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US Malls Collapsing Have Commercial Real Estate Lenders Getting Aggressive



In New Jersey, lenders to the American Dream mall are heading to court, demanding a $389 million payment on their defaulted debt.

Some 25 miles north, just over the state line with New York, investors are looking to foreclose on one of the country’s largest malls. And across the country in Los Angeles county, the owners of a Westfield mall expect it to be foreclosed if they can’t sell the property.

The collapse of the US mall industry, long hyped by billionaire investor Carl Icahn and other doomsayers, may indeed finally be near. The industry has been shaky for years, of course, but now that interest rates are soaring from record-low levels, lenders are beginning to move aggressively against property owners.

“There’s a cost benefit analysis being done with respect to taking an action now — that they’re preserving more value by acting now rather delaying action,” said Cynthia Nelson, a senior managing director who leads real estate restructuring at FTI Consulting.


All of this marks the start of what’s expected to be a wave of defaults in the wider commercial real estate industry as that jump in borrowing costs causes property values to fall. This time around offices are also in the spotlight as the work-from-home phenomenon leads companies to cut the space they lease.

Short sellers have also begun to circle once again. It’s not Icahn out in front on the bet this time but Bruce Richards, the chief executive officer at Marathon Asset Management.

The Short Bet on Offices Is Starting to Look Like Malls

CMBX indexes are used to short real estate debt

Source: Bloomberg

Icahn bet against malls using derivatives linked to a series commercial real estate indexes known as CMBX. It’s a similar instrument that hedge fund trader Michael Burry, one of the main characters in the movie The Big Short, used to short the US housing market more than a decade ago.

But Richards says the mall CMBX trade’s too expensive now. Instead, he’s focused on a more recent version of the CMBX index, Series 13, that’s more heavily tied to office towers. In a recession, the spreads could blow out, he says.

“The better short may be more recent vintage securities with heavy office exposure,” he said.

Richards’ bet comes as borrowers including Brookfield have already handed back the keys to some office properties or are opting to default.

relates to Malls Are in Trouble Again, Offices Are Next
The Gas Company Tower stands at 555 W. 5th Street in Los Angeles. Brookfield defaulted on loans secured by the building, and lenders may foreclose, according to filings
Brookfield Office Properties

“The mall business can provide a preview to the challenges owners and lenders of office buildings may face in the coming years,” said Vince Tibone, a retail analyst at Green Street.

By the Numbers

A Comeback Story Starts to Fizzle

Chinese junk bonds lose steam after 50% rally

Source: Bloomberg Asia Ex-Japan USD Credit China High Yield index

China‘s aggressive steps last year to prop up its battered property sector slowed a wave of defaults by the country’s developers and kicked off a rebound in the value of their bonds. A Bloomberg index of US dollar-denominated bonds issued by junk-rated Chinese companies — a benchmark dominated by distressed developers — gained about 50% from its lows in November through the end of January. The rally has lost steam this month, however, as a slump in housing sales persists, keeping cash tight for the builders. Despite Beijing’s sweeping efforts to inject liquidity into the sector, a number of developers have kept their bondholders waiting until the final hours before grace periods run out on their interest payments, Alice Huang, Jackie Cai and Lorretta Chen report. One builder, Central China Real Estate, remitted funds this week for a $9.75 million bond payment that was originally due Jan. 14.

High Alert

  • Lenders to Cinven-owned Italian life insurer Eurovita have started to write down €300 million of loans after the domestic regulator suspended management and halted redemptions, pushing the private-equity owner into the spotlight. The saga highlights concerns among regulators and banks about private equity’s ownership model when it comes to companies offering financial products to retail customers.
  • Lapo Elkann, one of the heirs of the billionaire Agnelli family, reached a deal to restructure the debt of his own fashion company Italia Independent Group. Elkann will inject €13 million, while creditors will write off as much as 90% of their loans.
Italia Independent Group Chairman Lapo Elkann Interview
Lapo Elkann, chairman of Italia Independent Group, gestures while speaking during a Bloomberg Television interview in London, U.K., on Wednesday, Dec. 13, 2017.
Photographer: Luke MacGregor/Bloomberg

Latest on… Adani

Adani Group moved to reassure investors’ after a damaging short-seller report accused it of fraud.

