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117 Real Estate Essay Topic Ideas & Examples

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Real estate is a vast and diverse industry that encompasses everything from buying and selling properties to property management and development. There are many fascinating topics within the field of real estate that can be explored through essays. If you are a student or professional in the real estate industry looking for essay topic ideas, you have come to the right place. In this article, we have compiled a list of 117 real estate essay topic ideas and examples to inspire your writing.

• The impact of the COVID-19 pandemic on the real estate market
• The role of technology in the future of real estate
• The importance of sustainable development in real estate
• The pros and cons of investing in commercial real estate
• The impact of gentrification on urban neighborhoods
• The benefits of using a real estate agent when buying or selling a home
• The challenges of property management in a competitive market
• The rise of co-living spaces in major cities
• The impact of Airbnb on the traditional hotel industry
• The role of real estate in economic development
• The benefits of investing in real estate as a long-term strategy
• The impact of zoning laws on property values
• The benefits of investing in real estate crowdfunding platforms
• The challenges of affordable housing in major cities
• The impact of interest rates on the real estate market
• The role of real estate developers in shaping urban landscapes
• The benefits of investing in real estate investment trusts (REITs)
• The challenges of property flipping in a competitive market
• The impact of climate change on real estate values
• The benefits of investing in rental properties
• The challenges of managing a multi-family property
• The impact of foreign investment on the real estate market
• The benefits of investing in vacation rental properties
• The challenges of buying a foreclosed property
• The impact of historic preservation on property values
• The benefits of investing in mixed-use developments
• The challenges of property maintenance in a rental property
• The impact of urban sprawl on property values
• The benefits of investing in student housing properties
• The challenges of investing in a fixer-upper property
• The impact of property taxes on real estate values
• The benefits of investing in real estate as a retirement strategy
• The challenges of investing in a commercial property
• The impact of smart home technology on property values
• The benefits of investing in a vacation home
• The challenges of investing in a rental property out of state
• The impact of historic tax credits on property values
• The benefits of investing in industrial properties
• The challenges of investing in a luxury property
• The impact of transportation infrastructure on property values
• The benefits of investing in a short-term rental property
• The challenges of investing in a property with environmental concerns
• The impact of energy efficiency on property values
• The benefits of investing in a co-working space
• The challenges of investing in a property with zoning issues
• The impact of walkability on property values
• The benefits of investing in a mixed-income housing development
• The challenges of investing in a property with title issues
• The impact of green building certifications on property values
• The benefits of investing in a property with historic charm
• The challenges of investing in a property with structural issues
• The impact of transit-oriented development on property values
• The benefits of investing in a property with waterfront views
• The challenges of investing in a property with a high vacancy rate
• The impact of LEED certification on property values
• The benefits of investing in a property with a strong rental market
• The challenges of investing in a property with high property taxes
• The impact of mixed-use developments on property values
• The benefits of investing in a property with a strong school district
• The challenges of investing in a property with a high crime rate
• The impact of green roofs on property values
• The benefits of investing in a property with a strong job market
• The challenges of investing in a property with poor access to public transportation
• The impact of walkable neighborhoods on property values
• The benefits of investing in a property with a strong sense of community
• The challenges of investing in a property with high HOA fees
• The impact of urban agriculture on property values
• The benefits of investing in a property with a low cost of living
• The challenges of investing in a property with high insurance costs
• The impact of community gardens on property values
• The benefits of investing in a property with a low crime rate
• The challenges of investing in a property with high maintenance costs
• The impact of public art on property values
• The benefits of investing in a property with good schools
• The challenges of investing in a property with strict zoning laws
• The impact of bike lanes on property values
• The benefits of investing in a property with good walkability
• The challenges of investing in a property with strict building codes
• The impact of public parks on property values
• The benefits of investing in a property with access to public transportation
• The impact of mixed-income housing on property values

Whether you are a student looking for a research topic or a professional looking to expand your knowledge, these real estate essay topic ideas and examples can help you explore the many facets of the industry. From the impact of technology on the future of real estate to the challenges of investing in a fixer-upper property, there are endless possibilities for exploration within the field of real estate. So pick a topic that interests you, do some research, and start writing your next real estate essay today!

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Essays on Real Estate

Real Estate is a topic that affects everyone, whether we are looking to buy or sell a property, or just interested in the market trends. Writing an essay about Real Estate can help you explore various aspects of this field and contribute to the conversation about this important topic.

Choosing a topic for your Real Estate essay can be challenging, but it's important to pick one that you are passionate about and that will capture the interest of your readers. Whether you want to write an argumentative essay, a cause and effect essay, an opinion essay, or an informative essay, there are plenty of topics to explore. For an argumentative essay, you could discuss the impact of real estate on the economy or the pros and cons of investing in property. For a cause and effect essay, you might explore the reasons behind the housing market crash or the effects of gentrification on communities. If you prefer to write an opinion essay, you could share your thoughts on the best real estate investment strategies or the future of the housing market. And for an informative essay, you could delve into the history of real estate or the process of buying a home.

For example, if you choose to write an informative essay on the history of real estate, your thesis statement could be: "The history of real estate is a fascinating journey that has shaped the world we live in today."

In your paragraph, you could start by providing a brief overview of the history of real estate, highlighting key moments and developments. You could then discuss the significance of understanding this history and how it impacts the current real estate landscape.

In your paragraph, you could summarize the main points of your essay and emphasize the importance of learning from the past to make informed decisions in the future. You could also encourage further exploration of this topic and its relevance to our lives.

By following these examples and tips, you can create a compelling and engaging essay on Real Estate that will captivate your readers and contribute to the ongoing conversation about this dynamic and influential field.

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How Real Estate Contract Laws Can Help You

Real estate regulation act 2016, real estate investing in the current cycle, impact of rera, gst and demonetization on the real estate sector, future of uae’s real estate market for investors, islamic estate planning in malaysia, limitations of gst, shareholders reaction to dividend announcement on stock prices, real estate image process, top causes of delay in the conveyancing process, the pros and cons of eminent domain.

Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more generally) buildings or housing in general.

There are five main categories of real estate: residential, commercial, industrial, raw land, and special use.

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Latest articles

The effect of immigration on housing prices: evidence from 382 german districts.

The Effect of the Countercyclical Capital Buffer on the Stability of the Housing Market

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• Dag Einar Sommervoll

Volume Traders of Non-Homogenous Assets

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Editorial − 2020 Real Estate Finance & Investment Symposium

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Does Bankruptcy Identify a Type Of Real Estate Agent or a Stress-Induced Change in Performance?

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• Velma Zahirovic-Herbert

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Open access: valuing energy efficiency.

"We document that valuation practices have changed over time, and have recently started to specifically value the energy efficiency of homes." Click heading to read "Energy Efficiency Information and Valuation Practices in Rental Housing" in full! 

Open Access: Why do developers sell pre-completion?

Occasionally, units appear on the real estate market before development is done. What motivates this move? New Open Access research illuminates the phenomenon, with evidence from Hong Kong.  Click heading to read! 

Open Access: Does regulation prevent housing busts?

Housing finance regulation "might shield against the deleterious macroeconomic impact of housing busts and financial stability risks posed by housing booms," shows new, fully Open Access research.  Click heading to read!

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The Effect of Short Selling, Covid-19, and ESG

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Real Estate Investment Trusts and Joint Ventures

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Essays on the Impact of Urban (Dis-)Amenities on the German Real Estate Market

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Sustainability and the Occupant

The Effects of Mindfulness and Environmental Attitudes on Real Estate User Behaviors

• Nicolas J. Seyler

Innovation in Service Industries

An Investigation of the Internal and External Organizational Contexts from the Laboratory of Real Estate

• Susanne Hügel
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The Macroeconomics of Real Estate Investing

This dissertation explores macroeconomic aspects of residential and commercial real estate markets. The dissertation consists of three essays on topics in real estate investing, referring to investment in commercial property and in residential property other than owner-occupied housing. There are two main dimensions of the dissertation: one that looks at households’ holdings of investment real estate and another that looks at the information content of large data sets of macroeconomic and financial variables for forecasting real estate investment trust (REITs) returns. A third chapter of the dissertation also provides an overview of prior research, noting gaps that remain from both the consumer portfolio choice perspective and macroeconomic forecasting view.

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Essay on Real Estate

Students are often asked to write an essay on Real Estate in their schools and colleges. And if you’re also looking for the same, we have created 100-word, 250-word, and 500-word essays on the topic.

Let’s take a look…

100 Words Essay on Real Estate

What is real estate.

Real estate is about owning, buying, or selling land, houses, or buildings. It’s a big part of the economy and can be a good way to make money. There are three main types: residential, commercial, and industrial.

Residential Real Estate

Residential real estate is about homes. It includes houses, apartments, townhouses, and condos. This is the type most people think of when they hear “real estate”. People buy these properties to live in or rent out to others.

Commercial Real Estate

Commercial real estate is for business use. It includes offices, malls, and stores. Businesses rent these spaces to run their operations. Investing in commercial real estate can be profitable but it’s also risky.

Industrial Real Estate

Industrial real estate includes factories, warehouses, and research centers. These properties are used for making goods, storing items, or doing research. This type of real estate is important for businesses that make or store things.

Real Estate as Investment

Many people invest in real estate. They buy properties and hope the value will go up. Or they rent them out to make money. But investing in real estate can be risky. It’s important to research and understand the market before investing.

250 Words Essay on Real Estate

Real estate is land plus anything permanently fixed to it, like buildings, houses, and other structures. It includes both natural and man-made things. The term “real” comes from the Latin root res, meaning “things.”

Types of Real Estate

There are four types of real estate. The first is residential, which includes homes for families, apartments, and townhouses. The second type is commercial, which includes office buildings, shopping centers, and hotels. The third type is industrial, which includes factories and warehouses. The last type is land, which includes vacant land, working farms, and ranches.

Buying and Selling Real Estate

People buy and sell real estate for many reasons. Some buy homes to live in. Others buy to rent out and make money. Businesses buy commercial and industrial properties to use for their operations. Selling real estate can provide a large profit if the property’s value has increased over time.

Real Estate Agents

Real estate agents help people buy and sell properties. They know about the local market and can give advice on prices. They also help with paperwork and negotiations.

Why is Real Estate Important?

Real estate is important because it’s a big part of the economy. It can create jobs and wealth. It also gives people a place to live and work. It’s a way for people to invest their money and potentially earn more in the future.

In conclusion, real estate is a complex field that involves different types of properties and various activities like buying, selling, and renting. It plays a significant role in our lives and the economy.

500 Words Essay on Real Estate

Real estate is land, plus any buildings or resources on that land. It is divided into three types: residential, commercial, and industrial. Residential real estate includes houses and apartments. Commercial real estate includes offices and shopping centers. Industrial real estate includes factories and mines.

People buy and sell real estate for many reasons. Some people buy a house to live in. Others buy real estate to make money, by renting it out or selling it for a higher price later. When you sell a piece of real estate, you can make a profit if its value has gone up. But if its value has gone down, you might lose money.

A real estate agent is a person who helps people buy or sell real estate. They know a lot about the local market and can give advice on prices and what to look for in a property. They also handle the paperwork for buying or selling real estate. A good real estate agent can make the process easier and help you get a good deal.

Investing in Real Estate

Investing in real estate means buying property to make money. There are several ways to do this. You can buy a property and rent it out, earning money from the rent. You can also buy a property and sell it later for a higher price. Some people invest in real estate by buying properties that need fixing up, then selling them for a profit once they’re improved.

Risks and Rewards of Real Estate

Investing in real estate can be risky, but it can also be very rewarding. The value of real estate can go up and down, and there’s always a risk that you might not make money. But if you make smart choices and understand the market, you can make a lot of money from real estate. It’s also a tangible asset, which means you can see and touch it, unlike stocks or bonds.

The Role of Real Estate in the Economy

Real estate plays a big part in the economy. When the real estate market is doing well, it can help the economy grow. But when the real estate market is doing poorly, it can hurt the economy. The construction of new buildings creates jobs, and people who buy real estate often buy other things too, like furniture and appliances.

In conclusion, real estate is a complex field with many different aspects. It can be a good investment, but it also comes with risks. Understanding the basics of real estate can help you make informed decisions, whether you’re buying a home to live in or investing in property to make money.

That’s it! I hope the essay helped you.

If you’re looking for more, here are essays on other interesting topics:

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• Essay on Reality Shows Boon Or Bane
• Essay on Recession

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Real Estate Investment Decisions Essay

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Introduction

Over the years, commercial real estate investment has developed into a fully-fledged industry that continues to attract more investors. This observable fact has been necessitated by the fact that buying and selling property has proven to work as a financial investment option through which people can supplement their income (Ling & Archer, 2017).

