10 Must Reads for the CRE Industry Today (June 13, 2016)

10 Must Reads for the CRE Industry Today (June 13, 2016)


  1. Survey: Retail sector least prepared to comply with new FASB lease accounting standards “Respondents said the top challenges to lease accounting implementation are collecting necessary data on all organizational leases in a centralized, electronic repository (33.3%); and instituting processes to evaluate quarterly adjustments for the balance sheet, as well as profit and loss statements (20.5%). ‘Having a lot of leases or just a few complex leases in your portfolio can create management challenges. Other difficulties can arise due to disparate tracking systems, expanding global footprints and M&A activity,’ said James Barker, national office senior consultation partner, Deloitte & Touche LLP.  Not surprisingly, sectors with higher numbers of leases expected the highest level of difficulty implementing the lease accounting standards.  Retail and distribution led in the rankings of the highest Industries with more than half (61.2%) of respondents expressing concern.” (Chain Store Age)
  2. New Hotels for Millennials? “All eyes are on Millennials these days, and hoteliers should be no exception. With their focus on location over brand, they’re going to change hotel strategy in the next few years, declared James Wiseman, president of Margaritaville Development, during the hotel panel at the National Association of Real Estate Editors 2016 Real Estate Conference last week. Generally speaking, that means more experiential brands and a broader menu of options, allowing for greater flexibility to customize at the property level. Indeed, the new trend toward “soft brands” represents a good fit for their preferences, according to Peter Nichols, national director of Marcus & Millichap’s national hotel group. That approach involves a focus on the local property, with the branding present but secondary, listed in smaller type, and the design offering more of a unique feel, Nichols described. He listed Curio by Hilton as an example of such flexible lifestyle brands.” (Commercial Property Executive)
  3. Separating the Wheat from the Chaff​ “Changes in healthcare delivery has created a bifurcation in the REIT sector as many yield-starved investors have sought out the highest quality companies. The big headwind for healthcare REITs is in the skilled nursing sector where operators face continued pressure that has led to lower valuations for many REITs that own skilled nursing assets. The “Big 3” healthcare REITs – Ventas Inc. (VTR), HCP Inc. (HCP), and Welltower Inc. (HCN) – have been the market movers, based on their overall size the “Big 3” own around $72.5 billion of assets and control a dominating 64 percent of market capitalization within the healthcare REIT sector. So when one domino falls, the others usually follow.” (Forbes)
  4. Colleges are scrambling to ensure housing for transgender students meets federal standards “At a time of year when the nation's 2,100 residential colleges and universities are sorting out student housing assignments, they also are poring over a May letter from the Obama administration that thrusts them into the national debate on transgender rights. Known as the ‘dear colleague’ letter, it makes clear that federal law protects transgender students' right to live in housing that reflects their gender identity. Schools that fail to provide adequate housing to transgender students could face lawsuits or the loss of any federal funding they rely on. Although hundreds of universities had begun to offer gender-inclusive housing in response to student demand in recent years, many are now reviewing or expediting their plans so they can provide the option to incoming students for the first time this fall. The policies are intended not only to accommodate transgender students, university officials say, but to help siblings, gay students who want to live with straight friends of the opposite gender or simply groups comfortable with mixed-gender housing.” (Business Insider)
  5. Is the commercial real estate bubble about to pop? “The price of Southern California and U.S. commercial real estate has been rising for years, but it may be leveling off or even declining in the coming years, according to a new economic forecast from UCLA's Anderson School of Management. ‘The combination of a less favorable financial environment along with weakening fundamentals arising from increased supply and reduced demand will likely bring to an end the seven year bull market in commercial real estate,’ wrote senior UCLA Anderson economist David Shulman. ‘To be sure, we are in no way forecasting a 'crash,' but rather an extended period of sideways to down prices.’ Wayne Brandt, national originations director for Wells Fargo Bank, said he has become more cautious about making loans to commercial developers in anticipation of the shift. ‘I think we’re all looking at 2018, 2019 and 2020 as a slowing,’ said Brandt.” (SCPR.org)
  6. New Jersey’s Gold Coast sees record prices, slowing sales volume in 2016The Gold Coast of New Jersey has gotten so hot for developers in recent years that in many areas near the waterfront there is hardly any land left to go around. The land grab has pushed prices to record levels in some areas as buyers from around the world swoop in and snag the remaining plots. Developers forced to buy land at higher prices are now planning to build condominiums rather than rentals, a relatively new trend for even the most popular areas of Jersey City in Hudson County.” (The Real Deal)
  7. EXCLUSIVE: N.Y. politicians make progress on bill banning illegal short-term rental ads on Airbnb “A bill that would bar the advertising of illegal short-term rentals on platforms like Airbnb is gaining steam in the last week of the legislative session. Sen. Andrew Lanza (R-Staten Island) and Assemblywoman Linda Rosenthal (D-Manhattan) have agreed on language for a joint bill they hope can move before lawmakers end the legislative session on Thursday. The bill would prohibit the advertising of home sharing in multi-family units in New York City for less than 30 days and carry fines of up to $7,500 for multiple violations. The first-in-the-nation legislation has managed to unify both housing activists and developers.” (New York Daily News)
  8. Alchemy borrows $220M for Woolworth Building conversionAlchemy Properties took out a hefty loan to finance its residential conversion on the top floors of the Woolworth Building in Downtown. The company borrowed $220 million from Overseas Bank Limited, according to a news release. The money will go to fund the creation of 33 condominium units at 233 Broadway, which the firm calls the Woolworth Tower Residences. Joseph A. Sarcinella, Gerard A. Hefner Crystal Persaud, Konstantinos P. Melitsanopoulos and Rose C. Plager-Unger of Reed Smith represented the lender in the deal. Alchemy bought the top 30 floors of the building in 2012 for $68 million from Steve Witkoff and Ruby Schron’s Cammeby’s International, and subsequently poured millions more into renovations. The developers are reportedly planning to ask $110 million for the building’s penthouse. The least expensive unit there, a 1,200-square-foot apartment on the 44th floor, will have an asking price of $3.5 million.” (The Real Deal)
  9. RXR Sells Stake in Manhattan’s 61 Broadway “RXR Realty has sold a 49 percent stake in 61 Broadway, a 786,594-square-foot renovated office tower in Manhattan, to an affiliate of China Orient Asset Management, for $215.6 million. JLL secured $290 million in recapitalization financing for the Class A office asset, which is situated in Manhattan’s Financial District. The lending group of Bank of China and SL Green teamed up on the debt.”  (Commercial Property Executive)
  10. MVEDA highlights commercial real estate  “Multi-family housing in the area is lacking, the medical industry is rapidly growing and commercial construction is lagging, according to industry experts speaking at the Mesilla Valley Economic Development Alliance Business in the Borderplex meeting last week. Randy McMillan, with NAI 1st Valley, said the number of new commercial construction permits dipped to 20, with a value of $10.5 million, in 2015. That is a drop from the 25 permits valued at just over $21 million in 2014 and a far cry from recent high marks of 48 permits for commercial construction in 2008, valued at more than $56 million. ‘Office space is tough across the nation,’ McMillan said. But the largest sticking point in Las Cruces' commercial development is housing, he said. The number of multi-family housing units permitted in 2015 tallied only two, although that is an increase over 2014 when no permits were requested. Single-family units rose from 292 in 2014 to 379 in 2015. But the city is currently at a 99 percent occupancy rate for multi-family housing - essentially apartments, condos and duplexes. Rental rates, due to the decreased supply, have settled in the past two years at roughly $700, he said.” (Las Cruces Sun News)
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