While a catchy tune in support of founder Gautam Adani got more than 300,000 views on YouTube, executives had to talk money to convince bondholders the group is not spiraling into a full-blown crisis, Giulia Morpurgo and Finbarr Flynn report.

Their strategy seems to be working. Most of the group’s dollar bonds have climbed out of distressed territory after the company held two conference calls on Thursday to lay out plans for the repayment of the nearest debt maturities.

Money managers were worried that access to public funding markets would get more complicated and incredibly expensive for the group given the extra scrutiny Adani’s empire is now under.

However, Adani’s initial plans suggest that the group doesn’t have to tap capital markets to meet its debt maturities; instead, it can take advantage of private markets, issuing long-dated bonds to an undisclosed group of selected investors.

The ability to access new borrowing is key for a group that embraced the era of cheap debt by loading up with it. In recent years, Adani has tapped international bond buyers for more than $8 billion, while also turning to global banks for at least as much in foreign-currency loans.

Adani Bonds Exit Distressed Territory

Seeking private funding would not be a first for Adani; the Indian conglomerate tapped the US private placement markets on multiple earlier occasions before the short-seller report by Hindenburg Research. Entities related to Gautam Adani have counted the likes of Apollo among its private funding backers. The company has also traditionally had strong support from Gulf-based investors.

Notes From the Brink

Credit Suisse used to be big in trading the debt of troubled companies — but now it has problems of its own to worry about.

The Swiss lender is set to get out of distressed debt trading with the sale of a $250 million portfolio. The disparate assets include a loan to autoparts maker Standard Profil Automotive and claims linked to the insolvency of travel agent Thomas Cook, Giulia Morpurgo and Lucca De Paoli write. The team led by Thomas Mathieson, head of special situations and loan trading in London, could also move over to any buyer.

Exiting the distressed debt business allows the lender to allocate capital elsewhere instead of the relatively higher amounts needed to back troubled loans. It’s a sign of the radical changes needed to fix the lender’s balance sheet and comes shortly after the bank sold its structured product business to Apollo.

Read more: Credit Suisse Needs a Cockroach Exterminator

Credit Suisse has been bruised by years of scandals, including losses from the collapse of Archegos and Greensill. At the end of last year the bank hemorrhaged assets and recorded a fifth quarterly loss. The Swiss lender is in the early stages of a restructuring that includes cutting 9,000 jobs.

— With assistance by Giulia Morpurgo, Lucca De Paoli, Finbarr Flynn, Jeanette Rodrigues, Alice Huang, Jackie Cai, Lorretta Chen, Laura Benitez and Marion Halftermeyer


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2 real estate agents fired over their 'you could do worse' ad campaign double down on their brand –



A pair of real estate agents in London, Ont., who were fired from a realty firm for taking their advertising campaign, “You could do worse,” to billboards and social media have doubled down on their mantra.

Tristan Squire-Smith, 42, and Johnny Hewerdine, 43, were fired in December from a real estate business they don’t want to publicly name, but were quickly snapped up by the Realty Firm. CBC News has seen a copy of their termination letter, which cites “professional differences.”

We might not be for everybody, but the people who like us, really love us.– Tristan Squire-Smith, real estate agent

“They fired us for excessively using the phrase, ‘You could do worse,'” said Hewerdine, a Realty Firm broker who previously worked as an electrician. ‘We just stuck with it and actually doubled down on it, and now it’s just completely taken off.”


The mantra is polarizing, Hewerdine admitted.

But the two say they’re working to humanize the industry.

“It’s a great sort of self-deprecating phrase that means you’re actually not doing too bad,” said Squire-Smith, a registered nurse who retrained as a real estate agent during the pandemic and still works part time in long-term care. 

“We might not be for everybody, but the people who like us really love us,” he said.

Randy Pawlowski, past president of the London St. Thomas Association of Realtors, wouldn’t comment directly on the billboard or the slogan, but told CBC that he stands for professionalism in the industry.

