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10 Must Reads for the CRE Industry Today (June 7, 2018)

The Federal Reserve may raise its key interest rate above the rate of inflation at its June meeting, Reuters reports. DDR plans a spin-off in July, according to Forbes. These are among today’s must reads from around the commercial real estate industry.

  1. Fed Clambers Back to Positive Real Rates, Now Debate Is When to Stop “The Federal Reserve will likely raise its target interest rate to above the rate of inflation for the first time in a decade next week, igniting a new debate: when to stop. The Fed has been gradually hiking rates since late 2015 with little sign of tighter conditions hampering economic recovery. The expected June increase will raise the stakes as the Fed seeks to sustain the second-longest U.S. expansion on record while continuing to edge rates higher.” (Reuters)
  2. DDR to Spin-Off Retail Value on July 1 “On June 4, 2018, DDR Corp. that its board of directors approved the spin-off of certain continental U.S. and Puerto Rican real estate assets into a separate  company, Retail Value Inc. The separation will occur on July 1, 2018 through distribution of 100% of RVI’s outstanding shares to shareholders of DDR and is expected to be taxable to shareholders of DDR.” (Forbes)
  3. Sam Zell Uses Vulgarity While Saying He Promotes Women on Merit “Real estate investor Sam Zell, asked at a conference Wednesday about gender diversity and the #MeToo movement, said he has promoted women based on merit. Then he used a vulgarity. ‘I never promoted a woman because she was a woman. I never demoted a woman because she was a woman. My issue is what do you do, what do you produce, how do you interrelate to the rest of the business,’ Zell, chairman of Equity Group Investments Inc., said at the REITweek investor conference in Manhattan.” (Chicago Tribune)
  4. Some Pension Funds Profit from New York Real Estate. Why Don’t the City’s? “Not only do people come to New York City from all over the world. So do pension funds, from other countries and states, buying Manhattan real estate and often making tremendous profits. But that’s not how we locals do it. The Retirement Systems of Alabama bought 55 Water Street in 1993 for $202 million, and owns it through a subsidiary, debt free. One of the largest private office buildings in the country, 55 Water has given double-digit returns most years since then.” (The New York Times)
  5. Can WeWork Sustain its High Growth, the Key to its Lofty Valuation? “The collaborative workspace industry is witnessing exponential growth. As enterprises look for efficient workspace solutions which are managed externally, and startups and freelancers explore better infrastructure to work in, the co-working industry is gaining momentum. According to GCUC, the collaborative work spaces industry is likely to grow at an annual growth rate of nearly 16% in the next five years.” (Forbes)
  6. Notorious Landlord Hit with Record Suit Over Airbnb Rentals “The city has filed one of its largest ever ​Airbnb enforcement actions against a Hells Kitchen landlord, alleging he illegally rent​ed 26 units in seven walk-up buildings to travelers. The Manhattan Supreme Court lawsuit ​accuses Big Apple Management ​of subletting the rent-stabilized apartments for years despite 50 complaints and $120,000 in fines since 2011.” (New York Post)
  7. Gold Coast Condos-to-Apartment Deal Could Set Records “Photo by CoStar Group A $111 million sale of all the units at 1400 N. Lake Shore Drive would mark Chicago's largest condo 'deconversion.' A New York investment firm has offered to buy a vintage lakefront condominium tower in the Gold Coast for $111 million, potentially the highest price ever paid in a Chicago condos-to-apartments deal. ESG Kullen, which owns apartments around the country but none in Chicago, has agreed to buy all the 391 condos in the 21-story building at 1400 N. Lake Shore Drive, according to a person familiar with the transaction.” (Crain’s Chicago Business)
  8. Neiman Marcus’ ‘Strategy Is Working,’ Increasing Revenue, Sales in Q3 “Neiman Marcus Group is on a roll with three consecutive quarters of year-over-year sales growth, an indication that the company’s focus on innovations across the customer experience is paying off. For the quarter ended April 28, the company reported net revenue of $1.17 billion, an increase of 4.8% compared to total revenues of $1.11 billion for the third quarter of fiscal year 2017.” (Chain Store Age)
  9. 16 Ways Malls Are Filling Space Besides Stores “With retail chains closing at a record pace, empty spaces are piling up at some malls. With Toys R Us and Bon-Ton going out of business entirely while perennial anchor tenants Macy's has closed hundreds of locations and Sears appears to be at risk of closing entirely, mall owners are finding themselves looking for clever ways to fill openings. Add in the fact that interior mall retailers including Claire's, Gymboree, Rue 21, Payless, and countless others have declared bankruptcy, and you have a crisis for mall owners that's not going to be solved by more retailers coming along.” (The Motley Fool)
  10. It's Time for a Federal Class Action for Property Rights “So California pays nonprofit organizations to pay lawyers who routinely extract money from landlords for tenants with no valid defenses to eviction. Especially when done for squatters—trespassers—this expropriates a landlord’s property without compensation. Why not a federal class action for violating landlords’ civil rights, including taking their property in violation of the Fifth Amendment?” (Wall Street Journal, subscription required)
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