10 Must Reads for the CRE Industry Today (August 3, 2016) Photo: Courtesy of Sony

10 Must Reads for the CRE Industry Today (August 3, 2016)

 

  1. Freddie Mac: The Top Markets of 2017 “Freddie Mac provided its mid-year outlook today, and sees a moderating but bright multifamily market ahead. Following its second-quarter earnings report, the government-sponsored enterprise says it has processed about $27 billion in mortgage purchases so far this year. ‘And that puts us on pace to be around between $50 billion to $55 billion,’ for the year, said David Brickman on a conference call. ‘So far, it’s been a very robust year, another record half for us. We do see some moderation in the market but continue to have an overall positive outlook.’ Steve Guggenmos, vice president of multifamily research and modeling, believes that cap rates are in a very healthy place as the industry heads toward what should be a busy transaction season going forward. The risk premium—that spread between cap rates and the yield on the 10-year Treasury note—is as healthy as it’s been. He noted that while average cap rates decreased to 5.7% in the first quarter, they’re unlikely to be affected by any fluctuations in the 10-year Treasury.” (Multifamily Executive)
  2. Homeownership Drop Is Bad News, but Not for the Reason You Think “The homeownership rate fell again in the second quarter of 2016, hitting the lowest rate in more than 50 years, more than 6 full percentage points below the peak bubble years. This is both good news and bad news. It is good news because homeownership is not always good for everyone at all points in their lives. The building, banking and real estate industry have worked hard to make renting seem un-American. While homeownership can be a useful way for families to accumulate wealth, it's not generally advisable for people not in a stable employment and family situation. The transaction costs associated with buying and selling a home are roughly 10 percent of the sales price, which comes to almost $25,000 for a typical home. This is a lot of money to throw away for someone who has to move after a year or two because of losing a job or a family break-up. Of course the lost money to the homeowner is income for bankers and realtors.” (The New York Times)
  3. Zika Threatens Florida’s $67 Billion Tourism Revenue “On Monday, the U.S. Centers for Disease Control and Prevention (CDC) issued its first-ever travel warning for a destination inside the United States. The warning is related to several Zika infections in a north Miami neighborhood and could pose a threat to Florida’s $67 billion tourism industry. Florida is the top travel destination in the world, according to StateofFlorida.com, a website that is not affiliated with state government. If the virus should spread beyond its currently known location, it could threaten some of the state’s largest tourist attractions, like Disney World and Universal Orlando, along with such beachfront cities along the east coast as Palm Beach and Port St. Lucie…Florida Governor Rick Scott requested that the CDC send an emergency response team to help the state’s health department respond to the threat. The potential impact on the state’s $67 billion tourism industry could be significant. Some portion of travelers will avoid the state altogether, while the state and federal governments have a thin line to walk: making the public aware of the dangers of the virus without scaring it away.” (24/7 Wall St.)
  4. Joe Sitt: Chinese investors still love NY real estate “Despite a brief lull, Chinese interest in U.S. commercial real estate is still strong, according to Thor Equities CEO Joseph Sitt. ‘We saw a slowdown about six months ago, when China went through that little bump in the road, but now I am starting to see it going reverse,’ he told Bloomberg in a TV interview Monday. But while investor interest is back, Chinese savers are now looking increasingly for stable assets, Thor claimed. ‘People aren’t looking as much for development risk.’ At the beginning of the year, Chinese investment in New York showed signs if drying up amid weak economic data and exchange rate volatility.  In late January Related Companies CEO Jeff Blau said that U.S. real estate companies ‘should be looking for other sources of capital over the next few years.’ But recently, Chinese investors had a hand in high-profile New York real estate deals. On Monday, news broke that developer Xinyuan Real Estate paid $66 million for a large Flushing development site with plans to build a 269-unit condominium property. Meanwhile, property records indicate Extell Development landed Chinese investment firm Shanghai Municipal Investment (SMI) as an equity partner for its Central Park Tower project.” (The Real Deal)
  5. Office Depot to close 300 stores, pay dividend “Office Depot Inc., three months after its proposed tie-up with larger rival Staples Inc. failed regulatory muster, said it would launch a quarterly dividend and close an additional 300 stores as it charts a course for remaining a stand-alone company. Office Depot completed its strategic review of the business and announced moves such as growing its contract channel, optimizing retail operations in North America, implementing multiyear cost reductions and returning capital to shareholders. Meanwhile, the company said Wednesday it swung to a profit in the latest period, though revenue slipped. The earnings results, on an adjusted basis, missed Wall Street expectations. The company plans to trim $250 million in costs by 2018 and initiated a quarterly dividend program at 2.5 cents a share, payable on Sept. 15 to shareholders of record by Aug. 25. The company didn't specify job cuts were part of its plan to trim expenses but said it would lower overall general and administrative costs. Office Depot closed 42 stores in the second quarter, ending the period with 1,513 stores in North America as part of its earlier plan to close 400 stores. But Wednesday it said it would close an additional 300 stores on top of that.” (MarketWatch)
