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10 Must Reads for the CRE Industry Today (March 6, 2017)

  1. Get Ready for ‘Regular Fed Rate Hikes All Year,’ Ex-Treasury Official Warns “The Federal Reserve will increase interest rates next week, as many central bankers have been recently hinting, and that's only the beginning, according to Brookings Institution's Aaron Klein, a Treasury staffer during former President Barack Obama's administration. ‘The Fed is racing to get to 1.5 percent for the interest rate so that they can get above the next recession and get out in front,’ Klein said Monday on CNBC's ‘Squawk Box.’” (CNBC)
  2. Marriott to speed up expansion of Starwood brands: CEO “Hotels group Marriott International (MAR.O) is planning to speed up the expansion of brands acquired in the takeover of rival Starwood, and is not ruling out further additions to its portfolio, its chief executive said on Monday. Arne Sorenson also said 2017 was shaping up to be a solid year, though with some clouds on the horizon. ‘We are concerned about whether national policies around travel roll out in a way that is harmful to our business and economies,’ he said on the sidelines of the IHIF hotel conference in Berlin, highlighting political changes in the United States and Britain, and upcoming elections in Europe. Marriott, with brands including Ritz-Carlton, Renaissance and Autograph, completed the acquisition of Starwood in September, adding names such as Sheraton, W and Aloft to create the world's largest hotel chain with more than more than 6,000 properties in 122 countries. Sorenson said Marriott wanted to keep up the same rate of expansion as before the deal, meaning faster growth for the Starwood brands. He said a new Marriott group hotel would open on average every 15 hours in 2017. ‘We think with Aloft we can really ramp it up and grow them at a faster pace than Starwood,’ Sorenson said.” (Reuters)
  3. Amazon to Mount Solar Panels at 50 Facilities by 2020  “Amazon has just laid out a bright new goal for itself. The e-commerce giant announced the launch of a clean energy initiative that calls for the installation of solar panels on 50 fulfillment and sortation centers around the world by 2020. The Seattle-based company will kick off the endeavor by peppering the rooftops of more than 15 U.S. facilities in 2017.As our fulfillment network continues to expand, we want to help generate more renewable energy at both existing and new facilities around the world in partnership with community and business leaders,’ Dave Clark, senior vice president of worldwide operations with Amazon, said in a prepared statement. The initial stage of the solar installation program will cover—literally—properties in California, New Jersey, Maryland, Nevada and Delaware, allowing for the production of up to 41 megawatts of power at the facilities. Contingent upon such factors as the particular property and time of year among them, the installations could provide as much as 80 percent of a center’s annual energy demands. ‘We are putting our scale and inventive culture to work on sustainability—this is good for the environment, our business and our customers,’ Clark added. ‘By diversifying our energy portfolio, we can keep business costs low and pass along further savings to customers. It’s a win-win.’ Amazon is moving fast with its new solar installation program. However, the company still has quite a way to go to catch up with such leaders as Prologis, Walmart and Target, the latter of which tops the list of large corporations’ solar adoption at U.S. facilities, according to a 2016 report by the Solar Energy Industries Association.” (Commercial Property Executive)
  4. Why commercial real estate investors are looking to resilience rather than yields “Over the next few decades, commercial real estate developers could be just as likely to base investment decisions on rising sea levels as on rising interest rates. As factors such as urbanisation, climate change and social unrest exert increasing pressures on cities, traditional metrics for measuring investment risk cannot hope to capture the whole story. Instead, forward-thinking investors are turning their attention to resilience–a city’s ability to function in the wake of a disaster–to guide capital allocation. In April 2014, UK-based global property group Grosvenor published a three-year study, Resilient Cities, to seek new ways of measuring resilience as a means of better planning and managing its global portfolio. The report ranked 50 of the world’s most important cities according to their long-term resilience, with surprising results. Scores were arrived at by weighing a city’s ‘vulnerability’ against its ‘adaptive capacity’. While New York City may be prone to hurricanes, its ability to bounce back quickly–as it demonstrated in the wake of Hurricane Sandy in 2012–puts it higher than cities that you could expect to be less vulnerable. People sat up and took note. Here was an investor putting resilience ahead of projected vacancy rate and using the research to determine its own future capital allocation.” (Cities Today)
  5. Individuals are elbowing out investors in most housing markets, new data show “Home buyers are striking back. After the financial crisis, investors flooded into the real estate market to snatch up single-family homes at a discount and either rent them or re-sell them later. But new data from shows that individual buyers pulled market share from investors in 36 of 50 top metros in the 12-month period ending in August 2016.” (MarketWatch)
