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10 Must Reads for the CRE Industry Today (April 24, 2017)

The real estate industry will not take quietly to President Trump’s proposed tax overhaul, according to The New York Times. Sears has appointed another CFO and will close another 50 auto centers and 92 pharmacies in its next cost-cutting move, Business Insider reports. These are among today’s must reads from around the commercial real estate industry. 

 

  1. Trump's Industry, Real Estate, Poses Hurdle to Tax Overhaul “President Trump has promised a sweeping tax plan, arriving in the days ahead, that will be ‘bigger, I believe, than any tax cut ever.’ It will aim to bring down individual and corporate rates, simplify the overall tax code and unleash economic growth. Many tax experts say a key element to any fundamental overhaul is getting rid of certain deductions for businesses — the ‘special-interest giveaways that are masked as tax breaks,’ as House Republicans describe many of them in their own proposal. That is the only way tax rates for much of the country can go down without starving the Treasury, the experts say. But there is a major roadblock to that fundamental change, and it comes from a sector well known to the president: the real estate industry. As the nation’s first real estate developer-president — one who has refused to divest his holdings while occupying the Oval Office and has declined to release his past tax returns — Mr. Trump brings his career perspective to the tax question, as well as a substantial financial stake in the outcome. His interest will be shared by small builders, brokers and contractors in congressional districts across the country. And as they showed in rolling back previous changes that had taken away advantages, their lobbying prowess is formidable. “There’s probably no special interest that’s more favored by the existing tax code than real estate,” said Steven M. Rosenthal, a real estate tax lawyer and senior fellow at the centrist Urban-Brookings Tax Policy Center. “It’s really hard to take that industry on.” (The New York Times)
  2. Sears just lost its CFO for the second time in 6 months ahead of a looming financial deadlineSears has lost its second chief financial officer in six months, just as it begins talks with lenders over a looming debt payment. Sears CFO Jason Hollar has left the company to ‘pursue another career opportunity,’ the company said. Hollar was appointed to the role in October 2016 following the departure of Robert Schriesheim, the company's CFO since 2011. Sears has named Rob Riecker to replace Hollar, effective immediately. Riecker was previously Sears' controller and head of capital markets activities…Jeffrey Balagna, formerly Sears' executive vice president, and Joelle Maher, formerly Sears' president and chief member officer, left in December. The turnover comes as the company struggles to cut costs and revive business following years of declines in customer traffic and sales. Sears has been selling off assets to stay afloat as it burns through cash. It is facing a looming payment in July from the maturation of a $500 million loan facility, and said it is in talks to  evaluate refinancing options for the loan, and will provide an update on the status of those efforts prior to the end of May. The company also provided an update on planned cost savings, saying it would close 50 Sears Auto Center locations and 92 pharmacies at Kmart stores.” (Business Insider)
  3. Retail Landlord Gazit-Globe Sets Sights on New York “Global retail landlord Gazit-Globe Ltd. is planning to open a private U.S. subsidiary to invest in real estate in New York and other major metropolitan areas, the company said. Gazit-Globe, which is based in Israel and has focused on supermarket-anchored shopping centers in urban markets, already has a presence in the U.S. and New York City area through its subsidiary, Equity One Inc., a shopping-center real-estate investment trust. Earlier this year, Equity One merged with and into Regency Centers Corp., forming a company with 429 properties.” (Wall Street Journal, subscription required)
  4. Trump Policy Impact on Real Estate Still Unclear “The controversial visa-for-sale program called EB-5, which allows foreigners to get green cards by investing in economic development projects, has largely been driven by Chinese applicants in recent years. But interest in the program, which is set to expire on April 28, has spiked in recent months from investors in other countries, mainly because of uncertainty over President Trump’s overall immigration policy. Shortly after Mr. Trump enacted his first travel ban in January, Michael Gibson, a managing director of USAdvisors, which reviews EB-5 proposals for investors, started getting calls from European, Middle Eastern, Turkish and even Canadian clients, including people who’d traveled, worked or studied in the United States for years on nonimmigrant visas and never felt they needed permanent residency. Many of these people had not sought green cards before because of the tax consequences, Mr. Gibson said. But now, ‘they’re afraid their visas may be canceled or not renewed,’ he said. ‘We’ve even got clients from Canada — Canada, of all places. People who in a million years never would have considered applying for permanent residency are considering it now.’” (The New York Times)
