Too Many Vacant Lots, Not Enough Housing: The U.S. Real Estate Puzzle​​​

Despite a national housing shortage, tens of thousands of empty residential lots in Chicago, Detroit, Pittsburgh and elsewhere are beyond the reach of developers or kept vacant by owners because of legal and government obstacles that cities are now trying to knock down, the Wall Street Journal reported. In block after block, occupied homes sit next door to vacant, weed-covered lots that have spread in hopscotch patterns across largely Black and Latino neighborhoods, depressing property values and property tax revenue. Neighbors say half-empty blocks draw crime. Declining populations and job losses in former industrial hubs left many big-city neighborhoods with a deteriorating housing market, which has been made worse by government policies decades out of date. Cumbersome rules to resolve unpaid tax bills on abandoned lots keep away developers, and cheap tax assessments on vacant lots encourage owners to keep them off the market — perfect conditions for a downward housing spiral, according to officials seeking to resurrect the neighborhoods. “Vacancy becomes a disease, and it’s contagious,” said Bridget Gainer, a Cook County Commissioner and chair of the Cook County Land Bank Authority. The land bank has helped put around 865 vacant lots and more than 1,100 abandoned buildings back on tax rolls since it formed in 2013, a goal pursued by other cities. (Subscription required.) Read more.

Private Credit Loans Are Growing Bigger and Breaking Records​​​

The $1.5 trillion private credit market just set a fresh record for the largest loan in its history. With growing firepower, direct lenders are poised to take ever more deals away from banks and from the junk bond and leveraged loan markets, Bloomberg News reported. Private lenders such as Oak Hill Advisors LP, Blue Owl Capital Inc. and HPS Investment Partners LLC are providing a $5.3 billion loan package to Finastra Group Holdings Ltd., a fintech firm owned by Vista Equity Partners. Comprising a $4.8 billion unitranche, a blend of senior and subordinated debt, and a $500 million revolver facility, the financing is the biggest private credit loan ever in the U.S., according to data by KBRA DLD. It’s been a dramatic rise. Even as recently as four years ago, a $1 billion private loan was a rare event, and anything above $2 billion was simple aspiration. Also back then, the few borrowers who could tap the junk debt markets would opt instead for a private loan. But with banks still reluctant to commit capital to risky loans, borrowers have been flocking to direct lenders. Read more.

Electric Bus Maker Proterra’s Bankruptcy Reveals ‘Finite Window’ for EV Startups​​​

Electric bus maker Proterra Inc. had support from U.S. President Joe Biden, contracts with 135 transit agencies and $309 million in revenue. But despite that, it couldn’t turn a profit after nearly 20 years and filed for bankruptcy last week. In doing so, it revealed that a diversified business in the growing EV market and millions in government loans weren’t enough to keep it afloat, according to a Bloomberg analysis.  “Rest assured, there will be more bankruptcies  — including some public companies — in the EV industry,” said Pavel Molchanov, an equity research analyst at wealth-management firm Raymond James & Associates. “It's only a matter of time.” The Bay Area-based zero-emission bus manufacturer is one of the highest-profile EV company casualties in recent years. Proterra cited “market and macroeconomic headwinds” as the catalysts for its chapter 11 bankruptcy filing, where it listed assets and liabilities of at least $500 million each. The auto industry has deployed billions towards EV production, while across the globe, governments have set increasingly strict emissions limits and mandates to accelerate the transition to EVs. But manufacturing commercial EVs profitably remains a huge challenge for legacy automakers and younger companies alike. Despite increased market demand and government support for EV adoption, selling buses to transit agencies is costly, and contracts can take years to complete. That’s because bus customization needs vary by transit agency. Plus, municipalities tend to buy buses in batches when funding is available, creating unpredictability that makes it harder to manage a consistent cash flow, according to Nikolas Soulopoulos, head of commercial transport research at BloombergNEF. ​​​Read more.

