buyers of the luxury units are being offered some of their deposits back, after the project’s lender stopped funding its construction. 









The latest delay, resulting from economic concerns tied to the coronavirus pandemic, raises questions about the viability of the biggest condo project to break ground in Chicago in more than a decade.


At 74 stories and an expected cost of $470 million, the 1000M tower would be difficult to pull off even in the best of times.

It would not be the first audacious project in Chicago to succumb to a case of bad economic timing. The most memorable is the 2,000-foot-tall, Santiago Calatrava-designed Chicago Spire, a project that fell apart after breaking ground and became a global cautionary tale about the fickleness of construction cycles.


Construction lender Goldman Sachs has put the 1000M project on hold until it can be reviewed after a 90-day period ending in September, providing more time to assess the impacts of COVID-19 on real estate demand, according to developers Time Equities, JK Equities and Oak Capitals.

Goldman Sachs is “concerned about economic stability of the market at this particular time due to recent events,” Time Equities chairman and CEO Francis Greenburger said in an email Tuesday.

In recent weeks the virus has rapidly spread in several states, causing concerns about long-term damage to the economy.

The lender could agree to continue funding the project after the three-month wait, and the developer is exploring other ways to finance the project in the meantime, Greenburger said. He declined to say how much construction financing Goldman Sachs had agreed to provide.

“We are hopeful that a solution will be found in the months ahead,” he said.



The project, across from Grant Park, was the first prominent high-rise construction project in Chicago to shut down during the pandemic. The 1000M developers in June said foundation work stopped during the spring to prevent the spread of COVID-19. 

The lender covered the cost of the initial phase of the foundation but has not released additional funds, Greenburger said. “We remain hopeful that this graceful iconic structure will one day help define the skyline of Chicago,” he said.

The 832-foot-tall tower designed by Jahn is the largest condo project in Chicago, by unit count, to begin construction since the last recession. There are contracts to buy 101 of 421 units, and buyers have made 10% down payments, Greenburger said.

The developers recently informed buyers who had signed contracts that construction was being idled, giving them the option to take back half of their earnest money, Greenburger said.

Many buyers declined to take back the 5%, and those who did would need to repay the 5% when construction resumes, he said

During stay-at-home orders issued in March, construction was deemed an essential industry by Gov. J.B. Pritzker.

The devastating impact on the economy and the need to take health precautions such as distancing, staggering work shifts and taking workers’ temperatures has made construction projects challenging. Still, many big projects have continued uninterrupted in recent months.

One of the 1000M developers, New York-based JK Equities, took the rare step of starting work last month on a 42-unit luxury condo project on Chicago’s Near West Side.

Large projects delayed by the pandemic include construction of the massive office space Uber leased in The Old Post Office redevelopment and the planned observatory at the Aon Center, which would include adding an exterior elevator tower and creating a thrill ride atop the city’s third-tallest skyscraper.

Developers and construction contractors are closely watching to see how the pandemic will affect a more than decade-long construction boom, at a time when several megadevelopments are in advanced planning stages.

If completed, 1000M would stand tallest in the iconic row of skyscrapers on South Michigan Avenue.

It also would be the tallest building designed by German architect Jahn in his adopted hometown. Jahn’s prominent Chicago designs include the James R. Thompson Center and the United Airlines terminal at O’Hare International Airport.

1000M is already years in the making. The developers bought the site in the 1000 block of South Michigan Avenue for $17.2 million in 2016. That’s the year the city approved the project after Jahn altered the design, including chopping 200 feet from its height.

It took years before enough units were pre-sold to begin construction.

The Tribune reported in October that 1000M was moving close to the starting line, and later that month the developers held a groundbreaking ceremony.

At the time, Greenburger said the developers were close to finalizing an unspecific amount of financing from Goldman Sachs, with construction expected to take about three years.

Twitter @Ryan_Ori

Apartment Industry Advocates Lobby for New Stimulus Legislation as Senate Goes on Recess

“We are tremendously concerned what happens if those systems are not renewed,” says one insider about expanded unemployment benefits. 

Bendix Anderson       Jul 06, 2020        National Real Estate Investor

The clock is ticking in Washington D.C. In a few weeks, a federal emergency program will stop distributing extra funds to people who lost jobs in the crisis caused by the novel coronavirus. That could cause a huge number of renters to fall behind on their rents and eventually lose their homes.

“There is a threat of a massive wave of evictions,” says David Dworkin, president and CEO of the National Housing Conference, a Washington, D.C.-based non-profit focused on ensuring safe and affordable housing for all Americans. “I am hoping that the impetus for Congress to take action is not when sheriff’s deputies on a large scale start dumping people’s personal effect and children’s toys onto the sidewalk. I don't think it takes a lot of social media to provoke a reaction to that.”

Millions of renters lost jobs in the economic crisis caused by the global pandemic. So far, they have largely been able to pay their rent on time, thanks to a web of government stimulus programs. The largest is now timed to expire at the end of July. Yet while the U.S. House of Representatives has passed the Health and Economic Recovery Omnibus Solutions (HEROES) Act some time ago to offer Americans a new round of stimulus money, the Senate has just gone on a two-week July 4th recess without passing a bill of its own.

For the time being, many property managers have been forbidden from evicting tenants from rental housing in many parts of the U.S. by a patchwork of local laws and federal regulations that are also expiring and, in some municipalities, face lawsuits.

Housing advocates get through to lawmakers

It’s not the first time Congress has waited to act on an important program. “No one is surprised that we are not going to have this done [by the beginning of July],” says Paula Cino, vice president of construction, development and land use policy for the National Multifamily Housing Council (NMHC), a non-profit advocacy group for the apartment industry. However, the delay is still nerve-wracking. “We don’t see any certain timelines.”

Advocates like Dworkin and Cino have been in close contact with legislators and their staffs, despite the crisis caused by the spread of the coronavirus. “Nobody is on the Hill having in-person meetings anymore,” says Cino. “It’s all conference calls and Zoom calls.”

Because of the crisis, advocates can no longer catch the attention of Washington players in the halls of Congress and the offices nearby. However, they can often schedule more substantive conversations.

“Everyone is working from home and they are dying for human contact,” says Dworkin. “If you have something worth talking about, it is easier to get a meeting with a member of Congress.”

The expiration of programs like enhanced unemployment benefits for out-of-work Americans at the end of July has also added urgency to these discussions. “We are already seeing an increased interest in discussion of this issue among Republican staff in some member’s offices,” Dworkin notes.

The U.S. House of Representatives also recently passed a proposal focused just on housing issues, which would postpone evictions and foreclosures for struggling renters and homeowners for a year. The new bill repeats parts of the much larger, $3 trillion HEROES Act that has largely been ignored by the Republican-led Senate since the House passed it in May.

The smaller, new Emergency Housing Protections and Relief Act of 2020 includes many provisions supported by advocates for both renters and property managers—such as $100 billion in emergency rental assistance. “That’s critical—it gets dollars into renters’ hands to keep them from ever missing a rental payment,” says NMHC’s Cino.

The House bill also includes a national, uniform moratorium on evictions for all renters, which is more controversial.

“Rental housing providers cannot alone bear the burden,” says Greg Brown, senior vice president of government affairs for the National Apartment Association, a non-profit trade group for apartment building owners and suppliers. "These policies will inhibit the ability of property owners to manage their communities by interrupting the cash flow necessary to maintain effective operations."

Most renters are still paying


The vast majority of apartment tenants are still writing rent checks for now. By June 20, more than nine out of 10 apartment renter households (92.2 percent) had made a full or partial payment for the month, according to a survey by NMHC, which gathered data on 11.4 million professionally-managed apartments from five leading property management software systems.

That’s more than a quarter of the 43 million rental apartments in the United States.

Millions of Americans have filed new claims for unemployment benefits every week since the COVID-19 crisis began in March. Many have been able to keep paying rent because of trillions of dollars of benefit programs created by the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) in the first weeks of the crisis. That includes direct payments of $1,200 per taxpayer and expanded unemployment benefits that provide recipients an extra $600 per week.

“We are tremendously concerned what happens if those systems are not renewed,” says Cino.

Of these existing programs, expanded unemployment benefits may have helped renters the most. But they have also created the most controversy with legislators. “There are those that believe that it leads to unintended consequences,” says Cino. “It is absolutely one of the top issues and concerns for Senate Republicans.”

Advocates hope that deadlines coming up will motivate Congress to act. “I am very concerned that things are not moving,” says Dworkin. “However, last minute solutions are what Congress does best.”

The Economics (and Nostalgia) of Dead Malls - By Nelson D. Schwartz    New York Times  (2015)

With Department Stores Disappearing, Malls Could Be Next

Brick-and-mortar retail was in the midst of seismic changes even before the pandemic. Analysts say as much as a quarter of America’s malls may close in the next five years.

By: Sapna Maheshwari          July 5, 2020         New York Times

The directory map for the Northfield Square Mall in Bourbonnais, Ill., has three glaring spaces where large department stores once stood. Soon there will be a fourth vacancy, now that J.C. Penney is liquidating stores after filing for bankruptcy.















With so much empty space and brick-and-mortar retail in the midst of seismic changes even before the pandemic hit, the mall’s owners have been talking with local officials about identifying a “higher and better use for the site,” though they have declined to elaborate on what that could be.

“Filling in one anchor space, generally, is doable,” said Elliot Nassim, president of Mason Asset Management, which co-owns the Northfield Square Mall and dozens of other enclosed shopping centers. “But once you get hit by two others and you’re dealing with three anchor closures, that’s usually where we become a little more likely to put it into the bucket of a redevelopment.”

The standard American mall — with its vast parking lots, escalators and air conditioning, and an atmosphere heavy on perfume samples and the scent of Mrs. Fields cookies — was built around department stores. But the pandemic has been devastating for the retail industry and many of those stores are disappearing at a rapid clip. Some chains are unable to pay rent and prominent department store chains including Neiman Marcus, as well as J.C. Penney, have filed for bankruptcy protection. As they close stores, it could cause other tenants to abandon malls at the same time as large specialty chains like Victoria’s Secret are shrinking.

Malls were already facing pressure from online shopping, but analysts now say that hundreds are at risk of closing in the next five years. That has the potential to reshape the suburbs, with many communities already debating whether abandoned malls can be turned into local markets or office space, even affordable housing.

“More companies have gone bankrupt than any of us have ever expected, and I do believe that will accelerate as we move through 2020, unfortunately,” said Deborah Weinswig, founder of Coresight Research, an advisory and research firm that specializes in retail and technology. “And then those who haven’t gone bankrupt are using this as an opportunity to clean up their real estate.”

Ms. Weinswig said the malls that are able to withstand the current turmoil will be healthier — better tenants, more inviting and occupied — but she anticipated that about 25 percent of the country’s nearly 1,200 malls were in danger.

Most retailers that have filed for bankruptcy are closing stores but plan to continue operating.

Department stores account for about 30 percent of the mall square footage in the United States, with 10 percent of that coming from Sears (which filed for bankruptcy in 2018) and J.C. Penney, according to Green Street Advisors, a real estate research firm. J.C. Penney, which declined to comment, has said store closings will start this summer and could eventually number as many as 250. Green Street forecast in April that more than half of all mall-based department stores would close by the end of 2021.

That will have significant effects beyond reduced customer foot traffic. Many small mall retailers have clauses in their leases — so-called co-tenancy clauses — that allow them to pay reduced rent or even break the lease if two or more anchor stores leave a location.

“At a lot of lower-quality malls, where maybe there already is a vacant anchor, where you’ve got the Sears box that closed two years ago and not yet filled it, and now your J.C. Penney box is closed — that is going to cause that mall to likely lose a lot of tenants and possibly even lose its competitive positioning very quickly,” said Vince Tibone, a retail analyst at Green Street.

Mr. Tibone said he was pessimistic about the ability of most malls to fill vacant spaces, especially during the pandemic. Entertainment options like Dave & Buster’s are off the table, for instance.

“The reality is there are going to be dark boxes for some time,” he said.

And then there are customers, who already shop online in huge numbers and may not be all that eager to return to enclosed emporiums where they will be surrounded by other people.

“If there’s a perception out there that people are safer outside and less safe inside, that’s not great,” said Matthew W. Lazenby, chief executive of Whitman Family Development, which manages the luxury open-air Bal Harbour Shops outside Miami.


Even before the pandemic, American shopping malls were seeing their fortunes diverge. While malls in affluent areas with high-end stores and restaurants generally thrived, lower-tier malls, particularly those with competitors nearby, suffered over the years as retailers winnowed their physical stores and filed for bankruptcy. Macy’s, which also owns Bloomingdale’s, said in February that it would close 125 stores in “lower-tier malls” during the next three years, and Nordstrom just recently said it would close 16 of its 116 full-line department stores. While Neiman Marcus, which filed for bankruptcy in May, said it plans to reopen all its stores, landlords are watching warily.

Mr. Lazenby said that his mall was in a good position, but it, too, has been dealing with the decline of department stores. Barneys New York, which finished liquidating this year, was meant to anchor an expansion, and the mall also has a Neiman Marcus.

Brad Schlossman, chief executive of West Acres Development, where he oversees the popular West Acres mall in Fargo, N.D., which was founded by his father, said Sears was the mall’s first tenant and it had a lease that, including renewal options, had a 45-year-term that ran out in 2017.

Since Sears exited, the mall has been trying to redevelop the space, installing a Best Buy and trying to attract restaurants, though those plans may be put on hold depending on which tenants are able to pay rent in the near future.

Mr. Schlossman is optimistic about West Acres, partly because it is the only major mall in an area where the weather favors enclosed spaces. But he anticipates greater struggles in places where there are clusters of malls. “We are it in our community, so we don’t have that same either cannibalization or struggle to attract tenants because we’re competing against another mall,” he said.

As of June, 84 percent of the country’s 1,174 malls were considered healthy, reporting vacancy rates of 10 percent or less, according to the CoStar Group, a data provider for the real estate industry.

But that compares with 94 percent in 2006. And the percentage of healthy malls is expected to drop further as retailers carry out store closings announced this year, accounting for more than 83 million square feet of retail space. A significant percentage of that comes from apparel stores, which represent about 60 percent of occupied mall space.

Major mall operators have started to signal concern. The Simon Property Group, the biggest mall operator in the United States, is trying to terminate its $3.6 billion deal to acquire Taubman Centers, which owns and operates about two dozen high-end shopping centers.

In court filings last month, Simon Property said that Taubman’s malls were mostly enclosed, and that indoor malls “are the last types of retail real estate properties that most consumers will want to visit on a long-term basis after Covid-19.” (Simon Property also owns many enclosed malls.) While Taubman has promoted its wealthy, educated shoppers as an asset, Simon Property said that those consumers, in particular, are now “far more able and likely to use online shopping.” The sides have been ordered to enter mediation but if an agreement isn’t reached by the end of the month, they will go to trial. 

CBL & Associates Properties, which owns and operates roughly 60 malls, outlet stores and open-air shopping centers in the United States, said in filings last month that it was skipping about $30 million in interest payments due in June “to advance discussions with its lenders and explore alternative strategies,” and that there was “substantial doubt” it would continue to operate as a going concern.

Jim Hull, the owner and managing principal of the Hull Property Group in Augusta, Ga., which oversees 30 enclosed malls, expressed frustration about the exit of big national chains from “smaller or tertiary markets.” The result, he said, is that “the majority of people living in the smaller markets will either have to buy from the internet or have to drive 45 miles,” he said.

Already this year, Victoria’s Secret said it would close 250 stores in North America, while the Gap brand is closing at least 170 stores globally. Financial troubles are plaguing mall chain companies like Ascena Retail, which owns Ann Taylor and Loft, and the owner of New York & Company. And bankruptcies since early 2019 have included mall staples like Forever 21, Things Remembered, Payless ShoeSource and GNC. Lucky Brand Dungarees filed for bankruptcy on Friday.

Mr. Hull said that he anticipated making malls more “community-based” in smaller markets, with local and regional businesses. “It’s going to be cooking classes, boutiques, internet businesses that want a physical presence, health care, food choices,” he said.

In Cupertino, Calif., where Apple has its headquarters, the fate of the shuttered Vallco Shopping Mall has become a contentious issue, with impassioned public debates around replacing it with affordable housing, new entertainment and retail options or office space.

In the meantime, it is a partially demolished eyesore, according to Rod Sinks, a member of the Cupertino City Council. “We have a chain-link fence around the whole thing,” he said.

In Los Angeles, the former Westside Pavilion mall, once featured in the movie “Clueless” and Tom Petty’s “Free Fallin’” music video, is turning into office space for Google. Terri Tippit, the 74-year-old chairwoman of the local Westside neighborhood council, lamented the loss of the space and said it “reflected the way our society is changing and going.”

Still, some investors have bought midtier malls in recent years and have already been working on how to repurpose and change spaces — even “de-malling” malls, by flipping store entrances so that they face the street.

“We didn’t buy malls since 2014 thinking that J.C. Penney or Sears or Bon-Ton were going to be in business forever and operate department stores, and if you were, then shame on you,” said Ami Ziff, director of national retail at Time Equities, a real estate firm whose investments include eight enclosed malls. “Is there going to be more distress, vacancy and bankruptcy? Yes. Hopefully, you know what you’re doing so you can pick up the pieces to refill that space.”

By the Numbers...


U.S. Job-Growth Optimism Tempered by Stall in States’ Reopenings


By: Reade Pickert           July 2, 2020            Bloomberg News

The U.S. labor market made greater progress than expected last month digging out of a deep hole, yet optimism over the rebound was tempered by stubbornly high layoffs and a resurgent coronavirus outbreak across the country.

Thursday’s simultaneous release of the monthly employment report and the weekly jobless claims data offered diverging snapshots of the economy: One reflecting a flurry of rehiring -- particularly at restaurants and retailers -- as state economies reopened. The other reflecting a jump in new virus cases, which has led many of those same states to halt or even walk back reopening plans.

While President Donald Trump said the jobs figures proved the economy is “roaring back,” the pace of recovery may slow or even stall if employers grow cautious and delay rehiring workers -- in fact, some have already been laid off a second time.

Paired with the coming expiration of the federal government’s extra $600 in weekly unemployment benefits, the economy could take another hit in the months ahead. Even a decade from now, the jobless rate will still be above pre-pandemic levels, according to Congressional Budget Office projections released Thursday.

“No one should be expecting we’re on a straight trajectory higher,” said Jennifer Lee, senior economist at BMO Capital Markets. Initial jobless claims are the “worrying part” of Thursday’s figures, and “it’s going to be a few steps forward and a couple steps back,” she said.

Payrolls rose by a more-than-expected 4.8 million in June after an upwardly revised 2.7 million gain in the prior month, according to Labor Department figures. The data, which offer a snapshot of mid-month conditions, also showed the unemployment rate fell for a second month to 11.1%. That was a bigger decline than anticipated, but the rate still remains far above the pre-pandemic half-century low of 3.5%.

