Walgreens riteaid merger

10 Must Reads for the CRE Industry Today (July 7, 2016)

 

  1. Foreign buyers flood US real estate, but buy cheaper homes “The appetite for U.S. real estate continues to flourish, but international buyers are shifting their sights from luxury to less-pricey properties. This may be due to overall higher home prices, along with a stronger U.S. dollar, which both cost foreign buyers more at the negotiating table. There are also fewer nonresident foreigners investing in the market. ‘Weaker economic growth throughout the world, devalued foreign currencies and financial market turbulence combined to present significant challenges for foreign buyers over the past year,’ said Lawrence Yun, chief economist of the National Association of Realtors (NAR). ‘While these obstacles led to a cool down in sales from nonresident foreign buyers, the purchases by recent immigrant foreigners rose, resulting in the overall sales dollar volume still being the second highest since 2009.’” (CNBC)
  2. More U.K. real estate funds stop investors withdrawing cash “Four more big asset management firms have halted trading in commercial property funds in the past 24 hours, the latest sign of turmoil since the U.K. voted to leave the European Union on June 23. A total of seven funds have been frozen this week and more than half of the £25 billion ($32 billion) held in investment products of this type is now under lock and key. The funds are heavily exposed to offices and other prime commercial property in the U.K. that can't be unloaded quickly enough when nervous investors want their money back. Henderson Global Investors, Columbia Threadneedle Investments and Canada Life are the latest to suspend operations. A fourth investment firm, Aberdeen Fund Managers, slashed the value of its fund by 17% and temporarily halted withdrawals so investors would have a chance to reconsider decisions to pull their money.” (CNN)
  3. Real Estate Investment Trusts Are The New Savings Accounts “It used to be that you could put $1 million into an insured savings account and earn interest of about $50,000 a year. Today, the same $1 million would generate between $100 to $500 a year. For years now, real-estate investment trusts (REITs) have paid dividends that are roughly 100 times what savings accounts and money market funds are paying but carry the risk that a sharp rise in interest rates might lead to capital losses. Sam Miklosko says the fear of sharply higher interest rates is overblown and the risk can be managed. Sam started his REIT Opportunity fund at Marketocracy in April, 2009. His returns have averaged 20.98% since then, which compares nicely to the S&P 500’s 12.77% return over the same period. His returns would rank in the top quartile of all U.S. Equity fund managers for the past 5 and 1 year periods. Before taking anyone’s investment advice, you should always check out their track record.” (Forbes)
  4. Are retail’s biggest lenders too exposed?After a run-up in pricing that even some of the industry’s most bullish observers find head spinning, Manhattan’s luxury retail market is starting to show cracks, and that could put its most active lenders on the line. Big banks such as Wells Fargo, Bank of America, Deutsche Bank and France’s Crédit Agricole, as well as regional lenders such as M&T Bank and Signature Bank, are sitting on top of the largest loads of debt issued on Manhattan retail properties, according to data provided by research firms Actovia, Trepp, CrediFi and Real Capital Analytics. While there is not a deluge of troubled loans, should the market take a deep enough turn, several of those lenders could feel the backlash, industry observers told The Real Deal.” (The Real Deal)
  5. Walgreens Expects to Shutter Only 500 Stores After Rite-Aid Deal Closes “Despite a regulatory environment in which the U.S. government has scuttled quite a few megamergers this year, Walgreens Boots Alliance is confident its planned purchase of Rite Aid  will go through by the end of 2016. What’s more, WBA CEO Stefano Pessina said on Wednesday the combined company would only have to shed about 500 stores to address regulators’ antitrust concerns. That’s much less than what some analysts, or even the company, initially expected when the all-cash deal was announced last October. When WBA said last year it would buy its smaller rival for $9.4 billion, the company said it could have to close as many as 1,000 stores across both chains to placate the Federal Trade Commission. One analyst even floated the far-fetched figure of 3,000 drugstores. Without any divestitures, a combination of the nation’s No. 1 (at the time the deal was announced) and No. 3 drugstore chains would total 12,800 locations. With CVS Health’s acquisition of Target’s pharmacy business in December, the top two pharmacy chains (Walgreens and CVS) in the U.S. would operate more than 20,000 locations combined, too high a concentration and therefore a problem for the FTC.” (Fortune)
