A report from Bloomberg. “The subprime mortgage-backed bond may be dead in America a decade after it helped trigger the global financial crisis, but a security with some of the same high-risk characteristics is starting to take off. It’s called the non-qualified mortgage — basically a loan granted to borrowers whose checkered financial record made them ineligible for conventional mortgages.”
“This surge in issuance of non-QM bonds, as they’re called, comes just as some initial indications of delinquency rates on the loans are starting to emerge. The short answer: They’re high. About 3% to 5% in some bonds, according to Barclays Plc.”
“Fund managers’ willingness to plow money into these securities shows how the intense suspicion that met mortgage bonds after the housing bubble burst last decade is starting to slowly fade. ‘It’s obviously disturbing this late in the cycle to see originations for these loans at the kind of level they’ve kicked up to,’ said Daniel Alpert, managing partner at Westwood Capital. ‘The housing market is not quite ready for a big infusion of this product.’”
The Epoch Times on California. “Beijing-based Oceanwide Holdings’ $1 billion trophy development across from the world famous Staples Center in Los Angeles has shut down due to a barrage of lawsuits by unpaid contractors. Just two years after city approval, the famed 49-story central tower was set to include 184-room five star Park Hyatt hotel rooms and 164 condos; flanked by two 40-story towers featuring 504 super-luxury condos; and connected by about 200,000 square feet of high-end retail shopping.”
“But in January 2019, Oceanwide Holdings was targeted in a slew of FBI subpoenas regarding potential bribery, extortion, money laundering, and conspiracy involving LA City Council member Jose Huizar. Other Chinese real estate developers in Los Angeles receiving subpoenas included Shenzhen New World Group that owns the downtown Los Angeles Marriott and the Sheraton Universal hotels, and Shanghai-based Greenland USA that owns the Metropolis Los Angeles and Atlantic Yards in New York.”
“DCBID trumpeted that market-rate apartments in the LA downtown core increased 10-fold over the last two decades, from 2,426 to 27,616 at the start of this year’s third quarter. But with another 3,296 rental units under construction, the LA Weekly reported rents fell slightly in September to $2,665 per unit. The downtowns’ first decline since 2011 was blamed on a 12 percent rental vacancy rate and a looming new supply from Oceanwide and the other Chinese developers with projects at various stages of completion.”
“A Beijing spokesman told Bloomberg its LA Plaza project is still under construction and that the company still has access to development loans. But the Oceanwide Plaza subcontractors are contesting the authenticity of a ‘suspicious’ $325 million deed of trust on Oceanwide Plaza that is held by a group representing Chinese EB-5 visa investors that provided green card work permits for creating U.S. jobs.”
The Real Deal on New York. “As WeWork attempts to scrub its image clean of Adam Neumann, some of the ousted CEO’s transactions serve as a bitter reminder of the company’s former culture of excess. One is WeWork’s $850 million purchase of the Lord & Taylor building. Six current and former WeWork employees familiar with the acquisition told The Real Deal that WeWork overpaid, perhaps by as much as $200 million. Moreover, some said, the deal was rife with potential conflicts of interest.”
“A particular concern was the role of Steve Langman, a WeWork board member who held interests in the buyer, the seller and the tenant in the Midtown building before the sale closed. ‘It was an above-market purchase price, and we had to sign an above-market lease to save Langman’s ass and save the deal,’ said one former WeWork executive. A current employee familiar with the matter said Neumann drummed up support for the acquisition. ‘The rationale internally was, this was a crown jewel.’”
“‘They overpaid by $150 million to $200 million,’ said one person close to the matter. A current WeWork executive said, ‘We clearly overpaid, and it was no secret.’”
From Crain’s New York Business. “A German real estate investor will likely lose tens of millions of dollars on a retail space it has owned for the past five years near Times Square – offering the latest glimpse of distress in the market for brick and mortar stores in the city. Munich-based GLL Real Estate Partners purchased the roughly 17,000 square foot space at 140 W. 42nd St. in the base of a Hilton Garden Hotel in 2014 for about $85 million when the outlook for retail was far rosier.”
“Now the investment firm has hired a sales team from the brokerage Meridian Capital Group to market and sell the space, which includes the basement, ground, second and third floors, for roughly $50 million – what would amount to a $35 million loss.”
“GLL purchased the retail space at a moment when its location along West 42nd Street between Times Square and Bryant Park seemed ascendant. GLL is one of several foreign based real estate investors who made large real estate acquisitions in the city in recent years, only to lose millions of dollars.”
From KMBC. “The owners of one of Kansas City’s largest low-income housing companie are experiencing financial trouble, multiple employees told KMBC 9 Investigates. T.E.H. Realty owners did not meet payroll, this week, and employees fear they may lose their jobs, according to the employees who spoke to KMBC on the condition of anonymity.”
“T.E.H. Realty, based in Reading, Pennsylvania, with several connections to Israel, has faced a barrage of complaints from residents and increasing scrutiny from government officials after multiple KMBC 9News investigations into critical fire-code violations, sewage backups and potential mold in apartments.”
“The employees said management called properties in Kansas City, St. Louis, Indianapolis, and Tulsa, Oklahoma, this week, to inform them they had to delay payroll by a week. T.E.H. Realty investors own 11 low-income properties around the Kansas City metro with 1,600 units. The company owns at least 26 complexes with more than 5,700 apartment units across the country.”
“T.E.H. is currently facing a foreclosure lawsuit from federal mortgage backer Fannie Mae at the Crestwood Apartments in Kansas City, Kansas. The company is one of Kansas City’s largest evictors, according to a tenants’ rights group, KC Tenants.”