10 Must Reads for the CRE Industry Today (September 7, 2016)

10 Must Reads for the CRE Industry Today (September 7, 2016)


  1. TIF Bond Issues Last Year Hit Highest Level Since 2006Tax-increment financing began in 1952 in California as a way to jump-start development in blighted areas. Since then it has spread to nearly every state. Typically new property tax revenue generated by development in a TIF district is pledged to pay for public infrastructure within the district. Laws in some states also allow sales tax to be diverted and some permit TIF funds to be spent on private development costs. New TIF bond issues in 2015 totaled nearly $700 million, according to data analyzed by Elise Lomel of the financial advisory firm PFM Group in Atlanta. That total, which excludes refinancings, was the highest yearly total since 2006, excluding California, which largely exited the TIF sector by 2012. Not all TIF projects involve the issuance of debt. However, the numbers have bounced around in recent years, and the total in the first half of 2016 came to just $77 million, her analysis found. Counting California, the peak for non-refinancing TIF bonds since 2000 occurred in 2006, at about $3 billion.” (The Wall Street Journal)
  2. Lower Manhattan population more than doubles since 9/11, report says “The number of residents and new apartments in lower Manhattan has skyrocketed since 2000, while the number of jobs remains below pre-9/11 levels, according to a report Tuesday. The report, released by state Comptroller Thomas DiNapoli, painted lower Manhattan as a burgeoning residential neighborhood that is far less reliant on the financial sector years after the 9/11 terror attacks. In 2014, there were nearly 50,000 people living in the area, for example, more than double the population in 2000. That influx coincided with a similar increase in housing units, which numbered 30,000 in 2015. ‘Lower Manhattan is doing more than rebuilding; it is transforming and moving forward with resilience and hope,’ said DiNapoli in a statement. Private-sector employment has steadily grown as well, with the number of jobs reaching 228,300 in 2015, the highest level since the terror attacks, according to the report. However, the number is below pre-9/11 employment levels. And the majority of jobs are no longer in the financial sector. Instead, other industries such as business services and hospitality now make up a bigger slice of the pie.” (Crain’s New York Business
  3. Gas/Convenience Stores Go Glam with Guess Corp. “The notion of gassing up and grabbing something on the go is about to be re-envisioned through diamond-encrusted glasses. Via its Guess Petroleum unit, The Guess Corp. will introduce an exclusive chain of über-upscale gas station/convenience stores designed to transform a couple of typically mundane tasks into a ritzy experience. Target market: those with a net worth exceeding $50 million. GP Club won’t be the kind of gas-and-go or stop-and-shop that attracts the average Joe; this will be something entirely different. Presented in four-story structures designed by architectural firm Scott+Cormia, GP Club is a concept whose time has come, according to Guess, which operated primarily as a diamond trading concern before commencing its expansion into new businesses in 2012. ‘The economy is doing well and the affluent consumer is enjoying more disposable income than before,’ Tiffany Taylor, corporate vice president with The Guess Corp., told Commercial Property Executive. ‘Our research and experience shows that the ultra-affluent want more exclusive products and services, and the gas/convenience store space has not responded to this, so with GP Club, we are.’” (Commercial Property Executive)
  4. Economy Watch: Overeseas Investment in US CRE Still Strong “Direct foreign investment in U.S. commercial real estate totaled 17 percent of all real estate investment by dollar volume in 2015, making that a record year. This year is on track to see a lower share of overseas investment in domestic CRE—mainly due to the impact of the stronger dollar—but even so, foreign investors still represent a significant slice of the pie, according to a recent report by Marcus & Millichap. The reasons for that include global financial market volatility, weak foreign economies, low alternative investment yields and other factors creating uncertainty, which reinforce the advantages of U.S. commercial real estate, the report says. Many foreign investors are still looking for capital preservation and asset stability on American shores, rather than yield. In any case, historically, international investment in the U.S. has averaged 9 percent of total investment. This year might not reach the highs of 2015, Marcus & Millchap said, but international investors still accounted for about 11 percent of the dollar volume of all U.S. properties sold in the first half of 2016.” (MultiHousing News)
