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10 Must Reads for the Commercial Real Estate Industry (April 28, 2017)

Multifamily developers are increasingly accommodating a more mobile workforce by adding both communal and quiet workspaces as amenities, according to The Wall Street Journal. Bankrupt builder Westinghouse has asked a judge to let it borrow $800 million from Apollo Management to fund completion of two nuclear power plants, reports Reuters. These are among today’s must reads from around the commercial real estate industry.

  1. Utilities say Westinghouse loan puts their reactor construction at risk “The owners of one of the first new U.S. nuclear power plants in decades said the half-finished reactors might not be completed without changes to a proposed $800 million loan to the bankrupt builder, Westinghouse Electric Co LLC. A unit of Toshiba Corp., Westinghouse has asked a U.S. bankruptcy judge in Manhattan to allow it to borrow up to $800 million from affiliates of Apollo Global Management LLC to stay afloat. Westinghouse filed for bankruptcy in March, blaming billions of dollars of cost overruns at two nuclear power plants it is constructing in Georgia and South Carolina. Utilities led by Southern Corp's Georgia Power said in court papers filed on Wednesday that Westinghouse's debtor-in-possession, or DIP, loan should not grant liens on the designs, patents and other intellectual property.” (Reuters)
  2. Working From Home? Real-Estate Developers Are Here to Help “When Joshua Bryan leaves his apartment to go to work, he travels up three stories, to the 40th floor of his building in Chicago’s South Loop neighborhood. There, he settles into a workspace with television screens, a kitchenette and sweeping views of Lake Michigan. For meetings, Mr. Bryan books a first-floor conference room with teleconference equipment and interactive white boards for presentations….With a growing number of Americans working from home, architects and builders are crafting spaces that spare residents from conducting business at a Starbucks.” (The Wall Street Journal, subscription required)
  3. Kingsley: Real Estate Remains Most Attractive Asset Class for ’17 “Institutional investors are looking to commit $62 billion in new capital to commercial real estate investments in 2017, according to a survey by Kingsley Associates and Institutional Real Estate. This is an average reduction of 19% to their investments in this asset category compared to 2016. ‘The decline in new capital flows can be largely attributed to two primary factors,’ according to Jim Woidat, a principal at Kingsley Associates. “US survey respondents reported real estate holdings exceeding their target allocations to real estate, which reduces the need for new capital commitments. In addition, investors report a significant uncalled capital overhang of $47 billion, which also limits the need for new capital deployment.” Most US investors however—72%–are still actively looking for new real estate investments in 2017. They are most interested in industrial properties, as a result of demand from the growth of e-commerce, with multifamily coming in second. Third on their list is the self-storage property type, followed by senior housing and student housing, while they are less enthusiastic about office, medical office and retail properties.” (Chief Investment Officer)
  4. 'Rich Dad' author Robert Kiyosaki on how to get rich in real estate [VIDEO] “Robert Kiyosaki, author of 'Rich Dad Poor Dad', talks to MarketWatch about what Millennials need to know to become successful real-estate investors.” (MarketWatch
  5. PGIM Real Estate closes European debt fund “The European debt strategy provides alternative financing, including whole loans, mezzanine and preferred equity. Investments range from about £10 million to more than £100 million across Western Europe. PGIM Real Estate raised more than 80% of the capital for PRECap VI during the nine months after the U.K.'s vote to leave the European Union, said a news release from the firm…Investors in the fund include the $8.6 billion San Bernardino County Employees' Retirement Association, which committed $25 million; $186 billion New York State Common Retirement Fund, which committed $200 million; $51.3 billion Pennsylvania Public School Employees' Retirement System, £75 million; and $21.2 billion New Mexico State Investment Council, £70 million.” (Pensions & Investments)
