The BAN Report: Zillow Flops / Vaccine Mandate Rules Roll Out / Fed Officially Tapers / SBA Finishes Banner Year / International Travel Resumes Soon / The 140MM Buckeye Hotel Portfolio

Zillow Flops

We expressed deep skepticism of Zillow’s algorithmic home-flipping endeavors, watching them buy thousands of homes in order to generate scale with the hope of make a single-digit return. Not surprisingly, it was a total disaster but any measure.

Real-estate firm Zillow Group Inc. is exiting from the home-flipping business, saying Tuesday that its algorithmic+ model to buy and sell homes rapidly doesn’t work as planned.

The firm’s termination of its tech-enabled home-flipping business, known as “iBuying,” follows Zillow’s announcement about two weeks ago that it was halting all new home purchases for the rest of the year. At the time, Zillow pointed to labor and supply shortages for its inability to renovate and flip houses fast enough.

In a statement Tuesday, Chief Executive Rich Barton said Zillow had failed to predict the pace of home-price appreciation accurately, marking an end to a venture the company once said could generate $20 billion a year. Instead, the company said it now plans to cut 25% of its workforce.

“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility,” Mr. Barton said.

Zillow and other tech-powered house flippers, known as iBuyers, purchase homes, renovate them and then try to sell them quickly, making money on transaction fees and home-price appreciation. Zillow used an algorithm to make home price estimates, called the “Zestimate,” and determine what it would pay home sellers.

Ultralow mortgage-interest rates and a need for more space to work from home have driven robust home-buying demand in the past year and a half. Prices have climbed sharply in almost every corner of the U.S.

“It feels like this would be a hard time to lose money buying and selling houses,” said Benjamin Keys, professor of real estate at the Wharton School of the University of Pennsylvania. “This is a time frame where prices have gone up in a lot of places, dramatically.”

How dumb do you have to be to lose lots of money flipping houses in a rising market? After all, home prices are rising nearly 20% annually. It would be hard to find any public company investing its capital more poorly than Zillow.  

Zillow, which released earnings Tuesday, said its home-flipping business, Zillow Offers, lost $381 million last quarter, as measured by adjusted earnings before interest, taxes, depreciation and amortization. That resulted in a combined adjusted Ebitda loss of $169 million across all of Zillow.

Zillow has an inventory of about 9,800 homes across the United States that it is currently shopping to investors. Additionally, there are another 8,200 homes in contract it has agreed to buy. The company expects to lose somewhere between 5% and 7% on these homes, the company said.

Tech companies that burn through millions trying to build scale in order to disrupt businesses that actually make money are a menace. I apologize for the schadenfreude, but it gives me great pleasure to see an arrogant tech company hoisted by its own petard. 

Vaccine Mandate Rules Roll Out

The Labor Department released rules today on the vaccine mandates for businesses with 100 or more employees. The good news is these rules will not be implemented until after the Holidays, as we have advocated previously in this publication.  

The Biden administration ordered U.S. companies Thursday to ensure their employees are fully vaccinated by Jan. 4 or regularly tested for Covid-19 — giving them a reprieve over the holidays before the long-awaited and hotly contested mandate takes effect.

Workers must receive their second shot of Pfizer or Moderna’s two-dose vaccines or a single dose of Johnson & Johnson by that date, according to the requirements.

The administration on Thursday also pushed back the deadline for federal contractors to comply with a stricter set of vaccine requirements for staff from Dec. 8 to Jan. 4 to match the deadline set for other private companies and health-care providers.

The newly released rules, issued by the Occupational Safety and Health Administration under the Labor Department, apply to businesses with 100 or more employees. All unvaccinated workers must begin wearing masks indoors by Dec. 5 and provide a negative Covid test on a weekly basis after the January deadline, according to the requirements.

Companies are not required to pay for or provide the tests unless they are otherwise required to by state or local laws or in labor union contracts. Anyone who tests positive is prohibited from going into work. Employers are also not required to pay for face coverings.

