10 Must Reads for the CRE Industry Today (October 12, 2016)

10 Must Reads for the CRE Industry Today (October 12, 2016)

 

  1. Donald Trump’s Inner City Nightmare Is all Wrong “Donald Trump in his presidential campaign has painted inner cities as poverty-stricken war zones, with the situation only getting worse. In fact, inner cities may be in better shape than they have been in decades, according to analysis of housing prices by Seattle-based real estate brokerage and data firm, Redfin. Back in the 1970s, when Abba was still at the top of charts and the first Star Wars movie was released in theaters, inner cities were ‘synonymous with crime and poverty,’ wrote Nela Richardson of Redfin. ‘In recent years, [though] cities have undergone an economic and cultural Renaissance, making the urban core a popular and highly demanded place to live and to work,’ she wrote. ‘Light-rail infrastructure has been built in many inner-city areas, and nowadays the high-paying jobs are showing up downtown instead of in suburban office parks.’” (Fortune)
  2. Chinese currency outflows are bigger than you think: Goldman “Currency outflows from China may be far bigger than previously thought, according to investment bank Goldman Sachs. Bloomberg had previously estimated that a net $550 billion had left China between January and August. But that figure only counts funds that are converted from yuan to U.S. dollars within China and then moved out of the country. According to Goldman Sachs, savers often move yuan out of the country and then convert them to dollars in offshore markets. Those transactions haven’t been included in counts of Chinese currency outflows. Goldman Sachs estimates that these offshore deals accounted for 56 and 87 percent of all outflows in July and August.” (The Real Deal)
  3. Clinton proposes closing real estate loophole, not Trump “Tax experts say there’s good reason the tax code lets businesses and their owners deduct losses from future earnings — it encourages investment and smooths out bumps in the business cycle. The problem is when taxpayers can use loopholes to claim larger losses on their tax returns than they suffered in reality. ‘Real estate businesses are often in a tax loss position even as they’re making money,’ Burman said. Their property can increase in value while they can claim losses from wear and tear on the buildings. And rather than pay taxes on the increases on their property, developers can trade them with other businesses for no tax liability. Clinton would limit these ‘in-kind swaps’ to $1 million in assets annually. ‘Her plan would actually have more effect on the real estate business than Trump’s plan,’ Burman said. Trump’s plan could benefit his industry and family in another way. He’d allow so-called pass-through firms to pay taxes at the lower 15 percent rate. Currently those businesses — sometimes small, but sometimes large partnerships — pay at personal income tax rates. Tax experts say business owners like the Trumps could reincorporate firms to take advantage of the clause.” (The Washington Post)
  4. C&W says industrial real estate market continued strong pace in Q3 “It was another good quarter for the industrial real estate market in northern and central New Jersey, according to Cushman & Wakefield, but with one caveat…C&W said overall net absorption reached 13.2 million square feet for the year, which is a new annual high, with one quarter still remaining in the year. Meanwhile, vacancy for warehouse space ticked down to 4.5 percent, while the total development pipeline grew to 7.9 million square feet as 1.2 million square feet of industrial product was completed during the quarter and another 1.6 million square feet broke ground. The industrial market did fail to absorb space at the same pace as previous quarters, C&W said, but it registered 1.9 million square feet of occupancy gains in Q3, mostly in the central New Jersey submarkets. Overall industrial vacancy was flat at 5 percent.” (NJBiz.com)
  5. Strata Equity Group Buys Southeast Residential Portfolio for $720M “Strata Equity Group acquired the 24-property Southeast Residential Portfolio (SERP) from an affiliate of DRA Advisors LLC for more than $720 million. CBRE Capital Markets facilitated the sale, which ranks as one of the largest multifamily transactions in 2016….SERP consists in 6,294 units located in suburban areas throughout 13 metros in Georgia, North Carolina, Tennessee and South Carolina. ‘We believe the long-term fundamentals of the apartment sector, particularly Class B product, remain healthy. Our investment in SERP reinforces that belief,’ Scott Wittman, Strata’s director of Investments, said in a prepared statement. The buildings were completed between 1985 and 2000, with 72 percent of the units being two- and three-bedroom apartments and a larger-than-average unit size of approximately 1,100 square feet. SERP has a long track record of rising rents and consistent occupancy. Over the last three years, net rental income has increased 12.2 percent, while averaging 95.3 percent occupancy.” (MultiHousing News)
