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10 Must Reads for the CRE Industry Today (February 24, 2017)

10 Must Reads for the CRE Industry Today (February 24, 2017)


  1. 4 reasons international high-net-worth buyers invest in U.S. real estate “The rule of law still matters to international real estate investors. High-net-worth individuals investing in real estate do not act monolithically. The U.S. must take advantage of its strengths and be aware of emerging competitors. Why do high-net-worth individuals (HNWI) from outside the U.S. choose to invest in the U.S. real estate market? At the conclusion of a recent networking gathering, a participant came up to me and inquired about this. We had a good conversation, and I thought it worth sharing my observations.” (Inman)
  2. 6 key trends affecting healthcare real estate in 2017 “On January 20, 2017, President Trump signed an executive order indicating "prompt repeal" of the Affordable Care Act (ACA) and instructed federal agencies to use "all authority and discretion available to them to waive, defer…or delay the implementation of any provision … that would impose a fiscal burden on any State or … individuals." Republicans have made efforts to repeal the ACA since its enactment, but Congress has not yet acted in 2017 to make significant changes to the law. One may only speculate as to the extent to which the ACA will be unraveled and how it will be done. Republicans have circulated multiple plans to replace the law, and Republican leadership has indicated that a replacement plan should reverse the expansion of Medicaid, strengthen Medicare, and give taxpayers "more control and more choices" in selecting plans, while maintaining the ban on preexisting conditions. Rep. Tom Price, M.D. proposed a bill last year which would fully repeal the ACA and replace it with a plan which includes individual health pools, expanded HSAs and elimination of the healthcare exchange. This legislation passed in Congress under budget reconciliation rules but was vetoed by President Barack Obama.” (Becker’s Hospital Review)
  3. J.C. Penney to close 130 to 140 stores “J.C. Penney Co. will shutter two distribution centers and 130 to 140 stores as the big-box department store contends with falling foot traffic and ramps up to compete with online retailers. The closures announced Friday represent 13% to 14% of the company's store portfolio, less than 5% of total annual sales and 0% of net income. The announcement came as Penney reported its first annual profit since 2010. Still, Penney's shares, battered 17% so far this year, lost another 3.5% premarket to $6.62. Chief Executive Marvin Ellison said closing stores will allow Penney to adjust its business to ‘effectively compete against the growing threat of online retailers.’ He said maintaining a large store base gives Penney a competitive advantage in the evolving retail landscape since its locations are a destination for personalized beauty offerings, special sizes, affordable private brands, and home goods and services.” (MarketWatch)
  4. Kohl's, Macy's turn landlords in bid to unlock real estate value “Department store operators Kohl's Corp (KSS.N) and rival  Macy's Inc (M.N) are betting on a potential money-spinner – carving out prime space within their sprawling stores and  leasing them to other retailers. The move underscores the pressing need for the two chains to better monetize their real estate assets at a time when fewer people are visiting malls and instead shopping online for everything from clothes to home decor items. Kohl's said on Thursday it would operate 500 of its nearly 1,150 stores with much lower square footage and would look to lease out the remaining space to other retailers. Macy's, whose flagship locations include Herald Square in Manhattan and Union Square in San Francisco, is also planning to carve out storefront space for high-end retailers and lease or sell that space, Chief Executive Terry Lundgren said on Tuesday. The companies, whose stores are located in prime shopping districts, are hoping that leasing out store space to popular brands will not only generate a steady rental income but also attract more shoppers to its own stores.” (Reuters)
  5. Gap CEO: Retail Bankruptcies Are Actually Good News For Us “Did your favorite retailer go out of business? Gap's chief executive would like you to think about shopping at its stores, please and thank you. On a call with analysts and investors on Thursday, Gap CEO Art Peck noted that some of its previous competitors have gone belly up and the company is in a position to benefit from the thinning of the crowd. ‘When the lights go off and the windows get boarded over, that is market share that is made available to the rest of the industry,’ said Peck. ‘She isn't stopping shopping, she's just shopping somewhere else.’ Gap, which owns names like Gap, Old Navy and Banana Republic and is trying to come out of a serious sales slump, would like to be that somewhere else.” (Forbes)