Besides, benefits such as appreciation of properties, a favorable reward profile, low liquidity, cash flow, and tax benefits have also played a pivotal role in the high rate of growth experienced in the industry since the turn of the century. However, experts argue that investing in commercial real estate has its risks that every investor has to put into consideration to make informed and intelligent decisions (Rodgers & McFarlin, 2016).

This mainly entails conducting a thorough market and property analysis before making any investment. Studies have shown that the importance of conducting the analysis is that it helps an investor to establish whether he or she will enjoy good profit margins and growth from an investment (Coppola, 2014). Real estate is a complex investment that requires an investor to have a good comprehension of the most significant aspects that often influence one’s ability to make decisions that are well informed and intelligent enough.

According to experts in commercial real estate, investment decisions are often influenced by several aspects. One of the most significant aspects is the location of a property (Ling & Archer, 2017). To have a commercial real estate property that has the potential for a high return on investment, it is important to ensure that it is located close to social amenities such as schools, hospitals, shopping centers, major highways, and religious centers.

Also, investors need to choose tax-exempt and peaceful areas for their properties. The main reason for this is the fact that these elements make commercial properties more affordable and attractive to their clients (Coppola, 2014). Experts also argue the location of commercial properties is important in ensuring that the needs of the targeted clients are met in terms of scenic views and neighborhood status.

Choosing the right location for commercial real estate investment constitutes informed and intelligent decisions because property valuations are often based on their proximity to essential amenities such as markets, warehouses, and transport hubs all of which are integral elements in the daily activities of the clients (Rodgers & McFarlin, 2016). To make the right decisions, experts advise that an investor should make an effort of checking the ownership and intended use of all the free land in the locality to ensure that their future usage will not compromise the profitability of their investment (Ling & Archer, 2017). Adherence to zoning regulations helps one in choosing the right location for commercial real estate investment.

Another significant aspect of real estate investment decisions is the horizon and purpose of investment. Studies have shown that low liquidity is one of the characteristic elements of the real estate industry that can easily compromise the ability of an investor to achieve high profitability form commercial properties (Coppola, 2014). The ease of entry and exit in real estate investment often leads many people to invest without a clear purpose. Investors need to have a good comprehension of the numerous real estate horizons and choose the one that aligns with one’s investment purpose.

They can buy commercial property for self-use, leasing, as well as for selling on a short-term or long-term basis. All these categories have unique dynamics that can lead to unexpected results and financial distress to an investor if the purpose of investing is not clear enough. Buying a property for self-use helps one to save money on rentals. Besides, one tends to enjoy the benefits of self-utilization, as well as the appreciation of the property’s value (Coppola, 2014).

Buying property for commercial purposes such as leasing helps an investor to enjoy the regular income and the long-term value appreciation. This means that the investor will become a property owner, which will require adequate preparation about managing tenants, meeting regular costs relating to repairs, as well as enhancing their capacity to handle disputes and legal issues related to the leasing of properties. Investors can also buy a property to sell for short-term benefits or long-term use such as a retirement home.

Understanding these categories constitutes informed and intelligent decisions because an investor will buy a property depending on its valuation and ability to reward him or her with sustainable profit margins and prolonged growth. According to experts, investors in commercial real estate need to have a clear purpose for buying property as a way of cautioning them from poor investment decisions characterized by monetary loss and acquiring properties of low value (Ling & Archer, 2017).

Decisions for commercial real estate investment are highly dependent on the ability of an investor to manage the pitfalls associated with loans. Investing with borrowed money helps to amplify potential gains at the risk of greater losses. Although loans provide an investor with a certain degree of convenience, they also attract big costs because they tend to commit future income to get utility whose cost of interest is spread across several years (Coppola, 2014).

Investors should avoid ignoring the risks associated with loans if one intends to maximize their benefits. When taking loans to finance a commercial real estate investment, an investor must consider the projected future earnings, which often determine the ability to adapt a sustainable payment plan. Therefore, an investor should choose a mortgage loan that fits his or her situation by considering crucial elements such as charges levied by financiers, as well as terms and conditions (Ling & Archer, 2017).

Also, an investor should take time to look around and bargain for a deal with lower interest rates and insurance premiums. This is a crucial element of informed and intelligent investment decisions because the success of real estate investments requires a lot of financing. Therefore, a decision on whether to take up a fixed rate, adjustable floating rate, interest-only, or zero down payment mortgages should be of paramount importance before making a real estate investment (Rodgers & McFarlin, 2016). The main reason for this is the need to maximize the return on investment and growth potential of a property.

Another important aspect of investment decisions is the state of the economy in terms of the rate of employment and incentives for investment. Research has shown that the success of real estate investment is highly influenced by the spending power of the people (Rodgers & McFarlin, 2016). This phenomenon is often dependent on the rate of employment, in that the higher the number of people with a steady income in an area the higher the likelihood that they will purchase homes or increases the demand for better housing. Experts argue that a high rate of employment leads to an increase in homeownership, thus resulting in a drop in inventory and a rise in prices (Ling & Archer, 2017).

Therefore, buying properties to sell them at a profit is very sensitive to an investor. Also, an investor can opt to buy houses at low prices in areas where the rate of unemployment is high to sell them as soon as the economic climate of the areas starts to show signs of improvement. However, such decisions cannot be made without conducting a thorough market analysis. The economic potential of an area can be determined by assessing any proposed developments and the existing amenities.

An investor should also assess the state of the economy in terms of the rate of construction in an area. If the number of homes being built is very high, chances are the value of properties in the area is very low. On the other hand, if the constructions are limited, the value of properties is often high due to high demand and limited supply. These elements play a pivotal role in helping an investor to make informed decisions because one will choose an area that will attract a high return on investment (Ling & Archer, 2017).

Real estate investments have a high-value return profile that can be hard to ignore for any investor. However, the success of commercial real estate investments is highly dependent on informed and intelligent decisions. Significant aspects of investment decisions include the location of a property, the price, potential income, taxation, zoning laws, the purpose of investment, and the source of financing. Thoughtful consideration of these aspects plays a pivotal role in helping investors make decisions that enable them to reap maximum benefits while mitigating any related risks.

Coppola, C.R. (2014). How to win in commercial real estate investing: Find, evaluate & purchase your first commercial property- in 9 weeks or less . New York, NY: RDA Press.

Ling, D.C., & Archer, W. (2017). Real estate principles: A value approach (Mchill- hill/Irwin series in finance, insurance, and real estate) (5th ed.). New York, NY: McGraw-Hill Education.

Rodgers, W., & McFarlin, T.G. (2016). Decision making for personal investment: Real estate financing, foreclosures and other issues . New York, NY: Springer.

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111 Real Estate Essay Topics

🏆 best essay topics on real estate, 🌶️ hot real estate essay topics, 🎓 most interesting real estate research titles, 💡 simple real estate essay ideas, ❓ real estate research questions.

• Real Estate Industry Review
• Megatrends in the Real Estate Market
• D. M. Pan National Real Estate Company’s Housing Price Prediction Model
• Jim Mallozzi’s Positive Leadership in Real Estate
• Hypothesis Testing for Regional Real Estate Company
• Business Model of McKinnie Real Estate
• Strategic Project Environment: Lusail Real Estate Development Company
• Use of Microsoft Office Suite Application by a Real Estate Appraisal Specialist The article presents information about using Microsoft Office Suite in KLW Appraisal Group, especially KLW Appraisal Group’s general real estate appraisal.
• Selling Price and Area Analysis for D.M. Pan National Real Estate Company The report aimed to study the correlations between the area of the real estate objects measured in square feet and the selling price to benchmark.
• Comparing Islamic REITs: Insights from Global Financial Crises The performance of Islamic REITs during economic downturns has not been determined. It has not been determined whether they perform better than the conventional REITs.
• Inflation in the Real Estate Industry This paper will cover the real estate industry in the US, as it might be affected by the increased inflation rates, as the demand for housing is not increasing as quickly.
• Concepts Used for Real Estate Closing This study examines four distinct phrases that may be utilized throughout the closing process of a real estate transaction.
• Cost per Square Foot in the Pacific Region: Hypothesis Testing This paper uses statistical analysis to compare the average sample cost per square foot to the reported cost per square foot.
• Demographic Changes and the Future of Real Estate An increase in population in any region will always increase the demand for accommodation houses in the real estate industry.
• Real Estate Business in Australia The real estate market in Australia experienced an upswing during the pandemic; indeed, people started to buy more residential properties during the last two years.
• Business Ethics in Real Estate Business ethics still remains one of the most important areas in business practice influenced by internal and external factor, cultural and social changes.
• Real Estate Company’s Information Management The report addresses the concerns and constraints that real estate firms have to face during the implementation of their key objectives and management of customers’ needs.
• Real Estate Role in Sustainable Development The objective of this paper is to investigate the role of real estate in sustainable development in developing countries.
• Investment Viability in Real Estate The real estate is divided into residential real estate and commercial real estate. Residential real estate is concerned with all types of housing; apartments and family homes.
• Islamic Reits: Real Estate Investment Trust This paper reviews some of the studies done on IREITs with the aim of determining their effectiveness during economic downturns.
• Islamic Real Estate Investment Trust REITs form part of Investment Trusts in Real Estate. These are trusts that give investors an investment guide in all landed properties.
• Investing in Real Estate in Germany: Factors to Consider Real estate investment in Germany is a sure bet as only 45% of the population occupies their own homes. In Berlin, only 13% of the residents have their own homes
• Real Estate Appraisal: Single- and Multi-Family Houses An appraisal is the opinion of an expert to estimate the value of a residence. What the appraiser will work on will be giving a report in regards to the size, state of the house, etc.
• Real Estate Strategic Improvements Strategic planning is a systematic process that aids in creating goals for an organization’s future and determining the best way to accomplish them.
• Median Housing Price Prediction Model for Real Estate Company In this paper, a regression analysis was conducted to determine the nature of the relationship between listing price and commercial space in East South Central.
• Real Estate: Impact of New Building Trends and Technologies Architectural rendering, construction simulation, 3D models, building information modeling, and sustainable building positively influence the future of real estate.
• Technologies and Trends in the Real Estate Industry in the USA This paper discusses how technology has played a significant role in advancing the building and construction industry in the United States, making it a global power.
• Oil Prices as a Trend in Real Estate Business The scientific work aims to consider the impact of such a real estate trend as oil prices and how their growth or fall affects it.
• Real Estate Investment and Hospitality Industry Performance The COVID-19 pandemic has also affected real estate investments differently. Some businesses benefited from the rise of coronavirus, while others recorded so many losses.
• Aspects of Fundamentals of Real Estate The city’s proper zoning and housing can increase the quality of life and provide free of pollution living conditions for citizens.
• U.S. Real Estate Industry Analysis The paper focuses on real estate as an industry and analyzes the primary points, such as major companies and the perspectives of the business groups.
• Smart Home in Aging Society: Real Estate Industry The increase in the global aging population has been recognized in connection with the trends in morbidity and mortality of older adults has continuously dropped.
• Real Estate Judgement Summary The case presented by the United States Attorney General seeks a determination of whether the mineral reservation law.
• The Relative Effect of Property Type and Country Factors in Reduction of Risk of Internationally Diversified Real Estate Portfolios The aim of this paper is to identify and study the impact of diversifying portfolios of real estate securities mainly based on two categories.
• Land Supply and Real Estate Development in Hong Kong Hong Kong’s real estate industry is characterized by a high rate of appreciation, a clique of a small group in the industry, and a relatively huge public housing sector.
• Industry Research Completion: Real Estate Industry Industry passes through a sequence of developments and downfalls either due to external factors or any internal grounds.Economic establishment helps to foster the growth of industries
• Scottish Real Estate Market Analysis The economics, dynamics and interactions between use, investment and development sectors are discussed for analyzing the factors that influence trends of the commercial real estate market.
• Real Estate and Affordable Housing Many people have suffered the consequences of the crisis financially. This crisis calls for a measure that provides shelter at a reasonable rent or price.
• Factors and Beliefs on Real Estate Markets The government is looking into revamping growth by addressing unemployment and taxation issues. These two vital factors largely affect real estate markets.
• Restriction on Ownership and Its Impact on Real Estate Market Real estate is a sector that has attracted several investments in recent years. The sector growth has attracted several rules and regulations to protect both private and public interests of its acquisition.
• Real Estate Market Role in Macroeconomics Real estate markets are affected by several factors, and employment changes are a core factor. Reduction of exports and real estate hiccups are to blame for the soaring unemployment figures being realized.
• Rengo Real Estate Project Marketing Strategy Marketing has a broad range of activities. The promotional approach would enhance the use of promotion mix to try to sell the Rengo Real Estate Project.
• European and American Real Estate Institutions Various countries have different policies and structures that govern the operations of a real estate institution. This paper handles five major real estate institutes.
• State Bank’s and Real Estate Bank’s Collapse Today, the collapse of state banks is the problematic situation which is often associated with significant economic and political problems in the country.
• Indonesia’s Potential Real Estate Bubble The Indonesian housing market is heading towards a burst. This reality has been necessitated by economic factors that are integral to its propagation.
• Investing in Real Estate in Germany: Political and Legal Factors to Consider When engaging in international business, investors must comprehensively consider the political and legal factors existing in their preferred investment countries.
• Cognitive Moral Development and Real Estate Practitioners
• Effective Facebook Marketing for Real Estate Business
• Cross Border Real Estate Investment in India
• European Non-Listed Real Estate Fund Risk Factors
• Controlling for the Impact of Variable Liquidity in Commercial Real Estate Price Indices
• China’s House Price: Affected by Economic Fundamentals or Real Estate Policy
• Expense and Rent Strategies in Real Estate Management
• Currency Swaps and International Real Estate Investment
• Buying Real Estate That Is Not for Sale
• Commercial Real Estate and Corporate Finance
• European Metropolitan Commercial Real Estate Markets
• Buy and Holding Real Estate
• Economic Recovery, Small Business, and the Challenge of Commercial Real Estate
• Commercial Real Estate and Native American Leasing
• Budgetary Risks From Real Estate and Stock Markets
• Cross-Border Capital Flows Into Real Estate
• Contested Market Making in India’s Private Real Estate Development Sector
• Economic Risk Factors and Commercial Real Estate Returns
• Globalisation, Institutional Structures and Real Estate Markets in Central European Cities
• High Inflation and Returns on Residential Real Estate in Turkey
• California Real Estate State Exam Latest
• Broward County Real Estate Best in Florida
• Asymmetric Information and the Predictability of Real Estate Returns
• Financial Crisis and the Real Estate Market in Greece: The Impact on Bank Stock Prices
• Corporate Real Estate’s Impact on the Takeover Market
• Asymmetric Risk Measures and Real Estate Returns
• Contrarian Real Estate Investment in Some Asia Pacific Cities
• Commercial Real Estate and Management Information Systems
• Corporate Real Estate and Stock Market Performance
• Creative Real Estate Financing Methods
• Bargaining over Residential Real Estate: Evidence from England
• Bridging the Gap between Capital and Real Estate Markets
• China Real Estate Market
• Clustering Methods for Real Estate Portfolios
• Consumer-Oriented Real Estate Technologies
• Expected Returns and Expected Growth in Rents of Commercial Real Estate
• Financial Development, Real Estate Development and Economic Development
• Individual Agents, Firms, and the Real Estate Brokerage Process
• Financing Real Estate and Urban Regeneration in Iran
• Key Factors Which Impact on Real Estate Market
• Are Nurses More Altruistic Than Real Estate Brokers?
• Can Linear Predictability Models Time Bull and Bear Real Estate Markets?
• Are Real Estate Markets Integrated With the World Market?
• Can Institutional Investors Bias Real Estate Portfolio Appraisals?
• Did Investors Regard Real Estate as ‘Safe’ During the ‘Japanese Bubble’ in the 1980s?
• Does Real Estate Ownership Matter in Corporate Governance?
• Does the Diversification Potential of Securitized Real Estate Vary Over Time?
• What Are Interactions Between Private and Public Real Estate Markets?
• How Computer Software Can Help the Real Estate Appraiser?
• How Efficient Are Real Estate and Construction Companies in Iran’s Close Economy?
• How Globally Contagious Was the Recent Us Real Estate Market Crisis?
• How Inheritance Affects the Real Estate Market in an Aging Economy?
• How Real Estate Developers Can Improve Community and Political Stability?
• What Attracts Foreign Direct Investment in China’s Real Estate Development?
• What Moves Appraisal-based Real Estate Returns at the Metropolitan Level?
• What Role Does the Real Estate Construction Sector Play in China’s Regional Economy?
• Why Real Estate Industry Does Not Build Affordable Housing in India?
• Why the Real Estate Market Can Work for You and Against You?
• What Factors Are Affecting the Location of Real Estate?
• Has the Digital World Had Any Influence on Real Estate in Nigeria?
• What Are the Dynamics of Real Estate Prices?
• How Student Loans Are Hurting the Real Estate Market?
• How the Dot Com Companies Affect Real Estate in New York?
• Is There a Real Estate Factor Premium?
• What Is a Regression Method for Real Estate Price Index Construction?

