%1

Nordstrom is the latest retailer to shutter stores in downtown San Francisco as crime, rising costs and the fallout from remote work forces lead companies across the country to reevaluate viability in major cities, the Washington Post reported. The Seattle-based retailer, citing dwindling foot traffic, will not renew leases for its store in Westfield Mall and a Nordstrom Rack across the street, according to an email sent to staff from chief stores officer Jamie Nordstrom. The Westfield store will be open until the end of August, and the Rack location will close July 1. In a statement to the Post, Westfield attributed the closure to “the deteriorating situation in downtown San Francisco” and blamed the departure of businesses on “unsafe conditions for customers, retailers, and employees, coupled with the fact that these significant issues are preventing an economic recovery of the area.” Whole Foods announced in April it was shutting down its year-old flagship store downtown “for the time being” to “ensure the safety of our Team Members,” the company told the Post. Retailers Anthropologie and Office Depot are also exiting the area.

The seeds of First Republic Bank’s downfall were sown in the jumbo mortgages of Silicon Valley, where a unique strategy to loan wealthy individuals extraordinary sums of money blew up in spectacular fashion, Bloomberg News reported. In the early 1980s, First Republic Chairman Jim Herbert, then running San Francisco Bancorp, wanted to get into a new line of business. The Bay Area’s high earners were coming to him and asking for unusually large loans to buy pricey properties in the area. “Why don’t we do a couple of these and see how they go? Can’t bankrupt the whole bank,” Herbert said to the firm’s president, according to an account of the conversation on First Republic’s website. Years later, after Herbert left San Francisco Bancorp and founded First Republic, his new bank became known for handing out interest-only mortgages at rock-bottom rates to borrowers with high incomes and exceptional credit scores. Typically, they didn’t have to start repaying the principal for a decade. Demand for the loans surged during the pandemic as wealthy buyers sought mortgage deals that would allow them to keep the bulk of their money in higher return investments. The rush helped First Republic double its assets in four years. It also contributed to its collapse. In the early hours of Monday morning, JPMorgan Chase & Co. agreed to acquire First Republic from the Federal Deposit Insurance Corp., which seized the bank after a tumultuous period in which its stock had cratered and depositors had pulled almost half their money. Just a few weeks earlier, Wall Street’s biggest banks had stepped in to shore it up with their own cash.

Bankruptcy Judge Mary F. Walrath on Friday approved a multibillion-dollar business wind-down for Reverse Mortgage Investment Trust (RMIT), one day after a delay allowed the company to provide additional information on funding for its liquidation, National Mortgage Professional reported. On Thursday, Judge Walrath halted RMIT's scheduled confirmation hearing after raising concerns about the feasibility of the company's plans to meet top-priority case administration claims without further reorganization. By Friday morning, however, RMIT had filed a revised order, plan and declaration that addressed the judge's concerns. The plan includes proposals for financing a case with $1.23 billion in long-term funded debt and a mortgage-servicing portfolio that totaled over $25.5 billion when the company filed its chapter 11 petition. The revised declaration includes a more comprehensive description of the expected estate funding that would be available throughout the wind-down and explains how administrative claims are to be paid, according to Patrick Venter of Sidley Austin LLP, an attorney representing RMIT. RMIT filed for bankruptcy at the end of November, citing rising interest rates and a downturn in new loans for its liquidity crisis. RMIT is one of the largest originators of reverse mortgages in the U.S., with the majority of its reverse mortgage portfolio insured by the Federal Housing Administration (FHA) and pooled into mortgage-backed securities guaranteed by the Government National Mortgage Association (Ginnie Mae).

