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10 Must Reads for the CRE Industry Today (May 31, 2016)

10 Must Reads for the CRE Industry Today (May 31, 2016)


  1. How International Issues Affect Foreign Investment in U.S. Real Estate “Foreign investors have long viewed U.S. real estate as a good place to diversify their portfolio and benefit from the world’s strongest economy. But in recent years, hard assets in the form of U.S. property has also become an option to safely store money. 'We’ve become what is today, I guess, the largest offshore location in the world,' says Ed Mermelstein, an international real estate attorney based in New York. But what happens to an investor's interest in U.S. real estate when international events affect his or her home country and lead to uncertainty over the future? From economic meltdowns abroad to terrorism to squabbles over European Union membership, the growing international role in major U.S. real estate markets means we’re more likely to see the impact of those issues, says Ross Milroy, owner and broker at Ross Milroy Realty in Miami. ‘The Miami real estate market – and I think New York is very similar as well – we’re so dependent on the international buyers, and they’re such a huge part of our market,’ Milroy says. ‘A lot of our real estate markets do not follow traditional patterns, and a lot of our demand is dependent on what’s going on in those home countries of our buyers.’” (U.S. News & World Report)
  2. The Flipside Of China's Love For American Real EstateThe types of projects being funded and built by Chinese investors are much larger than single family construction. These are multi-story properties that have longer construction time lines. The construction crews are larger and needs down the supply chain or bigger, for everything from cement to rebar. Construction jobs are only part of the picture. Development of hotel, office, and retail properties keeps permanent jobs in tact, while development of all types creates jobs in building management, according to the Rosen Group’s annual study. Rich Chinese immigrant investors are required to create 10 jobs for each investment under the EB-5 visa law. Asia Society estimates that Chinese investment through the EB-5 program created as much as 70,000 jobs last year, based on their own methodology.” (Forbes)
  3. This Fed President Says Markets Are 'Well-Prepared' for a Summer Rate Hike “St. Louis Federal Reserve President James Bullard said on Monday global markets appear to be 'well-prepared' for a summer interest rate hike from the Fed, although he did not specify a date for the policy move. ‘My sense is that markets are well-prepared for a possible rate increase globally, and that this is not too surprising given our liftoff from December and the policy of the committee which has been to try to normalize rates slowly and gradually over time,’ Bullard told a news conference after speaking at an academic conference in Seoul. ‘So my ideal is that if all goes well this will come off very smoothly.’” (Fortune)
  4. Real estate firms see solid but not spectacular growth in year “Real estate managers notched solid overall asset gains during 2015, but at a much slower growth rate than a year earlier. Pensions & Investments' annual survey of money managers found real estate equity assets under management totaled $385.4 billion at the end of 2015, a gain of 3.3%, while timber assets under management at year-end 2015 were up 8.6%, to $15.3 billion. Real estate investment trusts, meanwhile, rose 5.4% to $85 billion. But just a year earlier, P&I's universe of the largest managers of U.S. institutional tax-exempt assets showed gains of 24.5% for equity real estate and 18% for REITs. Timber in 2014 dipped 2.7%. ‘We are still seeing interest in real estate,’ said Brad Morrow, head of manager research in the Americas in the New York office of consulting firm Willis Towers Watson PLC.” (Pensions & Investments)
  5. Real estate diversifies as developers build for today’s end users “While the perception is that our market is one-dimensional due to the sheer number of high-rise condos that have been built over the past decade, today there are thriving single-family home and apartment communities under way in neighborhoods like Doral, Weston, Pembroke Pines, and even in and around downtown Miami. Although we have seen an uptick in condo development in the past three years, the majority of units being built this cycle are selling to owners who will spend all or part of their time here. This marks a shift from the boom-turned-bust of 2008, which was driven by condo developers, their buyers and banks over-leveraging themselves in the name of speculation. Case in point: In downtown Miami, the center of overbuilding last cycle, 85 percent of the 3,438 condos delivering this year are pre-sold, according to the Miami Downtown Development Authority’s latest market report. The same study found that 94 percent of downtown’s existing units are occupied by full-time residents. South Florida’s real-estate sector has learned from its past mistakes, and today’s housing market is proving resilient despite economic volatility overseas.” (Miami Herald)