The rules do not apply to people who go to a workplace where other people are not present, who work remotely from home or perform their work exclusively outside. Workers with sincerely held religious beliefs, disabilities, and those with medical conditions that do not allow them to get vaccinated can receive exemptions.

Attached is the 490-page ruling. It does appear that the mandates are a little more workable, as it appears to give exemptions to truck-drivers, and other workers who do not interact with other co-workers. We will learn soon whether these rules will cause more labor shortages.

Fed Officially Tapers

This week, the Fed officially approved plans reducing its bond-buying program, in which it was purchasing Treasuries and mortgage securities, in order to keep rates down.

Fed officials agreed to wind down their $120-billion-a-month asset-purchase program by $15 billion each in November and December, a pace that could phase out the purchases entirely by next June.

Fed Chairman Jerome Powell said officials had pulled forward, relative to market expectations earlier this year, the potential end-date for the bond-buying program in case they decide they need to raise interest rates next year to cool down the economy if inflationary pressures broaden.

“We need to be in a position to act in case it becomes necessary to do so,” he said at a press conference Wednesday.

It also has been buying at least $80 billion in Treasurys and $40 billion mortgage securities every month—initially to stabilize financial markets and later to hold down longer-term interest rates. The Fed’s holdings of those securities has more than doubled since March 2020 to around $8 trillion.

The Fed said it would reduce asset purchases by $15 billion a month, but reserved the prospect of accelerating or slowing down that pace “if warranted by changes in the economic outlook.” Officials don’t want to lift rates until after they have ended the bond purchases.

Mr. Powell declined to specify under what circumstances the Fed might speed up the reductions, or “taper,” of its asset purchases, leading to some disagreement among analysts after the meeting.

It’s hard to remember a time when the Fed has been this slow to react to inflation. The Fed only has two goals, reducing unemployment and taming inflation, and there has never been more job openings ever, so the Fed’s done all it can to reduce unemployment. Rather than accepting the fact that we have inflation, the Fed is in complete denial, arguing that it is all transitory. We may be witnessing the biggest miscalculation of the Fed since the late 2000s, in which they missed the subprime crisis. 

SBA Finishes Banner Year

The SBA funded a total of $44.8 billion in loans in Fiscal 2021, showing dramatic increases over the prior year.

“In the midst of a once-in-a-generation pandemic, the SBA’s mission-driven team delivered a record number of SBA’s traditional loans to our nation’s small businesses – in addition to more than $1.1 trillion in COVID-related relief since the start of the pandemic,” said SBA Administrator Guzman. “While progress has been made, our data also tells a deeper story:  historic inequities in accessing capital persist, and we must do more to lower the barriers of entry to opportunity for all our entrepreneurs. We will continue to build on our impactful programs to meet small businesses where they are and connect them with the resources needed to thrive.”

“The SBA continues to make headway in helping small businesses access much-needed capital, but much more work remains to be done,” said Patrick Kelley, Associate Administrator for the Office of Capital Access. “Our flexible, low-interest 504 loan program grew in loan volume by 41%, and the SBA team is already at work for fiscal year 2022 to support job and entrepreneurial growth across the country.”

Fiscal year 2021 traditional lending data of note includes:

  • $36.5 billion in 7(a) loans: Nearly 52,000 7(a) loans worth more than $36.5 billion were provided to small businesses. Lenders reported that minority business owners received nearly $11 billion in 7(a) loans or 30% of the SBA’s total 7(a) portfolio. Data also shows that women-owned businesses received nearly $5 billion in FY 21, while veteran-owned businesses received $1.2 billion.

  • $8.2 billion in 504 loans: Working with authorized Certified Development Companies (CDCs), the SBA’s 504 program delivered 9,600 loans worth more than $8.2 billion to small businesses, fully exhausting funding authority for the first time in the program’s history. Minority business owners received nearly $1.88 billion in loans -- 23% of the total 504 portfolio. In FY 21, the program also provided over $712 million in lending to women-owned businesses and increased its support of rural small businesses by nearly 33%.

