Ralph Lauren store Photo by Spencer Platt/Getty Images

10 Must Reads for the CRE Industry Today (April 5, 2017)

Should President Trump’s budget pass in its current form, Habitat of Humanity CEO Jonathan Reckford said it would be “devastating to affordable housing,” Business Insider reports. About 15 percent of corporate activist investor campaigns targeted REITs in 2016, according to REIT.com. These are among today’s must reads from around the commercial real estate industry.

 

  1. Habitat for Humanity CEO: Trump budget would be ‘devastating to affordable housing “In mid-March, the Trump administration released a partial outline of its 2018 budget, which proposes billions of dollars in funding cuts to most government agencies, including the department of Housing and Urban Development (HUD). If Trump's budget passes, HUD is expected to lose approximately $6.2 billion next year — a 13.2% change from 2016.  These deep cuts to HUD would exacerbate America's affordable housing crisis, according to Habitat for Humanity CEO Jonathan Reckford. ‘If the White House budget were to become the actual budget — and we realize it's more of a political statement than a true budget — it would be devastating to affordable housing in the US,’ he tells Business Insider. Founded in 1976, Habitat for Humanity is a nonprofit organization that has built over 800,000 homes worldwide. The nonprofit's latest campaign, Home is the Key, is fundraising during April to raise money for more houses in the US. The goal is to address the nation's affordable housing crisis.” (Business Insider)
  2. Infrastructure overhaul may top $1 trillion, cut red tape: Trump “President Donald Trump vowed on Tuesday to cut red tape to speed up approval of infrastructure projects and said his overhaul could top $1 trillion on roads, tunnels and bridges, one of his 2016 election campaign promises. Trump, a real estate businessman before he was elected, did not provide further details on the amount or where the money would come from when he spoke to a White House meeting of 50 chief executives and other business leaders. U.S. Transportation Secretary Elaine Chao said at the forum that the administration plans to release a legislative package in May. Investors have become more skeptical that the plan would win approval this year in Congress, which is controlled by Republicans who are traditionally wary of big spending. Trump said building a highway can require dozens of approvals and take 10 to 20 years, a process he vowed to speed up. Trump said he would not fund projects that cannot be started within 90 days. The administration wants to improve the electrical grid and water systems, rebuild airports, bridges, roads and potentially hospitals for military veterans and broadband.” (Reuters)
  3. Growth of REIT Industry Helping Attract Activists, Menna Says “Gil Menna, a co-chair of the REITs and real estate mergers and acquisitions practice at Goodwin Procter, joined REIT.com for a video interview at REITWise 2017: NAREIT’s Law, Accounting & Finance Conference in La Quinta, California. Menna participated in a REITWise panel discussion on activist investors. He noted that capital flows have been a prime reason for a pick-up in activity. ‘There’s a lot of capital allocated to activist activities, and the REIT industry is growing… so it provides a likely target,’ he said. Menna noted that 15 percent of total corporate activist campaigns in 2016 were targeted toward the real estate industry. He acknowledged that while there have been some positive benefits from activism, such cases are the exception to the rule in the REIT industry because REITs already provide a high level of information. Activist investors are unlikely to be able to obtain additional or alternative information, Menna said.” (REIT.com)
  4. Ralph Lauren closing Fifth Avenue store “The company announced the store closing plans Tuesday, and said that should save $140 million a year. In addition to the restaurant, the company will keep seven other New York City stores open as well. It has 485 company-owned stores worldwide. Ralph Lauren has struggled with declining sales and sharply reduced earnings in recent quarters. The company recently announced that CEO Stefan Larsson will leave the company as of May 1 due to creative differences with founder and chairman Ralph Lauren. Lauren will remain chairman and chief creative officer but will not assume the CEO job, according to the company. The company announced restructuring plans last year, laying off 8% of its staff and closing 50 stores to save $180 million to $220 million a year.” (CNN Money)
  5. Despite Trump's claims, bank regulation hasn't slowed lending “President Donald Trump on Tuesday repeated his campaign pledge to undertake a major overhaul of bank regulations, arguing that lending restrictions are hampering job growth. Tighter lending conditions often throw cold water on job growth. A closer look at the data, however, shows that neither of those things is happening in the U.S. Trump made his remarks following a White House meeting with a group of business executives, noting that his administration is working on giving a "major haircut" to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act The sweeping measure was enacted following the financial collapse of 2008 that sparked the deepest global recession since the 1930s. ‘The banks got so restricted,’ Trump told the executives Tuesday. ‘We want strong regulation, but not regulations that make it impossible for banks to lend money to people that are going to create jobs.’ While there may be good reasons to overhaul parts of the sweeping law, concern about a slowdown in bank lending isn't one of them.” (CNBC)
