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10 Must Reads for the CRE Industry Today (April 8, 2016)

10 Must Reads for the CRE Industry Today (April 8, 2016)


  1. Yellen, Alongside Former Fed Chairs, Says Rate Hikes on Track “The U.S. economy is on a solid course with some hints of inflation so the Federal Reserve is on track for further interest rate hikes, Federal Reserve Chair Janet Yellen said on Thursday in a defense of her decision to tighten policy late last year. In a rare spectacle, Yellen spoke on a New York panel alongside her three predecessors who ran the world’s most powerful central bank. She said that, seven years after the brutal financial crisis, the U.S. labor market was now ‘close’ to full strength, again arguing that inflation would not be held down much longer by the strong dollar and low oil prices.” (Fortune)
  2. Fed’s George says commercial real estate a potential asset bubble “The commercial real estate market is a potential asset bubble that ‘bears watching,’ said Kansas City Fed President Esther George on Thursday, pressing her case for the U.S. central bank to ‘stay the course’ and gradually raise interest rates.‘ In the long run, a failure to keep interest-rate policy in line with improving fundamentals can distort the allocation of capital toward less fruitful—or perhaps excessively risky—endeavors,’ George said in a speech to an economic forum in York, Nebraska.” (MarketWatch)
  3. U.S. Will Appeal Metlife Ruling, Saying Yes it Is 'Too Big to Fail' “Federal regulators’ decision to designate insurer MetLife Inc as ‘too big to fail’ was ‘arbitrary and capricious,’ the U.S. judge who struck down the determination last month wrote in an opinion that was unsealed on Thursday. The U.S. government plans to appeal the court decision, a Treasury spokesman said in a statement late on Thursday. Treasury Secretary Jack Lew said he strongly disagreed with the decision and the government would vigorously defend the work of the Financial Stability Oversight Council (FSOC), made up of several U.S. regulatory agency chiefs, which designated MetLife as a systemically important financial institution in 2014.” (Fortune)
  4. Can Commercial Real Estate Maintain Momentum? “Two new data reports on the commercial real estate sector offer very different visions regarding the sector’s vibrancy, with one detailing a healthy 2015 and the other forecasting a bumpy near-term future. First, the year that passed: 2015 saw commercial and multifamily mortgage bankers closing $503.8 billion in loans, according to the 2015 Commercial Real Estate/Multifamily Finance Annual Origination Volume Summation published by the Mortgage Bankers Association (MBA). Last year’s level was 26 percent higher than 2014, while dollar volume of closed loans rose by 17 percent year-over-year.” (National Mortgage Professional)
  5. Multifamily REITs Hold Strong Despite Softening “Multifamily fundamentals are beginning to soften, after several strong years, with apartment completions expected to peak in 2016. This peak should result in an increasing vacancy rate over the next two years. Notwithstanding these early indicators, multifamily REITs are expected to outperform REITs in other sectors, given ongoing preference to rent versus buy within the markets in which they operate, limited development exposure, and good rent and same-store NOI growth. Of the seven traditional multifamily REITs that we rate, five have a positive outlook and two are stable, reflecting continued earnings growth and solid balance sheet and cash flow metrics in the sector.” (Commercial Property Executive)
  6. There are too many sporting goods stores and not enough customers “An oversaturation of brick-and-mortar sporting goods retailers could pose a problem for Dick’s Sporting Goods Inc., even with another competitor on the brink of bankruptcy, say Credit Suisse analysts. Vestis Retail Group, which owns Eastern Mountain Sports, Bob’s Stores and Sport Chalet, is exploring a bankruptcy filing, Bloomberg reports, citing a person familiar with the matter. The three chains have about 146 stores combined. This report comes just weeks after rival Sports Authority filed for bankruptcy protection. It plans to shut about 140 locations.” (MarketWatch)
  7. Victoria's Secret owner L Brands to restructure business “Victoria's Secret owner L Brands reported March sales at established stores above analysts' expectations and said it would restructure its business to focus on core categories. L Brands said it would create three units within its Victoria's Secret business — Victoria's Secret Lingerie, Pink and Victoria's Secret Beauty — and eliminate certain merchandise categories. The changes are aimed at narrowing the company's focus and simplifying the operating model, Chief Executive Leslie Wexner said on Thursday.” (CNBC)
  8. How much longer will the love affair last? “It’s no secret that New York City developers have over the past few years been tapping the EB-5 spigot. Giant builders like Macklowe Properties, Extell Development, the Witkoff Group and the Related Companies have all helped themselves to the relatively cheap capital they can access through the program. But now, the relative affordability of EB-5 cash compared with traditional financing—the main draw of the program—is being compromised by strong developer demand, increased competition for Chinese investors and a rise in the fees charged by intermediaries, sources told The Real Deal.” (The Real Deal)
  9. Manhattan rents finally went down “The median rental price in New York City's most expensive borough dropped 2.8% to $3,300 in March from the same time a year ago. This is the first annual decline in 24 months, according to the latest report by real estate appraisal firm Miller Samuel for Douglas Elliman Real Estate. ‘The rental market is sitting within the city's robust economy so that drives demand,’ said Jonathan Miller, CEO of appraiser firm Miller Samuel. ‘But there has been this disconnect with the type of housing we are bringing to market and the wages that are being paid.’ The rental market has been tapping the brakes since August, but Miller doesn't expect rents to continue to decline.” (CNN)
  10. Beninati accuses Kalikow of ‘calculated scheme’ to take over Sutton Place project “It seems the battle for control of one of the city’s most talked-about development sites has only just begun. Bauhouse Group chief Joseph Beninati plans to take legal action against lender Richard Kalikow for allegedly conspiring to wrest control of his planned residential tower at 3 Sutton Place, he said in documents filed with the United States Bankruptcy court Wednesday. Beninati alleges that Kalikow, his lender on the $1 billion condo project via his company Gamma Real Estate, engaged in a 15-month-long ‘calculated scheme’ designed to sideline him from his own development, using insider information obtained from Beninati’s own lawyer, who also happens to be Kalikow’s cousin.” (The Real Deal)
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