10 Must Reads for the CRE Industry Today (February 10, 2017) Photo by Mike Ehrmann/Getty Images

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

 

  1. Sears may sell land, cut jobs to save $1B; shares soar “Sears may sell more locations, cut more jobs and put more of its famous brands on the block as part of its latest plan to revive the faltering retail chain. The company, which also owns Kmart, said Friday that it is cutting costs by at least $1 billion a year. It also said that it was adding $140 million in liquidity by reworking its debt, giving the company more breathing room. The Hoffman Estates, Illinois, retailer, which has been losing money for years, also said comparable-store sales during the holiday shopping season weren't as bad as industry analysts had believed them to be. Shares of Sears Holding Corp., which are already down 40 percent this year, soared 30 percent at Friday's opening bell.” (Statesman)
  2. Investors reach $40 million settlement over Sears real estate deal “Sears Holding Corp's (SHLD.O) chairman and chief executive, Eddie Lampert, and the company's board agreed to a $40 million settlement of a shareholder lawsuit that alleged Lampert benefited from a deal to spin off 235 of the struggling chain's best stores. The lawsuit was brought on behalf of Sears and against Lampert, other Sears directors and Seritage Growth Properties, the real estate investment trust established to acquire the stores. Sears spokesman Chris Brathwaite said the lawsuit was settled to avoid protracted litigation. The settlement must be approved by Delaware's Court of Chancery. The defendants said in court papers the agreement was not admission that the allegations were valid. The lawsuit is a derivative action and the settlement payment will be made to Sears. The company's shareholders will only benefit indirectly.” (Reuters)
  3. Economy Watch: Americans Moving at Record-Low Rates “Between 2015 and 2016, 11.2 percent of the U.S. population moved, according to the recently released results of the Census Bureau’s 2016 Current Population Survey Annual Social and Economic Supplement. That’s the lowest one-year mover rate ever reported by the bureau, which began tracking migration in 1948. At that time, moving was more common, as demonstrated by an annual mover rate of 20.2 percent. That fact that Americans are more hesitant to change their residences now than they used to be probably has a number of root causes, some relating to the recession. In any case, that’s both good and less-than-good news for various parts of the real estate industry. It’s good for apartment owners, for instance: their tenants are sticking around longer. Indeed, renters have experienced a greater decline in their mover rate compared to owners, the bureau said. Renters began with a mover rate of 35.2 percent in 1988 (when the bureau began tracking moves according to whether the mover rented or owned). By 2016, this rate had fallen by more than 10 percentage points, down to 22.9 percent. The decline for owners was not nearly as steep, as 9.5 percent moved in 1988 compared to 5 percent in 2016.” (MultiHousing News)
  4. Why this building's days may be numbered “After buying a low-rise retail building in the South Loop, Buzz Ruttenberg is happy to collect rent for the time being. But he's already dreaming what he could build in its place. A venture led by the Chicago developer paid $7.9 million for the 8,400-square-foot building at 400 S. Financial Place, which he expects to tear down someday to make way for a tall tower. ‘It could be office, it could be condos, it could be small rentals that cater to students,’ said Ruttenberg, founder of Belgravia Group, a Chicago-based developer that specializes in residential projects. ‘We'll see.’ Ruttenberg bought the one-story building in a joint venture with North American Real Estate, a Schaumburg-based retail investor and developer, according to Stan Johnson, the New York-based brokerage that sold the property. They acquired the building from a venture led by Fort Lauderdale, Fla.-based investor Lawrence Oberman, according to Cook County property records. Current zoning for the South Loop property does not limit the height of a tower a developer could build there, Ruttenberg said.” (Crain’s Chicago Business)
  5. Will New York or Los Angeles Be the Next Big Tech Scene? “New York has been the number two city for tech startups and thrived with venture capital firms for the past five to six years, says Griffith. Recently, there has not been a big tech IPO from New York. But there still are lots of one to five billion dollar companies that are about to go public. Unicorns like WeWork and Blue Apron are examples. Griffith points out that the city needs its tech startups to stay there and go public instead of being sold to Silicon Valley companies. Nusca argues that New York tech scene has had a lot of promises that didn’t happen, mentioning Gilt Group, Fab, and Rent the Runway. Snapchat's upcoming IPO and other valuable L.A.-based companies such as Oculus and Cornerstone OnDemand, a cloud-based talent management company, show that L.A. is ready to be the next great tech scene.” (Fortune)
