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'Loan to Own Guys' Chase 12% Returns in Distressed Real Estate – BNN

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(Bloomberg) — Private credit funds, sitting on $196 billion for U.S. commercial real estate deals, are poised to pounce as struggling property owners seek loans to ride out the pandemic.

About $430 billion in commercial and multifamily debt, more than half of which is held by banks, is maturing in 2021, with fresh capital needed to head off a tsunami of defaults.

Read more: Commercial Real Estate Set for Pain With $430 Billion Coming Due

As banks look to unload shaky debt and owners of struggling offices, hotels and retail properties resist selling at distressed prices, private credit funds are expecting a busy 2021, with plenty of opportunities to put capital to work.

“At the 30,000-foot level, it’s that capital need that’s going to draw a lot of demand for debt,” said Jonathan Pollack, global head of real estate debt strategies for Blackstone Group Inc., which raised a record $8 billion for a debt fund that closed in September.

Commercial real estate sales plunged 40% this year through November, led by a 72% drop in hotel transactions. The market remains frozen in large part because buyers and sellers of buildings are far apart on price, according to Real Capital Analytics Inc.

Private credit fund managers anticipate a pattern similar to the global financial crisis, when distressed debt began changing hands one or two years before buying opportunities emerged.

Madison Realty Capital, a New York-based private equity lender with $5.6 billion in assets under management, is among the firms offering new debt to struggling borrowers after acquiring their troubled loans from banks and other lenders.

“In the last 90 days, I’ve had lots of dialogue directly with banks and debt funds in terms of loan sales,” said co-founder Josh Zegen. “We’ve executed on some of it, but I see a lot more going into the first and second quarters of 2021.”

Runway Ends

New debt financing for distressed properties can generate returns of 10% to 12% for lenders, according to Russell Gimelstob, chief executive officer of Ascendant Capital Partners, a Los Angeles-based finance firm with $20 billion in investments.

Read more: Commercial Property Prices Jump With Distressed Deals on Hold

That’s less than the potential returns for directly acquiring distressed properties, but those deals will remain scarce until current owners run out of money or lenders run out of patience. That could take at least another year.

“We think equity and real estate trades are going to be more prevalent when the runway ends,” Gimelstob said.

Debt can be a path to acquiring properties at a discount, with lenders positioned to foreclose and assume ownership when borrowers default. Legal actions in New York courts to seize property from delinquent borrowers have already begun, led by “the loan-to-own guys and the loan-we-don’t-mind-owning guys,” Neil Shapiro, a real estate attorney with Herrick Feinstein LLP, said.

“I’d expect, like every other cycle, that these actions will accelerate because this stress will have been going on more than a year,” he said.

Bank Void

Private capital is filling a void left by traditional lenders. Commercial real estate loan originations by banks fell 68% in the third quarter from a year earlier, according to the Mortgage Bankers Association. Banks, which hold $1.5 trillion in commercial and multifamily debt, have also been slow to shed delinquent loans. So far, regulators have allowed them to delay recognizing nonperforming debt.

The fiscal relief bill passed by Congress gives them another year to account for those potential losses, extending the deadline until Jan. 1, 2022.

Read more: Deutsche Bank Selling $814 Million in Commercial-Property Loans

The lack of distressed loans coming to market so far has surprised Kingsley Greenland, CEO of the Debt Exchange, who said about $700 million has come up for auction on his platform in the second half of 2020, little changed from the pre-pandemic volume. But now, there are more buyers.

“It’s a classic demand exceeds supply scenario and it pushes up prices,” Greenland said. “It’s a seller’s market.”

©2020 Bloomberg L.P.

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Home sales hit record in 2020 despite pandemic – CP24 Toronto's Breaking News

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OTTAWA — The Canadian Real Estate Association says home sales in December hit an all-time record for the month to end what was also a record year.

It says December sales were up 47.2 per cent compared with December 2019, the largest year-over-year gain in monthly sales in 11 years.

Sales for the month were also up 7.2 per cent compared with November.

For 2020 as a whole, CREA says some 551,392 homes were sold, up 12.6 per cent from 2019, and a new annual record.

The actual national average home price was a record $607,280 in December, up 17.1 per cent from the final month of 2019.

CREA says excluding Greater Vancouver and the Greater Toronto Area, two of the most active and expensive markets, lowers the national average price by almost $130,000.

This report by The Canadian Press was first published Jan. 15, 2021.

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Who knew a health crisis would spur on a Vancouver real estate boom? – News 1130

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VANCOUVER (NEWS 1130) – Prices are up, and buyers are bidding. As the option of remote work continues, the demand for property is also continuing to rise.

One of the country’s leading brokerages says there is a real estate boom in Vancouver, and while low interest rates and pent-up demand are factors, the pandemic has helped fuel it.