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These essay examples and topics on Real Estate were carefully selected by the StudyCorgi editorial team. They meet our highest standards in terms of grammar, punctuation, style, and fact accuracy. Please ensure you properly reference the materials if you’re using them to write your assignment.

This essay topic collection was updated on January 9, 2024 .

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Staff Working Papers Working Paper 23-05: When Climate Meets Real Estate: A Survey of the Literature

Author: Justin Contat; Carrie Hopkins; Luis Mejia; Matthew Suandi

​​Ab​stract:

In this paper, we survey a growing body of academic research at the intersection of climate risks, housing, and mortgage markets, with a focus on the United States. With near unanimity, climate scientists project disasters to increase in frequency, severity, and geographic scope over the next century. While natural hazards, such as hurricanes, riverine flooding, and wildfires have historically posed risks to regional housing markets, the systemic risk that climate change may pose to housing and mortgage markets is of increasing concern. To understand the components of systemic climate risk, we survey existing work relating physical and transition risks to mortgage and housing markets, including both single-family and multifamily segments. Our review of physical risks addresses price, loan performance, and migratory effects stemming from flooding, wildfires, and sea level rise. In surveying transition risks, we discuss papers on energy use and decarbonization as they relate to real estate. Where possible, we explain how these topics may intersect with housing affordability and sustainability, especially for historically disadvantaged communities. We conclude by drawing attention to critical areas for research into flood and other climate-related perils likely to pose significant challenges for real estate in the coming century.​​

A revised version of this paper has been accepted for publication in an academic journal with open (free) access. The online appendix referenced in the published paper begins on page 73 of the working paper. Citation: Justin Contat, Carrie Hopkins, Luis Mejia, Matthew Suandi. 2024. “When Climate Meets Real Estate: A Survey of the Literature." ​ Real Estate Economics .  https://doi.org/10.1111/1540-6229.12489

Adjusting to Structural Change: the Outlook for Commercial Real Estate in the Twelfth District

Communities and businesses play a crucial role in shaping the Federal Reserve’s monetary policy. To inform our decision-making, the San Francisco Fed hosts discussions with the people we serve so we can hear their stories and perspectives on how economic data translates into real impacts in the Twelfth District. Our “Beyond the Numbers” series shares some of those insights with you.

During the pandemic and continuing into the post-pandemic period, Commercial Real Estate (CRE) has been buffeted by significant economic headwinds. Given the sector’s size and significance for both the Twelfth District and national economies, the SF Fed has been closely tracking the economic activity associated with the production, financing, and management of space for business, multifamily residential, commercial, and industrial activity.

After two previous roundtables in 2023, we recently convened our third roundtable. Mary Daly, President and CEO, and Laura Choi, Executive Vice President of Public Engagement, sat down with industry representatives. They were interested in how the various CRE asset classes are fairing and focused on whether industry trends that had emerged in the last few years were continuing. Finally, they also discussed how roundtable participants viewed likely future developments. 

Different Outlook Across and Within Asset Classes

During previous roundtables, industry representatives emphasized the importance of differentiating between and within CRE asset classes when analyzing the sector. The participants in this most recent roundtable echoed this fundamental insight.

Throughout the period of turbulence in CRE, the office class has been a leading concern. Participants in this latest roundtable noted that the office asset class remains stressed. They pointed out that the demand for high end office space has picked up. However, the story is much different for lower quality office space. As one participant noted, “[L]ower end office space is rough.” Some owners have gone so far as take buildings down.

Participants also discussed the apartment market. Here they pointed out it was important to differentiate by location. Demand and rents have been increasing in coastal cities while cities, especially in the Sun Belt where the markets were particularly robust, have experienced marked weakness.

Some Clearing in the Market

President Daly and Laura asked participants for their view of the overall market, especially in relation to making transactions and the availability of financing. Industry executives distinguished between two property categories: one, properties that are performing and approaching refinance; and two, non-performing properties. In the second category it is difficult to secure financing, especially for office space.

It is a different matter, the participants emphasized, for the first category of properties. Here they noted that the market is beginning to clear. In 2023, there was a general reluctance to complete deals to avoid getting in too early and making mistakes. However in 2024, the participants felt the environment was better. There are more interesting opportunities available as prices seem to be near the bottom. Uncertainty does remain. As one executive underscored, it will take three years for the market to clear completely and now, “it is a matter of figuring out when the three-year period started.”

Adjusting to Structural Change in the Future

Asked about future developments in the sector, the leaders pointed to the structural change in the office class as one of the lasting effects of the current industry stress. The transition to remote work has permanently changed the office market, and the roundtable participants did not think demand for office space, especially on the lower end, will come back to pre-pandemic levels.

Nonetheless with the market beginning to clear, the roundtable participants had a more positive outlook generally. There are still sources of significant stress, but they felt they could be managed without leading to systemic stress on the overall economy. As one participant concluded, the real estate business is still in the hospital but it is “out of the operating room.”

The Value of Roundtables

The SF Fed’s conversations with CRE executives have been one of the most valuable sources of information about the state of sector. Through these roundtable conversations, leaders and economic analysts at the SF Fed have been able to combine insights gleaned from economic data with a real-time perspective from practitioners in the field and achieve a richer understanding of the sector.

With such valuable data from stakeholders, the SF Fed is better able to fulfill its mission to develop monetary policy for the benefit of all Americans. This is the reason we will continue to listen and learn from business and community leaders across the Twelfth District.

POSTS : beyond the numbers

The Path Forward for Commercial Real Estate in the Twelfth District

Twelfth district commercial real estate executives forecast a mixed outlook.

The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.

Axos: Glaring Commercial Real Estate Loan Problems and Lax Underwriting Beneath This Priced-For-Perfection Bank

