10 Must Reads for the CRE Industry Today (August 8, 2016)

10 Must Reads for the CRE Industry Today (August 8, 2016)

 

  1. Which real estate market is next? “When it comes to the technology arena, real estate investors are holding their breath and waiting to see what other hub might start to slow next. “‘Seattle is holding up fine now,’ said Andy McCulloch, managing director of real estate analytics at Green Street Advisors LLC, a real estate research firm in Newport Beach, Calif. But noting more buildings are expected to come on the market, he asked: “Is Seattle where the next slowdown will be?” Gardner Ellner, an acquisitions director in the Los Angeles office at CBRE Global Investors, who recently bought a television station and office complex in Seattle as an investment for insurer Allstate Corp., said he ‘likes the value proposition of Seattle.’ Seattle is more affordable when it comes to the cost of living than San Francisco, Mr. Ellner said. ‘I think it has a lot of room to grow from a tenant standpoint and so there is a lot of upside in the market,’ he said. There are natural barriers that limit the overbuilding that could push prices down, he added.” (Pension & Investments Online)
  2. Foreign Money Is Circling Distressed Retail Assets; Here's How to Play It “It was an early morning last January down in Florida when, with a giant iced coffee in hand, I popped into a large presentation hall to listen to a key Mattress Firm (MFRM) executive speak to a room of about five people. The low turnout was to be expected -- despite being in the news over the past year for its big Sleepy's acquisition and weak stock-price performance, the business of selling mattresses and box springs isn't exactly sexy. Nevertheless, I sat in and listened to one of the most confusing presentations of my career. The slide deck was so amped up with numbers, projections and pretty charts that I had only one takeaway: Mattress Firm would have a challenging time over the next three years -- integrating a whopping 80 Sleepy's distribution centers and rebannering stores, while also focusing on the core business of selling mattresses across a dizzying array of different brands. Since then, that general view appears to have played out. I watched a local Sleepy's during the spring take over five months to be converted into a Mattress Firm. The exterior of the building came out great, but the location is horrible -- which underscores a sense on Wall Street that Mattress Firm didn't truly know the extent of Sleepy's issues.” (The Street)
  3. Solid Jobs Report Helps Clinton, May Set Stage for Autumn Rate Hike “The nation's economy added a forecast-crushing 255,000 jobs in July, the Labor Department said Friday in a report that bolsters Democrat Hillary Clinton's presidential campaign and may set the stage for the Federal Reserve to boost interest rates this fall. The job growth followed June's gain of 292,000 positions, which was revised upward today from an initial estimate of 287,000 last month. Average hourly compensation, the statistic that has helped fuel debates about whether the expansion is delivering wage gains to average workers, rose 0.3 percentage points, meaning wages are now up 2.6% for the past year, beating inflation by about a point and a half. Economists had expected the unemployment rate to dip by one-tenth of a percentage point to 4.8%, according to the median forecast in a survey by The Wall Street Journal. The unemployment rate held steady at 4.9% for all workers, as the percentage of adult Americans participating in the work force edged higher in an apparent response to plentiful jobs. Economists had expected it to dip to 4.8%.” (The Street)
  4. Can NYC's biotech sphere be saved? “From his perch at Mount Sinai medical school, assistant professor Ravi Sachidanandam has been riding the entrepreneurial wave that’s been rolling through the city’s biotech sector. In late 2013, the physicist-turned-genome researcher rented a work counter at the just-opened Harlem Biospace incubator and launched a startup focused on the immune system and genetics. Named Girihlet, after Islamic geometric “girih” tiles, it now has five employees and is hiring five more. Girihlet also recently scored a $2.5 million investment led by a top Silicon Valley firm and has enough customers for its sequencing technologies—one of which can monitor the immune system through blood samples—to be close to breaking even. But Girihlet’s gains will be New York’s loss. While Sachidanandam, 47, lives in Brooklyn and works in Manhattan, his company is now located in Berkeley, Calif. “We were at our wits’ end,” he said of his efforts to find funding and a bigger lab in the city once the company outgrew Harlem Biospace last year. ‘This ecosystem is too small.’ His story is a familiar one in a city that is home to an unparalleled roster of research institutions but has always punched below its weight when it comes to turning emerging science into viable business. For years it was a given that local researchers leading emerging companies would move to Cambridge or California, where they could find experienced biotech players ready to guide them plus plenty of empty lab space that other startups had outgrown.” (Crain’s New York)