  6. Leases for 320 Sports Authority stores to go to auction “Sports Authority’s remaining 320 store leases will be auctioned in June. The leases will be sold by commercial real estate, advisory and investment group A&G Realty Partners, which is currently accepting bids on the leases. The leases are for stores that range from 10,000 sq. ft. to 80,000 sq. ft., and are located in many of the major retail markets in the country including prestigious locations in New York City, Chicago, Los Angeles, Dallas, and Miami.” (Chain Store Age)
  7. University of Chicago to Sell 11-Property Student Housing, Retail Portfolio  “HFF was recently selected to market the sale of an 11-property, 394-unit portfolio plus six land sites, all under the ownership of the University of Chicago. Managing Director Brian Kelly and Associate Director Michael Higgins led the HFF investment sales team representing University of Chicago. The portfolio includes six graduate student housing properties, four faculty/staff buildings, one retail property and six land sites, all totaling 272,593 square feet. The properties are located in Hyde Park within walking distance to campus, six miles south of Chicago’s Central Business District and close to Lake Michigan. The student housing facilities totaling 520 beds were 95.9 percent occupied overall at the time of the announcement. Unit sizes in the communities average around 692 square feet. University of Chicago plans to sell the entire portfolio in a single deal and no individual trades will be considered.” (MultiHousing News)
  8. New Google Development Center Coming to Metro Detroit “Google announced it’s taking its Self-Driving Car Project to Metro Detroit. The company will be opening a 53,000-square-foot self-driving technology development center in Novi, Mich. Work is currently underway for setting up the new facility, but the projects should be complete and operational by the end of the year. The investment comes after several years of collaborations between specialists from the Greater Detroit area and Google for the Self-Driving Car Project. ‘Many of our current partners are based here, so having a local facility will help us collaborate more easily and access Michigan’s top talent in vehicle development and engineering. Our engineers, working with local partners, will further develop and refine self-driving technology. One of the first tasks will be to ready our self-driving Chrysler Pacifica hybrid minivans,’ company representatives said in a Google+ post. One of the first tasks for the new technology center will be working on the self-driving Chrysler Pacifica hybrid minivans.” (Commercial Property Executive)
  9. Ulta soars—online and in store “Ulta Beauty turned in what could be the best retail performance of the first quarter, posting strong brick-and-mortar and online growth and results that easily topped estimates. The company boosted its guidance for the year.  Ulta’s net sales for the quarter, ended May 2, surged 23.7% to $1.07 billion, up from $868.1 million in the year-ago period, and surpassing estimates for $1.03 billion. E-commerce sales shot up 38.8% to $61.0 million from $44.0 million last year. Same-store sales, which includes Ulta’s e-commerce sales, surged 15.2% compared to an increase of 11.4% in the first quarter of fiscal 2015. The sales increase was driven by 11.0% growth in traffic and 4.2% growth in average ticket. Net income increased 37.4% to $92.0 million compared to $66.9 million last year, The company posted earnings of $1.45 per share, crushing estimates of $1.29 per share.” (Chain Store Age)
  10. Motor City Gets a $100M Boost with New Industrial Facility “Global auto supplier Flex-N-Gate will build a new production unit on a 30-acre parcel located on Detroit’s eastside, in the I-94 Industrial Park. The sale of the land has been approved by Economic Development Corporation (EDC) of the City of Detroit. The Urbana, Illinois-based company will spend $95 million for the construction and capital costs of the new plant, but additional investments might push the amount up to $100 million. The project received a $3.5-million Business Development Program grant, to encourage the development. 'Building a new plant from the ground up within the Detroit city limits will be a milestone moment for Flex-N-Gate, made possible thanks to our partnership and collaboration with Ford, the City of Detroit and the State of Michigan,' said Shahid Khan, owner of Flex-N-Gate. The new facility will supply parts for Ford Motor Company and will create up to 650 jobs for Detroiters  over the next three years.” (Commercial Property Executive)
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