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• Axos Financial is a $3.1 billion market cap regional bank headquartered in San Diego, California that was incorporated in 1999 and went public in March 2005. 
• Axos trades at a 35% P/TBV premium compared to similarly sized community and regional banks, pricing in investor expectations of outsized growth, a low-risk loan book and multiple years of runway ahead.
• Its aggressive valuation premium implies that, despite operating in an environment that has devastated many peers, Axos has navigated it by (1) allocating to the lowest-risk asset classes (2) with superior underwriting standards, that have resulted in (3) a portfolio of high-performing projects.
• Our research, including industry analysis, interviews with 21 former employees, lease agents and industry experts, combined with an examination of Axos’ loan book derived through local property records, indicates a company exposed to the riskiest asset classes with lax underwriting standards and a loan book filled with multiple glaring problems.
• Contrary to many peers who backed away from the deteriorating commercial real estate market post-covid pandemic, Axos doubled down, increasing its total exposure from $5.5 billion in March 2021 to $9.9 billion in March 2024. Now, 53% of Axos’ total loan book is exposed to these segments.
• By comparison, a 2023 Moody’s study found that regional banks’ exposure to direct commercial real estate made up only 16.5% of their respective loan books, on average.
• The industry has begun to plummet: distressed U.S. commercial properties rose from $56.9 billion in 2022 to $85.8 billion in 2023. $2.2 trillion in commercial mortgages are set to mature before the end of 2027.
• Even AAA-rated bonds backed by CRE debt are now taking losses, and multifamily investments have plunged to four-year lows.
• “It’s a sh*t show,” one Axos deal partner told us about the office market in New York. 37.5% of Axos’ commercial real estate loans were in New York, where a CRE “bloodbath” has resulted in commercial realty foreclosures increasing 65% year over year.
• Beyond its dangerous allocation choices, Axos’ lax underwriting standards expose it to major added risk. A former regional leader told us Axos’ customer base in commercial and multifamily revolved around “borrowers who couldn’t get loans from other banks”.
• In New York alone, with over 125 competing mortgage lenders including top tier banks, Axos faces stiff competition. A former loan originator told us that Axos had to stretch its underwriting criteria to compete: “There had to be a problem for us to even have a shot at it”.
• Per one former employee on Axos’ embrace of borrowers with criminal histories: “ If the felony was explainable, we’ll bank them”. A second added that bad “credit scores…didn’t kill a deal”. A third said “I don’t recall there ever really being a…minimum net worth or minimum liquidity requirement”.
• A former Axos credit review officer detailed the practice of loan “evergreening,” or providing loans to non-performing or doubtful borrowers to avoid recognizing problems, per litigation records. Similar schemes, also known as “extend and pretend”, were described by former employees during our investigation.
• These underwriting standards have resulted in a portfolio filled with clear problem loans, based on our review of a cross-section of Axos’ loan book. On March 31, 2024, Axos reported it had provisions for credit losses in its CRE category of just $83 million, a metric that seems vastly understated.
• For example, Axos lent up to $97.5 million (4.8% of tangible book value), for an apartment construction project in Queens. The underlying borrower has been criminally indicted twice personally, including a case involving a construction kickback scheme with a mafia captain. His company was indicted in a third case.
• One reason most banks don’t lend up to $97.5 million to individuals with multiple indictments and documented mob ties is that even if things go well, it can be difficult to get your money back. This is made even more challenging when things go poorly, as seems to be the case with this property.
• The project was scheduled for completion in May 2024, but contrary to many buildings that pre-lease significant portions of a project, the leasing agent told us it has leased zero units, indicating it may already be in distress.
• In December 2020, Axos lent up to $48.2 million (2.4% of tangible book value) to build an apartment block in Brooklyn, according to local property records. Four years later, amidst zoning issues with the Department of City Planning in New York, there are no signs of construction activity and weeds are growing on the land, per our visit to the site last month.
• In 2021, Axos lent up to $34.7 million (1.7% of tangible book value) for the construction of a medical office building in Harlem at 2226 Third Avenue, according to local property records.
• By 2023, the borrower faced multiple foreclosures after allegations emerged that he had embezzled money from real estate projects and lost much of it to extravagant personal spending and gambling on stocks. The borrower is now under investigation by the DoJ and SEC over allegations of embezzling real estate funds, per local media.
• Construction on the medical office building was completed in February 2024. The whole building is vacant, and the owners are attempting to remarket it with a change in use, per our interview with the leasing agent.
• In 2022, Axos lent up to $35 million (1.7% of tangible book value) to a developer to construct a 12-story apartment building in Manhattan. Two years later, we found a seemingly derelict property with graffiti tags and little signs of construction.
• In November 2023, Axos took over a $105 million loan (5.2% of tangible book value) on an office building in Manhattan called “The Six.” Its owner, Savanna, has been “defaulting on debt, repeatedly extending loans, and reducing its ownership stake within individual properties,” per media reports. The building is currently less than 50% occupied, per CoStar.
• Axos has $1.4 billion of multifamily loans originated during or prior to 2020, when interest rates were close to zero. Former employees told us that, given a typical fixed period of around 5-6 years, many of these come due within the next year and risk being underwater.
• Axos has been extending loans or attempting to offer slight discounts to keep them afloat, but “in a lot of cases the loans, the properties didn’t cover”, per a former employee.
• Axos’ rosy-looking credit metrics show signs of manipulation or distortion. Disclosed loan to value (LTV) ratios in commercial real estate are 17% less than the median average of 9 of its peers.
• “the Bank routinely misrepresented the average loan to value ratio’s of its loans to investors,” per allegations by a former credit review officer documented in litigation records.
• Non-performing loans as a percent of its key commercial real estate category have stayed almost flat in the last 2 years, from 0.4% in 2021 to 0.43% in 2023. By contrast, large national banks like Wells Fargo and Bank of America have seen this ratio increase by 1.9%-2.0% in the same period.
• Provisions for future stress as a percent of the commercial real estate category (called “allowances”) have inexplicably decreased 0.5% since June 2021, from 1.8% to 1.3% at the end of December 2023.
• We estimate that at least $1.1 billion of CRE loans originated at lower interest rates will face renewal in the coming year, testing the sufficiency of Axos’ abnormally low provisions. Axos’ auditors identified this as a critical audit matter given “the judgmental and subjective nature” of the company’s forecasts.
• Banking is an industry as old as Mesopotamia. Over the last 4,000 years, the industry’s participants have evolved in tandem. All U.S. banks are subject to the same federal funds rate and interest rate dynamics, and similar regulations and requirements. Competitive edges, along with comparable ratios and margins, are generally razor thin.
• For as long as banks have been around, there have also been ‘too good to be true’ outliers that claim to have discovered a magical lending formula. In this case, we are meant to believe that Axos’ has selected only the best felons and troubled borrowers and properties to lend to, allowing it to waltz gracefully through the imploding commercial real estate market. We think otherwise.
• While we do not to call into question Axos’ liquidity position or its depositor base, history shows that these ‘outliers’ often take on undisclosed risk to fuel their optimistic numbers.
• Overall, Axos’ exposure to the riskiest asset classes, its lax underwriting standards, and glaring issues with its portfolio indicate that the company faces significant stress ahead.

Initial Disclosure: After extensive research, we have taken a short position in shares of Axos Financial, Inc. (NYSE:AX). This report represents our opinion, and we encourage every reader to do their own due diligence. Please see our full disclaimer at the bottom of the report.

Basics On The Business: A $3.1 Billion Digital Focused Bank, Headquartered in California

Axos Financial (“Axos”) is a $3.1 billion market cap regional bank headquartered in San Diego, California that was incorporated in 1999 and went public in March 2005 . [1]

The company describes itself as a “technology-driven financial services company that provides innovative banking products and services to customers nationwide”, per its website . It is led by Gregory Garrabrants, who has been CEO and President since 2007.

Axos has two key businesses: its “ banking business ” and its “ securities business ”.

Its banking business covers deposit and loan activities for a range of customers, from personal consumers to commercial and industrial customers, per Axos’ filings . Its banking business accounted for ~95% of Axos’ pre-tax income as of December 2023 . [2]  

Its securities business, comprising the rest of Axos’ pre-tax income, is aimed at financial market participants and includes brokerage, investment advisory and clearing.

The bank’s entire loan book was valued at $18.7 billion on March 31st, 2024 , comparable in size to many regional banks.

Bull Case: Asset-Light Business Generating Returns On Assets In The 90 th Percentile Of Its Peer Group, While Maintaining Prudent Underwriting

Axos has operated since inception as a digital bank, meaning it doesn’t have the fixed costs typically associated with legacy “brick and mortar” banks.

The bank has described its loan growth as “ prudent ” with “low LTVs” and has said in the past that its conservative underwriting and secured lending has well-positioned its portfolio for an economic downturn. [ Pg. 12 ]

Over the last 10 years, Axos has grown its total loan book at an average of 22% per year. Its profitability has regularly increased in tandem, with net income growing 23% per year on average.

In its May 2024 investor presentation, Axos reported earnings metrics that dwarfed most of its peers, with returns on equity, returns on average assets and net interest income all at, or above the top 94 th percentile of its peer group. [4]

Along with its strong growth and margin performance, Axos’ risk metrics remain better than industry averages, with non-performing loans and leases to total loans currently at just 0.63%, compared to a Q1 2024 industry average of 0.91%.

Fundamentals: Axos Trades At A 35% Premium Relative To Peers Based On Price/Tangible Book Value

Price to Tangible Book Value (P/ TBV ) is a baseline valuation metric commonly used to analyze bank stocks. It compares the company’s price to the equity available to stockholders, leaving out intangible assets such as goodwill or intellectual property.

Axos trades at a ~35% P/TBV premium compared to similarly sized community and regional banks, pricing in investor expectations of outsized growth, a low-risk loan book and multiple years of runway ahead.

On May 15 th , 2024, Axos shares hit all-time highs of $63, with the stock currently trading around 15% off those highs. 

Axos’ aggressive valuation premium implies that, despite operating in an environment that has devastated many of its peers, Axos has navigated it by (1) allocating to the lowest-risk asset classes and (2) accumulating a portfolio of extremely high-performing projects driven by (3) superior underwriting standards.

Part I: Axos Has Allocated To The Highest Risk Asset Classes—53% Of Axos’ Total Loan Book Is Exposed To The Sharply Deteriorating US Commercial Real Estate Market

Between commercial real estate and multifamily segments, axos’ total exposure is $9.91 billion as of march 2024.

Rather than allocating to the lowest-risk asset classes, Axos is highly exposed to the riskiest.

Commercial real estate (“CRE”) lending is commonly defined as loans originated on properties that are used for business purposes, such as offices or retail stores, as well as multi-unit residential buildings, called “ multifamily ”. [5]

Collectively we refer to Axos’ disclosed categories of “Commercial Real Estate” and “Multifamily & Commercial Mortgage”, found in its filings, as Axos’ “Total Commercial Real Estate Exposure”.   Over the last 3 years, between March 2021 and March 2024, pandemic lockdowns and the shift to working from home helped catalyze an exodus from commercial real estate by many industry participants. [6]

During that time, Axos doubled down. Its total commercial real estate exposure grew in absolute value by 81%. [ 1 , 2 ] Its CRE category grew 94%, during the same time period. [ 1 , 2 ]

At the end of March 2024, Axos reported a balance of $5.9 billion in its commercial real estate segment —32% of its entire loan book or 292% of tangible book value . It also reported $4 billion in its “Multifamily and Commercial Mortgage” category—21% of its entire loan book or 198% of tangible book value . [7] [ Slide 10 ]

As a result, Axos’ total commercial real estate exposure has ballooned to 53% of total net loans , or $9.91 billion.

By Comparison, A 2023 Moody’s Study Found That Regional Banks’ Exposure To Direct Commercial Real Estate Made Up Only 16.5% Of Their Respective Loan Books, On Average

A 2023 Moody’s study found that the average regional bank, defined as holding $10-160 billion in assets, had 16.5% of assets exposed to CRE, far less than Axos’ 53%.

The same study found that the highest direct total CRE exposure came from community banks at 24.3%, a number still less than half of Axos’ current exposure.

The Industry Has Begun To Plummet: Distressed U.S. Commercial Properties Rose From $56.9 Billion In 2022 to $85.8 Billion In 2023

“at some point, that avalanche is going to hit”: $2.2 trillion in commercial mortgages are set to mature before the end of 2027, aaa-rated bonds backed by cre debt are now taking losses and multifamily investments have plunged to four year lows.

Distressed U.S. commercial properties grew from $56.9 billion in 2022 to $85.8 billion by the end of 2023, according to MSCI , which noted that offices constituted 41% of distressed assets and that the “multifamily market constituted the largest pool of potentially distressed assets, with a value of USD 67.3 billion, ahead of office with USD 54.7 billion.” [8]

Cumulative distress has been on a steady rise since 2022 and has eclipsed its post-Covid highs.

The Federal Reserve and the International Monetary Fund (IMF) have both commented on the threat, with the latter noting in January 2024 that the US commercial real estate market has seen “one of the steepest price declines in at least a half century”.

Commercial real estate data firm Trepp predicts “distress will keep rising,” per a February 2024 Wall Street Journal report that states more than $2.2 trillion in commercial mortgages are set to mature before the end of 2027. Lonnie Hendry of Trepp told the Journal:

“At some point, that avalanche is going to hit.”

NBC reported on May 21, 2024 that multifamily rents in April fell 0.8% because “a massive amount of new supply entered the market, with still more in the pipeline”.

This supply glut is further exacerbated by weak investment appetite: data retrieved from Costar as of May 2024 shows that multifamily investments have fallen to four-year lows.

On May 23, 2024, Bloomberg reported that “for the first time since the financial crisis”, AAA rated bonds backed by commercial real estate debt were suffering losses.

The article detailed how buyers of the AAA portion of a $308 million note on the 1740 Broadway building in midtown Manhattan took a 26% loss after the loan was sold at a steep discount.

Lea Overby, a CMBS strategist at Barclays, told Bloomberg :

“Now that we’ve seen the first commercial mortgage backed securities get hit, other AAA bonds are bound to see losses…”

37.5% Of Axos’ Commercial Real Estate Loans Were In New York

“the worst market i’ve seen”: new york city cre “bloodbath” has resulted in commercial realty foreclosures increasing 65% year over year, “it’s a sh*t show,” one axos deal partner told us about the office market in new york.

