Apartment Landlords Face Peril As Their Debt Costs Skyrocket.

"Apartment buildings, long considered a real-estate haven, are emerging as the next major trouble spot in the beleaguered commercial-property world.

Investors bid up the prices of multifamily buildings for years, attracted by steadily rising rents and the prospect of outsize returns. Many took on too much debt, expecting they could raise rents fast enough to pay it down.

Unlike office buildings and malls, which have been hit hard by remote work and e-commerce, rental apartments have low vacancy rates. The apartment sector's main problem isn't a lack of demand -- rents have soared since 2020 -- it is interest rates.

The sudden surge in debt costs last year now threatens to wipe out many multifamily owners across the country. Apartment-building values fell 14% for the year ended in June after rising 25% the previous year, according to data company CoStar. That drop is about the same as the fall in office values.

Mortgage delinquencies in the multifamily category are low but increasing. Borrowing costs have doubled, rent growth is slowing and building expenses are rising. Data provider Trepp earlier this year identified one type of rental-apartment debt as accounting for a large share of the commercial mortgages at risk of default.

Apartment landlords face a "hydrogen-bomb scenario," said Peter Sotoloff, a veteran real-estate finance executive, a former founding member of Blackstone's property debt business and former managing partner at Mack Real Estate Credit Strategies.

Outstanding multifamily mortgages more than doubled over the past decade to about $2 trillion, according to the Mortgage Bankers Association. That is nearly twice the amount of office debt, according to Trepp. The data provider adds that $980.7 billion in multifamily debt is set to come due between 2023 and 2027.

"Everyone is focused on office," Sotoloff said. The risk of apartment defaults, he said, "is a really big issue that is not getting the attention it deserves."

Multifamily-building owners in Los Angeles, Houston and San Francisco have defaulted on loans against thousands of apartments. Blackstone, the world's largest alternative-asset manager, is in special servicing on mortgages related to 11 Manhattan apartment buildings, according to a person familiar with the matter A spokeswoman for Blackstone said the buildings have unique issues and are "not representative of the strength we're seeing in our broader rental-housing portfolio."

Apartment buildings have a reputation as a lower-risk commercial real-estate investment. They have performed relatively well even at times of recession, including during the 2008-2009 financial crisis when the housing market crashed. People always need a place to live, and during times of crisis former homeowners would flood into the rental market.

Inflation also allowed landlords to raise rents higher than usual, which boosted the values of their buildings. Asking rents rose 25% over 18 months spanning 2021 and 2022, according to rentals website Apartment List.

To many investors, these factors justified paying high prices. Apartment-building owners often borrowed more than 80% of the building value from bond markets. Most apartment loans are fixed-rate, long-term mortgages. During the pandemic, however, investors took out more shorter-term, floating-rate loans.

Many of these investors raised rents aggressively, betting that they could sell the buildings or refinance their debt at much higher valuations once their buildings generated higher rental income.

But few anticipated that interest rates could rise so quickly, pushing down building values and forcing landlords to refinance at much higher rates. Regional banks, a crucial source of funding, are lending far less today, making it harder to refinance mortgages. Rent growth has slowed sharply in many U.S. cities, while inflation and growing insurance premiums have raised the cost of running buildings.

A new crop of private real-estate firms, funded mostly by floating-rate debt and small-investor cash, have become bigger competitors in the multifamily market. Some paid higher prices based on rosy expectations of steep rent increases for years to come. Now, they are having trouble making the numbers work.

Los Angeles-based Tides Equities has acquired more than $6.5 billion in rental property since 2016, mostly lower- and middle-income apartment buildings in Southwestern cities. In 2021, at a property in a Dallas suburb, the company expected to push up rents 44% over the course of three years, ratings-agency reports show. In June, Tides told investors the strategy wasn't going as planned. Renters were "becoming too tight on cash," the company said in a letter. Some properties were no longer earning enough money to cover debt payments, and investors would likely need to put in more money to save buildings from default, the letter said.

In an interview, Tides's co-founders Sean Kia and Ryan Andrade said they were working with lenders on ways to avoid default at properties that faced difficulties.

Houston-based Nitya Capital, owner of about $3 billion of multifamily buildings, notified investors in March that it was slashing profit expectations because of steeper interest rates.

"We are essentially paying the higher mortgage costs instead of making cash distributions," Nitya Chief Executive Swapnil Agarwal wrote in an investor letter.

