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Must Reads for the CRE Industry Today (December 28, 2016)

Must Reads for the CRE Industry Today (December 28, 2016)



  1. Real-Estate Industry Braces for Tax Upheaval “The real-estate industry has long known it would face a fight in 2017 about how federal tax law applies to commercial and residential property. But it is beginning to shape up to be different from what many expected. Most had predicted Hillary Clinton would be in the White House, mounting an effort to use tax code changes to increase collections from big commercial property owners. Instead Donald Trump is coming to town. And despite his extensive background as a real-estate developer, many in the industry are expressing concern about the seismic changes in the tax code that could be ushered in by his presidency for all businesses, including real estate. During the campaign, President-elect Trump proposed such measures as using tax policy to limit imports and boost U.S. manufacturing, but stayed silent on how the real-estate industry should be taxed. A spokeswoman for the Trump transition declined to comment on tax reform beyond what candidate Trump said during the campaign. Still, real-estate executives say a sweeping blueprint for overhauling most of U.S. tax law made in June by House Republicans appears to have a better chance with a Republican in the Oval Office. The plan appears to be gaining traction, according to real-estate industry lobbyists who have been having extensive behind-the-scenes discussions about what it would mean for real estate.” (The Wall Street Journal)
  2. Louisiana Attracts $8.5B Natural Gas Facility “The State of Louisiana just got a holiday treat from Venture Global LNG, which recently announced it would develop an $8.5 billion natural gas liquefaction facility and liquefied natural gas (LNG) export terminal in Plaquemines Parish, La., roughly 30 miles outside New Orleans. Venture Global will erect Plaquemines LNG on a 632-acre parcel stretching 7,000 feet along the Mississippi River. The project, which will have the capacity to export 20 million metric tons annually, marks Venture Global’s second natural gas liquefaction and export development in the Pelican State. In December 2014, Venture Global announced that it would build Calcasieu Pass LNG in Cameron Parish at a cost of $4.5 billion. Calcasieu Pass LNG will be able to accommodate the exporting of 10 million metric tons per year.” (Commercial Property Executive)
  3. Home-building and Real Estate ETFs Rise After Case-Shiller Data “Exchange-traded funds tied to the real estate and home-building sectors rose on Tuesday, as data showed that the price of houses in the U.S. stayed near all-time highs in October. According to the S&P Case-Shiller index, home prices rose 0.6% in October, having risen 5.1% over the past year. The cost of housing has surged in part because of rising demand triggered by an improved economy, as well as a shortage of homes available for sale.” (MarketWatch)
  4. New U.S. Industrial Fund to Spend $1.5 Billion “GLP, a Singapore-based global provider of logistics facilities and the second largest owner and operator in the United States, is once again firmly focused on the U.S., establishing a new fund that plans to invest $1.5 billion over three years. GLP US Incomes Partners III will be seeded with a $1.1 billion portfolio from Hillwood. The first part of the deal is closing this month with the purchase of a $700 million portfolio from Hillwood that was announced in September. The remaining $400 million of identified pipeline assets from Hillwood, a Dallas-based development firm that develops and acquires industrial properties across North America and Europe, will be acquired in phases upon completion and lease-up. GLP, as the asset manager of the fund, will also make another $400 million in acquisitions that satisfy the fund’s investment criteria. GLP said the fund has total equity commitments of $620 million from six leading global institutional investors from the U.S., Asia and Middle East, which own 90 percent of the fund. As the asset manager, GLP will own the remaining 10 percent. This is GLP’s third industrial acquisition in the U.S., where it is now the second largest logistics property owner and operator with a footprint of about 173 million square feet, putting it behind San Francisco-based Prologis.” (Commercial Property Executive)
  5. As Election Cloud Lifts, Real-Estate Brokers See Brighter Times “The uncertainty created by a polarizing national election cut into New York real-estate sales in 2016. But now that the campaign season is over, brokers expect sales to pick up. Wealthy buyers in New York often delay discretionary purchases until they feel comfortable, said Hall Willkie, president of brokerage Brown Harris Stevens. That appears to be happening. In an early sign of progress, real-estate brokerage Compass found that the number of contracts signed in the two-week period beginning Nov. 26 far surpassed the number signed during the same period a year earlier. Overall in the quarter, the number lagged the same quarter in 2015 by 21%.The world exhaled because the election was behind us and life could move on,’ said Leonard Steinberg, the president of Compass. Howard Lorber, chairman of brokerage Douglas Elliman, said he expected a rebound next year, citing the strong stock market and promised tax cuts from President-elect Donald Trump. He said the tax cuts should stimulate real- estate buying even if interest rates continue to rise.Tax cuts make people feel richer at any price point,’ he said. ‘More spendable dollars equate to more expensive real estate.’” (The Wall Street Journal)