  • $71.8 million in microloan funding: In fiscal year 2021, $71.8 million in microloan funding went to nearly 4,400 small businesses. Forty-one percent of those loans went to underserved communities, including Hispanic-owned and Black-owned small businesses.

Compared to the prior year, these were dramatic increases – 62% in 7(a) and 41% in SBA 504. Last night, a business banking manager said to me that PPP changed the relationship many business borrowers had with SBA, viewing the SBA a lot more favorably after their PPP loans.  

International Travel Resumes Soon

Starting Monday, the 18-month US ban on international tourists ends, providing international travelers show proof of vaccination and a negative COVID test.

On Nov. 8, the United States will lift an 18-month ban on international tourists, as long as they show proof of vaccination and a negative coronavirus test. The land borders with Canada and Mexico will also reopen for international visitors who are fully vaccinated and American citizens residing in those countries, as well as U.S. tourists returning home. Currently, passenger traffic in the United States is close to reaching 2019 levels, with millions of domestic travelers passing through Transportation Security Administration checkpoints each day.

Millions more are expected to hit the skies and the roads in the coming weeks. But as pandemic regulations ease in some countries, others are tightening entry rules to contain new waves of the virus. The shifting rules, rapidly changing course of the pandemic and lack of international coordination on travel regulations continue to leave consumers — and many travel operators — flustered and confused.

This is great news for hotels, downtowns, and international airports.    So, a good time to invest in hotel loans as Clark Street has two offerings nearing $150MM.

The 140MM Buckeye Hotel Portfolio

Clark Street Capital's Bank Asset Network ("BAN") proudly presents: "The 140MM Buckeye Hotel Portfolio." This exclusively offered portfolio is offered for sale by one institution ("Seller"). Highlights Include:
 

  • A total outstanding balance of $135,716,048 comprised of thirteen loans and nine relationships

  • The loans are secured by first mortgages on fifteen hotels located in Ohio (77%) and Indiana (23%)

  • The properties have a weighted average age of 9 years with 79% constructed since 2013

  • The weighted average LTV of the entire portfolio is 73.62%

  • All loans are performing without any current modifications, except for a single relationship in bankruptcy

  • 98% of the properties are major hotel franchises (Hilton, Marriott, Choice, IHG)

  • All loans include personal guarantees

Files are scanned and available in a secure deal room and organized by credit, collateral, legal, and correspondence with an Asset Summary Report, financial statements, and collateral information. Based on the information presented, a buyer should be able to complete the vast majority of their due diligence remotely.

Timeline:

  • Sale announcement: Thursday, October 28, 2021

  • Due diligence materials available online: Monday, November 1, 2021

  • Indicative bid date: Monday, November 22, 2021

  • Closing date: Tuesday, December 14, 2021

Bids will be entertained on individual assets, a combination of assets, or the entire portfolio. 

Please click here for more information on the portfolio. You will be able to execute the confidentiality agreement electronically.

The BAN Report: The Great Split / We Quit / Casinos Roll / Tom Brady / The 140MM Buckeye Hotel Portfolio

The Great Split

This week, General Electric, once the world largest company by market cap, announced it is splitting into three companies, signaling the end of the conglomerate era.   

David Cote, a former GE executive who later ran rival conglomerate Honeywell International Inc. for 15 years, said he believed when Mr. Culp took over that a breakup was the only recourse for GE. It “just seemed too far gone to pull back together,” Mr. Cote said.

“The conglomerate is dead, and this is the end of the conglomerate,” said Bill George, a former chief executive of Medtronic PLC and now a senior fellow at Harvard Business School. GE units could likely invest more effectively on their own, he said.

GE once built the equipment that gave cities electricity, sold the appliances that modernized homes, broadcast the NBC TV network, financed home mortgages, invented the MRI machine and ushered in a jet age. Yet over the decades it abandoned many of those pursuits. The company barely survived the financial crisis, and its retreat took on greater urgency after 2018, when the company’s profit troubles prompted it to slash its dividend and change leaders.