Royal LePage CEO Phil Soper says the aggregate price of a Greater Vancouver home last quarter rose more than seven per cent to a little over $1.1 million.

RELATED ARTICLE: Vancouver office vacancy rates spike amid COVID-19, but well below national average

New data from Royal LePage finds more than half of Canada’s largest real estate markets have seen double-digit price growth over the last few months.

The brokerage says multiple offers have again become common and almost every detached home is attracting competitive bids.

Soper says 2020 was the strangest year of his career and that the term “recovery” is an understatement. He adds that, looking at fourth quarter results, he can state without hyperbole that the health crisis has triggered a real estate boom.

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Top Real Estate News of the Week: January 11 to 15 – Toronto Storeys

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Another week in Toronto has come to a close and, from January 11 to 13, real estate stories continued to take our desktops by storm. In fact, you may have struggled to keep up with it all!


And, let’s be real: everything — *gestures vaguely* — is a lot right now, so there’s a fair chance you don’t want to spend your weekend doom-scrolling, trying to catch up on all the latest news about what’s up, what’s down, and what’s not budging. In fact, we wouldn’t recommend it. (Who thought the change of the calendar year meant anything at all, really?)

To make your day a little easier, we’ve gathered up this week’s top articles and assembled them below. Consider this place your Toronto real estate news digest, where you can get the picture before you go outside to get some (socially distanced) fresh air.

With that, we’ll get right to it. Here are your top “storeys” for the week:

1. What Ford’s New COVID Measures Mean for the Ontario Construction Industry

As Ontario grapples with surging daily COVID-19 case numbers that are now threatening to swamp hospitals, Premier Ford announced new public-health measures aimed at slowing the spread of COVID-19, which includes new restrictions to the construction industry. The measures include a stay-at-home order, in connection with a province-wide state of emergency declaration.

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2. Ford Government Approves Temporary Ban of Residential Evictions

With stay-at-home orders in place, the Ontario government has approved an emergency order that temporarily pauses the enforcement of residential evictions. This marks the second time in less than a year that the province has paused residential evictions. The government made the announcement Thursday morning, two days after Premier Ford declared the province was entering its second state of emergency as Ontario grapples with surging daily case numbers that are now threatening to swamp hospitals.

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3. Canadians Believe More in the Housing Market Than the Overall Economy

Is this optimism? Despite the negative implications COVID-19 has had on nearly every business sector, it appears the pandemic hasn’t had an (lasting) effect on the the real estate industry. According to RBC’s latest edition of its Home Buying Sentiment Poll, Canadians still believe in the strength of the housing market — despite growing concerns of the overall economy.

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4. Average Rent Prices in Downtown Toronto Are Now Less Than the GTA Average

“Never thought I would see this,” Realosophy Realty President John Pasalis wrote on Twitter. His words are paired with a visual, which shows that right now, downtown rents are priced lower than those across the city at large, as well as across the GTA. The core’s average rent price is $2,132, under Toronto as a whole at $2,152, and the GTA’s current $2,227 average.

But there’s more to rent prices than their at-a-glance averages.

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5. Average 1-Bedroom Rent in Toronto Has Dropped Over 20% Year-Over-Year

In a similar vein to the above article, this week, Padmapper released its January national rent report, analyzing hundreds of thousands of listings last month to examine median rent prices across the 24 largest cities in the country. And where the country’s largest city is concerned? One-bedroom rents fell nearly 4% month-over-month, while rents are down over 20% year-over-year.

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6. Who Gets the House? ‘Divorce Month’ Prompts Real Estate Questions

In news that’s both a bummer and important to know, the first month of the year is often known as ‘Divorce Month’ — pandemic or not. And COVID, along with all the increased time it’s forced people to remain together under one roof, has likely only added to the number of people now seeking separation from their partners. And while the initial decision to part ways is the first of a long list of decisions that must be made, what to do with a shared property is most often also hanging out at the top of that list.

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7. Canadian Housing Market Already On Pace to Have Record Year in 2021: RBC

On Wednesday, RBC Senior Economist Robert Hogue released a new report looking at the current state of the country’s housing market, which Hogue believes is on pace to set more records amid the current unprecedented public health and economic challenges. The report begins with this sentiment: “in the end, the rollercoaster that was 2020 left Canada’s housing market more or less where it started the year: full of bidding wars, escalating prices and exasperated buyers unable to find a home they can afford.”

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8. A Sprawling Winter Light Exhibit is Coming to Toronto’s Waterfront

Need some fresh air? We feel you. Starting this Friday, two new outdoor light exhibits will open to the public as part of Harbourfront Centre and The Waterfront BIA’s outdoor winter celebration of arts & culture: Site Alive | Winter Editionwhich will transform the 10-acre waterfront campus into a unique, immersive world of sensory experience.

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