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10 Must Reads for the CRE Industry Today (December 22, 2017)

The SEC is suing the former CEO of the Woodbridge Group for operating a Ponzi scheme, reports the Wall Street Journal. Larry Lindsey, former economic advisor to George W. Bush, may be nominated for the position of Federal Research vice chairman, according to CNBC. These are among today’s must reads from around the commercial real estate industry.

  1. Treasury Will Allow Fannie, Freddie to Retain Small Capital Buffer “Mortgage-finance giants Fannie Mae and Freddie Mac will retain some of their quarterly earnings as part of an agreement between the Trump administration and their regulator to allow the companies to build a small buffer against future operating losses. Under the agreement, announced Thursday by the Treasury Department and the Federal Housing Finance Agency, the companies will be permitted to reserve $3 billion in capital.” (Wall Street Journal, subscription required)
  2. Larry Lindsey Being Considered for Fed Vice Chair Job: Sources “Larry Lindsey, a former top economic advisor to President George W. Bush and a one-time Federal Reserve governor, is being considered for the Fed vice chairman job, according to sources. The White House is looking for monetary policy expertise for the position, according to the sources and Lindsey would fit that bill. He was a governor of the central bank from 1991 to 1997. Lindsey, president and CEO of economic consultancy firm The Lindsey Group, is also interested in exploring the Fed vice chair job, according to the sources.” (CNBC)
  3. Retroactive Depreciation Changes Encourage Closing Deals Before Year End “The Tax Cuts and Jobs Act has radically changed the rules for bonus depreciation at least for a while.  Instead of 50%, we will be getting 100%. And what is really exciting is that bonus depreciation will apply to used property. I'm thinking that there will be serious pressure to close deals before the end of the year, because this is one of the few provisions that is retroactive (to September 27, 2017). An acquisition in 2018 will get the same treatment, but the top tax rate will be lower and more importantly there will be a 20% deduction for flow-through income.” (Forbes)
  4. SEC Sues Woodbridge Ex-CEO Shapiro Over Alleged $1 Billion Ponzi Scheme “The Securities and Exchange Commission has sued Robert Shapiro, accusing the former chief executive of Woodbridge Group of operating a Ponzi scheme that raised more than $1 billion from individual investors for the now-bankrupt real estate operation. Mr. Shapiro is accused of lying to investors, signing falsified documents and making “Ponzi payments to investors,” as well as using investor funds for his own personal enjoyment, among other wrongs, according to papers unsealed Thursday in a Florida federal court.” (Wall Street Journal, subscription required)
  5. To Lure Amazon’s HQ2, Detroit Would Free It from Many Taxes—and Allow it to Pocket Employees’ State Income Taxes for 20 Years “Count Detroit among those that have made extraordinarily generous offers to convince the e-tail giant to set up shop in their neck of the woods. Just how generous? Crain's Detroit Business, which got a copy of Detroit's bid, offers a picture. Should it choose to accept the joint bid from Detroit and neighboring Windsor, Canada, Amazon would receive extensive tax breaks and be allowed to pocket the state income taxes paid by its Detroit employees for 20 years. Meanwhile, the state of Michigan has committed to investing $120 million to train students to become tech workers.” (Business Insider)
  6. PPF Reaches Agreement with Toys ‘R’ Us, Votes in Favor of Restructure “The Pension Protection Fund, London, voted in favor of proposals at a meeting to consider the restructuring of Toys R Us, following agreements by the company regarding its pension fund. The U.K. firm sponsors the Toys R Us Limited Staff Pension and Life Assurance Scheme. The U.K. corporate office is based in Maidenhead, England.” (Pensions & Investments)
  7. Interest Rates Will Increase Again Making 2018 Painful for Consumers “Hello, inflation. Central bankers are expected to raise rates at least three four times in 2018, which means consumers have faced five increases since December 2015. The burden is increasing for those are already saddled with credit card debt and student loans. ‘With another three rate hikes in 2018, the cumulative effect on credit card rates and home equity lines of credit will be two percentage points,’ said Greg McBride, chief financial analyst for Bankrate, a New York-based financial content company.” (The Street)
  8. The 10 Juiciest Real Estate Lawsuits of 2017 “Real estate players are among New York’s most litigious characters and 2017 was no exception to that. Family feuds, angry partners and jilted tenants all meant that the courts were full of industry drama this year, and one high-flying landlord swapped a Hamptons mansion for a Rikers cell. Lawyers prepared colorful complaints full of references to sex, drugs and breach of contracts, and racked up the billable hours. As always, The Real Deal was there to document the legal intrigue. Read on for a closer look at the juiciest cases from the last 12 months.” (The Real Deal)
  9. Chicago Makes Room for More Growth “Chicago’s development boom has caught up with demand, leading to flat rent growth, a trend seen in other Midwestern markets. The supply volume has made the bifurcation between rental rates for luxury and working-class units even more distinct. Rents for Lifestyle apartments dipped 0.3 percent, while those in Renter-by-Necessity units increased by 1.8 percent. The pace of new construction is expected to continue. Chicago is slated to add around 9,000 units to its inventory in 2017, marking a post-recession high, up 13 percent year-over-year.” (Commercial Property Executive)
  10. Fulton market Apartment Deal Could Be Priciest of 2017 “The developers of a new 29-story luxury apartment tower in the Fulton Market neighborhood have sold the building in what will likely go down as the most expensive apartment deal of 2017. A joint venture including Shapack Partners and Focus Development has sold the Parker Fulton Market, a 227-unit tower overlooking the Kennedy Expressway that opened in 2016, to J.P. Morgan Asset Management, according to people with knowledge of the transaction.” (Crain’s Chicago Business)
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