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Basis Points September 2nd – The Waiting Game

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What I’m Reading

Waiting Game: Although many tenants are not paying rent and many landlords are not paying their mortgages, the floodgates for distressed opportunities have not yet opened, largely because of eviction and foreclosure moratoriums.  Deal flow will start once these moratoriums lift and the first shoe to drop will likely be retail.  Globe Street

Hitting a Ceiling: High frequency economic indicators like TSA passenger data, restaurant reservations and mass transit volume have mostly plateaued or are declining again. Calculated Risk

Emptied Out: Parking garage operators in NYC operate on month-to-month leases and typically see a decline in occupancy of around 5% in August as residents go on vacation.  However this year, occupancy is down as much as 60% in some parts of the city, giving remaining tenants a lot of bargaining power to push back on rental rates. (h/t Mike Deermount) Wall Street Journal See Also: The exodus of New York residents has led to bidding wars on pretty much any available homes in suburban New Jersey, Long Island and Connecticut.  New York Times

Danger Zone: In a recent study, Trepp reported that the percentage of loans that are 30 or more days delinquent was 23.4 percent as of July. That’s the highest percentage on record, and an incredible 1,746 percent increase from July 2019, when only 1.34 percent of hotel loans were more than 30 days past due. Mortgage Professional America See Also: Shares of luxury operator Host Hotels fell after the company said it expects the COVID-19 pandemic to have a “material negative impact” on financial results “well after” restrictive measures to contain the outbreak have been lifted. MarketWatch

Discount Dining: The continuing pandemic fallout has LA’s restaurant real estate market seeing a 20% drop in rental rates.  Private landlords have been more willing to drop their asking rates to make a deal while institutional owners haven’t budged from their pre-pandemic levels.  Eater

Free Fallin’: Zumper’s national August apartment rent report is showing double-digit year-over-year decreases in San Francisco, San Jose, NYC, and DC with no signs of bottoming out. Zumper

Chart of the Day

The blue line below represents Real Capital Analytics’ property price index for NYC commercial buildings.  The orange line is the price adjustments necessary today to keep deal volume constant given historical trends in the supply and demand for real estate investments as calculated by the team at the MIT Center for Real Estate Price Dynamics Platform.  The relationship between these two is usually quite consistent.  Something has to give…

Source: Real Capital Analytics

WTF

Frowned Upon: An Oklahoma man arrested for going through a Taco Bell drive-thru naked told police that all his clothes were in the wash and that he was unaware such nude motoring was illegal.  The Smoking Gun

Tis the Season: A 74-year-old landlord shoved a female tenant and then stole a Donald Trump flag that was displayed in the victim’s yard because Florida. The Smoking Gun

Basis Points – A candid look at the economy, real estate, and other things sometimes related.

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