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10 Must Reads for the CRE Industry Today (February 1, 2017)

10 Must Reads for the CRE Industry Today (February 1, 2017)


  1. Kushner divests equity in major NYC property “Jared Kushner has divested his equity interest in 666 Fifth Avenue, a 39-story office and retail building on Manhattan’s famed shopping area, according to a spokesperson at Kushner Companies. Kushner said he would step down as CEO of Kushner Companies, a family-owned real estate company, and begin to divest himself of substantial assets after he was made a senior White House advisor to US President Donald Trump, his father-in-law. ‘Mr. Kushner divested his equity interest in 666 Fifth Avenue, and has no role in the management or operations of the property,’ a Kushner Companies spokesperson said in an emailed statement to IFR. 'Mr. Kushner’s ownership interests were sold using a third-party appraisal for fair market value to a family trust, of which he is not a beneficiary,' the spokesperson said. Neither Ivanka Trump nor her and Kushner’s children are beneficiaries to the family trust, the spokesperson also confirmed." (Reuters)
  2. Halle: May See Real Estate-Friendly Trump Policies  [VIDEO] “PGIM Real Estate Global Head of Real Estate Securities Marc Halle weighs in on the impact of President Trump’s policies on the real estate market. He speaks on ‘What’d You Miss?’” (Bloomberg)
  3. Cbl, Sears In 7-Store Sale-Leaseback “Shopping center REIT CBL & Associates Properties Inc. said Monday that it had closed on a sale-leaseback transaction for five Sears department stores and two Sears Auto Centers located at CBL malls. The deal will provide CBL with control of these locations for future redevelopment. CBL paid a total of $72.5 million for the five locations. They include the Sears parcels at Cross Creek Mall in Fayetteville, NC; Brookfield Square in Brookfield, WI; Hamilton Place Mall in Chattanooga, TN; Eastgate Mall in Cincinnati; and Jefferson Mall in Louisville. The two acquired Sears Auto Centers are located at Northgate Mall in Chattanooga and Volusia Mall in Daytona, FL. Sears will continue to operate the department stores under new 10-year leases. Under the terms of the leases, CBL will receive aggregate initial base rent of approximately $5.075 million, with Sears also responsible for paying common area maintenance charges, taxes, insurance and utilities. CBL will have the right to terminate each Sears lease at any time on six months’ notice, except during the peak holiday selling season.” (Globe St.)
  4. These cities are the most and least affordable for renters “The good news for renters is that landlords today are less likely to raise the rent by a lot. The bad news is, rents are still high and unlikely to fall anytime soon. As with all real estate, though, rents are local, and some unexpected markets are heating up, while some hot ones are cooling off. Austin, Texas, for example, is one of the most affordable rental markets in the nation, even though home prices there are rising fast. The reason is that job growth and wage growth are strong in the new tech hub, and rents are still comparatively low. It would take just 23 percent of the average resident's monthly household income to pay the average monthly rent, according to a new study by AppFolio, an apartment management company which commissioned data from Axiometrics, a real estate research firm.” (CNBC)
  5. Chinese Investment In Overseas Real Estate Hit Record High In 2016 “Chinese buyers invested a record $33 billion in commercial and residential property last year, a nearly 53% increase from 2015, according to JLL Global Capital Flows. The United States was the most popular destination, drawing in $14.3 billion, followed by Hong Kong, Malaysia and Australia. The United Kingdom came in fifth, down one spot from the year before. JLL said it’s unlikely for investments in 2017 to hit the same volume as last year, due to China’s tightening capital controls. Chinese regulators stepped up oversight of capital outflows from China, which hit a high in October. Among the actions, regulators said they would need to sign off on all foreign acquisitions over $10 billion – $1 billion if outside a buyer’s core business. Regulators also said to halt all foreign real estate purchases by state-owned enterprises totaling more than $1 billion. Though the rules have been in place for a while, market watchers observed that the rules are being more strictly enforced now. Anecdotally, U.S. real estate developers and other market watchers said they’ve started to see some delays to real estate transactions by Chinese buyers as a result China’s clampdown on capital flows. Despite this, JLL said that Chinese investment will remain a an important player in the global real estate market. Chinese investors have been eager to diversify overseas into other currencies as the renminbi has been depreciating.” (Forbes)
  6. A multifamily boom is born  “Developers have big Hollywood dreams, and their target audience is millennials. Several multifamily projects are slated to hit the Hollywood market over the next few years as young creative professionals clamor for apartments in the thriving new media hub. The neighborhood hit 96.2 percent of its residential capacity at the beginning of December, according to Rainmaker Insights, the research partner of apartment search engine Rent Jungle. That’s somewhat tighter than the 95 percent the firm recorded for the City of Los Angeles as a whole. With very few vacancy signs in Hollywood, rents are climbing — a fact that hasn’t escaped the notice of developers. The average Hollywood apartment asking rent rose nearly 14 percent to $2,947 in November 2016, up from $2,595 a year earlier, according to Rainmaker Insights data scientist Michael Mele. By contrast, the firm clocked in the Los Angeles countywide rent increases at around 1 percent. The 10 largest multifamily projects that are either proposed or in construction would add 5,410 residences to the Hollywood market.” (The Real Deal Los Angeles)