  6. Sony to open new retail concept at Manhattan headquarters “Sony is rebooting its retail presence in the city on the ground floor of the office building across from Madison Square Park where it relocated its U.S. headquarters earlier this year. The electronics and entertainment giant will open Thursday Sony Square NYC, a space where it will showcase new products and prototype technologies, host consumer events and present film screenings and music performances. The 25 Madison Ave. store will also feature a limited collection of top-selling products found in the company's catalogue that customers can purchase. The space puts Sony among a growing list of retail brands with concept stores in Manhattan that focused on providing customers with an experience rather than pushing consumers to buy gadgets…’We want to be able to tell our story and drive an emotional connection to our products,’ said Steven Fuld, a senior vice president of corporate marketing at Sony, who was involved in creating the new store. ‘This is not just a commercial enterprise. This space is all about being able to touch and see our products and content in action and all that Sony can do.’” (Crain’s New York)
  7. Miami Retail Center Changes Hands for $285M “Weingarten Realty Investors has acquired The Palms at Town & Country, a 667,757-square-foot open-air retail center in Miami, from TIAA Global Asset Management. The property fetched a whopping $285 million, according to the South Florida Business Journal. HFF represented the seller in the transaction, led by Senior Managing Director & Co-head of HFF’s retail practice Daniel Finkle, Managing Director Luis Castillo and Associate Director Nat Scarmazzi. 'The Palms at Town and Country is a highly productive regional shopping center with tremendous near and long-term value creation opportunities that can materially grow the property’s cash flow as well as continue to solidify the property’s fortress retail status in the Miami market,' Finkle told Commercial Property Executive. “This combination is unique, especially in one of the strongest retail markets in the country.” The Palms at Town & Country’s retail roster includes Publix, Marshalls, Dick’s Sporting Goods, Nordstrom Rack, Total Wine & More, Kohl’s, Toys”R”Us, 24-Hour Fitness and Forever 21 Red. It also boasts restaurant such as Blue Martini, Corner Bakery Café and Casavana Cuban Cuisine.” (Commercial Property Executive)
  8. Twin Cities Multifamily Market Tightens “Like many US cities, downtown Minneapolis has undergone a renaissance that has transformed the surrounding neighborhoods from warehouse districts into luxury apartment communities. In some areas, such as the North Loop, that change is nearly complete, and may even be moving into a new phase. ‘This is a residential community that continues to grow, but it largely has made the change,’ Matt Rauenhorst, vice president, real estate development, Opus Development Co., LLC, tells GlobeSt.com. ‘The limit on this cycle is availability of sites rather than demand.’ And office developers are now moving in, and see many opportunities to establish workplaces in the now-lively neighborhood. ‘That seems to be the next step in its evolution.’ But the Twin Cities still provides a lot of prospects for multifamily developers, as the neighboring St. Paul market is seeing a migration of renters into its downtown area, and its change is at a much earlier stage. Developers have added more than 13,000 multifamily units to the Twin Cities region since 2013, according to a report published late last year by Minneapolis-based NAI Everest. Vacancy rates in the Twin Cities averaged just 2.3%, the researchers found. The non-downtown St. Paul submarket had, at 1.4%, the lowest rate in the region. Downtown Minneapolis vacancy rates averaged 6.4% and downtown St. Paul rates averaged 2.8%.” (Globe St.)
  9. Why Washington’s biggest real estate deal just collapsed “Executives at the JBG Cos., owners of more Washington-area real estate than any other firm, have been looking for years to expand elsewhere in the country and thought they had their ticket to grow with a proposed $8.4 billion acquisition of New York REIT. The deal would have given the Chevy Chase-based firm 3.3 million square feet of New York real estate, a chance to chart the company’s growth for the foreseeable future. But it didn’t stick. On Tuesday morning — 69 days after announcing the deal — the two companies called it off, issuing a joint press release saying there was no way forward after sustained resistance from New York REIT shareholders who wanted to sell the company’s buildings for cash instead. “After extensive discussions with our stockholders, the NYRT Board of Directors determined that it is in the best interests of the Company and its stockholders to terminate the combination agreement effective immediately,” Randolph C. Read, chairman of the New York REIT’s board, said in the release. Now the two firms will head in different directions.” (Washington Post)
  10. How starchitects are remaking NYC’s skylineIn a city ruled by conservative straight-lined skyscrapers, Bjarke Ingels’ 2 World Trade Center — when and if it is finally built — will stand out as a playful, teetering staircase. Designed as a series of seven precariously stacked blocks, the 3 million-square-foot building rising over Lower Manhattan doesn’t so much want to go upward as topple over. In a Wired story last year, Ingels likened the process of designing 2 World Trade Center to 'playing Twister with a 1,300-foot high-rise.' It’s a bold experiment considering that back in 2015, when he and Larry Silverstein began discussing the project, the Danish architect had never even designed an office building in New York City. He’d made waves in other arenas, with his pyramid-shaped rental building for the Durst Organization in Midtown West and a mixed-use development in Copenhagen that drew praise for its figure-eight shape. But this was one of the final pieces of the World Trade Center complex, the second-tallest tower of the six planned in the most historically fraught site in the city. His lack of experience aside, enlisting Ingels to design the tower also meant jettisoning one of the most renowned architects in the world: Norman Foster. Silverstein had tapped Foster, who designed the Hearst Tower and 50 United Nations Plaza, for the project in 2006.” (The Real Deal)
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