10 Must Reads for the CRE Industry Today (June 27, 2016)

10 Must Reads for the CRE Industry Today (June 27, 2016)


  1. Crescent Real Estate CEO John Goff launches fund to buy $4 billion in property “Fort Worth property executive John Goff is heading up a new real estate fund that plans to invest up to $4 billion in properties. Goff is chief executive of Crescent Real Estate Holdings and Goff Capital Partners, two companies with significant Dallas-Fort Worth real estate holdings. His new GP Invitation Fund I has already raised $200 million from investors by invitation only. Goff said he began putting together the fund late last year. 'We are able to raise the capital very quickly,' he said. The fund has bought or has committed to buy six properties valued at about $400 million, including a hotel development site in Nashville and two office buildings under contract.” (The Dallas Morning News)
  2. Barnes & Noble Inc. To Unveil Four Stores With Restaurants Serving Alcohol “In an attempt to overcome the recent slump in business, Barnes & Noble Inc. announced Thursday that it is set to unveil four concept stores in the next year that will feature restaurants serving alcohol. The announcement came during an investor conference after the bookseller reported disappointing fourth-quarter results Wednesday. For the quarter ended April 30, comparable-store sales were down 0.8%, while total quarterly retail sales, which include the stores and the BN.com online business, fell 2.2% to $850 million, reported the Wall Street Journal. The chain that owns 640 bookstores nationwide, aims to combat weak store traffic with expanded cafes serving beer and wine in order to draw more shoppers into the bookstores and keep them there longer.  As of now, it offers pastries, sandwiches, Starbucks coffee and Wi-Fi in its cafes. In addition to this, the four new stores will offer a full breakfast, lunch and dinner menu, together with waiter service. Chief Executive Ron Boire said, ‘We’re going to offer good food, and because we’re Barnes & Noble it’s going to be affordable, not $50 dinner entrees,’ according to the Journal.” (International Business Times)
  3. Classic Waldorf Hotel to Be Gutted, Up to 1,100 Rooms Turned Into Condos “The Chinese acquirer of the Waldorf Astoria is finalizing plans for an extensive overhaul that would shut the landmark New York hotel for up to three years and convert as many as three-quarters of its rooms into private apartments, people familiar with the matter said. Anbang Insurance Group Co.’s restoration plan calls for closing down the 1,413-room property in the spring, removing as many as 1,100 hotel rooms and eliminating hundreds of hotel jobs, the people said. When the Waldorf reopens, the hotel will feature between 300 and 500 guest rooms upgraded to luxury standards, the people said. The remaining units will be sold as condominiums. The vast reduction in Waldorf hotel rooms will lead to the elimination of many room-service, housekeeping and other hospitality jobs. The Waldorf has about 1,500 hotel employees. The new owners and Hilton Worldwide Holdings Inc., which will continue to manage the property when it reopens, have reached severance agreements with hundreds of these workers at a cost of $100 million or more, some of the people familiar with the matter said.” (The Wall Street Journal)
  4. $2.8 Billion Brookfield-Rouse Merger Takes Step Forward “An affiliate of Brookfield Property Partners is now one step closer to acquiring mall owner Rouse Properties after Rouse’s stockholders approved the agreement at a meeting yesterday, according to a release from Rouse and a Securities and Exchange Commission filing. The company stockholders, excluding the Brookfield affiliates that collectively hold 33.5 percent of the outstanding shares of the company, will receive $18.25 per share in cash, far more than Brookfield’s initial bid. That amounts to $702.6 million, and the total transaction is valued at approximately $2.8 billion, including the company’s indebtedness, according to Rouse. The deal is expected to close by July 6. It was reported in January that Brookfield put in an all-cash bid at $17 a share, or $657 million, for the rest of mall owner Rouse’s stock. On Feb. 25, the companies entered into a definitive merger agreement.” (Commercial Observer)
  5. Fairstead, Blackstone shopping piece of Caiola portfolio “ Despite frequently touting their multifamily investments as long-term plays, Fairstead Capital and Blackstone Group have placed a portion of the coveted 24-building Caiola portfolio on the market after less than a year, sources told The Real Deal. The owners hired Ariel Property Advisors’ Shimon Shkury and Victor Sozio to market four Upper East Side buildings in the 979-unit Manhattan market-rate multifamily package they acquired in September for $690 million, sources said. The portfolio is spread across Chelsea, Murray Hill and the Upper East Side. The four-building package includes a 19-story, 69-unit property at 449-451 East 83rd Street, sources said.” (The Real Deal)