Meanwhile, a separate weekly report showed initial applications for unemployment benefits in state programs remained extremely elevated last week, falling by less than expected to 1.43 million new applications. Continuing claims -- or claims for ongoing unemployment benefits in state programs -- rose slightly to 19.3 million in the week ended June 20.

U.S. stocks rose following the data, though they pared gains on speculation that a second wave of coronavirus cases could jeopardize an economic rebound.


What Bloomberg’s Economists Say


“The upward surprise in the June jobs report demonstrates that economic fundamentals remain strong enough to facilitate a relatively robust recovery once Covid-19 is under control. However, in the near term, the positive signal somewhat fades given the recent sharp acceleration in new virus cases and the looming income cliff stemming from the expiration of augmented unemployment benefits this month.”

-- Yelena Shulyatyeva, Andrew Husby and Eliza Winger --

The Labor Department’s Bureau of Labor Statistics has largely fixed a problem that resulted in respondents being misclassified as employed when they should have been labeled as unemployed. Adjusted for the errors, the June unemployment rate would have been about 1 percentage point higher than reported -- or 12.3%, compared with an adjusted 16.4% in May. “The degree of misclassification declined considerably in June,” BLS said.

The increase in payrolls was led by leisure and hospitality and retail, illustrating the effect of the easing of business restrictions. Health care also saw increases as doctors’ and dentists’ offices reopened.

It’s a “little more disconcerting that we’re not seeing broad-based gains across industries,” BMO’s Lee said.

Also, state government payrolls fell by another 25,000 -- the fourth straight decline -- as budget situations grew more dire amid falling tax revenues.

Beneath the headline numbers are even bigger underlying trends. About 17.8 million Americans remain unemployed, down from 23.1 million in April, indicating that only about a third of the jobs lost during the pandemic have been recovered.

Another is massive churn: About 12.4 million people were newly employed in June -- about double the pre-pandemic pace -- according to BLS figures compiled by Bloomberg, while the rate of people moving from employed to unemployed was also double last year’s average rate.

White House economic adviser Larry Kudlow, speaking on Bloomberg Television, said the report was “spectacular” and many more people temporarily laid off will return to work.

Trump’s Democratic opponent, Joe Biden, said on a livestream Thursday that the positive jobs report doesn’t compensate for the scale of the health crisis. “There is no victory to be celebrated,” he said. “We’re still down nearly 15 million jobs, and the pandemic is getting worse, not better.”

Key Numbers

Unemployment among minorities and women remained worse than among White Americans and men. The Black unemployment rate fell to 15.4% from 16.8%, while it declined to 10.1% from 12.4% among White Americans. Hispanic unemployment dropped to 14.5% from 17.6%.

Meanwhile, the household survey showed more than 2.8 million Americans permanently lost their job in June, a 588,000 increase from a month earlier that was the biggest since the start of 2009. While the total number is the highest in six years, the figure bears watching for more systemic damage to the labor market caused by the pandemic.

“The first thing I looked at was number of people permanently laid offand that continues to climb, and I think that’s some cause of concern,” said Ryan Sweet, head of monetary policy research at Moody’s Analytics. “Even when this pandemic’s over those people are going to need to find work.”

really comment on the articles in the feed.  I believe that they should stand on their own merit.  But the information over the last several days has been less than inspiring.  When the Federal Reserve pointedly is telling the government what it needs to do, it is a case of the tail wagging the dog - but not in a good way.   The Europeans have abandoned us, we are lumped in the same category as Brazil and Russia and the pandemic appears have no end in sight.  There is no doubt from a real estate point of view, these are troubling omens.   

Fed officials raised concerns in June that U.S. could enter a much worse recession later this year if coronavirus cases continued to surge


The scenario, which officials described as plausible, was revealed in minutes of their June meeting before the surge in cases escalated


By: Rachel Siegel       July 1, 2020         The Washington Post


Federal Reserve officials raised concerns about additional waves of coronavirus infections disrupting an economic recovery and triggering a new spike in unemployment and a worse economic downturn, according to minutes released Wednesday by the central bank about its June 9-10 meeting.

Fed Chair Jerome H. Powell has repeatedly said that the path out of this recession, which began in February, will depend on containing the virus and giving Americans the confidence to resume normal working and spending habits. But the notes from the two-day meeting reveal how interconnected Fed officials view a prolonged economic recession and the pandemic’s continued spread — and why Powell often asserts that lawmakers will need to do more to carry millions of Americans out of this crisis.

“In light of the significant uncertainty and downside risks associated with the pandemic, including how much the economy would weaken and how long it would take to recover, the staff judged that a more pessimistic projection was no less plausible than the baseline forecast,” the minutes read. “In this scenario, a second wave of the coronavirus outbreak, with another round of strict limitations on social interactions and business operations, was assumed to begin later this year, leading to a decrease in real GDP, a jump in the unemployment rate, and renewed downward pressure on inflation next year.”

On June 10, when this Fed meeting concluded, there were 20,456 new coronavirus cases in the United States that day, according to a Washington Post analysis. The situation has deteriorated markedly since then, and 44,474 new cases were reported Tuesday. Anthony S. Fauci, the government’s top infectious-disease specialist, warned this week that the country could soon face 100,000 new coronavirus cases a day “if this does not turn around.”

Notably, the Fed’s discussion about these concerns came before the big surge in coronavirus cases in the past two weeks. The latest surge has forced California, Florida and Texas to reimpose restrictions on restaurants and bars, and nine other states have postponed or scaled back reopening plans. The reversal means that many Americans — including hourly and low-wage service employees — have been kicked out of the workplace for a second time.

That grim reality is colliding with what experts have dubbed a “fiscal cliff,” when the $600-per-week increase in unemployment benefits expires at the end of this month. Congress is facing multiple decisions about how or whether to extend government aid this summer. Powell has often said that more congressional action is likely to be needed to provide direct relief to struggling households and businesses.

Powell and other Fed officials stop short of outlining exactly what they think lawmakers should do in a new stimulus package or other legislation. But the meeting minutes underscore what the central bank’s leaders have said in public, which is that the Fed’s tools can do only so much.

The Fed has propped up many emergency programs to support the markets and extend loans to municipalities and small and midsize businesses. But the central bank only has authority to lend — not spend. Testifying before the House Financial Services Committee on Tuesday, Powell said that for many companies and industries desperate for help, “more debt may not be the answer here."

Among the risks noted by Fed officials at the June meeting: “Fiscal support for households, businesses, and state and local governments might prove to be insufficient.”

Still, those concerns are much different from the forecast the White House has offered, as President Trump has predicted a sharp increase in economic growth. This week, senior White House economist Larry Kudlow said that the “overwhelming” evidence pointed to a V-shaped recovery.



Powell has hesitated to say precisely what type of bounce back — including a V, U or W-shaped recovery — the country could face, and he emphasizes that the situation remains extraordinarily uncertain.

But the Fed has taken steps to incorporate a range of possibilities, including more dire ones, into its emergency response. Last week, the Fed released new data on how the country’s largest banks would fare under those three scenarios and concluded that if there is a slower, U-shaped recovery or a W-shaped scenario, several financial firms “would approach minimum capital levels.”

Others within the central bank have been more direct. In an interview with The Post on Wednesday, Mary C. Daly, president of the San Francisco Federal Reserve Bank, said she “would hesitate to call this a recovery” and specifically said the country was not in a V-shaped rebound.



The Fed’s June meeting took place just weeks after George Floyd, a black man in Minneapolis, died in police custody, spurring nationwide protests against racism and American policing. With the protests came a broader reckoning over racial inequalities that permeate the American economy, especially for communities of color, which are most vulnerable to the current recession.

Powell has frequently been asked whether the Fed should specifically consider the black unemployment rate, or whether the central bank’s programs widen economic disparities rather than repair them. His frequent response is that the Fed’s emergency programs are meant to protect American jobs and that if unemployment can return to its historically low, pre-pandemic levels, minority workers will especially benefit.

“Injustice, prejudice, and the callous disregard for life had led to social unrest and a sense of despair,” the Fed minutes said.

Source:  National Association of Convenience Stores

Weak Demand for Ventas, Healthpeak Senior Housing Bodes Poorly for the Industry

Hundreds of communities halted admissions during the pandemic, leading to lost revenue as pandemic-related costs have soared

By:  Peter Grant                          June 30, 2020                 The Wall Street Journal

The reopening of admissions at senior housing communities owned by companies like Ventas Inc. and Healthpeak Properties Inc. is slowing but failing to end the downward slide in occupancy rates, the latest sign that the hard-hit industry faces a long slog to recovery.

Hundreds of senior housing communities halted admissions during the pandemic to protect residents against a virus that is particularly deadly to the elderly and those with health problems. That has meant lost revenue at a time when pandemic-related costs have soared.

Now, as a shaky reopening proceeds in parts of the U.S., many of these communities have started admitting new seniors. But the reopening of admissions hasn’t led to a surge in move-ins and rising occupancy resulting from pent-up demand that some companies have expected. 

About 53% of operators with assisted living units reported that occupancy was continuing to decline in the week that ended June 8 from the same period in the prior month, according to a closely watched Covid-19-related weekly survey of 150 operators conducted by the National Investment Center for Seniors Housing & Care. That is an improvement from the week that ended May 10, when 70% of the operators reported occupancy declines.

Tepid Demand

More operators of assisted-living units reported move-ins declined from a month earlier than reported increases.


Many of the operators also continue to report that move-ins are down from one month ago, although this statistic also is starting to improve, according to the survey.

Many seniors and their families are still concerned that they may face a higher chance of catching Covid-19 at a senior community than living by themselves or with family members. Some also are reluctant to move to senior housing because many communities are still restricting visitor access even if they are allowing new admissions. 

Ventas, one of the country’s largest senior housing owners, said in mid-May that about 30% of its communities were still closed to new admissions. Earlier this month the company said that move-ins were improving and that many of its communities were planning to open “to a more robust resident experience” in early July.

The communities that are in advanced stages of reopening have “a lifestyle that looks and feels much more like it did before the Covid crisis,” said J. Justin Hutchens, Ventas executive vice president, at an investor presentation earlier this month.

Like other senior housing companies, Ventas-owned properties have adopted strict protocols for new admissions. New residents must have two negative Covid-19 tests before being admitted and many have to stay in quarantine for two weeks before mixing with other residents.

With admissions restarting, move-ins have risen at Ventas communities. But occupancy at a 395-community portfolio of Ventas properties fell 0.70 percentage points in the first two weeks of June. 

That is an improvement from the 1.5 percentage points it fell in the last two weeks in April. But occupancy now stands at 80.7%, compared with 85.5% in the first week of April.

Ventas in June cut its quarterly dividend to 45 cents a share, a decrease of 43% from the first quarter.

Meanwhile, Healthpeak Properties, another large senior housing owner, said in an investor presentation that, as of the end of May, 78% of its communities were accepting move-ins, versus 45% as of late April.

The occupancy of Healthpeak’s senior housing operating portfolio fell 1.9 percentage points between April 30 and May 31, to 79.5%, the company said. It was an average of 85.7% for the first quarter of 2020.

The higher expenses and reduced revenues hitting operators are compounding financial headaches that many were facing before the pandemic due to oversupply and a growing aging-in-place trend.

Michael Carroll, an analyst at RBC Capital Markets, said that conditions facing the industry were improving but he predicted that occupancy declines would likely continue at a “modest” level in the near term. “The virus is so unpredictable, there’s not a lot of ability to have confidence on what will happen in the next several months,” he said.

Shopping Center Rents Could Tumble as Retailers Exit

Key Occupancy Data Hits 11-Year Low, Indicating More Retail Vacancies May Be Ahead

By Jennifer Waters     June 30, 2020          CoStar News

There's been a lot of talk in the retail industry in the past decade about the balance between store occupancy and vacancy rates weighing favorably for property owners, boosting rents and profitability.

But that’s changing.

The initial three months of 2020 marked the first time in 11 years that retail property has had negative net absorption, or more tenant space going empty than filling up. The change in the total amount of square feet occupied from one quarter to the next dipped into negative territory. 

As the second quarter closes out, that downward angle is steepening, according to CoStar Market Analytics, which is projecting net absorption could be on a slippery slope through the start of the third quarter in 2021, plunging to its deepest level at the end of this year before starting to ease up.

While the coronavirus pandemic required all but the most essential retailers to turn the lights off for nearly three months, a seismic transformation that already was underway in the industry fast-forwarded from roughly a 10-year span to five years or even less time. 

Retailers are immediately whittling down their footprints. Bankruptcies are soaring. Others are just giving up completely. 

Cumulatively, that’s a harbinger of what could be steeply rising vacancies, falling lease rates and property values. None of that has happened. Yet. 

“It’s likely to,” said Brandon Svec, director and market economist in CoStar's Chicago office. “This is a forced rightsizing of the industry.” 

For landlords, it represents a big red flag as they brace for dark storefronts of every size and shape while even the healthiest of tenants see their revenues ravaged. Those retailers waning ahead of the pandemic have already either disappeared, such as Pier 1 Imports, or are thinning their store ranks, such as J.C. Penney and Macy’s.

More tenants moving out than in is expected to put even more pressure on owners who were looking to fill big holes before COVID-19. On top of that, there’s uncertainty about whether experiential features such as fitness centers and food halls will still be people magnets a year from now. 

“This is a little ripple before the tidal wave of what we’re actually going to see,” Svec said. 

CoStar is forecasting about 100 million square feet of negative net absorption between all of 2020 and the first half of 2021. The fourth quarter alone is projected to total slightly more than the three previous quarters combined as the physical process of closing stores accelerates. New retail space is expected to spike by 24 million square feet in the third quarter right before a 40 million-square-foot plunge in absorption in the fourth quarter, according to CoStar data.

Key Industry Indicator

Net absorption reflects supply and demand and is a good measure of the muscle of any sector of the commercial real estate industry. When it’s positive, it means demand for space is elevated, occupancy rates are healthy and rents are competitive. When it reverses course, vacancy rates creep ahead and effective rental rates tend to sink. 

Data tends to lag because net absorption is gauged by the physical occupancy at properties. If a retailer says it’s going to close 100 stores by 2021, the net absorption rate doesn’t actually change until each store is vacated and then left empty.

At the same time, if that retailer were to clean a store out on a Friday and a new big-box tenant were to set up shop Monday — something akin to a logistical magic trick in this environment — the net absorption rate would stay static. 

It falls into the minus column when there’s no one to take that vacant space, something expected to be commonplace as the pandemic wears on and leasing activity slows. Landlords are finding out weekly which stores are likely to close, but it may not actually impact absorption levels until liquidation sales are completed and the keys are handed back.

When all is said and done, the retail landscape will look dramatically different, and the cost of leasing space could drop considerably.

In a worst-case scenario, real estate firm JLL is projecting retail rents will slump some 7.1% on an overall basis. That’s in the event of an ongoing pandemic with a more severe impact and store closings ahead. In a more moderate setting, rents are expected to fall 5.5%. But if consumer confidence and retail sales rebound faster, that so-called V-shaped recovery, rents might drop back only 2.1%. 

That’s a bad-news scenario on any level, but it’s not an across-the-board issue because some segments and markets will be better at squaring net absorption than others, said James Cook, director of retail research for the Americas at JLL. 

“It’s going to depend on what market you’re in and depend on what retail property type we’re talking about,” Cook said.

Transformation Speeds Up


Indeed, the acceleration of the retail transformation is fast at work: Some segments, such as indoor shopping centers and malls that are department- and chain-store heavy, are expected to get hit hardest, while open-air lifestyle settings with grocers as anchors and discount centers should be relatively spared.


“The markets where it will be especially tough in the near term are those that are tourism focused, that depend on travelers for revenue,” Cook said. It is expected that domestic travel will pick up more quickly than international travel, especially after the European Union’s ban on all travelers from the United States. 

“Markets like Las Vegas and Orlando, Florida, that rely on domestic and international travelers will be slow to return,” Cook said.

Big urban markets could bounce back sooner, according to Anjee Solanki, national director of retail services at Colliers International. 

“The deal flow is very active in New York, for example,” she said. “I would have thought that it would be slow, considering how big it is and the COVID there, but there’s a lot of positive push from chains and national brands that have actually been performing quite well during the COVID outbreak.”

By her reckoning, that’s the silver lining of more tenant space going vacant than filling up for those who were priced out of markets such as New York, Los Angeles and Chicago, for example. That's even the case in smaller emerging markets such as Austin, Texas, or Raleigh, North Carolina, before the pandemic. 

“They have the ability to get onto certain streets and certain locations that are now more open,” she said of tenants.

For would-be leaseholders, it’s a blessing they’re looking to get. An East Coast health food restaurant entrepreneur, who didn’t want to be identified because he’s negotiating deals, started a small chain of quick-serve stores in 2015 and hopes to expand into at least two more this year.

“Before the pandemic, you didn’t have to convince people to come to your restaurant and eat, you just had to be a good restaurant,” he said. As economies across the country are reviving, he’s reopening his sites and putting the legwork in again to find new locations.

“Of the deals we’ve already looked at, we’re not being cut a deal on rent but getting cut a deal on tenant improvements,” he said. “At the end of the day, it’s just a math equation, and it’s working really well for us now.” 

That could change, according to JLL’s Cook, but it’s too early to see it. “All the asking rents are the same they were before COVID-19,” he said. “Sure, the effective rents are probably being negotiated lower, but we don’t have a ton of visibility on that yet.

“One thing’s for sure, rents are certainly not going up,” he said.

June commercial rent collections mirror previous quarter day at four-day mark


By Jessica Newman    Tuesday 30 June 2020         Property Week - UK

The commercial property management platform reported that the UK average of total rent collection had risen from 18.2% - the amount recorded on 24 June. The updated 38% average on 28 June is the same as that recorded at the four-day mark after the March quarter rent day.

On the March quarter day, 25.3% of commercial rent was received in the first 24 hours, rising to 67% 60 days after the deadline.

London has increased its collection the most out of the UK regions compared with the previous quarter day. Rent collected in the capital was up 3% on the amount collected four days after the March deadline, although the total collected in London remains below the overall UK average at 36%.

Re-Leased’s analysis revealed that the West Midlands was the strongest performing region, receiving 41% of rents due by 28 June. This is up 1% on its March quarter day performance and 3% higher than the current UK average.

Meanwhile, the North West is performing at 8% lower than the UK average with 30% collected, 1% lower than the amount collected four days after the March quarter day.

Re-Leased’s analysis is based on rent collection from 10,000 commercial properties and 35,000 leases on its UK platform.

