Gray Capital

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Economic sentiment has been on the rise for the past few months across multiple datasets, and inflation expectations are on the decline. Yes, these are feelings/sentiments rather than facts, but economic vibes play into the decisions of grocery shoppers and investors alike. Catch our full conversation on the latest episode of the Gray Report: https://hubs.li/Q02XsSLq0

Even before the milestone election, prospects for commercial real estate were expected to markedly improve, following projections of lower inflation, lower interest rates, and a labor market that has been bumpy but resilient. Read our latest blog post for more on the current moment and future projections for CRE, multifamily, housing, and the economy: https://lnkd.in/g5JuRHHW

PwC's much-anticipated Emerging Trends in Real Estate report argues that "[r]eal estate investors and developers should be poised for an upturn in industry trends as the post-pandemic disruption abates and positive cyclical forces gain strength." For more of the latest research and reports on multifamily, housing, and the economy, sign up for the Gray Report Newsletter at https://hubs.li/Q02WPlL30. Link to PwC report: https://hubs.li/Q02WPF0q0

The effects of "extend and pretend" haven't faded from the CRE market, but optimistic signs for the multifamily market continue to break through. Watch the latest episode of the Gray Report for our full discussion of the latest news and research on the multifamily market, housing, and the economy: https://bit.ly/4fqlSPP

HUD's new proposal looks to reignite housing supply growth through lower debt costs. Catch the latest episode of the Gray Report for our full discussion of these new plans from HUD and the potential impact for multifamily investors and the housing market more broadly: https://bit.ly/3AzXyvn

CoStar recently recognized Gray Capital's acquisition of Solana at the Crossing as one of the top sales in Q3 2024. This acquisition has been a significant milestone for Gray Capital. We appreciate the recognition from CoStar, and we've been hard at work from day one improving the property, with a beautiful new paint job from Renovia nearly finished and even more upgrades on the way. (https://lnkd.in/gbFZjHnu)

Happy Halloween from a galaxy far, far away (and from Gray Capital)!

We tracked the wave of CRE loan maturities last year, and according to the Federal Reserve Bank of New York, there may be another wave coming in 2026, due in part to extend and pretend practices. The Federal Reserve Bank of New York's new paper, "Extend and Pretend in the U.S. CRE Market," (https://lnkd.in/gVwYXNEu) points to this upcoming wall of loan maturities as one consequence of "banks’ incentives to extend the maturity of their existing impaired loans to avoid writing off their capital . . . particularly pronounced from 2022:Q1 onward as rapidly rising rates created large marked-to-market losses on securities held by banks, eroding their economic capital." Extend and pretend has been a prominent topic of conversation for the past few years, and this paper's value isn't as much in identifying the practice as it is in measuring its extent, outlining the conditions and lenders that incentivize extend and pretend, and projecting the consequences of the practice, one of which is that (new) wall of CRE loan maturities. Compared to the guidance that the Fed issued last year encouraging workouts and accommodations, this NY Fed paper seems to be headed in the opposite direction, calling attention to the costs and consequences of loan extensions. Are the current prospects for the economy and the CRE market strong enough that a more strict approach from banks (less extending and pretending) won't lead to crisis, whereas in June 2023 that chance of crisis was a lot more pressing? If this is an indirect endorsement of the economy and CRE markets, I'll take it, but after tracking the (expected) wall of loan maturities in 2023 that ended up being less dramatic than initially anticipated, it's difficult for me to think that the 2026 loan maturities will be as impactful either. We've just published a more lengthy write-up of the NY Fed's paper on the Gray Capital blog (https://lnkd.in/g59MYTeN), our upcoming episode of the Gray Report will have even more discussion of this issue, and we will continue to follow this topic with additional research and reporting.

The New York Fed shares a word of warning about extending and pretending: "This extend-and-pretend behavior has also led to an ever-expanding 'maturity wall,' namely an increasing volume of CRE loans set to mature in the near term—which, as we later argue, represents a meaningful financial stability risk." https://hubs.li/Q02VNTDw0