CFPB Considering New Rules to Crack Down on Data Brokers​​​

The Consumer Financial Protection Bureau (CFPB) is considering new rules to crack down on data brokers amid a wider push to reduce risks from the rapidly expanding capabilities of artificial intelligence, The Hill reported. CFPB Director Rohit Chopra said at a White House roundtable on Tuesday that the agency is looking to potentially bring data brokers — firms that harvest and sell consumer data — under the purview of the Fair Credit Reporting Act. The Fair Credit Reporting Act grants various protections to consumers regarding background reports that are assembled with information about them, such as safeguards to ensure accurate information and restrictions on its use. Under one proposal floated on Tuesday by Chopra, data brokers would be defined as consumer reporting agencies, and the sale of data about payment history, income and criminal records would be treated as a consumer report, triggering additional requirements under the law. The CFPB is also considering a rule that would clarify whether identifying information contained in consumer reports produced by credit reporting companies, known as “credit header” data, is also considered a consumer report. Read more.

Commentary: Corporate Failure Is a Valuable Asset that’s Hard to Protect*​​​

The fraction of enterprise value of large U.S. companies represented by tangible assets — things like real estate and inventory — has fallen from 50% to 20% over the past 15 years, according to a Bloomberg commentary. Moreover, only about 25% of enterprise value is in identifiable intangible assets such as patents, copyrights, trademarks, customer lists and data files. The remaining 55% is in assets too intangible to even identify clearly — things like technical knowledge, corporate culture, going-concern value and customer relationships. A recent article in Business Law Today calls attention to something less tangible still: the economics of negative information assets. How do you assess and safeguard corporate know-how about products that didn’t work, dead-end research or failed experiments at a time of heightened staff mobility? For companies with little in the way of tangible assets or recurring revenue — ones valued primarily on expected future products and services — gauging the worth of what a company knows is key, and much of that knowledge is about approaches that don’t work. Moreover, that knowledge only has value if the company can protect it. Just as normal matter exists in a sea of dark matter and dark energy that make up 95% of the universe, positive business information (such as product specifications) exists in a much larger sea of negative information (such as ideas that don’t work). Not only are intangible assets — especially negative information assets — growing rapidly in economic value, they are also getting harder to protect. Employee mobility has grown since 2008, especially in technology fields, and the government is working to increase it further with Federal Trade Commission efforts to ban noncompete clauses and the proposed Workforce Mobility Act of 2023. Courts are getting more reluctant to grant patents and other intellectual protection, especially on software. Work-from-home means that information spills out to uncontrolled locations, and of course the Internet makes transmitting information far easier than in the past. From an investor’s perspective, this means that only about 20% of what you pay for an average stock covers assets that can be easily insured and protected against theft or damage, and that creditors can seize and sell in a bankruptcy with some hope of recovery. Read more.

* The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI. 

Mortgage Rates Hit 7.09%, Highest in More than 20 Years​​​

The average mortgage rate rose to 7.09%, its highest level in more than 20 years, according to data released Thursday by mortgage giant Freddie Mac, the Wall Street Journal reported. The increase extends a lengthy stretch of high borrowing costs that has slowed the housing market to a crawl. This marked the first time since last fall that the rate on a 30-year, fixed-rate mortgage rose above 7%. A year ago, rates were around 5%. The housing market is the part of the economy hit most directly by the Federal Reserve’s high-rate policies. The resulting slowdown in refinancing and purchase activity has battered some mortgage lenders, leading to tens of thousands of layoffs in the industry and weighing on economic growth. Mortgage rates aren’t directly tied to the central bank’s moves. But they tend to move loosely with the 10-year Treasury yield, which on Thursday hit its highest level since 2007. Some analysts see ample room for the 10-year yield to keep climbing as markets brace for the possibility that rates aren’t going to decline soon. When the Fed started lifting interest rates at a rapid clip last year, the rising cost of borrowing to buy a home was expected to be temporary. A year and a half on, rates are climbing back toward their highs, despite briefly dipping toward 6% in late 2022 and early 2023. Now, buyers, sellers, investors and real estate players are adjusting to the idea that higher rates are here to stay, or at least here to stay longer than they were expecting. Read more.