Axos reported that as of June 2023, 37.5% of its commercial real estate loan category was in New York, per its latest 10-K. [ Pg. 6 ]

New York is a geography that warranted its own “Risk Factor” in Axos’ 10-K, where it disclosed that “declining real estate values, particularly in California and New York, could reduce the value of our loan and lease portfolio and impair our profitability and financial condition.”

Over the last year, numerous media reports and industry research reports detailed the unfolding disaster in New York’s CRE market. The Financial Times called it a “bloodbath” last year. Bisnow quoted a source calling it the worst market they’ve ever seen, and the New York Times wrote in March that prices were tumbling. [ 1 , 2 , 3 , 4 ]

One commonly tracked indicator is the number of foreclosures, measuring a key risk for when lenders are generally forced to sell the underlying property collateral.

In New York, the number of commercial property foreclosures increased 65% year on year in March 2024, according to Attom Data, a commercial real estate analytics firm.

After California, which accounts for another 7.1% of Axos’ CRE category, New York had the highest number of commercial foreclosures out of any state, per the data.

Our research found office buildings in New York financed by Axos between 2020-2024 that are facing stresses in commercial real estate markets, as detailed in Part II. We interviewed an Axos deal partner, asking about their assessment on New York office pricing. They told us “it’s a sh*t show”, further explaining:

“… every day you’re hearing about a different office that loses a very large tenant. And when you have these empty offices, you can’t fill them back up. Offices have a distinct issue where they’re huge amounts of blocks of space where the landlord pays to build them out. So you have to pay tenant improvement”.

In brief, Axos is highly exposed to the riskiest asset classes in the country that are in a state of collapse. Navigating this minefield unscathed, as its stock price suggests it has done, would require Axos to have nearly flawless loan selection.

Part II: A Closer Look At Axos’ Portfolio Shows A Loan Book Filled With Glaring Problems

On March 31, 2024, Axos reported it had provisions for credit losses in its CRE category of just $83 million. [ Slide 27 ]

Axos has reassured investors that it has largely been immune to broader market stress, saying “we’re not really seeing anything that we find concerning”, per the CFO’s comment on the Q3 2023 earnings call. [ 1 ]

Our findings show otherwise—that Axos’ embrace of troubled borrowers in the riskiest markets in the country has predictably resulted in major projects that appear to be either stalled or deeply underperforming. Others are nowhere near completion or barren and vacant.

Axos Lent Up To $97.5 Million (4.8% Of Tangible Book Value), For An Apartment Construction Project In Queens

The underlying borrower has been criminally indicted twice personally, including a case involving a construction kickback scheme with a mafia captain, his company was indicted in a 3 rd case.

In October 2023, Axos entered into an agreement to lend up to $97.5 million for an apartment construction project at 147-35 95 th Avenue, Jamaica, Queens per New York property records . [9] [10] [ Pg. 5 ] The property is slated to be a 521-unit apartment building, per Multi-Housing News .

By itself, the loan represents up to 4.8% of Axos’ tangible book value and could be one of Axos’ larger loans, even higher than the maximum loan values indicated on Axos’ website for construction lending.

The underlying borrower is Sutphin Boulevard Equities, owned by Solomon Feder, per state government records. [ Pg. 25 ] [11]

A basic Google search shows Solomon Feder is party to 3 criminal indictments for fraud, a kick-back scheme with a reported mobster and an off-the-books compensation scheme. [12]

#1: In February 2022, Solomon Feder was indicted over allegations relating to a “$20m off-the-books compensation scheme” involving “envelopes of cash” to avoid detection.

In February 2022, Solomon Feder was indicted in a scheme that enabled construction companies to under-report payrolls, per a press release by the Manhattan District Attorney . This involved workers being paid “ with envelopes of cash ”, to avoid detection.

#2: In January, 2023, Solomon Feder was indicted in a construction kick-back scheme involving a Gambino mobster “captain”.

A Statement of Facts, released by the Manhattan District Attorney, mentioned Feder and his company. [ Pg. 10 ] The indictment showed Solomon “Sol” Feder’s company had upped the price for contract work on 250 5 th Avenue at the behest of the key accused in the kickback scheme, Robert Baselice. [ Pgs. 9-10 ] The case is still ongoing, per court records.

At the time of the kickback scheme, the purported mastermind, Robert Baselice (aka Robert Basilice) was an executive with The Rinaldi Group , a contractor that has not been charged with any wrongdoing. A 2010 NY Post article referred to Baselice as a “Gambino crime-family associate” when he was indicted in a large scale gambling ring bust. [13]

#3: In May, 2023, Big Apple Designers, owned by Solomon Feder, was indicted over a scheme to fraudulently qualify as minority and/or women-owned business enterprises, per a New York government press release. [ Pg. 5 ]

The Project Run By The Axos Borrower Involved In 3 Indictments, With Documented Mob Ties, Is Scheduled For Completion In May 2024

It has leased zero units, per the lease agent, indicating it may already be in distress.

One of the reasons most banks don’t lend up to $97.5 million to individuals with multiple indictments and documented mob ties is that even if things go well, it can be difficult to get your money back.

This is made even more challenging when things go poorly, as seems to be the case with this property, slated for completion in May 2024, per CoStar.

Given the imminence of completion, we expected many of the 521 units to have already been rented, as is common with most successful projects. But when we called the lease agent, The LiscoGroup, in mid-May they told us: [14]

“ Nothing is leased yet… The building is still empty… It will finish in construction, it should be done in the next month or so.”

When we asked if it would be possible for us to rent 200-300 units they told us it “shouldn’t be an issue”.

In short, one of Axos’ large specialty loans appears to have zero apartments rented and is owned by an individual with multiple indictments and alleged ties to the mob, information found through a basic internet search.

Given our conversations with former employees, as described later in Part III, we suspect Axos agreed to lend to this individual knowing his history or was almost incomprehensibly negligent in missing these red flags.

In December 2020, Axos Lent Up To $48.2 Million (2.4% Of Tangible Book Value) To Build An Apartment Block In Brooklyn, According To Local Property Records 4 Years Later, There Are No Signs Of Construction Activity And Weeds Growing On The Land, Per Our Visit To The Site

In December 2020, Axos was listed as a lender on 962 Franklin Avenue, along with Fortress, a global asset manager, per New York property records . [ Pg. 3 ] The developer is Continuum , a boutique New York developer. New York City Department of Finance Records lists the loan as up to $48.2 million.

The project appears to be running into challenges with environmental and zoning permissions. In June 2023, the New York City Department of City Planning determined that the rezoning proposal may have a “significant adverse impact on the environment”.

Over 3 years after Axos’ entered into the lending agreement, the property zoning proposals still do not appear to have been approved, according to NYC planning records .

In late 2023, local media reported that the site was still an empty lot with overgrown weeds.

We visited the site in May 2024 and found that the situation remains unchanged.

Its neighboring property, 960 Franklin Avenue, has also faced opposition from local residents and construction has not commenced, per media reports . Just months ago, in April 2024, Axos loaned up to $91 million to the new stalled development on 960 Franklin Avenue, according to New York Property records . [ Pg. 5 ]

In 2021, Axos Lent Up To $34.7 Million (1.7% Of Tangible Book Value) For Construction Of A Medical Office Building In Harlem At 2226 Third Avenue, According To Local Property Records By 2023, The Borrower Faced Multiple Foreclosures After Allegations Emerged That He Had Embezzled Money From Real Estate Projects And Lost Much of It To Extravagant Personal Spending And Gambling On Stocks

The borrower is under investigation by the doj and sec over allegations of embezzling real estate funds, per local media.

In October, 2021 Axos lent up to $34.7 million for construction of a property at 2226 Third Avenue in Harlem per New York property records . [15] [ Pg. 5 ] The deal was recorded during the height of Covid, exemplifying Axos’ strategy of ‘doubling down’ on CRE when many others began to withdraw.

The ultimate owner of the development is Elie Schwartz, through his firm Nightingale Properties. [16] As of media articles from 2023, Schwartz and his firm are currently facing foreclosure on multiple properties due to allegations he embezzled real estate funds for personal use and to gamble on stocks, which he lost. Schwartz is in the process of unwinding his assets including his properties, personal residences, and jewelry as part of restitution efforts to harmed investors.

Schwartz is currently under investigation by the SEC and DOJ related to the allegations of embezzlement and real estate fraud.

Construction On The Medical Office Building Was Completed In February 2024

The whole building is vacant and the owners are attempting to remarket it with a change in use, per the agent.

Beyond the project sponsor’s extreme state of distress, the development Axos lent to appears to be failing.

Construction was completed on the office property in early February of this year, per local media . The development, called “The Labs on 121”, offers lab space that is “precisely developed to not only meet – but far surpass – today’s life science demands”, per its brochure. [ 1 , 2 ]

In April 2023, The Commercial Observer, a real estate news site, reported that “the 10-story, 193,000-square-foot building at 2226 Third Avenue hasn’t signed any leases yet”. A leading CRE data provider, CoStar, shows that the whole building is still vacant.

We spoke to the agent of the property, CBRE, in early May 2024. They told us that they were attempting to remarket it as a more general facility and not just life sciences:

“So the building was really built to be a life sciences building, but we’re sort of marketing it as a dual, like, we’re also looking at some schools and stuff like that.”

They went on to confirm that the entire building is still available:

“Yes. The whole building is available. It’s 200,000 [square] feet.”

For a such a large, completed construction to have zero tenants and face a major rebranding all while the owner battles foreclosure and potential criminal and civil fraud charges indicates that Axos will likely face distress on the property.

In 2022, Axos Lent Up To $35 Million (1.7% Of Tangible Book Value) To A Developer To Construct A 12 Story Apartment Building In Manhattan 2 Years Later, We Found A Seemingly Derelict Property With Graffiti Tags and Little Signs Of Construction

In March 2022, Axos lent up to $35 million to developer ZD Jasper on 3 parcels on 429 West 36 th and 430th & 434th West 37 th street in Manhattan to build a 12 story apartment block, per The Real Deal and New York Property Records . [ Pg. 3 ] ZD Jasper is a family firm that has around 12 employees, per a 2022 YouTube video. [ 0:21 ]

In March 2023, it was reported that development was being stalled by a neighboring property owner who has not signed off on the demolition of the existing property, per The Real Deal . In May 2024, nearly 2 years after the loan sanction, we visited the property. All we saw was a derelict building with graffiti tags and little sign of construction activity.

In short, the project has apparently not started construction ~2.5 years after Axos financed the transaction.

In November 2023, Axos Took Over A $105 Million Loan (5.2% Of Tangible Book Value) On An Office Building In Manhattan Called “The Six” Its Owner Has Been “Defaulting On Debt, Repeatedly Extending Loans And Reducing Its Ownership Stake Within Individual Properties” Per Media Reports

The building is currently less than 50% occupied, per costar.

As we noted in the introduction, the first AAA rated bonds backed by commercial real estate debt that were suffering losses were office buildings.

Axos and its CEO Garrabrants have often tried to reassure investors that they are not affected by major dislocations in the office category (as discussed earlier). In April 2023, Garrabrants implied that Axos has avoided the most stressed pockets of the office market:

  “I think office, clearly in many cities in places that we stayed away from for a long time is doing terribly” (Source: Axos April 2023 Investor Call )

In July 2023, Garrabrants further reassured investors:

“The majority of our commercial real estate secured by office properties are located in metropolitan areas that have not seen a meaningful negative impact from work-from-home and other dynamics.” (Source: Axos July 2023 Investor Call )

Despite this claim, we found signs of trouble in this segment. For example, in November 2023, Axos took over a $105 million loan on an office called “The Six”, located on West 56 th Street in Manhattan, per New York property records . [ Pg. 4 , Pg. 4 ]

The underlying owner of the building is the Savanna Group, a “vertically integrated real estate investment manager” per its website and CoStar.

The general contractor on this project was the aforementioned Rinaldi Group, where Robert Baselice, the purported “ ringleader ” of the mafia kickback scheme mentioned above had previously worked as a senior executive.

Baselice, representing the Rinaldi Group, was present for the topping out of the building in July, 2019.

The Savanna Group portfolio is reportedly in a state of distress, per The Real Deal .  It has been “defaulting on debt, repeatedly extending loans and reducing its ownership stake within individual properties”.

Data from CoStar shows the building is only 46.5% leased, 6 months after Axos’ loan agreement.

At the end of May 2024, we spoke to CBRE, the broker for the property, who confirmed about half of the building was still available:

“We leased by about a half a building. It’s a 90,000 square foot building. I say probably what’s left is close to that. In that 40 to 50k range”

The broker also offered that pricing may need to come down further to have a better chance at occupancy:

“ I think the pricing is pretty expensive.”

