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10 Must Reads for the CRE Industry Today (November 28, 2016)

10 Must Reads for the CRE Industry Today (November 28, 2016)


  1. The One Big Real Estate Trend You Need to Understand in 2017 “Forget a tale of two cities: Extreme housing market fragmentation is now creating different experiences for home buyers and sellers in a wide range of locations and segments. Nationally, home prices are expected to keep rising, albeit more slowly— 3.5% in 2017, vs. 4.5% in 2016, per Moody’s Analytics projections. But even more so than in recent years, your position is now going to hinge on what and where you’re buying or selling. Hoping to escape a downtown condo for the suburbs? Your equity should go far: Small homes have seen much sharper price growth than larger ones, urban areas have appreciated faster than metro outskirts— and both trends are expected to continue in 2017.” (Fortune)
  2. More shopped online than in stores over Thanksgiving weekend “Americans jumped on holiday deals over the weekend but a larger slice of their spending migrated online, often through mobile devices, highlighting the high-wire act that faces retailers tethered to stores. A National Retail Federation survey released Sunday showed that online spending during Thanksgiving weekend grew at the expense of store spending for a straight second year. The NRF survey estimates that about 109 million people shopped online, compared with 99 million in stores. Foot traffic at malls and shopping centers was thinner than the frenzied crowds of years past after retailers offered discounts earlier in November and many of the promotions also were available online.” (MarketWatch)
  3. Economy Watch: Senior Housing Enjoys Strong Returns, But Also A Few Jitters “Senior housing continues to outperform other asset classes, posting total returns at 16.1 percent, 17 percent, and 15.3 percent over one-, three- and five-year periods, respectively, according to the recently released CBRE Seniors Housing & Care Investor Survey. Those totals are more than any other asset class for each period. Investor interest in the property type slowed down during the first half of 2016, however, following a broader pattern of CRE investor jitters. Transaction volume in U.S. senior housing dropped to $6.7 billion in the first half of 2016, compared with $13.5 billion in the first half of 2015. Much of the decline in volume was due to a drop in deals by public REITs. Coupled with the increase in the percentage of investors expecting no change in their exposure to senior housing over the next 12 months, there’s been an increase in market uncertainty or a “wait and see” market environment, the report notes. One reason is because there’s been downward pressure on occupancies recently.” (Commercial Property Executive)
  4. What Should a Global Investor Expect from Multi-Housing in 2017 “Interest of international capital entities for U.S. multifamily communities has been growing constantly, peaking at $150 billion in 2015, according to Blake Okland, vice chairman & head of U.S. multifamily at ARA Newmark. While the numbers for this year have not been added up, analysts are looking ahead to 2017. Predictions show even more interest from global investors towards residential assets on U.S. soil. The main factors encouraging this approach are changes in regulations and Brexit. The effects of Brexit—the United Kingdom’s exit from the European Union—will be more visible next year and, so far, it seems this exit translates into even more foreign capital coming to the U.S. According to Okland, most of the 30-40 percent of global capital that is now focused in the U.K. or Europe will be redirected to the U.S. Also, Asian investors, which usually claim 30 percent of U.S. gateway sales, will represent up to 80 percent of interested buyers. In terms of market sentiment, Brexit determined traditionally evasive overseas investors to proactively approach American firms. “Post-Brexit, investment volumes in central London have been off significantly. International demand is down considerably as investors seek clarity on the future direction of Britain. That has drawn international investors to direct their investment requirements to the U.S. We are witnessing a significant rise in demand for U.S. investment product from Europe, the Middle East and Asia-Pacific,” Alex Foshay, senior managing director at NGKF, told Multi-Housing News.” (MultiHousing News)
  5. Marriott to keep all 30 flags after $13B Starwood deal “Marriott International’s $13 billion acquisition of Starwood Hotels & Resorts made it the largest hotel operator in the world with 5,700 properties and 1.1 million rooms spanning 30 different brands – each of which will remain distinct and separate in the new company. Marriott had 19 brands prior to the deal, including its luxury flagship Ritz-Carlton, which competed with Starwood’s luxe St. Regis properties. As the deal neared completion, observers speculated that Marriott might fold similar properties together, but global brand officer Tina Edmundson said the plan is to keep all 30 flags intact. ‘We thought long and hard about how you serve up 30 brands in a meaningful way — one that helps consumers infer both price and experience,’ Edmundson, who spent 18 years earlier in her career working at Starwood, told Bloomberg News. Edmundson said eight of the 30 brands will be designated as ‘luxury,’ marketed toward two different types of travelers.” (The Real Deal)
