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10 Must Reads for the CRE Industry Today (February 22, 2017)

10 Must Reads for the CRE Industry Today (February 22, 2017)


  1. Are REITs Right for Your Retirement Portfolio? “Real estate is often viewed as an effective way to hedge against market volatility. In a 2016 Bankrate survey, 25 percent of U.S. investors chose real estate over stocks as their preferred long-term investment target. While owning real estate can be lucrative, it's not necessarily the most feasible option for every investor. Acting as a landlord, for instance, can be both costly and time-consuming. A real estate investment trust, by comparison, offers many of the same benefits associated with direct property ownership without the hands-on management responsibilities. REITs are designed to generate income for investors and they also offer an opportunity for long-term growth. As you're planning your retirement investment strategy for 2017 and beyond, it's important to ask yourself whether a real estate investment trust belongs in your portfolio.” (U.S. News & World Report)
  2. Investing in Real Estate With Your IRA: A Primer “Real estate can fund your retirement—but brace yourself for lots of risk and rules. Self-directed individual retirement accounts allow people to diversify their investments into assets other than the traditional stocks, bonds and mutual funds that make up most retirement plans. Examples of alternative investments include real estate, precious metals and oil and gas holdings. The catch: The IRS requires a qualified trustee or custodian to administer the assets, such as handling transactions and managing paperwork and reports. So far, only about two dozen companies in the U.S. can act as custodians of self-directed IRAs.” (The Wall Street Journal, subscription required)
  3. Trump, The Russian Connection, And The Future Of Ultra Luxury Real Estate “Whatever your political optics no one can avoid the word “Trump” these days. So amid all of the executive orders, cabinet hearings, and media ju-jitsu doesn’t anyone else find it surprising that we haven’t heard much about the segment of the economy closest to the new President’s heart: luxury real estate? If the sparkling, new multi-million dollar Sunny Isles Ritz-Carlton Residences sales center just north of Miami Beach is any indication of what the ‘Trump Effect’ means for international real estate investment in the U.S., it’s already giving it a nice tailwind. It’s also a telling symbol in some ways of what a Trump Presidency represents economically and globally from the outside in. Even during the Great Recession and Trump v. Clinton, luxury American real estate never lost its appeal to high net worth international buyers, particularly from emerging economies like Turkey, Brazil, Russia, and China. The U.S. dollar and stock markets remain strong. The rule of law still prevails. And despite recent financial disclosure requirements for residential purchases over $5 million, the American pied-a-terre is still one of the world’s safest (and most enjoyable) financial investments.” (Forbes)
  4. Blackstone Nabs $1.7B US Portfolio from Swedish Pension Fund “In spring 2016, occupational pension fund manager Alecta tapped JLL’s Global Capital Markets group to market the portfolio, which consists of 47 office, retail, multifamily and industrial properties spanning the U.S. and U.K.  Investors don’t shell out the big bucks for nothing. “With current economic instability, the portfolio offers a significant concentration of properties located in resilient markets with strong underlying fundamentals,” Stephen Collins, Americas head of JLL’s Capital Advisors business, said in a prepared statement upon announcing the marketing assignment last year. Blackstone grabbed the U.S. segment of the collection, adding 21 assets to its holdings at a price tag of $1.7 billion. The acquisition financing was a two-part endeavor, with The Royal Bank of Canada supplying a $799 million loan for the office, grocery-anchored and high-street retail, and industrial properties. And a government-sponsored enterprise came through with a $93 million loan for the multifamily communities. Blackstone’s new acquisitions are none too shabby; the portfolio features such top-tier locations as Chicago, San Francisco and Washington, D.C., home of the premier 230,000-square-foot office tower at 815 Connecticut Ave. NW.” (Commercial Property Executive)