In terms of the collateral value, a recent transaction at 1740 Broadway is illustrative of the current stress in the Class A office space in New York. 1740 Broadway is a 640k square foot office tower located less than two blocks away from 106 W 56th Street. After a fire sale in mid-April 2024, investors in the AAA rated bonds, backed by 1740 Broadway, got less than three quarters of their return, per Bloomberg .

Assigning a similar square foot valuation of $290.46 would value The Six at a mere $25.4 million. [17] [ 1 ]

While Axos has claimed to be immune from the stress in the office market, in our view, the characteristics of one of its largest office loan transactions suggest otherwise and show hallmarks of stress.

Axos Has $1.4 Billion Of Multifamily Loans Originated Prior To 2020, When Interest Rates Were Close To Zero

Former employees told us that, given a typical fixed period of around 5-6 years, many of these come due within the next year and risk being underwater, axos has been extending loans or attempting to offer slight discounts in an effort to keep them afloat, according to a former employee.

Asked about potential loan stress last month, Axos’ CFO Derrick Walsh told investors:

“No, we’re not really seeing anything that we find concerning.” ( Q3 2023 Earnings Call )

Interest rates have risen from near zero to 5.5% since 2022. With the sharp rise in rates, many of Axos’ multifamily mortgages are now coming out of their fixed period and risk becoming delinquent.

Axos reports the vintage of its loans, showing that $1.4 billion of loans, or 36% of the multifamily book, was originated before June 2020.

An executive who left the bank in 2024 told us that many of these multifamily loans coming up for renewal were now underwater on the collateral value:

“We would find out that a loan was in trouble… [What] really exacerbated it [was] when the rates started going up and skyrocketed last year. And a lot of the hybrid loans started to come due… Because you [the borrower] get into this, you’ve had this loan for 3 or 5 or 7 years and it’s been fixed and everything’s been hunky dory and you forget about it. You forget that time frame is coming to a close. And now you’re going to have to address these higher rates. And in a lot of cases the loans, the properties didn’t cover.”

They went on to opine that some of Axos strategies to cure these loans were “kind of a joke” and ultimately ineffective given the magnitude of interest rate increases:

“I think what they were really trying to do is give the borrowers adequate time to try to refinance somewhere else. Sometimes they would maybe negotiate a little bit smaller, initial bump instead of being nine and a quarter. Maybe they’d go to, which I thought was kind of a joke, eight and three quarters or something like that. I mean, if it doesn’t work at nine and a quarter, it’s probably not going to work at eight and three quarters.”

A Call For Transparency: If Axos Is Truly Confident In Its Underwriting, It Should Disclose Details About Its Commercial Lending Portfolio

There is significant opacity around Axos’ loan book. We were only able to infer loan amounts and counterparties through local property records, scattered media reports, and litigation records, without full details on each deal.

If Axos is confident in its loan quality, as it suggests, it should be happy to provide more details to investors on its commercial loan portfolio such as deal terms, disbursed amounts and counterparties, in order to fully assess its exposures and risks.

Part III: Axos’ Lax Underwriting Standards Expose It To Major Risk

Our findings show that the issues with Axos’ portfolio stem from its lax underwriting standards.

Axos lends in the most competitive metro regions of the country, including New York and California, which account for 66.5% of its real estate loans. [ Pg. 26 ]

In these states, borrowers have hundreds of options competing for their business, including well-established banks like J.P Morgan, Citi, and many others.

A New York commercial real estate broker and former investment bank director we interviewed told us:

“[New York] It’s very competitive from a lending perspective, which makes it possible to do deals here, but also makes it very cutthroat in a lot of ways. A lot of banks will bend over backwards to do deals in New York… From a competition standpoint, I don’t think that there’s a market that’s tougher .” “ In New York, the active subset is probably about 250 [lenders] …” [18]

Axos has touted its “conservative” underwriting. The company’s ‘commercial lending’ website touts “streamlined processing and common sense underwriting.” [ Pg. 12 ]

Our research revealed precisely the opposite. A former Axos loan originator told us that Axos had to stretch its underwriting criteria to compete:

“There had to be a problem for us to even have a shot at it.”

A Former Regional Leader Told Us Axos’ Customer Base In Commercial And Multi-Family Revolved Around “Borrowers Who Couldn’t Get Loans From Other Banks”

“ if the felony was explainable, we’ll bank them,” they told us, bad “credit scores… didn’t kill a deal” and “i don’t recall there ever really being a… minimum net worth or minimum liquidity requirement”, we were told by former employees.

Former employees told us that far from applying “common sense” to its lending, there were few restrictions on the type of borrowers Axos worked with, and that Axos even banked felons and borrowers with troubled histories:

“It was the borrowers who couldn’t get loans from other banks. So it’s the dirty borrowers. Did they have a felony? If the felony was explainable, we’ll bank them, because he [the Axos CEO] was all about being well secured to the real estate.”

In a market with well-established competition for CRE deals, Axos would differentiate itself by embracing loans with problems other bank refused to touch, then try to add extra protections into the deal structuring, according to a former senior loan officer we spoke with who worked in the multifamily loan division:

“That was about the only way we could win anything, is if there was any hair. If it was a straightforward, straight up A/B kind of deal, we couldn’t compete on pricing or leverage. So there had to be a problem for us to even have a shot at it. And usually it was a borrower problem or it was an occupancy issue ..”

They went on to add that “ we couldn’t complete… unless other banks wouldn’t touch him ”, further reiterating that:

“…they [other banks] priced so much better than we did that we just couldn’t compete unless, as I said, unless the borrower was really hairy or something like that and the other banks wouldn’t touch him. Then we had a shot.”

“We weren’t doing Fannie and Freddie quality properties either. We weren’t doing those types of deals.”

A former senior loan officer also told us that at Axos, credit scores and credit problems wouldn’t typically kill the chances of a deal:

“They haven’t been a credit driven borrower, at least in the IPL [Income Property Lending] space. I mean credit scores. Well, we got them. Didn’t really, it didn’t kill a deal, let’s put it that way. If they liked the real estate… and if he [the borrower] had some credit problems, that was okay.”

A Former Credit Review Officer Uncovered Evidence Of Loan “Evergreening”, Or Providing Loans To Non-Performing Or Doubtful Borrowers, During Her Time At Axos Bank, Per Litigation Records Similar Types Of “Pretend And Extend” (aka ‘Zombie Lending’) Schemes Were Described By Former Employees During Our Investigations

Evergreening is a term used in banking circles to describe banks renewing or providing further loans to borrowers that should otherwise be recognized as non-performing or doubtful – it is sometimes referred to as ‘zombie lending’. [19] In March 2022, a former credit officer at Axos Bank brought a suit for wrongful termination claiming Axos bank retaliated against her attempts to raise concerns about compliance at the bank.

One specific allegation of evergreening she made related to “warehouse lending”. [ Pgs. 11-12 ] These are loans provided to “third-party mortgage companies”, per Axos’ 10-K . They get reported in a single segment along with single family mortgages and totaled $4.1 billion in value or 22% of Axos’ overall loan book, per Axos’ Q3 2024 financial statement. [ Pg. 18 ]

According to the court complaint , Axos Bank had financed approximately $45 million of loans by two third parties – Commerce Home Mortgage and A&D Mortgage. [ Pgs. 11-12 ] These loans turned stressed and were aging beyond Axos’ internal policy and the terms of the loan agreement, per the officer.

According to the complaint, instead of reporting these non-compliant loans, Axos decided to evergreen them, in what Axos called “hospital line” loans. [ Pg. 12 ] The term “hospital line” was a “reference to the status of the loans on life support” per the same complaint. [ Pg. 12 ]

Similar schemes – not correctly identifying borrower stress and giving extensions on loan maturities – were corroborated by our interviews with former employees, who called them “pretend and extend”.

One multifamily property manager told us that for defaulting borrowers, who couldn’t make loan payments or single payments to keep the loan regular, Axos would find another way:

“They’ll say I don’t have a million dollars. Okay, we’ll have to go find another solution. So, a lot of times, like I said, we call it pretend and extend. So if there’s a loan maturity, [or] the borrower can’t get a loan, we’ll give them more term.”

Part IV: Axos’ Rosy-Looking Credit Metrics Show Signs Of Distortion or Manipulation

Axos has seen a collapse in commercial real estate in its key markets. With its underwriting standards that embrace troubled borrowers and situations, and specific signs of stress with multiple portfolio properties, it is unfathomable that the company has dodged the issues in its markets.

Despite this, ratios that normally indicate stress (non-performing loans), likely stress (allowances for credit losses) or those that should track the value of underlying collateral (loan to value ratio), have remained essentially flat for Axos between 2021-2024.

The superior credit metrics and LTV figures that Axos touts imply that the bank is navigating the super-saturated and extremely competitive commercial real estate market with precision and finesse, and has resulted in investors awarding Axos a premium valuation.

We suspect these metrics to be highly misleading or manipulated.

#1 Suspect Key Credit Metric: Axos’ Disclosed Loan to Value (LTV) Ratios In Commercial Real Estate Stands At 39% As Of December 2023

This ratio is 17% less than the median average of 9 of its peers, nearly all of whom fall between 50% and 78% ltv.

A Loan to Value ratio (LTV ratio) compares the amount borrowed to the value of the underlying asset at the time of origination, per Axos’ disclosures . It is thus a measure of the bank’s security against the loan in case of a foreclosure situation. Axos discloses LTVs in commercial real estate at 39% as of December 2023, 17% lower on a median average basis to comparable peers. The majority of its peers report similar disclosures in commercial real estate of greater than 50%.

When we asked former employees about the outlier LTV ratios, their experience pointed to much higher LTVs at origination. A manager responsible for credit risk told us regarding the overall commercial book:

“On the commercial side, I think a lot of the properties were 65, 70 [LTV] at most, the low 70s, I think, if I recall correctly. The vast majority of them had significant equity.”

Another manager working within Commercial Real Estate specifically, and aware of construction and bridge loans, told us that LTVs would be between 50-60% on completed value for construction projects:

“Typically it would be like 50 to 60% LTV-ish, on the as-complete value.”

Even Axos’ website says that for construction and bridge loans, which make up 64% of the commercial real estate book, it will finance up to 70% LTVs depending on the property. [ 1 , 2 ] Since over $3.4 billion, or 59% of the commercial real estate loan book was originated before June-end 2023, most prior to the collapse of commercial real estate prices across the US, it is evident that on a current value basis, LTVs would likely be far greater than disclosed. In short, the disclosed LTV ratio, instead of offering the comfort of prudent underwriting, appears to be a red flag of potential data distortion, further supported by our findings in Part 3.

#1 Suspect Credit Metric Cnt’d: “The Bank Routinely Misrepresented The Average Loan To Value Ratio’s Of Its Loans To Investors”, Per A Former Credit Review Officer

A former Credit Officer, who left the bank in 2021, explained how Axos “routinely misrepresented” loan to value ratios to investors, per allegations in a legal complaint.

The complaint alleges that Axos bank was using differing metrics than true LTV, and that the denominator (i.e. collateral value) was overstated by using advance rates, which typically would take into account assets beyond just the property.

After highlighting numerous disclosure issues and loan malpractice with compliance teams and leaders at Axos, instead of resolving them, the former credit officer claims she was fired. [ Pg. 14 ] The case is ongoing, per legal records on PACER.

#2 Suspect Key Credit Metric: Axos’ Non-Performing Loans As A Percent Of Its Key Commercial Real Estate Category Have Stayed Almost Flat In The Last 2 Years, From 0.4% in 2021 to 0.43% in 2023 By Contrast, Large National Banks Like Wells Fargo And Bank of America Have Seen This Ratio Increase By 1.9%-2.0% In The Same Period If Non Performing Loans Increased To These Levels, It Would Mean $131 Million Additional Non Performing Loans For Axos, About 7% Of Tangible Book Value In 2023

At Axos, as is common across the industry, loans are classified as non-performing when a borrower has unpaid dues for more than 90 days.

While the reporting is designed to be prescriptive, deal structures (e.g. payments at the end of a term) and extensions in loans may ultimately delay the eventual recognition of loans as non-performing. As a result, tracking non-performing loan ratios versus industry peers or so called “bell-weather” stocks is vital. 

Over the last 2 years, since interest hikes have commenced regularly, large cap banks like Bank of America and Wells Fargo have seen non-performing loans in commercial real estate increase 3 to 4 times, or an increase of 2% and 1.9% respectively.

