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Real estate stocks take big hit as markets suffer worst day since 1987 – The Real Deal

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Real Estate Stocks Plummet (Credit: wildpixel/iStock)

As the stock market saw its worst plunge since the coronavirus outbreak, real estate stocks fared no better.

UPDATED, 10:05 p.m.: Stocks continued their downward fall Monday, nearly a day after the Federal Reserve unleashed another rate cut and measures to prevent the economy from further spiraling as the coronavirus continues to spread across the United States.

The real estate sector was part of the turmoil, as a mass sell-off Monday morning triggered another circuit breaker that stopped trading temporarily — the third time this week. By market close, the Dow Jones Industrial Average had plummeted nearly 13 percent — almost 3,000 points — and the S&P 500 fell 12 percent, the worst drop since 1987. The Nasdaq also plummeted over 12 percent.

Real estate stocks, at least by one measure, appeared to fare worse than the broader market Monday. The FTSE Nareits All Reits Index, which tracks real estate investment trusts, nosedived 17.8 percent.

By midday Monday, infrastructure REITs appeared to be among the groups suffering the least, posting a decline of just 5.5 percent, according to Nareit. The worst-performing sector was hospitality — feeling the pain of cancelled bookings and events. Those stocks were down over 18.5 percent, according to Nareit.

Other real estate companies also were impacted. Realogy Holdings Corp. closed the day at $3.96 — a 28 percent drop and a record low for the residential brokerage conglomerate. CBRE dropped almost 17 percent, and Cushman & Wakefield’s stock fell 9.4 percent. Redfin, another residential brokerage, was down nearly 20 percent, and home builder Toll Brothers saw its stock plunge over 29 percent.

“I think it’s pretty clear we’re headed toward a contraction,” said Heidi Learner, chief economist at Savills.

The coronavirus, which causes the respiratory illness COVID-19, has led to over 6,500 deaths around the world. In the U.S., there are more than 3,500 cases. The pandemic has led states, including New York and New Jersey, to restrict public gatherings and shutter movie theaters, venues, casinos, and more. Restaurants and bars are only able to provide customers with takeout and delivery services.

Alexi Panagiotakopoulos, co-founder of Fundamental Income, sponsor of the NETLease Corporate Real Estate ETF, said it’s not just real estate that is impacted: It’s the entire market.

“The ripple effects are completely unknown,” he said. “It’s completely unprecedented in every sense of the word.”

In times of market volatility, investors typically would turn to defensive investments like REITs, which have built-in revenue from contractual rental obligations and are required to pay out 90 percent of taxable income to shareholders.

REITs “should typically exhibit less economic sensitivity,” said Michael Knott, managing director and head of U.S. REIT research at Green Street Advisors. “But in today’s world, there is no playbook for COVID, and you have extreme market upheaval and economic shock taking place.”

Prior to the sell-off, which began roughly a month ago, the fundamentals of the U.S. economy were strong, Panagiotakopoulos noted. Unemployment was low and banks were well capitalized. This means that as soon as people start leaving their homes again, markets could pick back up, he said.

But as companies force employees to work remotely, municipalities keep children out of school and governments ask people to practice “social distancing,” it’s clear commercial tenants will be impacted. Some REITs appear to have fallen almost in lock-step with some operating companies, in spite of those baked-in rent contracts, Panagiotakopoulos noted. He pointed to casino giant MGM, which recently shuttered its resorts and whose REIT has fallen staggeringly, along with MGM’s separate operating company.

“In my personal opinion those should not be one and the same,” he said.

The Federal Reserve Sunday evening slashed its benchmark interest rate to near zero — its second rate cut this month — and instituted a package of measures to boost credit and liquidity. After the Fed’s announcement, other central banks around the globe adopted similar measures to support financial markets.

Learner said the Fed’s actions suggest that the economic risks posed by the virus have increased — and it’s not necessarily clear that the rate cut will translate to lower borrowing rates for commercial real estate players.

“I think the jury is still out on how long the economic impact will continue and I think in large part that hinges on how long we see the health impact, these closures and this moratorium on travel,” Learner said.

Larry Kudlow, chief economic advisor to President Trump, said Monday that the White House will do “whatever it takes” to save the economy from the impacts of the coronavirus. On the table, he said, was a bailout deal for airlines, which have been hit hard by reductions in travel. Airlines reportedly were seeking a $50 billion deal from the government, which would be more than three times the amount of federal assistance the airlines received after the terrorist attacks of Sept. 11, 2001, the Wall Street Journal reported.

Knott, the Green Street analyst, said the Fed implemented significant monetary policy Sunday, but what’s needed is big fiscal policy — in other words, targeted stimulus to offset the macroeconomic shock taking place.

“The Fed is sort of fighting the last battle, and investors seem to be voting that the effort is futile and wasting its bazooka shots,” he said.

Read more on financial markets during the age of coronavirus

That travel moratorium could be having another impact on real estate: It could make it harder for deals to get done, as people either can’t or won’t go see properties they might want to buy, Learner said.

For the first eight weeks of the year, European deal activity was down 18 percent from last year; it was down 50 percent for the Asia Pacific region, according to Real Capital Analytics. Deal activity in the Americas, where the virus has more recently seen a growth in COVID-19 cases, was up 10 percent, but RCA noted that deal activity for February is preliminary.

“Many of the networking events cancelled across the globe (such as MIPIM) have traditionally kicked off the sale processes and it remains to be seen how the curtailment of face-to-face meetings between brokers, buyers and lenders will impact transaction activity,” RCA said in a post Friday.

