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10 Must Reads for the CRE Industry Today (October 26, 2016)

10 Must Reads for the CRE Industry Today (October 26, 2016)


  1. Simon Property raises outlook on improved rents “Simon Property Group Inc. said Wednesday that occupancy and rent rates improved during the latest quarter, leading the retail real estate operator to boost its annual earnings forecast. For the year, Simon Property expects earnings on a per-share basis between $6.25 and $6.27, up from a previous range of $6.04 to $6.12. The company also expects funds from operations, a key profitability measure for real-estate investment trusts, will be between $10.85 a share and $10.87 a share, up from $10.77 to $10.85. Analysts surveyed by Thomson Reuters expect $10.86. The Indianapolis-based firm has benefited recently from high occupancy rates as it has shifted its focus on bigger malls and outlets. Funds from operations for the latest quarter were $976 million, or $2.70 a share, compared with $918.7 million, or $2.54 a share, a year ago.” (MarketWatch)
  2. Why Austin supplanted D-FW to become the ULI's top real estate spot in the U.S. “Austin has edged out Dallas in the competition for the top U.S. real estate market. Both Texas cities headed the list of the best places to invest in property and develop in 2017, according to the annual Emerging Trends in Real Estate report by the Urban Land Institute and PricewaterhouseCoopers. The yearly study surveys real estate execs across the country for their predictions about the U.S. property market and economy. Last year, the closely watched report ranked Dallas-Fort Worth first and Austin a close second. ‘This year Dallas flip flopped with Austin,’ said Andrew Warren, PwC's director of research. ‘Austin has been steadily climbing in the last 10 years.’” (The Dallas Morning News)
  3. A Project Mends a Gash in the Street Grid of Washington “The depressed highway is a road from nowhere, the remnant of an Interstate once planned to cut through residential neighborhoods. Activists blocked the larger plan for the freeway in the 1960s, so this small segment close to the Capitol is left to feed traffic from city streets to other freeways, leading south over the Potomac to Virginia and east across the Anacostia River. The scuttled plan left an open gash — a six-lane trench — that divided Capitol Hill from downtown Washington’s East End. Now, a large air rights project is underway to cover the trench with five buildings, bringing with them 2.2 million square feet of offices, apartments, public spaces, shops and restaurants. Covering three square blocks, it will bridge a divide in the city and restore Pierre L’Enfant’s original street plan for the nation’s capital. The seven-acre project, called Capitol Crossing, also entails moving an 1876 synagogue, Washington’s oldest and more recently a museum of local Jewish history.” (The New York Times)
  4. Moody’s: Slow supply chains are department stores' Achilles heel “Relatively slow supply chains are hindering department stores’ ability to compete effectively in today’s retail market. That’s according to a new report by Moody’s Investor Service, which finds department stores fighting to stay relevant in a world in which consumers have rapidly prioritized value and convenience as pricing becomes more transparent, and in which consumers are shifting to off-price retailers and online shopping. Aggregate operating income of department stores is expected to decline approximately 11% this year. ‘Consumers today have access to a broad array of goods at the most competitive prices, which has spurred retailers across the industry to accelerate their efforts to compete more effectively,’ said Moody's VP Christina Boni. ‘Department stores have been the hardest hit, with relatively slow supply chains their biggest Achilles' heel.’ Department stores suffer inventory backlogs when consumer demand suddenly shifts, according to the “Department Stores Battle to Stay Relevant” report. Big markdowns to clear merchandise at such major players as Macy's and Nordstrom have dampened consumers' willingness to pay full price for goods. The markdowns also underscore department stores' supply chain challenge.” (Chain Store Age)
  5. New luxury rentals have dog parks and lounges — and they’re nowhere near South Beach “
A fireside lounge and coffee bar, inviting cabanas by the pool, a media room with a wall of big screens, a terrace featuring an outdoor pool table, a fitness center with on-demand spin and yoga classes and life-size virtual trainers — welcome to the ‘burbs, baby. If this sounds like a resort, that’s completely by design. New amenity-rich rental communities complete with conference rooms and business centers are popping up well beyond the gleaming towers of downtown Miami or Fort Lauderdale. A sampling: In West Kendall, Richman Signature Properties last month opened the luxury rental development Azura; it is set to open Portico in Sunrise this fall. In Miramar, FCI Residential recently has begun leasing Atlantico, on the heels of opening Toscana at Margate. In West Miami, the The Estate Companies developed the Soleste Club Prado and Soleste West Gables, and has several more projects set for the neighborhood.” (Miami Herald)