‘Zero awards won’

The latest billboard by Squire-Smith and Hewerdine is up on Wharncliffe Road, a busy thoroughfare in London, and features photographs of them as teenagers. Squire-Smith has long curly blond hair and Hewerdine is wearing his graduation robes from his Grade 8 portrait. Another one of their billboards proudly proclaims, “Zero awards won! (No fine print required).”

Johnny Hewerdine and Tristan Squire-Smith pose in front of their newly minted billboard on Wharncliffe Road in London, Ont.
Hewerdine and Squire-Smith pose in front of their newly minted billboard on Wharncliffe Road in London. (Submitted by Johnny Hewerdine)

The two men met two decades ago and were on the varsity swim team together at Western University.

“These photos are taken at our most awkward moment of our lives,” said Hewerdine. “I’m a 13-year-old Grade 8 graduate in this photo and I believe Tristan is 15 years old.”

Both say they’re trying to humanize the industry.

“We’re just really focusing on the consumer, opposed to us standing up on a billboard with arms crossed, trying to make us look perfect,” said Hewerdine.

Tristan Squire-Smith and Johnny Hewerdine have more conventional photos too, but say they enjoy using videos and photos that are a bit more 'human.'
Squire-Smith and Hewerdine have more conventional photos too, but say that for their work, they enjoy using videos and photos that are a bit more ‘human.’ (Submitted by Squire-Smith and Hewerdine)

“They’re total professionals,” said Pete Greenwood, who hired Hewerdine to sell his condo earlier this month. It was listed for $389,900 and sold for $400,000 in five days.

“He’s just a good guy to work with, and so’s Tristan,” said Greenwood. “They did a 30-second video of my house and turns out we’re all big Seinfeld fans, so we actually did a Seinfeld-themed video of my house.

“I never laughed so hard in my life,” he said.

London Morning7:11What’s behind the billboard with the slogan ‘you could do worse’?

London Morning host Rebecca Zandbergen gets to the bottom of a fresh billboard with an odd advertising slogan. Real estate agents Tristan Squire-Smith and Johnny Hewerdine explain how they were going for something out of the ordinary.

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Cottage housing market to see price decline: Royal LePage – CTV News



A recent report from Royal LePage is predicting a drop in prices for Canadian cabins and cottages this year as demand softens from economic uncertainty and low housing stock.

The Royal LePage Recreational Property Report, released on Tuesday, expects the aggregate price of a single-family home in Canada’s recreational housing market to fall 4.5 per cent this year to $592,005 compared to 2022.

Royal LePage’s aggregate home price is based on median prices, including for single-family, single-family waterfront and standard condominium homes.


“Despite a modest decrease expected this year, the national aggregate price would remain more than 32 per cent above 2020 levels, after two years of double-digit price gains in the country’s recreational real estate market,” the report says.

While Quebec and Ontario should see the largest price decreases year-over-year at eight and five per cent respectively, the report offers a hopeful outlook for Alberta.

The province is expected to be the only region in the country where recreational housing prices will increase this year at 0.5 per cent.

This all comes after the aggregate price rose 11.7 per cent year-over-year to $619,900 in 2022, the report says. In 2021, prices rose 26.6 per cent year-over-year.

“After two years of relentless year-round competition, Canada’s recreational property markets have slowed and returned to traditional seasonal sales patterns,” Royal LePage president and CEO Phil Soper is quoted saying in the report.

Soper says interest rate increases have less of an impact on recreational homes, given buyers tend to put more money down and borrow less. Earlier this month, the Bank of Canada announced it would be holding interest rates at 4.5 per cent after continuous increases since March 2022.

However, general consumer inflation and lack of inventory have “damped sales activity,” while recreational homebuyers tend to have the “benefit of time” to find the right property, he says. “Call it a want versus a need.”


An online survey of 202 Royal LePage recreational real estate brokers and sales representatives, conducted between March 1 and March 18, found 57 per cent are reporting lower inventory than last year.

Compared to pre-pandemic times, even more – 65 per cent – say inventory is lower.

“While low inventory poses a challenge for buyers looking for that special cabin or lakeside cottage, the coinciding contraction in demand has resulted in a return to more normal market conditions,” the report says.