Re-Leased chief executive Tom Wallace said: “It’s promising to see that London’s rent collection curve is trending upwards compared to the same day in the March quarter. This is a sign of the capital’s resilience and our latest data should provide some reassurance to landlords with diverse portfolios that include assets in London.”

“As the first week of the quarter has progressed, there are new positive signals for the UK-wide picture. By day 4, June is tracking like-for-like with March, with 38% of rent due paid. This demonstrates that since the due date on 24th June, the rate of collection has improved.”

AMC Theaters Pushes Back

Re-openings to July 30

Chains Revise Plans Based on Delays for Major Movie Studio Releases

By Lou Hirsh           June 29, 2020      CoStar News

Struggling AMC Theatres, the nation's largest movie theater chain and a key traffic generator at retail centers, has pushed back the opening of its U.S. cinemas by two weeks to July 30 after studios, including Walt Disney Co. and Warner Bros., delayed openings of highly anticipated new releases that AMC is counting on to remain financially viable.


AMC Theatres, based in Leawood, Kansas, said it now plans to reopen about 450 U.S. locations on July 30 instead of the previously announced July 15. It expects to open an additional 150 cinemas the following month. 

"Barring further complications from the coronavirus outbreak, AMC expects to be open at essentially its full complement of approximately 1,000 theatres globally by early August," the company said in a statement Monday.

The expected summer openings come as AMC Theatres, which operates 11,000 screens globally as part of China-based conglomerate Dalian Wanda Group, struggles with a difficult financial situation created by coronavirus-forced shutdowns in mid-March. 

AMC said the closings essentially shut off all revenue for the company, causing "substantial doubt" it can viably remain in business after losing as much as $2.4 billion in the first quarter, according to financial filings. The company said its future depends on factors including the pace of reopenings and the timing of movie releases as the film production industry remains in shutdown mode.

As coronavirus cases climb in many regions, studios have delayed the release of major films in hopes of premiering them at a time when they can draw in the largest audiences possible. Among them, Warner Bros. announced delays several times this month for the release of its anticipated blockbusters "Tenant" and "Wonder Woman 1984." 

The effects are industrywide. Theater closings have spurred the layoff and furloughs of thousands of theater industry employees nationwide, with some now coming back to work at the major national and regional chains.

Rival theater chain Regal Cinemas, part of Cineworld Group, plans to start reopening theaters July 10 at half-capacity with a mostly older lineup of movies, such as "Jurassic Park," "Star Wars: The Empire Strikes Back" and "Black Panther."

Another big chain, Cinemark, began phased reopenings in several cities on June 19, with capacity restrictions and other measures based on local health regulations.

AMC has said its U.S. theaters are expected to reopen at 30% capacity with enhanced hygiene and distancing protocols, and customers are expected to wear masks.

"Our theatre general managers across the U.S. started working full time again today and are back in their theatres gearing up to get their buildings fully ready just a few weeks from now for moviegoers," said CEO Adam Aron in a statement, noting the company is devoting "extraordinary resources" into safety and sanitation efforts ahead of planned reopenings.

U.S. Pending Home Sales Post Record Gain, Exceed All Forecasts

By:  Maeve Sheehey   June 29, 2020   Bloomberg News

Contract signings to purchase previously owned U.S. homes surged in May by the most on record as mortgage rates fell and some states began to reopen from coronavirus lockdowns.

The National Association of Realtors’ index of pending home sales increased 44.3% to a three-month high of 99.6, after falling in April to the lowest level in records back to 2001. The median projection in a Bloomberg survey of economists called for a 19.3% gain in May. Even with the outsize advance, the index is below the pre-pandemic high of 111.4, reached in February.






The advance adds to signs the residential real estate market is snapping back faster than most of the economy after the typically robust spring home-selling season was interrupted amid the shutdowns. Mortgage rates have dropped to the lowest on record, helping to stabilize demand though the industry may be challenged by high unemployment and lingering health concerns.

“The outlook has significantly improved,” Lawrence Yun, NAR’s chief economist, said in a statement.

The Realtors project existing home sales to reach 4.93 million units this year, up from a previous forecast of 4.77 million. Last year, there were more than 5.3 million previously owned homes sold.

An S&P homebuilders index advanced 1% in early trading on Monday after the Realtors data.

Some government officials began easing their restrictions on business in May. With coronavirus cases increasing in states including Texas, California and Florida, some locations are putting a pause on lockdowns. Still, home-purchase loan applications are close to an 11-year high.

Pending home sales rebounded sharply in all U.S. regions, including a 56.2% monthly jump in the West and a 43.3% gain in the South.

‘Flying Blind Into a Credit Storm’: Widespread Deferrals Mean Banks Can’t Tell Who’s Creditworthy 


Bankers are tightening lending standards and looking for new data that can help them figure out who’s risky and who’s not


By: AnnaMaria Andriotis      June 29, 2020      The Wall Street Journal 

Banks have pulled back sharply on lending to U.S. consumers during the coronavirus crisis. One reason: They can’t tell who is creditworthy anymore.

Millions of Americans are out of work and behind on their debts. But, in many cases, the missed payments aren’t reflected in their credit scores, nor are they uniformly recorded on borrowers’ credit reports.

The confusion stems from a provision in the government’s coronavirus stimulus package. The law says lenders that allow borrowers to defer their debt payments can’t report these payments as late to credit-reporting companies. From March 1 through the end of May, Americans deferred debt payments on more than 100 million accounts, according to credit-reporting firm TransUnion, a sign of widespread financial distress.

The credit blind spot has further clouded the outlook for lenders. For years, strong consumer spending and borrowing helped propel them to record profits. Now the economy is in shambles, and they are trying to figure out what is going to happen to all of the debt Americans racked up in better times.

Lenders that are having a tough time spotting risky loan applicants are approving fewer borrowers for credit cards, auto loans and other consumer debt. They are also hunting for new data sets that could indicate who is in financial trouble and how much they need to set aside to cover soured loans. The Federal Reserve last week said the biggest U.S. banks could be saddled with as much as $700 billion in loan losses in a prolonged downturn.

“Without accurate information, their only option is to pull back on credit,” said Michael Abbott, head of banking for North America at consulting firm Accenture PLC. “Banks don’t know who is going to pay and who isn’t. It’s like flying blind into a credit storm.”

Banks started tightening their underwriting standards in March, when the first wave of coronavirus layoffs began.

By early April, 33% of banks that responded to the Federal Reserve’s senior loan officer survey said they had increased their minimum credit-score requirements for credit cards over the previous three months, up from 14% in January. Bank respondents tightened lending standards for all consumer-loan categories tracked by the survey.

Loan originations have fallen, a result both of the tightening and a decline in consumer demand. An estimated 79,000 personal loans were extended in the week ended May 10, compared with 226,000 in the week ended March 22, according to Equifax Inc. Auto loan and lease originations fell to 266,000 from 390,000 during the same period. General-purpose credit-card originations totaled 483,000, down from 856,000. In 2019, weekly card originations rarely fell below 1.2 million.

Lenders have asked some credit-reporting companies to remove borrowers in deferment programs from solicitation lists for credit cards and other loans, according to people familiar with the matter. Some 74 million credit-card solicitations were mailed out in May, down from 316 million in February, according to Mintel Comperemedia. Mailed personal-loan solicitations fell by more than half to 84 million over the same period.

“Banks are looking very carefully at their underwriting models to see if they need to be adjusted to factor in latent risk,” said Rob Strand, senior economist at the American Bankers Association.

Prepandemic, deferrals weren’t much of a problem for banks. They were used rarely for most types of consumer debt and were usually confined to areas hit by natural disaster. Now, a staggering number of consumers around the U.S. are in deferral or other repayment programs, leading banks to question whether the credit scores and reports they have relied on for decades are reflecting applicants’ true level of risk.

Lenders are recording that information on borrowers’ credit reports in different ways. Boxes that were either marked on time or late are being left blank by some lenders. Some are applying codes next to debt accounts that indicate the borrower is in deferment or forbearance. Others are using natural-disaster codes.

What’s more, lenders can’t tell if a borrower in deferment has fallen on tough times or is simply taking advantage of lenders’ relief options.

Forbearance and natural-disaster codes “were really designed for acute types of situations,” said Curt Miller, executive vice president of credit-risk solutions at TransUnion. “If you look at what’s happened, it’s so broad and widespread there’s nothing in the system designed to say 100 million accounts are in this status.”

Lenders are looking for data that will help them figure out which applicants are a safe bet and who’s likely to run into financial trouble.

They are also considering using unemployment data—such as cellphone records that show unemployment office visits and benefit-deposit data—that could help them figure out how to account for future loan losses, according to people familiar with the lenders’ discussions. Some banks are reviewing cash flow in deposit accounts to get a better idea of the risk lurking in their loan books, the people said.

The Long, Unhappy History of Working From Home

As the coronavirus keeps spreading, employers are convinced remote work has a bright future. Decades of setbacks suggest otherwise.

By David Streitfeld           June 29, 2020​​        New York Times

Three months after the coronavirus pandemic shut down offices, corporate America has concluded that working from home is working out. Many employees will be tethered to Zoom and Slack for the rest of their careers, their commute accomplished in seconds.

Richard Laermer has some advice for all the companies rushing pell-mell into this remote future: Don’t be an idiot.

A few years ago, Mr. Laermer let the employees of RLM Public Relations work from home on Fridays. This small step toward telecommuting proved a disaster, he said. He often couldn’t find people when he needed them. Projects languished.

“Every weekend became a three-day holiday,” he said. “I found that people work so much better when they’re all in the same physical space.”

IBM came to a similar decision. In 2009, 40 percent of its 386,000 employees in 173 countries worked remotely. But in 2017, with revenue slumping, management called thousands of them back to the office.

Even as Facebook, Shopify, Zillow, Twitter and many other companies are developing plans to let employees work remotely forever, the experiences of Mr. Laermer and IBM are a reminder that the history of telecommuting has been strewn with failure. The companies are barreling forward but run the risk of the same fate.

“Working from home is a strategic move, not just a tactical one that saves money,” said Kate Lister, president of Global Workplace Analytics. “A lot of it comes down to trust. Do you trust your people?”

Companies large and small have been trying for decades to make working from home work. As long ago as 1985, the mainstream media was using phrases like “the growing telecommuting movement.” Peter Drucker, the management guru, declared in 1989 that “commuting to office work is obsolete.”

Telecommuting was a technology-driven innovation that seemed to offer benefits to both employees and executives. The former could eliminate ever-lengthening commutes and work the hours that suited them best. Management would save on high-priced real estate and could hire applicants who lived far from the office, deepening the talent pool.

And yet many of the ventures were eventually downsized or abandoned. Apart from IBM, companies that publicly pulled back on telecommuting over the past decade include Aetna, Best Buy, Bank of America, Yahoo, AT&T and Reddit. Remote employees often felt marginalized, which made them less loyal. Creativity, innovation and serendipity seemed to suffer.

Marissa Mayer, the chief executive of Yahoo, created a furor when she forced employees back into offices in 2013. “Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people and impromptu team meetings,” a company memo explained.

Tech companies proceeded to spend billions on ever more lavish campuses that employees need never leave. Facebook announced plans in 2018 for what were essentially dormitories. Amazon redeveloped an entire Seattle neighborhood. When Patrick Pichette, the former chief financial officer at Google, was asked, “How many people telecommute at Google?” he said he liked to answer, “As few as possible.”

That calculus has abruptly changed. Facebook expects up to half its workers to be remote as soon as 2025. The chief executive of Shopify, a Canadian e-commerce company that employs 5,000 people, tweeted in May that most of them “will permanently work remotely. Office centricity is over.” Walmart’s tech chief told his workers that “working virtually will be the new normal.”

Quora, a question-and-answer site, said last week that “all existing employees can immediately relocate to anywhere we can legally employ them.” Those who do not want to go anywhere can still use the Silicon Valley headquarters, which would become a co-working space. Quora declined to say how many employees it has.

Adam D’Angelo, Quora’s chief executive, said that he and the rest of the leadership team would push against the notion that remote workers were second class by working remotely themselves. All meetings would be virtual. The future of work, he wrote, would be a paradise for the rank and file.

Quora said 60 percent of its workers expressed a preference for remote work, in line with national surveys. In a Morning Consult survey in late May on behalf of Prudential, 54 percent said they wanted to work remotely. In a warning sign for managers, the same percentage of remote workers said they felt less connected to their company.

One very public setback for remote work was at Best Buy, the Minneapolis-based electronics retailer. The original program, which drew national attention, began in 2004. It aimed to judge employees by what they accomplished, not the hours a project took or the location where it was done.

Best Buy killed the program in 2013, saying it gave the employees too much freedom. “Anyone who has led a team knows that delegation is not always the most effective leadership style,” the chief executive, Hubert Joly, said at the time.

Jody Thompson, a co-founder of the program who left Best Buy in 2007 to become a consultant, said the company was doing poorly and panicked. “It went back to a philosophy of ‘If I can see people, that means they must be working,’” she said.

The coronavirus shutdown, which means 95 percent of Best Buy’s corporate campus workers are currently remote, might now be prompting another shift in company philosophy. “We expect to continue on a permanent basis some form of flexible work options,” a spokeswoman said.

Flexible work gives employees more freedom with their schedules but does not fundamentally change how they are managed, which was Ms. Thompson’s goal. “This is a moment when working can change for the better,” she said. “We need to create a different kind of work culture, where everyone is 100 percent accountable and 100 percent autonomous. Just manage the work, not the people.”

But it is also a moment, she acknowledged, when working can change for the worse.

“It’s a crazy time,” Ms. Thompson said. “When you’re a manager, there is a temptation to manage someone harder if you can’t see them. There’s an increase in managers looking at spyware.”

Remote workers might be free of commuting costs, but they are traditionally more vulnerable. Jeffrey Gundlach, who runs the Los Angeles investment firm DoubleLine Capital, said in his monthly webcast that he had started seeing his newly remote staff in a new light.

“I kind of learned who was really doing the work and who was not really doing as much work as it looked like on paper that they might have been doing,” he said. With “some of the supervisory, middle-management people,” he added, “I’m starting to wonder if I really need them.”

At the beginning of the year, the unemployment rate was low and workers had some leverage. All that has been lost, at least for the next year or two. Widespread remote work could consolidate that shift.

“When people are in turmoil, you take advantage of them,” said John Sullivan, a professor of management at San Francisco State University.

“The data over the last three months is so powerful,” he said. “People are shocked. No one found a drop in productivity. Most found an increase. People have been going to work for a thousand years, but it’s going to stop and it’s going to change everyone’s life.”

Innovation, Dr. Sullivan added, might even catch up eventually.

“When you hire remotely, you can get the best talent around and not just the best talent that wants to live in California or New York,” he said. “You get true diversity. And it turns out that affects innovation.”

Mr. Laermer, the public relations executive, is more cautious about the implications of the crisis. In March, when he shut down his office, he anticipated disaster — like what happened on Fridays in 2017, but five times worse.

Instead, things have been pretty good. He even hired a few people he had never met, via Zoom, “and they’ve been phenomenal.”

What changed? Well, the technology, including Zoom, is better. Moreover, “we have rules now,” he said. “You have to be available between 9 a.m. and 5:30 p.m. You can’t use this as child care.”

But he said he was not trying to get out of his office lease.

“Companies are saying working from home is working so well we’re going to let people work from home forever,” he said. “It’s good P.R., and very romantic, and very unrealistic. We’ll be back in the office as soon as there’s a vaccine.”

U.S. Home-Mortgage Delinquencies Reach Highest Level Since 2011


John Gittelsohn     Bloomberg News

June 21, 2020

U.S. home-mortgage delinquencies climbed in May to the highest level since November 2011 as the pandemic’s toll on personal finances deepened.

The number of borrowers more than 30 days late swelled to 4.3 million, up 723,000 from the previous month, according to property information service Black Knight Inc. More than 8% of all U.S. mortgages were past due or in foreclosure.

The increase in delinquencies was smaller than the 1.6 million jump in April, when the economy ground to a halt nationwide. Still, the path ahead is clouded by the spread of new Covid-19 cases, uncertainty over business reopenings and the looming expiration of benefits that have helped jobless homeowners avert delinquency.

About 20.5 million Americans filed continuing claims for unemployment benefits in the first week of June, Labor Department figures show.

The delinquency count includes homeowners who missed payments as part of forbearance agreements, which allow an initial six-month reprieve without penalty. Many of those borrowers initially made payments despite qualifying for the relief plans, a share that has diminished as the crisis lingers.


Only 15% of homeowners in forbearance made payments as of June 15, down from 28% in May and 46% in April.   Black Knight also reported:

  • Mississippi had the highest delinquency rate in May, followed by Louisiana, New York, New Jersey and Florida.

  • New York’s share rose to 11.3%. It peaked at 13.9% in December 2012.

  • New Jersey’s rate was 11%, compared with the peak of 16.8% in December 2012.

  • Florida’s share climbed to 10.5%. Its previous peak was 25.4% in January 2010








Colony Capital Likely to Turn Over Control of 48 Hotels

Portfolio Spanning 21 States Faces Default After Loan Modification Talks Stall

By Mark Heschmeyer
CoStar News

June 21, 2020

Colony Capital appears willing to give up control of a portfolio of 48 hotels to a receiver after missing April and May payments on a $780 million loan securing the properties.

If the portfolio spanning 21 states goes into receivership, it would be one of the first notable casualties of the coronavirus pandemic in the commercial mortgage-backed securities market. Hotels have been particularly hard hit by decreased travel and government stay-at-home orders issued to slow the spread of the coronavirus.

The loan is collateral in a single-borrower CMBS deal. According to a filing with the Securities and Exchange Commission, it was transferred to special servicing in April due to imminent monetary default. 

Colony, which declined to comment to CoStar, is 90% owner of the portfolio in a joint venture with Chatham Lodging Trust. A person familiar with the situation but not authorized to speak about it confirmed CMBS information regarding the loan's status.

“The lender and borrower have attempted to negotiate a loan modification, although [they] have not been able to come to an agreement on terms,” according to CMBS notes from special servicer Midland Loan Services. “The lender is in the process of seeking the appointment of a receiver for all of the properties. The borrower has agreed to an orderly transition of the properties to a receiver since agreeable terms for a loan modification could not be reached.”

Traditionally, receivers are appointed to manage properties and turn over cash flow to the lender pending either a sale or foreclosure.

In its first-quarter earnings report, Chatham Lodging reported that the joint venture did not make debt service payments in April and May. Revenue per available room, a key hotel industry metric, was down about 18% for the portfolio.

The joint venture was in active negotiations with Midland to seek various relief, including interest forbearance, temporary use of capital expenditure reserves to fund interest payments and hotel operations, Chatham reported.

