10 Must Reads for the CRE Industry Today (May 25, 2016) Photo by Scott Olson/Getty Images

10 Must Reads for the CRE Industry Today (May 25, 2016)

 

  1. U.S. Probes Real-Estate Firm With Ties to Sen. Bob Corker “A real-estate firm that has been a favored investment of Tennessee Republican Sen. Bob Corker is under investigation by federal law-enforcement officials for alleged accounting fraud, according to people familiar with the matter. The Federal Bureau of Investigation and the Securities and Exchange Commission are focusing their examination of CBL & Associates Properties Inc. on whether officials at the Chattanooga, Tenn., company falsified information on financial statements to banks when applying for financing arrangements, the people said. Law-enforcement officials have talked to former CBL employees who allege the company inflated its rental income and its properties’ occupancy rates when reporting those figures to banks, the people said. The FBI and SEC officials have also separately asked questions about the relationship between the company and Mr. Corker, who is close with senior executives at the firm and has made millions of dollars in profits trading the company’s stock in recent years.” (The Wall Street Journal)
  2. China could buy $220 Billion of U.S. Real Estate over Next Four Years “First quarter GDP slowed considerably since 2009. The banking system is highly over-leveraged. Corporations are deep in debt. Credit growth, industrial production, retail sales and recent signs of stabilization have fallen short of expectations. However, as a result of continued poor economic growth, Chinese investors have been pushing into higher yielding opportunities abroad, especially in real estate. In fact, according to a new report from the Asia Society and Rosen Consulting Group, Chinese investors have become the largest foreign buyers of U.S. property after pouring billions into the market in search of safer offshore assets. After a substantial surge in residential and commercial real estate from Chinese investors in 2015, the five-year investment total has ballooned to $110 billion.” (The Huffington Post)
  3. Global push by US retailers expands real estate footprint “The World Wide Web may be the fastest-growing retail space, but the physical world itself is still a target for U.S. retailers seeking growth. The U.S. led all other nations in global retail real estate expansion last year, opening more stores overseas than anyone else, according to a new report from CBRE Group. American retailers already operate in more foreign countries than Asian and European retailers do, but the gap is now widening. U.S. retailers expanded internationally at a faster pace last year than in 2014, accounting for 21 percent of retailers entering cities internationally. Italy was second at 14 percent and the United Kingdom third at 11 percent, according to CBRE. "I think it's an indication that U.S. retailers are seeking growth, and one of the main drivers of growth is to expand into a channel that they're not in today," said Anthony Buono, chairman of CBRE's global retail executive committee.” (CNBC)
  4. Economy Watch: Hotel Revenues Edge Down, Expenses Edge Up “U.S. hotel revenue growth is slowing down, while expenses are on the rise, according to CBRE Hotels’ Americas Research’s 2016 edition of Trends in the Hotel Industry, which was released this week. After five years of strong increases in occupancy, average daily rate (ADR) and profits, U.S. hotels reached the top of the current business cycle in 2015, noted R. Mark Woodworth, senior managing director of CBRE Hotels’ Americas Research. 'It isn’t a surprise that Total Operating Revenues grew just 5.3 percent from 2014 to 2015,' Woodworth said. “What stands out as a concern for hotel owners and operators was the increase in expenses, especially during a year when inflation was just 0.1 percent.” From 2014 to 2015, 56.9 percent of the hotels in the Trends sample posted an increase in occupancy, down from the 70+ percent marks posted the prior few years. Some 86.1 percent of the properties in the sample were able to raise their room rates during the year, however, while 80.5 percent of the hotels enjoyed an increase in revenue per available room (RevPAR). On average, the Trends sample achieved a RevPAR gain of 4.6 percent.” (MultiHousing News)
  5. A fresh take on ‘Retailtainment’ and future of fun “Retail has been the foundation of shopping centers throughout their existence, but new entertainment concepts are making inroads in traditional retail venues. Even in mixed-use venues, it is generally accepted that a critical mass of traditional retail is the highlight, and that other uses are complementary pieces, designed to drive traffic and support the retail component. While the industry has been slowly evolving away from that traditional model for some time now (dining and entertainment uses in particular have emerged as more significant pieces of the commercial puzzle) that trend has exploded in recent years. A wide range of dynamic and engaging new entertainment uses have sprung up, and have functioned as increasingly prominent features on the development landscape. Today, entertainment is no longer a side dish: it’s the main course. And it’s a meal that landlords and commercial development decision-makers are increasingly interested in ordering. Entertainment concepts have evolved well beyond the movie theater, and creative new brands like Momentum Indoor Climbing, Pinstripes, Punch Bowl Social, iFLY indoor skydiving and Topgolf have captured imaginations and dollars as they expand across the country.” (Chain Store Age)