  5. Akerman CRE Report Finds Rising Optimism, Despite Uncertainties “The U.S. CRE market is looking at a rising level of confidence, stiffer competition from single-family residential for the nation’s housing dollar, and concerns over rising prices and falling cap rates, according to the eighth annual Akerman U.S. Real Estate Sector Report, released last week. Since the U.S. presidential election, the report from U.S. law firm Akerman LLP indicates that 53 percent of investors and lenders are more optimistic about the 2017 outlook for the U.S. CRE market, compared to last year’s 38 percent. This increased investor confidence arises from the prospects of deregulation, tax reductions and stronger economic growth. About 64 percent of real estate executives interviewed after the election say the Trump administration’s agenda will have a moderately or significantly positive effect on the industry. This number is up from 54 percent who were bullish about the pro-business presidential candidate during the 2016 campaign.” (Commercial Property Executive)
  6. Berkadia Finalizes Transactions in NY, FL “Berkadia’s New York office has secured $15.1 million in acquisition financing for the affordable housing property Tony Mendez Apartments in Manhattan’s East Harlem neighborhood. Director Michael Shmuely arranged the 16-year, fixed-rate loan for borrower Heritage Realty, leveraging Berkadia’s partnership with Fannie Mae. The loan featured a 4.29 percent interest rate, a 65 percent loan-to-value ratio and 10 years interest only followed by a 30-year amortization schedule. The 14-year-old, 130-unit property offers one-, two- and three-bedroom floor plans. It is located at 75 E. 116th Street and 58 E. 117th Street, giving residents easy access to several bus stops and subway lines.” (MultiHousing News)
  7. Hyatt, Miami in talks to rebuild Miami River hotel and convention center site “Hyatt and the city of Miami are contemplating a deal to redevelop the chain’s Regency hotel and the city’s 35-year-old James L. Knight Center convention complex. Under the terms of a compact being presented next week to Miami commissioners, Hyatt would have 12 months to come up with a master plan to build a new hotel with meeting space and a mixed-use development at the mouth of the Miami River. If that plan is approved, Hyatt, which has six years left on its existing lease before facing a 45-year option to renew, would execute a new and expanded 99-year agreement with the city and begin construction.” (Miami Herald)
  8. Blackstone reveals cash reserves of $32.2B for RE investments “Thanks in part to some major real estate sales, the Blackstone Group has $32.2 billion in dry power to invest in global real estate. That allocation represents about one-third of the $94.3 billion it has to invest across all asset classes, IPE Real Estate reported. Blackstone’s total real estate assets under management are worth about $101.2 billion, according to its most recent earnings report. The company sold $21 billion in real estate over the past year, including a 25 percent stake in Hilton Worldwide Holdings Inc., which sold to China’s HNA Group. In Los Angeles, it’s selling the Wilshire Palisades building in Santa Monica for about $287 million, or $1,400 a square foot, sources told The Real Deal.” (The Real Deal)
  9. Foreclosure activity drops to pre-recession levels nationwide “The number of foreclosure filings, which include default notices, auctions and bank repossessions, dropped 19% nationwide from a year ago during the first quarter, affecting only roughly 235,000 properties, according to a report released this month by real-estate data firm Attom Data Solutions. That figure represents the lowest level of foreclosure activity reported since the third quarter of 2006. The trend extends to the local level: More than 100 markets fell below pre-recession foreclosure levels, up from 78 markets last year. Among those markets are Los Angeles, Houston and Miami. Cities where foreclosure activity remains elevated compared to before the financial crisis include Philadelphia (97% above the level before the recession), New York (80% above) and Boston (26% above.)…While the decline in foreclosures indicates a stronger housing market, it could also worsen the affordability crisis creeping up in many cities across the country. And the lack of affordable housing has caused many people to choose to rent for longer, since down payments can easily cost a year’s salary in some markets.” (MarketWatch)
  10. Miami Worldcenter brings luxury real estate, new jobs “Hundreds celebrated phase one of a groundbreaking change, Sunday night, in South Florida. The Miami Worldcenter was premiered, which is America’s second-largest luxury urban real estate development. According to Paramount Miami Worldcenter, phase one is a 60-story, $500 million skyscraper, which includes resort-style pools, a fitness center and spa, astronomy observatory, tennis courts, soccer field and a bar. Paramount CEO Daniel Kodsi said the whole project will be a ‘city within America’s city of the future.’” (7 News Miami)
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