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10 Must Reads for the CRE Industry Today (June 12, 2017)

The District of Columbia and the state of Maryland are suing President Trump for violating the Constitution’s anti-corruption clauses by accepting money for his private business from foreign governments, reports The Washington Post. Gymboree has filed for bankruptcy, according to Forbes. These are among today’s must reads from around the commercial real estate industry.

  1. D.C. and Maryland to Sue President Trump, Alleging Breach of Constitutional Oath “Attorneys general for the District of Columbia and the state of Maryland say they will sue President Trump on Monday, alleging that he has violated anti-corruption clauses in the Constitution by accepting millions in payments and benefits from foreign governments since moving into the White House. The lawsuit, the first of its kind brought by government entities, centers on the fact that Trump chose to retain ownership of his company when he became president.” (The Washington Post)
  2. Gymboree Files for Bankruptcy, Plans to Close at Least 375 Stores “Children's clothing retailer Gymboree filed for Chapter 11 bankruptcy protection on Sunday evening as it attempts to escape from a crushing amount of debt. The retailer will seek to eliminate more than $900 million of debt from its balance sheet. Gymboree, which was taken private by Bain Capital for $1.8 billion in 2010, has accumulated $1.4 billion in debt, according to bankruptcy filings. Gymboree will also close at least 375 stores, according to the filings, as it attempts to "right size" its brick-and-mortar footprint. It said it could close as many as 450 of its 1,281 stores and will run the rest as normal.” (Forbes)
  3. Public Sector Investors Favor Real Estate, Renewables—Survey “Public sector investors plan to raise exposure to real estate, infrastructure, green bonds and renewables over the coming year, while cutting holdings of low-yielding government bonds, an annual survey showed on Monday. The Official Monetary and Financial Institutions Forum (OMFIF) polled chief investment officers and reserve managers at 31 public sector institutions with combined assets under management of $4.21 trillion. With low or even negative returns from fixed income, and volatility in equity markets, there is growing appetite for illiquid assets that deliver steady, predictable returns.” (Reuters)
  4. No Full-Time Minimum Wage Worker Can Afford a 2-Bedroom Apartment in Any U.S. State “The absolute least that an employer is legally allowed to pay an employee for an hour's work varies across the country, but one fact remains constant: In no state does working 40 hours a week for minimum wage enable a person to rent a two-bedroom apartment. That's according to new research by the National Low Income Housing Coalition covered by The Washington Post. Across the country, it reports, even full-time workers would have to make about or more than twice as much to afford a home.” (CNBC)
  5. Walmart Under Siege as Germany’s Aldi Announces Major U.S. Attack Plan “Aldi is coming after Walmart's grocery market share, as the German discount retailers said it will invest $3.4 billion to expand its U.S. presence. The privately held German grocery store said it plans to increase its store base to 2,500 by 2022, the company said Monday. Aldi currently operates 1,600 U.S. stores. In February, the retailer announced it was investing $1.6 billion in its U.S. stores, with plans to remodel and expand more than 1,300 stores by 2020. The new openings are expected to create 25,000 jobs over the next five years and make Aldi the third-largest grocery chain operator in the U.S. behind Walmart and Kroger.” (The Street)
  6. Houston Ranks 4th in Nation for Industrial Real Estate Sales “Colliers International ranked Houston fourth among U.S. metro areas for volume of industrial transactions in the first quarter of 2017, putting the Bayou City above Northern New Jersey, a major national port area, and suggesting a relatively resilient local economy.  A current boom in industrial real estate has been fueled largely by demand for warehouse space for distribution of consumer goods as retail models shift towards e-commerce. Colliers said industrial real estate was the only real estate sector to post year-over-year sales volume gains last quarter.” (Chron)
  7. Macy’s Inc. Quietly Courts Buyers for Cincinnati Properties “Local department stores have been spared so far in a Macy's cost-cutting quest to close about 100 stores nationwide. But that doesn’t mean the company isn’t working on real estate deals in Cincinnati. At the International Council of Shopping Centers convention in Las Vegas last month, local real estate brokers were buzzing about the possible sale of Macy’s Florence Mall furniture store. Florence Mayor Diane Whalen has been working the grapevine and is convinced a deal is being explored.” (WCPO Cincinnati)
  8. WeWork Versus CoWrks: How Two Real Estate Scions Are Betting Big on the Co-Working Space  “Currently, there are more than 160 players in the co-working space who run more than 350 operational centres across tier-1 and tier-2 cities in the country, according to a report by Colliers International. The better-known names among these are InstaOffice, Awfis, BHive, Regus, Spaces, 91springboard, and Investopad. Co-working spaces have become a viable option for startup companies and professionals who cannot afford to maintain an office because of high rentals and deposits as well as maintenance hassles.” (YourStory)
  9. Overbuilding in Richmond? “Following several years of strong supply, Richmond’s multifamily market is shifting down a gear. Rents rose 1.6 percent year-over-year through April, continuing to trail the national average. With almost 20,000 units in the pipeline—more than a third of which are under construction—the metro is at risk of overbuilding. With $830 million in assets changing hands, 2016 marked the sixth consecutive cycle high. Investors are focusing mainly on value-add opportunities. There were roughly 7,800 units under construction as of April, and the metro is well on track to surpass 2016’s level of completions this year.” (Commercial Property Executive)
  10. Creative Markets for Property Rights Can Solve Many Problems “Property rights are at the core of the American success story. Businesses won’t invest in plants and equipment if they worry about losing the rights to the future profits generated by that property (see Venezuela). When we talk about somebody’s home being their castle, we are talking about the owner’s right to control her property. While the basic concept of property rights is generally well understood, what is underappreciated is how flexible property rights can be when markets are created for unbundled parts of those property rights. A perfect example of how useful unbundled property rights can be is air rights.” (Forbes)
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