“This was the largest company in the market by far, it was probably viewed as the best-run company in the market by far,” said David Giroux, chief investment officer at T. Rowe Price Group, a mutual-fund manager and major GE shareholder. “It fell so far for so long, principally because of really poor capital allocation and lack of operational excellence.”

Mr. Culp, the first outsider to run GE, sold off business units, replaced much of the company’s leadership, shrank the headquarters and revamped GE’s sprawling operations. Company finances improved, and GE paid off $75 billion of debt. But a breakup was never Mr. Culp’s plan when he took over, according to people familiar with the matter. “It was hard even for Culp, as an outsider, to make the decision,” one of these people said.

GE shareholders, employees, and former employees can thank Jeff Immelt, perhaps the worst CEO in modern history, for this stunning fall from grace.Nevertheless, GE is not alone. Johnson & Johnson announced it was splitting the pharmaceutical and medical-device businesses.

The separation will kick off the biggest change in direction in J&J’s 135-year history. Disposable diapers, indigestion tablets and cough remedies powered J&J during its early history, then provided the diversification that helped the company ride out the ups and downs of its riskier but higher-reward pharmaceuticals and medical-devices businesses.

Toshiba announced this week that it is splitting up into three, just like Siemens did previously. The new conglomerates appear to be the tech companies, as they seem to be better at leveraging economies of scale. All of this is great news for shareholders as these smaller companies will be better-managed and more focused.

We Quit

Setting another record, 4.4 million workers quit their jobs in September. People are quitting in a variety of industries, especially in leisure, hospitality, manufacturing, and health care. Moreover, it’s not just lower-wage workers that are quitting their jobs.

JPMorgan Chase & Co.’s equity derivatives desk has faced a wave of defections this year, part of a growing trend across the financial industry, Bloomberg News’s Hannah Levitt reports. Unlike many Americans leaving their jobs, JPMorgan’s senior executives had positions lined up at rival powerhouses like Bank of America Corp., Citigroup Inc. and Millennium Management. But, like workers in other industries, bankers are increasingly basing their career decisions on more than just money. After more than a year of the Covid-19 pandemic, flexible lifestyles are in demand.

The fact that JPMorgan and other Wall Street institutions aren’t immune to greater turnover at their highest ranks is good reason to think the tightness is quite persistent. It’s been clear for a while that with job openings at near-record highs, including among restaurants and other front-line industries, employers have had to offer higher wages and bonuses to attract candidates who might otherwise rather wait out the pandemic. Hourly workers in the leisure and hospitality industry saw earnings jump by 12.4% in October relative to a year earlier, for instance, according to Labor Department data.

Either way, employees’ unusual propensity to quit raises the risk of a wage-price inflation spiral — not something the Fed or the Biden administration wants to contemplate with the U.S. consumer price index rising at its fastest pace in three decades. Powell, for his part, sees it as a mismatch between worker supply and demand. “You have people who are held out of the labor market, you know, of their own, they're holding themselves out of the labor market because of caretaking needs or because of fear of Covid or for whatever reason,” he said. To be sure, a return to a normal participation rate is possible.

But it could also be the case that some Americans 55 and older, who are more likely to have sizeable financial assets that have lately soared in value, aren’t particularly interested in returning to work, regardless of any salary boost. As my Bloomberg News colleague Cameron Crise noted, “there has never been a postwar recession where either the employment or participation of older workers has lagged this badly. That’s flashing an amber warning signal that something is different this time around.” On the opposite side of the spectrum, if you believe survey data posted on Twitter last week by Mark Cuban, a portion of the labor force (presumably on the younger side) has quit because of gains from trading crypto.

Its interesting that many workers are leaving companies that insist that workers return to their offices.In 2022, we will get some clarity on the durability of remote work. Most company CEOs insist their returning to their offices, but will they buckle when their works refuse?  

Casinos Roll

US commercial casinos just finished their best quarter ever, as Americans have returned to casinos at levels never before.