  6. Get Ready, There Is a Looming Merger Boom in One Depressed Part of the Stock Market “Shoppers may ultimately get the shaft in the form of higher prices, but many companies in the consumer space could be about to move forward with big deals to maximize shareholder value amid the disruptive shift to digital buying. Handbag and accessories maker Coach (COH) reportedly made a bid for rival Kate Spade (KATE) a week ago. The latter party is now considering the offer. On the surface, this would be a horrible deal for Coach to make. For starters, each company sells the same product (handbags and accessories) at the same struggling department stores and within retail stores in the same top malls. But, with top line growth increasingly hard to come by in categories such as handbags due to the fundamental shift in how people shop, Coach could be resigned to this type of deal for several reasons. First, Coach is good at taking brands overseas, and this is an untapped opportunity for Kate Spade. Secondarily, Coach could drive a good chunk of supply chain savings, anywhere from shipping products to stores to sourcing raw materials. To be sure, this is the type of deal being done to boost profit margins over time, not necessarily because these could be two companies which, when combined, see cross-selling opportunities and an explosive top line.” (The Street)
  7. UPS says it will open new Arlington shipping hub with 1,400 jobs in 2018 “United Parcel Service has confirmed that it will open a new $200 million shipping center in Arlington. The city of Arlington last week approved economic incentives for the more than 1 million-square-foot distribution center near Interstate 20. UPS said Tuesday that the 110-acre project will eventually have 1,400 full-time workers. ‘The new Arlington building is part of the strategic investments UPS is making to dramatically improve the efficiency and connectedness of our hubs, package centers and transportation network,’ Craig Wiltz, UPS district president, said in a written statement. ‘This project is part of our ongoing efforts to keep pace with rapidly evolving demands of e-commerce customers in Texas, across the U.S. and around the globe,’ Wiltz said. ‘UPS is taking its efficient global operation to the next level.’” (Dallas News)
  8. Texas Muni Commits $380 Million to Real Estate, Absolute Return “The Texas Municipal Retirement System (TMRS) has committed $380 million to real estate and absolute return strategies. The $25.1 billion fund approved the commitment at its March 30-31 meeting, a fund spokesman confirmed. TMRS committed $50 million each to Stockbridge Value Fund III and IC Berkeley Partners IV, both real estate strategies. Stockbridge is a diversified value-add U.S.-focused real estate fund with target returns of 12%-15% gross of fees. The Berkeley fund invests in light industrial, multi-tenant properties in the United States. It is an income-focused fund. Both commitments were recommended by the fund’s real estate consultant, Courtland Partners. The fund also committed $280 million total to three absolute return strategies: $100 million to the BG Umbrella Fund, $90 million to the H2O Alpha 10 Feeder Fund, and $90 million to the Red Cliff Asia Fund. BG is a European-focused multi-strategy opportunistic fund, H2O is a global currency and credit focused macro fund, and Red Cliff focuses on arbitrage opportunities in Asia. Alternatives consultant Albourne Partners recommended the moves.” (Chief Investment Officer)
  9. Former ARC Hospitality Closes First Phase of $400M Investment “Now renamed Hospitality Investors Trust Inc., the former American Realty Capital Hospitality Trust Inc. has closed the $135 million initial funding of a $400 million convertible preferred commitment from an affiliate of Brookfield Strategic Real Estate Partners II, a CRE private equity fund managed by affiliates of Brookfield Asset Management Inc., HIT announced late last week. In addition, HIT has completed a transition to self-management, having terminated its previous external management agreement with American Realty Capital Hospitality Advisors LLC. Former employees of the advisor and its affiliates who had been involved in the day-to-day management of the company’s hotel assets, including all of the advisor’s executive officers, have become employees of HIT.” (Commercial Property Executive)
  10. The Mark Co. to Make Its Mark on LA Residences “The Mark Co. will drive sales and marketing for Los Angeles’ Oceanwide Plaza Residences. The 504 luxury condos are part of a 1.5 million-square-foot project developed by Oceanwide Holdings, which also includes a five-star 184-key Park Hyatt hotel and 153,000 square feet of retail known as The Collection. The $1 billion project is slated for completion in 2019. The three mixed-use towers will feature a two-acre sky park with fully grown trees and lawns 100 feet above street level with an array of outdoor amenities exclusively for residents and their guests. Amenities will include a basketball court, a running track, a pool, and separate runs for both large and small dogs and their resident owners. The development is immediately adjacent to the Staples Center and LA Live. The Mark Co., a subsidiary of Pacific Union International, will benefit from the recent merger of Pacific Union and Los Angeles-based luxury brokerage John Aaroe Group, extending its reach with more than 1,100 real estate professionals in 38 offices throughout Northern and Southern California.” (MultiHousing News)
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