Real Estate Firms Bucking Trend of Fewer Bankruptcies In 2021

Real estate firms were bucking the trend of fewer bankruptcies in companies with over $100 million in assets this year, says a new report from Cornerstone Research. 

With the recovery from the pandemic, only 43 large company bankruptcies were filed in the first half of 2021, compared to 89 during the same period in 2020.

Still suffering from the fallout of Covid-19 struggles of shopping centers and hotels, real estate was a notable exception to the trend of lower bankruptcies.

Real estate firms accounted for four of the nine mega bankruptcies with over $1 billion in assets in the first half of the year including Knotel, Le Jeune Villas Developments, EHT US1,and Corp. Group Banking.

Using another measure of industries, Cornerstone said five of the nine largest corporate bankruptcies were filed by real estate investors.

Cornerstone noted the second and third largest bankruptcies by assets during the period were REITs: Washington Prime Group, with assets of $4.03 billion focused on shopping centers, and Hospitality Investors Trust with assets of $1.7 billion which focused on hotels.

Neither bankruptcy would have made the top 20 list of bankruptcies by assets in 2020, according to Cornerstone.

Tough times could still be ahead for some large firms that survived the pandemic by increasing debt warned J.B. Doyle, a report co-author and Cornerstone Research principal. “Despite the decline in the number of large bankruptcies in the first half of 2021, future increases in borrowing costs could be especially concerning for companies that borrowed heavily to weather the COVID-19 pandemic. We will see if increases in debt burden from the pandemic affects bankruptcy filings in the future.”