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10 Must Reads for the CRE Industry Today (Jan. 6, 2020)

Bed Bath & Beyond has struck a sale-leaseback deal with Oak Street Real Estate Capital, reports the Wall Street Journal. The tax reform has made REIT conversions more attractive, according to Financial Advisor. These are among today’s must reads from around the commercial real estate industry.

  1. Bed Bath & Beyond Strikes Real Estate Deal “Bed Bath & Beyond Inc. has signed a deal to sell roughly half its real estate to a private-equity firm and lease back the space in a transaction that will generate more than $250 million in proceeds for the troubled home-goods retailer, according to people familiar with the situation. The 2.1 million square feet of space sold to Oak Street Real Estate Capital LLC includes the company’s Union, N.J., headquarters, a distribution facility and an undisclosed number of its roughly 1,500 stores, the people said.” (Wall Street Journal, subscription required)
  2. Silicon’s Valley Newest Rival: The Banks of the Hudson “When Facebook was searching for another New York office, one big enough to fit as many as 6,000 workers, more than double the number it currently employs in the city, it had one major demand: It needed the space urgently. So after the company settled on Hudson Yards, the vast mini-city taking shape on Manhattan’s Far West Side, existing tenants were told to move and a small army of construction workers quickly began to revamp the building even before a lease had been signed.” (The New York Times)
  3. Yellen Says Regulators Need New Powers to Combat Potential Asset Bubbles “Federal regulators need enhanced powers to combat potential asset bubbles, said former Federal Reserve Chairwoman Janet Yellen on Sunday. Economists, who don’t often agree on much, seemed united at the American Economic Association annual meeting here behind the idea that interest rates are likely to stay low over the long-term horizon, given demographic trends and other factors.” (MarketWatch)
  4. Hudson’s Bay Shares Shoot Up 6% After Richard Baker Sweetens Bid “Hudson’s Bay Co. Chairman Richard Baker raised his offer to take the struggling retailer private, handing a victory to minority shareholders including Catalyst Capital Group Inc. that fought to derail the original bid. Hudson’s Bay said in a statement late Friday it agreed to a new bid by Baker and a group of allies, who together control the company. The offer was increased for a second time to $11 a share from $10.30. Baker’s first offer was for $9.45 apiece in June.” (Financial Times)
  5. Economists Question the Benefits of Targeted Tax Breaks “State and local governments across the U.S. spend at least $30 billion a year to attract and keep companies, but the biggest deals generate little in the way of economic benefits in return, a new study shows. The research calls into question the common practice of using narrow, firm-specific tax breaks to attract businesses and boost employment.” (Wall Street Journal, subscription required)
  6. Tax Reform Makes Real Estate Investment Trusts More Attractive “The Tax Cut and Jobs Act’s qualified business income deduction offers investors in real estate investment trusts a chance to deduct the QBI component, among other breaks. Because most REIT distributions are classified as qualified dividends, the trusts can provide a higher deduction than would direct ownership of real estate. Some restrictions on QBI deductions also don’t apply to REITs. A couple of years into the TJCA, ‘a client considering whether to go direct into real estate or invest in a REIT may now choose the REIT because there’s a tax advantage that wasn’t there before,’ said Bryan Kirk, director of financial and estate planning at Fiduciary Trust Company International in San Mateo, Calif.” (Financial Advisor)  
  7. SF Hopes to Build 250 Affordable Housing Units for Seniors Near Laguna Honda “Two years after neighbors helped kill a plan for low-income senior housing on Laguna Honda Boulevard, the city is giving it another shot. And this time the proposal seems to have enough political juice to actually happen.” (San Francisco Chronicle)
  8. Marijuana Businesses Raise Millions of Dollars by Cashing Out of Real Estate Through Sale-Leaseback Deals “Large cannabis companies increasingly are selling their own cultivation, processing and storage facilities and immediately leasing them back as a way to instantly raise tens of millions of dollars at a time when outside financing is scarce. Unlocking the value of real estate with a sale provides money that can be used to grow a marijuana firm’s core business, without diluting the value of its stock, the way issuing more shares would.” (Marijuana Business Daily)
  9. Commercial Loan Data Provider CrediFi Shutting Down “Nearly $30 million in funding from investors wasn’t enough to save startup CrediFi, a provider of data and analytics for the commercial real estate space. The startup, based in Tel Aviv and New York, has announced that it is shutting down operations. The company was founded in 2014 by former Thomson Reuters executive Ely Razin.” (Mortgage Professional America)
  10. These Could Be the Worst Real Estate Markets in 2020 “Generally speaking, 2020 is expected to be a tepid year for the U.S. housing market. Existing home sales are expected to drop by 1.8% on average, according to Realtor.com, thanks to an uptick in new construction and a lack of affordable inventory in many markets. Home prices are expected to continue to rise, with the average U.S. home value forecast to grow by 0.8% over the next year. However, this is much lower than the gains we've seen in recent years. Over the past five years, the average U.S. home has seen its value grow by more than 25%, so it's fair to say that a gain of less than 1% in 2020 would be a significant slowdown.” (Million Acres)
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