Real Estate Week in Review for July 8. 2023
June was the hottest month ever recorded in human history, scorching parts of the U.S. and Mexico.
The hot weather is an apt metaphor for investors that are also being torched, only by market conditions, not the effects of climate change.
Tides Equities, which acquired a $7 billion multifamily portfolio by taking out floating-rate loans at extremely low interest, is really feeling the heat. When the Fed hiked rates, the firm’s debt service ballooned, where now 20 percent of its portfolio faces distress, co-founder Ryan Andrade told investors in a letter. Without a capital infusion, Andrade warned, properties would not have “sufficient holding power.”
At least $1.5 billion of the firm’s floating-rate loans mature in the next two and a half years.
Other investors that are also exposed to the fallout of the current market include GVA Investments, Rise 48, ZMR Capital and Nitya Capital.
Meanwhile, State Street Corporation is delinquent on $81 million in loans tied to an office complex in Irvine and failed to pay off the loan in full when it came due in March.
The Boston-based investment manager holds two loans on the 893,000-square-foot complex at 18101 Von Karman Avenue — one for $45 million and the other for $36 million — that are in default, according to data from Trepp.
In Manhattan, commercial office investors are also feeling the heat because of how cold things have gotten.
Indeed, available office space reached an all-time high in the second quarter, with 70.3 million square feet ready for leasing. That left nearly 20 percent of office space available, the highest since the pandemic began, according to a report from Savills.
It’s another sign of how much the office market is struggling and the extent to which tenants have the upper hand in negotiating leases. Leasing activity fell 12 percent in the first half of the year from the same period in 2022, and the pace in the second quarter was 25 percent lower than the pre-pandemic average for April through June.
In Florida, a couple of politicians are finding either themselves or their policies in hot water.
Miami Mayor Francis Suarez’s annual financial disclosure form failed to reveal his dealings with Coral Gables-based developer Rishi Kapoor’s firm.
Every year in early July, municipal, county and state elected officials are required by Florida law to file what’s known as a “statement of financial interests” that lists their assets and sources of income for the preceding year. Suarez submitted his form for 2022 on July 1, this year’s deadline.
Suarez’s net worth more than doubled to $3.4 million compared to 2021, the disclosure shows.
It was previously revealed that the mayor, who is also a longshot candidate for the GOP presidential nomination, was being paid $10,000 a month as a consultant by a subsidiary of Kapoor’s development firm Location Ventures. Suarez earned at least $170,000 during a two-year period beginning in late 2021, according to the Miami Herald.
Finally, Gov. Ron DeSantis’ ongoing war with just about everyone in the state has caught the attention of the Department of Justice, which filed a statement of interest in federal court last week, saying Senate Bill 264, violates the Fair Housing Act and the 14th Amendment’s Equal Protection Clause. DeSantis signed the bill — which limits foreign ownership, particularly Chinese nationals, of real estate in the state — into law in May and it went into effect July 1.
DeSantis, who is running for the GOP nomination for president, touted the law earlier this year as a way to put Florida in the forefront of U.S. national security, with China posing a massive risk to the country.