  6. How one tweak to affordable housing policy could make a big difference for developers “The proposal, known as income averaging, would allow developers to set aside units for wealthier tenants, whose rents would help subsidize lower-income tenants. It could create more rentals units with deeper affordability, advocates say. Here’s how the system currently works: The federal government calculates a statistic called area median income, or AMI, which is then used to set affordability standards for some projects, including those taking federal Low Income Housing Tax Credits (LIHTC). But the formula that calculates AMI includes incomes from those counties in upstate New York. Critics say that this formula puts affordable rents at levels out of reach for city residents where local median income is much lower. ‘Affordable,’ according to AMI, may not actually be affordable to those in certain communities. But income averaging could help alleviate some of this affordable housing burden, supporters say. It would utilize the current AMI calculations, but would increase affordability through tweaks to the LIHTC program, which has helped finance over 75,000 units of low-income housing in the city between 2005 and 2014.” (The Real Deal)
  7. Miami ‘has never seen a tower quite like this’ “Every week, a ship leaves Dubai loaded with an entire floor's worth of structural pieces bound for what's likely the most unusual, not to say outlandish, tower ever erected in Miami — One Thousand Museum, one of the last designs from the late superstar architect Zaha Hadid. The pieces, made of a lightweight concrete reinforced with glass fiber, form the sinuous skeleton that coils up along the exterior of the tower like Jack’s beanstalk or the bones of an alien life form. The assembly of the bones is an intricately coreographed operation of daunting precision, using a construction technique that’s not been tried before. Once it’s finished, sometime in 2018, One Thousand Museum will be, to the best of anyone’s knowledge, only the second exoskeleton tower in Miami — that is, one in which structural supports lie outside of the building’s skin, like the skeleton of an insect or a crustacean. The One Thousand Museum exoskeleton permits expansive interiors uninterrupted by columns and broad terraces spanning a jaw-dropping 40 feet that jut from the tower’s corners, giving the building a serrated edge. ‘Hadid didn’t just design a cool building,’ said One Thousand Museum co-developer Kevin Venger. ‘This side of the world has never seen a building quite like this.’” (Miami Herald)
  8. Russian Real Estate Deals Never Materialized for Trump “He visited imperial palaces and construction sites. He presided at a Miss Universe pageant. He hobnobbed with city officials at gala functions and seemed to particularly enjoy dining on Russian sausage. Donald Trump did not strike any real estate deals here.  The New York real estate tycoon has his name on hotels, resorts and other properties from South Korea to Turkey to Panama, but none in Russia, though he repeatedly said he wanted to build a Trump tower in Moscow and discussed various deals in three visits dating back to 1987.  He has spoken glowingly of Moscow and President Vladimir Putin. Now that Trump is in the White House, his relationship with Russia is coming under increased scrutiny, especially since U.S. intelligence agencies have concluded that the Kremlin meddled in the 2016 election in his favor. Critics speculate that Trump may let potential business interests in Russia influence his foreign policy.  Although Trump is said to have shown broad interest in a deal with Russia that would include cooperation in fighting the Islamic State group in Syria and would address Russia's interference in Ukraine, his administration has signaled that now may not be the time for such deals.” (Fortune)
  9. Exclusive: Neiman Marcus hires debt restructuring adviser – sources “U.S. high-end department store chain Neiman Marcus has hired investment bank Lazard Ltd to explore ways to bolster its balance sheet as it seeks relief from a $4.9 billion debt pile, people familiar with the matter said on Friday. The sources asked not to be identified because the matter is confidential. Neiman Marcus did not immediately respond to a request for comment, while Lazard declined to comment.” (Business Insider)
  10. Retailer Hhgregg Is Closing a Lot of Stores and Cutting a Lot of Jobs “As brick-and-mortar retailers struggle with online competitors, home appliances seller hhgregg is shrinking fast in a bid to turn around. The company announced Thursday it would close 40% of its stores and three distribution centers by mid-April. About 1,500 jobs are expected to be cut as a result, or 29% of the company's full-, and part-time work force by March 2016. ‘We are strategically exiting markets and stores that are not financially profitable for us,’ said Robert J. Riesbeck, hhgregg president and CEO. ‘We have determined that the economics of the affected locations will not allow us to achieve our overall goal of becoming a profitable company again.’' (Forbes)
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