  6. LA Council approves a massive overhaul at Paramount Studios “Paramount Studios, the last major film studio based in Hollywood, is in for pretty thorough makeover after the LA City Council approved a plan Tuesday that will add nearly 1.4 million square feet of new floor space to the historic complex. Paramount has been hoping to redevelop its campus for some time, first unveiling plans for a 25-year overhaul back in 2011. The project approved by the city Tuesday calls for the demolition of more than 500,000 square feet of sound stages and office space that currently occupy the site. This will be replaced with numerous new structures, including a 150-foot office tower (five feet taller than the studio’s iconic water tower). Originally, plans called for the tower to reach 240 feet, but the city’s planning commission nixed that idea, siding with local residents who complained that the tower’s height would be wildly out of step with the surrounding area. Commissioners also rejected Paramount’s proposal to top the tower with a digital sign. According to the LA Times, the studio has also agreed to pay $475,000 to neighboring Council District 4 in order to address traffic issues raised by the project.” (Los Angeles Curbed)
  7. Vornado’s LA selloff is part of company’s larger effort to slim down: Analysts “The sale of Vornado Realty Trust’s last remaining Los Angeles property will be another step towards consolidation and simplification for the New York-based REIT, sources told The Real Deal. The company’s decision to sell off the 43,000-square-foot Class A office property at 800 Corporate Pointe in Culver City is in line with its recent attempts to refocus its attention on New York office deals and tie up loose ends on anything that’s distracted from its core focus. ‘Roth is trying to simplify the company, make it more manageable, more focused and easier to understand,’ said Sandler O’Neill analyst Alex Goldfarb of the company’s CEO Steve Roth. ‘Having two or three random investments in L.A. doesn’t help that at all.’ As Vornado looks to refocus on New York, there is no competitive advantage to keeping property in L.A, Goldfarb said.” (The Real Deal)
  8. In Jewelers Row in Philadelphia, Condo Plan Worries Preservationists “Among the oldest diamond districts in the country, the Jewelers Row section of this historic city has been a part of the engagement stories of couples in the region for generations. In the district, artisans and retailers have sold gems and jewelry since the mid-19th century, making it an unlikely cause for preservationists in the city, who in recent decades have focused on bringing new life to abandoned buildings. A plan by Toll Brothers City Living, a developer, to make way for 80 new residential units on the 700 block of Sansom Street, the center of Jewelers Row, is challenging some of the district’s businesses and is shifting priorities for activists in the city. Toll Brothers plans to demolish five three- and four-story buildings erected in the late 19th and early 20th centuries to build a 16-story condominium tower. It has promised to preserve the appearance of the street by building a new facade on the site of the demolished buildings. Demolition is scheduled to start in mid-2017, and construction is expected to take about two years.” (The New York Times)
  9. Drybar's Alli Webb On The Secrets To Her Blowout Chain's $100 Million Success “As recently as seven years ago, longtime hairdresser Alli Webb was driving around Los Angeles in her 2001 Nissan Xterra, braving traffic to visit clients of her mobile blow dry service Straight at Home.Her trajectory since then has been staggering by any measure. Webb opened the first Drybar salon in Brentwood, Calif. in early 2010 with the help of a $250,000 investment from her brother. Today, the styling chain — it famously offers 'no cuts, no color, just blowouts' — comprises 65 salons across the U.S. and Canada. This year, Drybar is on track to do $100 million in revenues, up from $70 million in 2015 and $20 million in 2012, when Forbes first profiled Webb.” (Forbes)
  10. Ross Stores continues aggressive expansion “The new locations round out the company's expansion plans to add approximately 90 locations in 2016. ‘We entered two new states in October, with stores in North and South Dakota, and continued to expand dd's Discounts by opening its first location in Colorado,’ said Jim Fassio, president and chief development officer. Looking ahead, Ross continues to see plenty of opportunity to expand its store base across both new and existing markets, and ‘remains confident that over the long-term, Ross Dress for Less can grow to 2,000 locations and dd's Discounts can become a chain of 500 stores,’ Fassio said. The company currently operates 1,342 Ross locations in 36 states, the District of Columbia and Guam, along with 193 dd's Discounts stores in 15 states.” (Chain Store Age)
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