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13 Must Reads for the CRE Industry Today (Oct. 12, 2020)

Pay cuts for tech employees relocating from Silicon Valley to lower cost markets have raised tensions at the firms, according to The Wall Street Journal. Property developer Lendlease is making a $1 billion bet on Brooklyn, reports CommercialRealEstate.com.au. These are among today’s must reads from around the commercial real estate industry.

  1. Silicon Valley Pay Cuts Ignite Tech-Industry Covid-19 Tensions “Companies point out that changing pay based on the local cost of living is standard practice for many organizations, including the federal government—with decisions to raise or lower salaries related to housing costs and other factors. Letting someone take a San Francisco salary to Wyoming could be considered unfair to present and future remote hires in cheaper cities who might receive a lower wage.” (The Wall Street Journal)
  2. Welltower Sells $1.3 Billion of Real Estate. What Does This Mean for Investors? “Welltower didn't come out and give an exact reason for the sales, or a definitive plan on what their next moves will be. However, their $1.1 billion in proceeds from the sales will have a significant impact on their cash position and balance sheet. The REIT has been working on improving their balance sheet since they ended the second quarter with a debt/EBITDA ratio of 6.32x. Since July 1, 2020, they have paid down $860 million in debt that had maturity dates ranging from 2022 to 2024.” (Million Acres)
  3. Real estate mogul Sam Zell invests in perishables forwarder Able Freight “Self-made billionaire Sam Zell’s investment company has added to its portfolio Able Freight, a Los Angeles-based international airfreight forwarder that specializes in transport of perishable goods. Equity Group Investments, Chicago,  this week said it purchased a majority stake in Able with management participation from CEO Orlando Wong to tap the growing cold-chain logistics sector.” (American Shipper)
  4. JCPenney Moves Forward With Closures of 140-Plus Stores as It Seeks to Exit Bankruptcy “In a Thursday filing with the United States Bankruptcy Court for the Southern District of Texas, the beleaguered chain revealed that it is set to shutter 144 stores across the country. The locations are part of JCPenney’s plan to shut down 242 locations, announced five months ago in its Chapter 11 filing. The move comes a month after the department store said that it had reached an agreement to sell its business to Simon Property Group and Brookfield Property Partners.” (Footwear News)
  5. Lendlease’s $1b New York play “Property developer Lendlease, with backing from Aware Super, has made its first major regeneration foray into New York, taking control of a Brooklyn site on the waterfront with plans for a $1 billion build-to-rent project. Across the East River from Manhattan, the project will transform a full city block in the Greenpoint neighbourhood into about 800 apartments, with a portion of those earmarked for affordable housing under a New York City program.” (CommercialRealEstate.com.au)
  6. McDonald's Illinois headquarters to sell for about $420 million “Developer Sterling Bay has a deal to sell McDonald's headquarters building for about $420 million, in what would be the highest-priced property sale of the year and a record price for the booming Fulton Market district. An obscure investor from the Pittsburgh area, Normandy Properties, has a preliminary deal to buy the 575,000-square-foot office building at 110 N. Carpenter St., according to people familiar with the deal.” (Herald & Review)
  7. No 'qualified' bidders for California Pizza Kitchen in bankruptcy asset sale “An Oct. 8 auction to sell the assets of California Pizza Kitchen Inc., which filed for Chapter 11 bankruptcy in July, was cancelled because there were no qualified bidders, according to court documents filed this week.” (Nation’s Restaurant News)
  8. New York’s Commercial Rents are ‘Too Damn High’ “Commercial rents are a key variable in any city economy. If rents are too high, small businesses can’t make enough profit to survive, and repurposing (turning retail space into office space, say, or office space into storage space) is too risky for the landlord. This leads to so-called high-rent blight. But if rents are too low, landlords don’t have the incentive to rent or develop properties.” (The New York Times)
  9. New York State Pension Expands into Real Estate, Absolute Return “The New York State Common Retirement Fund (NYSCRF) made five commitments totaling roughly $565 million to expand into real estate and absolute return strategies. The public pension fund in August closed three investment funds placed through new relationships in the US and abroad in the Nordic Region, as well as two smaller bets on warehouses and senior housing through its emerging manager program, which invests in new and diverse firms, the state comptroller disclosed.” (Chief Investment Officer)
  10. Jonathan Rose Cos. Closes $525M Affordable Housing Fund “Multifamily investors have pulled back dramatically during this year’s public health and economic crisis, but Jonathan Rose Cos. has bucked the trend with the recent closing of an oversubscribed, $525 million fund focused on preserving affordable multifamily housing.” (Multi-Housing News)
  11. What Will Happen to Cash Flows for Skilled Nursing Facilities? “Cash flows for healthcare REITs have exceeded Fitch Ratings’ expectations since the onset of the coronavirus pandemic, primarily due to greater than anticipated federal and state government financial support for skilled nursing facilities (SNFs). However, the ratings agency says this strong cash-flow position is subject to change. REITs with meaningful SNF exposure will be challenged ‘due to the likely need to grant temporary rent deferrals or permanent rent cuts to some SNFs in 2021 if government funding runs out before SNF underlying cash flows recover to pre-coronavirus levels,’ says Fitch.” (Connect Real Estate)
  12. Will Dollar General win over higher-income consumers with its new store concept? “Do you expect to see Dollar General grow the new popshelf store concept into a successful national chain? What aspects of popshelf should DG focus on to make it most appealing to higher-income shoppers?” (Retail Wire)
  13. At Disney World, ‘Worst Fears’ About Virus Have Not Come True “As tumultuous as the three months since the reopening have been, however, public health officials and Disney World’s unions say there have been no coronavirus outbreaks among workers or guests. So far, Disney’s wide-ranging safety measures appear to be working.” (The New York Times)
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