Replies to post #106267 on Mohacsy's Safe Portfolio Member Forum

[Elroy Jetson]

Fred Cordova founder of the Santa Monica-based Corion commercial real estate brokerage, previously EVP of Capital Markets Group at Kennedy Wilson Properties.

https://biz.crast.net/whats-happening-in-the-office-sector-is-the-apocalypse-this-commercial-real-estate-ceo-says-the-disaster-has-already-begun/

I wouldn’t be surprised to see, one or more of the commercial REITs to be taken private and then once the Fed takes its foot off the gas, it stops raising rates, and signals that they’re going to hit the pause button, and maybe even lower rates at the end of the year, and Once inflation is under control, you will see buyers re-entering the market.

In many downtown areas think you’ll see some more conversion from office to multifamily. Values still have to come down to about $100 per square foot, and they’re not there yet.

$100 per square foot for office space translates into $125 per [rentable] square feet for multifamily because you lose about 20% of rentable space when you convert; That’s the magic number.

It costs about $250 to $350 per square foot to convert these buildings, so there’s still a difference. But if you can bridge that equity gap, which I think is a play to do through a private partner with the city and the state and that’s what we’re working on, you can get some of these buildings converted - sold with a cost of $375 to $475 per square foot of residential space.

[Elroy Jetson]

Office properties are going to be sold; Lenders are going to gain control.

Lenders want to preserve their property, so the best way to preserve the loan balance is to short sell the property.