10 Must Reads for the CRE Industry Today (November 16, 2016)

10 Must Reads for the CRE Industry Today (November 16, 2016)

 

  1. Droning Along: What Commercial Real Estate Property Owners Should Consider in the Drone Age “Drone use in the real estate industry has exploded in recent months. The utility of drones in sales, marketing, construction, surveying, and inspection of real property is undeniable. There is vast potential for commercial use of drones in the real estate industry.  Their use has become very important in marketing strategies for brokers and developers, for inspection teams on construction projects and even for construction of high-rise cable structures. For example, drones can assist with moving dirt on a construction site using autonomous dump trucks, bulldozers, and excavators with real time mapping of the movement of soil and cement. Drones have also been extremely useful to surveyors in preparation of property reports and for owners who use drones for property security. Drones are also increasingly used in other industries, like retail, as has been in the news lately. Both Amazon and Walmart are testing the waters of drone usage for faster retail package delivery. Most recently, Walmart is looking to use drones to increase the efficiency of their distribution warehouses. UPS has jumped on the bandwagon, delivering an inhaler via drone recently in Boston and even 7-11 recently delivered slurpees, a chicken sandwich, donuts and hot coffee to a private home that placed an order in Reno. Smaller local businesses are finding ways to utilize drone technology, like a local pharmacy in San Francisco that is testing the use of drones for delivery of prescription drugs and other items.” (National Law Review)
  2. Trouble Brewing in Commercial Real Estate “Defaults are rising in a key corner of the commercial real-estate debt market just as borrowing costs are set to jump, raising the likelihood of a slowdown of the $11 trillion U.S. commercial property sector in 2017. A financial crisis-era regulation is about to take effect that is expected to make some commercial real-estate borrowing more expensive and complicated, analysts said. At the same time, interest rates have increased since the election of Donald Trump as the nation’s 45th president last week and seem poised for a sustained rise from recent historic lows, which would further squeeze an industry built on borrowed money. ‘I can paint a picture that it could be disastrous, with runaway inflation and high interest rates,’ said Charlie Bendit, co-chief executive of Taconic Investment Partners LLC, at a New York industry luncheon last week. The worries raise fresh concerns for the commercial property market as it enters its eighth year of expansion. Already, landlords are battling a slowdown in sales and rising vacancy rates of multifamily housing units across the U.S. and of office space in Houston, Washington, D.C., and other big markets. Commercial property sales volume was down 8.6% in the first nine months of 2016 to $345.4 billion, according to Real Capital Analytics.” (The Wall Street Journal)
  3. Trump won. What does that mean for commercial real estate? “Now that the shock of the presidential election is over, it’s time to ask the big question: How will a Donald Trump presidency impact the commercial real estate industry? No one knows the answer yet, of course, but experts are weighing in. And the consensus so far? A Trump presidency, and a Republican-controlled federal government, shouldn’t slow the positive momentum that commercial real estate is enjoying today. The change in the White House could even provide another boost to that momentum, depending on which forecasts you read. Marcus & Millichap recently published its own special report looking at the election and what it means to the men and women in the commercial real estate industry. The news was largely positive. On the plus side, Marcus & Millichap said that the U.S. economy should continue to grow as the new president takes office. As the company says, the U.S. economy is now in its seventh year of a durable but moderate expansion. Marcus & Millichap says that 2 million to 2.5 million new jobs should be added during the next year. The country currently has an unemployment rate of 5 percent and 5.5 million unfilled job openings. Marcus & Millichap predicts that unless an unexpected surprise hits the country, the economy will continue to grow, something that will result in an increase in commercial real estate construction, leases and sales.” (REJournals.com)
  4. Trump Name To Be Removed From Three Manhattan Apartment Buildings He Doesn't Own “Tenants of three Manhattan buildings may have to live in Trump’s America, but they no longer need to live in an apartment complex that bears his name. Currently part of Trump Place, the buildings on the Upper West Side will be renamed 140, 160 and 180 Riverside Boulevard effective this week. The move comes after 614 people signed a petition requesting Trump’s name be removed. Despite carrying the president-elect’s branding the 1,325 rental units have been owned by Chicago-based real estate firm Equity Residential since 2005. (For now the Trump Place name will remain on condominium buildings 200, 220 and 240 Riverside Boulevard, which neither Equity Residential nor Trump own.) Linda Gottlieb, the resident who circulated the petition last month, was not shy about her disdain for then candidate-Trump. She dubbed her campaign ‘Dump The Trump Name’ and called out his widely condemned statements degrading women, immigrants and the disabled. In the petition she also noted her disgust at the idea of her rent payments adding to Trump’s net worth.” (Forbes)
