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10 Must Reads for the CRE Industry Today (June 3, 2019)

Eddie Lampert buy the remaining Sears Hometown stores, reports the Wall Street Journal. Forbes looks at the issues of creating affordable housing. These are among today’s must reads from around the commercial real estate industry.

  1. The Mall Meltdown Continues “Retailers’ earnings season has gone from bad to worse. The bleeding intensified last week, with shares of Abercrombie & Fitch plummeting 26% on Wednesday, the biggest percentage decline since the company went public. PVH Corp., owner of brands including Van Heusen, Tommy Hilfilger, and Calvin Klein, dropped 10% that day, too. On Thursday, women’s wear chain J.Jill was down a jaw-dropping 53% and on Friday, Gap Inc. slid 9%. It is hard to miss what all of these retailers have in common: They are mall-based.” (Wall Street Journal, subscription required)
  2. U.S. Construction Spending Flat in April, Little Sign of Housing Rebound “Construction spending in the U.S. was basically flat in April, suggesting little pickup in the housing industry despite tumbling mortgage rates. Economists surveyed by MarketWatch had predicted a 0.3% increase. Construction outlays rose at a 1.3 trillion annual rate in April, virtually identical to March, the Commerce Department said Monday. Spending on big government projects such as roads increased, but outlays declined on new homes.” (MarketWatch)
  3. Why Real Estate ETFs Now? “This has been an interesting year for investors, as stocks and bonds rally pretty much at the same time, making the job of finding uncorrelated—or low-correlated—returns a little tricky. This is where a segment like real estate investment trusts (REITs) comes in. REITs not only offer returns that have low correlation to traditional stocks and bonds, but so far this year, they have delivered solid outperformance relative to the broader market.” (ETF.com)
  4. Eddie Lampert’s Company to Buy the Rest of Sears Hometown, Outlet Stores “Hedge fund owner Edward Lampert has reached a deal that would bring Sears Hometown stores under the same corporate umbrella as Sears and Kmart. Mr. Lampert, the former Sears Holdings Corp. chief executive whose Transform Holdco LLC controls Sears and Kmart, is buying the 42% of Sears Hometown shares he and his hedge fund don’t currently own for $2.25 a share in cash, the companies said Monday. Sears Hometown stores were spun off from Sears Holdings Corp. seven years ago.” (Wall Street Journal, subscription required)
  5. Affordable Housing Is Double for Builders and Buyers, But Here’s the Problem “A new report, Attainable Housing: Challenges, Perceptions and Solutions, by the Urban Land Institute’s (ULI) Terwilliger Center for Housing and real estate consulting firm RCLCO explores the shortage of housing affordable to moderate-income home buyers, including first-time buyers, and offers solutions to increase the supply. For the purpose of the report, attainable housing is defined as non-subsidized, for-sale housing that is affordable to households with incomes between 80 and 120 percent of the area median income.” (Forbes)
  6. Marriott CEO: Chinese Travelers ‘Don’t Feel as Welcome’ in the U.S. Due to Trade Tensions “Chinese travelers are showing some reluctance to vacation in the U.S. due to the trade war between Washington and Beijing, Marriott International CEO Arne Sorenson told CNBC on Monday. ‘They don’t feel as welcome in the United States,” said Sorenson, saying their apprehension is “affecting the coastal markets,’ such as New York and Los Angeles, the most.” (CNBC)
  7. Lodging Market Headed for a Brief Slowdown “The hotel sector will experience a decline in demand in 2020 and 2021, marking a delayed mimicking of the anticipated deceleration of the national economy, according to CBRE Hotels Research’s June 2019 Hotel Horizons report. Change is afoot in the lodging industry’s supply-demand structure, per the report. The lodging sector, as the economy, is cyclical. CBRE Hotels points to CBRE Econometric Advisors’ forecast of a slowdown in the national economy from a 2.2 percent increase in GDP in 2019 down to a 0.7 percent increase in 2020, and 1.4 percent in 2021.” (Commercial Property Executive)
  8. Up Front: CRE’s Numbers Are Slipping “The outlook for commercial real estate is expected to moderate over the next three years, according to the latest forecast from the Urban Land Institute’s Center for Capital Markets and Real Estate. Growth will continue, it found—but at a slower pace than previous years. In just about every category or asset class, some level of slippage is expected. For example, growth forecasts for CRE prices are projected to slow with 5% price appreciation expected this year, 3.7% next year, and 2.8% in 2021. The latter two years are below the long-term average growth rate of 4.4% for the first time since 2011.” (GlobeSt.com)
  9. D-FW Non-Residential Building Surged Last Month “Construction in the Dallas-Fort Worth area surged in April. A huge year-over-year increase in nonresidential building starts in the area last month added to the annual building totals, according to a new report from Dodge Data and Analytics. Nonresidential building starts in the D-FW area totaled more than $1.2 billion in April — more than twice the activity of April 2018. Residential starts fell from a year ago last month and totaled about $1.1 billion.” (Dallas Morning News)
  10. East Bay Office Asset Sells for $115M “HFF has arranged approximately $93 million in acquisition financing for 1333 Broadway, a 253,393-square-foot office building in Oakland, Calif. HFF worked on behalf of the buyer, Swift Real Estate Partners, and secured the floating-rate loan through an affiliate of Brookfield Asset Management. The seller of the 10-story asset was CIM Group. The price was $115 million, according to information provided to Commercial Property Executive by Yardi Matrix.” (Commercial Property Executive)
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