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10 Must Reads for the CRE Industry Today (March 22, 2017)

Marriot has elaborated on its plans to expand, saying it will add 300,000 rooms globally by 2019, Reuters reports. SoftBank is continuing its U.S. real estate investments with a $300 million infusion into office-sharing company WeWork, according to The Wall Street Journal. These are among today’s must reads from around the commercial real estate industry.


  1. Marriott to add up to 300,000 rooms by 2019 “Marriott International Inc (MAR.O) said on Tuesday it planned to add up to 300,000 rooms worldwide by 2019, as part of a three-year growth plan, ahead of the No. 1 hotel chain's investor day. The owner of Ritz-Carlton and St. Regis luxury hotel brands said it would earn $675 million in stabilized fees from hotel rooms added to its system. Earlier this month, Marriott said it would speed up expansion of its Starwood brand in Europe by 2020. Marriott bought Starwood for about $12.41 billion in September, adding names such as Sheraton, W and Aloft to create the world's largest hotel chain with more than 6,000 properties in 122 countries.” (Reuters)
  2. SoftBank Invests $300 Million in WeWork  “SoftBank Group Corp. has invested $300 million in shared-office space giant WeWork Cos., part of a sizable bet on a company that has become a favored host of young tech startups, according to people familiar with the matter. The investment in the seven-year-old New York company is expected to be a prelude to at least two other chunks of funding, together totaling around $3 billion, the people said.” (The Wall Street Journal, subscription required)
  3. All Signs Point To A Strong 2017 Real Estate Market “President Trump would like to stimulate the economy through deficit spending and deregulation. The market has responded by selling off bonds and buying bank stocks. How will this impact the real estate market? The bond sell-off has caused interest rates to increase nearly one percent, which increases the cost of a $300,000 mortgage by roughly $250 a month. On the other hand, reduced regulation could increase lending for credit-challenged individuals. Also, potential deficit spending could create new jobs. In this scenario, more credit and jobs could mean more buyers bidding on homes. It has been an unusual post-inauguration ride, and there is, of course, uncertainty around what the new administration will be able to accomplish and how policy decisions will impact loan programs.” (Forbes)
  4. For China’s middle class, Brooklyn real estate offers more than a green card “Since the Great Recession, snapping up prime real estate in coastal American cities, sometimes sight unseen, has become an increasingly popular sport with China's wealthy. In 2014, for the first time, the Chinese bought more Manhattan apartments than did the Russians, according to Reuters. The strength of the U.S. dollar compared to the fragile yuan is making China's middle class a major force in the Brooklyn real estate market. The existing cultural infrastructure of its Chinatowns aside, the potential profit margin of owning property in Brooklyn's up-and-coming areas is hard to beat. ‘You could purchase an income-producing property in a middle-class Brooklyn neighborhood like Bed-Stuy and see a 7 or 8 percent rate of return on a monthly basis from your rent rolls,’ said Jeanette Colegrove, a licensed real estate broker at Brown Harris Stevens in Brooklyn. According to January 2017 figures from the Elliman Report, a monthly survey of New York City rentals, the median rent in Brooklyn has risen to $2,750.” (CNBC)
  5. Economy Watch: US Real Estate Billionaires Mostly Include Familiar Faces “American real estate billionaire Donald Bren came in at No. 66 on Forbes’ annual list of the world’s billionaires, which was released on Monday. Those on the list are ranked by net worth and categorized by industry and country of origin. Bren, with a net worth of $15.2 billion, has often been the U.S. leader on the list over the years. His firm, Irvine Co., owns more than 115 million square feet of real estate, mostly in southern California. His net worth is no chump change, but it isn’t in the same league as the list’s top billionaires worldwide, including Bill Gates(No. 1 this time around), with a net worth of $86 billion. Warren Buffett and Jeff Bezos were place and show on the Forbes billionaire list, with a net worth of $75.6 billion and $72.8 billion, respectively. Other top U.S. real estate billionaires that made the list include Stephen Ross (No. 186, $7.4 billion); Richard LeFrak (No. 219, $6.5 billion); and John A. Sobrato (No. 224, $6.4 billion). Chicago billionaire Sam Zell came in at No. 324, with a round $5 billion in net worth, while the world’s most famous real estate billionaire, Donald Trump, placed at No. 544, with $3.5 billion in assets, according to Forbes.” (Commercial Property Executive)
