Trump Tower Photo by Spencer Platt/Getty Images

10 Must Reads for the CRE Industry Today (July 21, 2016)


  1. Freddie Mac must face revived lawsuit over risk disclosures “A federal appeals court on Wednesday revived a lawsuit accusing Freddie Mac and several former top officials of defrauding shareholders by concealing its subprime mortgage exposure and its inadequate risk management prior to the 2008 financial crisis. The 6th U.S. Circuit Court of Appeals said a lower court judge erred in concluding that the Ohio Public Employees Retirement System did not sufficiently allege that its losses were caused by Freddie Mac's disclosure shortfalls.” (Business Insider)
  2. Real estate stocks let you ‘have your cake and REIT it, too’: Analyst “In today's unusual market environment, real estate investment trusts are among the best investments, according to Evercore ISI's head of technical analysis. REITs consist of real estate holdings but trade as stocks. And for tax reasons, they pay out nearly all of their income in the form of dividends, which makes them a popular yield vehicle in the era of minuscule bond yields. For instance, the Vanguard REIT ETF (VNQ) pays a dividend yield of nearly 4 percent, which is nearly in line with that of the Vanguard Long Term Corporate Bond ETF (VCLT). ‘With both stock and bond prices at record highs, this is a great way to have your cake and REIT it, too, if you will, Evercore ISI's Rich Ross said Tuesday on CNBC's Trading Nation. While he admits that the chart looks ‘overbought,’ he observes that ‘all of the [central bank] policy is driving people into yield-seeking behavior, and that plays right into the REITs. So I'm a buyer here on the breakout.’” (CNBC
  3. Dallas property investment fund plans to buy more than $900 million in real estate “Dallas-based real estate investor Velocis has raised $270 million for its second real estate fund. The company - which has $400 million in property under management - plans to use the new fund to invest in up to $920 million in properties.‘In the six short years since Velocis was formed, we have raised approximately $415 million, leading to the acquisition of 21 assets across 10 markets,’ managing principal Fred Hamm said in a statement. ‘We are grateful for the support of our investors and look forward to continuing our success as we secure assets, create value and maximize the return for our investors.’ Velocis' Fund II is buying office, medical office, data center and retail properties priced from $20 to $70 million. They company expects to buy about 20 properties over a 3-year period. Velocis investors include high-net-worth individuals, large family offices, and institutional investors in the United States, Mexico and Japan.” (The Dallas Morning News)
  4. Fannie Mae Research: New-Construction Pipeline Update “In her latest market commentary, Fannie Mae's Kim Betancourt takes a look at the new-construction pipeline and its implications for those markets where cranes are swinging left and right. The busiest metros include Houston and Dallas, as well as Washington, D.C., and New York City: The latter has more than 100,000 units being built, while the first three have over 30,000 in the pipeline, with Denver, Seattle, and Boston close behind. But all of this activity comes with a heavy price, especially in Houston as it struggles to regain its footing from declining oil prices: ‘A combination of low oil prices and a weaker than expected local economy are decreasing demand for rentals at the same time as deliveries of new units are surging. This suggests that the metro is in for a period of rising vacancies, declining rent growth, and even possible rent contractions.’” (Multifamily Executive)
  5. Economy Watch: Architects Still Busy, Bodes Well for CRE “The American Institute of Architects’ Architecture Billings Index was positive in June for the fifth consecutive month, buoyed by elevated levels of demand across all project types, according to the organization on Wednesday. The June index came in at 52.6, down from 53.1 in the previous month. Also, the new projects inquiry index was 58.6, down from a reading of 60.1 the previous month. Both indexes are leading economic indicators of construction activity, reflecting the roughly nine- to 12-month lead time between architecture billings and construction spending. An uptick in architectural work predicts one in construction (in early 2017, in this case). Overall, the score reflect an increase in design services, since any score above 50 indicates an increase in billings. The indexes are derived from a monthly “Work-on-the-Boards” survey sent to a panel of AIA member-owned firms. Participants are asked whether their billings increased, decreased, or stayed the same in the month that just ended, as compared to the previous month, and the results are then compiled.” (MultiHousing News)
