Alanis Morissette could have been talking to regulators and lenders in her 1995 hit “You Learn” which highlighted the benefits of experience. Instead of “you live…you learn,” for bankers it is “you lend……you learn.”
In the early 1990s a drawn-out real estate recession and recovery was the result of banks and regulators being heavy-handed when there was no liquidity in the market. The game plan in the Great Recession of 2008-2010 was squeeze those that can pay and leave the others alone. It was a somewhat laissez-faire approach by the banks that seemed to work and allowed weaker balance sheets to improve over time while regulators were patient.
This time, lenders and regulators alike seem to be using a similar playbook with the difference being that large banks largely avoided making big bets in real estate this cycle, learning from their experience in the Great Recession. Recent passing grades on stress tests and research from Moody’s indicates that large banks, or at least the vast majority, are solid.
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What is helping regulators keep a lighter hand in this cycle is they don’t see systemic banking risk brought on by suffering in the real estate sector. Since no other industry is as reliant on capital, the acute pain of “higher for longer” rates is isolated to real estate.
The wildcard this time is the change in office attendance and significant drop in office space demand and occupancy. That has led to the most scrutiny of office loans which, of course, are not ready for the spotlight.
According to research from Trepp, banks have increased their net charge-offs, have increasing delinquencies on loans and their collateral loan-to-values are rising due to sinking occupancy. While Moody’s research seems a little more bullish, it still predicts that 70% office-backed bank loans will default at maturity.
As with many things in life, the solution for bank and borrower alike is time. Assuming regulators will be light-handed, the banks will keep extending maturities and time will help heal some gaping holes in loan portfolios brought on by underwater office loans.
In the meantime, liquidity for bank loans is a little tight leaving room for other lenders to increase their volumes. CMBS lenders see a bit of an opening in an unlikely place – multifamily loans.
The problem for many loans is the cash flow available for debt service does not allow for a new loan to be taken out at the same level of proceeds. This may be why CMBS lenders are seeing an uptick in multifamily loans, long dominated by agency (Fannie and Freddie) lenders. CMBS lenders can underwrite a DSCR that is based on interest only payments and therefore squeeze out more proceeds than agency lenders. Today, the rates are not terribly different either.
Commercial mortgage rates are now in the 6.00% to 6.50% range for most five- and 10-year loans. Floating rate loans are priced much higher and now are in the 8.00% range for assets that are not stabilized.
Lower leverage loans may price more aggressively, and office loans will likely price wider. It is no surprise that most bank lenders are being very cautious with their capital allocations, but if the past is any predicter of the future, this is a good time to put loans on the books.
Business openings and closings in Richmond area
Barnes & Noble
Barnes & Noble will be closing its 9850 Brook Road store in Glen Allen. Its last day of operation will be Sunday, June 23. Read the story.
Txtur
Txtur, a Roanoke-based furniture company, has opened a showroom at 604 Hull St. in Richmond’s Manchester neighborhood. Read the story.
Marshalls
The Marshalls store in Midlothian is moving from 9748 Midlothian Turnpike to Westchester Commons at 109 Perimeter Dr.
A new Marshalls is also headed to 5730 Hopkins Road in the Meadowbrook Plaza center in North Chesterfield, while the Marshalls at 4020 Meadowdale Blvd. in Chesterfield will be closing. It will be replaced by a new Planet Fitness.
Planet Fitness
Planet Fitness is set to open a new location at Meadowdale Plaza, 3950-4126 Meadowdale Blvd., in Chesterfield.
Shoreline Seafood Market
Shoreline Seafood Market is now open at 10614 Patterson Ave. in Canterbury Shopping Center.
From David Whitby, the former owner of Yellow Umbrella seafood, Shoreline is a “traditional seafood market…reimagined” where visitors can shop the rotating fresh fish case, pull up a chair at the dine-in counter for lunch or shop the market for wine, tinned fish, and gourmet groceries. Read the story.
Gearharts Fine Chocolates
Gearharts Fine Chocolates recently opened a new dessert cafe at 11331 W. Broad St.
BLVCK WAX
A new black owned luxury body waxing and beauty brand located at 400 Southlake Blvd, Suite J2, empowering women to feel confident and beautiful in their own skin.
Midtown Yoga
Midtown Yoga is making their Virginia debut with a new studio in Carytown. Located at 3526 W Cary St. Suite A140, Midtown Yoga provides a welcoming and dynamic workout experience for both the yoga-curious and the yoga-devoted.
Scenthound
Scenthound, a wellness-focused dog care center, opened in Short Pump at 10921 W. Broad St., Suite B.
Ruby
Ruby, located at 3030 W. Cary St., specializes in good quality, casual clothing, is closing in June after nine years in business. It is a sister shop to The Phoenix.