However, Axos’ non-performing commercial real estate loan ratio has remained essentially flat, increasing by just 0.03% despite being heavily concentrated in the most problematic markets like New York and California.

As of December 2023, this would have meant at least $131 million additional non-performing loans for Axos, about 7% of tangible book value. [21]

#3 Suspect Key Credit Metric: Provisions For Future Stress As A Percent Of The Commercial Real Estate Category (Called “Allowances”) Have Inexplicably Decreased 0.5% Since June 2021

Banks set aside money to create reserves for payments on loans that they do not expect to be paid back on. This is known as allowances for credit losses .

Such allowances are estimated and an area where banks have discretion. Axos states that:

“ management establishes an allowance for credit losses based upon its evaluation of the expected lifetime credit losses related to the amortized cost basis of loans on the balance sheet.” , per its 10-Q .

Since 2021 – the middle of the Covid pandemic — credit loss allowances as a % of Axos’ commercial real estate loan book have trended down, from 1.8% at the end of June 2021 to 1.3% at the end of December 2023, per its financial statements. [ 1 , 2 ] Axos’ CRE allowances were significantly lower than the industry average of 1.6% at the end of December 2023, per S&P Global Intelligence , the credit ratings agency. This is 1.5% lower than mega banks like Wells Fargo, who reported credit allowances of 2.8% at the end of December 2023. [22]

An increase in allowances by 1.5% in the CRE category would lead to an estimated $88 million negative impact, or 21% of on consensus net income for 2024, per Bloomberg. [23]

#3 Suspect Key Credit Metric Cnt’d: We Estimate That At Least $1.1 Billion Of CRE Loans Originated At Lower Interest Rates Will Face Renewal In The Coming Year, Testing The Sufficiency Of Provisions Axos’ Auditors Identify This As A Critical Audit Matter Given “The Judgmental And Subjective Nature” Of The Company’s Forecasts

The sufficiency of Axos CRE provisions will likely be tested in the next 12 months.

Axos discloses that it has $3.76 billion in short duration bridge and construction loans equivalent to ~64% of its commercial loan book as of March 31 st , 2024, per its investor presentation. [ Pg. 12 ] At Axos, bridge and construction loans have a maximum term of 3 years, according to its corporate website , and they are generally paid back at the end of the loan terms, sometimes akin to “ bullet loans ”.

­­When analyzing the vintage of the loan book, we note that Axos originated $1.65 billion in commercial real estate loans in fiscal year 2022 (i.e. July to June for Axos). [ Pg. 22 ] Assuming that 64% of Axos’ Commercial Real Estate book has a tenure of ~3 years (the maximum term advertised), this implies that approximately $1.1 billion of commercial real estate loans, or ~18% of that book are estimated due in the next ~12 months.

As stress in broader markets has spread and interest rates have increased by over 500bps since the Federal reserve started hiking rates in 2022, we expect provisions for credit losses to increase as a % of Axos’ commercial real estate book. Axos’ auditors have also noticed, raising credit loss allowances in Commercial Real Estate as a key audit matter and noting the “judgmental and subjective nature” of the company’s forecasts. [ F-1 ]

#3 Suspect Key Credit Metric Cnt’d: Axos’ Closest Bridge Loan Peer is Arbor Realty, Where Bridge Loans Make Up Virtually All Of Arbor’s Loan Book Between December 2021 and March 2024, Arbor’s Multifamily (A Commercial Bridge Loan Proxy) Non Performing Loans Rose From 0.02% to 4.4% Of That Portfolio By Contrast, Axos’ Non Performing Loans Have Increased By Only 0.18%, From 0.26% to 0.44% In Its Commercial Real Estate Portfolio If Axos’ Non Performing Bridge Loans Were In Line With Its Closest Peer, It Would Mean $234 Million Additional Non Performing Loans, About 12% Of Tangible Book Value

Bridge loans are short term financing loans that, as the name suggests, are used to “bridge” the gap until a borrower gets more permanent financing or it’s able to meet a particular financial obligation.

At Axos, these loans are generally less than 3 years, per its website , and are counted under the commercial real estate loan portfolio as part of what are known as “specialty” loans, likely owing to their more complex and structured nature.[ Pg. 12 ]

In total, Axos has $1.8 billion in outstanding bridge loans, representing 31% of its disclosed commercial real estate book . [ Pg. 12 ] Axos doesn’t itemize non-performing loans for bridge loans specifically. Axos’ closest listed peer in the bridge loan space is Arbor, where bridge loans account for 97% of its loan book, per its Q1 2024 report . Most of Arbor’s loans are multifamily loans, which are multi-unit properties and generally considered commercial real estate, making it a relevant proxy for Axos’ bridge loan book. Between December 2022 and March 2024, Arbor’s non-performing loans in its multifamily bridge loan portfolio have increased from 0.02% to 4.4% of its portfolio. At Axos, meanwhile, commercial real estate non-performing loans have only increased from 0.26% to 0.44%, or by just 0.18% during the period.

Despite being heavily exposed to bridge loans in its commercial real estate book, Axos would have its investors believe that it somehow has inexplicably managed to avoid the stress that other lenders like Arbor have experienced over the last 18 months.

Banking is an industry as old as Mesopotamia. Over the last 4,000 years, the industry’s participants have evolved in tandem. All U.S. banks are subject to the same federal funds rate and interest rate dynamics, and similar regulations and requirements. Competitive edges, along with comparable ratios and margins, are generally razor thin. This is especially true of banks operating in highly competitive markets like New York and California.

But, for as long as banks have been around, there have also been ‘too good to be true’ outliers that claim to have discovered the magical lending formula. In this case, we are meant to believe that Axos has selected only the best felons and troubled borrowers and properties to lend to, allowing it to waltz gracefully through the commercial real estate market minefield without so much as a scratch.

Note that we do not call into question Axos’ liquidity position or its depositor base. History has shown, however, it is almost always the case that these outliers are taking on undisclosed risk to fuel their optimistic numbers and justify their valuation premiums. We see significant downside ahead.

Appendix A 67% Of Axos’ Commercial Real Estate Loans Are Via Indirect Note Structures, Typically “A-B” Notes Former Employees Indicated This Structure Obscured Axos’ Visibility On The Underlying Borrower

The company claims to have unique structuring and exit strategies that provide them with greater protection than traditional commercial real estate lenders. But in interviews with former employees we were told about arrangements that are typical of senior secured bank loans.

In one common structure, the A-B note, Axos has less visibility into its underlying borrowers, posing added risks. An A-B note structure for commercial real estate deals involves two separate tranches “A” – the highest tranche, and “B” – the secondary tranche that is subordinate to the A (i.e. gets paid out later in a stressed scenario).

According to Axos’ investor presentation , $3.97 billion or 67% of its Commercial Real Estate category are structured via such types of indirect notes, where Axos has “ first payment priority ” (the “A tranche”).

Former employees recalled to us that Axos’ commercial real estate deals commonly used the A-B note structure. A former Commercial Real Estate manager at Axos explained:

“So if it’s a $100 million construction loan, we team up with like, Fortress Investment Group, for example. They were one of our big partners… So basically, Fortress would underwrite the whole loan, so they would underwrite the $100 million construction loan, and then we would give them an advance. Where basically it came out to around 70% of the whole loan. So, you know, they would write the check for $100 million, and then we would essentially write the check to Fortress for $70 million. Right? So really they were only in the deal [for] $30 million. And then they would have $70 million of like leverage essentially.”

Former employees explained that Axos often was reliant on the second partner (B or “junior lender”) for most of the information about certain projects. A credit analyst told us that the company relied on the B-lender for most of the due diligence during the loan cycle. Speaking about interfacing between A lender (Axos) and B lender (usually a credit fund), and how to assess the liquidity position of the underlying borrower after the loan had been originated, they noted:

“I would say a lot of the due diligence at that point would be coming from your B-lender.”

A consultant to a credit fund and junior “B” lender along with Axos in many deals noted the opaque dynamic:

“The borrower doesn’t usually know who it is [the A lender]…They’re [A lender] not interfacing directly with the borrower. And part of that is because if there is a problem, they don’t know how to fix it. A lot of these places don’t know how to fix it”

In short, while A-B structures might be typical in commercial real estate, as former employees explained, the lack of visibility, firsthand due diligence and connection to underlying borrower provides fertile ground for under-recognition of stressed assets.

Disclosure: We are short shares of Axos Financial, Inc. (NYSE: AX)

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[1] Axos is formerly known as the Bank of Internet , or BofI.

[2] Excluding corporate/eliminations.  

[3] Loans reported net of allowance for credit losses.

[4] Note that for efficiency ratios , lower is considered better.

[5] Industry norms held by regulators, ratings agencies, and data providers generally classify multifamily real estate with more than 4 units as commercial real estate. Moody’s classifies multifamily with 4 units and above as commercial. S&P Intelligence also discussed it in relation to CRE loans and when determining credit allowances as a % of CRE loans. Multifamily is also included in Credit Rating Agencies framework for CMBS (Commercial Mortgage Backed Securities). [ Pg. 3 ] A Federal Reserve guidance note as far back as 2006 states that “CRE loans also include loans secured by multifamily property.” [ Pg. 2 ]) Industry and financial publications also note multifamily as part of CRE exposure, including NAREIT , an industry body representing real estate trusts, Altus , a provider of CRE data and news and data provider Bloomberg . Axos defines Multifamily & Commercial Mortgage as 4 units plus. Note that Axos re-organized its CRE definitions post July 2020, just after CRE started to generate negative headlines during the height of the Covid pandemic, creating a separate “multifamily and commercial mortgage” category, referencing Accounting Standard Update (ASU) 2016-13 (collectively ASC 326). [ Pg. 7 ]

[6] Even prior to Covid and the GFC, bank concentration in commercial real estate has been a concern for the Federal Reserve. A Federal Reserve guidance note from 2006 states historically that “concentrations in CRE lending coupled with weak loan underwriting and depressed CRE markets have contributed to significant credit losses in the past”. [ Pg. 1 ] More recently, Axos’ high concentration in CRE was highlighted in a February 2024 Reuters article , which looked at CRE exposures across U.S. regional banks.

[7] Total net loan book

[8] MSCI calls these assets “potential distress”, which it says “may precede full-blown financial trouble”.

[9] The loan is structured via an indirect note with a second lender, per the loan documents. [ Pg. 4 ] The end underlying borrower is ultimately the sponsor.

[10] Loan data referenced throughout this report is as of the most recently available public reports via the Automated City Register Information System “ACRIS” as of 5/31/2024. The loan amounts refer to sanctioned loan amounts and do not necessarily reflect the amount disbursed, given some loan types (e.g. construction loans) will be drawn down over time.

[11] Attached to the NY Department of Environmental Conservation cleanup application for 147-35 95 th Avenue, as Exhibit A, is a NY State Entity Operating Agreement which lists Solomon Feder as the sole member of Sutphin Boulevard Equities. [ Pg. 36 ] The signatory on the loan docs is Joel Zupnick, who has partnered with Solomon Feder on other projects .

[12] Our process for verifying that it was the same Solomon Feder: Firstly, Lexus Due Diligence shows a same-aged individual, with a connection to Big Apple Designers, named in the indictments. One of the other companies named in the indictment, Velocity Framers, is connected to JJ Weiss, a director at Key Developers, a Solomon Feder entity per Rocket Reach and media articles .

[13] Realdeal a real estate news aggregator confirmed that Baselice was the same individual from the 2010 case. 

[14] Lease agents, per CoStar.

[15] This was again through an indirect note exposure.

[16] Nightingale owns the property through its entity ONH 2226 Third Ave LLC, per media reports , references to the entity on the development’s website , and property records .

[17] Deal valuations per CoStar

[18] For example, the state of New York, has 133 lenders whose main specialization is “commercial lending”, per FDIC’s BankFind suite tool . This does not include credit unions or funds that are also engaged in lending activity. To recreate the search: go to the FDIC look-up tool , search by active institutions in the State of New York, download the data file and search the “SPECGRPN” column for  “Commercial Lending Specialization”. This yielded 133 results as of May 31, 2024.

[19] The term and the practice of “evergreening” are discussed in research papers by the International Monetary Fund (IMF), for example.

[20] Axos: Weighted Average of CRE Loan Book, OZK: All construction and development loans, CVB: across all CRE Seacoast Bank: Weighted Average Of CRE Non-Owner Occupied, S&T Bancorp: Average of Office CRE Loans, ConnectOne: Weighted Average Of CRE Loan Book, Trico Bancshares: Weighted Average of CRE Loan Book (including Multifamily), Renasant: Weighted Average Of Non-Owner Occupied Office, Customers Bancorp: Average Across Office and Retail CRE, Arbor: Total LTV including a small segment of single family which has lower LTVs.  [21] We used Bank of America (with lower non-performing loans) as the reference point.

