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10 Must Reads for the CRE Industry Today (January 9, 2019)

The Wall Street Journal reports on a case of EB-5 fraud surrounding a mixed-use development in Houston, Texas. WeWork has re-branded as The We Company and expects a $2 billion new investment from SoftBank, reports CNBC. These are among today’s must reads from around the commercial real estate industry.

  1. Foreigners Funded Houston Development to Get Green Cards. They Were Duped, SEC Says “Scores of foreign investors in pursuit of U.S. green cards poured nearly $50 million into what they thought was going to be a giant senior housing, luxury residential and retail project in a booming suburb of Houston. Instead, the developers ‘improperly transferred’ $20.5 million into other real-estate investments, according the Securities and Exchange Commission. None of the investors have obtained visas. The developers last month settled charges with the SEC and agreed to pay $51.4 million in a penalty and reimbursements to investors.” (Wall Street Journal, subscription required)
  2. WeWork Is Rebranding, and SoftBank Ups its Investment by $2 Billion “WeWork is rebranding as The We Company as it collects new capital from SoftBank Group. SoftBank plans to invest $2 billion more in WeWork, the start-up announced Tuesday. That’s in addition to $4 billion that was previously announced and brings SoftBank’s total investment in the start-up to around $10 billion. Most of SoftBank’s recent investment is at a post-money valuation of $47 billion, but $1 billion of the investment was at a lower, pre-money valuation of $20 billion.” (CNBC)
  3. Some Workers Need Jobs as Much as Builders Need Workers. Cities Connect Them “A year ago, Jeromy Gaviola was struggling to find steady and meaningful work in San Francisco. Living in the working-class neighborhood of Hunters Point, he heard about a program that was training residents to build the Chase Center, the $1 billion, 18,000-seat arena in Mission Bay that will be the new home of the Golden State Warriors when it opens this fall. Mr. Gaviola, 33, applied to the program, was accepted and completed six weeks of training in early September.” (The New York Times)
  4. Chrysler Building, a Famed Slice of Manhattan Skyline, Is on the Block “New York City’s iconic Chrysler Building is up for sale. The owners of the 1930 art deco office tower—an Abu Dhabi government fund and New York developer Tishman Speyer—have hired CBRE Group Inc. to market the property, according to Darcy Stacom, chairman of the firm’s New York City capital markets group. In recent years, U.S. and overseas investors have splurged on famous properties like the Willis Tower in Chicago and New York’s Waldorf Astoria Hotel, for which a Chinese insurer paid $1.95 billion in 2015—a record for a U.S. hotel sale.” (Wall Street Journal, subscription required)
  5. Unpaid Federal Workers Owe More Than $400 Million in Mortgage and Rent Payments This Month “For many federal workers, keeping a roof over their heads got a lot harder in January thanks to the partial government shutdown that is approaching its third week. Altogether, unpaid federal workers — including roughly 380,000 furloughed employees and 420,000 people working without pay — owe around $438 million in mortgage and rent payments in January, according to a report published Tuesday by real-estate firm Zillow. That breaks down into $189 million in monthly rent payments and $249 in mortgage payments.” (MarketWatch)
  6. Most of 330 Madison Ave. Is Up for Grabs, but Vornado Keeps its Stake “A majority stake in 330 Madison Ave. owned by the Abu Dhabi Investment Authority is heading to the sales market at pricing expected to reach nearly $1 billion. Vornado Realty Trust owns the remaining 25 percent stake in the 43-story building and markets and leases the building. Its stake is not for sale, sources said. The 845,000-square-foot tower on the western blockfront between East 42nd and 43rd streets was completely refurbished in 2012 with $121 million in upgrades, including new mechanicals and curtain wall.” (New York Post)
  7. J.C. Penney CEO Starts First Round of Store Closings Amid Holiday Sales Decline “J. C. Penney Co. said it will close three stores this spring and may announce more next month as new chief executive officer Jill Soltau embarks on a broad evaluation of its footprint. The announcement briefly sent shares up in late trading. The Plano-based company declined to identify the store locations. J.C. Penney also reaffirmed its earlier guidance that it will generate free cash flow in fiscal 2018 and reduce its bloated inventory, an issue that has plagued the company in recent quarters.” (Dallas Morning News)
  8. PwC Issues Positive Capital Markets Forecast “Released this month, PriceWaterhouse Cooper’s financial markets report for the last quarter of 2018 points out that ‘trade negotiations, a strong dollar and rising U.S. interest rates have affected all sectors of the capital markets.’ In 2019, the direction of the Chinese and European economies may be cause for concern, even though the general outlook is positive. The research also consolidates the belief that there will be from two to four interest rate increases in the next 12 months.” (Commercial Property Executive)
  9. Dollar Tree Would Lose Money if it Tried to Sell Family Dollar as Starboard Is Pushing “If Dollar Tree Inc. were to sell Family Dollar, it would be ‘fortunate’ to get two-thirds of the $9 billion paid for the rival chain, according to Raymond James analysts. Activist investor Starboard Value LLP has taken a 1.7% stake in the company and is making demands for board seats and changes to the company, including a possible sale of Family Dollar. Dollar Tree acquired Family Dollar in 2015 after a yearlong battle.” (MarketWatch)
  10. The Best REITs for 2019 “This market wipeout has one big silver lining for income investors like you and me: dividend yields are soaring—and today we’re going to tap four of my favorite stocks for payouts all the way up to 8.9%. First, though, to see just how incredible this buying opportunity is, look no further than the Vanguard REIT ETF, the benchmark ETF for real estate investment trusts (REITs). If you logged into your investment account now and simply bought VNQ, you’d kick-start a nice 4.8% income stream.” (Forbes)
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