1.  COVID-19 Real Estate Sentiment Survey and the Truncated V-Curve, with a Tail...

“As the current coronavirus pandemic reaches a (hopefully) peak in the U.S. and the extent of the devastation to the economy comes into focus – 22 million unemployed, thus far, with downstream impacts to everything from retail sales, sporting events, the price of oil, and the stock market (regardless of a mini bull market in the past week or so) – we have begun to think about what the recovery is going to look like, which real estate segments will be the winners and losers in the “Great Lockdown,” and what is happening in the real estate capital markets? And so we asked our client base of real estate market professionals to tell us what they thought, in this special edition COVID-19 Real Estate Sentiment Survey.” (RCLCO Real Estate Advisors, 4/21)

What you need to know:

• 64% of respondents expect a fairly strong return to growth once the economy reopens but differed regarding the recovery time frame. 32% predict a “Wide U-Curve” that will stretch the economic impact of COVID-19 across the entirety of 2020, while the other 32% calling for a “Narrow U-Curve” with peak cases occurring in May 2020 and a second-half recovery.
• Declines in revenues and property values are expected across the CRE spectrum, at varying degrees. When the recovery gets underway, however, the industrial sector is poised for growth as businesses increase inventories and enhance their supply chains.

Read the full article here.

2.  April CMBS Remittance Data Reveals 10X+ Increase in Non-Payment of Hotel Loans; Almost 5X for Retail Loans

“Because the coronavirus headlines really took off around mid-March, most borrowers had made their March 1 payments. It was assumed that many borrowers would withhold their April payments – especially in the hard-hit lodging and retail segments. However, failure to make an April 1 payment would not make a loan 30 days delinquent if the borrower had made the March 1 payment. The status – according to CREFC guidelines – would place the loan in a category of either "late but within grace period" (Category “A”) or "late beyond grace period (“Category B”). (Trepp, 4/15)

What you need to know:

• Nearly 20% of hospitality and 9.6% of retail CMBS loans are now categorized as A or B, as of April 15^th. In March, the percentage of loans that fell into these categories was 1.5% and 1.7%, respectively.
• Since most borrowers made their March 1 payments, this current data provides an indication of the size and scope of potential delinquencies moving forward.

Read the full article here.

3.  Fed's Latest Stimulus Includes CMBS Relief

“Yesterday the Federal Reserve announced it was pumping more money into the beleaguered US economy: an additional $2.3 trillion that will commit hundreds of billions of dollars in loans to mid-sized business, as well as much-needed support to states and large counties. This new stimulus also includes support for CMBS, as the Term Asset-Backed Securities Loan Facility (TALF) will now include legacy CMBS as eligible collateral, according to the CRE Finance Council. Eligible CMBS securities must have been issued prior to March 23, 2020, while securities related to other asset classes are only eligible if they were issued after this date.” (GlobeStreet, 4/10)

What you need to know:

• As noted in last month’s update, the Fed began purchasing CMBS issued by government-sponsored entities for the first time in its history but refrained from including private label CMBS. The original TALF program from the 2008 credit crisis included legacy CMBS in later iterations.
• The inclusion of private label CMBS to the TALF is an expanded attempt to restore stability to the CMBS secondary market and restore CMBS lending and issuance.

Read the full article here.

4.  A Wave of 'Dark' Stores Could Open Across the U.S. as Governments Lift Restrictions on Nonessential Businesses

“As US officials weigh lifting social distancing measures, some governments are easing restrictions by allowing nonessential businesses to reopen as "dark" stores that provide service only through drive-thrus, curbside pickup, or delivery.”  (Business Insider, 4/20)

What you need to know:

• Some U.S. states are now amending their shelter-in-place orders to allow retail sales as long as customers are prohibited from going inside. This allows for florists, furniture outlets, and many others to reopen as “dark” stores.
• This will help ease the economic pain for many small businesses and help reduce crowding in big-box stores deemed essential, like Target and Walmart.

Read the full article here.

5.  Falling Oil Prices Could Squeeze Top Energy Markets

“Following last month’s crash, the price of U.S. oil plummeted to a historic low on Monday, dipping into negative numbers for the first time ever and threatening to cause a big shakeup in office markets like Houston, where oil and gas occupiers account for nearly half of all office leasing activity.” (Commercial Property Executive, 4/21)

What you need to know:

• The impact of the pricing crash will likely lead to an increase in distressed office properties in Houston and other U.S. markets that are heavily dependent on the industry.
• This oil downturn can largely be attributed to the current macroeconomic conditions and less so to the sector’s fundamentals. If economic conditions were to improve, the rebound will likely be quicker than in previous oil downturns.

Read the full article here