The portfolio consists of 48 select-service, limited-service and extended-stay hotels, totaling 6,401 rooms. The hotels operate under eight different flags across three hotel brands that include Marriott, Hilton and Hyatt.

Colony has seven hotel portfolios that combined total 157 properties. The Los Angeles-based global investment firm run by real estate veteran and President Trump confidante Thomas Barrack disclosed last month that it does not anticipate putting any more capital into any of its hotel properties and was exploring options for those holdings. Colony has been working with its adviser, Moelis, and all its lenders to maximize shareholder value in the lodging segment. 

The debt on the properties within the portfolio are securitized entirely at the property level and not guaranteed by Colony. Nor is the loan cross-collateralized with other portfolios. Such a debt structure gives potential third parties flexibility of maintaining or capturing the value of a portfolio, according to a Colony SEC filing.

Last winter, Colony announced plans to unload its oldest real estate properties and shift to become a global platform for investing in digital infrastructure and real estate.

New Surveys Pour Cold Water on Notion That the Office Is Dead

Big Majorities Say They Don't Expect to Work From Home Forever


By Sharon Smyth
CoStar News

June 19, 2020

Over the past three months, the COVID-19 pandemic has forcibly accelerated the growing trend of working from home, leaving workplaces around the globe empty and prompting many market commentators to hail the end of the office.

Not so, according to Harry de Ferry Foster, co-head of U.K. operations at Savills Investment Management, which has 23.4 billion U.S. dollars of assets under management globally.

"I think the death of the office has been overdone. Twenty years ago, it was thought that the rise in home working would mean no one would want offices anymore, but we’ve needed far more space than was predicted at the time. Technology has obviously improved and people do work from home more, but we have still needed more and more office space," de Ferry Foster said during a telephone interview. "There are many commentators who want to say something interesting and predict the end of the office, and when it doesn’t happen the hype is quickly forgotten.’’

Research from Colliers International indicates he may well be right. The broker’s latest "Global Work From Home" survey, which polled more than 5,000 respondents from 18 different industries across the globe, found that, while there is employee support for the continuation of some form of remote work, the desire and need to return to the office is likely to be strong once the pandemic is over.

Only 12% of respondents said they would like to work four days or more from home post-lockdown, with 49% saying they would like to limit WFH to a maximum of two days a week when the pandemic has subsided, the survey found.

"The greatest surprise for many companies has been the realization that their organization can work remotely, be productive and stay connected,’’ said Jan Jaap Boogaard, head of Colliers' advisory practice for workplaces in Europe, the Middle East and Africa, which carried out the survey. “However, the office is very much alive and kicking because it is hard to create a compelling team culture when working remotely. We need face-to-face interaction in order to build true, meaningful connections.”

The survey found that 23% of respondents reported that their productivity had declined as a result of working at home full time, 26% reported it had increased and 51% reported no change at all. Living arrangements had the greatest impact on productivity, with about 30% of respondents who had roommates, and around 27% of those who had children reporting a more pronounced decline or lower increase in their work performance, according to the survey.

"People like to be around other people. It was fine on lockdown but as we are coming out there seem to be more neighbors working on their homes, more children running about and that level of disturbance will only increase the further we come out of lockdown,’’ de Ferry Foster said. "And what about graduates? Are children going to grow up learning from an iPad, go to virtual university and then as they progress to a job sit at home and never interact with anybody? I don’t see that happening; graduates need to be in offices around mentors, listen to people on the phone and pick up how are things are done.’’

Of the employees polled in the Colliers survey, those aged between 21 and 30 expressed the greatest desire to work from the office compared with older generations. Thirty-eight percent of respondents said that remote working left them feeling isolated from their team, and 12% said their managers were unable to manage virtually.

According to Sven Moller, associate director for EMEA Workplace Advisory at Colliers, companies will need to find a balance between creating enough space to allow people and teams to meet in the office when they need to, while managing their space efficiency and flattening workplace occupancy peaks. "Many successful innovations and collaborations arise unexpectedly, it’s serendipity, and this is hard to achieve over scheduled video calls,’’ Moller said.

A separate survey by Savills sent to 65,000 clients during the lockdown period in late April found up to 89% of respondents said they believed that physical office space remains a necessity for companies to operate successfully, but the office is set to change.

Over 70% of respondents believe there will be a long-term impact on the design and size of the workplace, including an increase in flexible and remote working, which is predicted not to affect significantly, if at all, the total demand for office space given the need to create more distance between workers. The survey found that 18-24-year-olds continue to display a clear preference for the office, with 25% still expecting to spend no time at home post-lockdown, the highest of any age category.

In a column for CoStar, Hunter Booth, Savills director of office agency in London, wrote the pandemic has accelerated a "cultural shift in work style with a deeper trust of employees to manage their time and location appropriately," suggesting going forward that companies are likely to offer more flexibility in work relationships.

"The office offers a valuable boundary between work and home, but the flexibility to work from home when required is here for good," he argued.

"Overall, what has shifted for good, I believe, is a mindset of inclusiveness and the realization that, as long as we are all doing it, we can blur the lines of work, home and play to ultimately be more productive, happier and fulfilled," he concluded, before saying there are some new safety routines he is ready to bid goodbye to once the health crisis is over. "I’m not walking one way round the office forever though!"

Mall of America Said to Miss Another Payment on Mortgage Debt

By:  John Gittelsohn   -    June 16, 2020,    Bloomberg News

Minnesota’s Mall of America missed another payment on a $1.4 billion mortgage, putting the borrower more than 60 days delinquent, according to people with knowledge of the financing.

The mall, one of the largest shopping centers in the U.S., didn’t make its roughly $7 million debt payment for June, according to the people, who asked not to be named speaking about a private matter. It was the third straight month of missed payments for the property.

Triple Five Group, the company that owns the mall, didn’t reply to requests for comment.

The 5.6-million square-foot complex, which features 500 stores, partially reopened June 10 with reduced capacity at restaurants and movie theaters. An indoor theme park, Nickelodeon Universe, remained closed to comply with health directives, according to its website.

Mall of America is one of North America’s three largest shopping centers, all owned by the Ghermezian family. The properties face financial challenges as coronavirus infection precautions depress the lure of experiential attractions, such as theme parks, and brick-and-mortar retailers lose market share to online competitors.

Mall landlords have struggled to collect rent from shuttered retailers, adding to the financial pressure in the industry.

The West Edmonton Mall, the first mega shopping center developed by the Armenians in the 1980s, began gradually reopening in May.

The Ghermezians’ American Dream, a megamall in the New Jersey Meadowlands with an indoor ski slope and water park, has not yet fully opened. The developer’s construction costs for the project surpassed $2 billion, up from an original 2015 estimate of $1.55 billion, according to a recent report by CBRE Group Inc.

The Ghermezians pledged 49% of their equity interests in the West Edmonton Mall and Mall of America as collateral to finance the American Dream.

The demise of America’s malls can deal a blow to the towns that depend on them



Lauren Thomas





  • Malls and shopping centers across the country provide $400 billion in local tax revenue annually, according to the International Council of Shopping Centers. 

  • “I worry a lot as this crisis plays out,” ICSC CEO Tom McGee said. “Our industry funds everything form the fire and police to [local] infrastructure.” 



The coronavirus pandemic is speeding up the demise of America’s struggling shopping malls, which could deal a devastating blow to some towns that depend on them. 

When a mall goes dark, a community loses more than just a place to shop and grab a slice of pizza at the food court’s Sbarro. In many neighborhoods, the mall is an economic engine, hiring hundreds, if not thousands, of workers and providing a significant amount of dollars to the local tax base. 

Malls and shopping centers across the country provide $400 billion in local tax revenue annually, according to the International Council of Shopping Centers, the retail real estate industry’s trade group. And there are about 1,000 malls — both privately and publicly held — still operating in the U.S. today, according to commercial real estate services firm Green Street Advisors. 

“I worry a lot as this crisis plays out,” ICSC CEO Tom McGee said. “Our industry funds everything form the fire and police to [local] infrastructure.” 

In a pre-Covid-19 universe, teenagers would often land their first jobs at the mall. Kids would hang there after school. So-called mall walkers would use the open space in the mall before stores opened to the public to break a sweat. Mom-and-pop shop owners would open their first businesses there. And department stores, a mall’s coveted anchors, once thrived during their prime. 

The acceleration of e-commerce, along with a shift toward more consumers wanting to live downtown instead of the suburbs, has led to fewer people frequenting malls over the years. And as the pandemic hit, malls were boarded up, along with the stores in them. Some, including the Northgate Mall managed by Northwood Retail in Durham, North Carolina, are now closing for good. Former department store executive Jan Kniffen has predicted a third of America’s malls will vanish by 2021. 

The Rent is Due

As retailers aren’t able to pay rent on time, landlords of America’s malls are not able to pay their own bills, making matters worse during the pandemic and speeding up this domino effect. The Tennessee-based mall owner CBL & Associates warned earlier this month that its ability to continue as a going concern is in doubt after the retailers in its properties have skipped rent payments during the Covid-19 crisis, forcing CBL to miss two of its own interest payments. 

Should CBL be forced into bankruptcy, it would mark the first filing by a commercial real estate owner during the pandemic. They keys to CBL’s 108 malls could be handed back to lenders. Some of its properties could be shut down permanently, if no new owners emerge to take over and run these assets.  A CBL spokesperson declined to comment about a potential bankruptcy. 



CoolSprings Galleria, a CBL mall in Franklin, Tennessee, offers up one such example of a property that is a huge aid to its local tax base. And as the mall has taken a hit during the pandemic, the town of Franklin is tapping into its budget reserves to make ends meet, according to one administrator. 

“Our mall is such an attraction, it drives our revenue significantly,” according to Franklin County City Administrator Eric Stuckey. “If you are so dependent on sales taxes [like us], it can take just a month or two and you’ll see the impact.” 

He compared the situation with 2008 and the Great Recession. 

“The recession had a real impact on disposable income,” Stuckey said. “What people weren’t able to spend at the mall ... translated into lost local revenue.” 

He explained that Franklin will need to use its fund reserves for the foreseeable future until CoolSprings Galleria bounces back, which he expects to happen over time since it is the only major retail draw in the area. 

Others will be less fortunate. 

“Malls die slowly, generally over a period of years,” said Lacy Beasley, president of the real estate advisory firm Retail Strategies. “At first one anchor closes and then another. For a mall to shut down completely, the mall has already been declared dead by the customer.” 

However, the rapid acceleration of store closures this year, due in large part to the Covid-19 crisis, is adding to mall owners’ challenges and could be speeding up that death. As many as 25,000 closures could be announced by retailers this year,according to a tracking by Coresight Research, with 55% to 60% of those in malls. That would set a new record, up from a previous record of more roughly 9,800 in 2019, the firm said. 

As anchor tenants such as bankrupted J.C. Penney go dark, non-anchor tenants such as American Eagle or Gap typically have what are known as co-tenancy clauses to be able to vacate the property sooner if they’d like. With enough vacancies and nothing to replace them, a mall could be pushed out of business this way. (Penney is already kicking off going-out-of-business sales at more than 150 locations this month, as it tries to restructure the company in bankruptcy proceedings.) 

To be sure, developers are trying to get creative. A former Sears store at the West Oaks Mall in Ocoee, Florida, was rebuilt into a Xerox call center. Ford Motor moved its offices into a former Lord & Taylor department store at the Fairlane Town Center in Dearborn, Michigan. 

But it might not be enough. 

“Malls can be redeveloped and released, but it often will never replace the impact [to towns] the mall had in their heydays,” Retail Strategies’ Beasley said. 


A blow to the budget 


PREIT, a real estate investment trust that has a portfolio of 21 malls in the U.S. including Cherry Hill Mall in Cherry Hill, New Jersey, said it pays more than $65 million in real estate taxes every year. In Pennsylvania and New Jersey alone, the company estimates that its malls account for about 17,000 jobs.


“When you think about a mall from an economic perspective, it’s a real engine, there is no question about it,” PREIT CEO Joe Coradino said in an interview. “We are typically the largest tax payer in any given municipality.” 

An analysis by Retail Strategies outlines the substantial impact a mall closure would have on local municipal budgets. 

The average size of a regional mall in the U.S. is anywhere between 400,000 and 800,000 square feet, with three to five anchor tenants. So-called C- and D-rated malls, which bring in the least amount of sales per square feet, are those considered to be the most at risk to go under. These malls average sales of between $200 and $325 per square foot, Retail Strategies said. 

That said, the annual sales receipt of an average C- or D-rated mall would be roughly $90 million to $145 million, according to the analysis. And at a 2% local tax collection rate, the locality that it is situated in would collect anywhere between $1.8 million to $3 million annually on the mall for sales tax, it said. 

There are roughly 730 B- C- and D-rated malls in the U.S., according to Green Street. 

As purchases made at certain malls have tumbled over the years, municipalities are left trying to reshape their budgets. 

“Cities are more incentivized to help retail now than they ever have been,” Beasley said. 

Even the biggest mall owner in the U.S., Simon Property Group, has voiced concern over this issue. 

Simon’s portfolio of about 200 malls and outlet centers, including Roosevelt Field mall in East Garden City, New York, are by and large A-rated, making it one of the best operators in its space. Most, if not all, of Simon’s malls are expected to stay open longer-term. 

“We want to help these local communities because frankly they depend on our sales tax and our real  estate tax,” Chief Executive David Simon said in May during an earnings conference call, as he discussed the mall owner’s plans to reopen during the coronavirus pandemic. 

“I hope the communities appreciate what we’re doing,” he added, mentioning the Long Island area in New York as one example, where Simon pays more than $60 million annually in property taxes for a handful of properties.

Boxpark founder warns of retail and hospitality sector ‘Armageddon’


The retail and hospitality sectors are “on a collision course” to Armageddon, Boxpark founder Roger Wade warned this week as shoppers returned to UK high streets after 12 weeks in lockdown.

By Jessica Newman  Wed 17 June 2020      Property Week



Wade said that if landlords, tenants and government did not come together to address the rent crisis, up to 50% of retail and hospitality operators were in danger of going under. “We’re certainly on course for collision. At the end of June, there’s going to be up to six months outstanding rent and I think you could have up to 50% of retail and hospitality businesses that won’t survive lockdown.”

He called on landlords and tenants to set aside their differences and work together. “We’ve got to realise we’re all in this boat together and unless we all swim together, we will all sink together,” said Wade. “Everyone has to compromise. If landlords reduced rent by a third, the government gave a third towards a grant and operators were responsible for a third, that might be acceptable. But we’ve got to get to a sensible solution, because if not it will come down like a house of cards.”

Wade described the proposed code of practice to encourage “fair and transparent discussions over rental payment” as little more than “a token gesture” and called for a more robust framework that could be applied across the industry.

Wade, who is both a landlord and tenant, added that for operators to survive, three things needed to happen: the social distancing rule needed to be slashed from 2m to 1m; pubs, restaurants, cafes and hotels needed to reopen on 4 July; and tenants needed to take a more holistic approach to solving their rent issues with landlords.

He said he also wanted to see the three-month moratorium on commercial landlord sanctions against tenants for non-payment, which is currently due to expire at the end of the month, extended “until we find the framework to resolve the current rent crisis”.

As The High Streets Task Force was formally launched this week with Ellandi co-founder and former Revo president Mark Robinson at the helm as chair, Wade also questioned the likely impact of the government’s new £50m Reopening High Streets Safely Fund, likening it to a band-aid.

It was now a question of survival not growth for many businesses, he added. “Our shops, our hotels and our pubs are the heart and soul of our community,” he said.

“If we want to create ghost towns up and down our country, then, you know what, do nothing. We need urgent measures, so initiatives like overhauling business rates and encouraging turnover rents.”

Calling for “decisive action to address the issue of rent”, he warned: “Government didn’t create this problem; landlords didn’t create this problem and operators didn’t create this problem, so we must adopt an attitude of shared pain.” 

Coronavirus Tips Ailing Gym Chain 24 Hour Fitness Into Bankruptcy

Gym chain to permanently close nearly a third of its 445 locations



By: Alexander Gladstone   -  Updated  June 15, 2020    The Wall Street Journal

Gym chain 24 Hour Fitness Worldwide Inc. filed for bankruptcy protection Monday as it deals with the fallout from temporarily closing its locations due to the Covid-19 pandemic.

The San Ramon, Calif., company, which is owned by private-equity firm AEA Investors LP and the Ontario Teachers’ Pension Plan, aims to permanently shut down 135 of its 445 gyms throughout the U.S. The gym chain, which has about 3.4 million members, plans to reopen most remaining locations by the end of June.

The company sought protection under chapter 11 in the U.S. Bankruptcy Court in Wilmington, Del., seeking to restructure some $1.4 billion in debt, including $930 million of senior loans and a $500 million unsecured bond. The gym chain said that it has reached an agreement with a group of creditors to provide about $250 million of debtor-in-possession financing to fund its business during the bankruptcy case.

The coronavirus outbreak has hurt a number of other fitness chains. Gold’s Gym International Inc. filed for bankruptcy in May. Town Sports International Holdings Inc., the parent company of New York Sports Clubs and Lucille Roberts gyms, has hired lawyers to explore a debt restructuring, which could include a bankruptcy filing.

The Wall Street Journal reported in May that 24 Hour was shopping for a bankruptcy loan of as much as $200 million. 

“If it were not for Covid-19 and its devastating effects, we would not be filing for chapter 11,” Chief Executive Tony Ueber said. “We expect to have substantial financing with a path to restructuring our balance sheet and operations to ensure a resilient future.”

Even before the pandemic, 24 Hour Fitness was struggling with declining membership and rising costs due to minimum-wage increases. The company had earlier tried to save costs by eliminating towel services at the majority of its clubs. 

The company’s restructuring chief, Daniel Hugo, said Monday that a number of operational missteps in previous years had hurt its financial performance.

The company was beginning to see positive changes under a new management team installed in early 2019, but its turnaround efforts were materially disrupted by Covid-19, Mr. Hugo said in a declaration filed with the court

Last year, 24 Hour Fitness brought in $1.5 billion of revenue. Before furloughs and layoffs due to Covid-19, the company had approximately 19,200 employees. After temporarily closing its clubs in mid-March, 24 Hour furloughed 17,800 employees and terminated 700 others, the company said.

The chain is now reopening gyms it plans to keep. It has reopened about 20 of its fitness centers in Texas. The company is using an app-based reservation system to enforce social-distancing requirements and a touchless check-in system to limit contact with surfaces, Mr. Hugo said.

Businessman Mark Mastrov founded 24 Hour Fitness in 1983. AEA, Ontario Teachers’ Pension and other investors paid $1.85 billion for the chain when they bought it in 2014 from private-equity sponsor Forstmann Little & Co.

Judge Karen B. Owens of the U.S. Bankruptcy Court in Wilmington has been assigned to oversee the 24 Hour bankruptcy case, number 20-11558.


