10 Must Reads for the CRE Industry Today (May 24, 2016)

10 Must Reads for the CRE Industry Today (May 24, 2016)


  1. Judges Throw Out $1.27 Billion 'Hustle' Settlement Against BofA “A U.S. appeals court on Monday threw out a jury’s finding that Bank of America was liable for mortgage fraud leading up to the 2008 financial crisis, voiding a $1.27 billion penalty and dealing the U.S. Department of Justice a major setback. The 2nd U.S. Circuit Court of Appeals in New York found insufficient proof under federal fraud statutes to establish Bank of America’s liability over a mortgage program called ‘Hustle’ run by the former Countrywide Financial Corp. The Justice Department claimed Countrywide, which Bank of America bought in July 2008, defrauded government-sponsored mortgage financiers Fannie Mae and Freddie Mac by selling them thousands of toxic loans.” (Fortune)
  2. Economy Watch: Quality of CMBS Improves in Q1, Says Moody’s “The quality of new CMBS loans improved as commercial property prices leveled off in the first three months of 2016, Moody’s Investors Service says in a new report, ‘Sector Update – Q1 2016 New Loan Quality Improves as Asset Prices Level Off.’ The rating agency said that the report is the first of what will be quarterly overviews of the U.S. commercial real estate and CMBS markets. Aaa (sf) bond spreads were volatile during Q1 2016, contributing to slowing conduit loan origination, said Moody’s director of commercial real estate research, Tad Philipp. ‘But over the last few transactions Aaa (sf) spreads have tightened and conduit issuers have ramped up their lending again.’ Given volatile CMBS spreads, life insurance companies had a competitive edge relative to CMBS for loans on high-quality properties during Q1.” (MultiHousing News)
  3. Commercial Real Estate May Help Provide A Smoother Ride On The Road To Your Investment Goals “As an investor in private commercial real estate, you are buying units of ownership of office buildings, industrial buildings, apartment buildings, retail centers, and even hotels. The buildings comprising a larger portfolio are acquired through private transactions between a willing buyer and seller, specific to individual properties. Investing in tangible properties influenced by space market fundamentals (meaning tenant demand and available supply) versus investor sentiment likely helps to dampen volatility. Unlike Real Estate Investment Trusts (REITs), private commercial real estate is not influenced by fractional ownership trading, which occurs in public markets on a public exchange.” (Seeking Alpha)
  4. Analysis: Federal Court Blocks Staples’ Acquisition of Office Depot “Retail mergers have long been subject to scrutiny by the antitrust authorities at the Federal Trade Commission (FTC). But perhaps no two retail chains have found themselves more often in the FTC’s cross-hairs than the two largest office supply providers in the United States, Staples and Office Depot.    Duplicating the fate of their proposed 1997 transaction, following a lawsuit filed by the FTC, last week Judge Emmet Sullivan of the United States District Court for the District of Columbia, issued an order prohibiting them from moving ahead with the latest iteration of their merger.  Judge Sullivan found that the FTC had met its statutory burden of showing that there was a reasonable probability that the proposed merger would substantially lessen competition in the sale and distribution of consumable office supplies to large Business-to-Business (B2B) customers. Upon learning that the Court had agreed with the FTC and would issue an injunction preventing them from closing the transaction pending further legal proceedings, Staples and Office Depot abandoned the transaction.” (Chain Store Age)
  5. Top Target exec talks retail giant’s urban moves “Although it’s been just a year since Target shuttered its 133 Canadian stores, the company has already moved on in a big way, namely rolling out “flexible format” locations in major cities, which means smaller, less traditional Target stores customized to meet the needs of urbanites, including carrying smaller pack sizes and locally relevant merchandise.” (The Real Deal)
  6. Apple stores getting reboot as company unveils new store design “One of the most successful formats in the history of retailing is about to get a makeover. Apple Inc. unveiled its vision for the future of its retail empire, opening a two-level flagship in San Francisco with new design flourishes and service elements that will be rolled out to Apple stores worldwide. The sleek, streamlined design emphasizes community, interaction and education, with a sizeable part of the store devoted to an open area, called The Forum, where visitors can learn about the company's assorted software and hardware offerings. Centered around a 35-ft.-wide, high-definition video wall, the space includes year-round programs for kids, monthly events for teachers, sessions for current and aspiring developers, sessions in partnership with local experts in creative arts and more.” (Chain Store Age)
  7. Suburban apartment rents hit another record high “The median net suburban apartment rent rose to a new high the first quarter, extending a recovery that began back in 2009, according to a report from Appraisal Research Counselors, a Chicago-based consulting firm. The net rent hit $1.39 per square foot in the quarter, up 4.8 percent from a year earlier, the report said. ‘Market demand is still strong, and we've got a modestly growing base of renters that's just going to keep pushing rents up,’ said Appraisal Research Vice President Ron DeVries.”(Crain’s Chicago Business)
  8. Why L.V.’s biggest industrial real estate developer is feeling confident “Oregon real estate magnate Jordan Schnitzer is one of the biggest landlords in Las Vegas, with millions of square feet of warehouses under his control. He hasn’t built a local industrial project since the recession. But now, with the market heating up, Schnitzer is breaking ground again. Schnitzer, owner of Portland-based Harsch Investment Properties, is expanding Henderson Commerce Center, an industrial park at Warm Springs and Eastgate roads, with a 240,000-square-foot building. No tenants are lined up yet.” (Vegas Inc)
  9. Startups are taking over the New York real estate market “The Technology, Advertising, Media and Information companies, collectively known as TAMI tenants, are increasingly taking over the office leasing market as these small incubating companies grow into Amazonian-like monsters. According to Cushman & Wakefield, over 100 TAMIs are now seeking some 4 million square feet of space. While the majority are focusing on offices of 10,000 feet to 100,000 feet, seven of those hundred are searching for over 100,000 feet, and a few are also new to New York City. The sheer number of feet being leased each year by TAMIs is also leaping as they grow both in number and in size. From 2011 to 2014, TAMI leases of 10,000 feet and up averaged a total of 4.8 million feet each year.” (The New York Post)
  10. NYC’s BIDs spent $127M in 2015: report “The city’s 72 business improvement districts, many of which are helmed by some of the biggest names in real estate, spent a total of $127 million in 2015, according to a new report. The Downtown Alliance, which represents Lower Manhattan, tallied the most expenses at nearly $20 million. Of that sum, a majority was spent on marketing and sanitation services, according to the Small Business Services’ annual BID trend report. SBS oversees the city’s BIDs and releases a report annually based on data provided by the organizations. Only six BIDs spent more than $5 million, and the median expenses for 2015 was $430,780. The 180th Street BID in Queens had the smallest expenses for the year with $52,517.” (The Real Deal)
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