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10 Must Reads for the CRE Industry Today (October 12, 2018)

Wells Fargo prepared its first post-financial crisis mortgage bond, according to MarketWatch. If Sears files for bankruptcy, CEO Eddie Lampert might bid of some of its real estate and other assets, reports Reuters. These are among today’s must reads from around the commercial real estate industry.

  1. Mortgage Rates Fast Approaching 5%, a Fresh Blow to Housing Market “A 5% mortgage rate isn’t that high by historic standards. During much of the decade before the financial crisis, these rates hovered between 5% and 7%. But a return to more normal lending rates won’t feel normal to many buyers who have become accustomed to getting a mortgage loan at 4% or lower, and they could experience sticker shock at what they would have to pay now for a home loan.” (Wall Street Journal, subscription required)
  2. Sears CEO Lampert Explores Bidding for Assets in a Bankruptcy—Sources “Sears Holdings Corp Chief Executive Officer Eddie Lampert is exploring a bid for some of the cash-strapped U.S. retailer’s businesses and real estate once it files for bankruptcy, an alternative to a traditional court-supervised reorganization, people familiar with the matter said on Thursday. Under the scenario, the 125-year-old department store operator, once the world’s largest retailer, would initially avoid an outright liquidation, but would have to navigate the bankruptcy process without some of its key assets.” (Reuters)
  3. Sears Has Been Liquidating Outside of Bankruptcy for Years. That’s Making It Harder to Save Itself Now. “In effect, Lampert liquidated Sears outside of a formal bankruptcy proceeding. But now, as Sears is staring down the real threat of bankruptcy, those moves may come back to haunt it. Sears is asking lenders for money to support it in bankruptcy, but it has little to offer them by way of collateral or reassurance. That dearth makes it harder to avoid full-out liquidation, though not impossible, whether that comes before or after filing for protection, people familiar with the ongoing talks say.” (CNBC)
  4. Wells Fargo Readies its First Post-Crisis Mortgage Bond “Wells Fargo &Co. is preparing to sell mortgage bonds to investors, only the second such big bank to offer a deal like that since the financial crisis a decade ago. So-called ‘private-label’ securitizations, in which a lender bundles together hundreds of income-producing assets and sells pieces of the whole to investors who want fixed income, disappeared after the housing shock, and the move is likely more of a one-off trial run than the start of a resurgence of that market.” (MarketWatch)
  5. The Future of Real Estate Investing: A New Global Asset Class Emerges “In effect, Lampert liquidated Sears outside of a formal bankruptcy proceeding. But now, as Sears is staring down the real threat of bankruptcy, those moves may come back to haunt it. Sears is asking lenders for money to support it in bankruptcy, but it has little to offer them by way of collateral or reassurance. That dearth makes it harder to avoid full-out liquidation, though not impossible, whether that comes before or after filing for protection, people familiar with the ongoing talks say.” (Forbes)
  6. Warehouse Space Growing Tighter on Rising E-Commerce Demand “Warehouse space keeps getting harder to find as the drive toward online retail sales pushes more goods into already-squeezed U.S. distribution centers. The availability of industrial property declined in the third quarter as nearly 50 million square feet of warehousing capacity came onto the U.S. market in the three-month period, according to real-estate brokerage firm CBRE Group Inc. Distribution and e-commerce fulfillment operations are moving into new space just as quickly as it is being built, CBRE said.” (Wall Street Journal, subscription required)
  7. Spec Suite Office Market Grows in D.C. Region: Report “The D.C. region is seeing an increase in demand for move-in ready offices, also known as speculative suites, according to a new report from Newmark Knight Frank (NKF). As of August, there were about 624 spec suites available in the D.C. region, according to the report. With an inventory of 164 million square feet, Northern Va., has the largest number of available spec suites at 320, with the majority of the offices located in three submarkets: the Rosslyn/Ballston corridor, Tysons Corner and Reston/Herndon.” (Commercial Observer)
  8. Despite Record Affordable Housing Production, the Poorest New Yorkers Struggle to Pay the Rent “The city is building and preserving more affordable housing than ever, but federal programs remain the most effective tool for supporting the poorest households, according to a report released Thursday. The Citizens Budget Commission analyzed a recent housing survey and found that around 44% of households pay more than 30% of their income in rent—after accounting for government subsidies such as the Supplemental Nutrition Assistance Program and Section 8 housing vouchers.” (Crain’s New York Business)
  9. The Walt Disney of Retail: Meet the Billionaire Building the Malls of the Future “To understand The Grove, the 575,000-square-foot shopping Xanadu in central Los Angeles, let its owner, Rick Caruso, introduce you to its neighbor, the iconic Farmers Market. He takes you to a butcher stall where, some 80 years ago, Caruso’s father was sweeping the floor. Next he points to a pizza stand founded by Patsy D’Amore, who baked L.A.’s first pie in 1939. ‘I grew up on his knee,’ he says. Dapper in a custom suit and red-and-black-striped tie, Caruso weaves his way through the chaos, frequently stopping to ask merchants, ‘How’s business?’” (Forbes)
  10. New Logistics Real Estate Platform Targets $5B in Managed Properties “A new logistics real estate platform headquartered here focused on the acquisition, development and management of modern logistics properties in key North American markets has been launched. The new platform— Logistics Property Company, LLC— has partnered with Macquarie Capital Real Estate Investments on the formation of the platform. LPC seeks to grow its business to more than $5 billion of properties under management over the next five years to become a leading developer and operator of logistics facilities and occupancy solutions in North America.” (GlobeSt.com)
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