10 Must Reads for the CRE Industry Today (March 31, 2016)

10 Must Reads for the CRE Industry Today (March 31, 2016)

 

  1. Distorted Markets: Why Banks Are Better Off Than You Think, and Real Estate Isn’t “Since the market bottomed in 2009, prices have risen more and the rally has lasted longer than the run-up leading to the financial crisis, according to Green Street Advisors LLC, a real-estate research firm. Driven in part by strong fundamentals, prices have doubled from their lows. Capitalization rates, the yield generated by properties, are just above 5% and are now just above triple-B bond yields, which Green Street sees as a good proxy for risk.” (Wall Street Journal)
  2. The Buildings Behind Real Estate’s Richest Barons “Earlier this month, Forbes published a list of the 20 richest real estate billionaires in the world in 2016. CrediFi went beyond the rankings to see which U.S. commercial real estate properties are in the portfolios that helped these billionaires make it to where they are today. Here’s what we found.” (Forbes)
  3. Is Trader Joe’s Starting a Price War with Whole Foods? “Grocery store chain Trader Joe’s appears to be girding for a price war with rival Whole Foods Market. A basket of 77 items at Trader Joe’s, a fast-growing privately held specialty grocer, was 26% cheaper than its equivalent at Whole Foods, according to a price comparison recently conducted at New York area stores by Deutsche Bank. That was a larger difference than in previous store checks.” (Fortune)
  4. Pennsylvania REIT Sheds Rest of Mall Laggards “A retail real-estate company has sold four lower-quality malls for $92.3 million, completing its effort to unload the 13 worst-performing assets in its portfolio. Pennsylvania Real Estate Investment Trust, or PREIT, sold two malls in Alabama and one in Christiansburg, Va., to a fund managed by Farallon Capital Management LLC of San Francisco. It sold Lycoming Mall in Pennsdale, Pa., to Kohan Retail Investment Group of Great Neck, N.Y.” (Wall Street Journal)
  5. Private Real Estate Funds Have a Record $231B to Spend—but Few Places to Put It “Private real estate funds have more money to spend than ever before, but that’s not necessarily good news for the real estate market. As of March, private real estate investment funds worldwide had $231 billion in aggregate dry powder – or capital commitments from fund investors ready to be spent – according to research firm Preqin. That’s the highest figure in history and a 10 percent increase since December.” (The Real Deal)
  6. Housing Costs for Low-Income Renters are Up a Crushing 50% Since 90s, New Study Says “Housing costs in particular stand out for lower-income families as a significant and growing burden. The cost for lower-income renters rose nearly 50% between 1996 and 2014, according to the Pew study. A decline in homeownership rates among the middle and upper-income households since the housing crisis in 2007 is contributing to the tight supply in the rental market with vacancy rates at a historical low below 7%, according to Pew.” (Forbes)
  7. Wells Fargo Shopping Downtown, Uptown Real Estate Market for Potential Move “One of downtown Dallas’ big banking tenants is shopping the real estate market for a new location. Wells Fargo has its downtown offices in the landmark Fountain Place tower – the 60-story green glass rocket of a building on Ross Avenue. Real estate brokers say that Wells Fargo has been looking at new office buildings in Uptown as well as other downtown buildings for a possible move.” (The Dallas Morning News)
  8. Real Estate Lending: Bad Boys, Bad Boys… Whatcha Gonna Do When They Come Tax You? “’Bad boy’ guarantees are often used in real estate lending transactions to discourage bankruptcy filings in the event that a project fails.  While bankruptcy attacks on these clauses have failed, a recent IRS memorandum threatening the tax treatment of such guarantees may make them less attractive as bankruptcy-proofing devices.” (The National Law Review)
  9. Detroit’s Billionaires Hope to Change Downtown with Development Spree “On a recent drive through Detroit's Brush Park, Melissa Dittmer paused to consider the expectations of a city whose spirit had been beaten down by decades of decay and abandonment. Dittmer was talking about plans to transform an 8.4-acre section of Brush Park, once home to the city's elite before being all but abandoned in Detroit's decline, into a new neighborhood with a fresh mix of architecture.” (Curbed Detroit)
  10. Why American Tower Corp. Is Overleveraged “The problem with having huge debt levels is that it gives the company a small margin for errors and any industry headwinds would put pressure on its financial position. The good news is that management is aware of this situation and reportedly plans to continue de-leveraging over the coming years. Given the recent run-up of the share price over the past year, it is advised to stay on the sidelines.” (Seeking Alpha)
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