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10 Must Reads for the CRE Industry Today (August 9, 2018)

The U.S. Treasury made a proposal for new tax regulations on pass-through entities, reports Reuters. Mall owners are leasing space to co-working firms, according to CNBC. These are among today’s must reads from around the commercial real estate industry.

U.S. Treasury Proposes Tax Rules on Pass-Through Businesses “The U.S. Treasury on Wednesday proposed tax regulations for a new 20 percent income tax deduction for owners of businesses organized as pass-through entities, including rules to prevent the measure from becoming a tax loophole for wealthy Americans. The regulations are intended to provide everything pass-through owners need to comply with the Republican Tax Cuts and Jobs Act, a sweeping overhaul of the U.S. tax code that President Donald Trump signed into law in December.” (Reuters)

Rite-Aid, Albertsons Call Off Merger Amid Investor Opposition “In a surprise move, Rite Aid Corp. and Albertsons Cos. called off their planned $24 billion merger on the eve of a shareholder vote in the face of mounting protests from investors. Some of Rite Aid’s biggest shareholders had planned to vote against the pharmacy’s planned merger with privately held grocer Albertsons, unconvinced by the companies’ argument that a deal was necessary to fend off competition from Inc. and others.” (Wall Street Journal, subscription required)

Wall Street Doubts Recent Pledge of Top Fed Officials That Central Bank Can Keep Balance Sheet Reduction Plan “Even though the New York Federal Reserve’s top markets official recently insisted the central bank’s campaign to shrink its $4.2 trillion balance sheet is running smoothly and will continue, Wall Street is abuzz with talk that it will end sooner rather than later. In a speech in Manila last weekend, Simon Potter, the New York Fed’s markets chief, said the Fed’s balance sheet reduction would continue ‘without unnecessary surprise, disruption, or volatility in financial markets.’” (MarketWatch)

Pricey Housing Markets in West Are Cooling Off Most Quickly “Western states experienced the sharpest decline for existing-home sales in the second quarter, a sign that rising prices, higher mortgage rates and, to a limited extent, the new tax law are weighing on pricier markets. Existing-home sales in the western region, including California, Washington and Arizona, declined 4.1% in the second quarter compared with the first quarter, according to data released Wednesday by the National Association of Realtors.” (Wall Street Journal, subscription required)

Shopping Mall Owners Fill Empty Stores with Offices as Coworking Companies Branch Out “Empty since 2016, the former Barney's at Scottsdale Fashion Square mall in Arizona is finally getting a new tenant, and it isn't exactly selling shoes. In Scottsdale and elsewhere across America, stores left vacant by retailers, including now-bankrupt Toys R Us and Bon-Ton, are being converted into shared office space. Mall owners are increasingly turning to unconventional tenants to fill some of the estimated 200 million square feet of retail space that's closed or is expected to close since the beginning of 2017.” (CNBC)

Renting Has Spiked in America’s 50 Largest Cities Over the Last Decade “A decade after the Great Recession, homeownership is on the rise in the U.S. But for many residents of the country’s largest cities, renting is still the reality. The share of people renting their home, rather than owning it, increased in all 50 of the largest cities in the country between 2006 and 2016, according to a new report from real-estate website ZG. Renter households now represent the majority in 29 of those 50 cities — back in 2006 at the start of the housing crisis, only 16 had renter-household majorities.” (MarketWatch)

Singapore Overtakes China as Top Asian Capital Source in 2018 “According to global real estate consultant CBRE, commercial real estate investment volume in Asia totaled $118.8 billion in Q2 2018, an increase of 1.7% from Q2 2017. There was minimal movement in cap rates in H1 2018, according to the latest CBRE Cap Rate Survey. The largest changes were industrial cap rates decreasing by 10 basis points (bps) year-over-year and retail power center cap rates increasing by 26 bps.” (World Property Journal)

Rent Control Is an Emerging Issue in the Governor’s Race “It hasn’t received much attention yet, but the question of whether to allow local units of government to impose rent control is beginning to emerge as an issue in the race for governor. Current state law flatly bans Chicago, Cook County and other municipalities from adopting across-the-board limits on rent. With gentrification and the rent hikes that go with it sparking increasing debate in some parts of the city, progressive activists have stepped up efforts to change things.” (Crain’s Chicago Business)

Goldman Sachs Buys 830 KSF Midwest Industrial Portfolio “Goldman Sachs Asset Management Private Real Estate (GSAM PRE) has added 830,000 square feet of industrial product to its holdings. The asset manager recently acquired a group of 10 industrial properties referred to as the Chicago Urban Industrial Portfolio. The Chicago Urban Industrial Portfolio is located in Cook and DuPage counties, with the majority of the assets situated in the O’Hare, North Cook and North DuPage submarkets.” (Commercial Property Executive)

A Rare Break for Renters: 325 Units at Waterside Plaza Could Become Affordable “Residents used to pay well below market rates at Waterside Plaza, raising families and growing old in a middle-class Manhattan community of four residential towers on the East River. But rents soared and scores of tenants moved out after the development aged out of the state’s Mitchell-Lama program two decades ago. The surrounding Manhattan neighborhood changed, and today only about 28 percent of the apartments are still occupied by longtime residents.” (The New York Times)

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