  6. Berkadia’s Head of Investment Sales on Investment Strategies “When Keith Misner joined Berkadia back in December 2015 as head of investment sales, he brought more than 25 years of experience to the Berkadia team and made an immediate impact in expanding the company’s investment sales presence across the country. Previously, Misner served as senior vice president and portfolio manager at Abacus Capital Group LLC, senior vice president of transactions at AIMCO and held senior leadership roles at Grubb & Ellis, CBRE, GreenCastle Development and Cushman & Wakefield. Misner recently took time from his busy schedule to chat with MHN about the year we left behind and what he sees ahead.” (MultiHousing News)
  7. Jerry Brown comes out against L.A. real estate development measure “Wading into the contentious debate over real estate development in Los Angeles, Gov. Jerry Brown on Thursday lent his formal opposition to Measure S, suggesting the city ballot initiative dubbed by opponents as a “housing ban” is too restrictive. ‘I join with all those who say Measure S goes too far,’ Brown said in a concise statement released by the ‘no’ campaign, which pointed to the Democratic governor’s proposed state budget summary warning about impediments to creating more housing. Measure S, sponsored by Michael Weinstein of the Los Angeles-based AIDS Healthcare Foundation, would temporarily halt development projects seeking General Plan amendments or other changes resulting in an increase in height or density. They argue it would patch a broken planning and land-use system.” (Sacramento Bee)
  8. Affordable Housing Portfolio Trades Hands for $180M “Kline Enterprises has sold a 1,009-unit affordable housing portfolio managed by First National Properties for $180 million. The buyer was a joint venture between Hudson Valley Property Group, Red Stone Cos. and Wheelock Street Capital. The senior- and family-affordable assets are in Paterson, Orange, East Orange, Metuchen, Old Bridge, Hazlet and East Windsor, all locations in New Jersey. The seven properties are subsidized by long-term, project-based Section 8 contracts and encumbered by various regulatory restrictions. The $180 million value is the result of a sophisticated financing structure specific to portfolio transactions. The sale of the portfolio will ensure long-term affordability for over 2,500 residents and preservation of the assets through sustainable upgrades and planned renovation over the next several years. SVN Affordable/Levental Realty was the listing broker tasked with marketing on behalf of Kline.” (MultiHousing News)
  9. Structured Development Announces 100KSF Office Sale “Structured Development’s founding principal, Michael Drew, announced the $27.8 million sale of 1333 N. Kingsbury, a 100,000-square-foot office building in Chicago’s Clybourn Corridor. Credit Suisse Group, a Zurich-based company bought the asset for $278 per square foot. Cody Hundertmark and Blake Johnson of CBRE represented the seller, Everbury Partners, a limited partnership managed by Drew. Prior to becoming an office space, 1333 N. Kingsbury housed manufacturing operations for Peppers Waterbeds. Drew converted the building intro a multi-tenant office building including college sports recruiting firm National Collegiate Scouting Association, which occupies 38,000 square feet and recruiting and staffing firm TrueBlue, which occupies 30,000 square feet. According to Yardi Matrix, the office building also includes 56,000 square feet of retail space.” (Commercial Property Executive)
  10. Miami commission approves permits for Midtown 6 and 7 towers “A pair of new residential towers being proposed at Midtown Miami cleared a final government hurdle. on Thursday. The Miami City Commission approved permits for Midtown 6 and Midtown 7, as well as tandem loading berths and height increases for the two projects. A partnership between the Magellan Development Group and Alex Vadia, who owns the development site totaling nearly 4 acres on Northeast First Avenue from 30th and 31st streets, is building the two 32-story towers with 838 total units. The towers are being built on top of a four-story podium that includes 39,718 square feet of retail and office space. The buildings will also share a common courtyard and pedestrian plaza, but will each have a garage with a total of 1,101 parking spaces. The commission voted 3-0 to grant a major use special permit for Midtown 6, which will house 447 units, and a class II permit for Midtown 7, which will have 391 units. In addition, the commissioners also approved a height increase of up to 10 percent for both buildings and tandem loadng berths.” (The Real Deal Miami)
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