The nation's commercial casinos won nearly $14 billion in the third quarter of this year, marking the industry's best quarter ever, and pushing U.S. casino revenue past what it was for all of 2020, according to figures released Tuesday.

The figures from the American Gaming Association, the casino industry's national trade group, show U.S. casinos are poised to have their best year ever in 2021 as more consumers feel comfortable visiting casinos amid the COVID19 pandemic, and as online and sports betting revenues continue to grow.

U.S. casinos are on pace to break the annual record of $43.65 billion, set in 2019, the group said.

Bill Miller, the association's president and CEO, noted that the second quarter of this year also broke records.

"Two straight quarters of record gaming revenue is an incredible accomplishment in any context, let alone after the most challenging year in industry history," he said in a statement. "Our recovery is not a flash in the pan, but rather a sustained result of our leadership in responsible reopening, world-class entertainment offerings and widespread favorability."

The nation's non-Native American casinos won $13.89 billion in July, August and September of this year. For the first three quarters of this year, U.S. casinos have won nearly $39 billion, surpassing the total for all of 2020, and exceeding the total for the first three quarters of 2019 by 18%.

Jane Bokunewicz, director of the Lloyd Levenson Institute at New Jersey's Stockton University, said pent-up demand among pandemic-weary customers played a big role in the industry's resurgence as restrictions were lifted.

"After a year of restrictions and quarantines, people were anxious to get out and enjoy in-person experiences again," she said. "The casino industry responded quickly to implement clean and safe protocols providing a welcoming environment to people seeking safe social activities. 

"The explosive growth of internet gaming during the pandemic engaged a new audience of consumers who may have become curious about brick-and-mortar casinos and the in-person gaming experience," she added. "Encouraged by casino marketing and loyalty programs they may have decided to try something new." 

David Schwartz, a gambling historian at the University of Nevada Las Vegas, agreed that eagerness to get out and do things among gamblers who had been reluctant to visit casinos in Las Vegas or in their local regions is one factor driving the higher numbers.

Despite Delta, Americans seem to want their 2019 back.

Tom Brady

Tom Brady’s success well into his 40s is a function partly of his extraordinary self-discipline.  

At 44, with most of his peers retired, limping or clutching at the disks in their backs, Brady is on a blitzing pace to throw for more than 5,000 yards and 50 touchdowns this season as he and the Tampa Bay Buccaneers approach Sunday’s game with the Washington Football Team. This is a feat worthy of gaping incredulity, and it raises the question of what makes Brady’s clock tick. It would be sooooo convenient to think Brady came preloaded with some unattainable, far-fetched genetic gift not relevant to you. The simple truth may be more banal — and exposing — than that. His longevity may just be the product of better habits than yours and mine.

The behavioral-science term for the inability to reject immediate gratification in favor of a bigger gain is “delayed reward discounting.” People who delay-discount tend to perceive something as less valuable the longer they have to wait and work for it. Whereas others are stronger at setting and attaining more distant-horizon goals. This is “one of the most relevant predictors” of long-term success, according to Michael Sofis, a senior scientist with health services consultant firm Advocates for Human Potential. And it’s undoubtedly a contributor to Brady’s sheer longevity. He was in his 30s when he started training for his 40s, quitting sugar and white flour, among other steps. And he works in May for what might happen in February. Consider this story about him.

In the spring of 2020, in the midst of the coronavirus outbreak, Brady participated in the Match II, the made-for-TV golf exhibition with Phil Mickelson and Tiger Woods in Florida. It was hot and raining. Nevertheless, a couple of hours before tee-off, Charles Barkley saw Brady in the parking lot of the golf club. He was running sprints. “What the hell are you doing?” Barkley said.

“I’m trying to win a Super Bowl,” Brady replied.

Brady’s unquenchable ambition is of course a mystery — but what really separates him is that he marries it to method. Without that method, year-round rigor, he would be just another guy with big aspirations who couldn’t live up to them. “If I don’t really work at it … and if I don’t play to my strengths, I’m a very average quarterback,” he said years ago, and it’s true.