  6. Detroit’s Paradise Valley to Regain Its Charm “The Downtown Development Authority (DDA) of the City of Detroit finally gave its seal of approval to a major mixed-use development project meant to revive the Paradise Valley Cultural & Entertainment District, a historic African-American neighborhood. The total investments add up to $52.4 million and are slated to be completed in 2019. In 2006, the DDA spent $10.5 million from casino funds to purchase all nine properties involved in this project. ‘I’m proud that a decade later, the DEGC (Detroit Economic Growth Corp.) has found developers who have the capacity to develop the entire district at once and turn it into a cultural destination that’ll serve Detroit for years to come,’ Rod Miller, CEO of the DEGC, said in a prepared statement. The project involves the simultaneous transformation of five existing buildings and four surface lots into a mixed-use complex which will include commercial and retail space, residential units, office spaces, restaurants, entertainment venues and a boutique hotel.” (Commercial Property Executive)
  7. Sunset Junction Mixed-Use Trio May Swap in a Boutique Hotel “The three-building string of buildings that developer Frost/Chaddock has been planning for a few years now just put out its draft environmental impact report. Representatives for F/C tell Curbed that among the required "Alternatives" section in the environmental document is an option that the developers are strongly considering: replacing one of the mixed-use buildings with a boutique hotel. The Junction Gateway project as it’s presented in the environmental documents would add nearly 300 units and about 26,000 square feet of a variety of uses afrom creative offices to restaurants to a gym. The project would spread that all out across three buildings along Sunset Boulevard in Silver Lake—4000 Sunset (where a F/C demolished a row of shops back in 2011), 4100 Sunset (site of the 4100 Bar), and 4311 Sunset (the old Bates motel site). 4000 Sunset was also the site that was almost the site of the Silverlake Conservatory of Music. But now, F/C says, they’re starting to consider tweaking the plan a bit.” (Los Angeles Curbed)
  8. US Wind Facilities Command $312M “NextEra Energy Partners LP has acquired nearly 285 megawatts of contracted renewables from two modern wind facilities from a subsidiary of its sponsor, NextEra Energy Resources LLC, for $312 million, plus the assumption of approximately $253 million in liabilities. ‘This transaction once again demonstrates the strong and visible runway for future growth opportunities from our sponsor, NextEra Energy Resources, which we believe is a core strength of the partnership’s value proposition,’  Jim Robo, NextEra Energy Partners chairman & CEO, said in a prepared release. ‘The partnership’s already strong and flexible financial position for the year is further advanced by the addition of these high-quality projects expected to provide an attractive yield to investors.’ Located in Ellis, Ness, Rush and Trego counties in Kansas, Cedar Bluff Wind Energy Center is a 198.7-megawatt wind generation plant that has 111 1.7-megawatt GE turbines capable of generating enough electricity to power about 59,400 homes.” (Commercial Property Executive)
  9. Work Underway on Massive Dallas Mixed-Use Property “RED Development has broken ground on The Union Dallas, a mixed-use project scheduled for completion in 2018. The two-tower project will offer 309 unit residential units, 417,000 square feet of office space and 87,000 square feet of retail space. StreetLights Residential, which is leading the design and development for the 23-floor residential tower, also announced the name of that part of the development: The Christopher. Designed by Dallas-based architect HKS Inc., and with DPR as the general contractor, the project will also include a 60,000-square-foot Tom Thumb grocery store on the ground. A 21,000-square-foot green space and events plaza, created by Texas landscape designer Office of James Burnett, will be surrounded by other retail stores and dining options on the street. The central plaza, the project’s signature feature, will include water features, seating areas, trees and a performance area.” (MultiHousing News)
  10. Liberty Square redevelopment moves forward with Related Urban “The redevelopment of Liberty Square and Lincoln Gardens into one of the largest affordable housing developments in Miami-Dade County is finally moving forward with a developer. Related Urban Development Group’s bid for the mixed-use project received unanimous support by the Miami-Dade County Commission on Wednesday. After more than five hours of public discourse, questions and demands, commissioners awarded the public/private project to Related Urban, which was competing with Atlantic | Pacific for the roughly $307 million development. Built in the 1930s under President Franklin D. Roosevelt, Liberty Square is among the country’s oldest public housing projects. It’s been in disrepair for decades and home to rampant crime, the commissioners said, calling the process to redevelop it ‘long overdue.’ While Atlantic | Pacific initially had scored higher by a selection committee, the company failed to provide a backup source of funding if the developer did not secure the 9 percent tax credit it was seeking.”  (The Real Deal Miami)
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