  5. Is Restoration Hardware soft launching a property business? “Could Restoration Hardware, the luxury furnishings retailer known for pitching African mud cloth throws and Venetian beaded mirrors, someday get into the business of selling luxury homes themselves? There’s been a first foray: the St. Helena, Calif., home of company chief Gary Friedman, which is on the market for $10.5 million. Friedman, 58, said he paid $5.9 million for the Napa Valley house in 2013 and initially planned to turn it into a place to relax, but then found another house closer to where his company RH, is building RH Yountville, a food, wine, art and design complex. Friedman then decided to plow ahead with a two-year remodel of the St. Helena house that is top-to-toe Restoration Hardware: He said he personally led the RH design team, and all the furnishings are RH down to the linens and planters. The wine in the vault is from a business RH bought that sells wine, art and antiques.” (MarketWatch)
  6. South African-based retail giant enters U.S. with $3.8 billion acquisition “A company relatively unknown outside its home base has entered the U.S. retail market in a deal to acquire Mattress Firm Holding Corp., the largest mattress retailer in the United States. Steinhoff International Holdings will acquire Mattress Firm, whose assets include Sleepy’s, for $64.00 per share in cash, which represents a premium of 115% over the company’s closing stock price of $29.74 on Friday, August 5, 2016. The price represents a total equity value of approximately $2.4 billion and an enterprise value of approximately $3.8 billion, including net debt. The acquisition is expected to create the largest multi-brand mattress retail distribution network in the world.  Steinhoff, which is often referred to as the Ikea of Africa, is an integrated retailer that manufactures, sources and sells furniture, household goods and clothing in Europe, Africa and Australasia. It operates more than 40 brands in 30 countries. Houston-based Mattress Firm operates more than 3,500 stores in 48 states, with sales of $3.5 billion in 2015. The Houston-based retailer will operate as a subsidiary of Steinhoff from its Houston headquarters. Steve Stagner, executive chairman and chairman of the board of Mattress Firm, and Ken Murphy, president and CEO of Mattress Firm, will remain in their positions. Stagner will join Steinhoff’s executive committee.” (Chain Store Age)
  7. COPT Sells 137-Acre Philly-Area Office Campus  “Corporate Office Properties Trust, of Columbia, Md., has completed the sale of Arborcrest Corporate Campus, its Class A redevelopment office park in Plymouth Meeting, Pa., for $143 million. The buyer was Spear Street Capital, of New York and San Francisco, JLL’s Mike Morrone, managing director, and Patrick Gallagher, senior VP, told Commercial Property Executive. The campus comprises four office buildings that are 100 percent leased and total 654,000 square feet; plus the building at 785 Jolly Road, an approximately 190,000-square-foot “redevelopment opportunity;” and 27 acres of additional land. As of presstime, neither COPT nor Spear Street had replied to CPE’s requests for additional information.” (Commercial Property Executive)
  8. Jersey City Luxury Apartments Land $156M FinancingHFF has arranged $155.83 million in financing for the development of 90 Columbus—a 539-unit, 50-story luxury apartment tower in Jersey City, N.J. Working on behalf of Ironstate Development and Panepinto Properties Inc., HFF placed the construction loan with a national commercial bank. The debt placement team was led by Senior Managing Director Thomas Didio. HFF also procured permanent financing for the adjacent 50-story tower at 70 Columbus back in March through Northwestern Mutual Real Estate. Located in Jersey City’s Grove Street District, 90 Columbus is an integral part of a multi-phase development that also includes 50 Columbus, 70 Columbus, and the 152-key Marriott Residence Inn at 80 Columbus. The tower is scheduled for completion 18 months from now, and will feature studio, one-, two- and three-bedroom floorplans averaging 789 square feet each. Amenities will include a swimming pool, grilling areas, children’s play areas, dog run, table tennis room, library and Wi-Fi lounges.” (MultiHousing News)
  9. Plano office tower sale could set North Texas real estate record “Records are made to be broken. And a North Texas real estate high point could be set if a Plano office building changes hands. The 13-story Legacy Tower in West Plano on the Dallas North Tollway is in play. And an international buyer eyeing the property could set a new high for suburban office sales, real estate brokers who are tracking the deal say. Completed in early 2015, the office high-rise was built by Trammell Crow Co. and Principal Financial and is part of the Legacy Town Center mixed-use project. The 342,000-square-foot tower at the tollway and Legacy Drive is one of the top office properties in West Plano. A foreign investor that's shopping the deal is expected to pay close to $400 per square foot for the tower. That would set a new record for such office developments. The previous highest price paid was the $375-per-square-foot sale of the nearby former Encana Oil & Gas tower in Legacy Town Center.” (The Dallas Morning News)
  10. Austin Apartment Market at Record Highs “As of June of this year, the average rent in the Austin area has hit $1,227, beating the previous all-time high of $1,190 in 2015, according to Shonda Novak of the Austin American-Statesman . The occupancy rate has averaged out to 94 percent, and with almost 17,000 new units under construction, the Austin area’s apartment supply is growing by 7.7 percent, according to MPF Research-Real Page. The high occupancy rates have allowed rent to increase, but at a slower rate now than in previous years. “The good news from a tenant perspective is, the average rental rate increase is slowing a little bit,” said Charles Heimsath, president of Capitol Market Research.” (Multifamily Executive)
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