  7. Blackstone's Invitation Homes raises $1.54 billion in IPO: Source “Invitation Homes, the largest U.S. home rental company, raised $1.54 billion in an initial public offering on Tuesday, the company said, setting the stage for a pick-up in IPO activity in 2017. The stock market debut is the largest by a U.S real estate investment trust (REIT) since Paramount Group raised $2.29 billion in 2014 and represents a big win for its private equity owner Blackstone Group and Jonathan Gray, who runs the firm's real-estate business. The New York-based buyout firm founded Invitation Homes in 2012, about five years after the housing market began crashing and it started buying foreclosed homes in bulk. It has spent about $10 billion on the 48,000-home portfolio, representing one of Blackstone's biggest bets. Invitation Homes priced 77 million shares at $20 on Tuesday, within its previously indicated range of $18 and $21. REITS such as Invitation Homes became popular after the recession, as investors sought to benefit from low mortgage rates and property values.” (CNBC)
  8. Economy and real estate to see better times ahead “A University of Houston economist and a group of commercial real estate brokers, in separate events Tuesday, delivered mostly upbeat messages that the worst of the oil bust is over. In the office market, the amount of sublease space has finally peaked, and the retail and industrial sectors continue to expand. But the momentum that helped propel Houston's economy through several years of low oil prices is largely gone. ‘It's going to take a long time to turn the ship,’ UH economist Bill Gilmer said to the Houston Chapter of CoreNet Global. This year, he said, is going to be much like 2016 but without the uncertainty of where the economy is headed. ‘The good news is we have turned the corner,’ Gilmer said. The momentum he was referring to during the lunchtime presentation was based on the 680,000 jobs created here from 2004 to 2014. That's the same number of jobs there are in Oklahoma City. ‘We needed to build a new metropolitan area literally inside Houston, and just because the price of oil fell at the end of 2014 did not mean that the catch-up period was complete,’ Gilmer said. Gilmer presented three scenarios of economic growth - the most ambitious showing a solid recovery and the return of energy jobs already under way. The most skeptical scenario showed a rebound that might not start until next year.” (Houston Chronicle)
  9. City Council's construction safety bills divide NYC's real estate industry “A new set of bills concerning construction safety are now at the center of a growing debate between different members of the construction industry. On Tuesday, the New York City Council began hearing testimony on a group of 21 bills that tackle several issues including crane safety, and requiring workers to take an apprenticeship program, Crain’s reports. The thrust of the discord has to do with this apprenticeship program, which NYCHA tenants in particular say disadvantages Black and Hispanic workers, according to the New York Daily News. ‘Adding an apprenticeship mandate to any legislation would create yet another barrier to employment for people of color living in NYCHA communities,’ Charlene Nimmons, a resident of Wyckoff Gardens in Brooklyn, said in a statement. ‘A government mandate requiring apprenticeships would exclude many black and Hispanic public-housing residents from construction jobs, particularly those created by NYCHA’s ongoing capital-improvement projects.’ Some developers at least were in agreement with that thought process. The Real Estate Board of New York said an apprenticeship program very clearly favored unionized labor, but the organization did offer its support to the overall package of bills, that are being called the Construction Safety Act by the City Council.” (Curbed NY)
  10. Seattle Office Development Commands $269M “A joint venture between RFR Holding and Tristar Capital has acquired Urban Union, a newly developed 290,647-square-foot, Class A office building in Seattle from Schnitzer West for $268.9 million. Kevin Shannon, Ken White and Michael Moll of NGKF Capital Markets represented the seller in the transaction. The sale price represented the largest price per square foot ever paid for an office property in the Seattle region. ‘Urban Union is a high-quality, amenitized office asset located within the South Lake Union neighborhood, one of the nation’s top performing urban office submarkets,’ Kevin Shannon, NGKF’s president of West Coast capital markets, said in a prepared release. ‘This asset offered the buyer a secure credit investment opportunity with income growth.’ The 12-story tower also contains 6,000 square feet of retail. Located at 501 Fairview Ave. North, the building is LEED Gold certified and includes amenity features such as Schnitzer West’s signature “Great Room” concept, which includes a two-story sculptural wood wall and an iconic glass blue cube that warms the entry.” (Commercial Property Executive)


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