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10 Must Reads for the CRE Industry Today (January 11, 2018)

The Fed is considering changes to its monetary policy to prepare for the next recession, reports CNBC. Sears may be running out of options if it doesn’t secure refinancing, according to USA Today. These are among today’s must reads from around the commercial real estate industry.

  1. The Fed, Worrying About the Next Recession, Considers Changes “Even while the economy and markets are booming, Federal Reserve officials are worrying about how they'll respond to the next recession, and they don't especially like the picture they see. It's one where the economy starts contracting but the Fed, still at a low interest rate, has little ability to respond. It lowers rates to zero but that amounts to only a fraction of the stimulus it has provided in past downturns. Once again, the Fed faces the quandary of what more it can do when it's at zero and can't cut anymore and is forced to contemplate extraordinary, uncertain and controversial measures like quantitative easing.” (CNBC)
  2. KKR Closes Second Americas Real Estate Fund at $2 Billion “KKR & Co. closed KKR Real Estate Partners Americas II at $2 billion, exceeding its $1.5 billion fundraising target, the alternative money manager announced in a news release on Wednesday. The opportunistic value-added real estate fund is KKR's second dedicated real estate fund after the first fund's launch in 2011. KKR Real Estate Partners Americas closed in December 2013 at $1.5 billion.” (Pensions & Investments)
  3. Sears ‘Will Consider All Other Options’ If Refinancing Fails, CEO Eddie Lampert Warns “Even as other department stores reported sales gains, Sears Holdings warned Wednesday that it will record a net loss for the period that included the critical holiday season, raising new doubts about the chain's future. Sears CEO Eddie Lampert sounded ominous in a blog post, writing that if the company can't refinance certain debt to get more financial breathing room, it ‘will consider all other options to maximize the value of Sears Holdings’ assets.’” (USA Today)
  4. Trump Sold $35M in Real Estate in 2017, Mostly to Secretive Buyers “President Trump’s companies sold more than $35 million in real estate in 2017, mostly to secretive shell companies that obscure buyers’ identities, continuing a dramatic shift in his customers' behavior that began during the election, a USA TODAY review found. In Las Vegas alone, Trump sold 41 luxury condo units in 2017, a majority of which used limited liability companies – corporate entities that allow people to purchase property without revealing all of the owners’ names.” (USA Today)
  5. Fannie Mae CEO: People Need Calm, Confident Leadership “When Tim Mayopoulos became CEO of Fannie Mae, he got a crash course in crisis management and leadership. It was the height of the financial crisis and the government housing entity was near collapse until the U.S. Treasury came to the rescue with a huge bailout package. Mayopoulos tells Fortune that the most critical leadership lesson he learned from those difficult years was the importance of being calm and optimistic. ‘People are looking for the CEO to set a tone,’ he says. ‘We all talk about our business strategies and we all talk about tactics we employ and all that. But at the end of the day, people are looking for calm, confident leadership.’” (Fortune)
  6. Kohl’s Plans to Lease Unused Store Space to Grocers and Convenience Stores “Kohl's Corp plans to lease space left vacant after shrinking some of its stores to retailers such as grocery stores or convenience stores, Chief Executive Kevin Mansell told CNBC. Not all of Kohl's roughly 300 ‘right-sized’ stores will necessarily lease unused footage, at least at the start, Mansell said. He added that the company has already identified "a whole list of partners" and was also considering partnerships with competitors.” (Business Insider)
  7. Why It Makes More Sense to Rent Than Buy “A majority of Americans are renting on the cheap — at least, compared to what they’d be paying if they bought a home. Most Americans (64%) live in a county where renting takes up a smaller portion of one’s paycheck than buying, according to a report released Thursday by real estate data firm Attom Data Solutions. And yet in more than half (54%) of housing markets — 240 of 447 U.S. countries — buying a median-price home is actually more affordable than renting a three-bedroom property.” (MarketWatch)
  8. Alabama Reels In $1.6B Toyota-Mazda Plant “The nationwide competition for Toyota Motor Corp. and Mazda Motor Corp.’s new joint-venture manufacturing plant is over, and Alabama has emerged victorious. The companies joined Alabama Gov. Kay Ivey on Wednesday, January 10, to announce that the $1.6 billion facility—and the roughly 4,000 jobs it will create—will go to Huntsville. A bevy of states from across the country vied for the Toyota-Mazda project in a process spearheaded by commercial real estate services firm JLL on the manufacturers’ behalf.” (Commercial Property Executive)
  9. Rental Market Is at Peak for Concessions “It wasn’t only the weather in December that was frigid. The rental market was facing all kinds of headwinds as the year came to an end. The share of rentals offering concessions set records in Manhattan, Brooklyn and Queens, according to a report from Douglas Elliman, even accounting for seasonality. In Manhattan, the share of apartments with concessions offered was at 36.2 percent, 37 percent higher than last December, and in Brooklyn, it more than tripled since last year to 46.1 percent of the market. Concessions were offered at 48 percent of new development rentals.” (The Real Deal)
  10. Marriott to China: We Do Not Support Separatists “Marriott International, the hotel chain, wants to be clear on this point: It does not support separatist elements in China. Marriott is best known for its hospitality, not fomenting rebellion in the countries where it does business. Nevertheless, it apologized to the Chinese government on Thursday for the way it worded a customer survey — wording that has spurred intense online criticism and a government investigation.” (The New York Times)
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