  6. New CoStar Data Reveal a Vast National Inventory of Naturally Occurring Affordable Housing—and an Untapped Opportunity “At least 5.5 million units of naturally occurring affordable rental housing exist in cities across the United States, according to newly released data from CoStar, a leading provider of data and analytics for the commercial real estate industry. Naturally occurring affordable housing (NOAH) is housing that is affordable without being supported by public subsidies such as low-income housing tax credits. NOAH’s market-rate affordability derives mainly from its age—most units were built 40 to 50 years ago—and lack of amenities: it is no-frills, functional housing that is nonetheless safe, secure, and inhabitable.” (Urban Land Magazine)
  7. Canadian retailer to enter U.S. with ‘disruptive’ concept “Spence Diamonds is dropping anchor in the United States with an innovative store concept and unique product offering. The diamond retailer will open a store in Austin, Texas, on Nov. 7, followed by a location in San Jose, Calif., on Nov. 10. A store in Scottsdale, Arizona is planned for first quarter 2017, with additional markets to be announced soon. The Spence concept is unique in that it features “artisan created diamonds,” which are identical to mined diamonds in every way, but created in a plasma chamber instead of being dug out of the ground. These diamonds are physically, optically, and chemically identical to the finest diamonds mined from the earth, but they are substantially larger than mined diamonds at any given price point, according to the company. (Spence stores carry both the artisan diamonds and traditional mined diamonds.) At Spence, customers can watch as diamonds are created right in front of their eyes. Jewelry is displayed in open cases and customers are free to take items out of the case for try on. JGA, Southfield, Mich., is serving as design firm for the company’s Austin store.” (Chain Store Age)
  8. Keeping your enemies close: Vornado mulls selling DC spinoff to rival “Vornado Realty Trust is mulling selling a spinoff of its Washington, D.C., business to rival JBG Companies in a deal that could be worth up to $6 billion. The Washington portfolio consists of more than 16 million square feet of office space, which would be spun off into its own company and then acquired by JBG, Bloomberg reported. The deal — if it goes through — could be worth $4 billion to $6 billion. No final decisions have yet been made. Vornado, led by Steven Roth, has rallied of late to consolidate its assets and focus its energies on its core market, New York City. The REIT sold its last Los Angeles property — a 43,000-square-foot Class A office property — earlier this month. Vornado has been considering selling its Washington office since at least early last year. In an April investor letter,  Roth wrote that the REIT has considered “options with respect to our Washington business, such as inviting in a new investor(s) or even separating the business in a spin or in a spin-merge.” (The Real Deal)
  9. Boston Agency Greenlights $75M Worth of Development “Development is set to continue at a strong pace in Boston, with the Boston Planning & Development Agency's (BPDA) board recently signing off on seven residential and mixed-use projects. The projects will total $75 million in investment and generate more than 150 construction jobs. To help streamline development in the city, the board also approved a plan to present the South Boston Rezoning Initiative to the Zoning Commission. The initiative began in 2014 at the request of Mayor Martin Walsh and city council members, with the goal of creating zoning that provides “predictable, appropriate development without the constant need for zoning variances,” according to the BPDA, a city agency formerly known as the Boston Redevelopment Authority. The initiative’s proposed zoning includes regulations concerning use, height, density and parking ratios.” (MultiHousing News)
  10. Gwinnett County permits world’s tallest skyscraper... theoretically “Gwinnett County, long a bastion of sprawling suburbia, is now paving the way for the world’s tallest building. At least, in theory. The AJC reports that the Gwinnett County Board of Commissioners abolished height restrictions for development around Gwinnett Place Mall. An old rule limited buildings in the area to 25 stories, but in the interest of spurring investment, the limit was removed. Theoretically, the move opens the door to soaring high-rise towers akin to the Burj Khalifa — currently the world’s tallest building.” (Atlanta Curbed)
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