The author ponders whether many people would give up a food they love to eat for just a 2% gain in their conditioning?   The short answer is not many.  

 

The 140MM Buckeye Hotel Portfolio

Clark Street Capital's Bank Asset Network ("BAN") proudly presents: "The 140MM Buckeye Hotel Portfolio." This exclusively offered portfolio is offered for sale by one institution ("Seller"). Highlights Include:

  • A total outstanding balance of $135,716,048 comprised of thirteen loans and nine relationships

  • The loans are secured by first mortgages on fifteen hotels located in Ohio (77%) and Indiana (23%)

  • The properties have a weighted average age of 9 years with 79% constructed since 2013

  • The weighted average LTV of the entire portfolio is 73.62%

  • All loans are performing without any current modifications, except for a single relationship in bankruptcy

  • 98% of the properties are major hotel franchises (Hilton, Marriott, Choice, IHG)

  • All loans include personal guarantees

Files are scanned and available in a secure deal room and organized by credit, collateral, legal, and correspondence with an Asset Summary Report, financial statements, and collateral information. Based on the information presented, a buyer should be able to complete the vast majority of their due diligence remotely.

Timeline:

  • Sale announcement: Thursday, October 28, 2021

  • Due diligence materials available online: Monday, November 1, 2021

  • Indicative bid date: Monday, November 22, 2021

  • Closing date: Tuesday, December 14, 2021

Bids will be entertained on individual assets, a combination of assets, or the entire portfolio. 

Please click here for more information on the portfolio. You will be able to execute the confidentiality agreement electronically.

The BAN Report: Frenzy in Austin / CVS Closes Stores / Retail Reset / Rent-Free for 23 Years! / The 7MM Chicago Commercial Portfolio / The 7MM Chicago Resi Portfolio

Frenzy in Austin

The New York Times had a great feature on how home-buying has completely changed, especially in markets like Austin, Texas. Prospective buyers who want to buy a home by offering a price at the listing price with a mortgage and inspection continency may be waiting for a very long time.

For Amena and Drew, their Austin home-buying odyssey was just beginning — a monthslong ordeal that would teach them quite a bit about the cruel realities of America’s housing market, in which home prices nationwide have risen by an astonishing 24.8 percent since March 2020. And this first lesson, appropriately enough, demonstrated just one of many ways that the old, measured rules of home-buying no longer applied — that the cutthroat competitiveness that once defined only a few U.S. markets (San Francisco, New York, Los Angeles) had now become standard across the country, as the median home price in small- and medium-size metropolitan areas rose by jaw-dropping levels: Boise, Idaho, 46 percent; Phoenix, 36 percent; Austin, 35 percent; Salt Lake City, 33 percent; Sacramento, 28 percent.

By bidding on two properties she had never visited, in a city nearly 2,000 miles away, Amena joined the 63 percent of North American home buyers in 2020 who made at least one offer on a home that they had never stepped into. Homes had been one of the few things resistant to online shopping: We browsed online, but we didn’t buy. The pandemic changed that. The result was a market that moved much, much faster.

And prospective owner-occupants are competing with speculators making all-cash offers. One investor’s story is pretty remarkable as he is in the process of buying 10 homes in Austin without ever visiting the town!

Often, the person still standing was that most hated figure in the Austin real-estate market, the California investor. The winning bidder for Ephraim Road, for example, was Michael Galli, a Silicon Valley real estate agent. “Here’s the interesting truth,” he told me. “I’ve never been to Austin.” He toured the Ephraim Road house on FaceTime.

In 2019, Galli decided he wanted to diversify, so he spent eight months studying cities online and kept coming back to Austin. It had high-income job growth and an influx of venture capital, the very things that had made Bay Area real estate so lucrative. Galli bought a large map of Austin and mounted it on the wall, studying it in the evenings with a glass of red wine in hand. He stuck Post-its onto points of interest: Apple, Samsung, Tesla, new transit lines. He believed he understood what tech workers wanted: spacious feng shui- and Vastu-compliant homes, with a bedroom on the first floor to accommodate foreign parents on long visits. And most important, good school districts. He resolved to acquire 10 homes within a 12-minute drive of Apple. For $1 million down, he’d own $5 million in assets that he would rent out for top dollar and that he believed would double in value in five years and double again by 12 years.

