🗞️ Who's afraid of the fall? | Inside the September 2023 Issue

Inside the latest issue of The Real Deal Sep 05, 2023 [View in Browser]( [Share](   [Magazine Cover Image]( Welcome back! Hopefully you had a great summer and were able to vacation somewhere on the planet that wasn’t 120 degrees in the shade. I’m excited about the fall, but also nervous. There’s less talk about a recession, but autumn is also a time of stock market curveballs (that’s when the Great Recession and Black Monday were thrown at us). Let’s hope we aren’t looking at the same unpleasantness this year — there are a lot of big questions for real estate: Will the post-Labor Day return to office finally pan out? Probably not, which still leaves big existential questions about our downtowns. There’s still lots of office space to be repositioned, and there’s a new term, “urban doom loop,” that’s being bandied about. Will “Red October” slam the multifamily market? Second to office in terms of distress is the multifamily sector. Lots of investors bought rental buildings in recent years. But those investors weren’t counting on rising interest rates when they borrowed floating rate loans. Cue what some are calling “Red October,” with nearly $8 billion in multifamily loans coming due in October and November, which are expected to drive a wave of distress. Will the residential market malaise end? We seem to be stuck in a low inventory, low sales environment. There’s not a ton going on, which is bad for brokerages and broker commissions. That tepid demand doesn’t inspire developers to build new projects either. With interest rates remaining high, who knows when that will change. The outlier is the jet-setting global wealthy, the 1 percent of the 1 percent, who are immune to market forces and can pay cash, whether they’re buying a Four Seasons-branded condo in Miami, Austin, New York or London. Of course, underlying all of this — determining the fate of the office, multifamily and residential markets — is the availability of money. Our big story package in this issue looks at financing from all angles amid a situation of lending being very much in limbo. Our ranking of the biggest lenders over the past year in New York City shows [a sharp drop-off]( compared to the year before in how much was doled out to borrowers. Reporter Isabella Farr also takes a look at Arbor Realty Trust, the most well-known publicly traded lender skewed toward multifamily lending. As rates have risen over the past year, Arbor has become [exposed to borrowers]( that are struggling to pay off these loans. It’s not all bad news. Despite the “doom loop” discussion about San Francisco’s downtown, the residential market in the Bay Area’s nicer neighborhoods appears to have hit bottom and is rebounding. Prices dropped enough that brokers are now seeing bidding wars ([that’s right, bidding wars](). San Francisco is often a canary in the coal mine nationally — perhaps it’s a harbinger of what could be ahead for other cities. We also have our annual ranking of [San Francisco’s top residential brokers](. Still, whether our big cities will support enough development to address housing shortages remains to be seen. The NIMBY versus YIMBY battle is playing out in Los Angeles, and the [NIMBYs seem to be winning](, at least for the moment. (And also don’t miss [our L.A. Forum on Sept. 21,]( where we’ll dive deeper into the issue.) It was only a few years ago that retail (not office) was the bête noire of the industry, where thanks to the rise of online retail, brick and mortar stores were expected to go extinct. Not so much anymore. In this issue’s Closing interview, we sit down with [famed retailer Mickey Drexler](, who’s back in startup mode. If you lift the curtain on an iconic retailer — the Gap, Old Navy, J. Crew — more likely than not, you’ll find Drexler has been there, playing the Wizard. Finally, on a personnel note, this month marks the departure of our SVP of Content, Hiten Samtani, who has been with The Real Deal for more than 10 years. A better creative partner I could not have had — someone who knows the DNA of The Real Deal as well as anyone. Fortunately, he’ll still be collaborating with us on future projects. Enjoy the issue. Editor's Note Stuart Elliott Editor-in-Chief & CEO   If you’re interested in receiving future magazine issues in print, sign up for our [annual subscription](. Save $20 OFF your first year with promo code: MAG20 [SUBSCRIBE NOW](   Nervous lenders retreat in NYC After more than a decade of rock-bottom interest rates, real estate lenders and borrowers in New York City are in a [precarious situation](. The rapid rise of rates and declining property values in some sectors have prompted lenders to be more selective about what sectors they lend in — and to whom. Most are sticking with current customers but being extremely cautious about adding new ones. “Their expansion is very guarded. It’s more opportunistic,” said Valley National Bank executive Chris Coiley. As a result, the volume of loan issuance has [plummeted]( over the past year. Owners of properties with sinking values have found it difficult to refinance expiring debt, and holders of that debt have no good options for how to proceed. [READ MORE](   [Image]( Inside Arbor Realty Trust’s books If you need a bridge loan to buy 3,200 apartments in Houston, who you gonna call? Arbor Realty Trust. Arbor has solidified itself as a go-to lender for multifamily shops, just like First Republic Bank was known as a mortgage financier for the rich. No other well known, publicly traded lender is so skewed towards multifamily. [Image]( Brokerages tap AI to rev recruitment ChatGPT’s debut last year made the opportunities in artificial intelligence-powered platforms hard to ignore — particularly in the data-driven world of real estate. As the technology continues to develop, AI might not replace agents at their jobs, but it could instead find them new ones. [Image]( South Florida's hot summer sales South Florida multifamily investment sales came to a standstill late last year, crippled by expensive financing and skyrocketing windstorm and other property insurance premiums. There's a cadre of players still in the South Florida multifamily game this year. Their deals provide insights into how creative investors are thinking about their capital stack. [Image]( Bidding wars return to San Francisco A frenzy in Hayes Valley. A fight in Pac Heights. Bidding wars are back in San Francisco after a [months-long hiatus]( when quickly rising interest rates and dire headlines forecasting the city’s imminent demise helped bring the market to a near standstill. [Image]( Why multifamily developers are having a brutal year in LA "At this point it’s just becoming harder and harder to do business here. It’s easier to get on a plane and do a build in Texas than it is to do it in our own backyard,” developer Artem Tepler said. In the summer of 2023, it’s a common Los Angeles refrain: While ongoing projects around the city are still finishing up, the city’s development climate has become notably bleak. Many firms are simply no longer interested in building here, and the multifamily pipeline is quickly drying up.   [THE CLOSING: M](ICKEY DREXLER INTERVIEWS WITH REAL ESTATE TITANTS   [Image]( The design impresario behind the Gap and J. Crew's casual cool look talks about good marketing, bad malls, and why he never chased the money Lift the curtain on an iconic retailer — Gap, Old Navy, J. Crew — and more likely than not, you’ll find Mickey Drexler has been there, playing the Wizard. From a design studio in Manhattan, Drexler is once again bringing his product and marketing chops, but the world is different now. When Drexler left Gap — “fired with one day’s notice,” he says — the flagship brand had more than 1,500 North American outlets. There are fewer than 500 today. The social-media age, fast-fashion culture, they’ve all brought a new ethos around style and clothing and retail that Drexler acknowledges. Still: “I never saw data design clothes.” [Read full story here →]( [FULL ISSUE HERE]( [More Newsletters]( | [Unsubscribe]( | [Privacy Policy]( | [Subscribe]( The Real Deal 450 West 31st Street, New York, NY 10001 ©2023 TheRealDeal. All rights reserved. [View Online](