Chuck E. Cheese bankruptcy casts shadow over hundreds of restaurant leases, Pre-pandemic home-price appreciation remains undisturbed, Mortgage rates fall to new all-time low this week
Mortgage News for 7/3/2020
Chuck E. Cheese bankruptcy casts shadow over hundreds of restaurant leases
In a move certain to send shockwaves across the commercial real estate market, the parent corporation of well-known arcade and pizza chain Chuck E. Cheese filed for Chapter 11 bankruptcy protection last week in order to have a “critical conversation” with its landlords and restructure its balance sheet.
The announcement by parent company CEC Entertainment casts a shadow over the future of more than 700 Chuck E. Cheese and Peter Piper Pizza locations across the country, already suffering from prolonged closures brought about by the COVID-19 pandemic.
As a part of its Chapter 11 filing, USA Today reported that CEC also compiled a list of 45 leases it “plans to reject,” which includes restaurant locations in California, Florida, Massachusetts, Ohio, and Oklahoma.
However, CEC announced that is has re-opened 266 company-operated restaurant locations – though subject to “ongoing negotiations with its landlords.” The company said that it expects to maintain ongoing operations in these locations “throughout the Chapter 11 process, providing dine-in, delivery, and carry-out services, hosting birthday parties during dedicated hours, and supporting fundraisers and events in the coming weeks and months.”
The company also said that it has filed customary motions intended to allow it to “maintain operations in the ordinary course including, but not limited to, paying employees and continuing existing benefits programs, honoring guest gift cards, and upholding commitments under its franchising and licensing agreements.”
Meanwhile, the company clarified that US and international franchised locations “operate under separate legal and financial structures “and are not included in the bankruptcy filings.
In a statement, David McKilips, chief executive officer of CEC Entertainment, said that entering bankruptcy was necessary to allow the beleaguered pizza chain to recover from the financial impact of the pandemic.
“I’m confident in the strength of our team and our world-class brands and look forward to more fully implementing our strategic plan as we put these financial challenges behind us,” said McKilips.
Source: Mortgage Professional America 7/2/2020 Author: Duffie Osental
Pre-pandemic home-price appreciation remains undisturbed
The trend of accelerating US home prices continued in April, according to new data from Standard & Poor’s and CoreLogic.
Annual home price gains were running at 4.7% pace across the country in April, up from 4.6% in March, according to the S&P CoreLogic Case-Shiller US National Home Price NSA Index. Month over month, the national index was up 1.1%.
The 10-City Composite annual increase remained unchanged from the month prior at 3.4%, while the 20-City Composite rose from 3.9% in March to 4% in April.
"April's housing price data continue to be remarkably stable," said Craig Lazzara
, managing director and global head of index investment strategy at S&P Dow Jones Indices.
"The National Composite Index rose by 4.7% in April 2020, with comparable growth in the 10- and 20-City Composites (up 3.4% and 4.0%, respectively). In all three cases, April's year-over-year gains were ahead of March's, continuing a trend of gently accelerating home prices that began last fall. Results in April continued to be broad-based."
Prices climbed in each of the 19 cities surveyed, and price increases accelerated in 12 cities. Phoenix (8.8%), Seattle (7.3%), and Minneapolis (6.4%) have the highest annual gains among the 19 cities.
"The price trend that was in place pre-pandemic seems so far to be undisturbed, at least at the national level. Indeed, prices in 12 of the 20 cities in our survey were at an all-time high in April," Lazzara said. "Among the cities, Phoenix retains the top spot for the 11th consecutive month, with a gain of 8.8% for April. Home prices in Seattle rose by 7.3%, followed by increases in Minneapolis (6.4%) and Cleveland (6.0%). Prices were particularly strong in the West and Southeast, and comparatively weak in the Northeast."
Source: Mortgage Professional America 7-2-2020 Author: Candyd Mendoza
Mortgage rates fall to new all-time low this week
Mortgage rates dropped to a new all-time low in the U.S. this week as a resurgence of COVID-19 infections caused investors to pile into the bond markets.
The average rate for a 30-year fixed mortgage was 3.07%, the lowest in a data series that goes back to 1971, and down from 3.13% last week, Freddie Mac said on Thursday. The average 15-year rate fell to a seven-year low of 2.56%, according to the mortgage financier.
Bond yields, used as a benchmark by mortgage investors, have fallen to near-record lows over the last week on news of a resurgence in COVID-19 infections, erasing hopes for a V-shaped recovery that would have the economy rebounding quickly from the virus-induced recession. States including Texas, California and New York have either paused reopening plans or reversed course to stem the spread of COVID-19.
“The spread of the virus is worsening in almost every state,” Goldman Sachs economists said on Tuesday.
“Over half of the US has now reversed or placed reopening on hold.”
The number of confirmed new COVID-19 cases in the U.S. reached a record 52,789 on Wednesday, the day after White House pandemic advisor Anthony Fauci, told Congress the nation could soon see more than 100,000 a day.
“I can’t make an accurate prediction, but it is going to be very disturbing, I will guarantee you that, because when you have an outbreak in one part of the country, even though in other parts of the country they are doing well, they are vulnerable,” Fauci told the Senate Committee on Health, Education, Labor, and Pensions on Tuesday.
Concern about a resurgence in COVID-19 infections have spooked financial markets and sent investors to seek the perceived safety of the bond markets. Market watchers call that dynamic a “flight to safety.”
Almost all U.S. mortgages are packaged into fixed assets and sold to investors, who are the ones that ultimately set mortgage rates by deciding what returns they are willing to accept, known as the “yield.”
“The concern about a coronavirus resurgence did take the wind out of the sale of equities and money did flow into bonds in the last few days,” said Keith Gumbinger, a vice president at HSH.com.
“That pressured bond yields down a little bit – they didn’t plummet, but they fell enough to have the rate measured in the Freddie Mac series set a new record low.”
Source: Housing Wire 7-2-2020 Author: Kathleen Howley
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