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10 Must Reads for the CRE Industry Today (July 25, 2016)


  1. Think Narrow: Why Commercial Real Estate Brokers Should Specialize “It’s obvious to all of us that commercial real estate is changing. Brokers are competing not just with each other, but also with new technology and self-service platforms. Clients aren’t just looking for partners with local or regional market knowledge—they want someone who understands the complexity of their individual needs, as well as relevant microtrends and pricing benchmarks. They want someone who can teach them something they can’t learn anywhere else. Brokers need to define their unique value propositions more sharply, and one way to do this is to become a specialist or expert in a few carefully chosen property types that make sense for your geography and brokerage. And unless you operate in a very small market, this means going narrower than the usual idea of CRE specialization. You may already focus on office, industrial, retail, multi-family, net-lease, etc.—but there’s value in developing expertise and market positioning in more specific niches within these types.” (Realty Biz News)
  2. What to expect in the Fed statement “The Federal Reserve is expected to hold interest rates steady at its meeting this week and refrain from signaling about a possible September rate hike due to continued uncertainty about the outlook for the economy in the second half of the year. The Fed will meet on Tuesday and Wednesday. Because Fed Chairwoman Janet Yellen will not hold a press conference, all eyes are on the policy statement to be released at 2 p.m. after the talks conclude. The Fed hiked rates last December but has refrained from moving ever since, unsure about the financial market turmoil at the beginning of the year, the lackluster growth in the first quarter. This caution was compounded by the decision late last month by U.K. voters to leave the European Union. “I’m not sure they’re quite ready to signal the coast is clear,” said Michael Feroli, chief U.S. economist for J.P. Morgan Chase.The Fed statement ‘won’t rock the boat,’ he added. ‘Though the data and backdrop have improved...downside risks remain and the outlook is uncertain,’ said Michael Hanson, senior global economist at Bank of America, in New York.” (MarketWatch)
  3. ‘Brexit’ offers unique opportunities for Miami real estate “The initial shock of the “Brexit” vote (England and Wales’ recent decision to leave the European Union) has come and gone, along with the expected turmoil in the global economic markets. The feared collapse of the EU economy has not, and probably will not, happen; the British pound has rebounded from its short tumble in the immediate aftermath; and the sun continues to rise in the east. Brexit now becomes a political struggle between the EU and the British government, which will take roughly two years of negotiations to straighten out their trade agreements. There has been a great deal of speculation about Brexit’s impact on Miami and South Florida from a variety of voices, offering both positive and negative perspectives. From my personal analysis of the tea leaves, Brexit presents some fascinating opportunities for our city’s real estate sector — as long as global and historical trends stay generally consistent. In uncertain situations, smart money seeks stability, safety — and value: From an American perspective, the immediate repercussions of Brexit have been the surge in our nation’s stock market and the continued strength of the dollar. Looking farther down the road, one can anticipate that perceived instability in Europe (and other parts of the world) will drive a tremendous amount of interest and investment toward the United States.” (Miami Herald)
  4. AMC agrees to $1.2 billion acquisition of Carmike Cinemas “AMC Entertainment Holdings Inc. and Carmike Cinemas Inc. said Monday they had agreed to a sweetened takeover deal at more than $800 million, after a vote to approve the deal was twice postponed following concerns among some Carmike shareholders that the sale price was too low. Under the latest terms, Carmike shareholders can opt to receive either $33.06 in cash or 1.0819 shares of AMC wherein 30% of Carmike’s outstanding shares are exchanged for AMC shares and 70% are exchanged for cash. The companies valued the transaction at about $1.2 billion—consisting of about $585 million in cash and $250 million in stock, plus debt. The new offer is about 10% higher than AMC’s original $30-a-share all-cash offer.” (MarketWatch)
  5. Beauty retailer opens milestone store “Bluemercury is testing a larger format space. The specialty beauty products and spa retailer announced the opening of its 100th store, in Savannah, Georgia. Located in the historic Jacob’s Men’s Shop Building in downtown Savannah, the space has a fresh and updated look, while still preserving traditional architectural elements such as exposed brick walls, wood flooring, and the historic original terrazzo entryway. Looking forward, at approximately 2,400 sq. ft., Bluemercury Savannah marks Bluemercury’s foray into a larger store size retail format. Bluemercury was founded in 1999 by Marla and Barry Beck, who identified a gap in the market for a neighborhood beauty store. In March 2015, the company was acquired by Macy's Inc., which has focused on expanding the brand, both with freestanding stores and in-store shops at Macy’s.” (Retailing Today)
  6. Sports Authority creditors move to convert bankruptcy to Chapter 7 “Sports Authority’s lenders and landlords have clearly lost patience. Lenders that say the bankrupt chain owes them $240 million, while suppliers that have shipped an estimated $50 million of goods are clamoring to be paid. In the filings Friday, the creditors said $23 million is being reserved for lawyers and advisers and $2.85 million for executive bonuses, while landlords and suppliers wait for their payments, according to Reuters. The proceedings have been marked with various legal tussles, including more than 160 lawsuits the retailer filed in March. At issue then was some $85 million worth of winter gear and other goods being sold at Sports Authority stores—items suppliers wanted returned because they feared not getting paid. These scuffles have stymied the chain’s efforts to sell more stores and it’s been forced to liquidate instead. Last week the chain moved to shut stores a month early, potentially saving many much-needed dollars in rent. But as the Journal points out, it's also putting the 14,000 employees it once supported in a tough spot, depriving them of a month of wages, job stability, and health insurance.” (Retail Dive)