The same survey also looked at cases where people moved and lived full-time at their recreational property during the COVID-19 pandemic.

Twenty-eight per cent of those surveyed said the trend of people now moving back to urban or suburban areas after relocating has become “somewhat common.”

However, 56 per cent described it as uncommon in their markets.

Those surveyed in Atlantic Canada were the most likely at 46 per cent to say this trend has become somewhat common.

“During the pandemic, with offices closed and people working from home, Canadians discovered that a recreational property could double as a principal residence, complete with capital gains exempt status,” Soper said.

“With high-speed internet now readily available in many rural markets, families flocked to recreational regions to put extra space between themselves and their neighbours and to take advantage of nature; particularly when cultural and sporting venues, shops and restaurants in cities were closed.

“Many urban businesses now require employees to be in the office at least a few days a week, making long commutes challenging. For many, living in cottage country full-time has lost its romantic shine, meaning we are back to viewing the cottage, cabin and chalet as a weekend and summer escape from urban living.”


The Royal LePage Recreational Property Report compiles insights, data and forecasts from 50 markets. Median price data was compiled and analyzed by Royal LePage for the period between Jan. 1, 2022, and Dec. 31, 2022, and Jan. 1, 2021, and Dec. 31, 2021. Data was sourced through local brokerages and boards in each of the surveyed regions. Royal LePage’s aggregate home price is based on a weighted model using median prices. Data availability is based on a transactional threshold and whether regional data is available using the report’s standard housing types. Aggregate prices may change from previous reports due to a change in the number of participating regions.

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For resort town workers, housing scarcity is worsening



Max Martin outside of the home he rents in Jasper, Alta., on March 19.Peggy Plato/The Globe and Mail

For more than seven decades, housing availability in the mountain town of Jasper, Alta., has been a challenge.

Although the total number of dwellings is slowly growing, in the past 10 years, the rental units in the primary market – units built specifically as rental – has declined as some units have transitioned into condo ownership. The shortfall in the number of dwellings needed to meet demand in Jasper has gone from 235 units in 2002 to roughly 700 in 2022.

“In Jasper, housing has always been in short supply,” says the town’s mayor, Richard Ireland. “Over the years, efforts have been made to correct that, but the problem seems to just continue regardless of all the steps that have been taken.”

These steps have consisted in asking Parks Canada to release land for the construction of both market and non-market, or subsidized and co-op housing.


Located on a national park, Jasper’s town boundary is constrained by Parks Canada’s regulations to limit the townsite’s physical expansion and protect the environment.

To ensure the town’s population remains in balance with the 118,222 square metres of developable land allocated to Jasper, Parks Canada requires that only those who work or run a business are eligible to live there – and releases parcels as needed.

“We’ve been able to get housing that’s more affordable and stays that way,” Mr. Ireland says. “But even with all the units that have been built, the pressure continues.”

In the face of skyrocketing visitor numbers, the need for more staff in Jasper is growing, and the availability of well-maintained, affordable housing for workers in Canada’s second most popular national park seems to be reaching a breaking point.

Since 2014, vacancy rates in Jasper’s primary rental market have remained close to zero, driving rents up by 30 per cent over the same period.

Christine Reyes (whose name has been changed to protect her identity) and her boyfriend share a one-bedroom apartment in Cavell Apartments, the town’s first purpose-built rental complex developed to provide staff accommodation in the 1970s.

Originally from the Philippines, Ms. Reyes moved to Cavell Apartments in the fall of 2021. Since then, the couple’s rent has gone up by 20 per cent – from $1,075 to $1,270 – and further increases are expected in 2023.

“What we’re paying now is just enough for us to make [ends meet],” Ms. Reyes says, noting she pays an additional $185 a month in parking, storage and pet fees. “I have family back home that I’m sending money to. I don’t think I could send money if rent [goes] up.”

In February, some tenants of Cavell Apartments received a letter from property management, informing them rents would be rising by about 40 per cent this year. The notice cites inflation, interest rates, as well as supply and demand as the drivers of such an increase.

