Louise Blouin, who grew up in a small town in Quebec, rose to the top tiers of society in New York and London a little more than two decades ago. She made a name for herself as an art-world mogul and a host of heady salons and glittering parties filled with artists, scientists, dignitaries and billionaires. But her time as a power player seemed to come to an end on Feb. 13, when she entered a bankruptcy courtroom in Central Islip, N.Y., the
The U.S. Supreme Court on Tuesday turned away a bid by landlords to challenge rent stabilization laws in New York City that cap rent hikes and make it harder to evict tenants, Reuters reported. The justices declined to hear appeals by property owners and industry groups of lower court rulings that found the price and eviction controls did not violate what is known as the "takings clause" of the U.S. Constitution's Fifth Amendment, which bars the government from taking property without compensating owners. New York City's modern rent stabilization system, enacted in 1969, was designed to address a shortage of affordable housing by capping rent increases and curbing the authority of property owners to evict tenants. The law, which was passed by New York state legislature and is implemented by the city, generally applies to buildings constructed before 1974 with at least six units, covering nearly one million apartments — around half of all apartment rentals in New York City. A city government panel each year decides the percentage increase landlords can charge for rent-stabilized units. According to proponents, rent stabilization measures protect communities by reducing tenant dislocation and homelessness, and by allowing residents to have long-term homes in a neighborhood. The New York law was amended in 2019 to expand tenant protections, drawing legal challenges from landlords and trade associations seeking higher investment returns and more control over their property.
The National Association of Realtors appeared to hit rock bottom in October when a Kansas City jury delivered a $1.8 billion verdict, finding that the industry kept home-sales fees artificially high. But the existential threat to the powerful trade group was about to get worse, the Wall Street Journal reported. Copycat lawsuits have been filed around the nation. Dozens of real-estate brokerages are now defendants. Federal regulators are scrutinizing the industry more closely than they have in years. Brokerage executives are pressuring NAR to settle the legal claims nationwide, worried that more large verdicts could push residential firms and local real-estate associations into bankruptcy. They complain that NAR failed to convey the gravity of the threat. “There has been consistently an arrogant attitude of the senior officers” of the association, said Dave Liniger, chairman of brokerage franchiser Re/Max Holdings. “It just seemed to me that it was just like a solid wall of, ‘It’s our way, and we’re going to keep it that way, and we don’t care.’” Re/Max was also a defendant in the Kansas City lawsuit, but it settled before the trial. A NAR spokeswoman said the organization has always been committed to working with the industry to improve its policies and resolve the legal threats. The Missouri jury found that the powerful trade organization and two brokerages had conspired to keep fees paid to buyers’ agents high. Long before that fiasco, some real-estate executives had urged NAR to change the decades-old commission structure, but the organization refused. The industry now appears headed for significant changes in how buyers’ agents are paid, a system that NAR has fought for decades to protect. One possibility is that sellers would no longer decide upfront how much buyers’ agents get paid, giving buyers more power to negotiate. More buyers might opt to buy homes without using agents at all, which could save them money on commissions but might put less sophisticated buyers at a disadvantage.
Former Treasury Secretary Lawrence Summers said the Federal Reserve and other agencies are right to be probing financial risks tied to commercial properties, saying this was a more important effort in the near term than its initiative to boost capital standards among big banks, Bloomberg News reported. “Regulators are right to be concerned about commercial real estate,” Summers said. “The chronic problem in banking is a failure to pay attention to the market value of assets,” and that’s a “particularly pronounced problem with commercial real estate, where there isn’t always a liquid market for properties,” he said. The Fed vice chair for supervision, Michael Barr, said earlier Friday regulators are “closely focused” on risks in commercial real estate loans, and have stepped up downgrades of supervisory ratings on lenders. Barr also is overseeing a push to force the biggest U.S. lenders to increase the amount of capital they set aside, and last year unveiled a plan for an almost 20% boost. 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!