  6. REITs and the Latest Fed Rate Increase  “For the second time in the past four months, the Federal Reserve has upped the benchmark interest rate by a quarter point to a target range of 0.75–1.0 percent. The news of the rate hike caused government bond yields to drop, but added to gains across all three major stock indexes on Wednesday. According to a post on crowdsourced financial site Seeking Alpha, Real estate investment trusts (REITs) rallied by over 2 percent following the announcement, confirming that REIT investors should not overly fear potential interest rate increases. The REIT market’s response to the impending March rate hike closely mirrored the response as the December rate increase approached: REITs tumbled leading up to that rate hike, dropping sharply this past October and November. Similarly, the REIT exchange-traded fund (ETF) indexes declined by 2 percent and then 4.5 percent in the two weeks leading up to the March rate hike. However, REITs immediately recovered both times, rising as soon as the rate was actually increased.” (Urban Land Magazine)
  7. Groundbreaking for $1 billion Mercer Crossing in Farmers Branch “Centurion American Development Group is kicking off construction on a $1 billion mixed-use development in Farmers Branch. The Mercer Crossing project on LBJ Freeway west of Interstate 35E has been in the works since 2015, when Centurion American bought 370 acres for the development. Since then, the developer has been working to complete zoning and master planning for the tract of land. The project is planned to include apartments, homes, retail and commercial space…The project is designed with 93 acres of urban commerce construction and 174 acres of residential single-family homes.” (Dallas News)
  8. Tahl Propp to convert 1325 and 1330 Fifth Avenue into $159M condo “Tahl Propp Equities plans to convert two rent-stabilized Harlem buildings near Central Park to condominiums, filings with the New York State Attorney General’s Office show. Long one of Harlem’s largest landlords, the developer is looking to cash in on a part of its vast Northern Manhattan portfolio with a new $159 million offering at 1325 and 1330 Fifth Avenue. Plans call for 150 condo apartments between the two addresses, with an average price tag of just over $1 million. The building at 1325 Fifth Avenue currently holds 71 rental apartments and 1330 has 80, so Tahl Propp would likely convert them without doing tear-downs and unit combinations. Most of these units are currently rent-stabilized, tax records show. However, conversions can only occur as units are naturally vacated. The project was filed as a “non-eviction” condo conversion, meaning tenants cannot be evicted for choosing not (or not being able to) buy their apartments from their landlord. No construction permits have been filed for the conversions so far.” (The Real Deal)
  9. Rouse sells Oregon power center “Rouse Properties has divested itself of an 821,564 center in Eugene, Oregon, whose tenants include Target, Cinemark, Cabela’s, Kohl’s, Hobby Lobby, and Ulta. The Shoppes at Gateway was purchased by Balboa Retail Partners for an undisclosed amount. ‘The Shoppes at Gateway is a thriving shopping center that drew significant investor interest,’ said JLL EVP Geoff Tranchina, who represented Rouse in the deal. JLL will continue on as the managing agent of the property.” (Chain Store Age)
  10. Inland Real Estate acquires 4 medical office properties “Inland Real Estate Acquisitions said it has acquired four medical office buildings in North Carolina, Texas and Utah, for a combined total of nearly 119,000 square feet of commercial real estate. Terms of the acquisitions were not announced. UNC REX Cancer Center, a 13,131-square-foot cancer treatment center at 117 Sunnybrook Road in Raleigh, North Carolina, was constructed in 2013. Located within the Raleigh-Durham region, also known as the Research Triangle, the one-story medical office building provides the more than 194,000 residents living within a five-mile radius with convenient care and access to a cancer treatment facility. Constructed in 2012, the Texas Orthopaedic & Sports Medicine Facility is a 36,804-square-foot medical office building at 13603 Michel Road in Tomball, Texas, approximately 32 miles northwest of Houston. The property consists of state-of-the-art surgical suites, pre-op rooms, patient exam and X-ray rooms and a therapy center with private physician offices.” (Chicago Daily Herald)
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