10 Must Reads for the CRE Industry Today (April 27, 2016)

10 Must Reads for the CRE Industry Today (April 27, 2016)


  1. Fed set to keep rates unchanged, may nod to ebbing risks “The U.S. Federal Reserve is expected to keep interest rates unchanged on Wednesday as it continues to monitor the impact from weakening global growth but may seek to signal to markets it is determined to resume policy tightening this year. The Fed has held its overnight lending rate for banks at a target range of between 0.25 and 0.50 percent since it lifted the benchmark interest rate for the first time in a decade from near zero last December. Since then the Fed has signaled more caution, despite the U.S. economy's relative strength, as concerns a slowing China would depress global growth sparked steep stock price declines and tighter financial market conditions early in the year.” (Reuters)
  2. Here’s Why Investors Are Skittish About the Marriott/Starwood Mashup “The Starwood deal soon will test Marriott’s management skills. Starwood has 1,300 properties, upping Marriott’s size by nearly 30%. And the company will have to not only integrate two global enterprises but also make them leaner. Starwood put itself up for sale in April of last year, and its stock rose to $87 but got relatively few bids. After shares slipped, Marriott offered to buy the company for $72 a share. Then came Anbang and the counter­bidding. Now Marriott’s bid values Starwood at $79.53, excluding nearly $6 per share that Starwood’s owners will get from a timeshare business, which is being spun off. ‘The deal was a home run before the bidding battle,’ says Lukas Hartwich, an analyst at Green Street Advisors. ‘Now it’s more like a single.’ The reason? Marriott may now be paying more for Starwood than its earnings justify. After the deal is done, ownership of the combined company will be split roughly 60-40 between Marriott shareholders and Starwood shareholders, respectively.” (Fortune)
  3. Mortgage REITs are enjoying a renaissance “As the housing market recovers, investors are taking another look at some of the investments derived from bets on mortgage credit. Real estate investment trusts that buy mortgage-backed securities and other income-producers may be ready for their moment, according to analysts interviewed by MarketWatch. Year-to-date share price appreciation among mortgage REITS is mixed, but several are in the double digits.” (MarketWatch)
  4. April is proving an acquisitive month for W. P. CareyIn its second transaction in less than three weeks, the net lease REIT has added a 4 million-square-foot North American industrial portfolio to its holdings, courtesy of a $217 million sale-leaseback deal with Forterra Building Products. It’s a big deal, and W. P. Carey is no stranger to those. ‘Because W. P. Carey has access to significant capital, we see most large sale-leasebacks in the market,’ Gino Sabatini, managing director & head of net lease investments at W. P. Carey, told Commercial Property Executive. ‘The advantage we have in addition to our capital resources is the ability to negotiate the transaction, complete the due diligence and underwrite the tenant and the real estate within a time frame that meets the seller’s own timing objectives.’ Consisting of 43 U.S. properties totaling 3.5 million square feet and an additional 6 assets offering an aggregate 500,000 square feet in Canada, the Forterra collection of industrial facilities is being utilized for concrete manufacturing and quality control testing. The group of predominantly multi-structure properties also includes storage and office space.” (Commercial Property Executive)
  5. Cracks are spreading in the online industry out to disrupt the banks “Cracks are spreading in the online lending industry. Startups like LendingClub, Prosper, and Sofi — which have set out to disrupt traditional banks — are scrambling for new ways to boost revenues and funding as investors lose interest and regulators raise questions about their business models…Regulators are concerned about the online lending model and its ability to survive credit crunches or other systemic risks.” (Business Insider)
  6. Fast-Rising Home Prices Squeeze First-Time Buyers “According to the S&P/Case-Shiller index, home prices in 20 major cities are up 5.4% from a year ago. ‘5.4% is a very healthy clip. The inflation rate in the U.S. has been running at 2% or less,’ said David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. ‘These home prices are rising about two and half times faster than the rate of inflation, and there is some risk that people might be eventually priced out of the market.’ The pace of home price increases has slowed somewhat, but there are wide variations across the country.  For instance, in the Pacific Northwest, prices have surged more than 11% in the past year in cities like Seattle and Portland.” (The Street)
  7. Office Depot earnings, sales derailed by stalled Staples merger  “Office Depot put the blame for disappointing first-quarter financial results on its delayed buyout by Staples. ‘The protracted regulatory review of the pending Staples acquisition continues to have a substantial disruptive impact on our business,’ stated Roland Smith, chairman and CEO, Office Depot. ‘Our North American Business Solutions Division and International Division are more impacted by this disruption and accordingly, both failed to meet our sales and profit expectations this quarter.’ Office Depot said it expects a decision on the merger, in the works for over a year now, by May 10.” (Chain Store Age)
  8. Long Beach, CA, finalizes P3 financing for $513M civic center “The new civic center will incorporate LEED and seismic-resilient design, and it will feature city hall and port high-rise buildings, library, plaza, parking, solar and, eventually residential, retail and a hotel…Michael Conway, the city’s project lead, said utilizing the P3 framework made it possible for Long Beach to forego 'bond issues, tax measures or voter approvals' before being able to start development and construction of the civic center, according to the Construction Index… Last month, Larry Casey, executive vice president at Skanska USA, told Construction Dive that P3s are a 'terrific' way for cash-strapped municipalities and local governments to tap the resources of the private sector in the search for funding solutions for many of their larger public projects. Casey also said that just the maintenance alone of the country’s current infrastructure is going to cost an estimated $3.6 trillion by 2020, so the P3 structure is something more public agencies will have to consider.” (Construction Dive)
  9. The little-known CMBS bill that could have a major impact on NYC real estate  “New York’s real estate industry is keeping a close eye on Capitol Hill – and not just because the U.S. Senate is debating the future of the EB-5 visa program. In March, the House financial services committee quietly passed a bill that could have a big impact on commercial real estate lending. Dubbed the Preserving Access to CRE Capital Act of 2016, the bill would soften restrictions on CMBS issuance that are set to take effect in December. It still faces a vote in the House of Representatives – which may be a tall order in an election year. But if the bill passes, it would make a lot of real estate lenders — and borrowers — very happy.” (The Real Deal)
  10. Eliot Spitzer's Trio Of Modular Skyscrapers Now Underway In Brooklyn  “Three new residential towers—each resembling an asymmetrical stack of boxes—are set to spring up along Williamsburg’s waterfront, in an area once occupied by factories and shipyards in New York’s industrial heyday. Funded by former-governor-turned-real-estate-developer Eliot Spitzer, the luxury development—now under construction at 416-420 Kent Avenue—will contain a mix of studio, one- and two-bedroom leasable apartments totaling 857 residences, a fifth of which have been earmarked for affordable housing.” (Forbes)
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