10 Must Reads for the CRE Industry Today (March 13, 2017)

10 Must Reads for the CRE Industry Today (March 13, 2017)

 

  1. Fed’s on thin ice in a Trump administration, expert says “Don’t blame the Federal Reserve if it looks jittery these days. The U.S. central bank is holding its breath waiting for a tweetstorm from President Donald Trump they are sure is coming. Fed Chairwoman Janet Yellen has decided to pick up the pace of interest rate hikes this year, and some Republicans are already muttering darkly that the Fed seemed perfectly happy to hold interest rates low for President Obama but seem unwilling to continue the favorable treatment now that the GOP has recaptured the White House. Sarah Binder, a professor of political science and George Washington University and a senior fellow at the Brookings Institution, says that Trump is more likely to pounce if the economy deteriorates than now.” (MarketWatch)
  2. Most Commercial Property Investors in U.S. Are Net Buyers in 2017 “According to CBRE newly released Americas Investor Intentions Survey 2017, the prospect of increased U.S. economic growth combined with less regulation, means that investor sentiment for commercial real estate investment is marginally more positive than last year, despite the potential for rising interest rates. The 2017 survey results reveal that investors will remain actively engaged in real estate investment this year, with the majority (67%) intending to be net buyers (more acquisitions than dispositions). The percentage of net buyers has increased since 2015 (60%) and 2016 (65%). The vast majority of these investors (83%) intend to maintain or increase their purchasing activity in 2017. Slow global economic growth that could undermine occupier demand (22%) was identified as the greatest risk factor for real estate investors, just ahead of rising interest rates (21%). Concern about property being overpriced and "a bubble waiting to burst" (16%) is a distant third among the list of potential threats. Investors are relatively unconcerned about the potential effects of government policy measures.” (World Property Journal)
  3. BMW Supplier Expands Operations in SC “Gestamp is expanding its existing facility in Union, S.C., in an effort to bring $129 million in new capital investment and lead to the creation of 130 jobs. The project from the international manufacturer of metal automotive components is expected to meet increased demand from local automotive original equipment manufacturers. ‘This new project multiplies our size in South Carolina with a remarkable investment that shows how committed we are with our future operations at the Union County plant,” Jeff Wilson, Gestamp North America’s CEO, said in a prepared statement. ‘The United States is a strategic market for us, where we have six plants in five different states, and we want to grow in this country with the major car manufacturers. This is an important step forward.’ Gestamp will be adding more than 300,000 square feet of space to its current operations, which are located at One LSP Road, and is designed to serve the existing BMW and Volvo Cars operations in the state. The company will also be constructing 123,000 square feet of new space and adding another 182,000 square feet by leasing an existing building.” (Commercial Property Executive)
  4. Consumer Debt Nears Pre-Crash Levels “Debt is back, says new data from the Federal Reserve Bank of New York. U.S. households increased borrowing in 2016—bringing student loan and auto lending balances to new records. But don’t panic yet. Credit scores and delinquency rates look better now than they did in 2008.” (Fortune)
  5. JP Morgan, Stream Realty Tackle $135M Makeover “Trammell Crow Center, an iconic office high-rise in the blossoming Arts District of downtown Dallas, will soon take on a new life. Property owners Stream Realty Partners and J.P. Morgan Asset Management have revealed plans for the $135 million transformation of the 1.2 million-square-foot asset into a mixed-use destination. Developed by Trammell Crow in 1984, the Skidmore, Owings & Merrill-designed Trammell Crow Center is a local architectural jewel, holding the distinction of being the city’s very first postmodern skyscraper, according to the Texas State Historical Association. With HOK onboard for the redesign, the 92 percent leased office tower’s architectural integrity will be maintained. Stream and J.P. Morgan have tapped HKS to bring the vision of the new segment of the project to life.” (Commercial Property Executive)
