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10 Must Reads for the CRE Industry Today (October 22, 2018)

Declining home sales have given a boost to multifamily and SFR REIT stocks, reports the Wall Street Journal. Naked Capitalism looks at how private equity bankrupted seven major supermarket chains. These are among today’s must reads from around the commercial real estate industry.

  1. Housing Woes Lift Outlook for Apartment, Home-Rental Stocks “Slumping home sales and rising interest rates are brightening the outlook for apartment and home-rental stocks. On Friday, the National Association of Realtors said sales of existing homes in September fell 3.4% from the previous month and 4.1% from a year earlier. The seventh-consecutive monthly decline was steeper than economists had expected and marks the latest in a string of data points that call into question the housing market’s momentum.” (Wall Street Journal, subscription required)
  2. How Private Equity Bankrupted Seven Major Grocery Chains for Fun and Profit “As Eileen Appelbaum and Rosemary Batt explain in a new article scheduled for American Prospect, Private Equity Pillage: Grocery Stores and Workers at Risk, the seven large grocery chains that filed for bankruptcy since 2015 all were victims of private equity firms overloading them with debt, which in turn kept them from investing in updating stores and their product lines. No similar publicly traded grocery chain suffered a similar fate during this period. And as the authors and others like your humble blogger have pointed out, private equity firms extract so much in fees relative to their meager equity investments in the funds they manage that they profit even when they drive the companies they bought into a ditch.” (Naked Capitalism)
  3. Lampert Reportedly Seeks Partner for Sears Bankruptcy Financing “Sears Holdings chairman Eddie Lampert is in discussions with at least one potential partner to contribute to a $300 million bankruptcy loan the US retailer is seeking, people familiar with the matter said Sunday. Lampert’s hedge fund, ESL Investments, has held discussions with Cyrus Capital Partners, an investment firm that holds some of Sears’ existing debt, about sharing the burden of funding portions of the $300 million loan, which would be separate from another $300 million bankruptcy loan that Sears’ banks have offered to provide, the sources said.” (Reuters)
  4. Search for Amazon HQ2 Sparks Real Estate Speculation “Plenty of real-estate investors are poised to buy property in whichever city Amazon.com Inc. picks for its second headquarters. Some aren’t waiting. Speculators are raising funds to invest in real estate near the winning site—wherever that may be—or are gathering cash commitments so they can pounce immediately after the winner is announced. Others are buying up shares of a real-estate firm that owns much of the property in a north Virginia city that many consider a leading contender.” (Wall Street Journal, subscription required)
  5. Alarm Bells for CRE Lenders after Bank OZK’s Bad Quarter “Bank OZK in Little Rock, Ark., did more than stub its toe when it reported lower profit tied to two big chargeoffs. The $22 billion-asset company may have lost the confidence of investors for the foreseeable future, even though management used an earnings call to passionately defend its heavy reliance on commercial real estate lending, where the charge-offs took place. At least that was the view of several analysts who cover Bank OZK, which has faced criticism in the past for its CRE exposure.” (American Banker)
  6. Zero-Waste Stores Pop Up in the U.S., Targeting Shoppers Tired of All the Waste “Some market entrepreneurs see a solution in the biggest store change imaginable: designing waste out of grocery stores altogether by creating what are known as zero-waste grocery stores. Over the last decade, some retailers also started rethinking their waste footprint and designed stores that encourage customers to bring their own containers. The Refill Shoppe in Ventura California is one such store.” (CNBC)
  7. Multifamily Inventory Rebalance Coming to U.S. “Global real estate consultant CBRE is reporting this week a 9.3% drop in permitting activity in U.S. for multifamily units last month is a favorable sign for future market balance due to slower construction activity. Other newly released statistics for multifamily housing--starts and units under construction--indicate that current construction activity is still at high levels. However, given the reduced permitting, a slowdown in both starts and under-construction totals can be expected in 2019.” (World Property Journal)
  8. Office Building in Plano’s Legacy Park Sells to Investors “An office building in Plano's booming Legacy business park has changed hands - the second recent sale in that area. Dallas' Pillar Commercial and Artemis Real Estate Partners have purchased the Lincoln Legacy II building at 5810 Tennyson Parkway near the Dallas North Tollway. The building was purchased from developer Lincoln Property Co. and USAA.” (Dallas Morning News)
  9. Hines, Oaktree Buy 515 KSF San Francisco Bay Office Campus “Hines recently joined forces with a subsidiary of real estate funds managed by Oaktree Capital Management LP on the acquisition of the premier Ygnacio Center office campus in the East Bay region of the San Francisco Bay Area. The partners acquired the approximately 515,000-square-foot property from LaSalle Investment Management. Hines hasn’t publicly disclosed the sale price of the asset. However, according to a June 2018 San Francisco Business Times article, the partners agreed to pay roughly $221 million for the asset, which last traded in 2016 for $158 million.” (Commercial Property Executive)
  10. Modern Apartment Building Twists for Enviable Green Space “Like most densely populated cities, Mexico City is not known for its sprawling backyards. Yet a new project from local firm Sordo Madaleno Architects shows how clever design can make personal green space a reality. The ultra-modern Alcazar de Toledo project is nestled into a hill overlooking Mexico City. Designed as luxury residences, the building has a curving driveway that leads to a covered rooftop parking lot and floor-to-ceiling windows.” (Curbed)
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