TAILWINDS & HEADWINDS
Tailwind: Hotel guests are giving owners room to raise rates, and demand set another weekly record.
Headwind: Apartment owners face more competition for tenants as deliveries outpace absorption.
Tenant demand is backing up pricing power in one sector and testing it in another.
COMMERCIAL CREDIT
01
Arbor suspends dividend after $85 million quarterly loss
Arbor Realty Trust suspended its common dividend Friday to preserve capital after reporting an $85.4 million third-quarter net loss. Nonperforming loans increased to $647.6 million, from $428.8 million in June.
So what: Loan problems have now reached the lender’s own payouts. If you’re an apartment owner leaning on bridge debt, check your lender’s appetite for extensions early. A lender protecting its capital may ask you to put in more of yours.
MULTIFAMILY FUNDAMENTALS
02
Apartment vacancy rises to 4.7% as deliveries outpace demand
U.S. apartment vacancy rose to 4.7% in the third quarter, with completions exceeding net absorption, according to CBRE’s Friday report. Average rents increased 1% year over year, while construction completions fell 11%.
So what: Less construction won’t rescue apartment rents immediately. Owners still have newly delivered units competing for tenants, so occupancy and concessions deserve more weight than a shrinking future pipeline in next year’s budget.
HOTEL DEMAND
03
Hotel RevPAR climbs 12.6% as demand sets a record
U.S. hotel revenue per available room increased 12.6% year over year during the week ending October 24, STR reported Friday. Room demand rose 5.2%, reaching a record for that calendar week, while average daily rates increased 7.4%.
So what: Hotels are getting help from both more guests and higher room rates. That gives owners a stronger revenue base heading into budget season. Keep event-driven spikes separate from repeatable demand when setting next year’s rate assumptions.
CMBS & REFINANCING
04
Maturity defaults drive 64% of newly distressed CMBS debt
KBRA reported a 7.7% delinquency rate across its rated U.S. private-label CMBS universe in October, little changed from September. Of $973.6 million in newly distressed loans, 64% involved imminent or actual maturity defaults.
So what: A flat delinquency rate can hide trouble at the refinancing table. For owners approaching maturity, making the monthly payment is only half the job; replacement debt still has to cover the balance coming due.
INDUSTRIAL FINANCING
05
Seagis secures $200 million loan on Amazon warehouse
Seagis received a $200 million loan from Northwestern Mutual on its fully Amazon-occupied Edison, New Jersey, warehouse, Commercial Property Executive reported Friday using Yardi Matrix information. The 923,000-square-foot property received a 10-year loan; the report did not disclose its rate or closing date.
So what: Lenders will still go long on an industrial building with a strong tenant and a proven logistics location. Borrowers should weigh the lender as well as the rate, since a longer term takes a refinancing deadline off the business plan.
RETAIL LEASING
06
Federal Realty signs 532,000 square feet at 14% higher rents
Federal Realty signed approximately 532,000 square feet of comparable retail leases in the third quarter at cash rents 14% above prior leases. Its adjusted comparable-property operating income increased 4%, according to Friday’s results.
So what: Federal Realty is raising income at lease expiration without adding space. For buyers, the opportunity is in the rent roll: below-market leases can deliver growth without another jump in market rents.
WATCH NEXT
Tuesday, Nov. 3, at 9 a.m. Central: the September job-openings report. Stronger hiring would support the case for business expansion, and weaker hiring would suggest companies are protecting flexibility. For office and industrial landlords, actual hires say more about expansion than unfilled postings do.