  6. Miami Marlins Claim To Have $1.6 Billion Handshake Agreement For Team “Two sources who spoke on the condition of anonymity said that Miami Marlins president David Samson has said that there is a $1.6 billion "handshake agreement" for the MLB team. Jeffrey Loria paid $158 million for the baseball team in 2002. In December, I wrote that Loria was looking for $1.7 billion for the baseball team. Since Loria purchased the team in 2002, the Marlins have moved into a new, $639 million stadium paid for by taxpayers. Marlins Park could have been a financial windfall for the team. But during the ballpark's first five seasons the Marlins have been one of the worst teams in baseball, losing more games than they have won each year. Paying for a stadium for a lousy team has ticked off supporters. Last season the Marlins had the lowest average attendance in the National League, 21,405. My sources would not say who the $1.6 billion handshake agreement was with other than he is a real estate developer based in New York City. The problem, according to these sources, is the potential buyer is not liquid, meaning he does not have the cash to buy the Marlins because his net worth is tied up in real estate. Thus, for the real estate developer to purchase the Marlins would likely require more debt than MLB would be comfortable with.” (Forbes)
  7. Lantian Files Plan for $650M Suburban DC Project “Lantian Development LLC’s vision for a 31-acre site in Rockville, Md., near Washington, just moved closer toward realization. Lantian and partner 1788 Holdings LLC recently filed a project plan with the City of Rockville, outlining a mixed-use destination tentatively called Shady Grove Neighborhood Center and bearing an estimated development price tag of $650 million. Submission of the project plan comes 18 months after Lantian and 1788 Holdings acquired the land, located along Shady Grove Road, in a $50 million deal…Designed by architectural firm Torti Gallas + Partners, Shady Grove Neighborhood Center will pop up where several outdated office buildings currently stand amid a swath of surface parking lots. It’s an ambitious undertaking. Per the project plan, an approximately 12-acre segment of the site will feature 1.3 million square feet of offerings, including 200,000 square feet of office space, 100,000 square feet of retail, a 100,000-square-foot full-service hotel and as many as 1,600 apartment residents, 12.5 percent of which will be reserved as moderately priced dwelling units.” (Commercial Property Executive)
  8. Morgan Stanley weighs move to Hudson Yards “Morgan Stanley is weighing a move to Hudson Yards, the latest major bank to consider planting a flag on the Far West Side of Manhattan. The bank is exploring the purchase of 2 million square feet at 50 Hudson Yards, the 2.9 million-square-foot tower where BlackRock is planning to move its headquarters. Talks are still in the early stages, and Morgan Stanley is also considering other sites in Hudson Yards. ‘We routinely review potential options for upgrading our workspaces,’ a spokesperson for Morgan Stanley told the Wall Street Journal. ‘As we consider plans to continue to upgrade our current office space, we are also in the very early stages of evaluating potential alternatives.’ The Hudson Yards space would be larger than Morgan Stanley’s current footprint, combined. The bank is currently based out of 1585 Broadway, a 1.3 million-square-foot tower in Times Square that it bought for $180 million in 1993. The building, which has been undergoing a floor-by-floor renovation, could fetch $1 billion, sources told the Journal. Morgan Stanley also owns roughly 570,000 square feet at 522 Fifth Avenue and a campus in Purchase, New York.” (The Real Deal)
  9. Former rent-controlled apartments in Hollywood are razed amid protests and bureaucratic confusion “Last year, Andre Dubois and his girlfriend were evicted, along with neighbors, from their rent-controlled apartments in Hollywood. The property owner, Belmond Homes LP, wielded the power of the Ellis Act, a state law that allows such evictions to occur on the condition that the apartment units be taken off the market. But months after moving out, Dubois and his girlfriend, who is battling cancer, said they were surprised to learn the units were being rented out on Airbnb.  The Los Angeles Housing and Community Investment Department opened up an investigation on the allegations of re-rentals and prepared to turn the case over to the city attorney. But then, last month, the same agency cleared the property owner to demolish the Hollywood apartments — even as its investigation continued.” (Los Angeles Times)
  10. Former TCU teammates handle the up-and-down land business “Talk about making every inch of office space count. At the height of the drilling boom and $100 oil, Bryan Cortney and Jesse Hejny wanted affordable expansion room for their rapidly growing oil and gas services business. The former Texas Christian University football teammates and 50-50 business partners of Purple Land Management LLC found that in a dilapidated office building that was downtown Fort Worth's first parking garage. The 33-year-olds have spent nearly $7 million buying and converting the 98-year-old building into an open-space, millennial-friendly environment. ‘We want to hire the smartest, most motivated people,’ Cortney says. ‘Our philosophy is infrastructure can set you apart. It's not easy to make that size of investment, but if you can, it can take you places.’ In one regard, he's speaking literally.” (Miami Herald)
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