—Dave Sebastian contributed to this article.

‘Running on Fumes’: Restaurants Trying to Reopen Face Cash Crunch


In addition to financing their reopenings, many restaurants need to pay overdue bills



By:    Justin Scheck and Heather Haddon  -  June 16, 2020  -  The Wall Street Journal

Denver chef Justin Brunson got caught in the middle of the financial squeeze facing restaurants as they try to reopen. He needed cash to start serving again at his four establishments, and he is owed money by some of the 150 restaurants that are customers of his high-end butcher business.

At his flagship restaurant, meat-heavy Old Major, the cost of food, staff, cleaning and training for new sanitary protocols was already daunting. When Mr. Brunson sat down a few weeks ago to calculate the cost of reopening, he had a harsh realization: “There’s no money in the bank, and I probably need 80 grand to start up again,” Mr. Brunson said.

Compounding the cash crunch, many of the customers of his butcher business, River Bear American Meats, still haven’t paid for things such as the capicola, kielbasa and short-rib bresaola they ordered just before the shutdown. “I’m just upset, worried and scared,” he said.

Restaurants, with their high failure rate even in good times, have trouble getting financing from banks, and the situation is worse now. “You do have very limited options,” said Kathryn Petralia, president of Kabbage, a small-business lender. Kabbage lends to restaurants, and the average interest rate on its loans is greater than 25%. Since restaurants have had little revenue recently, Kabbage shut down all its credit lines for new and old customers, and instead helped them apply for federal loans.



Restaurants are slowly resuming dine-in service after nearly every state required they suspend it in March because of the coronavirus. Limited dine-in service has resumed statewide in 38 states, according to investor research firm Gordon Haskett, though sales at sit-down restaurants remain down by double-digits from last year.

In many ways, the reopening has turned out to be harder than the closing because it is nearly impossible to predict revenues amid social distancing, while fixed costs remain the same.

The biggest problem is cash. Many restaurants get their food on credit and pay 30 days later with the revenue they have earned from selling it. Many never sold the food they bought before the shutdown and haven’t paid for it. Some suppliers won’t deliver new food on credit unless some of the old bills are paid.

Restrictions on how federal assistance money can be spent have been eased, but the fixes may have come too late for struggling small businesses.

Dwight Lawson and his wife, Susan Lawson, have owned Jabo’s Bar-Be-Q in Greenwood Village, a Denver suburb, for nearly 30 years but weren’t able to get federal assistance. They turned to takeout, and business fell by about 90%. “It’s been an absolute dogfight,” said Mr. Lawson, who is 75. “We’ve been running on fumes.”

When local laws allowed them to reopen at 50% capacity in late May, the couple tallied the costs, including about $2,000 for 300 pounds of brisket, more than twice the old price. Fearing they wouldn’t be able to pay back a loan, they pulled almost $20,000 out of their retirement savings.

In Colorado, restaurants were given less than a day’s notice before the shutdown. Many chefs gave away food, laid off staff and started trying to figure out ways to do takeout. There was a sense of communal struggle, said Denver-based chef Max Mackissock, who owns five restaurants including the bistro Morin.

“Everybody was pitching in and helping out,” he said. His cheese supplier gave him some free cheese. But “after about three weeks, the tune changed and everybody was like, ‘I gotta cover my ass,’” Mr. Mackissock said. It will cost about $10,000 to reopen each of his four restaurants that have remained partially open doing takeout and $50,000 or so to reopen the one that closed completely, he said.

As the shutdown set in, food suppliers became more worried about getting paid by restaurants that could be on the verge of closing down, said Mike DeNiro, vice president of LaSource Group in North East, Pa., which does debt collection for restaurant suppliers.

In the first month or so of the shutdown, Mr. DeNiro said, business slowed down. Clients such as Supreme Lobster, a Chicago seafood wholesaler, were more focused on managing the crisis than on collecting old debts. Demand from restaurants was plummeting, but retailer demand was soaring.


“It became mayhem with our supermarkets,” said Jacqueline Sylenko, who handles accounts receivable for Supreme Lobster. “The meat ran out, and people wanted seafood,” she said. “People wanted catfish. People wanted tilapia.”

Once the scramble to meet demand was over, she said, the company turned toward its restaurant clients. Many, she said, agreed to pay a few hundred dollars a month on their outstanding bills, but that still meant paying upfront for food delivered for the reopening.

Some, Ms. Sylenko said, “want to create new debt without paying off the old debt” and refused to negotiate a payment plan. That won’t work, she said.

That is when she calls in Mr. DeNiro. He approaches restaurants with a simple message: Figure out a way to pay your old bills, or you won’t get any more food when you reopen. “The last thing you want when you open are problems with your supply chain,” Mr. DeNiro said.

Those that can’t make good seem likely to go under. He worries that could happen to a lot of restaurants: May was his busiest month ever, he said, which means lots of clients aren’t paying up.

An estimated 3% of U.S. restaurants have closed for good since the start of the crisis, according to the National Restaurant Association. The trade group expects tens of thousands of restaurants will shut as a result of the pandemic.

Restaurant chains typically have more access to cash than independent restaurants, but it can be costly. Anthony Pigliacampo started a small chain called Modern Market in Denver that took on private-equity funding and expanded to dozens of locations. He said founders of private-equity-backed chains might have to give up some of their equity if they need to tap their investors for more money ahead of reopening. 

There is still cash available, but it is a fraction of what it was before. ARF Financial LLC, a finance company that lends to restaurants, has cut back the size of its loans from an average of $100,000 to between $15,000 and $20,000, and borrowers will have to “show they’re making progress ramping up to average sales” to get further credit, said President Les Haskew.

Mr. Brunson, who had been the owner of Old Major, said additional cash wouldn’t solve his bigger problem: Restrictions on the number of customers and a depressed economy mean he might end up operating at a loss. He could have switched to a cheaper menu or focused on takeout. Instead, this month he sold Old Major and will use the money to support his other ventures.

Write to Justin Scheck at and Heather Haddon at

This could be the next major retailer facing bankruptcy



By Chris IsidoreCNN Business     -    Monday   June 15, 2020



New York (CNN Business) With more than 10 million men out of work and millions more working from home, perhaps indefinitely, this is not the best time to be selling men's dress clothes.

That's why Tailored Brands (TLRD), which owns the Men's Wearhouse, Jos. A. Bank and K&G brands, could be the next major American retailer to file for bankruptcy.

"The company has had bankruptcy advisers for a couple of months now. It's exploring all of its options and it's not a 100% that they're filing, but the odds are pretty high," said Reshmi Basu, an expert in retail bankruptcies and an analyst with Debtwire, which tracks distressed companies. "There is not going to be as much demand given the work from home environment."

A number of national retailers already have filed for bankruptcy during the pandemic, including  J.Crew,  Neiman Marcus and JCPenney. The clothing sector of retail has been particularly hard hit by the crisis as consumer demand for new clothes has fallen sharply. Gap (GPS) reported a record $932 million loss for its first quarter. 

Other companies facing the risk of bankruptcy include Ascena Retail Group (ASNA), owner of clothing chains Lane Bryant, Justice, Ann Taylor and Dress Barn, which recently warned there is "substantial doubt" about its ability to remain in business.

Tailored Brands disclosed it is at risk of bankruptcy or even shutting down operations because of the Covid-19 crisis in a filing Wednesday evening.

"If the effects of the Covid-19 pandemic are protracted and we are unable to increase liquidity and/or effectively address our debt position, we may be forced to scale back or terminate operations and/or seek protection under applicable bankruptcy laws," the filing said. The company said it had no comment beyond the filing.

The company suspended rent payments for April and May when most of its locations were shut. It said it has been able to negotiate rent deferrals for a significant number of its stores, with repayment at later dates, beginning at the end of 2020 into 2021. It also furloughed or laid off 95% of its 19,000 employees. 


But things have not gone well at the 44% of Tailored Brands stores that reopened in early May. For the week ended June 5, sales at locations open for at least one week fell 65% at its Men's Wearhouse and were down 78% at Jos. A. Bank and 40% at K&G.

Sales declined 60% in its fiscal first quarter, which ended May 2. All of its stores were closed for about half the quarter, and its online operations halted for two weeks in March. But Tailored Brands has delayed reporting its complete results -- the Securities and Exchange Commission allows companies to postpone reporting during the pandemic.

One reason for the delay is that it is weighing how large a charge it must take to write down the value of various assets, including the goodwill it carries on its books -- a measure of the value of a company's brands and reputation. The charge will be purely an accounting move that involves no cash, but it could raise the cost of borrowing money the company needs to get through the crisis. 

Tailored Brands had $201 million in unrestricted cash on hand as of June 5, but that was primarily because it drew down $310 million on existing credit lines during the first quarter. That left it with only $89 million of borrowing available under those lines. 

The company has about 1,400 stores in the United States and Canada, with about half under the Men's Wearhouse name. It will probably have to close a significant percentage of them whatever happens with its reorganization efforts, said Basu.

"This is the company that has the legs it needs to possibly turn things around," she said. "But consumers' tastes and demand are going to change. They're going to emerge from bankruptcy with a much smaller footprint."

Oregon pauses reopening for a week amid rising infections and hospitalizations

June 12, 2020  -   The Washington Post

Oregon has put a one-week pause on counties’ reopening applications amid evidence that coronavirus infections are rising in both urban and rural parts of the state, Gov. Kate Brown (D) said Friday at a news conference.

The move is intended to give public health experts time to determine why the virus is spreading and whether the state needs to modify its reopening plan. Brown said she planned to work with those experts to decide whether to extend the pause, lift it early or take other action to stem the spread.

“This is essentially a statewide yellow light,” she said.

Of Oregon’s 36 counties, 29 are in Phase 2 of reopening, six are in Phase 1, and one has not begun to reopen. Brown’s order freezes in place each county’s status.

Health officials analyzing the state’s coronavirus data have noted reasons for concern, said Pat Allen, director of the Oregon Health Authority. The state recorded 178 infections on Thursday, its highest number since the outbreak began. Although testing has increased, Allen said the percentage of positive results has risen from 1.9 percent to 3 percent.

Emergency department visits have decreased, but overall hospitalizations have increased. Allen said the state is also facing large outbreaks in workplaces, including a seafood wholesaler in Lincoln County.

State Health Officer Dean Sidelinger told reporters that as of Friday morning, Oregon officials had not identified a positive case of the coronavirus in someone who recently attended a protest of police brutality.

“This is a tsunami”: These big retailers stiffed their landlords in May

Bankruptcy looms over some retailers who paid zero percent in May


TRD NATIONAL  /   By Sasha Jones         June 08, 2020

About 40 percent of national retail chains once again skimped on their rent in May, according to the latest monthly report on collection rates.

Among those are 24 Hour FitnessAMC Theaters and Pier One, all of which have either announced potential bankruptcy or plans to liquidate assets.

Overall, national retailers paid 60.1 percent of rent, a small increase from April’s 56.7 percent collection rent, according to a report from the data firm Datex Property Solutions. Total collections – from both national and local retailers – checked in at 58.56 percent in May, up from 54 percent in April, according to the data. 

However, an increase in collections may not be a silver lining. Many retailers have negotiated rent relief with their landlords, which could make the numbers seem higher than they actually are, according to Datex CEO Mark Sigal.

At the end of May 2019, national retail chains were able to pay 96 percent of their rent. Even just two months ago, that figure was at 94 percent.

The plummet in rent collections is largely a consequence of the coronavirus pandemic, which has shuttered stores, in some cases permanently.

Fifteen companies, out of the 131 companies included, have not paid a dime of rent last month. Bed Bath & Beyond, H & M, Century City, AMC theaters, Regal Cinemas, The Gap and Party City are among those.


Seven others have paid very little, including Barnes & Noble and DSW Shoe Warehouse. On Wednesday, The Real Deal first reported that Simon Property Group sued The Gap for $66 million for withholding rent in April, May and June. 

“A lot of the growth has been around more lifestyle oriented retail, the kind of retail where there’s a goodness to being present,” Sigal said. “With social distancing, the retailers that most build around that, folks like gyms and yoga studios or movie theaters — the types of operators where people are in the same space and close quarters — are the ones that have been most existentially impacted.”

The report counts major chains as those that have a minimum gross monthly rent of $250,000 or lease 10 or more locations. It is based on verified collections from Datex’s portfolio of clients that report payment information from thousands of U.S. properties.

However, not all companies are on their landlord’s naughty list this month. Unsurprisingly grocery stores, like Giant and Aldi have paid almost all their rent.

Between competitors, companies’ collections differed greatly. PetSmart, according to Datex, paid 89 percent of its collective bill, while Petco paid 42 percent. Hobby Lobby similarly paid 99 percent, while Michael’s trailed behind at 39 percent, per the data.

In part, this may be due to different franchisees or unsuccessful expansions in different areas, according to Sigal.

“This is a tsunami that is unanticipated,” Sigal said. “Within that, you may have heard of this quote, ‘bad companies are destroyed by crises; good companies survive them; great companies are improved by them.’ Retail is that story”

The restaurant sector experienced similar contrasts. McDonalds and Taco Bell, for example, paid the majority of their bills, while Jamba Juice and Five Guys paid less than half of theirs.

Stage Stores Bankruptcy Approval Could Put More Than 700 Stores Up for Sale or Lease

Retailer Still in Talks With Potential Buyers Even As It Proceeds with Liquidation

By Marissa Luck  CoStar News  -   June 11, 2020

A bankruptcy court judge approved Stage Stores Inc.'s plan to wind down operations at more than 700 stores nationally, meaning potentially millions of square feet of retail space could be put up for sale or lease across the country this year unless the department chain finds a buyer for its business. 

So far, no prospective buyers have submitted formal bids to buy Stage Stores, the Houston-based national department store chain owner that operates Stage, Peeble's, Gordman’s, Bealls and Palais Royal stores in 42 states.

Stage Stores filed for Chapter 11 bankruptcy protection May 10, and said it would liquidate its assets unless someone came forward to buy the company by a June 1 deadline. That deadline has passed with no proposals, but the company is still talking with some interested parties, said Joshua Sussberg, attorney at the law firm Kirkland & Ellis, the legal counsel in bankruptcy proceedings for Stage Stores. 

“We expect there to be significant, continued dialogue and action in the coming days,” Sussberg said in a June 10 hearing in the U.S. Bankruptcy Court for the Southern District of Texas.

Absent a buyer, Stage Stores sought and gained approval Wednesday from bankruptcy court Judge David Jones on how to wind down its operations at its nearly 730 stores. According to court filings, the stores will wind down and close within 16 weeks of reopening from coronavirus lockdowns, which in most cases is by the end of August. 

PJ Soloman Securities is continuing to work with interested parties on behalf of Stage Stores for a potential sale of the business. Stage Stores also is pursuing the sale of smaller real estate assets, distribution centers and intellectual property such as customer data, according to a presentation in court. 

Stages Stores owned about $540 million in land and $10.3 million of buildings as of Nov. 2, according to a filing with the U.S. Securities and Exchange Commission. Stage Stores owns two of its distribution centers in Jacksonville, Texas, including a 328,000-square-foot facility and a 171,000-square-foot property, according to its latest annual report filed in February 2019.

Stage Stores has settled any lockout disagreements with landlords, its attorneys said in the June 10 hearing.

Stage Stores had paid only part of its rent for May for its headquarters office at 2425 West Loop South in Houston's Uptown-Galleria area, Ivan Gold, an attorney with Allen Matkins Leck Gamble Mallory & Natsis LLP who represents the office landlord Galleria 2425 Owner Inc., said in a phone call.

Jones' order Wednesday will require Stage Stores to pay the remainder of unpaid rent for its office and retail locations by Aug. 1, according to the order. That means Stage Stores will have to be caught up on rent and continue to pay rent during the liquidation. Gold said Stage Stores paid its June office rent in full. According to court filings, Stage Stores pays $477, 868 per month for the space. Stage Stores leases 189,000 square feet of space at the office tower, which is owned by an affiliate of Naissance Capital Real Estate and managed by Hines, according to CoStar records. 

Stage Stores also said it had not paid the majority of March, April and May rent across multiple locations, according to court filings.

A settlement with lenders has not yet been approved and is not expected to be considered until the end of June.

Now, Stage Stores has reopened about 721 stores since coronavirus lockdowns have ended in many states, and stores are selling significantly more than originally expected, Sussberg said. Since mid-May, sales have hit $89 million, about $30 million above expectations, according to a presentation in court. Off-price store Gordman’s is performing particularly well, with same-store sales up 69% over the same time last year, Sussberg added. The remaining 6 closed stores in Stage’s chain are expected to open by June 15.

The Houston-based discount retailer, which was already struggling before the coronavirus, had $1.01 billion in debt and $1.71 billion in assets when it filed for bankruptcy, according to its court filings. The retailer said it generated $1.6 billion in revenue in 2019 and its biggest creditors include Nike, Adobe, Skechers, Ralph Lauren and Levi, among 50 other major product and service providers it owes money.

Stage Stores joins Neiman Marcus, J.C. Penney, Tuesday Morning and other retailers that have filed for Chapter 11 bankruptcy protection because of the coronavirus lockdowns and the recession. 

For the Record

Stage Stores hired Kirkland & Ellis LLP law firm as general legal counsel, while the law firm Jackson Walker LLP is assisting as local legal counsel, according to court filings. A&G Realty is Stage Store's real estate consultant during the restructuring. PJ Solomon Securities is assisting Stage Stores with evaluating business prospects and the selling of assets. Berkeley Research Group and Kurtzman Carson Consultants are also acting as consultants for Stage Stores. Gordon Brothers Retail Partners LLC is managing clearance sales.

JSO add-on

Stage had planned to convert more than 500 department stores across the country in 2020, including Bealls, Goody’s, Palais Royal, Peebles, and Stage, into Gordmans. Once the change-overs were completed, Gordmans would have had around 700 locations, making it one of the largest retail unified chains in the United States.

Hidalgo unveils COVID-19 'threat level' system, says Harris County at second-highest risk

Zach Despart  June 11, 2020   Houston Chronical

A large, ongoing outbreak of COVID-19 places the Houston area on the second-highest of four public threat levels unveiled by Harris County Judge Lina Hidalgo on Thursday.

If troubling trends continue, including an increase in coronavirus cases and hospitalizations, the county health department again would recommend residents stay at home except for essential errands, such as buying groceries and medicine, she said.



JSO Commentary:

This is a potential second wave and could be a major setback in the fledgling economic recovery currently taking place.  There is no doubt this is a worrisome development.

Federal Reserve predicts slow recovery with unemployment at 9.3 percent by end of 2020

The central bank plans to keep the benchmark U.S. interest rate

near zero through at least 2022.

