Another China real estate giant is facing choppy waters just weeks after troubled developer Evergrande disclosed $81 billion in losses over the course of two years.

Country Garden is facing financial turmoil, having lost billions of dollars and accruing $200 billion in unpaid debts, the New York Times reported.

“The Country Garden default could be as influential as Evergrande simply because it is so huge,” real estate analyst Rosealea Yao of Gavekal, a China-focused research firm, told the outlet.

Country Garden — a privately owned developer founded by a farmer three decades ago — is at risk of defaulting as it struggles to deliver nearly one million apartments across multiple cities in China, according to the outlet. 

The potential collapse is significant within China’s already strained housing market, with the economy’s leaders aiming for an upturn following pandemic-related lockdowns.

The concern is not limited to Country Garden; the broader housing market has been grappling with a series of collapses over the years. The company’s problems could spill over into the financial markets, hindering the real estate industry’s recovery and causing economic repercussions.

Country Garden, which had thrived during China’s real estate boom, turned billionaire founder Yang Guoqiang into a symbol of the country’s rapid growth. As the market tightened due to debt concerns, the government cracked down on real estate firms’ borrowing abilities. Despite this, Country Garden continued to meet its obligations by selling apartments before they were completed to finance operations.

However, a slump in home buying this year has led to a crisis for the company, facing its most significant challenges since its inception. It recently skipped two interest payments on loans, raising concerns about a possible default. If Country Garden does not repay or negotiate more time by early September, it could face defaulting on its loans.

Experts are worried that Country Garden might follow the path of Evergrande, which collapsed in 2021, causing panic in global markets. Given Country Garden’s immense size, its default could have similar far-reaching effects. 

China’s leadership has expressed a desire to adjust policies to support the housing market and stimulate growth, but it remains uncertain whether these measures will be sufficient. 

The government aims to reduce dependence on real estate for economic growth and has signaled that it will prioritize ensuring buyers receive the apartments they’ve purchased.

The situation poses numerous questions, including potential consequences for the Chinese economy if developers like Country Garden fail to reimburse suppliers. The unpaid bills from private Chinese developers are estimated to total $390 billion, according to Gavekal Research.

— Ted Glanzer

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Mall properties continue to struggle in the United States, creating opportunities for savvy investors to purchase the assets on the cheap.

4th Dimension recently purchased the Northtown Mall in Blaine, Minnesota, from Washington Prime Group for $31 million, the Star Tribune reported. The mall has approximately 645,000 square feet of leasable space, dragging the sales price to slightly above $48 per square foot.

It’s a steep decline from what the mall was last sold for. In 1998, Glimcher Realty Trust purchased the property for $54 million. Washington Prime bought out the real estate investment trust in 2015.

The 200-acre mall sports a decent occupancy rate for the times, 87 percent leased. Still, the Hollywood, Florida-based 4th Dimension is already eyeing seismic changes to the property.

Principal Felix Reznick told the Minneapolis/St. Paul Business Journal that, in addition to filling vacancies, his firm was also planning on developing the outparcels around the mall. Ideas being floated include an extended-stay or four-star hotel, as well as multifamily mixed-use square footage.

The mall’s largest tenant is Becker Furniture, which has more than one location in the mall. Its outlet and store span 183,000 square feet, more than a quarter of the mall’s leasable space. Other anchor tenants include Hobby Lobby, Burlington and Best Buy.

Reznick owns or co-owns about a dozen malls across the country. He’s the sole owner of four malls, all purchased within the last eight months, showcasing his belief in the sector.

Washington Prime is emblematic of the larger retail struggles for real estate. In 2021, the company filed for Chapter 11 bankruptcy protection, emerging through the process with $1 billion less in debt. In the second quarter of 2020, the Simon Property Group spinoff collected only 52 percent of rent owed.

Northtown Mall is far from the only one being sold for below its last sale price since the pandemic. In March, private real estate firm Laurus Corporation and Torchlight Investors sold a mall in West Los Angeles for $30 million below what they paid for it eight years earlier.

— Holden Walter-Warner

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Portland’s downtown office space market is confronting a concerning reality: nearly a third of its office space lies vacant, presenting a bleak outlook for the city’s commercial property sector. 

The downtown skyline, once bustling with activity, is now dotted with skyscrapers facing the challenges of too few tenants and loans that are nearing maturity without the possibility of refinancing, Willamette Week reported. 

Referred to as “death lists” among real estate professionals, the documents outline properties that are economically unsustainable. These buildings are burdened by excessive debt and insufficient rental income to cover it. Phrases like “deed in lieu of foreclosure,” “expected to go back to the bank,” or being on a “watchlist” due to upcoming loan maturities populate these lists, painting a grim picture of the market’s condition, the outlet reported.

The vacancy crisis amplified by the pandemic has affected markets nationwide, but Portland seems to be facing it particularly acutely. Many buildings with loans secured during the last real estate boom, marked by low interest rates, are now reaching maturity. However, their value has diminished while interest rates have surged, creating an unfavorable environment for refinancing.