  6. Phase I of 80-Acre Development in Growing D.C. Submarket Breaks Ground “Baltimore-based St. John Properties recently broke ground on the construction of Phase I of Ashburn Crossing, an Ashburn, Va., mixed-use development expected to bring a total of one million square feet of commercial space to Loudoun County. Situated at the intersection of Gloucester and Loudoun County Parkways, the Ashburn Crossing project currently includes plans for eight office buildings totaling more than 500,000 square feet, as well as a 20.5-acre parcel reserved for future retail. Situated close to the Redskins Park and Dulles Park Center, the development will soon benefit from faster access to Route 28 due to ongoing work that will connect the artery directly to Gloucester Parkway this fall. Close to Loudoun Tech Center and Ashburn Technology Park, Ashburn Crossing will offer much-needed space in a market hosting AOL, Verizon, Raytheon, Airbus, Equinix and a plethora of other NoVa hi-tech employers. The development also sits 5 miles from Dulles Airport and is within a one-hour ride from downtown Washington, D.C.” (Commercial Property Executive)
  7. Amtrak shifts Union Station rehab onto fast track “A long-dreamed-of effort to renovate historic Union Station and use it as a cash cow for owner Amtrak shifted onto a fast track today as Amtrak announced it's formally seeking a master developer for the Near West Side complex. The lure: The renovation of up to 1.3 million square feet of building and the construction of as much as 3 million square feet of office space on station air rights, all leveraged by the possibility of hundreds of millions of dollars in low-interest federal loans. The payoff: Selection of a developer as soon as this fall, a step that would allow work to actually begin. ‘Bringing in private equity through a master developer can best achieve the desired outcome that optimizes Chicago Union Station as an asset that serves more than 33 million travelers per year,’ Amtrak Executive Vice President Stephen Gardner said in a statement.” (Crain’s Chicago Business)
  8. The city of Boston will lend millions of dollars to landlords who promise to keep rents low “City Hall is looking to recruit white knight developers, investors and housing groups interested in buying rental buildings and offering a substantial portion of the units at below market rents. The Department of Neighborhood Development is rolling out a $7.5 million loan fund to help fuel acquisition of rental buildings by prospective owners who agree to offer at least 40 percent of the apartments at below-market prices. And the new owners must also agree to keep the current tenants, agreeing to the requirement that “no tenant in good standing will be displaced from their unit,” according to press release accompanying the rollout by the Department of Neighborhood Development.” (Boston.com)
  9. Can Dick’s Sporting Goods hang on to its current lead over Amazon? “In the battle between Amazon.com Inc. and the rest of the retail world, Dick’s Sporting Goods Inc. may have a slight advantage in the sporting goods area. At least for now. Credit Suisse teamed up with e-commerce pricing and analytics firm Boomerang Commerce and found that while Amazon offers sporting goods merchandise, it doesn’t have the strong edge over Dick’s Sporting Goods that it does over other retailers. ‘Amazon offers a competitive assortment but still mostly through third parties,’ the bank wrote in a Monday report. The analysis shows that only 17% of the 3,000 SKUs (stock keeping unit) tracked in the study were sold and fulfilled by Amazon. ‘Its pricing is somewhat less disruptive than expected, with few discounts on marquee brands (Nike Inc.). Under Armour Inc. and categories that Dick’s Sporting Goods relies on (activewear),’ said the report. But that edge might not last forever.” (MarketWatch)
  10. Labor unions, environmentalists are biggest opponents of Gov. Brown's affordable housing plan “Powerful opponents have emerged to fight Gov. Jerry Brown’s plan to streamline affordable housing development — and their main reason isn’t about building homes. A coalition of labor and environmental organizations has come out against the proposal, arguing that the governor’s plan would harm public health because it allows housing projects to sidestep the state’s premier environmental law. ‘It would be a disaster for local government, local communities, the environment and the citizens of California,’ said a May 18 letter to state lawmakers from the State Building & Construction Trades Council, the Natural Resources Defense Council and other labor and environmental groups. Brown’s plan would exempt urban housing projects that reserve a certain percentage of their development for low-income residents from detailed local government review. By making it easier to build houses, Brown believes the state can reduce California’s major housing supply deficit, which is considered the primary driver of the broad home affordability crisis.” (The Los Angeles Times)
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