Small businesses struggle to pay rent; Vornado refinances 2 NYC offices

S&P Global Market Intelligence offers our top picks of real estate news stories published throughout the week.

About a third of small businesses in the U.S. were unable to pay rent in full and on time in May, up from 28% in April, The Associated Press reported, citing a survey from small business referral network Alignable.

Businesses are facing rising costs due to inflation, and most government aid programs have ended.

More than half of the businesses surveyed said rent has increased over the past six months, as landlords, who have agreed to concessions and rent deferrals during the pandemic, are now collecting due rent, and some are even increasing rent.

Rents were up 4.6% year over year in the first quarter while vacancy rates were down to 6.5%, the lowest since before 2015, AP reported, citing data from Marcus & Millichap. Still, landlords could find it hard to impose rent increases on tenants who are already struggling with high prices due to inflation, Daniel Taub, national director of retail sales at the commercial real estate financing and advisory firm, said.

CHART OF THE WEEK: US equity REITs close July 1 at median discount to NAV

⮞ Publicly listed U.S. equity real estate investment trusts closed the first trading day in July at a 19.4% discount to their consensus S&P Capital IQ net asset value per-share estimates, down from the 14.7% discount at which they traded as of May-end.

⮞ Regional mall REITs saw the steepest median discount to NAV, at 50.9%. Simon Property Group Inc., the largest mall REIT by market capitalization, traded at a huge discount of 38.4%.

⮞ Farmland, communications and casino REITs traded at median premiums.

Vornado transactions

* Vornado Realty Trust completed June 28 the $700 million refinancing of its 770 Broadway office building in Manhattan, N.Y., replacing the previous $700 million loan scheduled to mature in July.

The office REIT also closed on June 15 a $480 million refinancing of the 100 W. 33rd St. property in the borough. That loan replaced the previous $580 million scheduled to mature in April 2024.

* Vornado also closed the sale of its eight-story Center Building office property in Long Island City, N.Y. The 498,000-square-foot building was sold to an undisclosed buyer for $172.8 million.

Office property acquisitions

* Heitman LLC sold the 22-story building at 1401 Lawrence St. in downtown Denver to PGIM Real Estate for $233 million, the Denver Business Journal reported. The building spans 309,987 square feet and is anchored by law firm Polsinelli PC.

* CP Group and DRA Advisors LLC bought an office building in Miami for $163.5 million, the South Florida Business Journal reported, citing a source close to the deal. An affiliate of Sumitomo Corp. of Americas bought the property known as Miami Tower for $220 million in 2016.

REIT Replay: REIT share prices slide during week ended July 1

Average short interest in US REITs up 13 bps in 1st half of June