Banks Increase CRE Workouts to Prevent Defaults
Work-From-Home Arrangements Linger, Most Federal Agencies Using Less Than 25% of Office Space
The Real Estate Roundtable Approves Five New Board Members
Roundtable Weekly
July 21, 2023
Banks Increase CRE Workouts to Prevent Defaults
Houston skyline Banks are increasing their efforts to modify troubled commercial real estate loans to prevent defaults, according to recent media reports. (GlobeSt  and Bisnow, July 14) Momentum on Modifications
  • Lenders are offering borrowers loan extensions and modifications, selling derivatives to fix interest costs, and offering subsidized loans to investors to purchase defaulted loans” according to CRE analysts and industry data quoted by Reuters on July 12
  • The reported increase in modifications follows a joint policy statement from federal regulators last month that encouraged financial institutions to work with borrowers on pending loan maturities. (Agencies’ joint statement, June 29 and National Law Review, July 9)
  • Real Estate Roundtable President and CEO Jeffrey DeBoer commented on the positive action by regulators. “This major step forward by federal regulators provides the flexibility that The Roundtable has consistently encouraged, and the relief many in the industry need, as the economy and communities struggle to move beyond the repercussions of the global pandemic,” DeBoer said. (Roundtable Weekly, June 30 and Roundtable letter to regulators, March 17)
Need for Liquidity RER Board Member Scott Rechler
  • On July 20, Roundtable Chair John Fish (SUFFOLK Chairman and CEO) discussed the pressures facing CRE and the recent policy accommodation from regulators on Bloomberg’s What Goes Up podcast. “The biggest problem right now is the capital markets nationally have frozen,” Fish said.
  • On July 14, Roundtable Board Member Scott Rechler, above, (RXR Chairman and CEO) joined CNBC’s Closing Bell Overtime to discuss the impact of the credit crunch and the need for more liquidity in the market. (Watch interview)
  • A July 6 article by Carl White, senior vice president of the St. Louis Fed’s Supervision, Credit and Learning Division, shows that the proportion of nonperforming CRE loans remains low on an average basis and has continued to decline since 2020.
Low occupancy rates for downtown offices in various cities are leading municipal governments to incentivize adaptive reuse by encouraging the conversion of often-older office buildings into residential properties. A report this week from RentCafe forecasts that conversions may increase by 63% in coming years, after adaptive reuse peaked from 2019 to 2020. (GlobeSt, July 19) #  #  #
Work-From-Home Arrangements Linger, Most Federal Agencies Using Less Than 25% of Office Space
Empty office space

Overall workplace occupancy registered 49.1% last week, according to Kastle’s 10-city Back to Work Barometer, which showed return to office rates vary significantly over the course of the week. Additionally, a recent Department of Labor American Time Use Survey showed that nearly 35% of Americans worked from home on an average day in 2022, down from nearly 40% in 2021. (Axios, June 23)

Public Sector

  • In the public sector, federal government offices remain largely unoccupied, according to a new report issued by the Government Accountability Office (GAO) that revealed most agencies are using their headquarters less than a quarter of the time.

  • The GAO report shows that 17 of 24 agencies' buildings were at 25% capacity or less after an analysis of 21.5 million square feet (SF) of usable federal office space during three weeks of Q1.

  • The empty federal offices have depressed local economies, according to a July 18 Federal News Network (FNN) broadcast. (Listen or read transcript of Federal Drive with Tom Temin)

  • The House Subcommittee on Economic Development, Public Buildings, and Emergency Management addressed the GSA report in a July 13 hearing called “When the Lights Are On but No One’s Home: An Examination of Federal Office Space Utilization”)

Roundtable Response

RER President and CEO Jeffrey DeBoer
  • In April, The Real Estate Roundtable wrote to members of the Senate about the need the federal government to end its “active encouragement of remote working for federal employees” and for federal agencies to return to their pre-pandemic workplace practices. (RER letter to the Senate, April 12)

  • Roundtable President and CEO Jeffrey DeBoer, above, sent a similar request to President Biden last December, noting that federal telework polices were ignoring “the negative impacts of remote work on cities and communities, labor productivity, and U.S. economic competitiveness, as well as the quality of government services.” (Commercial Observer, April 14 and RER letter to President Biden, Dec. 12, 2022).

A study released in May by New York University and Columbia University researchers shows how the disruption from remote work could impact municipalities. “The fiscal hole left by declining office and retail property tax revenues would need to be plugged by raising tax rates or cutting government spending. Both would affect the attractiveness of the city as a place of residence and work.” (Work From Home and the Office Real Estate Apocalypse, May 15 and Roundtable Weekly, May 26)

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The Real Estate Roundtable Approves Five New Board Members
2024 RER Board - image

The Real Estate Roundtable’s membership has approved five new members to serve on its 25-member Board of Directors during the 2024 fiscal year (July 1, 2023 – June 30, 2024). The Roundtable’s Board is effective July 1, elected from the membership, and includes industry representatives from four of The Roundtable’s 18 national real estate trade partners.

Board Transition

  • Roundtable Board Chair John Fish (SUFFOLK Chairman and CEO) also enters the final year of his three-year term that began on July 1, 2021. Fish said, “We look forward to the contributions of five new commercial real estate leaders who have joined The Roundtable’s Board of Directors. Their individual expertise, insight, and broad skill sets will add to our organization’s highly regarded effectiveness on national policy issues affecting CRE. Our Board, supported by our policy advisory committees and general membership, will continue to engage policymakers in Washington with fact-based, non-partisan analysis. I look forward to working with them on issues such as the negative impact of remote work on municipalities and communities; capital and credit concerns in a high-interest rate environment; and a practical approach to the role buildings can play in helping to achieve climate goals.”

  • “I also offer my sincere gratitude to our Board members whose terms have expired. Their significant service to the industry during a global pandemic was essential, and we look forward to their continued participation as Roundtable members,” Fish said. 

  • Roundtable President and CEO Jeffrey DeBoer stated, “Roundtable members consistently bring innovative solutions to compelling policy challenges facing CRE. The Roundtable’s Board of Directors represents all major industry activities and asset types, and includes diverse voices from throughout the country. This inclusion ensures that our Board’s decisions are sustainable, flexible, and based in real-world economics. I am eager to continue working with the Board as we advance new recommendations on organizational and strategic policy direction.”

The five new members joining The Roundtable’s FY 2024 Board of Directors as of July 1 are:

Stepping down from The Roundtable Board as of July 1 are:

The Roundtable’s 2023 Annual Report—“Sustained Strength, Sustained Solutions”—will be sent to all members next week.

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