Changing the Narrative Around Real Estate Bankruptcies

• Down but not out: The lawyer behind LuxUrban’s bankruptcy wants to shift the perception of bankruptcy from failure to a strategic tool in a company’s toolbox.

• Picky funds: Institutional investors are pulling away from certain U.S. real estate sectors while doubling down on others.

• Sunshine savings: Florida’s repeal of its commercial lease tax next month will save billions for tenants and strengthen the state’s overall business climate.

Investment Strategies

Changing the Narrative Around Real Estate Bankruptcies

LuxUrban was founded in 2017 with a bold pitch: master-lease apartments in major cities and convert them into boutique-style short-term rentals. The company rode the proptech wave, going public in 2022 and growing revenues to $43 million by 2023. But behind the top-line growth, losses mounted. High lease obligations, mounting fines tied to short-term rental restrictions, and expensive marketing eroded profitability. By mid-2024, liquidity had fallen below $2 million, and landlords were demanding missed rent. Last week, LuxUrban filed for Chapter 11 bankruptcy.

For many, bankruptcy is seen as the end of the story. But attorneys like Leo Jacobs, who represents struggling real estate firms, argue it should be viewed differently. He sees bankruptcy not as failure but as a tool—an option of last resort when negotiations with lenders stall. In today’s high-rate environment, those negotiations are becoming more common, with lenders weighing their own pressures from investors, balance sheets, and regulatory capital requirements. Jacobs advises reframing the borrower-lender relationship from one of opposition to one of shared problem-solving.

The stigma of bankruptcy in real estate often stems from the fear of losing future financing. Yet Jacobs argues that in the current market, lenders and creditors understand that many distressed situations are the result of broader economic forces, not just bad management. That perspective can help property owners make peace with restructuring as a path forward. LuxUrban’s collapse may look like another cautionary tale of over-expansion, but it also highlights how bankruptcy can function as a pressure release valve—allowing assets, companies, and investors to reset and move forward.

Overheard

Institutional Capital Pulls Back From Some CRE Sectors, Doubles Down on Others

Another one of the world’s most patient investors is bracing for slower returns as sovereign wealth funds are quietly shifting their U.S. real estate exposure. Singapore’s GIC is reportedly unloading a $10 billion manufactured housing portfolio. They aren’t alone. Australia’s Future Fund has been cutting its U.S. holdings, and Invesco’s latest survey shows sovereign allocations to real estate have been declining for years as infrastructure and private credit gain favor.

Still, the selling isn’t universal. Norway’s sovereign wealth fund just picked up a near-$550 million stake in a Manhattan office building, showing that prime assets in resilient markets can still draw long-term capital. The divergence highlights how funds are becoming more selective, shedding assets where demand is weakening and doubling down where structural demand drivers remain strong.

For the U.S. office and housing markets, this matters. When sovereign funds reduce their footprint, it signals caution about valuations and rent growth prospects. But when they do buy, it underscores where global investors see staying power: affordable housing, logistics, data centers, and trophy-level offices. This capital shift offers a view into where some of the most diligent investors think the next cycle’s winners are most likely to emerge.

Billions in Savings Ahead as Florida Repeals Lease Tax

Starting next month, Florida’s repeal of its commercial lease sales tax under House Bill 7031 will take effect. The change, signed into law on June 30, 2025, eliminates the state’s position as the only one in the nation to tax commercial leases, saving tenants an estimated $2.5 billion annually. The repeal applies to office, retail, and industrial properties and is expected to lower tenant costs, simplify compliance for landlords, and improve Florida’s business climate. However, both landlords and tenants must carefully review leases and billing practices to ensure the transition is handled correctly.

The repeal marks the end of a tax first imposed in 1969 under Chapter 212.031 of the Florida Statutes. Over the years, the rate fluctuated between 4% and 6%, but since 2016, the Florida legislature steadily reduced it, most recently to 2% in July 2024. HB 7031 eliminates both the state-level tax and local surtaxes, though landlords must remain aware that certain rentals—such as parking spaces, storage units, and short-term residential rentals—are still taxable under other statutes. Lease documents should be updated, and notices to tenants may be needed to avoid confusion during the transition period.

For the rest of the country, Florida’s repeal signals a new competitive pressure point in the commercial real estate market. By eliminating a tax that no other state imposed, Florida has not only leveled the playing field but also enhanced its appeal to businesses considering relocation or expansion. This could accelerate the migration of companies to Florida and encourage policymakers in other states to revisit property-related taxes and regulations as they compete for tenants and investment. More broadly, the move reflects a recognition that high transaction costs on commercial space can hinder economic growth, potentially setting the stage for similar reforms nationwide.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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