Keeping people home and stopping travel is triggering once-in-a-lifetime questions about the demand for some types of properties, Learner said. For instance, will stores exist without a physical footprint? Or will tourism return to its same levels as before the outbreak?

“I don’t think anyone really knows,” she said.

Write to Mary Diduch at [email protected]

UPDATE: This story has been updated to clarify that RCA’s February data is preliminary.

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COVID-19: Real Estate Update – Real Estate and Construction – Canada – Mondaq News Alerts

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Canada:

COVID-19: Real Estate Update

To print this article, all you need is to be registered or login on Mondaq.com.

As of Tuesday, March 24, 2020 all of Ontario’s
“non-essential services” were required to close in
response to the growing COVID-19 pandemic in the province. This
mandatory shut down will last a minimum of 14 days, with an
extension possible at the discretion of Premier Doug Ford.

The Ontario Government recently clarified which businesses and
services were deemed “essential” and would therefore be
allowed to remain open throughout this two-week period. A complete
list of essential workplaces can be found here. These include law firms and
WeirFoulds lawyers are fully operational and ready to assist
you.

For the real estate industry, the following services qualify as
essential and will therefore continue throughout the shutdown
period:

31. Banking activities related to credit intermediation;
credit unions

65. Professional services including lawyers and para-legals,
engineers, accountants, translators

67. Land registration services, and real estate agent
services and moving servic
es

Further, as Service Ontario operates its land registration
system online, we are hoping that transactions will continue to be
able to close without issue. Our Group is working to identify and
deal with issues that may arise in this regard.

For new or ongoing transactions, the off-title searching process
may be delayed or hindered altogether with the closure of some
municipal services. Please be advised that when purchasing
properties, these searches may take significantly longer than
usual. However, there is some good news for purchasers: many title
insurers are now offering extended coverage under owner and lender
policies to respond to the marketplace’s unavoidable delays and
disruptions.

The WeirFoulds Commercial Real Estate Group is committed to
ensuring that your transaction can proceed as planned. While our
office has adopted a “work from home” policy, our
lawyers, conveyancers and staff remain fully accessible without
disruption. Our Group has full access to all our clients’
working files, searches, documents and agreements. This includes
our conveyancers who we rely on a great deal in identifying and
resolving difficult title issues. The WeirFoulds Commercial Real
Estate Group is able to assist in any way needed.

Even though we are working remotely, we continue to collaborate
seamlessly with our other Practice Groups that we traditionally
look to for their expertise in commercial real estate matters,
including Leasing, Municipal, Expropriations, Infrastructure,
Construction, Corporate, and Environmental.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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Real estate market seeing new challenges amid COVID-19 pandemic – CityNews Edmonton

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CALGARY (CityNews) – Buyers are not able to go into homes, and sellers are taking them off the market as they quarantine.

The real estate industry has been deemed an essential service and can carry on but now, buyers, sellers, and agents are navigating a contactless world in a market full of unknowns.

“A lot of my buyers have just decided to put everything on hold, there’s a lot of uncertainty with how their down payments may be with affected by RRSP’s (and) job uncertainty,” said real estate agent Joseph Burke. “We’ve also seen some listings come off whether people are being quarantined or concerned about their overall health.”

In Alberta, COVID-19’s impact on oil prices is also set to have a major effect on the market.

“We may not get hit with the crisis as hard as they are in Italy, but the economic side of things, with oil dropping as fast as it has and all of that, that’ll be what will affect us on the real estate side,” said Burke.

Homebuyers were already advised to take precautions during open houses, not touching surfaces and keeping distance but there’s been a directive from the Alberta Real Estate Association to discontinue them beginning this week.

“Our realtors are getting very creative in doing videos and showing the property in other manners however typically people still want to feel and be in the home,” said Diane Scott with Royal Lepage Solutions.

Because it’s only been weeks since a societal shift began, the true impact of COVID-19 is still not completely apparent.

“What we are yet to see, is the economic impact will be from this pandemic on the real estate market. As the data starts to come out we’re gonna start to see where those trends are going and how it will affect us moving forward,” said Burke.

Despite a time of uncertainty, Diane and Joseph say it’s creating unique openings.

“There will be an opportunity for you as a seller especially because you’re going to have less competition in the early stages of it, buyers will be looking at your home versus 5 other homes, instead of 50 other homes,” said Burke.

“It’s a great opportunity, our prices are lower, there’s inventory out there, so if they’re in a rental, for instance, it would be a very good time to start looking to buy,” said Scott.

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Toronto real estate sales plunge as coronavirus weighs on market: Realtor – BNNBloomberg.ca

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Canada’s largest real estate market “hit the brakes” in the last full week of March as sales plunged and sellers pulled listings in the face of the COVID-19 crisis, according to a Toronto-based realtor.

What had been a gradual softening in Greater Toronto Area sales after a strong February turned decidedly negative last week, with sales down 37 per cent compared to the same period last year, John Pasalis, president of Realosophy Realty, told BNN Bloomberg in email.

There was also a 27 per cent increase in cancelled listings as the economy absorbs record job losses as entire industries come to a near standstill in an attempt to slow the spread of the virus.

“The market has definitely hit the brakes,” said Pasalis. He added some of those cancelled listings may end up getting relisted at a different price.

Despite the plunge in sales, Pasalis notes “the market is still quite stable because new listings are also on the decline.”

Numbers compiled by Realosophy Realty show new listings for the region fell by 33 per cent last week.

While last week’s average Toronto home price of roughly $856,000 is up about nine per cent year over year, annual price appreciation had been running stronger at the end of February into early March when there were more high-end homes being sold.

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