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10 Must Reads for the CRE Industry Today (May 16, 2017)

Starwood Capital Group CEO Barry Sternlicht has said that if President Trump’s policies don’t stick to a “business script,” then the economic “backlash could be significant,” CNBC reports. Rue21, a fashion retailer targeting the teen demographic, has filed for bankruptcy, according to Reuters. These are among today’s must reads from around the commercial real estate industry.

  1.  Real estate mogul Barry Sternlicht sees an 'inverse Trump effect' on the US economy “Major investors are ‘somewhat cautious’ as they wait to see whether President Donald Trump and Republican leaders on Capitol Hill can deliver on promises of lower taxes and massive business deregulation, Starwood Capital Group founder Barry Sternlicht told CNBC on Monday. ‘If we don't succeed, the backlash could be significant. It all really needs to succeed. I just hope [Trump] stays on the main script, which is the business script,’ he said on "Squawk Box," warning about the consequences if the hopes for pro-growth polices that fueled a 12 percent Trump rally in the S&P 500 since the election don't come to pass. Sternlicht described what he called the ‘inverse Trump effect’ on the economy — the idea that uncertainty over the details of the president's polices is holding back investors. ‘If I'm an individual and I know my capital gains tax is going to drop I might just wait to sell stuff,’ and sell into a more favorable tax environment, he argued.” (CNBC)
  2. Fashion retailer Rue21 files for Chapter 11 bankruptcy protection “U.S. teen fashion retailer Rue21 Inc filed for Chapter 11 protection on Monday in the Western District of Pennsylvania bankruptcy court. The retail chain, which sells budget-priced clothing and accessories at over 1,100 stores across the United States, listed assets and liabilities in the range of $1 billion and $10 billion, according to the court filing. Rue21 has entered into a Restructuring Support Agreement with certain stakeholders and expects to continue normal operations throughout the Chapter 11 process, it said in a statement late Monday. It has also reached agreements to obtain up to $125 million in debtor-in-possession (DIP) financing from existing lenders, and up to $50 million in new money term loan DIP financing from a group of its existing term loan lenders.” (Reuters)
  3. Sears tanks after CEO eviscerates top tool vendor he says is trying to cancel its contract “Sears CEO Eddie Lampert is taking his feud with a top tool supplier public. In a blog post on Monday, Lampert threatened legal action against One World Technologies, a subsidiary of the China-based Techtronic Industries that manufactures power tools and other products under the Craftsman brand. He said One World was trying to ‘embarrass’ Sears and ‘take unfair advantage’ of the retailer by changing the terms of its supplier agreement, or threatening to cancel its contract with Sears altogether.” (Business Insider)
  4. AG launches probe into Manafort's real estate dealings “New York State has opened an investigation into the real-estate dealings of President Donald Trump’s former campaign manager, Paul Manafort, deepening the already intense legal scrutiny of the young administration. The probe by New York Attorney General Eric Schneiderman, one of the most outspoken critics of the president, is in a preliminary stage, according to a person familiar with the matter who asked not to be named because the investigation isn’t public. Manafort, who ran Trump’s campaign from April to August last year, has owned property in the Hamptons and Trump Tower in Manhattan. Manhattan District Attorney Cyrus Vance Jr. is also in the early stages of an investigation into Manafort’s transactions, a person familiar with that probe said. Representatives for Schneiderman and Vance declined to comment.” (Crain’s New York)
  5. Here's how these retailers could turn things around this week “Retailers shuttering stores, slowing foot traffic in brick-and-mortar locations, and e-commerce players like Amazon and Wayfair gaining market share ... Sound familiar? This has been the narrative for much of the industry, following a disappointing start to 2017. Department store operators Macy's, Dillard's, Kohl's, Nordstrom and J.C. Penney each reported first-quarter results last week that sparked a selloff in the sector. The S&P 500 Retail ETF (XRT) ended the week in red territory, marking its worst 5-day performance since March. Now, Wall Street is preparing for an onslaught of more retailers' earnings to come — but it's a different mix of companies reporting, some of which could turn this discouraging narrative around.” (CNBC)
  6. Douglas Development Buys $66M Land for DC Project “Douglas Development Corp. acquired nine land parcels at 1801 New York Ave. NE in Washington, D.C., from the Schaeffer family for $66 million. The site is part of 15 acres that the company purchased to develop NewCityDC, a 1.5 million-square-foot mixed-use project. Gerry Trainor, executive managing director of Transwestern’s Mid-Atlantic Capital Markets Group, represented the seller. NewCityDC will include 422 apartments, 18 townhomes, 550,000 square feet of retail and 156 hotel rooms. The acquired site is bound by New York Avenue NE, Bladensburg Road NE and Montana Avenue NE, the location offering proximity to downtown Washington, D.C., Capitol Hill, Union Station, NoMA and the H Street Corridor, as well as exposure to more than 72,000 cars a day.” (Commercial Property Executive)
  7. Bellwether Closes First Equity Financing for $199M Deal “Bellwether Enterprise’s Equity Products Division brokered $41.5 million in joint venture equity financing for the acquisition of 914-unit Windsor Garden Apartments in Norwood, Mass. The total sale price was $199 million, and the deal was subject to a $160 million loan held by Freddie Mac, according to Yardi Matrix data. The buyers are AllianceBernstein and John M. Corcoran & Co., the current property manager, according to the same report. This is Bellwether’s first equity financing since the opening of its specialized branch in November 2016. Todd Johnson, director of the company’s equity products division, arranged and structured the joint venture equity, which was provided by a New York City-based real estate investment fund.” (MultiHousing News)
  8. Legacy West developers plan for June 2 grand opening “With Toyota already moving in just up the street, developers of the $400 million Legacy West Urban Village are gearing up for their grand opening. The retail, office, apartment and hotel complex at the northwest corner of Legacy Drive and the Dallas North Tollway will be the urban core of the $3 billion Legacy West development.” (Dallas Morning News)
  9. Amazon stock vs. Seattle real estate: Which was the better investment over the past 20 years? “Today is the 20th anniversary of Amazon’s IPO. In case you haven’t noticed, Amazon has been on quite the hot streak. Investors are cheering as the stock hits new a new high every few weeks. In many ways, Amazon stock is closely related to another local commodity that is on fire lately: Seattle real estate. Let’s take a look at how the return on those two hot investments compare to each other.” (GeekWire)
  10. Judge warns LES landlord that she could lose properties over illegal Airbnb rentals “A state Supreme Court judge warned a Lower East Side landlord that she could lose control of her properties if she didn’t stop using them as illegal Airbnb hotels. Manhattan Supreme Court Justice James d’Auguste delivered the warning to Rose King on Monday, after the city filed a $1.2 million lawsuit against the landlord, the New York Post reported. The judge also barred Rose from listing any of her apartments on Airbnb. ‘Your very ownership of the buildings may be in jeopardy,’ d’Auguste told King.” (The Real Deal)
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