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10 Must Reads for the CRE Industry Today (April 7, 2017)

Fitch has advice for banks on how to protect themselves in case of a commercial real estate downturn, reports Business Insider. CNBC looks at how many more stores specific retail chains would have to close to right-size their portfolios. These are among today’s must reads from around the commercial real estate industry.

 

  1. The Stock and Real Estate Markets Will Tumble Once the ECB Follows the Fed “The European Central Bank is in a completely different mode, actively engaged in monetary stimulus. It can be argued that the asset flows coming into equities and financial markets globally from the ECB, when coupled with the hopes for fiscal stimulus, have offset the tightening we have already seen from the FOMC. But those days are numbered. The ECB will at some point end its stimulus program. When it does, the global economy will start to feel the pain of monetary tightening by the FOMC more directly.” (MarketWatch)
  2. Fitch Found a Key Formula to Protect Banks from Being Burned if There’s a Commercial Property Crash “In a report sent to Business Insider, credit ratings agency Fitch argues that by looking at CRE loans during the two years leading up to the credit crisis (2005-2007), it found a new key way in which banks can safeguard against heavy losses should a seismic market crash happen again. The report titled ‘UK CRE: Countercyclical Lending Boosts Loan Returns,’ argues that first of all, the usual way for firms to lend money against property is via the loan-to-value (LTV) mechanism — the ratio of a loan to the value of an asset purchased. The higher the percentage, the higher the risk is for the lender.” (Business Insider)
  3. A Case for Stronger Commercial Real Estate Prices “This article is an attempt to make a defense of real estate prices which have risen over the years. If it appears flimsy that is because it is based on the theory of real estate being the ‘cleanest dirty shirt’ in our closet of investments options rather than a powerful argument of guaranteed strong demand going forward. This extends to real estate investment trusts (REITs) as well.” (Seeking Alpha)
  4. Here’s How Many Stores These Retailers Need to Close as More Shoppers Go Online “Barely a quarter into 2017, year-to-date retail store closings have already topped the historical high of 2008, a Credit Suisse report said Thursday. About 2,880 stores have closed year to date, compared with 1,153 at the same time last year. Since 60 percent of store closures are announced in the first five months of the year, Credit Suisse estimates there could be more than 8,640 store closings this year. Meanwhile, Cowen's Chen analyzed how many stores several major chains should close over five years' time. Here's what he concluded.” (CNBC)
  5. Want to Know if Your Local Payless ShoeSource Store is Closing? “Of the nearly 400 Payless ShoeSource stores that are closing in the U.S., the most -- 66—will be in Texas, according to a list released by the footwear retailer on Thursday. California is losing 49 stores, New York will have 22 store closures, and 17 Payless stores are closing in Florida, the company announced. Payless ShoeSource announced Tuesday that it has filed for chapter 11 bankruptcy and will restructure its operations in North America, including hundreds of store closures.” (MarketWatch)
  6. Amazon’s Real Estate Chief: ‘What We Are Trying To Do the Most Is Be Good Neighbors’ “Between the thousands of jobs Amazon adds each year and its insatiable appetite for office space in Seattle’s urban core, the company has come to symbolize the city’s radical and rapid growth and transformation. Whether Amazon is the cause, a scapegoat, or a little of both is up for debate. But one thing was clear during an interview with one of Amazon’s executives at last night’s Civic Cocktail event in Seattle — residents are looking to the tech giant for answers.” (GeekWire)
  7. 7-Eleven Adds 1,110 Stores, Tacos and Texas Clout with $3.3 Billion Sunoco Deal “7-Eleven is buying 1,110 convenience stores, mostly on the East Coast and Texas, from Sunoco in a deal valued at $3.3 billion. The deal puts 7-Eleven into the Houston  market and gives it a fully developed menu of tacos. It's one of the largest purchases by Irving-based 7-Eleven and gets Sunoco, which said it wants to focus on being a gasoline supplier, out of the retail business.” (The Dallas Morning News)
  8. Brookfield Snaps Up $855M Portfolio “A 45-asset portfolio of industrial and office properties in 12 states has changed hands for $854.5 million, according to TA Realty LLC, which made the sale on behalf of The Realty Associates Fund IX LP. TA Realty, a Boston-based provider of real estate investment management services to industrial and private investors, said that Brookfield-managed real estate funds purchased the assets. The portfolio comprises a mix of high-quality industrial and office properties totaling 8.6 million square feet.” (Commercial Property Executive)
  9. Decline of Suburban Office Sector in U.S. Is Over-Hyped, Says CBRE “With the migration of many millennials to urban environments, some commercial real estate industry observers are less than bullish when it comes to suburban office product. However, the so-called "downfall of the suburban office sector" may be highly exaggerated, according to a new report from CBRE Group, Inc. CBRE's analysis shows the U.S. suburban market strengthening in comparison to downtowns.” (World Property Journal)
  10. Bebe to Close 21 Locations “In a move to avoid filing Chapter 11, the fashion retailer is planning to shutter approximately 12% of its stores. The closures will incur an impairment charge of approximately $2.0 million and will make a termination payment to the landlord of approximately $7.4 million, according to a filing the chain made on April 4, with the Securities and Exchange Commission. The store closures comes on the heels of the chain retaining B. Riley & Co. as its financial advisor in March. The company has also has hired a real estate advisor to ‘assist with options related to its lease holdings.’”(Chain Store Age
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