While I was writing this guest editor’s column for the Journal of Corporate Renewal, two large Chinese real estate companies, China Evergrande and Modern Land, were making headlines as potential restructurings. Is this a sign that there will be broader implications across the global economy? The capital markets in the U.S. are still on fire and only time will tell.
It is undeniable that the real estate market has broad impact on the overall economy. Residential real estate has historically provided a primary source of savings and wealth creation for families. Post-global financial crisis, some of the largest owners of U.S. single-family residential real estate are now private capital funds, such as Blackstone and Brookfield. Competition in the real estate market, availability of financing, and relatively low inventory have all contributed to elevated pricing in the real estate market.
Beneath the surface, we find that the pandemic has impacted the real estate market via increases in building costs due to everything from labor shortages to supply chain issues. Further, builders, landlords, and tenants have all faced systemic issues as a result of the pandemic.
I am pleased to present four extremely thoughtful and researched articles by experts in their respective fields in the real estate sector. I appreciate the insights and wealth of information that each of the authors has been willing to share with our TMA members.
James Flicker, a managing director at DC Advisory, has been covering the paper and forest products industry for nearly three decades. Jamie’s article outlines the state of the housing market and how the supply/demand dynamic has impacted pricing for building products over the past 18 months. What were some of the factors that caused the disruption in the market, and are higher prices here to stay?
Andy Graiser, co-president of A&G Real Estate Partners, has decades of experience in lease mitigation, real estate dispositions, valuations, and acquisitions, and routinely advises a diverse array of healthy and distressed companies. Andy evaluates the impact that the pandemic has had on various markets across the commercial real estate sector, including office, retail, and family/entertainment/movie theaters. Where do we see either signs of hope or dire omens? Andy concludes with real estate optimization strategies.
Next, Sunny Singh, Alex Welch, and Daphne Papadatos of Weil, Gotshal & Manges LLP outline the strategies that lessors have deployed for workouts during these turbulent times. The Weil team has led some of the largest and most complex retail restructurings. Despite government support, lessors were required to provide additional support mechanisms to bridge lessees through the pandemic. Were the strategies sufficient, or have market dynamics required more extreme measures? The Amazon effect is evaluated as it relates to the pandemic and its impact on the ability of retailers to rebound from the pandemic.
Terrence Grossman, Nate Simon, and Nick Glennon from AlixPartners contributed their insights on real estate strategies that operators need to utilize to effectively combat the increasingly competitive and disruptive environment, as well as impacts from the pandemic. Terrence is a director in his firm’s Turnaround and Restructuring practice and has significant turnaround and operational experience, with particular expertise in the retail and real estate sectors, while Nate and Nick are vice presidents in the Turnaround and Restructuring practice. Pulling from their vast experience in the retail sector, the three describe how data can be utilized to optimize real estate portfolios.