U.S. Weekly Jobless Claims Drop as Labor Market Remains Tight​​​

The number of Americans filing new claims for unemployment benefits fell last week, pointing to continued tightness in the labor market even as job growth slows, Reuters reported. Labor market tightness is underpinning the economy, with data this week showing a solid increase in retail sales in July and a surge in single-family homebuilding, which prompted economists to raise their growth estimates for the third quarter. But that resilience raises the risk that the Federal Reserve could raise interest rates again. Initial claims for state unemployment benefits dropped 11,000 to a seasonally adjusted 239,000 for the week ended Aug. 12, the Labor Department said on Thursday. Claims surged in the week ending Aug. 5, with applications in Ohio accounting for a big chunk of the increase. The state, which has previously experienced fraudulent filings, attributed the jump to layoffs in the manufacturing and automobile industries. Automakers normally idle plants in July to retool for new models. Unadjusted claims dropped 15,067 to 212,850 last week. Claims in California declined by 3,519. There were also notable decreases in Texas, Michigan, New Jersey and Pennsylvania, which more than offset a sizeable increase in Virginia. Read more.

From Detroit to Hollywood, New Union Leaders Take a Harder Line​​​

The forces that swept Shawn Fain into power in March as the new president of the United Automobile Workers union are the same ones that have borne down on unions across a variety of industries: a feeling among members that they have spent years enduring out-of-touch leaders, meager wage growth and concession-filled labor agreements that have forced some to do similar jobs as co-workers for less pay, the New York Times reported. The long-simmering rage helps explain why, in addition to Mr. Fain, several prominent unions are now in the hands of outspoken leaders who have taken their membership to the brink of high-stakes labor stoppages — or beyond. Sean O’Brien, president of the International Brotherhood of Teamsters, has repeatedly referred to corporate leaders as a “white-collar crime syndicate” and warned that a strike of the union’s 300,000-plus United Parcel Service members appeared inevitable. (The union recently reached a tentative agreement that members are voting on.) Just after a union of more than 150,000 Hollywood actors called a strike in July, Fran Drescher, president of SAG-AFTRA, said that she was “shocked by the way the people that we have been in business with are treating us.” She added: “It is disgusting. Shame on them!” The companies, including UPS and the automakers, have indicated that they are willing to increase compensation but cannot jeopardize their long-term viability. The large Hollywood studios have offered actors pay increases but say they must be able to adapt to the decline of traditional television. And channeling members’ anger is not without risk: It can raise expectations and make it difficult for leaders to finalize contracts. O’Brien is facing a “vote no” campaign organized largely by UPS part-timers who argue that the union did not secure large enough raises. Read more.

Nomination Period Closing Soon for ABI’s International Matter of the Year Award​​​

ABI’s International Committee is accepting nominations for its Second Annual ABI International Matter of the Year Award. For criteria, eligibility and other information on the award, please click here.

Public Notice for Reappointment of Bankruptcy Judge Mildred Cabán​​​

The current term of office of Hon. Mildred Cabán, U.S. Bankruptcy Judge for the District of Puerto Rico, is due to expire on March 16, 2024. The U.S. Court of Appeals for the First Circuit is considering reappointment of Judge Cabán to a new term of office and has determined that she appears to merit reappointment subject to public notice and opportunity for public comment. Members of the bar and the public are invited to submit comments for consideration by the court of appeals regarding the reappointment of Bankruptcy Judge Cabán to a new term of office. All comments will be kept confidential and may be submitted via U.S. Mail to Susan J. Goldberg, Circuit Executive, John Joseph Moakley United States Courthouse, 1 Courthouse Way, Suite 3700, Boston, Massachusetts 02210, or in the form of a PDF letter attached to an email to Susan_Goldberg@ca1.uscourts.gov. The circuit executive will then submit the comments to the court of appeals for its decision. Comments must be received no later than Friday, September 8, 2023. 

Sign up Today to Receive Rochelle’s Daily Wire by E-mail!
Have you signed up for Rochelle’s Daily Wire in the ABI Newsroom? Receive Bill Rochelle’s exclusive perspectives and analyses of important case decisions via e-mail!

Tap into Rochelle’s Daily Wire via the ABI Newsroom and Twitter!