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Don't fret just yet about commercial real estate debt threat – Crain's Detroit Business

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Local experts believe banks and other lending institutions will work with landlords to avoid what could be a recipe for a wave of foreclosures on commercial real estate debt in light of the two-week mandated shutdowns of restaurants, bars and other businesses to combat the spread of coronavirus in Michigan, which has infected 65 people as of Tuesday.

With reduced or no revenue for those tenants, that could crimp rent payments and therefore threaten building owners’ debt service obligations.

But most agreed that for most lenders, short-term problems paying back loans won’t be worth the long-term hassle of property ownership.

“Now, it’s only for two weeks and no one’s going to lose their property unless they recently bought it and they’re way over leveraged,” said Steven Siegel, vice president of acquisitions for Lutz Real Estate Investments and Q10 | Lutz Financial Services, a commercial real estate finance firm based in Birmingham. “No lender really wants to own a property and all the lenders are in the same position.”

Ben Rosenzweig, a retail expert who is vice president of retail brokerage in the Detroit office of Colliers International Inc., echoed similar sentiments.

“Moreover, it’s doubtful that the banks want to take back thousands of properties through foreclosure, since they would all have higher vacancy rates and difficult to backfill in already.”

And it’s also in the landlord’s best interest to accommodate struggling tenants.

“From the owner’s financing standpoint, most mortgages require landlords to keep their occupancy and rental rates above a certain threshold. They will be hesitant to evict tenants who may have trouble paying rent during the short term, because they could put themselves in jeopardy with their bank,” Rosenzweig said.

Some are thinking of other ways to avoid the possible problem.

“It’s not theoretical. Restaurants will not be able to pay their rent at the end of the month,” said David Jaffe, an attorney with Birmingham-based law firm Jaffe Counsel PLC. “If their landlord is (large corporate landlord) Blackstone, that’s one thing. But if their landlord is a modest developer or even a decent sized developer, they can’t make their debt service payment.”

Jaffe is calling for a commercial rent and debt service moratorium.

“The lender has the Fed for liquidity backup. If the banks or bondholders need help, we have a vehicle there that’s much more responsive than the political process to deal with that.”

There are thousands of restaurants and bars and other businesses affected by Gov. Gretchen Whitmer’s executive order Monday, including fitness centers, movie theaters, coffee shops and casinos and others. The state has taken unprecedented steps to combat the spread of COVID-19, although there remains a cloud of uncertainty over what precisely the effects of the coronavirus will be on commercial and residential real estate.

“Landlords may have to consider flexibility,” said Tjader Gerdom, owner of Novi-based brokerage firm Gerdom Realty & Investment. “It may impact cash flow, just hopefully for a small duration.”

Justin Winslow, president and CEO of the Michigan Restaurant & Lodging Association, said in a statement that the bar and restaurant industry employs 600,000. He told Bridge Magazine that there are 16,000 restaurants and another 2,000 hotels in Michigan’s $40 billion dining and lodging industry.

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Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

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TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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Homelessness: Tiny home village to open next week in Halifax suburb

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HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

The Canadian Press. All rights reserved.

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Here are some facts about British Columbia’s housing market

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

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