What’s going on in Austin is a great example of a nationwide housing shortage. An easy solution is for banking regulators to encourage banks to ease lending standards on for-sale housing. I’ve yet to meet a bank that won’t let on multi-family, but I know plenty that won’t lend on condo buildings or single-family developments.  

CVS Closes Stores

This week, CVS announced that it was closing 900 stores over the next three years, representing about 9% of all its stores.

The company announced in a news release that it will focus more of its efforts on digital growth and turning its stores into destinations that offer a range of health-care services, from flu shots to diagnostic tests.

Store closures will begin in spring 2022. The company said it plans to close about 300 per year. In total, the closures will add up to roughly 9% of CVS’ nearly 10,000 U.S. stores. The company declined to share the specific locations of stores that will shutter.

CVS did not say how many employees will lose their jobs because of the closures, but said it will help those who are impacted find a different opportunity or role at another location.

CVS is shaking up its business as the Covid pandemic accelerates changes in consumer behavior. More people are getting prescriptions filled online, retrieving personal care items through curbside pickup, and visiting with doctors through telehealth. The drugstore chain and health insurer said it is closing the stores based on changes to the population, customer habits and health needs.

CVS has been in the middle of an effort to turn more of its stores into health-care destinations, which could drive more foot traffic and drum up more claims for its insurance business. It already has about 1,100 MinuteClinics, which provide urgent care for common illnesses like strep throat or administer flu shots.

One store format called a HealthHub has been expanded. These locations sell a wider variety of medical products, offer more services from therapy appointments for mental health to screenings for chronic conditions and have other wellness features like rooms that can host yoga.

The company has said it plans to have 1,000 HealthHub locations by the end of the year.

CVS said it plans to use three different store formats. One group will offer primary care services. Another will become HealthHubs. And a third will remain traditional stores that fill prescriptions and sell items from shampoo to milk.

CVS often paid top-dollar rents for attractive high-traffic corner sites. Many landlords will have difficulty re-tenanting these sites at similar rents.  We’ve seen deed restrictions as well that prevent the property from being used as another drugstore.    It does appear that all retailers, even those that appear to be better insulated from online retailers, need to reimagine their retail footprints.

Retail Reset

COVID-19 ended up helping many retailers fix long-standing inventory issues.

The Covid-19 pandemic was supposed to deliver a knockout punch to department stores and specialty retailers. Instead, many of them are bouncing back healthier.

Profits are exceeding 2019 levels at companies ranging from Macy’s Inc. to Ralph Lauren Corp. Dozens of chains restructured through bankruptcy or worked to shed money-losing locations and now have stronger balance sheets.

Even the supply-chain problems bedeviling companies have produced a silver lining: it has helped retailers break a cycle—at least temporarily—of overbuying and discounting that has eroded profits for decades, executives and analysts said.

“We were carrying too much inventory for years,” Macy’s Chief Executive Officer Jeff Gennette said Thursday. “Through the pandemic, our opportunity to work through our stock and get in line with demand is a benefit we’ll hold on to going forward.” He said stocking fewer goods translates into less cluttered stores, which is a better experience for customers, and results in more full-priced sales.

“It’s not pile it high and let it fly anymore,” Joanne Crevoiserat, CEO of Coach parent Tapestry Inc. said last week, referring to an industry maxim about selling large quantities of goods at low prices. Ms. Crevoiserat said Tapestry had begun reducing inventory even before the pandemic. “We’re not competing on price anymore,” she said.

Retailers have long had to walk the line between not having enough goods and missing out on sales, and having excess items that need to be marked down. In the past, they have tended to err on the side of having too much. During the pandemic, every retailer faced inventory challenges at the same time, making a reset possible.

