Sold for a third of ‘assessed’ value. 🤣 Distressed office building sales comps are starting to emerge - and it’s looking ugly. “Sixty Spear St., an 11-story building that is 30% occupied and is expected to be entirely vacant by summer 2025, has been sold to Presidio Bay Ventures for $40.9 million, about a 66% discount versus the most recent assessed property value of $121 million, according to local media SFGATE.” 🍀 Zerohedge / Daniel McNamara Appraisers will increasingly have actual sales comps they’ll be forced to use, rather than having latitude to speculate on current value. That will feed back into updated lender appraisals, increasingly forcing lenders to ‘recognize’ the loss of value, acknowledge technical LTV defaults (if the loan payments are still current) and finding capital to replace the loss of value on their balance sheet. 🍀
“San Francisco Prices Are Sinking, and Property Owners Want a Tax Cut. Owners of San Francisco’s office towers, shopping centers, hotels and homes are flooding the county with appeals to slash their property assessments — and tax payments — as real estate prices sink in the beleaguered city.” 🍀 Bloomberg
In case you missed it. 🤣 "We expect vacancy rates to rise further in the coming years as current office leases gradually expire and the elevated work-from-home rate persists, which is likely to cause office investment to fall an additional 11% by the end of 2024." - Goldman Sachs via Daily Chartbook
Doesn’t this depend when the last valuation was done, the occupancy at that point, other market data etc. if it was 100% leased at last valuation then this ‘new’ value would correspond.
It's painful to read... whew! What's ahead?
So when will landlords get off their $80/SF asking price to fill up their buildings?
Repositioning of Office to Residential is going to be the key opportunity...
I would suggest a Big Data analysis of pre and post distressed sales in prior recessions/depressions for some benchmarks on how bad it can get.
Price versus replacement cost analysis? Purchase price plus costs to repurpose to another viable use (hotel or apartments for instance - both of which are very costly for an office building)?
Portfolio Asset Manager / Development Manager / Receiver 🍀
1y“Trepp, Inc. recently reported that January valuations for CMBS-office backed loans were 52% to 60%.” “CRED iQ® reviewed 190 appraisals of major properties across all assets classes to determine the impact of current market conditions on asset values. Retail and office led the declines, with an average 41.2% valuation decline in $10 billion in assets. Retail was down 57% while office was on its heels at 48.7%.” 🍀 GlobeSt.com via Harold Bordwin / Keen-Summit Capital Partners LLC