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Chicago Mayor Brandon Johnson is proceeding with a revamp of empty downtown buildings initially estimated at $1 billion in an effort to counter a commercial real estate crisis that’s cut sale prices by more than 50%, Bloomberg News reported. The city, run by a progressive Democrat who’s been in power for less than a year, has been working with developers to refine plans to repurpose buildings along and near LaSalle Street, once known as the Wall Street of Chicago, according to the city’s Chief Financial Officer Jill Jaworski. An announcement is expected by the summer after high interest rates delayed the project, she said. Chicago, like many other cities in the U.S., has been struggling to fill empty offices after the pandemic hollowed out downtowns. Johnson’s move to keep an initiative kick-started by his predecessor Lori Lightfoot will help combat vacancy rates in the city’s central business district, which climbed to a record in the fourth quarter, according to real estate brokerage Jones Lang LaSalle. “It’s taken a little bit longer to get things going but we are working closely with those projects and doing what we can to move them forward,” Jaworski said in an interview on Friday. “We expect that we will see projects get announced and get off the ground in the near future.” Lightfoot, the first Chicago mayor to lose a reelection bid since 1983, first announced plans to repurpose almost 2.3 million square feet of vacant space — the equivalent of almost 40 football fields — in September 2022. The future of the so-called LaSalle Street Reimagined initiative had been in question since Johnson took over in May. Read more.

ABI will present a program April 30-May 2 that will address CRE exposure: the 2024 Distressed Real Estate Symposium, to be held in Ojai, Calif. Click here to register!

Miami-Dade County is seeking $2.5 billion to cope with one of the worst housing crises in the U.S., Bloomberg News reported. Mayor Daniella Levine Cava will propose the new, property tax-backed debt package to voters later this year, she said. The largest portion of the money — about $800 million — will go to a fund that will finance affordable housing projects, while the rest will be used to improve the county’s infrastructure, including parks, sewage and roads. “Cost of development is extremely high because land is so limited,” Cava said in an interview. While details of the bond proposal, set to be put on the ballot in November, are still being worked out, Cava said the “$800 million will go very fast.” Home prices in the Miami area have surged 82% over the past five years, thanks to steady inflow of wealthy newcomers, squeezing out those that can’t afford it. Miami-Dade county’s population has remained relatively stable since 2020, while traffic congestion soared and the percentage of people rent-burdened is among the highest in the nation. Miami isn’t alone in tapping bond markets to alleviate housing issues. Cities across the US have grappled with how to boost affordable housing as home prices have gone up. Telluride, a wealthy ski resort destination in Colorado, borrowed $31.8 million to pay for so-called workforce housing, same as vacation hot-spots like Nantucket and other towns on Cape Cod. On a larger scale, New York City sold $700 million of social bonds last year to help pay for affordable housing.

WeWork’s official junior creditors committee is seeking court approval to sue SoftBank, the co-working space provider’s biggest equity holder, alleging the Japanese conglomerate used WeWork’s prebankruptcy debt restructuring deal to improve its position in the company’s capital structure, WSJ Pro Bankruptcy reported. The committee said in a bankruptcy court filing Wednesday that SoftBank and another group of creditors representing 62% of WeWork’s unsecured notes orchestrated the May 2023 debt restructuring to “mitigate their losses and elevate their position in” WeWork’s capital structure, knowing that the company’s bankruptcy filing was imminent. Because of these “uptier transactions,” WeWork’s general unsecured creditors—including landlords and holders of about $180 million in unsecured notes—were left subordinated to $2.4 billion in newly created secured debt, the committee said. A WeWork spokesman didn’t directly comment on the committee’s assertion but said the company has made transparency and full cooperation with its key stakeholders a priority since its bankruptcy filing in November. The company remains focused on its lease renegotiations with landlords, aiming to emerge from bankruptcy “financially strong and profitable,” he said. The committee wants the bankruptcy court’s approval to pursue its claims against SoftBank and the participating creditors and, if appropriate, wants to seek a settlement to recover money for its constituents, according to the filing.

A small North Texas custom homebuilder is trying to recover from runaway costs during the Covid-19 pandemic and a judgment of more than half a million dollars that it's struggling to pay, the Dallas Business Journal reported. Argyle, Texas-based Noble Classic Homes Inc. filed on Feb. 26 for chapter 11 protection in the Eastern District of Texas. The company listed almost $632,000 in assets and about $630,000 in debt tied to a judgment for a 2022 construction-leak lawsuit in Denton County court. "We have constructed an estimated 800 custom homes over the past 23 years and never once experienced something like this," Noble President John Michaels wrote in a letter attached to the bankruptcy filing. The same couple who filed the 2022 lawsuit also sued Noble for allegedly making fraudulent transfers to other entities, according to court documents. In the bankruptcy filing, Noble reported $16.7 million in revenue from home sales in 2023 through affiliate company Noble Classic Management LLC but only about $94,000 in profit.

U.S. annual home prices rose again in December, although housing price growth slowed during the fourth quarter of 2023 from the prior three-month period, Reuters reported. Home prices grew 6.6% on a yearly basis from an upwardly revised 6.7% in November, a survey released by the Federal Housing Finance Agency (FHFA) showed on Tuesday. The slight decrease in appreciation followed on the heels of the swiftest annual growth in November since December 2022. On a monthly basis, home prices increased 0.1% in December from an upwardly revised 0.4% in November. "U.S. home prices increased modestly over the course of 2023," said Anju Vajja, acting deputy director for FHFA's division of research and statistics. "However, the market showed signs of softening as house price appreciation was lower in the fourth quarter of the year than in the previous quarter." Prices increased 1.5% sequentially in the final three months of the year, down from 2.1% in the previous three months, FHFA said. After nearing 8% during the fourth quarter of 2023, the average rate on the 30-year fixed-rate mortgage has remained below 7% since early December 2023, according to Freddie Mac data. The Federal Reserve has held off on raising its benchmark overnight interest rate since July.

