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10 Must Reads for the CRE Industry Today (March 30, 2017)

10 Must Reads for the CRE Industry Today (March 30, 2017)

Morgan Stanley is warning the commercial real estate market has limited room for growth, according to Business Insider. Kushner Companies and Anbang ended negotiations on the redevelopment of New York’s 666 Fifth Avenue, reports Fortune. These are among today’s must reads from around the commercial real estate industry.


  1. Morgan Stanley: The Bull Market In Commercial Real Estate Is About to End “The commercial real estate market is showing cracks and will peak this year, Morgan Stanley analysts forecast. The big risk for the market is that the growth of net operating income — the revenues generated from commercial properties, excluding operating expenses — could slow down, they said. Commercial real-estate prices have recovered above the peaks they set before the housing crisis a decade ago. However, the revenue generated by rents face two growing challenges.” (Business Insider)
  2. U.S. Investors Bet on Hotels and Offices “Real estate has been one of the losers from the so-called Trump trade since the US election. But pockets have outperformed as investors have bet that stronger economic growth will boost demand for offices and hotels. Hotel and resort real estate investment trusts are up 14.8 per cent since the election and Office Reits have risen 10.8 per cent — both outperforming the broader market. The broader S&P 500 Real Estate index is up a modest 3.3 per cent since November 8, against an overall market rally of more than 10 per cent.” (Financial Times)
  3. Kushner Companies and Anbang Drop Talks to Redevelop Manhattan’s 666 Fifth Avenue “Kushner Companies, the real estate firm formerly headed by President Donald Trump's son-in-law, said it has dropped out of talks to redevelop its flagship New York office tower with China's Anbang Insurance Group. The two companies, which had been in advanced talks according to media reports, both agreed to end the discussions about redeveloping a 60-year-old office tower that is steps away from St. Patrick's Cathedral and Rockefeller Center.” (Fortune)
  4. Trump’s Company Pursues Second Washington Hotel “President Donald Trump's company is actively seeking to open a second Washington hotel as part of a planned nationwide expansion, potentially creating another venue where he stands to benefit financially from customers doing business in the nation's capital. Representatives of the Trump Organization, now run by the president's adult sons, have inquired in recent months about converting one of several boutique, medium-sized hotels in upscale neighborhoods in and near downtown and reopening it under the company's new Scion brand.” (Chicago Tribune)
  5. Homebuilders Struggle to Fill Jobs ‘Americans Don’t Want’ “Housing industry veteran Gene Myers says he could be adding 50 percent more homes if he just had the people to build them. After weathering more than one recession, not to mention the worst housing crash in history, Myers says he has never seen anything like this. He noted that Denver's average sales rate would normally be about 15,000 homes per year, and the market is now operating at just over half that rate. ‘We're feeling so much stress on the capacity of the industry.’” (CNBC)
  6. The Long View: Mitsubishi Reloaded? Chinese NYC Investment Echoes the Japanese in the 80s “With every billion-dollar check a Chinese institution writes for a Manhattan trophy property, similarities to the Japanese investment boom of the late 1980s become more apparent. That boom was followed by a crash in the early 90s. And there are early warning signs that history could repeat itself. Last week, The Real Deal first reported that Chinese conglomerate HNA Group signed a deal to buy Brookfield’s 245 Park Avenue for $2.21 billion. If the deal for the office tower closes at that price, it would be one of the most expensive deals for a single Manhattan building ever recorded, behind the 2008 sale of the GM building.” (The Real Deal)
  7. Highest Local Profits on Single-Family Rentals? Will County “Chicago-area investors who want to get into the single-family rental game will reap the biggest rewards in Will County, according to a report. Single-family rentals in that southwestern part of the region should yield an average 9.9 percent return this year, according to a study by online real estate information service Attom. That's slightly better than Cook County, where Attom projects a 9.7 percent return. The figure is 8.1 percent in Lake County and 6.8 percent in DuPage. Attom did not have sufficient data on rentals for other counties in the metropolitan area.” (Crain’s Chicago Business)
  8. Senior Housing Properties Partners on Boston Assets “Less than a year after refinancing its two Fan Pier properties, Senior Housing Properties Trust has formed a joint venture with an unidentified sovereign institutional investor who bought a minority stake in 11 Fan Pier and 50 Northern Ave. for $261 million. The investor owns 45 percent equity interest in the joint venture with SNH owning the remaining 55 percent. The Newtown, Mass.-based REIT said the investment amount is based on a property valuation of $1.2 billion, with less than $620 million of existing secured debt on the property.” (Commercial Property Executive)
  9. E-Commerce Growth Gives Rise to Taller Warehouses in the U.S. “According to CBRE Group, Inc., the rapid growth of e-commerce fulfillment networks in recent years has resulted in a steady increase in the height and volume of warehouses and distribution centers, likely necessitating a shift to three-dimensional measurement of industrial space. The average height of warehouses built in the U.S. has steadily risen from roughly 24 feet in the 1960s to 32.4 feet this decade (33 feet in 2016). E-commerce companies have made use of that additional vertical space by installing mezzanine levels, allowing them to add more human inventory pickers in each building.” (World Property Journal)
  10. Extell Secures $168M in EB-5 Funds for Central Park Tower; Project’s Completion Date Pushed Back “In a call to Israeli bondholders Wednesday, Extell Development’s Gary Barnett reported that his firm had secured $168 million in EB-5 funds for Central Park Tower, the supertall condominium project set to rise on Billionaires’ Row. Up to $340 million in EB-5 funds may be raised for the 95-story tower at 225 West 57th Street, Extell’s filings on the Israeli stock exchange show. The $168 million brings Barnett one step closer to procuring the $1.2 billion needed to complete the project.” (The Real Deal)
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