  7. Economy Watch: Unemployment Rates Among the States Mostly Static “There’s some evidence that unemployment rates are stabilizing in many parts of the country, according to the latest Bureau of Labor Statistics report on regional and state employment, which was released on Friday. One takeaway: employment has recovered considerably since the recession, but the now the rate of recovery is slow to nil. Compared with May, unemployment rates were significantly higher in June in six states, lower in only one state, and stable in 43 states and the District of Columbia, the BLS reported. Compared with the same month a year ago, 16 states and D.C. had notable unemployment rate decreases, two states suffered increases, and 32 states saw no significant change. Though battered by the oil slump, South Dakota continued to experience the lowest unemployment rate among the states, at 2.7 percent, possibly because the influx of workers has virtually stopped, and people unable to find energy-sector work have left the state. Alaska had the highest unemployment rate, 6.7 percent.” (MultiHousing News)
  8. Cornell leases midtown Manhattan space for student networking “Cornell University has leased midtown Manhattan space where it will hold events for students and alum to network. The Ithaca-based Ivy League school took 14,000 square feet at 45 W. 57th St., between Fifth and Sixth avenues. It will take the seven-story building's entire second, fourth and fifth floors for more than 10 years. Asking rents at the property are in the $60s per square foot. The space will be used by Cornell's graduate school of management, college of business, school of hotel administration and school of applied economics and management, along with its other academic branches. Cornell said the new space will serve as a "bridge" between the engineering campus that is being built on Roosevelt Island. It plans to begin using the events space next month, in time for the start of the fall semester. "We see a strong presence in New York City as essential for enhancing our relationships with our alumni, corporate partners and other key stakeholders," said Soumitra Dutta, dean of the Cornell College of Business. "The space will also provide an excellent platform venue for our faculty and students to take advantage of the unique resources of New York City.’”(Crain’s New York)
  9. QIA Makes Good on US Investment Promise—Again “In January 2015, visiting officials of the State of Qatar told the U.S. Chamber of Commerce that the country would invest $35 billion in the U.S. over the next five years, and it continues to do just that, with its latest investment being Qatari Investment Authority’s acquisition of the office tower at 12100 Wilshire Blvd. in Los Angeles. QIA, the sovereign wealth fund of Qatar, and joint venture partner Douglas Emmett Inc. recently acquired the 365,000-square-foot property, located in the prestigious Brentwood submarket, from Hines for $225 million. It appears the transaction took place in a time warp. Hines U.S. Office Value Added Fund II also paid $225 million for 12100 Wilshire when it acquired the Class A property from RREEF Property Trust in 2007. 12100 Wilshire first opened its doors in 1985, rising 19 stories above the busy and highly desirable intersection of Wilshire and Bundy Drive. Today the Tracy Price Associates-designed office destination is facing a drop in occupancy to 77 percent with impending move-outs. However, the disappearance of names from the tenant roster spells opportunity for QIA and Douglas Emmett; the $51.06 per square foot average direct asking rent for class A space in Bentwood in the second quarter was roughly $9 more than rent for premier space downtown and $11 more than Class A space in Greater Los Angeles, according to a report by commercial real estate services firm JLL. Additionally, as of the close of the second quarter, there were no deliveries in Brentwood year to date, and there were no construction projects underway.” (Commercial Property Executive)
  10. DOB issues record number of stop-work orders at NYC construction sites “The city has issued stop-work orders at construction sites at a record pace this year following a series of serious accidents. The Department of Buildings issued 4,580 stop-work orders in the first six months of 2016 — a 23 percent increase from the same time last year and a 70 percent increase from 2012, when only 2,701 orders were issued, Politico reported. The agency said the orders — which shut down work on sites with violations until the problem is fixed and fines are paid — help promote safety in a construction-heavy city. In the past year, the city has seen at least 16 construction-related deaths. In February, a 15-story crane collapsed in Tribeca and killed a pedestrian.  The death inspired a series of safety recommendations, though the cause of the collapse remains under investigation. The number of stop-work orders seems to be growing faster than the number of permits issued for new construction. For example, permits for 11.2 million square feet of new construction were issued in the first half of 2012 while permits for 14.1 million square feet were issued so far this year. At the end of last year, developers rushed to obtain permits and begin construction, fearing the impending expiration of the 421a tax abatement. Following the spike of permits approved in December, the number of approved residential units in January dropped 94 percent to 453.” (The Real Deal)
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