A report from the Norman Transcript in Oklahoma. “The developer that partnered with the University of Oklahoma to construct Cross Village is suing the university for more than $750 million, alleging that OU misled Cross investors and breached its contract. Provident Oklahoma Education Resources filed suit against the university Monday in Cleveland County District Court, claiming that OU had a ‘costly but hopelessly flawed vision’ for Cross Village.”
“The Monday suit claims that while Provident and investors went into bond debt to fund the $250 million Cross project, OU misrepresented the demand for housing at Cross and the profit the development could produce. While the units OU wanted would have been suited to freshman students, Provident said, there was little upperclassmen demand for apartments without in-unit kitchens. The OU Daily reported that as of August 2019, only 34.7% of Cross’ 1,200 beds were occupied as the apartments’ rent rates were on par with those of other luxury housing developments in Norman.”
The Wall Street Journal. “Planned as a luxury option for students who might otherwise live off campus, Cross Village has been plagued by low occupancy rates since opening last year. In July, the university declined to renew the parking and commercial-space leases at the Norman, Okla., dormitories after a year, saying they weren’t providing enough value to justify the cost.”
“The lease terminations deprived the project of roughly one-third of its total revenue, according to the complaint. Some amenities at Cross Village have been closed since the lease, removing some of the dining options and other conveniences that made the facility attractive to students, who don’t have kitchens in their suites.”
“The trustee for bondholders, UMB Bank NA, said in September that the university would send a negative message to the municipal market by refusing to renew the leases. The university said it had ‘simply exercised its explicitly contractual rights’ to walk away from obligations that didn’t make economic sense.”
From Globe St on California. “The Los Angeles apartment market has a severe supply-demand imbalance, which has been a primary driver of record-low multifamily vacancy rates and rising rents. That trend, however, might be shifting. The vacancy rate in Downtown Los Angeles, for example, increased to 9.2% in the third quarter, according to research from NAI Capital.”
From Forbes on New York. “The six years following 2009 saw prices for New York real estate accelerating rapidly, leading to a 2015 peak; values soared to numbers at or even above their 2008 pinnacles. Then, as the rest of the national market continued to grow, albeit at a more moderate pace, ours faltered.”
“Buyers became more cautious as 2015 moved into 2016, with more and more new condo inventory flooding the marketplace, the product of development plans initiated several years earlier when the market indicators seemed so strong. The foreign buyers on whom so many developers were counting, especially the Russians and the Chinese, slowed their purchasing (in fact, with the Russians, their commitment to our market literally fell off a cliff; they stopped buying altogether).”
“Today, my analysis of recent sales finds them equivalent in price to those consummated in 2012. I believe our market has reached a floor, and that prices will stabilize at or near this level. That said, it will take time for many sellers to adjust their expectations to acknowledge the fact that prices have actually reached this level.”
The Gulf Times on New York. “For the world’s wealthiest, paying cash for a lavish Manhattan apartment was the ultimate status symbol. These days, even those buyers would rather get a mortgage. Of all $5mn-plus home purchases in the borough, the share made with cash tumbled to 44% in the third quarter, according to appraiser Miller Samuel Inc and brokerage Douglas Elliman Real Estate. That’s down from 80% a year earlier and the lowest rate since the firms began tracking the data in 2015.”
“‘In a rising market, cash has more power, but in a stable or falling market, it’s not as important,’ said Stephen Kliegerman, president of Halstead Property Development Marketing.”
From Senior Housing News. “Pegasus Senior Living has made progress turning around the nearly three dozen former Brookdale Senior Living properties it took over last year. All of this is aimed at positioning Pegasus to potentially take on other turnarounds while seizing additional opportunities down the road, Co-Founder and current Vice Chair Chris Hollister told Senior Housing News.”
“The issue is often complicated by new senior housing players like multifamily or commercial real estate firms which, while well-funded, lack an operating platform, he added. That’s not to say there aren’t some that are successful with this approach, it’s just that there are many more that aren’t.”
“‘They’re reading all the trends, and they maybe they go to NIC, but they don’t really know enough people to get the full story of how much people are hurting,’ Hollister said.”
“In surveying the senior living industry today, Hollister sees some similarities to two times when the senior living industry experienced a downturn: the first being the early 2000s, and the other being right after the Great Recession in 2008. ‘History doesn’t repeat itself, but it rhymes,’ Hollister said. ‘I do think we’re overbuilt, clearly, in most of the major markets.’”
From Reuters. “Thirteen prominent banks and financial services companies agreed to pay $337 million to resolve claims by investors that they conspired to rig prices of bonds issued by mortgage companies Fannie Mae and Freddie Mac for a decade. The preliminary settlements filed late Monday night in federal court in Manhattan require a judge’s approval, and would conclude private nationwide antitrust litigation brought against 16 defendants, with settlements totaling $386.5 million.”
“Investors including Pennsylvania Treasurer Joe Torsella had accused the defendants of exploiting their market dominance to overcharge for Fannie Mae and Freddie Mac bonds from Jan. 1, 2009, to Jan. 1, 2019, and keep more profit for themselves. The civil case began after a published report said the U.S. Department of Justice had opened a criminal price-fixing probe related to the bonds.”
“According to an amended complaint, the 16 defendants underwrote $3.97 trillion, or 77.2%, of Fannie Mae and Freddie Mac bonds from Jan. 1, 2009, to Jan. 1, 2016. Fannie Mae and Freddie Mac guarantee more than half of U.S. mortgages.”