10 Must Reads for the CRE Industry Today (February 7, 2017)

10 Must Reads for the CRE Industry Today (February 7, 2017)

 

  1. Fed Survey: CRE Tightening Trend Continues “Bankers continued tightening credit for commercial real estate loans and consumer loans in the last three months while holding steady on other business loans and easing credit standards very slightly in their home mortgage portfolios, according to the Federal Reserve’s latest senior loan officer survey released today. A net 33.3 percent said they tightened on CRE multifamily loans; 25 percent tightened on construction or land development loans. Demand for CRE loans was moderately weaker or about the same, respondents said. The tightening trend, consistent over recent quarters, is expected to continue through 2017; a net 29.8 percent said they expected to tighten standards on construction loans, while 44.1 percent said the same for multifamily CRE loans. Lenders generally expected to ease standards on commercial or industrial loans, particularly for smaller businesses. Nearly all bankers expected credit quality to improve or stay the same in 2017 for most categories, although a few bankers expected to see deterioration in their CRE portfolios." (ABA Banking Journal)
  2. Private Equity, Real Estate Victims of Their Own Success “Most alternative investments took a hit in assets in the year ended Sept. 30, as higher distributions than capital calls made their mark on defined benefit plan portfolios. Pensions & Investments' annual survey of the largest U.S. retirement plans showed assets invested by defined benefit plans among the top 200 funds dropped 7.2% in private equity, 6.4% in hedge funds, 1% in real estate equity and 0.9% in real estate investment trusts.” (Pensions & Investments)
  3. Privatizing Fannie and Freddie Yields 3 Investment Opportunities “Mnuchin's more recent comments, particularly those made during his Senate confirmation testimony, suggest that the hard-line stance may have softened on privatization of the two government-sponsored enterprises. But if recent experience has taught us anything, it is that the Trump administration moves very quickly when it decides to address an initiative. That being the case, investors should be asking how they can profit from the privatization of Fannie Mae and Freddie Mac. The answers come from the equities, private-mortgage and real estate markets.” (The Street)
  4. Big Investors Cut Back on Commercial Property as Bull Market Loses Steam “Asset managers at pension funds and endowments, as well as private-equity firms and other big investors, are throttling back on new acquisitions, selling more assets and shifting to less risky strategies as a way to protect against potential losses in a downturn. Additional selling could put stress on the market because demand for property has started to flag, especially at current price levels. Deal volume decreased by $58.3 billion, or 11%, in 2016, the first annual decrease since 2009, according to data firm Real Capital Analytics, a sign that investor appetite is waning. Investors that have picked up the pace of selling to lock in profits include private-equity firm Blackstone Group LP, real-estate giant Brookfield Asset Management, United Parcel Service Inc.'s pension trust and Harvard Management Company, which manages Harvard University's endowment. When these big investors do buy, they are focusing more on niche properties such as self-storage warehouses and biomedical facilities, which haven't seen the sharp price rise of trophy office buildings and rental apartments.” (The Wall Street Journal, subscription required)
  5. Skanska to Begin 38-Story Seattle Office Tower “Skanska USA Commercial Development is set to start work on 2+U, a lifted, 38-story, 665,000-square-foot office tower in Seattle’s urban core. The $392 million building is named for its location, at Second Avenue and University Street, near the Seattle Art Museum, Pike Place Market, Benaroya Hall (the home of the Seattle Symphony and also built by Skanska) and the downtown transit tunnel. The tower’s office space will be lifted to 85 feet, accommodating an all-seasons, 24,000-square-foot 'outdoor urban village' that includes arts and entertainment spaces, restaurants and retail, all open to the public. This part of the project was made possible by an alley vacation from the City of Seattle. The 1.01-acre site is subject to a 75-year ground lease from the Samis Foundation, a Seattle-based non-profit that supports Jewish education in the city.” (Commercial Property Executive)
  6. How Reports of a Potential Macy’s Takeover Reshape the Real Estate Scenario “Recent media reports have indicated a potential merger between Macy's Inc. and Hudson's Bay. ‘While we recognize the potential value of the real estate portfolio, we are also mindful of the challenges around monetization,’ Deutsche Bank’s Paul Trussell said in a report. He maintains a Hold rating on Macy's, with the price target of $34. ‘Real estate optionality could provide an avenue for M to unlock considerable value as the company owns half its store base and its flagships,’ analyst Trussell commented. The revised real estate analysis suggested total real estate value of ~$12.5 billion–$13 billion, or in the low $40's per share.” (Benzinga)
  7. Kroger Acquires NYC Flagship of Murray’s Cheese “Kroger Co. has acquired the building housing the New York City flagship of Murray’s Cheese, the specialty cheese shop with outposts in hundreds of Kroger supermarkets nationwide. Property records filed with the city Friday show the Cincinnati-based retailer paid $20.6 million to acquire three condominium retail units on Bleecker Street in Greenwich Village including the Murray’s flagship from entities controlled by Murray’s owner Rob Kaufelt.” (Supermarket News)
  8. Report predicts LA rents will keep rising in 2017 “A new report on the nation’s rental markets from real estate firm Marcus & Millichap puts Los Angeles at the very top of its 2017 National Multifamily Index, predicting that rents will rise more than five percent this year, while the city’s already low vacancy rate continues to decline. That’s great news for landlords, who should see real estate investments pay dividends this year, but renters may be understandably perturbed by the firm’s forecast. According to the report, rental prices will likely rise to an average of $2,095 per month by year’s end, an increase of 5.4 percent. The sizable price bump is mainly attributable to a predicted dip in the vacancy rate to just 2.6 percent. Moreover, new housing isn’t being constructed quickly enough to replace existing units that are filling up. The report also notes that around 10,900 multifamily units are expected to be added to the market in 2017, down from 12,900 that opened to residents the year before. Both numbers are high given LA’s sluggish pace of construction in recent years, but still lag far behind the number of units brought to market during the 1980s.” (Los Angeles Curbed)
  9. Largest Public Farmland Real Estate Trust Formed “Farmland Partners Inc. (FPI) completed its previously announced merger with American Farmland Company (AFCO), forming the largest public farmland real estate investment trust in the U.S. with a total market capitalization of approximately $400 million. The combined company is the largest public farmland real estate investment trust in the nation, spanning more than 144,000 acres across 16 states. The combined portfolio consists of approximately 75% primary row crop farmland and 25% specialty crops (fresh fruits and vegetables and permanent crops) by value.” (AGProfessional.com)
  10. Pension Fund Investor Buys Grand Prairie Distribution Center “A pension fund investor has purchased a Grand Prairie industrial building. Washington D.C.-based AFL-CIO Building Investment Trust bought Logistics Crossing I, a 667,635-square-foot industrial facility at 2305 W. Marshall Drive. The building was acquired from Atlanta-based developer Robinson Weeks Partners. The property is fully leased to a logistics firm that services General Motors' Arlington assembly plant.” (Dallas News)
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