  6. Discounter raises outlook as earnings soar “Dollar Tree on Tuesday reported a third-quarter profit that more than doubled compared to last year amid lower merchandise and freight costs. The retailer also lifted its guidance for the fourth quarter. Dollar Tree’s net income for the quarter, ended Oct. 29, rose to a better-than-expected $171.6 million, or 72 cents a share, up from $81.9 million, or 35 cents a share, in the year-ago period. The prior year included some charges and markdowns related to the Family Dollar business, which Dollar Tree acquired in 2015…Net sales increased 1.1% to $5 billion from $4.95 billion last year, just missing estimates. The prior year’s quarter included sales from 325 Family Dollar stores that were divested following third quarter 2015. “ (Chain Store Age)
  7. With $54 million land deal, Russian billionaire makes another big bet on Miami "Vladislav Doronin has paid $54 million for a waterfront two-acre parcel of land in Edgewater that belongs to a Catholic monastic order. The site extends half a block west from Biscayne Bay between Northeast 27th Street and Northeast 26th Terrace. It sits directly north of a planned 57-story condo tower called Missoni Baia being developed by Doronin’s OKO Group, which has invested heavily in Miami real estate over the last two years. In 2014, he paid roughly $40 million for the larger Missoni parcel. The price jump for the new purchase is a testament to the scarcity of waterfront land in and around Miami’s urban core. Doronin’s latest transaction is a sign that the man sometimes called Russia’s Donald Trump believes South Florida’s luxury condo market will rebound from its current slump. Sales for existing condos and new construction have slowed considerably because of a strong dollar and recessions in Latin America." (Miami Herald)
  8. Kohl's Sets Company Record for Online Sales on Thanksgiving “All of Kohl’s tech investments look to be paying off. The department store chain’s chief executive tells Fortune that Kohl’s had set a company record for single-day online sales on Thanksgiving. The news echoes strong results from Target, which also had a record Thanksgiving, and Adobe data suggesting total e-commerce sales in the U.S. topped $2 billion on Thursday. (Kohl’s is likely to break its own record on Monday, the biggest online shopping day of the year.) In the last year, Kohl’s has updated its shopping app, launched a mobile payment app, improved its in-store service for online orders, and shipped from more stores. Though the retailer was later than some competitors to this game, the result was a strong start to the Thanksgiving weekend, in which retailers get 15% of their holiday season sales.” (Fortune)
  9. Real estate allocations up as investors seek security “Institutional investors are using real estate as yet another proxy to bonds, to effectively manage volatility and protect against rising inflation. In Europe and the U.K. particularly, real estate allocations remain on the rise. The number of European investors allocating to real estate has increased 4% since November 2015 and, on average, those investors are allocating 40 basis points more, to 10.9%, as compared to a year earlier, according to data from London-based research firm Preqin. With average gilt yields of 0.5%, and the 10-year U.S. Treasury offering 2.3%, asset owners aren't shying away from taking on the illiquidity of real estate. Investors have accepted they need to be innovative in finding yield and they are becoming more sophisticated at it, sources said. David Engel, portfolio manager at the Swiss Federal Pension Fund PUBLICA, based in Bern, said the board of the 36.5 billion Swiss franc ($39.9 billion) fund approved a new strategic asset allocation of 4% to open-end real estate funds at the beginning of 2016, which includes non-Swiss real estate.” (Pensions & Investments)
  10. Waterfront Towers Reel In Unusual Loan Deal “The partners behind a gargantuan apartment complex being built on Manhattan’s far West Side have nailed down $2.3 billion in construction financing at a time when money from traditional lenders is hard to come by. GID and Henley Holding Co., a wholly owned subsidiary of the Abu Dhabi Investment Authority, are putting up three towers along the Hudson River between West 59th and West 61st streets. The expected finish date for the 1,132-unit Waterline Square project is 2019. The partners are borrowing $1.243 billion and are contributing more than $1 billion in equity. The leading lenders are Wells Fargo, HSBC USA, J.P. Morgan Chase & Co. and the National Bank of Abu Dhabi.” (The Wall Street Journal)
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