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10 Must Reads for the CRE Industry Today (August 31, 2017)

S&P warns that the government’s failure to raise the debt ceiling would cause more damage than the Lehman Brothers collapse, according to CNBC. Drones may help speed up insurers’ property damage assessments for Harvey claims, reports the Wall Street Journal. These are among today’s must reads from around the commercial real estate industry.

  1. Failure to Raise Debt Ceiling Would Be ‘More Catastrophic’ Than Lehman Collapse, S&P Says “Few think that Congress won't at some point raise the debt ceiling, which is a good thing because the consequences could be disastrous. In fact, one economist believes the scenario would be worse than the lowest point of the financial crisis. ‘Failure to raise the debt limit would likely be more catastrophic to the economy than the 2008 failure of Lehman Brothers and would erase many of the gains of the subsequent recovery,’ said Beth Ann Bovino, chief economist at S&P Global Ratings.” (CNBC)
  2. How Carl Icahn Made $1.4 Billion Playing the Booms and Busts of Las Vegas “On Tuesday, billionaire Carl Icahn announced he had sold the unfinished Fontainebleau resort in Las Vegas for $600 million, quadrupling his money in seven years. Just up the Las Vegas strip a few weeks earlier, in June, Golden Entertainment said it has agreed to buy the Stratosphere resort for $850 million from Goldman Sachs. These summer deals for the Fontainebleau and Stratosphere show Icahn at his best.” (Forbes)
  3. Insurers Are Set to Use Drones to Assess Harvey’s Property Damage “Property insurers are preparing to fly dozens of drones over homes and businesses to assess damage in the wake of Tropical Storm Harvey, the first widespread use of unmanned aircraft to size up catastrophe claims. Insurers have been testing drones and using them on a small scale since getting Federal Aviation Administration approval in 2015 to use the technology for U.S. inspections. Drones provide aerial images that can help insurance adjusters inspect buildings faster and more safely, executives say, part of a larger industry effort to speed up time-consuming claims.” (Wall Street Journal, subscription required)
  4. Nordstrom Warns Shareholders of the Risks of Going Private “Nordstrom kept quiet about the possibility of the family taking its namesake company private when reporting its last financial results, but company executives are warning of the potential risks in the latest documents filed with the Securities and Exchange Commission. ‘The exploration of a possible 'going private transaction' by the Nordstrom family could impact our relationships with our customers, employees, suppliers and partners, operating results and business,’ the company wrote in its quarterly filing with the SEC.” (Puget Sound Business Journal)
  5. Large Number of Vacant Apartments Will Help Houston in Harvey Aftermath “Houston, the fourth-most populous city in the country, has roughly 6.5 million people living in its metro area. It also has a huge supply of apartments—about 662,400 units as of mid-2017, according to RealPage calculations. Moreover, Houston has one of the lowest occupancy rates in the country, at 92.9%, down from its peak of 94.7% in mid-2015, according to RealPage. Due to the large number of apartments and relatively low occupancy rate, Greg Willett, RealPage chief economist, says the area should be able to accommodate a major influx of renters more easily than just about anywhere else across the U.S.” (Multifamily Executive)
  6. Hyatt’s Wellness Program Is Going to the Next Level with Fitness Brand Exhale Spa “Hyatt Hotels & Resorts acquired Exhale Spa, a boutique fitness and spa brand, for an undisclosed amount. Exhale has grown from one studio in 2003 to 29 boutiques in 11 markets across the U.S. today. This is Hyatt’s second acquisition in the wellness space. In January, it acquired Miraval Group, a wellness resort and spa company, for $215 million. Both deals are part of a larger strategy to invest in what Hyatt CEO refers to as ‘adjacent spaces.’” (Fortune)
  7. Asian Investment in Global Real Estate Picks Up Steam in 2017 “According to the latest research from CBRE, global real estate continues to serve as an attractive asset class for investors, with Asian outbound investment into the sector posting significant year-on-year gains in the first half of 2017. Approximately $45.2 billion of Asian outbound capital was directly invested into global property in the first half of 2017, representing a 98.4% rise year-on-year against $22.8 billion allocated in the first half of 2016.” (World Property Journal)
  8. The Evolving Consumer and the Emphasis on Experience “Some will want to attribute the recent struggles of certain brick-and-mortar brands to the steady growth in online sales. The fact is, however, that it’s the consumers, themselves, who are evolving, not just the technology at their disposal. Twenty years ago, success for department stores could be traced back to some combination of product mix, brand, and real estate. In 2017, the mantra of ‘location, location, location” has been replaced by a focus on the customer experience -- with a capital “E’ – that defines a brand’s narrative.” (Forbes)
  9. U.S. Condo, Apartment Markets Bounce Back in Q2 “According to the National Association of Home Builders' latest Multifamily Production Index, the U.S. Condo and Apartment market is enjoying a nice rebound this summer, as the MPI index posted a gain of eight points to 56 in the second quarter of 2017. The MPI measures builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100. The index and all of its components are scaled so that a number above 50 indicates that more respondents report conditions are improving than report conditions are getting worse.” (World Property Journal)
  10. Harry Macklowe and Estranged Wife Head for Public Divorce Trial After She Rejects $1B Payout “A billionaire Manhattan developer is headed towards a public divorce trial next week, despite a judge’s warnings that it’s going to get nasty. Harry Macklowe, 80, had boasted to reporters that he offered his wife half of his roughly $2 billion fortune to resolve their dispute, but that she rejected the eye-popping sum. During a pre-trial conference Wednesday, Manhattan Supreme Court Justice Laura Drager said the estranged couple hardly could agree on anything.” (New York Daily News)
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