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Five months into the pandemic, hotel rooms remain largely unreserved, office space sits empty and hardly anyone is venturing into malls, the New York Times reported. Commercial tenants are struggling to pay their rents, and property owners are struggling to make payments on the loans they took out to finance the buildings. Some real estate investors, including the hedge funds and private equity firms that hold those loans, have had enough. Unwilling to risk any more missed interest payments, they are taking property owners and developers to court, hoping to foreclose on their interests in the properties and minimize their financial losses. Already, there are a few high-profile battles, including one involving a retail complex in Times Square that is owned by the family of Jared Kushner, President Trump’s son-in-law. The operators of the Mark Hotel, one of Manhattan’s most luxurious hotels, with Art Deco-inspired rooms and a suite that can cost $10,000 a night, recently beat back a foreclosure attempt in court. These cases have been initiated by a type of lender that is driven largely by narrow financial interests, but real estate lawyers and lenders expect foreclosure proceedings to become more widespread the longer commercial tenants fail to keep up with the monthly rent checks. Given that a full economic recovery from the pandemic is probably years in the making, things could get much uglier in the commercial real estate market before they improve. “When this all started in March, the first reaction was this was temporary and let’s just see how this plays out,” said H. Scott Miller, a real estate lawyer with Carlton Fields. “But we’re getting to the point where people are saying, ‘How much longer can this continue?’ This just can’t be open-ended.” The delinquency rate on large commercial loans tied to real estate in the U.S. has surged to just under 5.78 percent — nearly doubling in just one month, according to Moody’s Investors Service, a credit-rating agency. During the financial crisis that began in 2008, that rate peaked at just over 10 percent, but not until four years into the crisis. The hospitality and retail industries, which have been hit especially hard by the pandemic, account for 82 percent of the most seriously delinquent commercial loans, Moody’s said.

Chesapeake Energy Corp. yesterday sought bankruptcy court approval to cancel $311 million in pipeline contracts, setting up a battle with U.S. regulators and operators including Energy Transfer LP, according to court filings, Reuters reported. Chesapeake on Sunday became the largest U.S. oil and gas producer to seek bankruptcy protection in at least five years, falling to heavy debt and the impact of the coronavirus outbreak on energy markets. The company separately said in a filing that it plans to operate six to eight drilling rigs for the next two years, about half the 14 rigs active on average in the first quarter, as it battles a historic downturn in oil prices. The shale pioneer wants to walk away from contracts with units of Energy Transfer, Boardwalk Pipelines, and a Crestwood Equity Partners and Consolidated Edison gas joint venture. The contracts involve about $293 million with Energy Transfer’s Tiger Pipeline and $18 million with Boardwalk’s Gulf South Pipeline.