10 Must Reads for the CRE Industry Today (October 20, 2017)

A tax system overhaul just became more likely with the Senate passing the 2018 fiscal budget, reports The Hill. MarketWatch warns that 2018 will be another tough year for U.S. retail chains. These are among today’s must reads from around the commercial real estate industry.

  1. Senate Narrowly Passes 2018 Budget, Paving Way for Tax Reform “Senate Republicans took the first step Thursday evening toward passing a tax plan and fulfilling a long-held campaign pledge. Senators narrowly voted 51-49 to pass the fiscal 2018 budget after a grueling hours-long marathon on the Senate floor. Sen. Rand Paul (R-Ky.) joined with every Democrat and independent to vote against the bill. The spending blueprint is key to Republicans' efforts to pass tax reform because it includes instructions that will allow the plan to avoid a Democratic filibuster.” (The Hill)
  2. Rising Rents Are Stressing Out Tenants and Heightening America’s Housing Crisis “The home-buying struggles of Americans, particularly millennials, have been well documented. Yet a recent study by found that the often-proposed “solution” of renting is not much of a panacea. Rents as a percentage of income, according to Zillow, are now at a historic high of 29.1%, compared with the 25.8% rate that prevailed from 1985 to 2000. No surprise, then, that 58% of the 1,300 renters in the Hunt survey said they felt ‘stressed’ about their rent, or that many respondents said they couldn’t save for future purchases like homes.” (Forbes)
  3. Developers Sell Century City’s Glamourous Past “Movie star Burt Lancaster had a condominium in Century City, as did Ruth and Elliot Handler, co-founders of the Mattel toy company. Ronald Reagan, while he was president, maintained his “Western White House” there. Today, celebrities including actor Matthew Perry and chef Nobu Matsuhisa look over Los Angeles from their Century City properties in the sky. For most, luxury living in Los Angeles evokes visions of sprawling estates. But since the 1960s, Century City has offered an alternative.” (Wall Street Journal, subscription required)
  4. Retailers Should Get Ready for Another Stressful Year in 2018 “The stress in the retail sector that has triggered a string of bankruptcies this year is unlikely to get much better in 2018. The sector is expected to again produce the most defaults at up to $7 billion, resulting in a 10% default rate, Fitch Ratings said Thursday. The September trailing 12-month retail default rate stood at 7.3% after Toys ‘R’ Us Inc.’s bankruptcy filing, up from just above 5% in July and August. The retail sector accounts for 30% of the defaults that have taken place in 2017 to date, with six issuers defaulting on debt totaling $5 billion.” (MarketWatch)
  5. Blackstone President Still Sees Opportunity in US Real Estate “The U.S. real estate market may have slowed down, but Blackstone Group president Tony James still sees plenty of opportunities for profit. ‘Real estate is a gargantuan market,’ he said during the company’s quarterly earnings media call Thursday. ‘There are always undermanaged assets.’ Blackstone has been investing heavily in logistics real estate, hoping to capitalize in the rise of online retail, and James indicated more acquisitions are possible.” (The Real Deal)
  6. WeWork: A $20 Billion Startup Fueled by Silicon Valley Pixie Dust “When Adam Neumann pitches potential investors on his startup, WeWork Cos., he likes to rev them up with a jaunt through his company’s shared office spaces. Before arriving, the 38-year-old chief executive typically sends staffers a directive: Activate the space.’ WeWork’s employees swarm a lounge to host an impromptu party with pizza, ice cream or margaritas.” (Wall Street Journal, subscription required)
  7. Foreign Property Investors Drawn to U.S. Industrial, Logistics Assets “According to CBRE, strong fundamentals, growing sophistication of logistics facilities and e-commerce growth has led to a surge in foreign industrial investment in the U.S. Foreign investors have acquired nearly $61 billion in U.S. industrial real estate since 2010, 48 percent of which has come from Asia-Pacific-based investors--largely from Singapore and China. Investors from Canada also invested more than $17 billion in U.S. industrial real estate assets during this period.” (World Property Journal)
  8. Luxury-Minded Louis Vuitton Scours the Nation for its First U.S. Factory Site, and Discovers Keene, Texas “Back in the summer, the chairman of French luxury goods maker Louis Vuitton let it slip at a high-brow fashion show in Paris that the company was looking to open its first manufacturing site in the U.S. Then earlier this month, the 163-year-old company bought 256 acres of land in Keene, Texas, from Dallas surgeon Wayne Z. Burkhead Jr. and Rockin' Z Ranch LLC, according to the Cleburne Times-Review.” (Dallas Morning News)
  9. Here’s How Much Characters on TV Shows Like ‘Friends’ Would Actually Pay in Rent “To determine whether or not popular TV characters would actually be able to afford their homes, apartment finding website RENTCafe compared how much characters from shows such as ‘The Big Bang Theory’ and ‘Grey's Anatomy’ would earn to what they would pay in rent. The full methodology is available here. Of all the characters from all the shows analyzed, New Yorker George Constanza from NBC's ‘Seinfeld’ is farthest in the red.” (CNBC)
  10. Why Sears Stock Could Plunge Another 30% by 2018 “The games seem to be ending for Sears Holdings. Because of CEO Eddie Lampert's big position in the stock and his ability (via his hedge fund) to finance, loan and pull out almost every stop in the book, Sears had been prone to sharp rallies. This is despite the growing short-interest betting against its demise. Well, that demise has certainly gained momentum. Shares hit new 52-week lows earlier this week, bottoming out at $5.48 before rallying back to $6. Can it continue to stay afloat? Only for so long.” (The Street)
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