  6. Affordable housing or rent control, what’s right for Pasadena? “The Pasadena Tenants Union, a recently formed tenants rights group, is debating whether it should advocate for either more affordable housing or rent control in Pasadena. The group will announce its decision in February 2017, according to Pasadena Now. Unlike a number of other Southern California cities, such as Los Angeles, Beverly Hills, West Hollywood, Santa Monica, Palm Springs, San Francisco and Thousand Oaks, Pasadena does not have any official policies on rent control, despite the fact that 52 percent of its residents are renters…There are close to 3,000 affordable housing units in Pasadena, primarily apartments, and another 1,400 low-income families who receive Section 8 housing vouchers, according to Bill Huang, Pasadena’s Director of Housing.” (The Real Deal Los Angeles)
  7. Downtown Detroit mixed-use property opens “The comeback of downtown Detroit, led by the expansive District Detroit project under construction, was advanced this week with the opening of The Scott at Brush Park. The upscale, mixed-use development of Broder & Sachse Real Estate and Sachse Construction is located about eight blocks north of District Detroit on Woodward Avenue. A project undertaken by the Ilitch family, owners of the Little Caesars pizza chain, District Detroit will consist of five ‘neighborhoods,’ as well as a new arena to host the National Hockey League’s Detroit Red Wings. The Scott contains 199 residential units and will house five retail and restaurant tenants. The Carter-Snell Skin Center is the first retail tenant to be named.” (Chain Store Age)
  8. Economy Watch: More Indications of Increased Consumer Confidence “On the heels of the University of Michigan reporting late last week that consumer sentiment was trending positive in November, the Conference Board reported on Tuesday that its Consumer Confidence Index was likewise up this month. The indexes have somewhat different methodologies, but the results point toward the same thing: Americans are feeling better about the economy—at least for now. The Conference Board Consumer Confidence Index, which had increased considerably in November, posted another gain in December. The Index now stands at 113.7 (1985 = 100), up from 109.4 in November. The board’s Expectations Index increased sharply from 94.4 to 105.5, but its Present Situation Index decreased from 132.0 last month to 126.1.” (MultiHousing News)
  9. Ensign Purchases 15-Property Assisted Living Real Estate Portfolio “The Ensign Group (Nasdaq: ENSG) now owns the real estate of 15 Wisconsin assisted living properties, which the company has been operating for more than a year.  Mission Viejo, California-based Ensign did not disclose the purchase price, but the transaction was funded from cash using the company’s revolver, effective Dec. 21, according to a press release issued Tuesday. Ensign did not immediately return a call from Senior Housing News on Tuesday afternoon. Ensign acquired the operations of the 15 communities from Menomonee Falls, Wisconsin-based Harmony Living Centers in August 2015. That deal included an option for Ensign to purchase the real estate, which the company now has exercised.  With this deal, Ensign owns the underlying real estate in 50 of its 209 operations, Ensign President and CEO Christopher Christensen stated in the press release. These operations include assisted living, skilled nursing, and other health care businesses, such as therapy, hospice, and home health.” (Senior Housing News)
  10. Real Estate Is Eurozone Bright Spot Despite Politics “Politics aside, there is one area in the eurozone that still may offer opportunities for investors: real estate, both residential and commercial. House prices have been slowly rising almost everywhere in the single currency area, helping the countries gradually dig themselves out of the debt crisis. Residential property prices have increased by more than 3% in the second quarter of this year compared with the same period last year, although they are still more than 10% below their 2007 peak, according to data from the Bank for International Settlements (BIS). The data show that in Spain, where the property sector was hard hit during the financial crisis, house prices have increased every quarter since March 2015. Year on year, they jumped 5% in the second quarter. Prices in Portugal also have been on the rise since March last year, with the trend accelerating lately. Ireland, too, has seen rapid growth in its residential property sector, with prices jumping every month. Only in Italy property prices have stagnated.” (The Street)
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