See below for Andy Little's latest commentary in the Richmond Times-Dispatch.

Pink Floyd’s 1973 hit song “Money” didn’t mention real estate as a glamorous place to park capital, but today there is more money chasing real estate than there are deals.

Despite the economy taking a breather to sort out the next wave of COVID-19, investor interest in real estate, like many assets, is surging. The abundance of capital is making some question where the market will go from here.

Real estate has always been considered a good hedge against inflation with the theory that rents rise with inflation, ultimately increasing the underlying real estate’s value more than the rate of inflation.

Rent inflation is clearly happening in the apartment sector with rents rising more than 12% last month compared with a year ago in August, according to data from Apartment List.

In the Richmond area, rents have increased more than 11% during the same time period, according to Apartment List.

While apartments are one place where rental growth is outpacing inflation, value investors are looking elsewhere to put their money to work.

Buyers of distressed properties have lined up to take advantage of defaulting loans related to retail and hotel properties, and it does appear that money is finally getting invested.

Commercial mortgage-backed securities financing for hotel and retail properties has represented the largest chunk of distressed loans since the pandemic began, according to analytics firm Trepp LLC.

However, those loans are quickly getting resolved and each month fewer remain in special servicing.

Assisting apartment and value real estate investors alike is extremely cheap and available debt capital.

Rates continue to sit at rock-bottom levels and are currently in the 2.75% to 3% range for 5- and 10-year loans backed by conservatively leveraged properties, according to the John B. Levy & Co. Inc national mortgage survey.

While not quite as cheap, debt is certainly available for both retail and hotel properties.

Two large loans in the Richmond region represent the only commercial mortgage-backed securities loans that are more than 90 days delinquent, according to data from Trepp.

The first is the Hilton Richmond Hotel & Spa/Short Pump in Henrico County, one of the Richmond region’s largest hotel properties and meeting space venues.

The hotel at 12042 W. Broad St. is slated to be sold at a foreclosure auction at 1 p.m. on Sept. 28 at the county courthouse, according to a foreclosure notice in the legal advertising section of the Richmond Times-Dispatch.

Much of the hospitality industry has suffered dramatic declines amid the coronavirus pandemic. As a result, the 254-room hotel, which was a popular destination for meetings, events and weddings, was unable to repay the loan.

The loan had a balance of $39.1 million at the time of default, but the total amount now owed is $41.8 million, according to Trepp.

An appraisal completed in February indicated a value of $47.4 million, Trepp’s data shows. The property is currently assessed by the county for $12.4 million, down from the $35.8 million assessment in 2020, according to Henrico’s online property records.

Despite an abundance of capital chasing deals, it is unlikely that a bidder will purchase the hotel at foreclosure auction for the outstanding loan balance, much less the appraised value.

The hotel had been owned by Shamin Hotels, the region’s largest hotel operator. In December, Shamin agreed to have a receiver take over the property, and the court appointed one.

That action only affects the Hilton Richmond Hotel & Spa/Short Pump’s non-recourse loan and none of Shamin’s other hotels. Each property is a separate business entity.

The other local property that is underperforming is the Stony Point Fashion Park in South Richmond.

Starwood Retail Partners, which bought Stony Point and two other malls in 2014, defaulted on the loan in March 2020. It was put under new ownership in late April of that year.

The original loan for the three properties was for $161 million, with $127.16 million still outstanding, according to Trepp. The balance on Stony Point’s portion of that loan portfolio was roughly $28.4 million, or about 22.3% of the total amount due, Trepp data shows.

“It is expected that the first property that will be brought to market [for sale] will be Stony Point,” according to a Trepp report dated in August.

Appraisal information is not broken down by property, but overall, the appraised value for the $127.16 million loan is about $89 million.

Stony Point has been losing tenants for years. Last year, for instance, the mall lost tenants, including cheap-chic fashion retailer H&M, cookware and kitchen retailer Sur La Table and Panera Bread bakery-cafe.

But the mall’s location off Chippenham Parkway is quite good, and there should be plenty of money interested in owning the property.

John B. Levy & Co. partner and investment banker Andrew Little can be reached at