  6. Have Trump condo prices suffered due to his presidential campaign? “While Donald Trump is tied with Hillary Clinton in the presidential election in some polls, his condos, at least some of those in the U.S., aren’t faring as well, price-wise. A market analysis of Trump-brand condominiums from Jan. 2015 to May 2015 by Seattle-based real estate listing firm Redfin showed before Trump announced his candidacy for the Republican nomination, Trump units outside of Manhattan had a sale price premium of as much as 6.8% versus other luxury units. The condos were compared with similar non-Trump brand models based on location, size and bedrooms. On a per-square-foot basis, that’s an equivalent premium of 9% or $97 a square foot. Redfin also noted that Trump condos were typically listed at about 1.6% above other similar listings during the same six-month period in 2015. During the same six-month period in 2016, the Trump brand, at least outside of the red-hot Manhattan market, doesn’t command such respect, at least in terms of price.” (MarketWatch)
  7. U.S. can’t seize Manhattan tower allegedly owned by Iran: courtA federal appeals court ruled that the United States can’t seize a majority stake in office tower 650 Fifth Avenue due to “insufficient evidence” that it is owned by the Iranian government. Nonprofit Alavi Foundation owns 60 percent of the tower, and critics have argued that it serves as a front for Tehran. U.S. Attorney Preet Bharara once called the 36-story building ‘Iran’s slice of Manhattan.’ In 2014, federal prosecutors reached a deal to seize the tower based on financial sanctions imposed on Iran in 1995, and use any profit to pay off victims of Iran-sponsored terrorism, such as the 1983 bombing of U.S. army barracks in Beirut. That agreement is now blocked. The U.S. could still seize a 40 percent stake in the tower owned by Iranian-controlled Assa Corporation, the New York Post reports. The building generates about $20 million a year in profits. In September of 2013, the tower, known as the ‘Piaget Building,’ was valued at over $500 million.” (The Real Deal)
  8. SNH Closes Major Mortgage Refi in Boston “More than two years after Senior Housing Properties Trust purchased two 15-story Class A life science buildings in Boston’s Seaport District for $1.1 billion, the REIT has refinanced the Fan Pier property and closed on a new $620 million mortgage. The 10-year loan has a fixed interest rate of 3.53 percent and will mature in August 2026. SNH, based in Newton, Mass., said it expects to use the proceeds of the new mortgage to repay a portion of the outstanding loan. Following the repayment, the REIT said it will have about $900 million available under its unsecured revolving credit facility. ‘We are pleased to take advantage of the current low interest rate environment to term out the majority of the outstanding balance on our unsecured revolving credit facility and to extend the average maturity of our debt to 8.9 years,’ David Hegarty, SNH president & COO, said in a prepared statement. ‘We believe that this transaction also highlights the value and quality of our medical office and life-science portfolio.’” (Commercial Property Executive)
  9. Hudson’s Bay completes $400M refi of Lord & Taylor’s Fifth Ave. flagship “Canadian retail conglomerate Hudson’s Bay Company has just closed $400 million in refinancing for the Lord & Taylor flagship in Manhattan. The new loan replaces a $250 million mortgage due in September of next year. According to a Hudson’s Bay press release, the fund will be used to reduce the company’s debt. The new loan will mature in August of 2021. ‘The opportunistic refinancing of the mortgage on the L&T flagship property is yet another example of the successful execution of our strategy as we continue to leverage our significant real estate portfolio. We are pleased to extend our Company’s debt maturity profile as well as secure an attractive interest rate of 4.3% through the term of the new mortgage,’ Richard Baker, HBC’s governor and executive chairman, said in a press release. In addition to completing the refinancing for the property, Hudson’s Bay also gave the lenders the authority to appraise the property, which is located at 424-438 Fifth Avenue. The appraiser valued the property at $655 million.” (Real Estate Weekly)
  10. Sweet Mixed-Use Project Coming to Sugar Land “Imperial Market Development LLC is moving ahead with plans for a $200 million mixed-use project at the 26-acre former Imperial Sugar Refinery site in Sugar Land, Texas, that will feature retail, a hotel, offices and luxury multifamily housing. The partnership is led by principals Geoffrey Jones and James Murnane, who purchased the property from Johnson Development Corp., according to the Houston Business Journal. Jones was chairman & founder of the Texas Real Estate Fund Inc., which developed, owned and invested in shopping centers, office buildings and retail projects in the Houston area since the 1980s. He was also an original co-general partner/developer of the Houston Pavilions mixed-use project in the Houston CBD.” (Commercial Property Executive)
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