A Virginia bank says it will delay plans to auction off land at West Virginia Gov. Jim Justice’s posh resort in an attempt to recover more than $300 million on defaulted business loans by the governor's family, the Associated Press reported. In a filing Friday in Greenbrier County Circuit Court, Carter Bank & Trust of Martinsville, Va., said that it will reschedule the March 5 auction to a later date, the Charleston Gazette-Mail reported. The bank also asked that a hearing set for Tuesday be postponed on a request by the Greenbrier Sporting Club in White Sulphur Springs for a preliminary injunction against the bank. Carter Bank published a legal notice in the Charleston Gazette-Mail on Feb. 6 announcing the March 5 auction in Lewisburg involving land at the Greenbrier Sporting Club. Carter Bank has said that it would “aggressively” pursue $302 million it was owed in principal debt, plus interest and fees, from companies owned by the governor’s family. In its Friday filing, Carter Bank said it “understands that homeowners within the Greenbrier Sporting Club development are also very interested in this matter and may be considering undertaking action of their own.” The sporting club is a private equity club and residential community that opened in 2000. Justice bought the resort out of bankruptcy in 2009. He began serving the first of his two terms as governor in 2017.
Landlords that aren’t engaging in lease negotiations with WeWork can tap letters of credit to cover rent the bankrupt co-working space provider is withholding, the company said in a filing, WSJ Pro Bankruptcy reported. The brief was submitted on Wednesday to the U.S. Bankruptcy Court in Newark, N.J., in response to petitions from roughly 20 landlords who requested the court’s intervention to collect January and February rent payments. The New York-based company said in the filing that the “vast majority” of those landlords have access to letters of credit, a financial instrument that serves as an alternative to a traditional cash security deposit. Those landlords should go ahead and draw funds from the banks that issued the letters of credit on behalf of WeWork to cover the overdue rents, the company said in the filing. Lawyers for the landlords have argued in their filings that bankruptcy code requires WeWork to make rent payments without delay because they are considered administrative costs that are first in line to be paid as they come due. A number of previous bankruptcy cases indicated that security deposits shouldn’t be depleted to satisfy administrative costs, the lawyers said. WeWork has been in violation of bankruptcy rules by not making rent payments, they said.
A Nebraska lawmaker whose north Omaha district has struggled for years with a housing shortage is pushing a bill that, if passed, could make Nebraska the first in the country to forbid out-of-state hedge funds and other corporate entities from buying up single-family properties, the Associated Press reported. Sen. Justin Wayne’s bill echoes legislative efforts in other states and in Congress to curtail corporate amassing of single-family homes, which critics say has helped cause the price of homes, rent and real estate taxes to soar in recent years. Wayne said that has been the case in his district, where an Ohio corporation has bought more than 150 single-family homes in recent years — often pushing out individual homebuyers with all-cash offers. The company then rents out the homes. Experts say the scarcity of homes for purchase can be blamed on a multitude of factors, including sky-high mortgage interest rates and years of underbuilding modest homes. Wayne's bill offers few specifics. It consists of a single sentence that says a corporation, hedge fund or other business may not buy purchase single-family housing in Nebraska unless it's located in and its principal members live in Nebraska.
Co-working giant WeWork Inc. is seeking fresh financing in order to finish negotiating rent cuts with landlords and exit bankruptcy, it revealed in a court filing, Bloomberg News reported. The beleaguered company needs the funds mainly to pay rent on office spaces used by its customers, while it deliberates which buildings around the world to keep and which to shed as part of its chapter 11 reorganization. WeWork said that its efforts “are at a critical juncture,” in a court filing that responds to complaints by a number of landlords. More than a dozen landlords had asked a federal judge to force WeWork to pay rent they claim it’s withholding in violation of bankruptcy rules. WeWork has denied the allegation, arguing that the landlords could be paid using other means, such as letters of credit, rather than demanding funds from its shrinking pool of money. The “vast majority” of the unpaid landlords have access to letters of credit and surety bonds set up to ensure they are paid, WeWork pointed out in its filing. The landlords could also be paid using traditional security deposits that renters typically put down when signing a lease, the company argued.
Arbor Realty Trust rose from its roots on Long Island, N.Y., to become a property-finance powerhouse. As a major lender to Sunbelt apartment buyers, it helped fuel a speculative real estate frenzy in 2021 and early 2022, the Wall Street Journal reported. That boom ended when interest rates shot up, imperiling borrowers’ ability to make payments on Arbor’s loans that were often repackaged into bonds and sold to investors. Now, the company is contending with a wave of property owners struggling to pay interest on their floating-rate debt. Borrowers of a quarter of Arbor’s securitized debt were late on debt payments as of mid-January, according to the data company CRED iQ, which analyzed figures from the bonds’ trustee. Borrowers of around 9% of the debt were 30 or more days late. Most borrowers who were late on January payments eventually paid, an Arbor spokesman said, and he said 5.8% of Arbor’s securitized debt payments are still not current on January payments.