[22] S&P also has a wider definition of commercial real estate, presumably including the multifamily category loans, which shows that Axos’ credit allowance as a % of total commercial real estate increased by 6bps in 2023, versus an industry average increase of 60bps.

[23] Consensus net income (adjusted) per Bloomberg is $420.3 million for 2024. CRE loan book is $5.9 billion in value, as of March 2024.

The Bartlett School of Planning

• Resources for Current Students
• Publications

Real Estate Markets and their Regulation

This research cluster is grounded in the economic/financial analysis of real estate markets to assess and analyse to which extent markets deliver equal, diverse and inclusive outcomes.

1 April 2024

It is predicted that three-quarters of the world population will be urban by 2050, making more sustainable real estate development, investment, land and resource use, and spatial planning, critically important to deliver pressing environmental, social and governance priorities. Notwithstanding local institutional factors and geographical specificities, most of the global urbanization process happens in the context of increasingly complex market economies and more specifically at the intersection of local real estate and international financial markets. Our research cluster is grounded in the economic/financial analysis of real estate markets in order to assess and analyse to which extent markets deliver equal, diverse and inclusive outcomes, with a specific goal to draw lessons for the design of planning policies and regulatory frameworks.

We are interested in the analysis of a broad spectrum of topical issues which are relevant for pressing policy debates:

• House prices and their affordability,
• The changing nature of office and retail markets,
• Financial forces affecting land markets and real estate development processes,
• Evolving industry practices.

Dr Tommaso Gabrieli, The Bartlett School of Planning Send Tommaso an email View Tommaso's profile

The primary activity for the first year will be the organization of a “research for policy” seminar series involving the many researchers working on Real Estate related themes across BSP, faculty, and UCL, helping to foster debates and collaborations across UCL. We envisage a unique role as a research cluster fostering the exchange of policy-oriented research done by different units and research centres across the Bartlett faculty and the wider UCL research community on issues related to urban planning and policy, the future of cities, and sustainable urbanization. We plan thematic seminars with a presentation from a UCL expert speaker, and a following discussion with critical questions from another academic expert and an expert from practice. The presentation would focus on research-lead policy ideas, the discussion would be critical and tackle issues around 1) financial/economic feasibility of the policy idea, 2) political opposition, 3) implementation issues.

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• Panel: Cities Face 'Doom Loop’ but There’s Hope

Panel: Cities Face 'Doom Loop’ but There’s Hope

A panel of experts said work from home has negatively impacted commercial real estate, but office-to-housing conversions can help.

NEW YORK – Real estate experts from around the world held a virtual seminar on Wednesday to discuss how to mitigate the impact of expanded work-from-home opportunities created by the COVID-19 pandemic.

The Volcker Alliance, a nonprofit think tank started in 2013 by former Federal Reserve Board Chairman Paul A, Volcker, hosted the event titled "Doom Loop or Boom Loop – Work from Home and the Challenges Facing US Cities."

The discussion centered on how to deal with changes wrought by the growth of work from home and hybrid positions during the pandemic, and the resulting challenges to office space value and related businesses and services that thrive on the traffic of commuters going to work.

The seminar was the companion to a paper released by the Volcker Alliance early Wednesday morning that laid out the challenges and opportunities facing cities in greater detail. The paper focused on New York, Philadelphia, Miami, Chicago, and San Francisco.

"Ever since the arrival of the COVID-19 pandemic in the US in 2020 led to a surge in people working from home (WFH), cities across the country have been forced to reckon with the possibility of a 'Doom Loop' scenario of vacant offices, depleted central business districts, declining economic competitiveness, and fiscal stress," the paper states. "However, given the right set of policies, cities can reverse their fortunes and embark upon a path to a 'Boom Loop' of greater productivity and economic growth."

Stijn Van Nieuwerburgh, a professor of real estate and finance at Columbia University's Graduate School of Business, sees potential in converting unused office space into housing.

"We have an excess of offices, and we also have a major housing affordability problem in pretty much all of our major cities, and we have a problem with the climate transition," Van Nieuwerburgh said during the panel discussion. "So at the end of the day we need to convert 'brown' offices into 'green' apartments. That's easier said than done."

Van Nieuwerburgh pointed out that there are physical and regulatory hurdles that must be overcome to facilitate conversion, but he said that generally speaking, 10% office space across the country is ready now for conversion into housing. For cities with older office stock such as Chicago and New York, that figure may go as high as 30%.

The greatest obstacle to conversion though, he said, is the financial one. Nieuwerburgh lays out three variables that are necessary for successful conversion.

First, he said the building needs to be bought at a substantial discount, as much as 60%, from its pre-COVID valuation. Second, the conversion costs must be reasonable. And finally the apartments must enter into a strong market that supports their high market rates.

"To be clear, we're talking about a luxury market conversion, where we're going to take an office building and produce very high-end apartments, the sort of places that in New York City would rent for $7,000 a month," Van Nieuwerburgh said.

He also acknowledged that this would do little to address the affordability crisis in housing and called on local and state governments to provide subsidies, tax abatements, and other incentives to support some of the units in conversions becoming available at affordable rents.

Kathryn Wylde, president and CEO of the nonprofit Partnership for New York City, looked at the issue from a different perspective, trying to highlight what employers can do to entice workers to return to the office.

"In terms of what's been found by employers to get people back to the office? They all say free food, in addition to moving into fancy new offices," Wylde said, adding that 20 million square feet of new office space has been built in New York since the pandemic, successfully bucking the trend of office space vacancies while charging the highest commercial rents the city has ever seen.

"There's been a flight from old, dingy office buildings to brand new buildings, and employers have shown they're willing to pay the cost," she said.

Wylde also argued that remote work may not be the biggest problem facing cities despite the empty buildings and other woes that cities are facing.

"There have been a lot of dynamics that are affecting [New York City]. I don't think that remote work is the most significant one in many respects," she said, adding that one of the biggest impacts on cities came in 2018 with the tax cuts passed by former President Donald Trump.

Part of that legislation, she said, capped local and state tax deductions at $10,000, and she said that change hurt urban states in particular such as New York, California, Illinois and Connecticut.

While the work of The Volcker Alliance focuses on larger cities across the United States, smaller cities like those found in Connecticut are facing similar issues. Commercial leasing saw ups and downs throughout 2023 in Hartford County, according to data gathered by CBRE Group, which is the world's largest commercial real estate services firm. The real estate picture was mixed, with leasing falling 17% from the third quarter, but rent costs per square foot rising by 4% year over year.

Working from home has also impacted local businesses that rely on daytime traffic from commuters and office workers to stay in business. Earlier this month, Tisane Euro-Asian Café, once a staple of the dining and party scene in Hartford's west end, closed earlier this month after 24 years in business. In its note to customers about the closure, Locals 8 Hospitality Group, the operator of Tisane and several other restaurants, directly referenced remote work as a challenge it could not surmount.

"Tisane used to be open from 7 a.m. to 2 a.m. prior to Covid and served four day parts. People would have meetings over coffee that rolled into lunch, lunch meetings that rolled into happy hour, or dinner that rolled into cocktails and music. Its central location on Farmington Ave served as the perfect meeting space for many. Unfortunately, with more people working remotely and fewer coming into Hartford, it has impacted the business we had before the pandemic," the restaurant group said in a statement.

© 2024 CTNewsJunkie - all rights reserved.

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FinancialResearch.gov

Conferences, 2024 financial stability conference – call for papers.

Published: June 4, 2024

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The Federal Reserve Bank of Cleveland and the Office of Financial Research invite the submission of research and policy-oriented papers for the 2024 Financial Stability Conference on November 21–22, 2024. The conference will be held in person in Cleveland, Ohio, and virtually.

Markets and institutions, increasingly interconnected, are being challenged by the dizzying pace of changes in the financial system, accelerating the buildup of risk and threats to solvency. Regulatory adaptations add another layer of complexity to the issue. Increasingly sophisticated algorithms and the rise of generative artificial intelligence may create new vulnerabilities across the system as banks, nonbank financial institutions, and financial markets exploit nascent opportunities. The twelfth annual conference will explore how firms and markets can become resilient or even antifragile and how regulators can encourage and accommodate needed changes.

Conference Format

The conference will bring together policymakers, market participants, and researchers in two types of sessions:

• Policy Discussions These sessions include keynote addresses and panel discussions in which participants from industry, regulatory agencies, and academia share their insights.
• Research Forums These forums follow the format of an academic workshop and comprise sessions to discuss submitted papers.

We welcome submissions of research on topics related to potential financial stability risks faced by financial markets and institutions, sources of financial system resilience, and related public policy. Conference topics include but are not limited to the following:

Emerging Risks

As the financial system continues to evolve, new risks emerge along with new businesses, new strategies, and new technologies. Old problems take on new dimensions as fiscal and monetary policies adapt to new economic and political realities, thereby adding new stresses to regulatory frameworks that themselves struggle to adapt. As information technology moves risk out of closely regulated sectors, it also creates new vulnerabilities from cyber-attacks. A rapidly changing physical environment and the prospect of nonhuman intelligences add even more uncertainty.

• Financial stability concerns related to faster payments and equity transactions such as the implementation of t+1 settlement
• The financial stability implications of generative AI and deep learning
• Cryptocurrencies, smart contracts, and blockchain
• Cyber-attacks
• Climate risk
• Interaction of monetary policy with macroprudential supervision
• Sources of resilience in the financial sector

Financial Institutions

A riskier macroeconomic environment poses challenges for financial institutions and their supervisors. Risk management tools and strategies will be tested by fluctuations in inflation and output and by new regulations designed to mitigate vulnerabilities. Network effects, including interactions with a rapidly evolving fintech and crypto sector, may lead to further risks at a systemic level. How are institutions adapting to these risks and associated regulatory changes? How prepared are regulators and policymakers? Are existing microprudential and macroprudential toolkits sufficient?

• Bank lending to nonbank financial institutions (NBFI)
• Insurance markets
• Banking as a service (BaaS)
• Regional banks
• Interest rate risk
• Risks of rapid growth
• Unrealized losses on balance sheets and mark-to-market accounting
• Impact of reforms to lenders of last resort, deposit Insurance, capital rules, and the FHLB system

Financial Markets

Inflation and the associated responses of central banks around the world have contributed to stress to financial markets that has not been seen in the recent past. Financial stability threats may arise from resulting reallocations through volatility spikes, fire sales, and financial contagion. The continued development of algorithms, decentralized finance (DeFi), and complex artificial intelligence has the potential to add novel risks to financial markets. To what extent do investors recognize these risks, and how does recognition affect investors’ allocations? How does opacity resulting from deficiencies in reporting, risk management, and operation standards for these risks affect investor behavior?

• Risks associated with high levels and issuance of public debt (for example, recent volatility around Treasury funding announcements, concerns about primary dealers and principal trading firms, the SEC’s recent rule about what defines a dealer and what that might mean for Treasury markets)
• Short-term funding
• Implications of deficits, central bank balance sheet policies, and financial stability
• The impact of technological innovation on financial markets

Real Estate Markets

Real estate is often one of the sectors most affected by and can be a cause of financial instability. Construction and housing play a major role in the transmission of monetary policy, and real estate-based lending remains a major activity of banks, insurance companies, and mortgage companies. A complex and active securities market ties together financial institutions and markets in both residential and commercial real estate.

• Commercial real estate (CRE)
• Nonbank originators and servicers
• International contagion
• Implications of remote work and the impact of COVID-19
• Effects of monetary policy on real estate markets

Scientific Committee

• Vikas Agarwal, Georgia State University
• Marco Di Maggio, Harvard University
• Michael Fleming, Federal Reserve Bank of New York
• Rod Garratt, University of California, Santa Barbara
• Mariassunta Giannetti, Stockholm School of Economics
• Arpit Gupta, New York University, Stern School of Business
• Zhiguo He, Stanford University
• Zhaogang Song, Johns Hopkins University
• Russell R. Wermers, Robert H. Smith School of Business, The University of Maryland at College Park

Paper Submission Procedure

The deadline for submissions is Friday, July 5, 2024. Please submit completed papers through Conference Maker . Notification of acceptance will be provided by Friday, September 6, 2024. Final conference papers are due on Friday, November 1, 2024. In-person paper presentations are preferred. Questions should be directed to [email protected] .

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