Yellow Umbrella Libbie Mill
Yellow Umbrella has opened a second location in Libbie Mill. It took over the space that was occupied by The Stables Market at 5001 Libbie Mill E. Blvd, Suite 135. The new spot offers most of the same provisions as the Patterson Avenue flagship, including prepared foods, grab-and-go lunch offerings, baked goods, pantry staples, charcuterie, wine and beer. It also has hot lunch offerings with house-made soups and made-to-order paninis. Read the story.
Odd Bird
Odd Bird, a new home goods shop, is now open in Jackson Ward at 320 Brook Road.
UGK@Hull
The Underground Kitchen has opened a boutique space featuring a curated selection of home entertaining items and foods such as rare wines, artisanal gourmet bites and vintage glassware. Check out its Instagram at @ugkhullstreet. 205 Hull St.
Amazon fulfillment center in Henrico
In Henrico County, Gov. Glenn Youngkin and Amazon officials cut a ribbon for Amazon’s new fulfillment center. Youngkin called it “the largest building I’ve ever seen in my life.”
The gigantic, 5-story building contains 2.7 million square feet of space — enough to fit 46 football fields.
At any given time, it stores about 20 million consumer items, such as diapers, books and batteries, ready to ship at a moment’s notice. Read the story.
Coca-Cola bottling plant in Henrico
Coca-Cola has spent $50 million to expand its manufacturing and warehouse facility in eastern Henrico County, as the Richmond market grows and demand for soda continues. Read the story.
Richmond’s new baseball stadium
Richmond’s planned baseball stadium is to include a beer garden, family zone and party area.
The Henrico Sports & Events Center
The Henrico Sports & Events Center, the county’s sprawling multipurpose building at the site of the former Virginia Center Commons mall, has opened to the public.
The 185,000-square-foot facility cost $50 million and can hold up to 4,500 guests in retractable seats. A flexible space, it has room for 12 basketball courts or 24 volleyball courts. It will host concerts, business events and more. Read the story.
Shades of Moss
Shades of Moss Plant + Design is a new plant, record and tea shop from Charlotte, North Carolina now open in Carytown at 2128 W. Cary St.
Padel Plant
The iconic Haxall hydroelectric plant located along the downtown Riverfront Canal Walk on the banks of the James River will soon be an indoor racket sports venue called the Padel Plant, complete with padel and pickleball courts as well as a food-and-beverage concept.
The venue will offer memberships with priority access, but also will be open to the public. It aims to open later this summer. Read the story.
Jean Theory
Jean Theory, a women’s clothing boutique at 5708 Patterson Ave. carries more than 70 styles of premium denim from top designers. Read the story.
Shenandoah Mansions
The Shenandoah building, located at 501 N. Allen Ave., is currently being renovated into a boutique hotel and will be the Fan’s first such hotel when it opens in the fall of 2024.
HomeGoods
HomeGoods has opened in the Willow Place shopping center at 5478 W. Broad St., across from Target and Barnes & Noble. Read the story.
Fink’s Flagship store at Short Pump
A rendering of Fink’s Jewelers’ planned flagship location. It’s expected to be finished this year at the corner of N. Gayton Road and W. Broad Street in Henrico. Read the story.
Painted Tree Boutiques
Painted Tree Boutiques, a home décor, gifts and boutique clothing store, is headed to the Westpark Shopping Center at 9819 W. Broad St. in western Henrico County. Read the story.
RVA Hot Wheelz
Identical twin sisters Dashia (left) and Destiny Oliver, 24, launched RVA Hot Wheelz which rents Slingshot vehicles at 3107 Old Hilliard Road in Henrico.
Read the story.
Bangers & Dinks
Bangers & Dinks, which gets its name from two pickleball terms, is an indoor pickleball court at 1516 Koger Center Blvd. in Chesterfield County.
Whistle Express car wash
Whistle Express Car Wash is now open in Powhatan at 1880 Stavemill Crossing Lane. Whistle Express purchased the 2-acre plot in 2021 for about $1 million. Near Route 60, the property is diagonal from Walmart.
In Hanover, a location is open at 7419 Pole Green Road. The parcel is a 2-acre plot bought by the chain that is adjacent to a Sheetz gas station and convenience store. Property records do not list a sale price.
The Midlothian Whistle Express is located at 10300 Midlothian Turnpike, an almost 1-acre plot bought by the company for $1.4 million in 2021 at the intersection of Midlothian Turnpike and Sturbridge Drive.
Popshelf
Popshelf is now open at the Shops at Stratford Hills at 7101 Forest Hill Ave.
Take a look at these restaurants that closed in the Richmond area.