Steamboat Winter Park

10 Must Reads for the CRE Industry Today (April 17, 2017)

The Federal Reserve banks of Atlanta and New York lowered their forecasts for U.S. economic growth, Reuters reports. Urban Land Magazine shares ULI’s latest survey results, showing excess supply and rising interest rates are keeping real estate economists “cautious.” These are among today’s must reads from around the commercial real estate industry.

 

  1. Jared Kushner in Talks to Sell Stake in Real Estate Technology Company “Jared Kushner, a senior White House adviser and son-in-law to President Donald Trump, is in advanced talks to sell his stake in a real estate technology company to a venture-capital firm as part of his efforts to divest himself of many business ties, according to people familiar with the matter. Kushner is close to selling his stake in WiredScore to a group including Los Angeles-based Fifth Wall Ventures, according to the people, as he moves to separate himself from conflicts of interest. The price and other group members couldn’t be determined, and the talks could still end without a deal. The divestiture is one of many Kushner is pursuing. Critics of the Trump administration contend that he, like Trump, still isn’t doing enough and that conflicts still exist. Kushner earlier this year disclosed that his stake in WiredScore was worth $5 million to $25 million.” (The Wall Street Journal, subscription required)
  2. Atlanta and N.Y. Fed cut U.S. first quarter GDP view after weak data “The Atlanta and New York Federal Reserve banks downgraded their outlook for U.S. economic growth for the first quarter after disappointing data on retail sales and consumer prices in March. First-quarter gross domestic product was on track to grow 0.5 percent, which was lower than the 0.6 percent growth rate calculated on April 7, the Atlanta Fed said. The New York Fed said on Friday its first-quarter GDP forecast was 2.09 percent, down from 2.56 percent a week earlier. On Friday, the U.S. Commerce Department said retail sales fell 0.2 percent in March following a 0.3 percent decrease in February, which was the first and biggest decline in nearly a year.” (Reuters)
  3. Improving U.S. Economics, Modest Rent Growth Forecast Through 2019 “The latest survey of U.S. real estate economists showed a marked increase in expected economic measures, most likely due to federal proposals to reform the tax code, reduce regulatory burdens, and invest in infrastructure. Compared with the same survey from six months ago, real estate economists have higher expectations about gross domestic product (GDP) growth, employment growth, and housing starts. Consistent with a stronger economy, forecasts for interest rates and inflation have moved higher. But key real estate metrics, such as NCREIF Property Index (NPI) returns and transaction volumes, showed little change from six months ago. These results are based on the semiannual ULI Real Estate Consensus Forecast, prepared by the ULI Center for Capital Markets and Real Estate. The survey was completed by 53 economists and analysts at 39 leading real estate organizations in March and early April 2017. These results will be reviewed in a member’s only webinar on Wednesday, April 19. In summary, respondents have raised expectations about economic growth through 2019. While greater job and income growth will be positive for U.S. real estate markets, forecasters were reluctant to upgrade real estate fundamentals or returns. New supply in the pipeline and/or higher interest rates are likely keeping real estate economists cautious, but more likely realistic as uncertainty about future growth remains a concern.” (Urban Land Magazine)
  4. Profits Jumped in 2016 for Independent Mortgage Bankers in U.S. “According to the Mortgage Bankers Association's Annual Mortgage Bankers Performance Report, independent mortgage banks and mortgage subsidiaries of chartered banks in the U.S. made an average profit of $1,346 on each loan they originated in 2016, up from $1,189 per loan in 2015. Average production volume for companies in our Annual Performance Report rose in 2016, reflecting a larger industry trend of increasing volume in 2016 over 2015, based on MBA industry estimates," said Marina Walsh, MBA's Vice President of Industry Analysis. ‘Average loan balances also rose, reaching a study-high $244,945 for first mortgages in 2016,’ Walsh continued. ‘This translated into higher revenues that reached a study-high $8,555 per loan in 2016.  Yet production expenses also reached a study-high, at $7,209 per loan, and offset a portion of these revenue improvements.  The net result was a slight increase in overall net production income.’ Mortgage lenders with servicing portfolios experienced significant fluctuations in the valuation of their mortgage servicing rights related to corresponding interest rate fluctuations during 2016.  Most servicers reported net servicing financial losses in the first half of the year, followed by recoveries by the end of the year. Including both production and servicing operations, 94 percent of the firms in the study posted overall pre-tax net financial profits in 2016, from 92 percent 2015." (World Property Journal)