By Heather Long   -  June 10, 2020  -   Washington Post

Federal Reserve leaders predict a slow recovery for the U.S. economy, with unemployment falling to 9.3 percent by the end of this year and to 6.5 percent by the end of 2021, after tens of millions of Americans lost their jobs in the stunning recession caused by the outbreak of the novel coronavirus.

Fed Chair Jerome H. Powell stressed Wednesday that more aid from Congress and the central bank is likely to be needed, especially since a substantial number of Americans may never get their jobs back.

“Unemployment remains historically high,” Powell said during a news conference Wednesday. “My assumption is there will be a significant chunk ... well into the millions of people, who don’t get to go back to their old job ... and there may not be a job in that industry for them for some time.”

What the Labor Department is doing about the ‘error’ that led to a lower unemployment rate

To revive the economy from the deepest recession since the Great Depression, the Fed pledged to keep interest rates at zero, most likely through 2022, and to continue its extensive bond-buying programs at the current pace for the foreseeable future. The Fed’s historic efforts, which could swell its balance sheet to $10 trillion by year’s end, are also fueling deeper inequality in the United States, many economists say.

Low interest rates have spurred enormous stock market gains and made it cheap to get a loan for a car, mortgage or business operation. But a prospective borrower generally needs to have savings and a stable job to get access to credit or invest in the market. The Fed has limited tools to use in emergency situations such as this, and they tend to buoy Wall Street far more than Main Street.

Read more....

Another 1.5 million workers filed for

unemployment insurance


Unemployment insurance claims have been trending down but remain historically high.


Eli Rosenberg  -  June 11, 2020   Washington Post

Another 1.5 million people applied for unemployment insurance for the first time last week, adding to the tens of millions of people who have applied for the benefits since the pandemic began and continuing a months-long drop in the number of initial claims.

The numbers seeking jobless benefits have remained at historically high levels for 12 weeks, since the coronavirus pandemic took hold in back in March, disrupting global supply chains and shuttering businesses for months.

The number gig and formerly self-employed workers who also applied for jobless benefits newly available to them under the expanded federal program went up to 705,000, from 620,000 the week before.

The total number of people currently receiving benefits edged down slightly to 20.9 million, from a revised 21.3 million the week previously, a staggering toll on the labor force. More than 44 million people have applied for unemployment benefits during the pandemic.

“That means 29 percent of the workforce has filed for unemployment claims during that period,” said Joseph Brusuelas, the chief economist at RSM. “Some may have returned to work. But that’s a stunning number nonetheless.”

The numbers add to the complicated economic outlook that U.S. policymakers face, as they push to reopen for business while containing further spread of the virus at the same time.

President Trump has hailed the signs that the economy may have already hit bottom — the unemployment rate dropped in May, surprising many economists — as an indication of that the recovery is beginning to take shape. But the official unemployment rate remains higher than at any time since the Great Depression.

Meanwhile, data collection errors disclosed by the Bureau of Labor Statistics have contributed to the official unemployment rate registering lower than what it should be, BLS has said.

And while some jobs, especially in the restaurant, retail and service sectors, are bouncing back quickly as local economics reopen, there are concerns about a second wave of layoffs. On Wednesday, the Federal Reserve chief Jerome H. Powell warned that some of the jobs lost won’t come back easily or at all.

“Hiring appears to be picking up, but is far below what the labor market needs for a robust recovery,” Nick Bunker, an economist at Indeed said in a statement.

While 1.5 million claims is among the lowest number of those seeking jobless benefits since the pandemic first started affecting the U.S. economy in mid-March, it’s still more than double the pre-pandemic record of 695,000 from 1982.

“We’re seeing devastating tolls in lives and lost economic output from the Covid pandemic,” said Mark Hamrick, an economist at Bankrate. “The elevated claims are a reminder that this two sided crisis is still very much with us.”

Federal Reserve officials are forecasting a slow and uneven recovery, saying Wednesday that they expect unemployment to fall to 9.3 percent by the end of the year as the economy shrinks 6 percent.

Fed Chair Jerome H. Powell said that more aid from Congress and the central bank will likely be needed.

Nicole Moore, a former part-time Lyft driver and organizer with Rideshare Drivers United, spoke about the challenges that drivers have faced as their work has been wiped out nearly overnight.

“People are so stressed,” she said. “I had a note that just broke my heart from someone....'Dear sir, I can’t explain the situation I’m in but I don’t have enough food for myself and my kids. Can you help me get my unemployment?' Those are the types of things that we’re seeing. It scares me what we’re going through."

U.S. economy officially went into a recession in February, ending record 128-month expansion

By:  Rachel Siegel         June 8, 2020     The Washington Post

The United States officially fell into a recession in February, ending a historic 128-month expansion as the coronavirus swept the country and put the economy into a tailspin.

The Business Cycle Dating Committee, which tracks and dates business cycles for the National Bureau of Economic Research, said the economy peaked just before the pandemic forced business and social activity into a holding pattern. Recessions often refer to two consecutive quarters of contraction, but the NBER’s calculation includes other factors, such as domestic production and employment.

“The time that it takes for the economy to return to its previous peak level of activity or its previous trend path may be quite extended,” the committee’s report said.

States and communities began issuing stay-at-home orders in mid-March to stem the spread of the highly contagious virus. The moves prevented an estimated 60 million coronavirus infections in the United States, according to a study published Monday, but came at a great cost to the economy. More than 40 million Americans lost their jobs as consumers stayed out of shopping malls, restaurants, theaters and other places where crowds gathers. Travel, tourism, retail and other industries were devastated, tipping such well-known brands as J. Crew, Neiman Marcus and Hertz into bankruptcy.

Though the nation’s unemployment rate dropped to 13.3 percent in May, versus 14.7 percent in April, the reading comes with an asterisk. The Bureau of Labor Statistics said it had misclassified data in May, April and March. Without the error, the unemployment rate would have been 16.3 percent for May and 19.7 percent for April, the agency said.

Now, as states gradually ease pandemic restrictions, the question will be whether “reopening” fuels an economic turnaround anytime soon, or whether the downturn will extend into next year as people struggle to go back to work and the nation contends with a possible second wave of infections.

That the economy had plunged into a recession was not a surprise. As economist Ernie Tedeschi put it: “It’s now official (and utterly unsurprising).”

Still, NBER’s report highlighted just how sharply the pandemic upended vast swaths of the economy and closed the book on an expansion that started in June 2009.

“In the case of the February 2020 peak in economic activity, the committee concluded that the drop in activity had been so great and so widely diffused throughout the economy that the downturn should be classified as a recession even if it proved to be quite brief,” the report noted.

In tracking business cycles and their inflection points, the NBER committee also takes into account indicators such as initial unemployment insurance claims, wholesale retail sales and industrial production. The committee’s official reports come retrospectively — or once it becomes clear there won’t be a need for major revisions even when more data becomes available.

Government officials and economists have offered different timelines for when the economy might rebound, offering up an alphabet soup of W-, V- and U-shaped recoveries that could unfold later in the year or into 2021.

The nonpartisan Congressional Budget Office expects the economic consequences of the novel coronavirus to exceed $8 trillion and suggests the economy will not fully recover until 2030. It also expects unemployment to hover above 10 percent into 2021, meaning the nation could still have joblessness that is worse than the Great Recession for months.

But experts say the turnaround will hinge on controlling the spread of the novel coronavirus, which has killed more than 109,000 people in the United States.

The NBER report had no effect on Wall Street, which is in the midst of a stunning three-month rally. On Monday, the Standard & Poor’s 500 index moved into positive territory for the year, the tech-heavy Nasdaq Composite set a record high and the Dow Jones industrial average extended its winning streak to six days.

Mall REITs Say Only 20% of Tenants Paid May

Rent in Pandemic

Collection Rate Also Dips at Strip Centers, the Most Resilient of the Property Type

By Mark Heschmeyer
CoStar News    -    June 8, 2020


Rent collection rates among retail landlords have deteriorated further during the coronavirus pandemic.

Shopping mall owners posted the worst numbers by far among major publicly traded real estate investment trusts, which hosted virtual presentations at the National Association of Real Estate Investment Trusts’ annual symposium. The REITs said they had collected about 20% of rents on average, according to a tally compiled by Morgan Stanley Research. The May figure was down from an average of about 26% in April.

Owners of strip shopping centers fared better, reporting an average of 57% of rents collected in May versus 65% in April. Strip centers generally are occupied by a higher percentage of retailers deemed essential, such as banks, grocery stores and pharmacies, medical offices and home improvement stores.

Retail properties across the country are beginning to reopen, but tenant troubles could be an obstacle to seeing rent collection numbers rebound. Some of the largest high-risk retailers occupy a significant share of mall space. In fact, 14 of the 20 largest mall tenants are either apparel retailers or department stores, and these 14 tenants occupy nearly one-quarter of all U.S. regional and super regional mall space, according to CoStar data.

Apparel retailers and department stores were among the tenants the REITs reported as having the lowest rent payment numbers.

For example, Jacksonville, Florida-based Regency Centers reported collection rates of 83% higher in May than in April for essential retailers. However, collections for soft goods retailers such as department and apparel stores was at 20%.

Oak Brook, Illinois-based Retail Properties of America reported an 88% collection rate for essential retailers. For nonessential retailers, the rate was 26%. The apparel retailer rate was just 12%.

Apparel and department store retailers are also highly exposed to the threat of e-commerce. According to the U.S. Census Bureau, clothing and accessory store sales slid 78.8% from March to April and have now fallen by 89.3% since April 2019.

However, nonstore retail sales, which are mostly e-commerce sales, grew about 8.4% month-over-month in April.

Since the outbreak of the coronavirus, four large apparel retailers have filed for bankruptcy: J. Crew, Neiman Marcus, Stage Stores and J.C. Penney.

Also last week, the tension between landlords and clothing retailers escalated as the nation's largest mall operator, Simon Property Group, sued clothing seller Gap to collect on $66 million in back rent.

Tenant problems are also showing up in the entertainment sector. Last week, major anchor tenant AMC Entertainment Holdings disclosed “going concern” doubts as it was projecting a loss in the first quarter between $2.1 billion and $2.4 billion.

Entertainment tenants are also among retailers that landlords report are having the most trouble making rent payments.

Regency Centers reported collecting May rents from just 15% of its entertainment tenants. Overall, it collected 68% of April pro-rata base rent, and 58% in May.

Retail Properties of America said it had not collected any rents from 2.1 million square feet of amusement/play center tenants. Overall, the REIT received 52.4% of May rent.

May rent collections were more bullish for other property types, according to Morgan Stanley’s tally.

Apartment REITs reported the highest rent collection numbers on average at 96% of rents collected in May versus 97% in April. Industrial REITs s reported 95% collection rates in May, down from 98% in April. Office REITs reported rent collections in May were similar to April at about 90%.

WeWork Chief Culture Officer to Depart Company He Co-Founded

Miguel McKelvey to Leave at End of June

By Clare Kennedy
CoStar News

June 6, 2020 | 8:04 A.M.

Coworking giant WeWork is preparing to soon say adieu to Miguel McKelvey, who co-founded the New York-based company in 2010 with former CEO Adam Neumann.

McKelvey, whose official title at WeWork is chief culture officer, announced he was leaving the company in an email to WeWork's staff, according to WeWork. His departure is voluntary, said a company spokesman who declined to comment further on the matter. CNBC reported the news early Friday. 

"After 10 years, I’ve made one of the most difficult decisions of my life – one that I’m not even sure has sunk in just yet," McKelvey wrote in the statement to WeWork's staff, which was provided to CoStar by the company. "But at the end of this month, I’ll be leaving WeWork. While it’s hard to leave, and I know there is a lot more work to be done, I could only make this decision knowing this company and our people are in good hands.”

McKelvey is taking his leave after a flurry of challenges to WeWork, which include a class action lawsuit brought by investors who allege WeWork misled them about its financial condition and operations, as well as a threat of legal action from WeWork tenants in three major U.S. cities who joined together last month to demand the firm stop charging them rent for office space they can't use because of government-ordered coronavirus shutdowns. 

He is one of the last remaining members of the original leadership team at WeWork, which has seen a number of shakeups in its top ranks since WeWork's once meteoric rise came to a grinding halt last fall, when Wall Street's scrutiny of its filings for its initial public offering cast doubt on the company's structure and viability. 

WeWork withdrew its IPO in September and Neumann was left the firm. In October, one of its largest investors, Japan's SoftBank, largely took control.

In February, WeWork hired a seasoned real estate executive, Sandeep Mathrani, as its new CEO in the hopes of staging a turnaround. However, the company's attempts to regroup were set back by the coronavirus pandemic, which swept the United States in early 2020 and necessitated widespread stay-at-home orders in most of the nation's major cities. The pandemic continues to pose an existential threat to the coworking industry, which is premised on providing its tenants with a stimulating work environment that maximizes human connection.

Executives at WeWork struck a warm, complimentary tone in their statements about McKelvey and his imminent departure.

McKelvey's "dedication to establishing a community that fosters connection and compassion has helped build a business that recognizes and celebrates inclusivity, authenticity, learning, and growth. I am confident [he] will bring the same entrepreneurial spirit to his future endeavors and we wish him all the best in what lies ahead," Mathrani said through the spokesman. "He has left an indelible mark on this company and he will be missed.“

Marcelo Claure, CEO of Softbank Group International, COO of Softbank Group and executive chairman of WeWork, recalled talking with McKelvey into the wee hours the night before he became executive chairman.

"I know that whatever his next adventure holds, he will continue to have an impact on so many,” Claure said.

States Hardest Hit by Closures Could See Property Valuations Fall by Low Double Digits

A new report from Reonomy looks at where property valuations might dip the most

Sebastian Obando | Jun 08, 2020

National Real Estate Investor

It’s been made clear by now that the retail, restaurant, travel and energy sectors have been hit the hardest by the impact from the COVID-19 crisis. But a recent report from Reonomy, a data platform for the commercial real estate industry, also highlights that administrative work, arts, entertainment and recreation industries have seen outsized fallout. Across the U.S., all these industries account for approximately 14 percent of GDP, Reonomy researchers point out.

In addition, many of these industries are concentrated in specific states, leading Reonomy to conclude that Alaska, Nevada, New Mexico, Oklahoma and Wyoming will be among those that will suffer more from the pandemic. Firm closures in the impacted sectors can lead to higher unemployment rates and longer-lasting periods of unemployment for workers, and to decreased tax revenues for the states. And decreased economic activity will also weaken property valuations.

In addition to the above-mentioned states, states with high concentrations of at-risk jobs include those that rely heavily on tourism (Mississippi, Louisiana, South Carolina and Hawaii), states with high levels of energy production (Wyoming, North Dakota, South Dakota and Louisiana) and states with large manufacturing sectors (Indiana, South Carolina, Alabama and Kentucky).

Complicating the matter are higher commercial rental rates in some of the most affected states. The higher the rents, the more difficult it will be for struggling tenants to pay them, even when the impact of the government’s PPP loans is factored in, Reonomy notes. The harder hit markets may ultimately experience valuation decreases somewhere in the low double digits, says a Reonomy analyst. 

To get further insight on what the report’s findings mean, NREI spoke with Omar Eltorai, market analyst at Reonomy.

The following is a partial response...  Read more at:

NREI: The report mentions at-risk labor forces and at-risk industries. Expand on that, what are the main takeaways from these sections?

Eltorai: The at-risk labor force is focusing on unemployment. The way I would break it down is labor force is focusing on the employee and the industry is focusing on the employer. That’s the difference between the two. They are certainly related. Think about it this way, there are types of jobs where the business might survive, but the employee is put in financial stress. Any sort of role where the job’s hours get cut back, or the job can’t be shifted remotely, and the employer has to cut hours instead of laying off. Even though that’s beneficial and helpful to provide some relief to the employer in terms of decreasing expenses, the employee is still put in a tricky spot where if they weren’t working for the last couple of months, that puts an added financial burden at the individual level. The industry piece is really focused on the employer level, where there are a number of businesses that can have inherent risk because of the way in which we’ve been trying to contain the pandemic.

NREI: What are some important trends you see developing that are worth keeping tabs on?

Eltorai: What’s unique about the pandemic and crisis that really make up this pandemic is how important geography is. It’s really a big factor, you can see that on a national level, when you’re looking across the states, but it also comes down to a much more local level where geographies have dramatically different experiences. There are many places that have higher density that are really feeling the effects of this pandemic and this crisis much more severely than other places. There are many other states that are reading about the pandemic, but they’re not quite experiencing it to the same degree. I think that’s really going to come through not only during the crisis and be a key differentiating factor there, but it will also be very key in the recovery as well. So, I think that it has been pretty amazing to see how powerful this pandemic has been. It has reshaped certain markets, but then it has left other markets, I don’t want to say untouched, but it’s far less noticeable in other markets.

NREI: What are some important trends you see developing that are worth keeping tabs on?

Eltorai: What’s unique about the pandemic and crisis that really make up this pandemic is how important geography is. It’s really a big factor, you can see that on a national level, when you’re looking across the states, but it also comes down to a much more local level where geographies have dramatically different experiences. There are many places that have higher density that are really feeling the effects of this pandemic and this crisis much more severely than other places. There are many other states that are reading about the pandemic, but they’re not quite experiencing it to the same degree. I think that’s really going to come through not only during the crisis and be a key differentiating factor there, but it will also be very key in the recovery as well. So, I think that it has been pretty amazing to see how powerful this pandemic has been. It has reshaped certain markets, but then it has left other markets, I don’t want to say untouched, but it’s far less noticeable in other markets.

A Million-Mile Battery From China

Could Power Your Electric Car



In a market broadsided by the pandemic, global sales of gas-powered cars and trucks may have already peaked.

The Chinese behemoth that makes electric-car batteries for Tesla Inc. and Volkswagen AG developed a power pack that lasts more than a million miles -- an industry landmark and a potential boon for automakers trying to sway drivers to their EV models.

For the makers of gas powered cars this graphic below is sobering .


Bloomberg New...June 7, 2020,

Office Towers Are Still Going Up, but Who Will Fill Them?

By Kevin Williams, June 2, 2020,  New York Times

Developers around the country are grappling with the fallout from the coronavirus pandemic as tenants cancel plans and workers fear returning to the office.

Before the pandemic shut down businesses, a robust economy had powered a building boom, sending office towers skyward in urban areas across the United States. The coronavirus outbreak, though, has scrambled plans and sent jitters through the real estate industry.

Skyscrapers scheduled to open this year will remake skylines in cities like Milwaukee, Nashville and Salt Lake City. Office vacancy rates, following a decade-long trend, had shrunk to 9.7 percent at the end of the third quarter of 2019, compared with 13 percent in the third quarter of 2010, according to Deloitte.

Developers were confident that the demand would remain strong. But the pandemic darkened the picture.