Apartment landlords still have reasons for optimism. Fannie Mae and Freddie Mac offer a reliable source of government-backed lending even as banks retreat. Most analysts expect housing shortages, and high rents, to persist. If interest rates come down, property prices could bounce back quickly. Multifamily owners with fixed-rate mortgages are better positioned to ride out any near-term turbulence.

Still, other threats are mounting. The unusually high number of new apartment buildings opening this year and next poses a supply concern.

Further, apartment-building values are more vulnerable to higher rates than their commercial counterparts because they are closely tied to the price of 10-year Treasury notes, which plunged as rates rose, said Chad Littell, CoStar's national director of capital-markets analytics.

Even some veteran real-estate investors that weathered past storms look vulnerable. Veritas Investments, one of San Francisco's largest landlords, and partners defaulted on debt backing 95 rental buildings during the past year. It stands to lose more than one-third of its San Francisco portfolio as a result.

"The multifamily real-estate sector is facing many of the same financial challenges as have been reported on for other asset classes including office, retail and hotel-hospitality," the company said earlier this year." [1]

1. Apartment Landlords Face Peril As Their Debt Costs Skyrocket. Putzier, Konrad; Parker, Will. 
Wall Street Journal, Eastern edition; New York, N.Y.. 08 Aug 2023: A.1. 

JAV uždraus kai kurias investicijas į Kinijos technologijų įmones

"JAV ketina uždrausti privataus ir rizikos kapitalo investicijas į kai kurias Kinijos technologijų įmones pagal Bideno administracijos vykdomąjį įsakymą, kuris padidino Vašingtono pastangas neleisti Pekinui kurti pažangiausių technologijų Pekino kariuomenei.

 

     Tikimasi, kad vykdomasis įsakymas apims tiesiogines investicijas į tris technologijų sektorius: puslaidininkius, kvantinę kompiuteriją ir dirbtinį intelektą. Tai uždraustų investicijas į kai kurias šių technologijų formas, o amerikiečiai, užsiimantys verslu Kinijoje, turėtų informuoti JAV vyriausybę apie investicijas į tris aukštųjų technologijų sektorius plačiau.

 

     Anot žmonių, susipažinusių su įsakymu, investuotojai, pažeidę šias taisykles, gali gauti baudas ir būti priversti atsisakyti akcijų. Tikimasi, kad, prieš įgyvendindama naujas taisykles, Bideno administracija priims atsiliepimus apie jas, kurie, kaip tikimasi, bus taikomi būsimiems sandoriams ir neapims portfelio investicijų į Kinijos akcijas ir obligacijas, anot informuotų žmonių.

 

     Tikimasi, kad taisyklės techniškai bus taikomos ir investicijoms į kitus priešininkus, tokius, kaip Rusija, tačiau tikimasi, kad jos praktiškai paveiks tik JAV investicijas į Kiniją.

 

     Iždo atstovas atsisakė komentuoti.

 

     Vykdomasis įsakymas yra augančio dvišalio susirūpinimo, kad Amerikos technologijos ir žinios gali netyčia padėti Pekinui sukurti ginklus, kuriuos jis galėtų panaudoti prieš JAV karinio konflikto metu, rezultatas. Bideno administracija praėjusiais metais apribojo pažangių puslaidininkių ir lustų gamybos įrangos eksportą į Kiniją, o JAV taip pat sustiprino Kinijos investicijų į Amerikos technologijų įmones kontrolę.

 

     Nors Bideno administracijos pareigūnai tokius veiksmus laiko tikslinėmis pastangomis apsaugoti JAV nacionalinį saugumą, Pekino pareigūnai teigia, kad jais siekiama sustabdyti Kinijos ekonomikos augimą ir vystymąsi.

 

     Kinijos prezidentas Xi Jinpingas pasiskundė prezidentui Bidenui dėl puslaidininkių eksporto kontrolės praėjusiais metais. Žingsnis, plačiai interpretuojamas, kaip atsakas į JAV eksporto apribojimus, anksčiau šiais metais uždraudė Kinijos pagrindinėms įmonėms pirkti technologijas iš didžiausios JAV atminties lustų gamintojos Micron Technology.

 

     Dėl naujų investicijų apribojimų kyla pavojus, kad abiejų supervalstybių diplomatijos atšilimas vėl užsišaldys.

