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10 Must Reads for the CRE Industry Today (February 8, 2018)

10 Must Reads for the CRE Industry Today (February 8, 2018)


  1. Here are the 10 hottest rental markets to make investors' landlord dreams come true “Home prices continue to climb in already-expensive Seattle, but investors with enough cash to get into the city's landlord business could see big returns. Seattle ranked in the Top 3 of the nation's best markets for rental real estate investors, according to an ‘opportunity’ list from HomeUnion, a single-family-rental acquisition and management company. Despite its high home prices, Seattle is seeing increasing demand for rental dwellings because of robust job growth in the area. Amazon alone recently announced it was hiring 100,000 new employees, and while they won't all work in Seattle, the corporate headquarters will need to grow for support. New jobs mean stronger demand for rental housing. The story is much the same in Atlanta, which topped HomeUnion's list as the best opportunity for single-family-rental investors. Both the Falcons and the Braves are building new stadiums in Atlanta, which will create an estimated 75,000 jobs for the city. Plus, home prices in Atlanta have not yet recovered as well as those in other markets, so investors can get in more easily and reap higher rents because of the increased demand.” (CNBC)
  2. Economy Watch: US Has 3 of Top 10 Most Dynamic CRE Markets “Where is the economy and the commercial real estate market changing the most quickly? According to the fourth edition of JLL’s City Momentum Index, which was published recently, Bangalore takes the No. 1 spot this year, with London (No. 1 last year) being bumped down to No. 6, largely on account of Brexit and its aftermath. Ho Chi Mihn City (Saigon) was No. 2 and Shangai was the top Chinese city at No. 4. The index tracks the speed of change of a city’s economy and commercial real estate market, identifying those cities that have the most dynamic attributes over the short and long term. It covers 134 major established and emerging business hubs across the globe, tracking 42 elements of a city’s dynamism.” (MultiHousing News)
  3. Japan's Sharp may break ground on $7 billion U.S. plant in first half: source “Japanese display maker Sharp Corp may start building a $7 billion plant in the United States in the first half of 2017, taking the lead on a project initially outlined by its Taiwanese parent Foxconn, a person with knowledge of the plan said. A decision by Foxconn to give Sharp the lead would come as Japanese Prime Minister Shinzo Abe prepares to travel to the United States to meet U.S. President Donald Trump, who in his inauguration speech vowed to put "America first". In a package Tokyo hopes will please Trump, Abe will unveil investments to create as many as 700,000 U.S. jobs, people familiar with the matter told Reuters earlier. "The investment will be by a Japanese consortium that will also include manufacturing equipment makers," said the person, who was not authorized to speak with media and so declined to be identified. A spokesman for Sharp said no decision on building a plant had been made. Foxconn, formally Hon Hai Precision Industry Co Ltd, did not immediately respond to a request for comment.” (Reuters)
  4. Department of Defense looks to rent space in Trump Tower “The Department of Defense is seeking to rent space in President Trump’s New York skyscraper, Trump Tower, a move that could directly funnel government money into the president’s business interests. The U.S. military agency is ‘working through appropriate channels . . . to acquire a limited amount of leased space in Trump Tower,’ Lt. Col. J.B. Brindle, a Pentagon spokesman, told The Washington Post in a statement late Tuesday. ‘The space is necessary for the personnel and equipment who will support the POTUS at his residence in the building,’ Brindle said. The space will be separate from the Secret Service detail that is routinely based in Trump’s signature midtown tower, where his private company, the Trump Organization, is headquartered and where he owns a lavish triplex penthouse. Although Trump now officially lives in the White House, the Trump Tower residence still houses his family, including first lady Melania Trump and their son, Barron.” (The Washington Post)
  5. BKM Launches Value-Add Fund, Targets $300M in Equity “Nearly one year after closing its debut fund, BKM Capital Partners, a California-based fund manager, has launched its second value-add institutional fund focusing on multi-tenant industrial assets. BKM Industrial Value Fund II LP will target $300 million in equity commitments and deliver $850 million in buying power. The fund will invest in the acquisition, improvement and repositioning of undervalued multi-tenant light industrial and small and mid-bay industrial warehouse properties in the Western U. S. to drive maximum value. 'There is a disconnect in the market in our niche asset class that has allowed us to consistently acquire these properties at a significant discount to replacement cost and peak pricing,' Brian Malliet, CEO & co-founder of BKM Capital Partners in Newport Beach, Calif., said in a prepared statement. 'We have a deep pipeline of opportunities, which is why we have more than doubled our target equity goal for Fund II.'” (Commercial Property Executive)