Experts note that Portland’s challenges extend beyond the pandemic’s impact. Plywood from 2020 protests still covers some downtown storefronts, and lingering homeless encampments add to the blight. The city’s downtown blocks face a mix of social issues, potentially deterring tenants and investors alike.

Bob Ames, a long-time investor in commercial property, said that the situation is dire, suggesting that major employers might stay away from Portland for years due to the prevailing conditions.

 “I’ve been in this business for 50 years, and I’ve never seen anything like this,” Ames told the outlet.

Data from Colliers highlights that Portland’s office vacancy rate, including sublet space, reached 31.5 percent in Q2 2023 — higher than several other major U.S. cities, according to the outlet. Only San Francisco, with a 31.9 percent vacancy rate, was higher.

“The Portland office market continues to face a bleak outlook at the midway point of 2023,” analysts at Colliers wrote, according to the outlet. “Over the next two quarters, more than 500,000 square feet of leased space is set to expire marketwide. Should these tenants maintain office space following the expiration of their leases, they will likely look to downsize their real estate footprints.”

The impact on Portland’s tax revenue is another concern. Given that the city relies on income tax and property tax, decreasing property values could lead to reduced tax revenue for public services like schools and shelters.

As loans come due, owners are faced with the dilemma of refinancing in a less favorable market environment. The consequences are evident in the case of buildings like Montgomery Park, Commonwealth Building, and Aspect on Sixth, each facing their unique challenges, including reduced market value, foreclosures, and liens.

— Ted Glanzer

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Shorts in the winter, and a negative electricity bill  ––  it sounds like the land of milk and honey.

In reality, it’s Boston. That’s at least for the owners of the city’s first certified passive houses. 

Since spec developer Dmitry Baskin completed the three spec homes, the buyers say they’ve hardly touched the thermostat, and the buildings operate so efficiently that the city owes at least one couple money, the Wall Street Journal reported. 

Baskin, who heads Boston-based Passive House Construction, partnered with Eric Robinson and Kevin Deabler’s Rode Architects to develop three single-family homes built to passive house standards. The four-bedroom, three-bathroom houses, at 55, 59 and 63 Brucewood Street, received their passive house certification from the CertiPHIers Cooperative after finishing construction last year. 

All three homes have solar panels installed, and use airtight construction and shading to maintain the internal climate. The houses eschew traditional heating and cooling systems in favor of small heat pumps and an energy recovery ventilation that circulates fresh air, according to the publication. 

The green technology means the homes operate extremely efficiently, providing huge reductions for the owners’ energy consumption and the utility bills that typically accompany them.

“This winter it got freezing, and we were in our shorts,” Amod Athavale, one of the homeowners, told the outlet. Athavale bought a 2,500-square-foot passive spec home with his wife, Manasi Datar, for $1.4 million last year. Despite this summer of record heat, the couple has maintained their home’s temperature with just a few hours of air conditioning a day.

Athavale told the outlet that their electricity bill currently has a negative balance around $1,000, meaning the utility provider owes them that amount.

Baskin’s other two passive spec homes sold for $1.4 million and $1.5 million, Redfin shows. When he bought the site in 2017, Baskin’s plan was to develop three duplexes, the outlet reported. As he started to pursue approval for the project, it became clear that the neighborhood was against multifamily development, so he pivoted to single-family homes.

Money made the decision to build passive houses –– Baskin needed something to set these homes apart so he could sell them for a premium and make development a viable investment, according to the outlet. Deabler, who sits on the advisory board of University of Maine at Augusta’s Architecture School, suggested passive houses after hearing that there were successful examples up north. 

Embarking on the project meant “diving into the deep end of building challenges,” he told the outlet. Mike DelleFave, an associate and architect with Rode who worked on the project, said building to passive standards increases construction costs between 10 and 15 percent. 

The sustainability marketing play paid off. All three homes went into contract during construction. 

Now, Baskin, Deabler and Robinson want bigger and more passive house development. The partners are planning a 30-acre passive house project in Stoughton, Massachusetts with 18 single-family homes. 

DelleFave said, “It’s hard to go back to those traditional building methods when you know that there’s a better way.”
— Kate Hinsche

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Dynasty trusts can shield wealth before the Trump tax cuts expire.

Packaged-food giant revamps Lunchables for the cafeteria, tapping a new market and drawing pushback.

The rare search of a newsroom has uncorked a debate in Marion, Kan.: What is a newspaper’s role, anyway?

A driverless Cruise taxi with a passenger collided with a fire truck Thursday night, just one week after state officials allowed the service to expand.

With the company’s market value having plunged nearly $300 billion since its July 2021 peak, CEO Dan Schulman is relinquishing the reins after nine years.

It’s fine to incorporate environmental, social and governance considerations into decision making. But not if we’re ignoring other important factors.