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10 Must Reads for the CRE Industry Today (August 8, 2017)

Federal Reserve’s plan to unwind its balance sheet could disrupt the market, argues Forbes. An FHFA street test showed Fannie Mae and Freddie Mac could need a $99.6 billion bailout in the event of a financial crisis, reports MarketWatch. These are among today’s must reads from around the commercial real estate industry.

  1. The Fed’s Balance Sheet Reduction Could Be a Lot More Dangerous than People Think “The whole process is expected to take a really long time, and it is intended not to cause any economic disruption. You have to wonder, though--if balance sheet reduction is essentially quantitative easing in reverse, then isn't it possible that it could potentially deflate the values of financial assets and increase market volatility? We don't actually know how markets will behave when the Fed stops reinvesting the proceeds of its portfolio of securities, but no matter how hard the Fed tries, it could end up being very disruptive to markets.” (Forbes)
  2. Fannie and Freddie Could Need $100 Billion Bailout in Next Crisis, Stress Test Finds “Fannie Mae and Freddie Mac could need a taxpayer bailout of as much as $99.6 billion if a severe economic downturn gripped the U.S., their regulator said Monday. The Federal Housing Finance Agency released the results of a stress test that examined how the mortgage finance companies would perform in what’s called a ‘severely adverse scenario.’ The stress test was mandated by the post-financial-crisis Dodd-Frank Act and the specifics of the scenario were devised by the Federal Reserve.” (MarketWatch)
  3. The Best Place for a New Warehouse? An Old Mall “The pressure for speedy online package delivery is prompting companies to look for distribution facilities closer to residential areas or highways. Some of the best locations, it turns out, are dead malls. Warehouse landlords say they like former malls because the shopping centers occupy swaths of space relatively close to where consumers [live].” (Wall Street Journal, subscription required)
  4. How the Trump Hotel Changed Washington’s Culture of Influence “In conversations with The Washington Post, the hotel’s management described its strategy to capitalize on the president’s popularity. It markets the hotel to Republican and conservative groups that embrace Trump’s politics but takes care not to solicit business from fringe groups that would embarrass the president. Trump supporters in red ‘Make America Great Again’ caps get a chance to rub elbows with White House officials against an American flag backdrop at the Benjamin Bar, where a signature concoction of winter wheat vodka, oysters and caviar goes for $100.” (The Washington Post)
  5. Bad Reviews Threaten RLJ’s Proposed Hotel Deal “Wall Street has been hammering shares of RLJ Lodging Trust ever since the hotel company founded by storied African-American entrepreneur Robert L. Johnson announced plans in April to acquire FelCor, another lodging real-estate investment trust, at what many considered too high a price. The all-stock deal, if approved by shareholders, would create one of the largest hotel-focused real-estate investment trusts.” (Wall Street Journal, subscription required)
  6. Hong Kong Investor Buys Standard Hotel for a Discount “The High Line-straddling Standard Hotel has found a surprise buyer, sources tell The Post: Hong Kong-based wheeler-dealer Goodwin Gaw. Of perhaps greater interest to the city’s potentially oversaturated hotel market, the purchase price is likely 15 percent less than what the Standard was in contract to sell for in 2014 — although the deal never closed. Sources said that a fund controlled by Gaw Capital Partners — which is run by Goodwin, 48, and his brother and sister — is in advanced talks to pay $340 million for the marquee property.” (New York Post)
  7. Rich SF Residents Get a Shock: Someone Bought Their Street “Thanks to a little-noticed auction sale, a South Bay couple are the proud owners of one of the most exclusive streets in San Francisco — and they’re looking for ways to make their purchase pay. Tina Lam and Michael Cheng snatched up Presidio Terrace — the block-long, private oval street lined by 35 megamillion-dollar mansions — for $90,000 and change in a city-run auction stemming from an unpaid tax bill. They outlasted several other bidders. Now they’re looking to cash in — maybe by charging the residents of those mansions to park on their own private street.” (San Francisco Chronicle)
  8. Can Wendy Silverstein Rescue New York REIT? “Four months after New York REIT started liquidating its holdings, its first-quarter earnings call turned hostile. The company — which had been dogged by shareholder disputes, lackluster returns and scandals for the better part of three years — finally had a plan to recoup cash by selling off its trophy assets, but some investors and analysts expressed alarm about how it was all playing out. The real estate investment trust’s newly minted CEO, Wendy Silverstein, estimated that the sale of the company’s assets would render $9.25 per share — $1.75 less than predicted shortly before she came on board.” (The Real Deal)
  9. Urstadt Biddle Invests in New Jersey Shopping Center “Urstadt Biddle Properties Inc. acquired a share in Washington Commons Shopping Center in Dumont, N.J. According to PropertyShark, the seller was Etc Properties LP, an entity affiliated with Landmark Development. The sale was structured as a DownREIT purchase upon which Urstadt currently owns a 31.4 percent equity interest in the newly formed ownership entity, which translates into $3.9 million. The firm will also handle property management and leasing services.” (Commercial Property Executive)
  10. Target, Best Buy See Nice Return on Border Adjustment Lobbying Effort “In the first six months of 2017, Best Buy spent $1.71 million lobbying, twice as much as it spent the entire year in 2016. Target Corp. spent $1.48 million lobbying from January through June 2017, only slightly less than it spent all of last year. The numbers, drawn from government records, show the Minnesota companies’ determination to kill a border adjustment tax on imports that House Republicans made a centerpiece of their Better Way tax reform plan.” (Star Tribune)
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