RealEstateNews 4.14.25

Weekly News Roundup

• Betting on Midwest Apartments
• Tariffs Repricing Real Estate
• Giant Mall Defaults 

Betting on Midwest Apartments

Morgan Properties, the country’s largest privately held apartment landlord, has agreed to pay $501 million for 11 multifamily properties across the Midwest, the latest wager that the region’s lack of supply provides fertile ground for rent hikes. Morgan has been aggressively expanding its Midwest footprint over the past several years, believing the region is primed for a mini Sunbelt-style boom. “The Sunbelt was obviously hot post-Covid,” said Morgan Properties Co-President Jonathan Morgan. “At the moment, it’s the Midwest.”

Morgan Properties and other real-estate investors are looking for places where a lack of supply is converging with new demand that will give them the pricing power to increase rents. The Midwest is among the most undersupplied regions in the country. That is partly due to developers’ fixation on faster-growing parts of the U.S. such as the Sunbelt, where people have migrated in droves.

In February, multifamily starts in the Midwest totaled 28,000 units, a 66% drop annually, according to a RealPage analysis of data from the U.S. Census Bureau and the Department of Housing and Urban Development. That supply strain has led to a steady rise in Midwest rent prices over the past several years, bucking the nationwide cool-down in rent growth. Job growth in the Midwest has also lagged behind the rest of the U.S. for years. But investors such as Morgan Properties see signs of a rebound, particularly for industries like manufacturing, logistics and education. Indianapolis and St. Louis in particular have experienced job growth in these areas. Source: Wall Street Journal

Tariffs Repricing Real Estate  

Property investors think American consumers will prioritize paying the rent and their cell-phone bills in a trade war. All bets are off for other non-essential spending. That is leading to a classic recession trade within real-estate stocks. Shares of the most economically sensitive property companies are cratering, especially those that are heavily exposed to discretionary spending.

Prologis, America’s biggest e-commerce warehouse REIT, is down 14% since President Trump unveiled his reciprocal tariffs. Mall stocks are down the same amount over worries that a slowing economy will hammer retailers. Even mall landlords that have deep-pocketed luxury tenants, such as Simon Property Group, have been hit. Housing stocks are holding up. American Homes 4 Rent and Invitation Homes have slipped 3%, significantly outperforming the S&P 500’s slide. 

“People have to keep a roof over their head,” says Cedrik Lachance, director of research at real estate analytics firm Green Street. “Multifamily apartments, single-family and manufactured home stocks should be okay.”  Most eye-catching are cell-tower owners American Tower and SBA Communications. Both stocks have gained 5% over the past two days. That’s partly tied to expectations that the Federal Reserve will have to cut interest rates to prop up the U.S. economy. But it’s also a bet on the hierarchy of needs of modern consumers: people strive to pay their cell-phone bill no matter how bad things get. Source: Wall Street Journal

Giant Mall Defaults  

Destiny USA, the biggest shopping mall in New York and one of the largest in the U.S., has defaulted on a $300 million mortgage. Carousel Center Co., the Pyramid Cos. entity that owns the original portion of the Syracuse mall, failed to obtain an extension of the loan’s maturity date when the mortgage came due on June 6 last year, according to the company’s latest financial statements.

As a result, the loan’s lender terminated a forbearance agreement with the company and all outstanding principal and unpaid interest became immediately due, according to an independent auditor’s report accompanying the statements. That raises the possibility that the lender could foreclose on the mall at any time, just like lenders did to two other Pyramid malls last year. The company obtained the $300 million loan from JP Morgan Chase Bank in 2014 as part of the financing of the expansion of the Carousel Center mall and the renaming of the center to Destiny USA. The loan was transferred to Wilmington Trust in 2019.  

Pyramid had been required to make interest-only payments on the loan and then pay off the loan in its entirety or refinance it when its maturity date came on June 6, 2019. But Pyramid was unable to pay off the loan or refinance it when the maturity date arrived because the mall’s market value had fallen substantially with the loss of major retailers and the rapid rise of online retailing. The company obtained several one-year extensions of the maturity date as part of a forbearance agreement with the lender. But when the latest maturity date arrived last year, it was unable to obtain another extension because the mall failed to meet the agreement’s net operating income targets. Source: Central NY News