A report from Crain’s Chicago Business in Illinois. “If you are in the hunt for distressed apartments on Chicago’s South Side, you have a lot of choices. You’ll have even more in the coming months. Dozens of buildings in neighborhoods like South Shore and Washington Park are hitting the market, the aftermath of an alleged $135 million Ponzi scheme by EquityBuild, their Florida-based owner. Another landlord, the Better Housing Foundation, could flush about 1,000 more apartments into the market after the nonprofit defaulted on more than $84 million in bonds it used to pay for them.”
“While their demise creates opportunity for investors who seek out distressed real estate, the story is more complicated than that. It also produces collateral damage, potentially undermining neighborhood stability as buildings deteriorate and property values fall. The city has cited Better Housing Foundation buildings for 6,002 code violations. Most of its apartments sit empty, unavailable to residents who need affordable housing.”
The Hartford Courant in Connecticut. “A New York real estate owner and developer, which has established a major presence in downtown Hartford in the past five years, has purchased the historic, yet decaying ‘Flat Iron’ building on the northern edge of downtown. Shelbourne Global Solutions LLC, of Brooklyn, N.Y., acquired the building at 529-543 Ann Uccello St. for $300,000 and a neighboring lot at 525 Ann Uccello St. for $100,000, city records show.”
“Shelbourne’s acquisition follows a recent, failed plan for new apartments in the building by a development partnership from Brooklyn, N.Y. Those plans by Brian Corriette and his business partner, Omar Wala, who operated under the name The ZAACO Group, failed to get off the ground, They lost the building in a foreclosure in 2018, court documents show.”
The South Florida Business Journal. “A pair of apartment buildings in Bay Harbor Islands have been targeted in a $5.1 million foreclosure lawsuit. Avatar Capital Finance filed the lawsuit against Bal Harbour Investments LLC, along with loan guarantors Yoni Ramras Nula Shala and Jack Saljanin. It concerns the apartment buildings at 1080 93rd St. and 1060 95th St.”
“According to the Jan. 13 complaint, Avatar Capital provided the mortgage to Bal Harbour Investments in February 2019. The borrower allegedly missed payments starting Oct. 2, 2019, and owes $5.1 million in principal, plus interest and fees. The four-story apartment building at 1080 93rd St. totals 30,017 square feet with 24 units. It was built on the 22,500-square-foot site in 1965. It last traded for $4.1 million in 2008. In 2016, Executive National Bank filed a $1.9 million foreclosure lawsuit against Bal Harbour Investments. That lawsuit was voluntarily dismissed in 2019 and the loan was declared satisfied shortly after the new mortgage was obtained from Avatar Capital Finance.”
The Detroit Free Press in Michigan. “A failed luxury condominium development in downtown Birmingham has a new owner and will be converted into one-bedroom apartments. The apartment conversion represents a dramatic change for the still-new building. The Forefront opened in 2017 on the site of a former art supply store, offering 10 condos with prices starting at $1.7 million and sizes ranging from 2,500 square feet to 5,100 square feet. But only two of those condos sold.”
“The building fell into receivership in December 2018 after the project’s original developer, Joseph (Joey) Jonna of Jonna Luxury Homes, defaulted on a $7.3 million construction loan.”
The Express News in Texas. “A San Antonio bankruptcy judge Friday OK’d a plan for a Los Angeles nonprofit to buy four complexes here as part of a deal valued at almost $42 million. The deal includes a total of 770 apartment units. The sale of the complexes was part of the reorganization plan presented by partnerships affiliated with San Antonio’s Terravista Corp. The partnerships entered bankruptcy in May to stop foreclosure proceedings by the lender at the time. A Terravista official had said a dispute with the lender erupted while the company was attempting to refinance the loans on the properties.”
From Bisnow. “The steady aging of America’s population brought many developers into the senior housing sector after the end of the recession, and fueled a boom in new construction. But that activity slacked off throughout much of 2019, and in the coming year closely watched occupancy figures will show whether the slowdown will last, or was just a slight hiccup. ‘There has been a concern that many markets are oversupplied, and investors and lenders, both the debt and equity sides, are aware of that, so there is a lot more caution,’ National Investment Center for Seniors Housing & Care Chief Economist Beth Burnham Mace said.”
