Editor’s note: One nation, under Covid

After more than 17 years of coverage that’s spread from New York and its surroundings to South Florida, Los Angeles and Chicago, we’re excited to present a combined issue that brings The Real Deal’s stories to doorsteps around the country.

You are reading TRD’s first national issue.  

In a world that’s increasingly globalized (even as we’re individually isolated), our newsroom is covering more national news that affects every market more than ever before.

Bringing together our local magazines under one umbrella made a lot of sense, as evidenced by the nearly 5,000 requests we’ve gotten for copies in the past several weeks, on top of our existing readership. That’s as TRD continues to see record digital traffic — on our website, from social media and through new channels like digital events. (Check out our recap of some of the heavy-hitters who appeared on our webinar series TRD Talks Live this past month.)  

In the middle of a crisis, information is more valuable than ever. And the extent of this crisis is still unfolding with some predictions going beyond dire. For instance, a recent column spelled out how we’ll be lucky if we escape a crisis that is “only” on the scale of the Great Depression. And there was the TRD Talks Live panelist who told us (before we went live) that he expected New York City to wind up in receivership.

While those scenarios are obviously unlikely, it gives one pause. This is a crisis that doesn’t follow the rules.

That applies to our cover story as well. Opportunities for investors won’t follow the rules of a typical crisis. As reporter Rich Bockmann writes, while many distressed investors have based their playbooks on the Great Recession, the pandemic’s playing field looks quite different. 

Most recent crises are rooted in financial excess (with the notable exception of 9/11). But this one is not about subprime mortgages or S&L bank collapses or inflated dot-com valuations sending the economy skidding off course. As our story notes, one of the biggest differences is that the current crisis hasn’t resulted in a breakdown in the banking system. 

Some lenders may be skittish and hesitant to make loans, but the financial system is still working. Things could be different later on, of course, if massive defaults happen.

As a result, there are billions sitting on the sideline, and investors are looking at opportunities a lot earlier. The gargantuan Blackstone, for instance, has $152 billion in dry powder.

Back in 2008, “people were afraid of their own shadows,” Eastdil Secured managing director Jonathan Firestone told us. “It took a year and a half for people to invest in opportunistic and distressed deals. This has happened in two months.”

A countervailing force — which renters, business owners, landlords and everyone but distressed investors are happy about — is the federal government’s $6 trillion intervention. Government relief efforts have temporarily kicked a lot of the distress down the road, as we note in our story.

But the carnage is immense. Hotel occupancy sank to around 25 percent in April, while national retail chains paid just 58 percent of their rents that same month. And nearly 37 million workers have filed for unemployment since mid-March.

And if working from home becomes the new norm post-coronavirus, that could have enormous implications for the office market. Twitter’s announcement that some workers would be able to permanently work from home, even after the crisis ends, is poised to send shockwaves through commercial real estate if other companies follow suit.

Meanwhile, in what could be another blow to real estate, more than 190,000 rent and mortgage strikes have surfaced nationwide, as Georgia Kromrei and Kathryn Brenzel examine. As the movement gains traction, property owners are organizing themselves — part of a battle that predated the coronavirus, in the fight over rent reform.

Finally, on a positive note, what’s been bad for cities like New York has been good for suburban markets as residents decamp to areas with less density. Whether this is a temporary boon to those markets or a permanent shift is seemingly very much in the air. 

Enjoy the issue and stay safe.