  5. Apple’s spaceship campus has an official name “Apple’s spaceship-looking campus is scheduled to open to employees in April, the company said today, announcing its official name: Apple Park. One interesting note from Apple’s post: The building is ‘the site of the world’s largest naturally ventilated building, projected to require no heating or air conditioning for nine months of the year.’ That is one of the campus’ several energy conservation-related features; it will be powered by 100 percent renewable energy and a large on-site solar installation. If you’re wondering, the top result for “world’s largest naturally ventilated building” is currently for Russia Tower, a skyscraper project that was planned for Moscow and reportedly canceled — and designed by Foster + Partners, the same architecture firm that designed Apple Park.” (Recode)
  6. Wal-Mart Is Selling Below The Replacement Cost Of Its Real Estate And Other Tangible Assets “Market currently values Wal-Mart at the replacement cost of its real estate and other real assets. You get all other assets and growth prospects for free. It is paying a shareholder yield of 7.7%. The way I like to think about valuation of companies is in the replacement cost of the assets and the cash flow derived from those assets. What would someone have to spend to recreate a company? What sort of cash flow would they get if they just wanted to maintain the value of that company and put the rest of the cash in their pockets? Wal-Mart (NYSE:WMT) provides a relatively easy case study for such a valuation method. In order to value Wal-Mart in this way we must first find the replacement cost of their tangible assets. Wal-Mart owns 1 billion square feet of retail space and distribution facilities. I went back through 25 years of annual reports to find the amount of money Wal-Mart has spent each year on Land and on Buildings and Improvements. I used those numbers to value the real estate in two different ways.” (Seeking Alpha)
  7. Sporting goods retailer gears up for new store openings “Dick’s Sporting Goods is expanding its breadth. The chain is preparing to open five stores during the second week of March, a move totaling approximately 180,000 sq. ft. of retail space. Specifically, a new Dick’s Sporting Goods will open in the Glendale area of Queens, New York, in one of the former Sports Authority locations that the company took over late last year. Another Dick’s store will open in Hinesville, Georgia. The company will also open a Dick’s Sporting Goods, Field & Stream and Golf Galaxy all under one roof in Davenport, Iowa – the third all-inclusive store of its kind in the country, the chain said. These new locations have created more than 370 total jobs through the hiring of full-time, part-time and temporary associates.” (Chain Store Age)
  8. MBA Special Report: Q&A Fannie Mae’s EVP of Multifamily “Jeffery Hayward, head of Fannie Mae’s multifamily mortgage business, spoke to MHN at the Mortgage Bankers Association CREF/Multifamily Housing Convention & Expo. In the following conversation, Hayward shared a few highlights from 2016, as well as initiatives that Fannie Mae is embarking on in 2017.” (MultiHousing News)
  9. Economy Watch: Robust Demand for U.S. Data Centers “Data centers had a good year in 2016, and they continue to be a strong asset class, according to a recent report by CBRE on the property segment. One reason for its robustness is that hyperscale cloud service providers have lately formed one of the main drivers of data center space absorption. Enterprise-driven requirements are generally shrinking, and end users are becoming more sophisticated at scaling or right-sizing their IT needs. Thus, end users are incorporating cloud solutions that reduce their need for traditional space and power-based co-location requirements, the report said. Looking ahead, more speculative data center capacity is scheduled for delivery in 2017 than in each of the past several years. The increase in capacity should facilitate increased leasing activity in supply-constrained markets.” (Commercial Property Executive)
  10. Massey pledges no city business with campaign donors “Paul Massey says the city won’t do any business with donors to his campaign if he’s elected mayor. But given his deep connections to the industry and how entwined it is with city government, it might be a difficult pledge to keep. During his first press conference since announcing his candidacy for mayor, the Cushman & Wakefield executive stood outside City Hall Tuesday morning and railed against Democratic incumbent Mayor Bill de Blasio. Massey castigated de Blasio over the mayor’s use of taxpayer funds for his legal defenses, remarking that de Blasio awarded ‘sweetheart contracts’ to special interests and sold off city property ‘to friends at below-market value.’ ‘[The city] needs a leader who will pledge no city business will be awarded to campaign donors,’ Massey, a Republican, said. ‘Taxpayers will not be forced to foot the bill for corruption charges coming out of City Hall. That’s a pledge I’m willing to make to every New Yorker.’ A spokesperson for de Blasio’s campaign could not immediately be reached for comment.” (The Real Deal)


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