From Skilled Nursing News. “As nursing homes’ operating margins dwindle due to insufficient Medicaid reimbursements, one state task force is encouraging lower performing facilities to simply shut down — and make more room for the remaining properties to grab a piece of a shrinking pie. The Nursing Facility Task Force of Massachusetts released a report declaring that the state is oversaturated with smaller nursing homes unable to properly care for residents, and suggested that they should close so that the fuller, better equipped facilities could better utilize limited available resources.”
“Among the group’s policy goals was a call to reduce the state’s bed glut by targeting ‘chronically low quality facilities…with negative median total margins of -6.2% compared to the industry’s median total margin of -3.2%…[which is] not sustainable,’ according to a task force study presented on January 31. At the heart of the task force’s argument is that Massachusetts simply has too many nursing home beds: Out of the 366 nursing homes that contract with MassHealth, the state’s Medicaid program, 16% remain in business with less than 80% occupancy.”
“‘One in six nursing homes now operates with occupancy under 80%; facilities with low occupancy rates are not sustainable,’ the task force stated.”
From Commercial Property Executive. “As labor slows down, so will the development of self storage properties in 2020, according to the report. In 2018, the industry saw a record 67 million square feet of storage space delivered before slowing down in 2019. And developers weren’t just building from the ground-up, as conversions of big-box retail spaces into self storage were a prominent trend. Overall, self storage development will likely continue to dip in 2020 due to the previous years’ strong new-supply pipeline. With so many projects in the works, the self storage market will likely have to adjust by lowering rents due to competition and oversupply, according to the report.”
From KTVU in California. “Despite a narrative that housing construction in the Bay Area is going gangbusters, the number of units built last year was nearly 10,000 shy of the year before, according to preliminary data from the Construction Industry Research Board and assembled Friday by Bay City News Service. In San Francisco, the number of units built fell by 1,841, the most behind Santa Clara County and Alameda County. The drop in Santa Clara County was 3,333 and in Alameda County 2,455.”
“Dan Dunmoyer, CEO of the California Building Industry Association said that statewide, 7 to 8 percent fewer units of housing were constructed in 2019 than in 2018. It’s the first year the numbers have been down since the Great Recession, he said. ‘It’s interesting and profound,’ Dunmoyer said.”
From Mansion Global on New York. “Basketball star Carmelo Anthony is asking $12.85 million for his New York City condo, a five-bedroom spread overlooking Manhattan’s High Line park. Mr. Anthony has owned the Chelsea home since 2015, when he bought the new construction condo for about $11 million, according to listing agent Michael Graves. Mr. Graves said he believes the apartment is priced to sell, and that his client is aware of the challenging market in Chelsea, which has an oversupply of new condos. ‘He understands that, to be successful, you have to price right,’ said Mr. Graves.”
From Reuters. “Asset management firm T. Rowe Price Group Inc has called its investment in WeWork a ‘debacle’ that caused the firm ‘outsized headaches and disappointments’ and left it holding shares worth just a fraction of their original value. In a rare public comment on its experience with a specific investment, the U.S. fund management group said in a Feb. 12 filing that it had invested in the startup in 2014 on the premise that WeWork’s management would focus on developing a more sustainable business strategy and slow its pace of growth.”
“Among the world’s most valuable startups a year ago, New York-based WeWork abandoned its attempt to launch on the stock market last September after seeing its valuation collapse due to concerns over its mounting losses and leadership. ‘They (WeWork’s management) took our advice for a few months, but new investors soon arrived who convinced management to put its foot back on the accelerator,’ T. Rowe, which manages more than $1.2 trillion in assets, said in the report.”
“‘While it’s possible that WeWork’s new management will improve operations somewhat, we are ready to declare this a terrible investment,’ T.Rowe said.”