What I’m Reading
Storm Clouds: The apartment sector has been a bright spot during COVID-19 but that is starting to change. Enhanced eviction protection, lower rent collections and unprecedented declines in asking rent in some urban markets are taking their toll on apartment owners. During the pandemic, the share of total apartment debt that banks place into their highest-risk categories has ballooned to 16.9% from 4.6%, according to a December report from Trepp.
To be clear, the apartment market has decoupled big time. The vast majority of the issues are in coastal gateway markets while the sunbelt and mountain west are still strong. Also, I anticipate that the new (and proposed) federal support packages will help some. All that being said, this is still a concerning trend. Wall Street Journal
Win/Win: Ghost kitchens are teaming up with empty hotels, providing a cheap startup workspace for the former and much-needed lease revenue for the latter. New York Times
Man Down: Co-living firm Quarters – which billed itself as “the WeWork of co-living” has filed for bankruptcy. Expect to see more of this sort of thing in 2021 as niche density plays finally throw in the towel. The Real Deal
Kicking the Can: Some 2.7 million homeowners are still pausing their monthly mortgage bills, and more might need help in the coming months. As I’ve written multiple times here in the past, this probably doesn’t end in a wave of foreclosures. There is simply too much equity and not enough leverage for that. Rather, this trend plays right into the hands of the big SFR platforms and their sale-leaseback plans. Wall Street Journal
Rising from the Ashes: The conversion of underperforming suburban malls to “town centers” with a mix of uses could ultimately lead to a suburban restaurant renaissance. Restaurant Finance Monitor
Chart of the Day
Property sectors continue to decouple.
Source: Real Capital Analytics
WTF
Catastrophe: A cat’s birthday party led to more than 15 people contracting Covid-19. This story is destined to become the historical artifact that explains why humans went extinct to future species that inhabit earth. New Zealand Herald
Heel Turn: A man who had been recently named “Paramedic of the Year” helped a supervisor steal COVID-19 vaccines meant for first responders because Florida. Associated Press
Basis Points – A candid look at the economy, real estate, and other things sometimes related.
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