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10 Must Reads for the CRE Industry Today (October 23, 2019)

Crain’s New York Business looks at the winners and losers in WeWork’s bailout by SoftBank. The Treasury yield has been normalizing in recent weeks, according to Reuters. These are among today’s must reads from around the commercial real estate industry.

  1. Treasury Yield May Be Back to Normal, But U.S. Economy Is Not “A closely watched part of the U.S. bond market that is widely viewed as a recession indicator has recently stopped flashing red. But investors and economists say the economy is still not in the clear. The so-called ‘inverted yield curve,’ in which yields on short-term bonds are higher than those on long-term bonds, reverted back to normal on October 11. The shift could be interpreted as a sign that investors are feeling more optimistic about the economy.” (Reuters)
  2. Regulator Says Government Will ‘Wipe Out’ Fannie Mae and Freddie Mac Shareholders If Needed “Shares of Fannie Mae and Freddie Mac have tripled in value this year as shareholders eagerly welcomed the Trump administration’s interest in ending the two mortgage firms’ conservatorship. But a side comment made by a regulator during a congressional hearing Tuesday shows how little is settled when it comes to the fates of the two companies that underpin much of the housing finance market in the United States.” (MarketWatch)
  3. Neuman to Get Up to $1.7 Billion to Exit WeWork as SoftBank Takes Control “SoftBank Group Corp. won approval from WeWork’s board to take control of the troubled co-working startup, in a deal that would hand co-founder Adam Neumann nearly $1.7 billion and sever most of his ties with the company. WeWork, in danger of running out of cash in the coming weeks, chose a rescue offer from SoftBank over a competing proposal from JPMorgan Chase & Co., according to people familiar with the matter. It had asked both parties to submit proposals by a deadline yesterday.” (Wall Street Journal, subscription required)
  4. Global Real Estate ETFs Scaling Higher: Here’s Why “The real estate corner of the broader market has been a key area of interest lately given the Fed and the ECB’s as well as many other central banks’ dovish stances that has kept the rates subdued globally and increased the appeal for the rate-sensitive stocks. Additionally, the ebb and flow of U.S.-China trade war tensions, global growth issues and Brexit concerns are making global investors jittery, boosting demand for safe-haven assets like Treasury bonds, which lowers yields.” (Yahoo! Finance)
  5. Winners and Losers of WeWork’s Bailout “Four years ago public-relations executive Gillian Small set up shop at a WeWork near Penn Station, in a 40-square-foot office with a table that folded up into the wall. Tenants were offered painting classes, free breakfast on Mondays, tacos on Thursdays, and on Friday nights Small and her husband enjoyed free draft beer in the common area. ‘It was like having a date without going out,’ she said.” (Crain’s New York Business)
  6. Falling Vacancies Brighten Gloomy Outlook for Retail Landlords “At least one ray of sunshine is peeking through the clouds hovering over the local retail real estate market. After rising to recessionary levels, the Chicago-area retail vacancy rate has fallen for the second straight quarter, a positive sign for a market smarting from a wave of store closings and retailer bankruptcies. The local vacancy rate dropped to 10.9 percent in the third quarter, down from 11.1 percent in the second quarter and a recent peak of 11.6 percent last year, according to CBRE.” (Crain’s Chicago Business)
  7. Paramount Group’s 900 Third Ave. Could Go for Over $400M “A new trophy-office offering is hitting the market and could sell for in excess of $400 million. Materials are circulating for the sale of 900 Third Ave., between East 54th and 55th streets, where a large outside glass-covered atrium near the top of the 36-story tower could be transformed into building amenity space. The Paramount Group ownership has hired the Cushman & Wakefield investment sales team of Adam Spies, Douglas Harmon, Adam Doneger, Kevin Donner, Joshua King and Marcella Fasulo to market the 597,986-square-foot glass-and-steel tower.” (New York Post)
  8. Industrial Real Estate Is Still the Healthiest Market in Metro Detroit “Luxury condominiums, hotels, and historic redevelopments may get the most attention, but it’s actually industrial real estate that is the healthiest market in metro Detroit. According to the 2019 third quarter report from real estate analysis firm CBRE, vacancy rate for industrial space is at 2.1 percent in the region. Compare that to office space, where the vacancy rate is at 14.2 percent—and that’s after nearly a decade positive gains.” (Curbed Detroit)
  9. Where Climate Risk Is the Highest for Real Estate “In commercial real estate, as in society at large, climate change is the subject of much attention and research, especially in the wake of several natural disasters that have caused billions of dollars in property damage. For property owners worldwide, climate-related issues carry unprecedented urgency. In its latest study, global equity index MSCI assessed climate risk in private real estate portfolios worldwide, asking the question: What’s the exposure?” (Commercial Property Executive)
  10. Simon Property Group: A Swan in an Ugly Duckling Sector “In a beaten-up sector, investors can often find high-quality companies that have been grouped together with some of their underperforming peers. In the mall space, high-quality REITs have been able to transform their business models, re-lease spaces at higher rents, and continue to drive traffic to their properties. At a P/AFFO of just 14 and a dividend yield of 5.6%, we believe SPG offers a compelling value proposition and is an exceptional company to buy at these prices.” (Seeking Alpha)
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