10 Must Reads for the CRE Industry Today (April 20, 2016)

10 Must Reads for the CRE Industry Today (April 20, 2016)


  1. Why the Great Divide Is Growing Between Affordable and Expensive U.S. Cities “Across the country, a divide is emerging between cities that are growing outward and remaining affordable and ones that are hemmed in by geography and onerous zoning codes and are becoming  more and more expensive. As a whole, U.S. cities are expanding as rapidly as they have throughout the last half-century. From the 1950s until the 2000s they have added about 10,000 square miles per decade, or an area roughly the size of Massachusetts, according to research by Issi Romem, chief economist at real-estate site BuildZoom, to be released Monday. But beneath the surface a divide is deepening.” (The Wall Street Journal)
  2. 18-Hour Cities And CRE Investor Interest “Think of 18-Hour cities as a second-tier city characterized by a higher than average urban population, a booming economy and a desirable lower cost of living compared to other metro areas. These cities are a happy medium between the mundane 9-5 hours typically found in the suburbs and the 24/7 buzz life in the big cities. Doing business in an 18-hour city is much more cost effective than conducting business in a larger market city. That's one reason why employers are allured by these areas and tend to target them as prime locations. As a result, Millennial job seekers flock to 18-hour cities for the opportunity to get the best of both worlds: urban living plus the perks of life from the suburbs. Retirees also benefit from 18-hour cities since they can access premium quality healthcare without the high cost offered in larger cities.” (Seeking Alpha)
  3. Banks Give New Focus to Commercial Real Estate Lending “The trade group found 82 percent of surveyed banks planned to increase their capital concentration in commercial real estate, nine percent of the surveyed banks claiming to already have 300 percent or more capital concentration in this lending sector and 19 percent reporting 100 percent or more capital concentration in construction lending. Among sectors, multifamily, office and retail were the most sought-after types of lending.” (National Mortgage Professional)
  4. How one man turned $20K into mall industry success “Now CEO of General Growth Properties, the second-largest mall portfolio owner in the United States, Mathrani has proven that if your instincts are sharp enough, it doesn't matter where your roots lie. Case in point: His first few months as the company's chief. It was 2010, and a judge had just approved a plan for GGP to exit Chapter 11. "I knew nothing about the company," Mathrani admitted. He was hired away from the retail division at Vornado Realty Trust, where he served as president for eight years. Yet on a road show to take the mall operator out of bankruptcy, he raised $2.3 billion. Mathrani then recapitalized the company with an additional $6.8 billion in equity, which he humbly chalks up to an adrenaline rush.” (CNBC)
  5. State expands cost-saving construction practice, giving hope it will be used elsewhere “In this year's state budget Gov. Andrew Cuomo expanded the use of design-build, a method of delivering complex infrastructure projects that if used in New York City could save the de Blasio administration an estimated $2 billion over the next decade. The catch? Design-build was expanded only to two specific projects Cuomo announced in his January State of the State speech: an expansion of the Jacob K. Javits Convention Center and renovations to Penn Station, which include the James A. Farley Post Office across the street. "The mega-projects we are now using it on are the most crucial to the state, and these are the ones we were able to get approval for on a case-by-case basis," a Cuomo official said.  Design-build requires the designers and builders of an infrastructure project to team up and submit unified bids for projects—rather than doing the work in sequential order.” (Crain’s New York)
  6. $1.1B Sale of Las Vegas Strip Retail Center Closes “A 50-50 joint venture of Simon Property Group and Invesco Real Estate has closed its purchase, for about $1.1 billion, of The Shops at Crystals in Las Vegas, the two companies announced Friday. The seller was a joint venture between MGM Resorts and Infinity World Development Group, an affiliate of Dubai World Corp. On behalf of the joint venture, Simon will lease and manage The Shops at Crystals, which features about 324,000 square feet of luxury retail space at the entryway of MGM Resorts’ $9 billion CityCenter complex on the Las Vegas Strip. The retail property is anchored by 10 luxury flagship stores, including Louis Vuitton, Gucci, Dolce & Gabbana, Tom Ford, Prada, Fendi and Tiffany & Co., on top of 30 more luxury retailers, including Céline, Saint Laurent and Richard Mille, whose only Las Vegas presence is at the center.” (Commercial Property Executive)
  7. California REIT to Acquire $371M Worth of Assets from Mindful Storage “Strategic Storage Trust II, a public, non-traded REIT which is sponsored by SmartStop Asset Management LLC, has agreed to acquire a 27-property self-storage portfolio from Mindful Storage. The total value of the transaction amounts to $371 million, Inside Self-Storage reported based on a March 25 filing with the Securities and Exchange Commission. The portfolio comprises 22 properties in three states, offering a total of more than 1.5 million square feet. Ten facilities are located in Florida, 11 in North Carolina (eight of which are in Asheville) and one in Maryland. The transaction also includes land parcels adjacent to four of the properties and one redevelopment site in North Carolina. According to the filing, the deal will be executed through 12 purchase-and-sale agreements with unaffiliated third parties.” (Commercial Property Executive)
  8. New York’s hotel building boom is over “The numbers don’t lie: The wave of new hotel construction in New York – which peaked in 2014 – is finally crashing as dozens of new hotels come online and developers shy away from planning new properties. Hoteliers submitted permit applications for only six new hospitality properties – a total of 512 units – citywide in the first three months of 2016, accelerating a downward trend that began last year, according to The Real Deal’s analysis of projects of at least 10 units filed with the Department of Buildings. In 2015, developers planned a total of 4,630 hotel rooms, or about 1,158 per quarter. Those numbers, in turn, were down from their 2014 peak. That year, 9,012 new rooms were planned, or about 2,253 per quarter.” (The Real Deal)
  9. Global Shopping Center Pipeline Rises to 41.9 Million Square Meters “According to a new global report CBRE, the worldwide shopping center development pipeline has continued to increase, reaching 41.9 million square meters in 2015, from 39 million square meters in 2014, and with Asian cities dominating all of the top ten most active global markets. The report, measuring shopping center development in 168 major cities globally, highlights that China remains the most active market in terms of delivering new space, accounting for two-thirds of construction globally. Chongqing, Shenzhen, Chengdu and Shanghai all have over three million square meters of space under construction in over 30 projects in each city. Across Asia Pacific, new development is active in 34 of the 41 cities surveyed, totaling 34.8 million square meters Outside of China, activity in Thailand and India is also robust. Bangkok is the only other market in Asia within the top ten most active development markets, with 1.7 million square meters of space under construction.” (World Property Journal)
  10. Global Real Estate Boom Is Coming to an End, U.K.’s Grosvenor Warns “A major U.K. landlord warned Tuesday that the boom in global real estate is coming to an end. London-based Grosvenor Group, which manages investments on behalf of the Duke of Westminster, said in its annual report that years of rising property values could be set to reverse. While it isn’t possible to predict when the market will turn, ‘it is only a matter of time,’ said Nicholas Scarles, group finance director, in the 2015 report. Real-estate investment surged after the 2008 financial crisis, pushing values of commercial and residential property to record highs in cities around the world. Amid low interest rates, returns in property looked attractive compared with other asset classes. Stock-market volatility, low oil prices and political uncertainty have dampened demand. High-end housing markets in cities like London and New York have softened in the past year. Commercial property transaction volumes totaled $1.2 trillion in 2015, down 2% from 2014, according to data-provider Real Capital Analytics.” (The Wall Street Journal)
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