 

     JAV investicijos į Kiniją, padėjusios paskatinti šalies ekonominį vystymąsi, pastaraisiais metais sulėtėjo, stiprėjant geopolitinei konkurencijai. Tiesioginės JAV investicijos į Kiniją praėjusiais metais pasiekė žemiausią lygį per 20 metų – 8,2 mlrd. dolerių, teigia „Rhodium Group“, kuri taip pat nurodė, kad JAV rizikos kapitalo investicijos praėjusiais metais pasiekė žemiausią lygį per 10 metų – 1,3 mlrd. dolerių.

 

     Neaišku, kiek to skiriama minėtiems tiksliniams sektoriams. Džordžtauno universiteto mokslininkų ataskaitoje nustatyta, kad 2015–2021 m. JAV investuotojai dalyvavo 401 sandoryje Kinijos AI įmonėse, o išskirtinai amerikiečių investuotojų investicijos tuo laikotarpiu siekė 7,45 mlrd. dolerių.

 

     Pasak žmonių, susipažinusių su derybomis, kurdami vykdomąjį įsakymą, Bideno administracijos pareigūnai sunkiai dorojosi su tuo, kaip atskirti dirbtinio intelekto formas, kurios pirmiausia kelia pavojų nacionaliniam saugumui, nuo kitų, plačiai naudojamų kasdieniais komerciniais tikslais.

 

     Net prieš jų išleidimą naujos kapitalo kontrolės priemonės pradėjo keisti JAV investuotojų elgesį. Rizikos kapitalo fondas „Sequoia Capital“ šių metų pradžioje atsiskyrė nuo Kinijos verslo po nuolatinio patikrinimo Vašingtone. Kitos įmonės pristabdė sandorius Kinijoje, nes laukia naujų taisyklių, teigia žmonės, susipažinę su jų mąstymu.

 

     Pramonės grupės Vašingtone siekė susiaurinti taisykles, kurias Bideno administracija praleido daugiau, nei metus, kurdama. Kiti pasiūlymai apriboti JAV investicijas į Kiniją buvo platesni.

 

     Dvipartinė JAV įstatymų leidėjų grupė praėjusiais metais paragino sukurti tarpžinybinę komisiją, kuri būtų patikrinusi investicijas į platesnį technologijų spektrą. Du įstatymų leidėjai šiais metais atgaivino šio plano elementus Senato priimtame metiniame gynybos politikos įstatymo projekte. Jų teisės aktai reikalautų atskleisti investicijas, o ne draudimus, ir negali tapti įstatymu.

 

     Rep. Mike'as Gallagheris (R., Wis.) ir Atstovų rūmų komitetas, skirtas Kinijai, paragino nustatyti apribojimus, kurie taip pat būtų taikomi daug didesniems JAV portfelio investicijų į Kiniją srautams. Neseniai paskelbtame laiške komitetas kritikavo „BlackRock“ ir MSCI, didžiausią akcijų rinkos indeksų sudarytoją, už tai, kad jos palengvino investicijas į Kinijos įmones, kurias JAV vyriausybė apkaltino Kinijos kariuomenės stiprinimu ir žmogaus teisių pažeidimu.

 

     Pasak žmonių, susipažinusių su detalėmis, Bideno administracijos pareigūnai iš iždo ir prekybos departamentų sėkmingai siekė apriboti vykdomojo įsakymo apimtį.“ [1]

 

Atsižvelgiant į įrodytus Kinijos įmonės „Huawei“ gebėjimus gaminti pažangius lustus „Huawei“ telefonui, Kinijos pasiekimus dirbtinio intelekto ir kvantinės kompiuterijos tyrimų srityje, arklys paliko tvartą, o mes, Vakarai, vis dar užsiimame bandymais uždaryti tvarto duris. Tačiau politiniai tikslai bus pasiekti. Mums, žmonėms, reikia priešo, kad galėtume glaudžiau bendradarbiauti su į mus panašesniais žmonėmis. Štai kodėl turėtume rimtai apsvarstyti, kad Amerika iš vienos pusės, o Rusija/Kinija iš kitos pusės išsiskirs mokslo, technologijų ir ekonomikos srityse. Šios dvi didžiulės galingos masės pradėjo tolti viena nuo kitos. Nieko negalime šiuo atveju padaryti.

1. World News: U.S. to Ban Some Investments in Chinese Tech Firms. Duehren, Andrew. 
Wall Street Journal, Eastern edition; New York, N.Y.. 09 Aug 2023: A.7.