  6. Ey On Real Estate Private Equity Trends “The global real estate division of financial consultancy Ernst & Young recently published a report on the private equity outlook in the real estate space. As the head of the division, Mark Grinis, says in an introduction, the premise of the report is that success in this space requires managerial focus on fundamentals, including the ability to keep 'one eye on international events and the impact they may have on their local investments.' The report starts with interest rates, and especially with the policy of the U.S. Federal Reserve. EY expects that the Fed’s funds rate will increase, modestly, and this “may increase the expense of developing new projects and refinancing existing projects.” But it does not believe that this poses a grave threat to asset values. Part of the reason it doesn’t pose such a threat is that the debt market is increasingly sophisticated, allowing real estate investors to ‘source debt packages that are not closely tied to rates in short-term markets.’” (Seeking Alpha)
  7. Sears' mounting debt load signals new financial stress “Sears is shuttering an additional 150 unprofitable stores, including 108 Kmart and 42 Sears stores, in an effort to curtail losses. The closures would leave Sears with fewer than 1,500 stores, down about 60% from 2011 totals. In a report mailed to Retail Dive that month, Debtwire analysts noted a potential change in tone from Sears executives that could suggest the once-iconic retailer is beyond the brink: That report highlighted Sears earnings reports in which the company underscores its intent not to borrow money to fund continued operating losses, but rather to “provide flexibility.”  “In reading the tea leaves, we compare this comment made in 2Q: ‘ it relates to funding our transformation, we continue to focus on the funding of our transformation while meeting all of our financial obligations,’ to this one in 3Q: ‘We believe that we have the resources to fund our transformation and meet all of our financial obligations,’ the Debtwire report reads. 'The intent behind the two statements may be the same, but we wonder if there is a subtle shift in tone when considered with the new language of not funding losses.' Sears has touted its ambitions to become an 'asset-light' company and to focus on becoming a “member-focused” one, and — in a December statement on the $200 million credit line — CFO Jason M. Hollar reiterated that stance.” (Retail Dive)
  8. City saw fewer, but larger air-rights deals last year “Fewer but larger air-rights transactions in Manhattan pushed the average price of an air-rights deal up 5 percent last year from 2015. Prices rose to an average of $292 per square foot, compared with $277 per square foot in 2015, a new TenantWise report has found. The highest price per square foot, $1,258, was paid by Extell for just 16.000 square feet of transferable development rights by the Theater District. Four jumbo deals in Hudson Yards totaling 843,293 square feet skewed the average deal size up to 51,918 square feet. By comparison, in 2015 there were just two Hudson Yards transactions for a total of 97,713 feet.” (New York Post)
  9. McPier says it's worth $1.7 billion a year to Illinois “The agency that runs McCormick Place is reminding Illinois lawmakers just how big an impact the convention center has on the state's economy. Amid a two-year budget fight in Springfield that has bruised it financially, and with a new hotel and basketball arena opening later this year, the Metropolitan Pier and Exposition Authority today released a wide-ranging study it commissioned to quantify how much money it generates for Chicago and Illinois. The big headline of the 112-page report: Over a five-year period from 2014 through 2018, the McCormick Place campus will generate $9.4 billion from operations, infrastructure improvements and construction of a new Marriott Marquis hotel and 10,000-seat Wintrust Arena.” (Crain’s Chicago Business)
  10. Mapped: The 30+ new buildings taking over Koreatown “Los Angeles is always evolving, but some neighborhoods change faster than others. A few years from now, it's hard to imagine any part of the city looking as different as Koreatown. With new buildings going up left and right, entire blocks could be nearly unrecognizable in a relatively short amount of time. Much of the area's development activity is concentrated around the Wilshire corridor, but a number of projects are also popping up to the north and south. And one development firm in particular seems to be on a mission to singlehandedly reinvent the neighborhood. We've mapped out all the major projects that have been proposed or are under construction in the area. It gives a sense of just how appealing the area seems to have become for developers.” (Los Angeles Curbed)
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