Since COVID impacted retailers simultaneously, it made it easier for retailers to live with lower inventory levels, since all were struggling to get new product in. So far, the doom and gloom scenario for retail has not played out yet.

Rent-Free for 23 Years!

A Long Island man was finally evicted from a house after occupying it without paying any rent or mortgage payments for a whopping 23 years.

Guramrit Hanspal, 52, bought the three-bedroom, 2.5-bath East Meadow home in October 1998 for $290,000, with $58,000 down. He made the first mortgage payment of  $1,602.37, and then never paid again. The house was foreclosed upon in 2000.

Over the years, Hanspal filed four lawsuits and seven bankruptcies, cases which automatically pause any attempt to evict. He even claimed COVID-19 financial hardship, court records show.

Other occupants of the Kenmore Street house also filed for bankruptcy along the way, as the house legally changed hands from one bank to another and finally to an investor — all of whom tried in vain to get Hanspal out.

Time and again law enforcement officers would show up to boot the deadbeat residents, only to be confronted with court documents giving Hanspal another chance.

Hanspal, who frequently represented himself in court and used different lawyers, would then abandon most if not all the court actions he began, defaulting or failing to show up for hearings.

That all changed Friday morning, when Nassau County sheriff’s deputies descended on the two-story corner home to change the locks, two months after Judge William Hohauser ruled that Hanspal was in the house illegally.

The man basically received 23 years of free rent, which is a stunning abuse of the court system in New York State. While predatory lenders do exist, so do predatory borrowers!

The 7MM Chicago Commercial Portfolio

Clark Street Capital's Bank Asset Network ("BAN") proudly presents "The 7MM Chicago Commercial Portfolio". This exclusively offered portfolio is offered for sale by one institution ("Seller"). Highlights include:
 

  • A total outstanding balance of $6,761, 048 comprised of 21 loans

  • Commercial loans secured by the first mortgages on Multi-Family (25%), Single Family Residences (22%), Residential Condominium Unit(s) (17%), Industrial (15%), Business Assets (11%), and Commercial Condo Unit(s) (10%)

  • 67% of the portfolio is non-performing, with 33% performing

  • The portfolio is located entirely in the Chicago MSA

  • The loans have a weighted average coupon of 4.85%

  • All loans include full personal recourse

  • The portfolio will be sold in its entirety to a single buyer

Files are scanned and available in a secure deal room and organized by credit, collateral, legal, and correspondence with an Asset Summary Report, financial statements, and collateral information. Based on the information presented, a buyer should be able to complete the vast majority of their due diligence remotely.

Timeline:

  • Sale announcement: Friday, November 19, 2021

  • Due diligence materials available online: Tuesday, November 23, 2021

  • Indicative bid date: Thursday, December 16, 2021

  • Closing date: Thursday, December 30, 2021

Please click here for more information on the portfolio. You will be able to execute the confidentiality agreement electronically.
 

The 7MM Chicago Resi Portfolio

Clark Street Capital's Bank Asset Network ("BAN") proudly presents "The 7MM Chicago Resi Portfolio". This exclusively offered portfolio is offered for sale by one institution ("Seller"). Highlights include:
 

  • A total outstanding balance of $6,817,844 comprised of 21 loans

  • The consumer loans are secured by Single Family Residences (85.38%), Condominium's (10.57%), and Townhome's (4.05%)

  • The portfolio is located in the Chicago MSA

  • 89% of the loans are non-performing

  • The portfolio has a weighted average LTV of 77%

  • The portfolio will be sold in its entirety to a single buyer

Files are scanned and available in a secure deal room and organized by credit, collateral, legal, and correspondence with an Asset Summary Report, financial statements, and collateral information. Based on the information presented, a buyer should be able to complete the vast majority of their due diligence remotely.

Timeline:

  • Sale announcement: Friday, November 19, 2021

  • Due diligence materials available online: Tuesday, November 23, 2021

  • Indicative bid date: Thursday, December 16, 2021

  • Closing date: Thursday, December 30, 2021

Please click here for more information on the portfolio. You will be able to execute the confidentiality agreement electronically.