  6. Starwood Property Trust’s Jeffrey DiModica Talks B-Pieces “Since Barry Sternlicht founded Starwood in 2009, the company has deployed $25.8 billion in capital with $0 in realized loan losses and amassed a $9.9 billion portfolio across its different business lines. Jeffrey DiModica joined Starwood Property Trust as president in 2014, after serving five years on its board of directors. He sat with Commercial Observer and explained how Starwood’s position as a permanent capital provider will pose an advantage when risk retention hits CMBS shops and how the real estate investment trust’s diversification play—from buying a massive special servicing company to becoming a property owner—will allow for profitability throughout any point in the cycle.” (Commercial Observer)
  7. Real estate co-op revives commercial properties “Three years earlier, a group of friends who lived or worked in Nordeast sat around a table drinking coffee and considering how to revive parts of the aging Central Avenue business district. Some hailed from the Eastside Food Cooperative at 2551 Central Ave. and explained the co-op model of member-ownership. The notion of a for-profit co-op appealed to the founders because they didn’t want NEIC to seem like a charity. Any Minnesota resident or business can join NEIC for a $1,000 investment. The co-op has about 238 members, turned its first profit and paid its first dividends this spring. ‘It’s one member, one vote, and no one party can have an outsized say in it,’ said Jill Wilhelmi, secretary of the NEIC board. ‘Also, the cooperative model was attractive to them because one person can come up with $1,000, but one person less often is able to come up with $250,000 or what it takes to purchase a building.’ In 2012 the co-op had 90 paid members and $171,000 in financing from Northeast Bank, the Windom Park neighborhood, and the city of Minneapolis. It purchased two adjoining buildings at 2504 and 2506 Central Ave. NE, near the intersection with Lowry Avenue Northeast.” (Finance & Commerce)
  8. $165M Financing Earmarked for LA Mixed-Use Project  “Broadbridge LA LLC has secured $164.5 million in financing to redevelop Broadway Trade Center, a 1.1 million-square-foot mixed-use building in downtown Los Angeles, from Jamestown LP. ‘The Broadway Corridor is poised to make a comeback as the urban heart of Los Angeles, and we’re pleased that we can assist as a lender on this transformative redevelopment project,’ Jamestown president Michael Phillips said in a prepared release. ‘We are committed to investing our resources in projects that transform spaces into true destinations through innovative mixed-use components, and we’re confident in the future of the Broadway Trade Center and the surrounding neighborhood.’ The financing will provide the necessary capital to pay off the existing loan and will allow Broadbridge to continue an extensive renovation of the historic building.” (Commercial Property Executive)
  9. The fall and rise of Chicago real estate in three acts  “Now many investors are wondering how the current boom will end. Memories of the last crash haven't faded, but few expect such a drastic drop. Most anticipate—and hope for—a benign slowdown. Property values may plateau or even decline a bit, but not enough to make it hurt. “If I had to bet, I would say we're going to have a soft landing in 12 to 15 months,” says Robert Habeeb, CEO of First Hospitality Group, a Rosemont-based hotel owner and operator. Still, the risks for real estate investors are higher than they were several years ago. Development here has picked up, especially in hotel and apartment markets, raising the prospect that supply will exceed demand. Property taxes are rising, and unresolved fiscal crises in Springfield and Chicago won't help the local investment climate. Demand for space, of course, would fall if the economy tipped into a recession. Whatever the future holds, a look back at three local properties—a Rosemont hotel, a Loop office tower and a development site across from Grant Park—shows how investors can gain and lose when the market swings.” (Crain’s Chicago Business)
  10. Rent Guidelines Board to vote on rent freeze “The city’s Rent Guidelines Board is set to vote Monday night on whether to extend the rent freeze for stabilized apartments by another year. In a preliminary vote last month, the board said it would consider increases of 0 to 2 percent for one-year leases and 0.5 to 3.5 percent for two-year leases. Those numbers were based on a study that found the cost of operating apartment buildings fell by 1.2 percent last year due to lower oil prices. Last year, the board voted to freeze rents for the city’s 1 million stabilized apartments for the first time ever. Raun Rasmussen of Legal Services NYC, a nonprofit that helps low-income tenants, told DNAinfo that ‘any rent increase is a bad increase for our clients.’” (The Real Deal)
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