J.Crew store

10 Must Reads for the CRE Industry Today (May 1, 2017)

MarketWatch looks at the advantages an LLC structure offers for owning real estate. Blackstone has acquired J.Crew’s debt through its credit subsidiary, which could help the struggling department store to delay bankruptcy, according to Reuters. These are among today’s must reads from around the commercial real estate industry.

  1. Exclusive: Blackstone's GSO snaps up J. Crew debt in restructuring gambit “GSO Capital Partners, private equity firm Blackstone Group LP's (BX.N) credit arm, is acquiring more of J. Crew Group Inc's debt, hoping for a profitable trade that could also give the U.S. fashion retailer more time to stave off bankruptcy, people familiar with the matter said. Sales have been declining as J. Crew, whose ballet flats and cashmere cardigans were once a staple of middle-class U.S. wardrobes, struggles to keep abreast of changing tastes and faces fierce competition from cheaper online retailers. It now has $2.1 billion in debt. Most pressing is $567 million in unsecured bonds coming due in 2019. To cut that burden, J. Crew is trying to slash more than half the bonds' value by placing the intellectual property of its eponymous brand into a new company, but holders of other debt are resisting the move.” (Reuters
  2. The advantages of owning real estate in a single-member LLC “Single-member limited liability companies (SMLLCs) are limited liability companies (LLCs) with only one member (owner). As with a corporation, operating a business or investment activity as an LLC generally protects your personal assets from exposure to liabilities related to the activity — under applicable state law. However, SMLLCs offer some unique tax attributes that make them ideal real estate ownership vehicles. Here’s the story on their advantages. Advantage: Disregarded SMLLCs are ignored for federal income tax purposes Under IRS regulations, the existence of an SMLLC is generally ignored for federal income tax purposes. In other words, the SMLLC is a so-called disregarded entity. The federal income tax treatment of a disregarded SMLLC is super-simple: its activities are considered to be conducted directly by the SMLLC’s sole member (owner).” (MarketWatch)
  3. Exclusive: Convene Raises $68 Million to “Starwood-ify” offices “Increasingly, venture investors view real estate as the next industry to be transformed by disruptive technology. But as they start investing in the category, they might find that traditional real estate investors, including Brookfield Property Partners, one of the country’s largest landlords, are already ahead of them. Convene, a New York City-based startup, is Brookfield’s only startup investment, and today Brookfield has doubled down on the bet. Brookfield led a $68 million Series C investment in the company alongside Conversion Venture Capital and ArrowMark Partners, the companies tell /react-text Fortune react-text: 236 . The Durst Organization and Elysium Capital Management also participated. Convene previously raised $45 million in funding. Brookfield is “eager to explore working with and investing in” exiting startups, a company spokesperson said.” (Fortune)
  4. Economy Watch: Commercial Property Valuations Gain in April “Commercial real estate valuations nationwide grew by an average of 1 percent during April, representing the industry’s strongest price growth since the election in November, according to Ten-X’s latest Commercial Real Estate Nowcast. The monthly uptick comes after generally tepid growth in valuation during the months after the election, including a 0.5 percent increase in March. The report also noted that CRE pricing has now risen 9.6 percent over the last 12 months, which is the strongest rate of annual growth since early 2016. According to the Nowcast, the hotel sector experienced a surprising pop in pricing, surging 1.3 percent during April. That places prices 1 percent above their April 2016 levels, breaking a streak of 11 consecutive months with negative annual growth.” (MultiHousing News)
  5. Miami’s real estate drawing Middle Eastern buyers “Every month, the Miami Association of Realtors announces the top 10 foreign countries that use its website to search for Miami real estate. As you might expect, this list typically features the “usual suspects” month after month, such as Colombia, Canada, Brazil, Venezuela, Argentina and France. However, the most recently published report (from January 2017) included an unfamiliar newcomer: Turkey, ranked at No. 7. Miami has always attracted foreign buyers, and we are very used to seeing strong interest from Latin America and Europe. But this marked the first time I can remember that a Middle Eastern country was included among that report’s top 10. While time and circumstances could make this inclusion an outlier, it is also a fairly good demonstration of Miami’s rising profile among wealthy and sophisticated real-estate buyers from that part of the world — a trend in which I have been fortunate to participate.” (Miami Herald)
  6. A&E buying seven Queens buildings for $83M “A&E Real Estate Holdings is in contract to buy a seven-building Queens portfolio for $82.8 million, in its latest grab at the few remaining New York City multifamily holdings of global alternative asset manager Ares Management, sources told The Real Deal. The portfolio holds 343 rental apartments and spans 272,500 square feet. A&E is set to close this summer on the purchase for about $241,000 per unit and just north of $300 per square foot. The addresses are 22-73 41st Street in Astoria; 132-70 Sanford Avenue and 151-10 35th Avenue in Flushing; 41-41 44th Street and 47-07 39th Street in Sunnyside; and 40-11 – 40-19 79th Street and 42-29 Judge Street in Elmhurst.” (The Real Deal)
  7. Two DC Office Buildings Sell For $259M “Westbrook Partners and TIER REIT recently sold 1325 and 1341 G St. (the Colorado Building), two Class A office buildings in Washington, D.C.’s East End submarket, to UNIZO Holdings Co. for $259 million. HFF represented both parties in the 440,419-square-foot, off-market transaction…TIER REIT has exited four non-target markets year to date, and currently operates in eight markets across the U.S. In January, the REIT completed three transactions totaling $217.7 million, including selling two office buildings in Philadelphia and Burbank, Calif.” (Commercial Property Executive)
  8. How Amazon is disrupting grocery “Of all Amazon’s retail ambitions — an online juggernaut that began with books and has expanded to everything under the sun — its grocery effort remains somewhat undercooked, despite a decade in the space…But it’s not just the size of the market, analysts say. As a high-frequency purchase, grocery makes a lot of sense for Amazon. ‘They want that consistent customer back in the fold. Most consumers look at grocery shopping as utilitarian. It’s not passion purchases, it’s ‘my standards, my staples,’ so to some degree any time you remove the pain points you win. Grocery is ripe with opportunities,’ Brendan Witcher, Forrester analyst, told Retail Dive. ‘Anyone can become a grocer, and Amazon has the benefit of having deep pockets, and most grocers don’t have that.’” (Retail Dive)
  9. Dollar General acquires 300-plus stores “Dollar General Corp. has added to its portfolio through an acquisition. The Federal Trade Commission has approved the sale of 323 Dollar Express stores by Sycamore Partners to Dollar General, reported Reuters. The Dollar Express chain is made up of former Family Dollar stores that Family Dollar sold to Sycamore Partners in late 2015. Sycamore Partners bought the stores in 2015 when Dollar Tree sold the stores in order to win antitrust approval to buy the Family Dollar chain.” (Chain Store Age
  10. Another hotel tower is in the works for Plano's $3 billion Legacy West “Plano's $3 billion Legacy West Development isn't finished growing. A project on the way will add a second hotel for visitors to the mixed-use development. Investor Sam Moon Group plans to build a boutique hotel in the Legacy West Urban Village on Headquarters Drive at Communications Parkway. The planned hotel will be across the street from Liberty Mutual Insurance's huge new corporate campus at Legacy West. JPMorgan Chase's campus is in the next block. The two office projects will employ more than 10,000 people.” (Dallas Morning News)



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