U.S. to Ban Some Investments in Chinese Tech Firms.

"The U.S. is set to ban private-equity and venture-capital investments in some Chinese technology companies under an executive order the Biden administration released, escalating Washington's efforts to prevent Beijing from developing cutting-edge technology for its military.

The executive order is expected to cover direct investments in three technology sectors: semiconductors, quantum computing and artificial intelligence. It would prohibit investments in some forms of those technologies, while requiring Americans doing business in China to inform the U.S. government about investments in the three high-tech sectors more broadly.

Investors that violate those rules may face fines and be forced to divest themselves of their stakes, according to people familiar with the order. Before enforcing the new rules, the Biden administration is expected to accept feedback on them, which are expected to apply to future transactions and won't cover portfolio investments in Chinese stocks and bonds, according to the people.

The rules are expected to technically also apply to investments into other adversaries such as Russia, but they are expected to only practically affect U.S. investment into China.

A Treasury spokesman declined to comment.

The executive order is a product of a growing bipartisan concern that American technology and know-how could inadvertently help Beijing develop weapons it could use against the U.S. in a military conflict. The Biden administration last year restricted exports of advanced semiconductors and chip-manufacturing equipment to China, and the U.S. has also heightened scrutiny of Chinese investment in American technology companies.

While Biden administration officials have cast the moves as targeted efforts to protect U.S. national security, officials in Beijing say they are aimed at kneecapping China's economic growth and development. 

Chinese President Xi Jinping complained to President Biden about the export controls on semiconductors last year. And in a step widely interpreted as retaliation for the U.S. export restrictions, China banned its major firms from buying technology from Micron Technology, the largest memory-chip maker in the U.S., earlier this year.

The new investment restrictions risk refreezing an attempted thaw in diplomacy between the two superpowers.

U.S. investment into China, which helped drive the country's economic development, has slowed in recent years as the geopolitical rivalry has intensified. Direct U.S. investment into China hit a 20-year low of $8.2 billion last year, according to Rhodium Group, which also said U.S. venture-capital investment hit a 10-year low of $1.3 billion last year.

It is unclear how much of that goes toward the targeted sectors. A report by Georgetown University researchers found that U.S. investors were involved in 401 transactions in Chinese AI companies between 2015 and 2021, with investments from exclusively American investors amounting to $7.45 billion in that period.

As they crafted the executive order, Biden administration officials struggled with how to distinguish forms of artificial intelligence that primarily pose a national-security risk from others that are broadly used for everyday commercial purposes, according to people familiar with the talks.

Even ahead of their release, the new capital controls have started to reshape U.S. investor behavior. Venture-capital fund Sequoia Capital split off its China business earlier this year after persistent scrutiny in Washington. Other firms have slowed or paused transactions in China as they await the new rules, according to people familiar with their thinking.

Industry groups in Washington sought to narrow the rules, which the Biden administration spent more than a year crafting. Other proposals to limit U.S. investment in China have been broader.

A bipartisan group of lawmakers last year called for the creation of an interagency panel that would have screened investments in a wider range of technologies. Two lawmakers this year revived elements of that plan in an amendment adopted by the Senate to its annual defense policy bill. Their legislation would require disclosure of investments, rather than prohibitions, and may not become law.

Rep. Mike Gallagher (R., Wis.) and the House committee dedicated to China have called for restrictions that also apply to the much larger flows of U.S. portfolio investment into China. In a recent letter, the committee criticized BlackRock and MSCI, a top stock-market-index compiler, for facilitating investment in Chinese companies the U.S. government has accused of bolstering China's military and violating human rights.

Within the Biden administration, officials from the Treasury and Commerce departments had successfully sought to limit the scope of the executive order, according to people familiar with the deliberations." [1]

Considering the proven ability of Chinese company Huawei to produce advanced chips for its phone, achievements of China in artificial intelligence and quantum computing research,  the horse left the barn, while we, the West, are still busy trying to close the doors of the barn. Political goals will be reached though. We, humans, need an enemy to collaborate more closely with people more similar to us. This why we should consider seriously, that America from one side, and Russia/China from another side will part their ways in science, technology, and economy.  These two huge powerful masses started drifting apart. Nothing we can do about it.

1. World News: U.S. to Ban Some Investments in Chinese Tech Firms. Duehren, Andrew. 
Wall Street Journal, Eastern edition; New York, N.Y.. 09 Aug 2023: A.7.