  6. Developer secures $300 million for downtown Manhattan condo project “The Lightstone Group secured a $305 million loan to build an 800-foot-tall condo tower in lower Manhattan. The company sourced the construction loan from Mack Real Estate Credit Strategies, a specialty lender. With financing in place, the tower will begin rising at 130 William St. in September, Mitchell Hochberg, the president and chief operating officer of Lightstone told Crain's. The project, which will likely be completed by fall 2019, will cost about $600 million to erect. Developers across the city have raced to construct condo spires with apartments costing millions of dollars apiece. With so many similar projects on the market, observers feel there is a glut of pricey units and developers will have to slash prices to sell apartments, possibly thrusting projects into financial turmoil. Hochberg said 130 William St. will be different. Lightstone worked through a complex process of assembling several properties to create the development parcel and the firm was able acquire the sites for below-market land prices, giving it leeway to sell the units in the building at a lower price than the competition. ‘I think the high-end market is challenged right now,’ Hochberg said. ‘But we do think that if you're priced well, which we think we will be, and located well and deliver a product that has value and good design, there's always going to be a lot of people who are interested in buying.’ Lightstone aims to sell units at an average of about $2,000 per square foot, a high price tag but still below the $3,000-plus per foot that other luxury projects are seeking.” (Crain’s New York)
  7. Coalinga Mayor Says City Real Estate Booming After Commercial Cannabis Growing Approved  “The city of Coalinga is seeing big growth in real estate after voters in November approved commercial cannabis cultivation. Coalinga's mayor says commercial properties are being bought up so quickly that the fees collected are helping relieve the city of its crippling debt. It has been four months since voters in Coalinga voted to allow medical marijuana cultivation, and Coalinga mayor Nathan Vosburg is thrilled about the economic outcome it is already starting to bring. ‘Things are looking good,’ he said. ‘We've had a great start, and we expect to continue.’ That's because the city sold the Claremont Custody Center to Ocean Grown Extracts -- a company that plans to turn the prison into a cannabis manufacturing facility. Vosburg says the city was able to pay off more than $3 million worth of debt. "We sold the prison for $4.1 million, but we had an $800,000 debt at the end of the year that we were going to be in debt for this year, so that takes us to a negative $300,000," he said. On top of that, commercial real estate is booming as well. And Vosburg says they have gotten hundreds of calls from people wanting to build in these locations.” (ABC30)
  8. Modern marvel: How Toyota poured 5 centuries of work into its Plano campus — during a labor shortage “When the first Toyota employees start moving into the auto giant’s new North American headquarters in late April, they’ll be setting up shop in a modern marvel. Yards of poured concrete that would pass 475 AT&T Stadiums end to end, 17,000 tons of reinforcing steel — the equivalent of 1,700 Dallas city buses. Acres of glass, literal tons of Texas limestone. But the most impressive part about the project isn’t the materials. It’s not the 7.75-megawatt solar power system or the interior color palette designed to reflect the indigenous Texas environment. It’s that, in a region where builders are struggling mightily to find construction labor, as many as 2,000 workers are out at the 100-acre Plano site at a given moment.” (Dallas News)
  9. Report details the development-rich year that was 2016 for Downtown LA “In Downtown LA, 2016 was a banner year for construction that ended with a bang, according to a new report from the Downtown Business Improvement District. “Having been doing this for as long as I have, I have not seen a year where there has been such dramatic growth,” the BID’s President and CEO Carol Schatz, who has worked in Downtown for over two decades, told Los Angeles Downtown News. A quick trip through Downtown offers many signs that construction in the neighborhood is not slowing down. And, now, this new fourth-quarter report provides some data to quantify the omnipresent boom. Here’s what the report found: In the year as a whole, construction was finished on 2,671 residential units, and work began on 4,000 more. In the fourth quarter of the year, 7,645 new residential units—1,200 of them condos—were proposed for DTLA, a spike that had previously been explained as developers trying to get proposals in the pipeline in case Measure S passed. The measure, which would have called for a two-year building moratorium, was defeated on Tuesday. Rents in office spaces in the subset called Class A, which is the kind of offices that comprise tall towers, climbed, too, and, overall, office space vacancy rates dropped 4.5 percent from the year before, down to 16.8 percent.” (Los Angeles Curbed)
  10. BFC’s nonprofit partner on Bedford-Union Armory project raises concerns “The nonprofit that BFC Partners selected to team up with on the Bedford-Union Armory redevelopment in Crown Heights is raising some concerns amid scrutiny. Caple Spence, executive director of Crown Heights’ Local Development Corporation, has an employment contract that gives him a 10 percent share of the charity’s profits and 20 percent of profits from developer fees – a rarity in the world of nonprofits, Crain’s reported. It was unclear whether the Local Development Corporation or BFC would get the developer fees for the project and if the revenues would be divided between the two, according to Crain’s. In 2014, the nonprofit reported revenue of roughly $752,000, but Spence raked in about $1.15 million in total compensation.” (The Real Deal)

 

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