“There is a pause occurring as companies more broadly consider their real estate needs,” said Jim Berry, Deloitte’s U.S. real estate sector leader.


The timing is unfortunate for Mark F. Irgens, whose 25-story BMO Tower in Milwaukee opened in mid-April at the peak of the statewide lockdown in Wisconsin. A month later, a small fraction of typical daytime foot traffic was passing by as most businesses adhered to the governor’s stay-at-home directive, which expired last week. A restaurant that was slated for the ground level was canceled, and three potential tenants have delayed their plans.

Instead of showing off the building’s sparkling Italian marble floors and panoramic vistas of Lake Michigan, Mr. Irgens is worrying about who is going to pull out next and what type of corporate landscape he might face when the pandemic finally ends.

But he is not putting on the brakes. The BMO had been planned for five years, and he has leases to negotiate, investors to please, tenants to woo and loans to pay off.

“Development projects are different than making widgets,” he said. “You can’t stop; you can’t turn it off. You have to continue.”

Slowly, workers are filling their BMO offices. Managers, who were scheduled to report on Monday, constitute about 15 percent of the building’s occupancy. Mr. Irgens thinks it will be the end of the summer before it gets up to 50 percent. Without a coronavirus vaccine, it may be year’s end before the building approaches a “normal” occupancy, he said.

Other developers around the country are also dealing with the fallout, especially for towers with Class A space, regarded as the highest-quality real estate on the market. In most cases, new buildings are not fully occupied, and developers were counting on a strong economy to do the work for them. For instance, the BMO Tower was 55 percent leased before the pandemic.

The question facing the owners of office towers is: Will anyone still want the space when coronavirus crisis fades?

If the economic pain drags on, there could be long-lasting changes to the way people work and how tenants want offices to be reimagined, said Joseph L. Pagliari Jr., clinical professor of real estate at the University of Chicago’s Booth School of Business. Some of the changes — like more spacious elevators — could be costly to put into place, he said.

The pandemic could be a “pivot point,” Mr. Pagliari said, and that would be bad news for building owners. The office towers were designed to be “best in class,” he said, but the pandemic has suddenly made their most salable amenities — common areas, fitness centers and food courts — into potential liabilities.

The economic crisis could also spur high interest rates on debt, which would cause building values to fall, Mr. Pagliari said. That may happen even if the crisis diminishes in the weeks ahead.

“The current pandemic has raised perceptions about the likelihood and consequences of future pandemics,” Mr. Pagliari said. Developers who can factor in such events will gain an advantage, but any skyscrapers that are built with pandemic fears in mind are years away.

The prospect that workers may want to continue working from home does not worry John O’Donnell, the chief executive of Riverside Investment and Development, which is developing a 55-story tower at 110 North Wacker Drive in Chicago. The tallest building erected in the city since 1990, it is scheduled to open in August and will be anchored by Bank of America. Other tenants include law firms, many of which are doing business from home.

“There is a need for collaboration, team building, common business cultures and a continuous desire to have social contact within a business,” Mr. O’Donnell said.

The building is 80 percent leased ahead of its August opening. One tenant signed for 40,000 square feet of office space at the height of the lockdown, which Mr. O’Donnell took as an encouraging sign.

The building is already being adjusted to meet post-pandemic needs, something Mr. O’Donnell said newer structures were better able to do. Amenities are being updated to be touch free. And owners are talking with tenants about walk-through thermal imaging to monitor workers and visitors for fevers.

The pandemic will result in a demand for more office space, not less, said Paul H. Layne, the chief executive of the Howard Hughes Corporation, a national commercial real estate developer based in Houston. Developers will move away from the industry-standard 125 square feet per person toward roomier workplaces.

But others say it is too early to tell when demand for office space will return. Jamil Alam, managing principal of Endeavor Real Estate Group, said the situation would vary by city.

“There will be winners and losers,” Mr. Alam said, explaining that he thinks denser metro areas like New York and Boston, which have been ravaged by the coronavirus, could find their luster lost in favor of smaller markets.

Endeavor, which is based in Austin, Texas, has a portfolio that includes 15.6 million square feet of commercial real estate in cities like Dallas, Denver and Nashville. One of its projects, the 20-story Gulch Union, will be the largest office tower in Nashville when it opens in August with 324,254 square feet of office space.

Smaller markets like Nashville are well positioned for companies wishing to pull up stakes from major metropolitan areas with higher density and costs, Mr. Alam said. Gulch Union has leased 27,000 square feet, and four more deals totaling 40,000 square feet are near completion.

Endeavor, which is based in Austin, Texas, has a portfolio that includes 15.6 million square feet of commercial real estate in cities like Dallas, Denver and Nashville. One of its projects, the 20-story Gulch Union, will be the largest office tower in Nashville when it opens in August with 324,254 square feet of office space.

Smaller markets like Nashville are well positioned for companies wishing to pull up stakes from major metropolitan areas with higher density and costs, Mr. Alam said. Gulch Union has leased 27,000 square feet, and four more deals totaling 40,000 square feet are near completion.

“Deals are still being done,” he said.

There will be an appetite for urban, walkable, mixed-use office environments, Mr. Alam said, and changes will need to be made in buildings over time, like fewer touch points on handles and elevator buttons.

But projects that have not been started yet will be paused, said Chris Kirk, managing principal of the Salt Lake City office of Colliers, the commercial real estate brokerage firm.

“If you are a developer or landlord or C.F.O., you are concerned,” he said. “Everyone is feeling the impact.”


Salt Lake City is in a better position to weather the crisis than other markets, he added, because Utah has had fewer coronavirus cases than most states and has not been under a statewide lockdown. 

And the city is experiencing a building spurt downtown. A 24-story Class A tower developed by City Creek Reserve, the development arm of the Church of Jesus Christ of Latter-day Saints, is scheduled for completion next year. The building, which will have 589,945 square feet of office space, is already 80 percent leased.

Salt Lake City has been averaging a new Class A office high-rise every decade, and the pace is increasing. Still, the pandemic might put the brakes on that.

“Anyone who would be coming out of ground speculatively now without the commitment has got to be thinking about their timing,” Mr. Kirk said.

Mr. Irgens hopes to ride out the pandemic and continue with other projects. In February, his company broke ground on a six-story building in Tempe, Ariz., and it is moving forward with a 235,000-square-foot Milwaukee office project that is 42 percent leased.

“My partners in my business are working really hard to figure out how to have business continuity, and it is really hard to do that,” he said. “Things are changing daily.”



Landlords ‘baffled’ as Travelodge prepares to launch CVA


By Jessica NewmanWed 3 June 2020     Property Weekly

Travelodge landlords have voiced their concerns as the operator prepares to to launch a CVA (Company Voluntary Arrangements) later today in a bid to end its bitter rent dispute. 


Claiming it had proved too complex to negotiate a deal with its more than 300 landlords, Travelodge is to put forward CVA proposals which would see it pay  £230m in rent for the period until December 31 2021, after which rent would become fully payable. 

The business’s shareholders have agreed to inject £40m into the business, use more than £100m of reserves and take on an additional £100m of debt, including £60m from shareholders. 

The proposals include keeping all Travelodge hotels open during the CVA, and giving landlords the option to add an extra three to five years onto their lease terms to make up for foregone rent during the Covid-19 lockdown. 

The budget hotel operator, which is owned by Golden Tree Asset Management and Avenue Capital and the investment bank Goldman Sachs, has been locked into a bitter dispute with landlords since it refused to make its quarterly rent payment in March.

The proposals are subject to approval from its creditors, the majority of which are its landlords. 

The CVA will be put to a vote on 19 July. 

Viv Watts, managing director at Oasis Holdings and head of the Travelodge Owners Action Group, said landlords are “baffled” by the choice to CVA.

Speaking on behalf of the landlords of 390 Travelodge Hotels, Watts said: “The Travelodge Owners Action Group has on three occasions shared a very generous proposal with Travelodge, offering some £70m in rent write-offs in 2020. Our proposal clearly demonstrates that any CVA, which would undermine the integrity of long term leases at great risk to UK pension and insurance industries, is not necessary,” he said.

“The latest plan appears to be an attempt to force through Travelodge’s original unjust proposal under the guise of a ‘non-traditional’ CVA, designed to enrich its offshore shareholders at the expense of UK savers and investors.”

Meanwhile, Nick Leslau’s Secure Income REIT, which owns 123 hotels, confirmed in a statement that it would be “scrutinising” any proposals made by Travelodge.

The statement read: “Travelodge has yet to provide details of their proposal to the Company and we await sight of any CVA documentation.”

“Once received, we will be scrutinising any proposals along with our team of expert advisors in order to best protect the Company’s position in determining whether or not to support any CVA proposals. Further information about the potential impact on the Company will be announced once we have been provided with the relevant information.”

Savills is advising Travelodge.

Mall Operator on Brink of Default After Retail Rents Go Unpaid


Lauren Coleman-Lochner and Steven Church   Bloomberg News

June 2, 2020, 10:43 AM CDT Updated on June 2, 2020, 3:08 PM CDT

Unpaid rent from retailers is upending turnaround efforts at CBL & Associates Properties Inc. and forcing the mall owner to skip an upcoming interest payment while it negotiates with creditors.

CBL said in a filing it withheld the $11.8 million due June 1 on its 5.25% unsecured notes, which mature in 2023, and invoked a 30-day grace period. Last week, the company drew $280 million from its line of credit, furloughed employees and halted redevelopment investments designed to reverse the decline facing many American malls.

The move could put the rest of CBL’s debt in jeopardy, too. If the company doesn’t make good on the missing bond payment, holders of CBL’s senior secured credit facility and other notes due in 2024 and 2026 could demand immediate repayment, according to the filing.

“Our priority during this time of uncertainty has been to preserve cash,” Chief Executive Officer Stephen D. Lebovitz said in an statement to investors last week. Chief Investment Officer Katie Reinsmidt declined to comment.

Trends haven’t been in CBL’s favor, and it’s not just because of the wave of bankruptcies and store closings that predates the virus crisis. Analysts have long predicted a major shakeout in retail properties serving less affluent areas, which dominate CBL’s roster of more than 100 properties in 26 states. Its malls have been hard hit by the departures of anchor stores such as Sears, J.C. Penney, Macy’s and Forever 21.

“It’s definitely a lower, less-productive portfolio,” Bloomberg Intelligence analyst Lindsay Dutch said in an interview. Its same-store sales average less than $400, compared with more than $660 for Simon Property Group Inc., the largest U.S. operator.

CBL lags in occupancy rates, a problem that could grow as retailers elect to keep more stores permanently shuttered. The Chattanooga, Tennessee-based company also lacks the cash to invest in attracting consumers and innovative tenants to its properties, Dutch said.

CBL has reopened 66 of the 68 malls it owns or manages, Lebovitz said. However, it collected just 27% of billed cash rents in April and likely will get 25% to 30% of May rents, based on preliminary receipts and conversations with retailers, he said.

“We have placed a number of tenants in default for non-payment of rent,” Lebovitz said in the May 26 statement. “We anticipate a significant portion of April and May rents will be collected later in 2020 and into 2021 under agreed upon deferral plans. However, negotiations are ongoing, and it is premature to estimate a recovery rate at this time.”

In January, CBL said it was exploring ways to reduce leverage and interest expense andto extend the maturity of its debt. The company hired the law firm Weil, Gotshal & Manges LLP and financial advisory Moelis & Co. LLC, according to the filing.

Even top-ranked centers are hurting now, with market rents at A-level malls expected to fall about 20% in the coming years, said Green Street Advisors, the real-estate research and consulting firm, in a May 27 note.

Green Street has forecast that more than half of all mall-based anchors will close by the end of next year. “Many mall-based retailers are in a much worse financial position compared to last cycle,” Green Street analysts wrote in the note. “Bankruptcy activity could be widespread and the surviving brands will likely seek to reduce their store fleets.”

till, the bankruptcy of General Growth Properties in late 2009 shows there can be a second act. The company reworked its $27 billion in debt, incurred during numerous aquisitions, and emerged the following year with Brookfield Asset Management holding a 26% stake. Brookfield took over the mall operator, then as now the second-largest in the U.S., in 2018.

More recently, Brookfield announced the creation of a $5 billion fund to shore up troubled retailers, following moves with larger competitor Simon Property Group to take stakes in bankrupt retailers Aeropostale and Forever 21.

But as shopping centers start to reopen, expect more retail distress, Dutch said.

“Some of those closings are going to be permanent,” she said, and when even healthier merchants decide to close locations, they’re going to choose less-productive malls first. “The demand for lower-quality locations isn’t there.”

Nursing Homes Fought Federal Emergency Plan Requirements for Years. Now, They’re Coronavirus Hot Spots.

The long-term care industry resisted a federal mandate to plan for disasters including pandemics. About 43% of nursing homes have been caught violating the requirement, including facilities that have now had deadly COVID-19 outbreaks.


by Bryant Furlow,  New Mexico In Depth, Carli Brosseau,  The News & Observer and Isaac Arnsdorf, ProPublica


May 29, 5 a.m. EDT

On Dec. 15, 2016, the nation’s largest nursing home lobby wrote a letter to Donald Trump, congratulating the president-elect and urging him to roll back new regulations on the long-term care industry.

One item on the wish list was a recently issued emergency preparedness rule. It required nursing homes to draw up plans for hazards such as an outbreak of a new infectious disease.

Trump’s election, the American Health Care Association, or AHCA, wrote, had demonstrated that voters opposed “extremely burdensome” rules that endangered the industry’s thin profit margins.

“Part of the public’s message was asking for less Washington influence, less regulation, and more empowerment to the free market that has made our country the greatest in the world,” AHCA wrote. “We embrace that message and look forward to working with you to improve the lives of the residents in our facilities.”

The letter was another salvo in the industry’s fight against regulations designed to stop diseases like COVID-19 from devastating elderly residents of the nation’s nursing homes, according to a review of documents and data by New Mexico In Depth; The News & Observer of Raleigh, North Carolina; and ProPublica.

The lack of pandemic plans helps explain why nursing homes have been caught unprepared for the new coronavirus, patient advocates and industry observers said. Across the country, more than one in four nursing homes have registered an outbreak, according to media reports. More than 16,000 nursing home residents and workers have died, accounting for 17% of COVID-19 deaths nationwide, according to an AARP tally on May 18. That figure is likely an understatement of the true scope of the harm.

Ongoing questions about the regulations may also have played a role. The 2016 rules mandated planning for all kinds of hazards, citing Ebola as an example. In 2019, the Trump administration clarified that nursing homes needed to include a specific plan for outbreaks of unfamiliar and contagious diseases — such as the coronavirus.

The plans must address how facilities will respond in an emergency — specifying how nursing homes will decide to shelter in place or evacuate and how they will provide residents with food, water, medicine and power. Nursing homes have to train their staff on these plans and practice them at least twice a year, if possible by participating in a drill with local agencies.


Some nursing homes were slow to comply, according to an analysis of inspection data, watchdog reports and interviews with ombudsmen and advocates. Inspectors have found more than 24,000 deficiencies with nursing homes’ emergency plans between November 2017, when the so-called “all hazards rule” took effect, and March 2020, according to public data reviewed by the news organizations. The violations occurred in 6,599 facilities, equal to about 43% of the country’s nursing homes.

Because of how the Centers for Medicare and Medicaid Services tracks the data, it’s not possible to say exactly how many of the emergency planning violations related specifically to a failure to plan for an infectious disease outbreak. Failures to meet routine infection control standards were excluded from the analysis.

But nursing home advocates say that more detailed plans accounting for expected staff and equipment shortages would have likely resulted in fewer deaths and illnesses at nursing homes stricken by the coronavirus. The current rule requires nursing homes to make contingency staffing preparations, but it doesn’t require stockpiles of personal protective equipment, or PPE.

“It’s just a river of grief, and it could have been prevented,” said Pat McGinnis, executive director of California Advocates for Nursing Home Reform.

Emergency plans help facilities train their staff ahead of time and guide tough decisions during a crisis, said Ted Goins, the president and CEO of Lutheran Services Carolinas, a nonprofit based in Salisbury, North Carolina, that runs several highly rated elder-care facilities.

“COVID-19 is a perfect example of why we have emergency plans in our facilities, and I’m sure that’s why it’s a requirement,” Goins said.

AHCA declined to make any executives available for an interview. In a statement, the group said the pandemic shows that nursing homes should be a bigger priority for resources but not for regulation.

“As we assess the COVID-19 pandemic and how to prepare our healthcare system for future outbreaks, more regulation is not necessarily always the answer,” AHCA said in the statement. “There will be time to look back and determine what we can do better for future pandemics or crises.”

One place to start: a nursing home and rehabilitation center in Albuquerque, New Mexico, with five deaths and 42 infections tied to a COVID-19 outbreak and no plan for dealing with a pandemic, according to its employees and New Mexico public records.

“Pandemic response? I mean, I don’t think anybody was really prepared for a pandemic of this level or this quickly,” said Edwardo Rivera, the facility’s administrator. “We did have some things in place, but nothing could have prepared us for what COVID-19 was.”

An Emergency Call


Robert Potts, 91, once flew America’s leaders around the globe.

A retired Air Force colonel who flew combat missions in Korea and Vietnam, Potts returned to the United States to serve as pilot for Air Force One and Air Force Two in the 1960s, according to service records and a family member. He spoke of flying President John F. Kennedy and first lady Jacqueline Kennedy.

After he fell at home and hit his head in March, Potts wound up at Advanced Health Care of Albuquerque, part of a nationwide network of 22 post-hospitalization rehabilitation and skilled nursing facilities.

The Albuquerque facility is a top-rated rehabilitation center with personal bedrooms and wine glasses in the dining hall. It takes care of patients needing physical, occupational or speech therapy after hospitalization.


In early April, AHC of Albuquerque staff and residents began testing positive for the coronavirus. Concerned about her father’s health, Potts’ daughter Susan wanted to bring him home. Somebody from the facility — Susan could not remember exactly who — assured the family that Potts had tested negative for COVID-19.


U.S. Renewables Outstrip Coal for First Time Since 19th Century


Will Wade -   Bloomberg News

May 28, 2020, 11:32 AM CDT

The U.S. consumed more energy from renewable sources last year than from coal, the first time that’s happened since the late 1800s when wood stopped powering steamships and trains.

Coal accounted for 11.3 quadrillion British thermal units of energy in 2019, a 15% decline from the prior year, a drop driven mainly by utilities turning away from the dirtiest fossil fuel. Renewables recorded 11.5 quadrillion Btu, up 1.4%, according to a statement Thursday from the the U.S. Energy Information Administration.

While coal has been gradually replaced in transportation and heating, it remained the biggest source of U.S. electricity until it was surpassed by natural gas in 2016. In a significant milestone, power generated by burning coal was expected to be overtaken by renewable electricity this year, but the consumption figures show that the green transition is already happening.

