S&P Global Market Intelligence offers our top picks of real estate news stories published throughout the week.
More than $38 billion of office buildings in the US face defaults, foreclosures or other forms of distress, the highest since the fourth quarter of 2012, as the sector reels from high interest rates and low demand, The Wall Street Journal reported.
High interest rates are a problem for office owners as they typically borrow at least half of a building's cost. Now, hopes for a rate cut from the Federal Reserve have dissipated as high inflation lingered.
Demand for offices has plunged during and after the pandemic due to work-from-home setups, which led tenants to reconsider their need for office space.
Owners are now paying back their loans at a much slower rate. According to Moody's, the payoff rate of office loans converted into commercial-mortgage-backed securities fell to 35% in 2023 from 90% in 2021. The latest figure was the worst payoff rate in the history of the data, which began 2007, according to the report.
CHART OF THE WEEK: US REITs' median discount to NAV up in April
⮞ Publicly listed US equity real estate investment trusts traded at a median 19.1% discount to their consensus net asset value (NAV) per share estimates as of April 30, up from a median discount of 15% as of March-end.
⮞ The regional mall sector saw the biggest valuation decline in April, with its median discount to NAV shifting to 14.8% from 0.3% median discount the month prior.
⮞ The only REIT sector that closed April at a median premium to NAV was the datacenter sector, at 0.5%, although it went down from the 10.3% median premium as of March 31.
Hotel focus
– VICI Properties Inc. is investing up to $700 million in The Venetian Resort Las Vegas through the firm's Partner Property Growth Fund. The investment will comprise $400 million to be drawn in 2024 and an option to draw $300 million in whole or in part until 2026.
– Host Hotels & Resorts Inc. acquired the 1 Hotel Nashville and the nearby Embassy Suites in Nashville, Tenn. The transaction is valued at over $500 million and the sellers include an affiliate of Starwood Capital Group Management LLC, Bloomberg News reported, citing people familiar with the matter.
Property exchange
– Nuveen Real Estate is looking to offload a Miami office building that is expected to fetch over half a billion dollars, Bloomberg reported, citing Jones Lang LaSalle Inc., which markets the property. The tower at the 701 Brickell houses tenants such as Bank of America Corp. and Apollo Global Management Inc., the report noted.
US hotel performance
The average daily rate (ADR) and revenue per available (RevPAR) room of US hotels were down during the week ended April 27, STR reported, citing data from CoStar, which provides information and analytics on property markets.
ADR was $154.44, down 1.3% from the comparable week in 2023. RevPAR was 2.5% lower at $101.42. Occupancy fell 1.2% to 65.7% during the period.
Among the top 25 markets, Philadelphia reported the only double-digit increase in occupancy. Detroit, host of the NFL Draft, recorded the highest jump in both ADR and RevPAR.
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REIT Replay: REIT shares rally during week ended April 26