  6. Why Trump's $1 trillion infrastructure plan won't work “If even part of President Trump's plan to spend $1 trillion to upgrade America's infrastructure comes to fruition—potentially creating 4 million trades jobs in the process—the demand for skilled tradespeople to improve roads, highways, bridges, air traffic infrastructure, waterways and the electrical grid will skyrocket in the coming years. But, America will never have the workforce it needs to meet the demand for skilled workers if we can't quickly debunk the myths surrounding the skilled trades, and get young people excited about a career in the trades today. A 2016 report from staffing agency Adecco shows just how big the skilled trades job deficit is. At the time it was published, 62 percent of firms said they were struggling to hire skilled workers in the trades. With a disproportionate number of baby boomers occupying skilled trades positions—more than 5 million in 2016—who are due to retire over the next 10 years, an estimated 31 million positions will be open by 2020. Of those, electricians are among those in shortest supply because of their older demographic: more than a quarter working in the industry are at least 55-years-old. Without skilled people to do the work, Trump's infrastructure plan may be dead on arrival.” (CNBC)
  7. Kennedy Wilson, Euro-Affiliate to Combine Into $8.2B Entity “Global real estate investment company Kennedy-Wilson Holdings Inc. (KW) and London-based Kennedy Wilson Europe Real Estate Plc (KWE), which invests in direct real estate and real estate loans in Europe, have agreed on the terms of an all-share transaction that will result in KWE becoming a wholly owned subsidiary of KW. The combined company is expected to have an enterprise value of $8.2 billion and a market cap of about $4 billion. Kennedy Wilson Europe was established in 2011 when Kennedy Wilson acquired Bank of Ireland Real Estate Investment Management. In 2014 Kennedy Wilson launched the £1 billion ($1.7 billion) IPO of Kennedy Wilson Europe Real Estate Plc, the second-largest real estate IPO in the history of the London Stock Exchange.” (Commercial Property Executive)
  8. A tough sales market dents even Manhattan’s toniest trophy towers “Over the last few months, a shift has reverberated across the sales market. There is stress on development sites, stress on retail condos and stress on hotels. ‘It’s not a bloodbath, but people are bleeding,’ says one broker requesting anonymity. ‘You can’t get a construction loan, you can’t get a partner, and you can’t get an anchor tenant on the commercial side. The outer boroughs spiked really hard and are coming back to reality. There is a long way to fall. Last year, sellers were trying to achieve buoyant 2015 pricing, explains Woody Heller, head of capital markets at Savills Studley. ‘That time has passed. There is still no shortage of capital, just a difference in pricing expectation.’” (New York Post)
  9. Payday for Blackstone: Firm closes on sale of 3 Pricey LA office deals “Spring cleaning at the Blackstone Group means a massive payday. The firm just closed on a two-building portfolio to a joint venture between Douglas Emmett Inc. and the Qatar Investment Authority for $352.8 million, CoStar data show. One of the properties, the 205,700-square-foot Wilshire Palisades building at 1299 Ocean Avenue, traded for north of $1,300 per square foot, sources said, breaking the price-per-foot record in Santa Monica that was held by Oracle’s purchase of 2700 Colorado late last year. The other, an 87,000-square-foot property at 429 Santa Monica Boulevard, sold for about $850 per foot, sources said.” (The Real Deal Los Angeles
  10. Bal Harbour Shops wins first approval for $400M expansion plan About a year after a plan to expand the Bal Harbour Shops died in a split vote, a new proposal won initial approval from a reshaped council — a long-sought victory for the luxury retail shopping center and bitter defeat for community members who have sought to derail the project at each turn. Capping a marathon Tuesday night hearing that stretched into early Wednesday, the council voted 4-1 to approve a group of zoning changes and a development agreement that pave the way for the $400 million, multi-year expansion project to move forward. Councilwoman Patricia Cohen was the sole no vote. A second reading will be held at 7 p.m. May 16 at the Sea View Hotel, 9909 Collins Ave. The evening began with hours of testimony from the public, Shops representatives and executives from Saks Fifth Avenue, a recent opponent to the expansion. After hours of discussion, a few elements of the plan were tweaked before the vote. The Shops, owned by Whitman Family Development, will pay for more off-duty police to work security through the years-long construction period, increase the funds to be provided for a new bayfront park and implement a parking surcharge as soon as the new parking garage is built.” (Miami Herald)


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