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10 Must Reads for the CRE Industry Today (March 23, 2017)

One Fed official feels the hot U.S. real estate market may be a sign of a downturn to come, reports Reuters. MarketWatch looks at the top cities Millennials are moving to. These are among today’s must reads for the commercial real estate industry.

 

  1. Hot U.S. Real Estate a Potential Red Flag: Fed’s Rosengren “The run-up in U.S. real estate prices could potentially amplify any future economic downturn, a Federal Reserve official said on Tuesday, urging regulators globally to consider tools beyond interest rates that could help cool the sector. A sharp downturn in U.S. residential and commercial property prices in 2007 and 2008 rocked banks that were highly leveraged in the sector, sparking the global financial crisis and deep recession. With the economic recovery now well under way, bank holdings of commercial and apartment mortgages rose 9 percent and 12 percent, respectively, in the past year.” (Reuters)
  2. Millennials Turn Their Backs on New York and San Francisco “The top three cities for millennials are Salt Lake City, Miami and Orlando, according to real estate website Realtor.com. Following those cities are Seattle, Houston, Los Angeles, Buffalo, N.Y., Albany, N.Y., San Francisco and San Jose, Calif. The cities were ranked by millennial page views of each area compared to the national average, and reflect important factors to millennials, such as job availability and affordability. San Francisco, for example, can be pricey, particularly for real estate, while Albany and Buffalo cost less.” (MarketWatch)
  3. Payless Said to Close Up to 500 Stores in Bankruptcy Reorganization “Yet another store chain looks set to seek bankruptcy protection in a brutal retail environment. Payless, the operator of a discount shoe chain, is set to file for bankruptcy protection as soon as next week, Bloomberg News has reported, citing unnamed sources. A Payless spokeswoman declined to comment to Fortune on the report. As part of that restructuring, Payless would close as many as 500 stores, though it had considered shuttering up to 1,000 stores, according to the report.” (Fortune)
  4. Trump’s Vegas Partner Says Business Is Not Dividing Profits from Foreign Governments as Promised “Two months ago Donald Trump’s lawyer Sheri Dillon stood in Trump Tower and announced that the president would donate all profits from foreign governments at his hotels to the U.S. Treasury—part of an effort to resolve concerns that the he would be in violation of a little-known clause in the U.S. Constitution the day he took office. Now Phil Ruffin, who owns the Trump International Hotel Las Vegas in a 50-50 joint venture with the president, says that’s not happening.” (Forbes)
  5. Investors Have $1.7T to Deploy, But Activity Will Be Flat in 2017: CBRE “There’s $1.7 trillion of dry powder across the globe just waiting to be deployed into real estate in 2017. But investor concerns ranging from a real estate bubble bursting to a black swan economic event throwing markets into turmoil has analysts projecting transaction volume to stay flat at $895 billion, according to CBRE. CBRE, the world’s biggest real estate services firm, published its annual survey of global investors Wednesday, which painted a rosy outlook for the year.” (The Real Deal)
  6. Bohannon Earmarks $145M for Menlo Park Projects “The Bohannon Cos. has received $145 million in financing to develop Menlo Gateway, an eight-story, 210,000-square-foot office building in Menlo Park. The mixed-use project also consists of a 1,040-space parking structure and a 41,000-square-foot fitness center. Square Mile Capital Management LLC originated the construction loan, which was arranged by John Kerslake and Briana Smith of NorthMarq Capital.” (Commercial Property Executive)
  7. This Is How You Destroy an American Icon “The retailer’s fate was sealed roughly 10 years ago when owner Eddie Lampert, the hedge fund billionaire, bought the chain, merged it with Kmart and then decided to all but stop investing in the chains’ upkeep and capital spending. The strategy has been questioned many times but Lampert, who eventually took over as CEO of the chains despite no retail experience, refused to budge from it. In fact, his 15-page manifesto in 2005 stated that conventional measures of retail success, such as same-store sales, were no longer relevant.” (New York Post)
  8. The $2 Billion Club: 245 Park to Join Elite Group of Manhattan Towers “An exclusive tribe of New York City office towers is about to gain a new member. Chinese conglomerate HNA Group has agreed to pay about $2.21 billion for 245 Park Avenue, a 1.8 million-square-foot tower, as The Real Deal first reported Monday. If the deal closes at that price, 245 Park would be only the fourth tower in the history of Manhattan to cross the $2 billion threshold in an outright sale. (TRD excluded partial-stake deals for the purpose of this analysis.)” (The Real Deal)
  9. Meridian Secures $150M Refi of 1 West 34th Street for BLDG, Crown “BLDG Management and Crown Acquisitions landed a $150 million financing from Wells Fargo and Goldman Sachs for 1 West 34th Street in Midtown, Commercial Observer has learned. Meridian Capital Group’s Carol Shelby arranged the 10-year mortgage, which carries a fixed rate of 4.31 percent and interest-only payments for the full term. The new loan, which will be securitized in the commercial mortgage-backed securities market, is replacing a $100 million loan that New York Community Bank provided on the 12-story office property in January 2014, property records indicate.” (Commercial Observer)
  10. Thor Equities Appoints New CFO “Urban real estate development, leasing and management company Thor Equities has announced the appointment of Fess Wofse as Chief Financial Officer. In his new position, Wofse will oversee all global finance operations at Thor Equities. In addition, he will be responsible for managing and reporting on the performance of the company and its investments, as well as supervising the firm’s accounting and risk management departments.” (Commercial Property Executive)
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