Editors’ Weekly News Roundup, June 5th – June 9th

After much thought and consideration, we believe it is in the best interest for Park’s stockholders to materially reduce our current exposure to the San Francisco market.Thomas J. Baltimore Jr., chairman and CEO, Park Hotels & Resorts

Each of the past week’s five most read stories on Connect CRE reflected the times we’re living in. Topping the ranking and closing out the week on a note of optimism was coverage of the recent appearance by JLL CEO and president Christian Ulbrich on CNBC. 

JLL CEO Ulbrich Sees Brighter Days for Office Leasing was the headline. In a three-and-a-half-minute interview segment on CNBC’s Last Call, the industry veteran provided a more comprehensive and nuanced overview of the market than you’re likely to get from media coverage that focuses on the massive quantity of office loans due to mature in the next few years. 

Ranking second was a report that Brookfield Asset Management is launching its next large-scale real estate fund. The company sees acquisition opportunities aplenty, especially in the office sector where it’s already one of the largest owners globally. 

However, while the number in the headline Brookfield Sets $15B Target for Fifth Flagship Real Estate Fund is lofty, it’s notable that the $15-billion goal falls short of the $17 billion that Brookfield reached with the fourth in the series. Even when you’re an institutional colossus and your fundraising target is in the 11-figure range, in the current environment it’s prudent to temper your expectations. 

Speaking of the current environment and loans coming due, lodging REIT Park Hotels & Resorts made headlines this past week by announcing that it has given up on a big CMBS loan secured by two of its San Francisco assets. Our third most read story, Park Hotels Walks Away from $725M CMBS on Two San Francisco Properties, reported the company’s rationale in preparing to hand over the keys to the Hilton San Francisco Union Square and the Parc 55 San Francisco. 

“Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges both old and new: record high office vacancy; concerns over street conditions; lower return to office than peer cities; and a weaker than expected citywide convention calendar through 2027,” said Park Hotels CEO Thomas J. Baltimore, Jr.  

Presumably this means that both properties will be hitting the for-sale market before long. It’ll be interesting to see what kind of pricing they garner, considering the local scenario Baltimore described. 

Higher levels of pricing aren’t always a good thing, certainly not when it comes to expenses. The past week’s fourth most read story reported a survey by the National Multifamily Housing Council that zeroed in on rising insurance costs for the industry. 

NMHC: Insurance Costs for Operators Up 26% Over Past Year focused on the council’s view that legislative action is needed to rein in those increases. That’s especially true in view of “the current confluence of high interest rates, increasing costs and an expanding need for affordable and attainable housing,” as NMHC president Sharon Wilson Géno put it. 

The week’s fifth most read story returned to the lodging sector and a positive outcome for the seller, in this case Blackstone Real Estate Income Trust. Ryman Hospitality was the buyer and the JW Marriott San Antonio Hill Country Resort & Spa in San Antonio was the property in Hill Country Resort Flips For $800M.  

BREIT’s disposition of the 1,002-key property wasn’t a sale made under duress, but an orderly exit from a five-year hold period. That five-year hold included the pandemic, a health crisis that hit the lodging sector especially hard in terms of revenue. It remains to be seen whether the Hill Country Resort & Spa deal was a benchmark for pricing or an outlier. 

Although the positive outlook expressed by JLL’s Ulbrich was grounded in solid evidence, the challenges facing the office sector are real. A story in the latest edition of Weekender takes a deep dive into the potentially hazardous combination of rising sublet space and maturing fixed-rate loans. Take a few minutes to catch up with that report along with the rest of Weekender and other stories you may have missed over the past week. 

Connect

Inside The Story

About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).