The Next Distressed Asset Class
Commercial Observer
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The party might be over for many investors who jumped into the multifamily space amid crushing demand for housing right before and in the early days of the COVID-19 pandemic. Read on for the big reason why. And, speaking of multifamily, today also brings details of a nine-figure deal in Washington, D.C.
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— Tom Acitelli, Deputy Editor
Multifamily Distress Next Headwind for CRE, Short Seller Says
The commercial real estate industry, still hurting from battle wounds delivered to the office sector during the COVID-19 pandemic, may soon be facing more trouble. Short seller Carson Block, CEO of Muddy Waters Capital, told Bloomberg that the source of the trouble is the many loans tied to the acquisition of apartment complexes with cheap floating-rate debt prior to 2022, after interest rates were cut to near zero at the start of the COVID-19 pandemic. The Federal Reserve aggressively raised interest rates to their highest level in 22 years from March 2022 to July 2023 before cutting rates by 75 basis points late this year. “A lot of multi-unit residential in the U.S. — particularly in the Sun Belt — is in trouble,” Block told Bloomberg in a story posted Thursday morning. “That’s the shoe that hasn’t really dropped yet, but that we think will.”
Japanese REIT Buys Part of D.C. Mixed-Use District for $279M
The developers behind the massive mixed-use redevelopment of the former Fannie Mae headquarters in Washington, D.C., have sold a chunk of the campus to a Japanese real estate investment trust. Roadside Development and North America Sekisui House (NASH) sold four of the six buildings at the 1.8 million-square-foot City Ridge to latter’s sponsored REIT, Sekisui House REIT, for $279 million. The deal included the 157-unit The Branches North and South, the 107-unit The Coterie, and the 86-unit Botanica, for a total of 350 units across roughly 330,000 square feet. The deal is equal to about $797,142 per unit. As of the end of July, the properties were about 91 percent leased, the REIT said in an announcement of the pending sale in August. The deal for City Ridge closed earlier this week, according to the Business Journals.
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