  5. The ‘closed’ fund conundrumWhen news broke earlier this summer that the Blackstone Group was planning to take its rental-home company, Invitation Homes, public by the first half of 2017, it came as little surprise. The private equity giant bought up 50,000 rental homes nationwide in the aftermath of the most recent financial crisis, with the intention of flipping them for a profit — either by selling them individually, unloading them in bulk or taking the portfolio public. It didn’t have a choice, since the fund that bought the homes — Blackstone Real Estate Partners VII — has a contractual obligation to sell its properties and return its investors’ money within a decade. But the deal did shine a light on so-called “closed-end” funds, which have a fixed life span and don’t sell new shares once an initial fund-raising period is over. These funds played a big role in helping the New York real estate market recover from its 2009 slump by buying up office and retail properties and bankrolling many of the latest condo towers.” (The Real Deal)
  6. Perot's development firm plans Texas-sized warehouse “The Perot family's real estate development firm plans to begin construction this week on a nearly 1 million-square-foot spec warehouse in Joliet, the largest such project underway in the Chicago area. Hillwood said it is set to build a 992,640-square-foot facility on speculation, or without any leases signed, on an 85-acre site it recently bought near interstates 55 and 80. The building can be expanded to as much as 1.5 million total square feet. Dallas-based Hillwood, led by Ross Perot Jr., is counting on continued strong demand for industrial space in the Chicago area after overall vacancy in the second quarter fell below 7 percent for the first time since 2001. Hillwood is emboldened after e-commerce giant Amazon recently leased a 746,772-square-foot warehouse the firm built on spec in the Laraway Crossings industrial park in Joliet. That had been Hillwood's largest project to date in the Chicago area. In addition to that warehouse, its second in Joliet, Amazon also has signed recent deals for large distribution centers in Romeoville and Monee. Home furnishings retailer Ikea and electronics maker Samsung also have recently leased large spaces near Joliet.” (Crain’s Chicago Business)
  7. European investors want to buy Jungle Island. What’s next for troubled park? “The parrots of Jungle Island could soon squawk the name of a new owner. Investors are working on a deal to take over the lease for Miami’s historically under-performing aviary and tourist attraction — and they may ask voters for the right to build a hotel and other improvements on city-owned land. Aventura-based ESJ Capital Partners is negotiating with a group led by Bern Levine, a veterinarian who bought the wildlife park in 1988 when it was called Parrot Jungle and located in what is now Pinecrest. Levine later won voter approval to move the attraction to Watson Island along the MacArthur Causeway, where it reopened in 2003.” (Miami Herald)
  8. Economy Watch: Residential Construction Spending Up in July “U.S. construction spending during July 2016 came in at an annualized rate of $1,153.2 billion, nearly the same as the revised June estimate, which was $1,153.5 billion, the Census Bureau reported ahead of the Labor Day holiday. Even so, the July 2016 figure is 1.5 percent higher than the July 2015 construction spending total. Such growth as there was in July was due to spending on private construction projects, which was up 1 percent compared to the revised June total. Public construction spending, by contrast, was down for the month by 3.1 percent. For the year, private construction spending gained 4.4 percent, while public spending dropped 6.5 percent.” (MultiHousing News)
  9. Silicon Valley Office Campus to Add Retail, Hotel “Washington Holdings, a Seattle-based institutional commercial real estate investment firm, is revamping its 46-acre Mission Park office campus in Santa Clara by adding 24,000 square feet of retail and a five-story, 175-room extended-stay hotel to the property. The firm, which also has offices in Santa Clara and Los Angeles, has received approval from the City of Santa Clara for the addition to the site, located about one mile from Levi’s Stadium. Mission Park, near Highway 101, spans a large stretch of Montague Expressway and is bordered by Mission College Boulevard and Lafayette Street. Washington Holdings, which acquires, develops, manages and invests in real estate assets within the western United States, bought Mission Park three years ago and has invested about $20 million in upgrades to building facades, common areas and adding new outdoor amenity spaces and sidewalks to create a more modern, pedestrian-friendly environment. The firm said leasing has already increased by more than 350,000 square feet.” (Commercial Property Executive)
  10. Big expansion planned for Westside shopping center “A decades-old shopping center in Marina del Rey might be getting some major updates and several hundred units of housing, according to plans filed with the city last week. The project would transform the Marina del Rey-adjacent Marina Marketplace, which, right now, is home to a Barnes and Noble and DSW shoe store, among other shops. Plans call for 27,300 square feet of new retail space, along with 658 units of housing—66 of those units will be deemed affordable, which is nice considering the rapidly price of rent in the area. It’s not clear how many of the businesses currently located within the marketplace will be displaced by the new project. As Urbanize LA reports, the 6.8-acre complex was developed in the 1970s and acquired by RREEF Real Estate in 2006. Renovation plans for the marketplace, along with the neighboring Villa Marina shopping center, were first reported in 2008.” (Curbed Los Angeles)
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