Today’s real estate challenges are causing assets to be handed back to lenders.
When this happens, the burden of identifying and unlocking value moves to the lenders who are left with the difficult decision of what to do. While everyone is talking about writing down these assets and the underlying debt, taking a creative approach to maximizing an asset’s potential can help achieve better outcomes and returns for investors.
In NYC alone, five to 10 office towers each month join the list of properties at risk of defaulting because of low occupancy, expiring leases or maturing debt that would have to be refinanced at a higher rate, according to The Wall Street Journal. About $1.2 trillion of debt was backed by office buildings at the end of the third quarter last year.
Taking pennies on the dollar may seem like the easy option, but a better outcome can be achieved with the right approach and expertise.
In good times, creating value is the cornerstone of developing and repositioning real estate assets. In difficult and uncertain times, it is even more critical. While times may be different, the approach to creating great places and increasing value through great placemaking, driving demand, and understanding audience (the people layer) is the best bet for curating solutions as unique as each individual real estate asset.
“The first misstep most real estate developers and investors make is thinking that design or entitlements are the solution – or worse, a strategy,” said Jeff Pollak, Chair of Streetsense’s Place Consulting practice group. “What we find, is that value is created by understanding the true data-driven demand for each purpose or use, and then curating solutions to not just solve for that demand, but to take advantage of it.”
Streetsense works with local, regional, and global commercial real estate developers, investors, and lenders to create CRE solutions and roadmaps, that provide a creative lens tailored to enhancing the value of each individual property to help our clients see what others don’t.
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