Even Howard Hughes can’t get a loan in this environment.
Howard Hughes Corporation got no takers on a multifamily proposal in the Woodlands, the Houston suburb where the firm is headquartered, CEO David O’Reilly told Bloomberg.
“Zero showed up and gave me a bid,” O’Reilly told the outlet. “I talked to 48 of them.”
The real estate developer and manager is known for its range of master-planned communities to offices and retail spaces, including condominiums in Hawaii and buildings in Manhattan’s Seaport area. Hedge fund manager Bill Ackman’s investment firm, Pershing Square Capital Management, holds around a third of the company’s stock.
The financing market for real estate is tightening, causing concerns among developers and owners. Commercial real estate is being impacted by rising borrowing costs, leading to payment difficulties, defaults and negotiations with lenders. Texas Billionaire developer Ross Perot Jr. has also noted the increasing difficulty of obtaining construction loans for real estate projects.
Apartment landlords are now experiencing the fallout as well. Despite benefiting from rent growth during the pandemic, they are now grappling with high borrowing costs and increased expenses that are eroding profits. Apartment building prices have dropped 21% over the past year, according to Green Street.
Lenders are currently focused on resolving existing loans and are hesitant to extend new ones, creating challenges for developers like Howard Hughes, despite strong demand from renters. Apartments Howard Hughes has already constructed in the Woodlands boast a 96% occupancy rate and double-digit rent growth.
“Sounds good, except I’m upset because it means I didn’t build the next building fast enough,” O’Reilly told the outlet.
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