While the proposed hike for existing tenants has been reconsidered, a bachelor suite in the complex was listed in March for a monthly rent of $1,604.50 – a rate akin to downtown Vancouver’s average rent for the same type of unit.

The property management company did not respond to requests for comment.

In a town where a significant share of renters are employed in the tourism industry, and whose hourly wage averages $18.36 (roughly $1.80 less than in B.C.), spending more than $900 a month in rent isn’t a viable option.

For local businesses, this challenge means they have to step in and absorb some of the cost of housing on behalf of their staff.

To ensure she can hire full-time staff year-round, Lynn Wannop, owner of Coco’s Café, has rented a two-bedroom unit in Cavell Apartments for nearly a decade. “That apartment makes it so that I can hold on to staff in the winter, when it’s really slow,” she explains.

Currently, she pays $1,225 a month in rent for the unit, and charges her staff $500 to live there. But in the face of the proposed increases, she wouldn’t have a choice but to continue to pay whatever rate the landlords ask. “As a business owner I have to suck it up and pay,” Ms. Wannop says. “I can’t operate my business without it.”

But spending more in staff housing costs means Ms. Wannop can’t raise wages either.

“I want my staff to be able to afford to live,” she says. “But I can’t afford to pay them any more.”

Moreover, Jasper’s housing shortfall doesn’t only drive rents up – it also creates challenges for tenants who end up living in sub-par accommodations for a lack of alternatives within their budget.

Since November, Max Martin and four friends have shared a five-bedroom, two-bathroom bungalow in the middle of town. While the group pay what they consider a reasonable amount in rent, the condition of the home is precarious.

Max Martin in an unusable, mould-filled bathroom in the home he rents with four friends.The Globe and Mail

“We have mould that [the landlords] have refused to come help fix,” Mr. Martin says, adding that “we went without heating for almost seven weeks.”

According to recent inspection reports from Alberta Health Services and the Jasper Fire Department, the dwelling presents critical safety issues, including windows that don’t open, exterior doors that can’t be locked for a lack of keys, faulty heating, and no smoke alarms.

In Mr. Martin’s view, Jasper’s tight rental market allows landlords to take advantage of young workers who, like him, come from overseas attracted by the natural beauty of the Rocky Mountains.

“People should be held accountable for their actions and the choices they make,” Mr. Martin says. “Especially when it comes to other people’s lives. As a landlord you’re in a privileged position where you can have a house that provides you passive income to let live and do what you want.”

But more supply is on the way.

Last December, a new purpose-built rental complex finally received a development permit, six years after the project was first announced. However, a building permit application is yet to be received by Parks Canada (the developer has until Dec. 13 to apply for this permit).

Featuring 144,822 square feet of apartments spread between two buildings, this development is expected to make a dent on Jasper’s housing gap when completed – but it’s unlikely that new market units can support the affordability levels required by tourism and hospitality staff.

Because market housing is subject to speculation and financialization, providing rental housing at rates commensurate to the wages of workers isn’t always possible, as returns for shareholders take priority.

“This model prays on power imbalances and problems that were already in place,” says Laura Murphy, research coordinator at the University of Alberta’s Affordable Housing Solutions Lab. “Especially in Alberta, where tenants are really dependent on landlords … because we don’t have lot of protections for tenants.”

In Alberta there are no limits to how much landlords can hike rents, as long as these increase only once a year.

To address this, Ms. Murphy suggests governments invest in non-market housing, as this “has proven to work time and time and again.”

Currently, there are about 155 non-market units in Jasper, but only 21 of them are rentals – and the landlord’s agreement with the municipality to provide housing at below market rates in the latter ends in 2029.

Like anywhere else in Canada, to boost the supply of suitable housing that remains affordable in perpetuity, Jasper requires support from senior levels of government.

“[In] 2023, council has budgeted a $5-million debenture to assist housing, but we will need some other partners to do that,” Mr. Ireland says. “We now need matching funds from either the province or the feds. We’ve gone to the province and made that application, so we will see what comes of that.”

On March 22, the municipality announced it would receive $6.5-million from the provincial and federal governments.

Combined with private investment, this new funding is expected to create 40 affordable units.



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