A Common Denominator In These Financial Calamities Is Timing

A report from Socket Site in California. “The sale of 765 Market Street#30C has now quietly closed escrow with a contract price of $1.2 million, down 29.4 percent from its 2017 value and an even greater loss when accounting for the cost of the remodeling.”

The New York Post. “A 25-foot-wide mansion built in 1899 is now in contract. It was last asking $12.2 million — which is less than what the sellers paid in 2015. The limestone residence at 17 Prospect Park West has 6,500 square feet of space. Jennifer Connelly and her husband bought the home for $3.7 million in 2003 and sold it for $8.45 million in 2008. It then sold for $12.4 million to a family trust, who first listed it for $12.9 million in 2018.”

From Bisnow New York. “One of the largest hotels in New York City has traded at a massive loss, an ominous sign for the owners of Manhattan’s big hospitality properties. Host Hotels & Resorts has sold its Sheraton New York Times Square hotel for $365M, far less than the $738M it paid for the 1,780-room property in 2006. Host was struggling to sell the property at the price it purchased the hotel for long before the pandemic, asking for $550M in 2018, according to REA. In 2020, Host admitted that the Times Square Sheraton’s value had sunk even lower, to $495M. The Times Square Sheraton sale adds Host to the list of several NYC hotel owners to sell their properties at a discount.”

The Real Deal on Texas. “After a long-fought legal battle, the original developer of a plagued Wade Park project had his claims of fraud dismissed by a federal judge, according to the Dallas Business Journal. A New York federal court on Friday dismissed fraud and other claims against the lenders with prejudice, meaning the same claim cannot be refiled. The project formerly called Wade Park or ‘Project X’ was a $2 billion, 112-acre development at the corner of the Dallas North Tollway and Lebanon Road.”

“Thomas had laid out plans in early 2017 for one of the largest mixed-use projects in the Dallas-Fort Worth area, complete with a high-rise office, an entertainment venue, 1 million square feet of high-end retail space, roughly 2,400 luxury residential housing units, and five hotels. Around this time, Gamma made a four-month $82.75 million bridge loan to the Wade Park developer. However, construction was completely halted by the summer of 2017, leaving just a giant pit and two partially constructed buildings in its place. It was repeatedly posted and removed from foreclosure listings throughout 2018, and thus never made it to auction.”

The Globe and Mail in Canada. “Action in the Toronto-area real estate market is a little more sporadic in early March as some pockets and price ranges remain high-octane while others are cooling off. Anita Springate-Renaud, broker with Engel & Volkers in Toronto also sees plenty of unrealistic sellers. ‘A lot of sellers say, ‘the market is crazy, I’m just going to put my house up at a ridiculous price.’ Buyers are savvy. You’re just going to end up shooting yourself in the foot.’ Sellers need to understand that the market averages do not apply to every property, she adds. ‘You won’t always get five offers – you might only get two – some only get one.'”

From The Tribune. “A prominent accountant has urged Bahamian financial institutions not to leave clients ‘holding the bag’ by selling them repossessed properties in unapproved subdivisions. Kendrick Christie, president of the Association of Fraud Examiners (ACFE) Bahamas chapter, told Tribune Business had had personally ‘suffered damage’ when he was unable to sell land previously acquired from a bank because the area it was located in lacked the necessary approvals under the Planning and Subdivisions Act.”

“Mr Christie revealed to this newspaper, while not naming the bank involved. ‘I can speak from experience. The reason I know about this is that I attempted to sell a piece of land that I bought from the bank, and could not sell it.’ While asserting that he was not seeing ‘to attack the banks,’ Mr Christie added that too often purchasers were left ‘holding the bag’ in such situations as they lacked the necessary financing to resolve the subdivision/title issues or seek potential legal recourse in a court system where cases were likely to be tied up for years.”

The Sydney Morning Herald in Australia. More units than houses sold under the hammer in almost all major cities in February in another sign the housing boom is losing steam. Affordability constraints and the return of investors meant clearance rates for units were higher than houses in Sydney, Brisbane, Adelaide and Canberra, according to Domain’s February auction report.”

“Domain’s chief of research and economics Nicola Powell said it was a turning point in the Sydney property market in particular. ‘What we’re seeing here is a solid data point to mark a turning point within the Sydney market,’ she said. ‘Not only have we got higher levels of homes, so much more choice for buyers and better buying conditions, we are also seeing softening of clearance rates, particularly we’ve got a turning point in units outperforming houses.'”

“Arch Staver, auctioneer at Nelson Alexander Fitzroy said he could not recall another time with as many cranes building residential units in Melbourne’s inner-city suburbs. ‘A buyer of a unit in Melbourne has never had so much to choose from. I’m not trying to say units are not a good purchase. [But] the pressure on rents is there.'”

From Forbes. “China’s real estate industry used to be a goldmine, minting one billionaire after another. Today, it has become a debt trap for shareholders and investors. The industry’s billionaire founders are facing their day of reckoning. They need to honor payments for a mountain of dollar bonds they have issued to international investors, which will come due in the next four years, with outstanding balances of $27.33 billion in 2022, $18.28 billion in 2023, $19.03 billion in 2024, and $ 17.99 billion in 2025.”

“Twenty one Chinese property developers have been ensnared in a vicious debt spiral in recent years, according to Fitch Ratings. They have defaulted on the payment of domestic or offshore dollar bonds, or both. Their method of dealing with their financial woes offers a hint at how this drama might play out. Tellingly, none of these companies has gone into bankruptcy proceedings, according to Fitch Ratings. Many of them are publicly listed stocks that continue trading on dwindling valuations.”

“These financial calamities in China’s real estate space differ in size, shape, and tone. A common denominator is timing. The bulk of the defaults, be they onshore or offshore, occurred in 2020 and 2021. Chinese securities brokerage Essence Securities estimated that of the 14 mainland real estate developers that defaulted on their payments of dollar bonds, totaling $8.65 billion as of year-end 2021, 10 took place last year, involving $6.34 billion.”

A Common Denominator In These Financial Calamities Is Timing