The former chief executive of Firestar Diamond, a jewelry wholesaler accused of taking part in bank fraud allegedly orchestrated by Nirav Modi, transferred his interest in a multimillion-dollar New York residence to his wife days after his company filed for bankruptcy in 2018, the trustee responsible for liquidating Firestar said in a lawsuit seeking to undo the transfer, WSJ Pro Bankruptcy reported. Mihir Bhansali made the transfer to place his interest in the residence, which had been purchased for $7.1 million, “outside the reach of his present and future creditors,” Richard Levin, the trustee working to distribute Firestar’s remaining assets, said in a lawsuit filed Monday in the U.S. Bankruptcy Court in the Southern District of New York. It is the third lawsuit lodged by the Firestar trustee against Bhansali, whom Levin said participated in the Indian bank fraud allegedly orchestrated by jewelry magnate Modi. Levin said in his new lawsuit that the residence in New York was bought partly with cash from the alleged Modi scheme. Levin said that Modi was found living in London in 2019 and arrested. In 2021, after a trial, the U.K. granted India’s request to extradite him, but Modi appealed the extradition ruling, and he remains in prison in London, Levin said.

The Trump International Hotel in Washington, D.C., was a favorite Republican meeting spot during the Trump presidency, attracting lobbyists, lawmakers and others with business before the administration. After the Trumps faced criticism that they were skirting government-ethics laws by profiting from the property, they put up for sale the long-term lease rights for the hotel in the former Old Post Office, the Wall Street Journal reported. In 2022, the Trumps sold those rights to Miami-based investor CGI Merchant Group for $375 million — a price that was tens of millions of dollars more than the other offers. CGI rebranded the hotel as a Waldorf Astoria. This month, the new owner defaulted on a $285 million loan related to the property, according to people familiar with the matter. The missed payments on that loan reflect higher interest rates and the above-market price the firm paid the Trumps, industry executives say. In an interview, CGI Chief Executive Raoul Thomas said he is lining up $100 million of new financing for the property. Mavik Capital Management, a real-estate debt and investment fund, is in talks to provide $75 million to cure the default and restructure the troubled balance sheet, while also providing money for a private club and another restaurant at the hotel. But reaching a final deal might not be easy. Hilton, which manages the Washington, D.C., property, has been talking to other firms about new capital and would have to approve any new partner.

More U.S. banks will fail as the commercial real estate crash begins to work its way through to lenders’ balance sheets, according to Joshua Pack, co-chief executive officer at Fortress Investment Group LLC, Bloomberg News reported. Fortress has already acquired about $1.5 billion of performing office loans from financial institutions at prices ranging from 50 cents to 69 cents on the dollar, he said in an interview with Bloomberg’s Credit Edge podcast. Lenders are selling at those levels because they fear values have further to fall and want to take the hit now, he said, adding that regulators will merge some banks as they look for solutions to the problem. Though the stress is not systemic, “you’re going to see more of this consolidation and/or liquidation of US banks,” Pack said. “A lot more eggs are going to get broken.” More than $900 billion of debt on US commercial and multifamily real estate will require refinancing or property sales this year as building values fall and credit costs remain much higher than they were when the loans were taken out, according to the Mortgage Bankers Association. Smaller banks are particularly vulnerable after they increased their CRE lending during the pandemic, boosting their market share, and leaving themselves vulnerable to soaring interest rates. Read more.

ABI will be presenting a program that will address CRE exposure: the 2024 Distressed Real Estate Symposium, to be held April 30-May 2 in Ojai, Calif. Click here to register!

Housing market trends are shaping up in favor of a solid 2024 for U.S. homebuilders — as long as mortgage rates don't jump back to the highs they hit late last year, the Associated Press reported. Sales of new homes rose nationally in 2023 for the first time in two years, climbing 4.2% from a year earlier, according to the Commerce Department. This bucked the trajectory of the broader housing market, which remained mired in a deep slump as sales of previously occupied U.S. homes sank roughly 19% to a nearly 30-year low. Homebuilders were able to mitigate the impact of higher interest rates on home shoppers by lowering prices and offering incentives like paying buyers’ closing costs or buying down the rate on their mortgage. They also benefited from a chronically low inventory of existing homes on the market. Those market trends are expected to help give homebuilders a leg up again this year, Wall Street analysts say. Moody’s Investors Service projects that new U.S. home sales will increase 5% in 2024, citing strong demand among millennials and a healthy job market.

Medical Properties Trust reported growing losses related to its largest tenant, Steward Health Care System, and said it lent the struggling hospital chain another $20 million, the Wall Street Journal reported. MPT, the nation’s largest hospital landlord, reported a fourth-quarter net loss of $664 million, or $1.11 per share, driven by $772 million of write-offs and other impairment charges mainly related to Steward, a Dallas-based hospital chain trying to stay out of bankruptcy. In a Jan. 4 update, MPT had said it expected to book about $350 million of write-downs related to Steward. In that same release, MPT said it had agreed to fund a new $60 million bridge loan for Steward and that Steward was $50 million behind on its rent. MPT in its press release this morning also detailed plans to raise cash through asset sales. Its shares were up 5% in morning trading. MPT’s comments about Steward will be closely watched in Massachusetts and other states where Steward has operations. Yesterday, Mass. Gov. Maura Healey sent Steward a letter demanding that it release its financial statements by Feb. 23. The last set of Steward financial results that were disclosed publicly was for 2020.