The operator of the former Bell Bank Park sports complex in Mesa, Ariz., filed for bankruptcy more than a year after opening, seeking a sale to repay roughly $300 million in defaulted municipal debt, WSJ Pro Bankruptcy reported. Legacy Cares, the nonprofit operator of the 320-acre sports complex, filed for chapter 11 on Monday, saying in court filings that it would seek to sell its assets, which are “severely underwater.” It listed $242 million worth of assets and over $366 million of liabilities in its filings with the U.S. Bankruptcy Court in Phoenix. The nonprofit, which had borrowed in the municipal bond market to build the park, defaulted on its interest payments last year. Revenue fell far short of projections, and Legacy Cares recently hired restructuring firm Miller Buckfire to consider options. The park loses roughly $1 million a month on its operations, a burn rate that will only increase as it approaches the summer, its slowest part of the year, according to Legacy Cares’ court papers. It has lined up a $9 million loan from UMB Bank NA, the trustee for municipal bondholders, to fund the expenses of the chapter 11 case.

To resolve a split of circuits, the Supreme Court heard oral argument in Tyler v. Hennepin County to decide whether a real estate tax foreclosure violates the Takings Clause of the Fifth Amendment when a municipality takes title but doesn’t give the owner the difference between the unpaid taxes and the value of the property. Oral argument on April 26 was the last argument of the term that began in October. Given the significance of the case in terms of constitutional law, the Court allowed almost two hours for argument. The Court will hand down a decision before the term ends in late June. The decision in Tyler may (or may not) resolve a long-standing circuit split on the question of whether a tax foreclosure can be attacked in bankruptcy as a fraudulent transfer.​​​​

Cincinnati developer Ray Schneider has filed bankruptcy, and one of the creditors Schneider is engaged in other litigation with is asking for a court-appointed trustee on the matter, the Cincinnati Business Courier reported. Schneider, the president of Circle Development, filed for chapter 11 bankruptcy on March 2 in the U.S. Bankruptcy Court for the Southern District of Ohio, claiming between $10 million and $50 million in assets in a court filing. He also claimed between $100 million and $500 million in liabilities. In a court document listing the 20 largest claims and creditors that Schneider owes, claims totaled more than $177 million, with an additional unsecured claim of over $7.2 million. Circle Development is the eighth-largest commercial real estate development group in Greater Cincinnati, according to Business Courier research. It had 1.36 million square feet of locally owned and developed property in its portfolio in 2022.

Before the pandemic, San Francisco’s California Street was home to some of the world’s most valuable commercial real estate. The corridor runs through the heart of the city’s financial district and is lined with offices for banks and other companies that help fuel the global tech economy. One building, a 22-story glass and stone tower at 350 California Street, was worth around $300 million in 2019, according to office broker estimates, the Wall Street Journal reported. That building now is for sale, with bids due soon. They are expected to come in at about $60 million, commercial real-estate brokers say. That’s an 80% decline in value in just four years. This is how dire things have become in San Francisco, an extreme form of a challenge nationwide. Nearly every large U.S. city is struggling, to some degree, with reduced office-worker turnout since the pandemic spurred remote work. No market was hit harder than San Francisco, for reasons including its high costs, reliance on a tech industry quick to embrace hybrid work, and quality-of-life issues such as crime and homelessness.

Hundreds of shopping centers across the U.S. are poised to lose their anchor tenant in the coming months after Bed Bath & Beyond Inc. filed for bankruptcy and announced plans to eventually close its remaining stores, the Wall Street Journal reported. While property owners will have to absorb additional costs to lure replacement tenants, and some might still struggle to fill large vacated spaces, many landlords say they aren’t worried. Demand for big-box space in open-air shopping centers remains strong despite rising interest rates, and plenty of other retailers are waiting in the wings to fill the spaces vacated by Bed Bath & Beyond, several real-estate executives said. New tenants will in most cases pay higher rents, too, these property owners say. “There is strong interest across the board in these locations,” said John Kite, chief executive of Kite Realty Group Trust, one of Bed Bath & Beyond’s biggest landlords, with 22 locations across its portfolio. “If this was going to happen, this is probably a pretty good time for this to happen.” Retail real estate struggled for years because of oversupply and the rise of online shopping. But the sector rebounded strongly over the past two years after pandemic lockdowns eased, shoppers returned to stores and retailers fine-tuned their mix of e-commerce and bricks-and-mortar locations. Nationwide, the retail availability rate fell to 4.8% in the first quarter, the lowest level since at least 2005, when real-estate firm CBRE began tracking the market.