  5. Real estate surge likely to follow resort ownership change at Steamboat, Winter Park “When Intrawest arrived in Steamboat Springs in 2007, the place was booming. The fact that the country’s then-largest resort operator paid $265 million for the ski area — almost three times the asking price a mere six years earlier — affirmed luxury projects under construction at the ski area’s base. Demand for real estate grew even more. Buyers flocked. Developers doubled down. Sales hit an all-time high of $1.5 billion. ‘We can’t figure out if it was just the tail end of the real estate boom or if it was Intrawest,’ said David Baldinger, owner of Steamboat Sotheby’s International Realty. ‘We think it was Intrawest, because the financial crisis was underway but Steamboat had strong volume for another year. We think it was enthusiasm for a new owner.’ That’s a common theme across the high country: a resort trades hands and real estate sales spike as attention turns to a region that’s about to see new energy and investment.” (Denver Post)
  6. Canada-based software firm moving U.S. headquarters to downtown Dallas “A Canada-based software firm is relocating its U.S. headquarters to downtown Dallas. Lone Wolf Real Estate Technologies is an almost 30-year-old real estate software and technology company that is based in a suburb of Toronto.  Its U.S. office has been in Las Vegas. The company serves 10,000 real estate company clients throughout North American. Lone Wolf is leasing 25,000 square feet in downtown Dallas' 717 Harwood office tower where it plans to relocate its U.S. headquarters, according to filings with Dallas' Economic Development Committee. The company plans to have 150 jobs in the new location. Lone Wolf is asking Dallas for a $150,000 economic development grant to set up the new office.” (Dallas Morning News)
  7. Dollar Express closing 17 Florida stores, laying off 125 “Seventeen Dollar Express stores are closing in Florida and their 125 employees are losing their jobs. The layoffs were announced in Worker Adjustment and Retraining Notification notices filed by Dollar Express’ owner, Sycamore Partners, to the Florida Department of Economic Opportunity. Sycamore Partners, a private equity firm, announced earlier this month that it was selling all 323 Dollar Express stores to the rival Dollar General chain. The layoff announcements by Dollar Express said the job losses will take effect “approximately June 30” and be permanent.” (Sun Sentinel)
  8. Retailers turn in mixed performance in March “A slump in consumer prices helped to keep retail sales in check in March. Retail sales in March inched up 0.3% over February, according to the National Retail Federation. (The NRF numbers exclude automobiles, gasoline stations and restaurants.) ‘Various factors were at play in the first quarter, but we are again seeing a pattern similar to previous years — consumer spending was weak but is expected to pick up as we move through the year,’ said NRF chief economist Jack Kleinhenz. Citing the most recent Consumer Price Index numbers that showed prices reversing course in March, Kleinhenz said a lack of pricing power continues to plague the retail industry. ‘There is no doubt that weak pricing power led to the bumpy period for retailers in the first part of this year,’ he said.” (Chain Store Age
  9. Economy Watch: Eds and Meds Help Sustain Markets in Down Times “The retail sector, as well as other kinds of real estate, are well known for suffering from the slings and arrows tossed by a volatile economy. But it turns out that a solid base of education and medical jobs can smooth out volatility in the retail sector, as well as in multifamily. That’s according to a new analysis by CBRE Group, using data from the most recent recession and afterward. The report outlines how, among the largest U.S. metro areas, those with higher concentrations of education and medical jobs experienced many of the smallest declines in retail and apartment rents during the 2007 to 2009 recession. Indeed, some of the smallest rent declines were in eds-and-meds strongholds such as Philadelphia, Pittsburgh and St. Louis. Even in gateway markets such as New York and Los Angeles, the effect of eds and meds on the local economy and the health of commercial real estate markets was greater than generally appreciated, noted Ian Anderson, CBRE director of research and analysis in Philadelphia. “Not only does this sector provide a source of growth, but it also delivers a notable degree of stability to commercial real estate properties and markets,” he said.” (Commercial Property Executive)
  10. Hudson Cos. Picks Architect for Latest Brooklyn Development “Hudson Companies has tapped architecture and interior design firm CetraRuddy for a new mixed-use project called 350 Clarkson. The development will be at 350 Clarkson Ave. in the Prospect Lefferts Gardens neighborhood of Brooklyn. The property will include 250 market-rate rental apartments, along with 6,000 square feet of ground-floor retail space. The eight-story structure will rise on land formerly occupied by low-rise commercial buildings, and represents the second phase of an effort aimed at increasing the number of housing options in the neighborhood. Common amenities at 350 Clarkson will include a rooftop terrace, attended lobby, children’s play room, gym, yoga room, resident lounge, game room, private screening room, and garden. The project is expected to achieve LEED, NYSERDA, and Energy Star certifications; leasing will begin in early 2019.” (MultiHousing News)
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