  5. Blackstone’s Gray: Trump win is a game changer for real estateThe Blackstone Group’s real estate head Jonathan Gray thinks Donald Trump’s victory in last week’s election is a game changer for the real estate industry. But whether it’s a good or bad one remains to be seen. ‘I think it’s fair to say that the economic narrative has changed,’ Gray said Tuesday at a conference hosted by Bank of America. ‘It does appear like we’re going to have lower taxes, less regulation and probably more fiscal spending, particularly around infrastructure. All of that should be good for growth,’ Gray said, adding that economic growth tends to increase income from real estate. But the flipside, according to Gray, is that the kind of debt-financed government spending spree Trump has hinted at could lead to higher inflation and higher interest rates. Still, Gray said ‘the potential for higher growth certainly exists.’ He argued that history shows real estate tends to do well during periods of high growth and rising interest rates.” (The Real Deal)
  6. Trump’s tax plans may have effects on real estate market “Could the election of Donald Trump have unanticipated impacts on the federal tax code’s benefits favoring owing a home over renting one? To the extent that the House, Senate and White House soon will be under one party’s control, the answer may well be yes. Although housing issues got scant attention during the campaign, Trump’s tax-change plans, linked up with ideas already proposed on Capitol Hill, could contain some jolts for many people. Late in the campaign, Trump revised his plans in ways that make it more compatible with House Republicans’ tax ‘blueprint’ issued in June. Trump would collapse the current seven tax brackets for individuals to just three: For married joint filers with incomes less than $75,000, the federal marginal tax rate would be 12 percent. For those with incomes of $75,000 but less than $225,000, the rate would be 25 percent. From $225,000 up, the rate for married joint filers would be 33 percent. Single-filer rates would have the same brackets but be based on incomes half the amounts for married joint filers. The capital-gains rate would remain capped at 20 percent, and the controversial 3.8 percent ‘Obamacare’ surtax on certain investment income would disappear.” (The Washington Post)
  7. Macy's expanding Backstage concept “Cincinnati-based retailer Macy's Inc. has plans to expand its off-price Backstage concept. Macy's Inc. will test putting Backstage pop-up apparel shops in 45 existing Macy's stores in time for the holiday shopping season this year. Macy's did not disclose which stores are getting Backstage pop-ups. That will more than double the number of Macy's Backstage shops in the U.S. There are currently 22 Macy's Backstage locations, primarily in the Eastern U.S. and Texas. A majority of those – 19 – are within existing Macy's locations. Macy's Backstage, launched May 2015, offers an assortment of women's, men's and children's apparel, as well as shoes, accessories, housewares and jewelry. Those stores do not carry merchandise procured for Macy's, but sold at a discount, but rather unique merchandise sourced by the Macy's Backstage team. The new Backstage pop-up locations will be placed close to Macy's Last Act clearance section.” (Cincinnati Business Journal)
  8. Dick’s Sporting Goods aims to corner a diminished golf market “With other companies walking away from the golf business or going bankrupt entirely, Dick’s Sporting Goods Inc. sees an opportunity to grab share in the shrinking golf market. In early November, Dick’s purchased what it says are the 'strongest assets' of the bankrupt Golfsmith International Holdings Inc., including intellectual property, inventory for 30 stores and 30 of what Dick’s says are Golfsmith’s “most profitable locations.’” (MarketWatch)
  9. Invesco buys School of Visual Arts dorm for $174M  “Invesco Real Estate bought the School of Visual Arts dormitory building in Kips Bay from a partnership led by Magnum Real Estate Group and Winter Properties for $174 million, according to property records filed with the city Tuesday. Magnum and Winter Properties partnered in 2013 to buy the site at 340 East 24th Street for $32.3 million from the nonprofit International Center for the Disabled. The companies then developed the 14-story, 46,000-square-foot dormitory that was designed by Ismael Leyva Architects. Dallas-based Invesco has been expanding its real estate holdings in New York City since 2011. The company paid $112 million for a Soho condominium at 139 Spring Street in January.  Last year, it bought an 80 percent stake in a mixed-use building at 131-137 Spring Street from SL Green. Magnum, led by Ben Shaoul, is known for developing luxury condominiums in Manhattan. In September, the company received a $195 million loan for its condo development at 196 Orchard Street.” (The Real Deal)
  10. One Kendall Square in Cambridge Trades for $725M “The East Cambridge life science submarket continues to be one of the hottest in the United States as Alexandria Real Estate Equities closes on One Kendall Square for $725 million, making it the biggest real estate deal in the Boston area so far this year. The $725 million price tag was 83 percent more than seller DivcoWest paid for the 7.9-acre complex of 670,000 square feet of office, laboratory and retail space nearly three years ago and is a testament to the current and future strength of the property and submarket. DivcoWest bought One Kendall Square, which also includes a nine-screen movie theater, 1,500-space garage and development parcel, in January 2014 from a joint venture of Rockwood Capital LLC and Related Beal for $395 million. Rockwood and Related Beal paid $210.5 million for the site in 2006. In its third-quarter earnings report released Oct. 31, Alexandria stated the purchase price of $725 million included the assumption of $203 million in debt. The REIT said it expected to pay for the acquisition by selling 7.5 million shares of common stock.” (Commercial Property Executive)

 

 

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