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10 Must Reads for the CRE Industry Today (November 21, 2018)

There is a real chance of a recession in 2020, according to the Washington Post. Small investors are buying delinquent mortgages from the last housing crisis, reports the Wall Street Journal. These are among today’s must reads from around the commercial real estate industry.

  1. A Decade After the Housing Crisis, Small Investors Try to Bring Busted Mortgages Back to Life “A decade after the financial crisis, there is a new breed of risk-takers in the U.S. housing market. During the boom before the bust, lenders made mortgage loans to countless buyers who couldn’t afford them. Lenders later wrote off many of the loans, but borrowers’ obligation to pay remained. Today, in an improved economy, a rag-tag group of individual investors, plus some Wall Street giants, is buying these old loans and trying to tease value out of them.” (Wall Street Journal, subscription required)
  2. The Two Big Reasons There Really Might Be a Recession in 2020 “Maybe the best reason to think there won’t be a recession in 2020 is that so many people are saying there will be. The idea being that the more people are worried about something, the more they should do to try to avoid it — right? You’d certainly think so, but not always. Consider the housing bubble: Economists including Paul Krugman and the Center for Economic and Policy Research’s Dean Baker spent years warning about the impending danger, but it didn’t matter. Policymakers didn’t do anything, and everyone else was too busy trying to get in while the getting was good to concern themselves with whether it was sustainable or not.” (Washington Post)
  3. Amazon Is Coming. Can New York’s Transit System Handle It? “When Andy Byford, the New York City subway leader, met with Amazon executives during the summer, Mr. Byford boasted that Long Island City in Queens was a transit wonderland ready to serve their army of workers. The reality is far less rosy. Long Island City does have half a dozen subway lines, the Long Island Rail Road, buses and ferry boats. But the picture Mr. Byford painted glosses over the enormous challenges facing the city’s transportation network, which regularly struggles to get millions of New Yorkers where they are going.” (The New York Times)
  4. Bain, KKR Establish Severance Fund for Toys ‘R’ Us Workers “The private-equity firms that owned Toys “R” Us Inc. before its collapse into bankruptcy have rolled out a severance fund for the thousands of workers left jobless as a result of the retailer’s liquidation in the U.S. KKR & Co. and Bain Capital each pitched in $10 million to create the TRU Financial Assistance Fund in order to allocate and distribute funds to former employees. The severance fund, which was earlier reported by The Wall Street Journal, is an unusual move by the private-equity firms. The fund isn’t required under bankruptcy law and has no ties to the chapter 11 process itself.” (Wall Street Journal, subscription required)
  5. American Homeownership Increases Again as Housing Market Looks for Balance “More Americans became homeowners in the summer months, fresh evidence of a housing market that’s finding some stability after several rocky years. The national homeownership rate was 64.4% in the third quarter, the Census Bureau said Tuesday. That’s a half-percentage point higher than a year ago. After touching an all-time high of 69.1% in 2004 as the housing bubble inflated, the homeownership rate bottomed out at 62.9% in 2016 as waves of Americans lost their homes or sold under duress. At the same time, many Americans who would ordinarily become buyers were locked out of the market by stringent lending rules, a lack of affordable inventory and a challenging economic backdrop.” (MarketWatch)
  6. Leaving Los Angeles: What the New Exodus Inland Tells Us “A decade ago, the communities inland from Los Angeles became the poster children of the housing bubble. As real estate agents urged clients to ‘drive until you qualify,’ the communities of Riverside County filled with eager house-buyers who weren’t afraid of 90-minute commutes – each way. Then the economy crashed, jobs dried up, the loosey-goosey mortgages people had relied on to finance their purchases stopped cooperating, and the exurbs emptied out.” (MarketWatch)
  7. Houston Commercial Market Significantly Improved Post Hurricane Harvey and Oil Crisis “The city of Houston's commercial property markets and oil driven economy seem to have fully rebounded, post Hurricane Harvey and depressed oil prices last year. That's according to Transwestern's latest TrendLines publication -- Capitalizing on a Transforming Commercial Real Estate Market -- which distills the trends of 2018 and sheds light on issues affecting Houston's future economy and commercial real estate industry in 2019 and beyond. Transwestern's research is also reporting that through the third quarter of 2018, the Houston economy has displayed marked improvements after weathering the impacts of both Hurricane Harvey and the 2014 oil crash.” (World Property Journal)
  8. CBRE’s Co-Working Company Brings On Former WeWork Exec “CBRE has hired a WeWork executive to bolster the ranks of its new co-working company. Robert Cartwright will join Hana as chief operating officer to oversee the company’s build efforts, personnel management and hospitality service. He left his position as senior vice president of global operations at WeWork in August, according to his LinkedIn, where he had worked since 2015. He was also an executive at Starwood Hotels until 2008 before co-founding his own hotel development company.” (The Real Deal)
  9. Data Center Trends: Insights from a Veteran “Data centers are rapidly growing out of their niche status as a real estate investment. A recent CBRE survey targeting 42 companies across the U.S. notes that 68 percent of investors and providers alike reported higher year-over-year occupancy in 2018. By the first half of this year, data center investment volume and net absorption were already close to surpassing the record-breaking 2017 numbers, according to another CBRE report. More than $7 billion in investment volume was reported, 47 percent of which was concentrated in asset transactions, as of June.” (Commercial Property Executive)
  10. Medical Marijuana Company Buys 4 Dayton Properties for $1 Million “A medical marijuana company recently bought four real estate parcels for $1 million. The properties — 307-313 Wayne Ave., 321 and 333 Wayne, with 117 Van Buren St., all in Dayton — were purchased by CannAscend Alternative LLC. Montgomery County property records identified the seller of all the properties as Goldflies Storage and Moving Co. The purchases are in line with plans the company has already revealed. CannAscend Ohio LLC proposes to open a medical pot dispensary called Strawberry Fields at 333 Wayne, a former service station.” (Dayton Daily News)
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