“This shows us the trend toward renewables is clearly well underway,” said Dennis Wamsted, an analyst for the Institute for Energy Economics and Financial Analysis. “We see it speeding up.”


The U.S. consumed more energy from renewables last year than from coal

Source: U.S. Energy Information Administration

How COVID-19 Is Impacting Asset Values in Europe


May 28, 2020  -   Source: SitusAMC



In 2019, SitusAMC evaluated nearly $1.3 trillion of commercial real estate across the U.S. and Europe. Hugo Raworth, Managing Director of SitusAMC and leader of the firm’s real estate valuation services in Europe, discusses how COVID-19 is impacting cash flow and property values in the European Union (EU), and which asset classes are likely to bear the brunt of the crisis.

How are valuers accounting for the impact of COVID-19 on commercial real estate assets?

With limited transactions outside of super prime assets, valuers have been moving values out based on market sentiment and short-term rental voids. However, the true impact, be it benign or aggressive, will become even more clear over the coming months as the market solidifies around transactional data.


Unlike 2008, this is a health crisis that has led to an income-liquidity crisis, not a capital-liquidity crisis. Pressure on investors and lenders is being driven by tenants’ cash-flow issues, not because of reckless behavior by borrowers nor sponsor or bank capital illiquidity. However, COVID does bear a similarity to 2008 in that both crises have led to market paralysis outside of super prime. No one wants to sell into a market that may recover in a few months’ time and most buyers are taking a wait-and-see attitude. In addition, investment alternatives will also play a big part in the re-pricing effect on real estate, whereby the stock and bond markets aren’t necessarily reflecting good risk-adjusted yields relative to real estate. 

The good news is that with valuers now able to undertake inspections, the hope is that we may start to see some market activity, which will enable valuers to point to more market evidence in assessing and tracking values.

What asset classes will be hardest hit by the pandemic?

Before the pandemic, retail had already been experiencing value losses with significant headwinds. That has been exacerbated by COVID-19, as consumers curtail spending and shop online rather than in-store. Coronavirus has pressed the fast-forward button on those challenges, intensifying some of the balance-sheet issues faced by other struggling occupiers.

Other assets are exposed to corporate occupiers with limited maneuverability due to high corporate debt. High corporate debt is not sector-specific, but some areas of the market are more exposed; serviced offices and some hotels have been widely commented on in the press in recent months.

Thirdly, any sector which relies on social interaction will have to adapt at least in the short term; leisure, retail, healthcare, hotels and again, flexible office space. How far and how deep these sectors are hit remains uncertain, but the road to recovery lies in occupiers in these sectors being able to adapt to the new world post-COVID and a swift return to full operational capacity.

What do lower asset values mean for owners and investors in terms of potential mark-to-market losses in their portfolios for the rest of 2020?

Investors and lenders will take write-downs on their assets, but this will be sector-specific and could be limited if some parts of the market recover swiftly. One thing is clear, there is significant weight of capital out there and banks are willing to lend. With real estate still priced attractively compared to other asset

classes, it is reasonable we could see this lessen the blow in some sectors, which will of course reduce mark-to-market losses.

Given questions about the security of income, aren’t investors likely to expect a discount in price to reflect the cash-flow risk?

So far, we are only seeing prime assets trade – grocery stores, prime central London offices and the like, or long-leased properties secured to strong tenants. In short, all super-secure, low-risk assets, and so far, no discount in this part of the market.

We have seen some repricing on assets where deals were agreed upon pre-COVID and have transacted now, but these are still limited. It’s clear that the market is expecting some discount even on some of the better-performing sectors such as offices and logistics. However, with most investors anticipating some market improvement over the balance of the year, and with no pressure yet to sell, many fail to see the logic in transacting now at a discount.

Increased national debt across most affected countries will be a significant economic burden for the foreseeable future. What impact will that have on property valuations, if any?

The cost of intervention has been huge across Europe; in the United Kingdom the government is paying 80 percent of wages of all furloughed staff. Any direct impact of increased national debt on values in any country in Europe is and will continue to be difficult to corroborate. However, governments will have to walk a careful path between fiscal responsibility and paying down the debt, whilst not suffocating economic recovery under the burden of high taxation and limited spending.

By the Numbers...  Average National gas prices and more importantly the margin.


Americans have filed more than 40 million jobless claims in past 10 weeks, as another 2.1 million filed for benefits last week

The economic struggle continues as states seek to reopen, but many workers and businesses remain uneasy about the future


By  Tony Romm  -   Washington Post

May 28, 2020 at 7:33 a.m. CDT

Americans have filed more than 40 million claims for jobless benefits in the past 10 weeks, according to new Labor Department data, laying bare a tremendous and sudden disruption in the U.S. economy that is already changing the types of jobs desperate workers are looking to fill.

More Americans are vying against each other to snag a shrinking pool of jobs assisting offices, entering data and handling other responsibilities that can be predominately executed from home, offering early clues about a labor market crunch that will intensify this summer.

The competition for these postings has become even more intense. The new Labor Department data said 2.1 million Americans filed for jobless claims last week, adding to an already tremendous number of people who have recently been laid off.

The scramble for remote, socially distant employment reflects lingering fears on the part of U.S. workers about their physical and financial security as the coronavirus pandemic stretches into its third month. There have been roughly 40 million applications for jobless benefits since March, and the Trump administration is expected to announce Thursday that even more have joined their ranks.

Many states have begun to reopen their economies, but the process has been uneven and companies continue shedding workers as the economic outlook for the rest of the year remains quite dark.

For Americans seeking new gigs, or aspiring to return to the workplace, the market may prove daunting, according to a snapshot compiled by ZipRecruiter, a job-posting website. There is a growing number of openings in warehouses as major retailers such as Amazon expand their footprints. But some of the greatest demand is for harder-to-get, “safe” jobs requiring little to no face-to-face contact, including data entry, customer service and other human-resource tasks, said Julia Pollak, the company’s labor economist.

Three months ago, for example, 19 people on average might have applied for an open customer-service representative position on the site, ZipRecruiter found. By May, that average had tripled, even though there was a 40 percent drop in the number of those jobs listed online in the first place.


“With six, seven, eight, maybe even 10 unemployed Americans per job opening,” Pollak said, “it’s a very competitive labor market.”

The tension looms over Washington as congressional lawmakers and the White House feud over their next response to the economic crisis wrought by the coronavirus. The latest hit came Wednesday, as Boeing, one of the largest U.S. manufacturers, said it was taking steps to lay off thousands of workers.

Millennials are the unluckiest generation in U.S. history

The pandemic has resulted in a national unemployment rate exceeding 14 percent, marking the highest rate since the Great Depression.

The historic rate of joblessness threatens the United States with an uncertain path toward economic recovery, the Federal Reserve affirmed in a report Wednesday, which highlighted precipitous drops in consumer spending, domestic tourism, manufacturing activity and agricultural conditions over the life of the pandemic.


Tuesday Morning Files for Chapter 11 Bankruptcy Protection, Plans to Close 232 US Stores

Discount Home Goods Retailer Lands $100 Million of Debtor-in-Possession Financing


By Candace Carlisle

CoStar News

May 27, 2020 | 2:34 P.M.


Discount home goods retailer Tuesday Morning Corp. filed for Chapter 11 bankruptcy protection as a result of the coronavirus-spurred lockdowns nationwide and plans to shed hundreds of its least profitable U.S. locations and a distribution center even as sales rise in the stores it has reopened. 

The Dallas-based operator of 687 stores in 39 states said in plans filed Wednesday in the U.S. Bankruptcy Court for the Northern District of Texas in Dallas it seeks to emerge as a stronger company by early fall. This is the latest brick-and-mortar retailer to file for bankruptcy protection, citing profitability issues tied to pandemic-related store closings, joining J.C. PenneyNeiman Marcus, Stage Stores and others. 

The move is significant because it shows that full-price retailers, which were already struggling, aren't the only chains hurt by stay-at-home orders implemented to slow the spread of the coronavirus, and that even a chain that was growing and healthy just three months ago is shedding commercial real estate space. Prior to the pandemic, Tuesday Morning said it had been growing its vendor base, improving brands and investing in technology, and the stores it has reopened have double-digit sales growth from the prior year, but it can't recover from months of lost business.

Many brick-and-mortar retailers were struggling financially before the pandemic because of changing consumer habits. Pier 1, another home goods retailer based in the Dallas area, filed for Chapter 11 protection three months ago and is now liquidating its assets after failing to find a buyer. Total U.S. retail sales fell more than 16% to $403.9 billion in April from the previous month, according to the latest report from the Department of Commerce. Sales at home goods stores like Tuesday Morning and Pier 1 fell 58.7% in April from March, and 66.5% from April 2019.

Tuesday Morning plans to close up to 230 stores in phases starting this summer. The initial phase includes 132 store closures as well as the closing of its Phoenix distribution center, which supported nearby underperforming stores. Tuesday Morning signed a 10-year lease at the Arizona hub in 2015 totaling nearly 594,000 square feet. At the time, the retailer expected to employ 300 workers at the site.

The initial store closures and liquidation sales are expected to start June 1, and take 10 weeks to complete, according to court filings. 

Another 100 store closures are expected in additional phases, leaving Tuesday Morning with about about 450 stores. Officials said the move is expected to help the company redirect resources to its most profitable stores. A spokeswoman for Tuesday Morning said the company had no additional comments beyond the bankruptcy filing and statement. 

Tuesday Morning listed total assets of $92 million and total debts of $88.35 million as of April 30, according to court filings. Tuesday Morning's average monthly lease obligation is about $10 million, and the company owes more than $16 million to various landlords for rent in April and May, according to court filings. The company owns its Dallas headquarters building and a distribution center in Dallas, records show.

British Land’s portfolio value tumbles by £1.2bn

By Sebastian McCarthy     Wed 27 May 2020

British Land has reported a £1.2bn slump in the value of its property empire as the Covid-19 pandemic takes its toll on the group’s embattled retail portfolio.

For the year ending 31 March 2020, British Land’s portfolio valuation slid from £12.3bn to £11.1bn, marking a 10.1% drop.  

The FTSE 100 REIT said that the drop was driven by a 26.1% fall in values in the group’s retail property, which it blamed on the “ongoing structural challenges compounded by the impact of Covid-19”.

Overall, the group collected 68% of the rent originally due for the March quarter (97% for offices and 43% for retail), which equates to 91% adjusting for rent deferred, forgiven or moved to monthly payments.

British Land also said that is has restarted work on all of its major sites – including 100 Liverpool Street and 1 Triton Square – having suspended developments in March for health and safety reasons. 

Chief executive Chris Grigg said: “We expect the major trends that inform our strategy to accelerate.  This includes the shift to online retail, reinforcing our focus on delivering a more focused Retail business and we made progress on this with £296m of retail sales.  All of our offices are in London, and here we expect demand to further polarise towards safe, modern, sustainable and well located workspace.”

He added: “Near term, we are expecting the offices market to be more cautious, but we continue to conduct virtual viewings and are encouraged by negotiations we are having.  In Retail, given current valuations and the lack of liquidity in the investment market, our focus is on delivering value though asset management, working to keep our places full and exploiting demand for assets which support an online offer. Our financial position is robust with debt low, significant covenant headroom and access to £1.3bn of undrawn facilities and cash so we are well placed to weather today’s challenges and succeed in the long term.”

J.Crew Landlords Pursue Rent From

Reopened Stores 

Bankrupt retail chain asks judge to let it pause paying rent for all stores until July 6


Soma Biswas  The Wall Street Journal

Updated May 21, 2020 5:18 pm ET

Dozens of J.Crew Group Inc.’s landlords, including some of the biggest mall owners in the country, are seeking rent payments from the retailer’s stores as they reopen, according to court filings.

The chain’s landlords - including Simon Property Group Inc., CBL & Associates Management Inc. and Brookfield Property REIT Inc. -  say they deserve to be paid rent on stores as malls and shopping centers reopen.  Many states are gradually easing restrictions on retailers that were forced to close stores to slow the spread of the new coronavirus, and have issued guidelines for restarting operations.

J.Crew has asked the bankruptcy court to allow it to stop paying rent on all its stores for 60 days - until July 6 -  saying it needs to preserve cash after closing about 500 locations in March.

Simon, a landlord for 126  J. Crew stores, said that 30 of its shopping centers reopened in early May in Florida, Georgia and other states.

J.Crew filed for chapter 11 protection in early May after struggling for years before the coronavirus pandemic prompted it to close stores and scrap plans to raise cash by spinning off its Madewell chain.

A committee representing J.Crew’s unsecured creditors has also objected to the retailer’s request to defer rent payments, pointing out the company hasn’t promised to pay back the deferred rent.

J.Crew and its real-estate adviser, Hilco Real Estate LLC,  have been trying to negotiate rent concessions with landlords and assessing which stores will shut down for good.

A hearing is scheduled on the matter before Judge Keith Phillips of the U.S. Bankruptcy Court in Richmond, Va., on May 26.

The tension between the company and its landlords echoes battles playing out in other retail bankruptcies. Modell’s Sporting Goods Inc., which filed for bankruptcy just before government mandates forced nonessential retailers to close their doors, won court approval to stop rent payments in March and April and got that extended until the end of May.

New Your Post - May 19, 2020

Pier 1 Imports to close all 540 stores after 58 years

By: Lisa Fickenscher

Pier 1 Imports is calling it quits.

The bankrupt home-goods retailer has asked a court for permission to liquidate its remaining 540 stores once they reopen after coronavirus-driven lockdowns, ending a 58-year legacy of selling glassware, wicker furniture and other home decor.

Pier 1 said it is in talks with several prospective buyers to sell its remaining assets, including its intellectual property and e-commerce business, during a court-supervised auction on July 15. The company has tapped Gordon Brothers to begin liquidating its locations this weekend across the US, according to court documents.

“It is now clear that Pier 1’s future does not involve any brick-and-mortar retail locations,” Pier 1 said in court filings.

The Fort Worth, Texas-based chain — founded in 1962 in San Mateo, Calif., under the moniker Cost Plus Imports — filed for bankruptcy protection in February, pushed to the brink by increasing competition from online home furnishings giant Wayfair, Target and Walmart.

In March, Pier 1 canceled a court-administered auction to sell the company, citing a lack of interest. Lenders explored buying the company but ultimately backed away, forcing Pier 1 to shut down for good, according to court papers.

“This is not the outcome we expected or hoped to achieve,” Robert Riesbeck, Pier 1’s chief executive and chief financial officer, said in a statement.

At the beginning of this year, Pier 1 had 936 stores and had hoped that closing half of them in bankruptcy would be a linchpin to its reorganization. But the coronavirus quashed the company’s ability to restructure, according to court documents.

“This decision follows months of working to identify a buyer who would continue to operate our business going forward,” Riesbeck said. “Unfortunately, the challenging retail environment has been significantly compounded by the profound impact of COVID-19, hindering our ability to secure such a buyer and requiring us to wind down.”

A handful of other big retailers have lately gone bankrupt amid the coronavirus crisis, including J. Crew, Neiman Marcus and JCPenney. Those retailers have all pledged to downsize their chains in a bid to keep them open.

Pier 1 had $358 million in sales for the quarter ended Nov. 30, down 13.3 percent from the comparable period in 2018, while its net loss grew from the prior year to $59 million.

The retailer is already getting a jump on Memorial Day sales, posting a 40 percent off discount on all outdoor furniture and wall decor.

Fannie, Freddie See Jump in Halted Payments on Senior Housing Loans

Government-Run Mortgage Companies Report Another $3 Billion in Multifamily Forbearances

By: Mark Heschmeyer           July 7, 2020                            CoStar News


Fannie Mae and Freddie Mac have reported reduced or suspended payments on another $3 billion in loans, a sign of intensifying distress in the U.S. multifamily industry related to the coronavirus pandemic.

The two government-sponsored enterprises have now offered this forbearance on about $12.2 billion in loans. Fannie Mae added more than 40 loans to its total in June, while Freddie Mac added more than 175.

Senior housing loans led the increase. The largest single loan in forbearance now is tied to a $1 billion portfolio of senior facilities owned by an affiliate of Blackstone Group, the New York-based private equity giant. Blackstone did not provide comment in response to a query from CoStar.

Senior housing has been related to almost 40% of U.S. coronavirus deaths through the end of May, according to the Kaiser Family Foundation, a national nonprofit group focused on healthcare. Efforts by landlords and operators to minimize the introduction and spread of the coronavirus, including stopping in-person tours and limiting move-ins in an elderly population in which the coronavirus symptoms tend to be more severe, caused occupancies to decline, credit agency Fitch Ratings said last month.

Fannie Mae has about $2 billion in loans tied to senior housing properties, representing 44% of the unpaid principal balance of its loans in forbearance. Of Freddie Mac’s $7.9 billion of forborne loans, 10.4% are backed by senior housing.

“The COVID-19 pandemic continues to have a profound economic impact across the country,” Steve Guggenmos, vice president of research and modeling at Freddie Mac, said in a statement. “At present, all states are in some stage of reopening. Nevertheless, unemployment claims remain high and there is much uncertainty about an economic recovery and — for many tenants and borrowers — concerns around how to make their next rent or loan payment.”

Freddie Mac reported 1,189 forborne loans, roughly 5% of all its mortgages that have been securitized for investors. This equates to about $7.9 billion of its unpaid balance. The average loan balance was about $6.6 million.

A high percentage of Freddie Mac’s forborne loans have small balances, at 75% by loan count, but 30% by unpaid loan balance.

Freddie Mac has a program that offers multifamily loans from $1 million to $7.5 million for properties with as few as five units. At smaller apartment complexes, a single tenant experiencing financial stress can have a significant impact on landlords, which explains why so many have requested forbearances, according to Guggenmos.

Fannie Mae reported 273 loans in forbearance totaling about $4.3 billion, or roughly 1.2% of its securitized loan balance. The average loan in forbearance equaled about $15.6 million.

The Blackstone loan was the largest added to the forbearance list by either mortgage company last month. Fannie Mae granted forbearance on a $536 million loan backed by 60 Brookdale Senior Living facilities totaling about 5,540 units. Blackstone and Brookdale acquired the facilities in a joint venture in March 2017. The loan is in forbearance until the end of August.

Blackstone fully intends to meet its interest obligations on the loan, a person familiar with the forebearance told CoStar. Senior housing makes up less than 1% of Blackstone's global real estate holdings.

Beginning in April, Fannie Mae and Freddie Mac started granting forbearance relief to qualifying multifamily borrowers to defer up to three months of mortgage payments. Those agreements are now coming to an end, even though the national number of coronavirus cases continues to increase. Last week, the federal government agreed to give borrowers the option to extend forbearances another three months.