Situs Newswatch 10/12

U.K. Commercial Real Estate Alive & Well Despite Brexit

Many people thought the sun had set on London’s commercial real estate market after the Brexit vote, but that’s clearly not the case based on the positive mood at the recently concluded ‘Expo Real’ real estate fair in Munich.

Situs Managing Director Chip Good says, “Frankly there was not as much conversation on Brexit at the Expo as I expected. People are simply back to work and yes there are properties being bought and sold.”

U.S. and Asian investors are among the big buyers as the exchange rate brought on by Brexit favors their currencies.

“One man’s misery is another man’s gain,” says Good, who oversees Situs’ European Business Development. “There’s a big demand from people who have the money either to put into loans or to buy real estate assets.”

The current figure for U.K. real estate transactions is only slightly below pre-Brexit levels and prices have also stopped falling. A JLL survey among 67 investors in Britain showed that 73 percent of them planned to invest in new property next year.

British Prime Minister Theresa May has set a date for Brexit talks, announcing that the formal negotiation process will start by the end of March 2017, which would put the country on course to leave the European Union by summer 2019.

Meanwhile, the Sunday Times reports that a so-called “hard” separation of the UK from the European Union would prompt Goldman Sachs to shift 2,000 highly paid staff out of London and others may follow.

Pound’s Pounding Helped U.K. Absorb Brexit Shock

When the U.K. voted to leave the European Union in June, the pound took its worst beating in half a century. Many economists saw that as a good thing.

Despite the shock of Brexit, more than three months later there are few tangible signs of economic distress in Britain: Employment is steady. The stock market has held up. Government bonds are strong. Houses are still being bought and sold. Consumers are still consuming.

Credit, say economists, goes in large part to the decline of the British pound, which has acted as a giant shock absorber against Brexit. It fell 11% against the dollar in two trading days after the vote, and after another sudden slump last week is now down 16%.

But suffering Brexit’s pain through the currency may be more comfortable than through higher unemployment or other ills—a luxury that wasn’t available to eurozone countries during the currency bloc’s debt crisis. Over the longer term, economic wisdom holds that a weaker currency will boost a nation’s sales abroad, so what the economy loses in the form of lower consumption—because consumers are poorer—will be recovered through higher exports.

“It is important that you have a live release valve like this,” said Tim Haywood, an investment director at GAM Holding.

read more: Wall St Journal 

First Brexit, Next Itexit?

Nobel Prize-winning economist Joseph Stiglitz predicted in a interview that Italy and other countries would leave the euro zone in coming years, and he blamed the euro and German austerity policies for Europe’s economic problems.

Europe lacks the decisiveness to undertake needed reforms such as the creation of a banking union involving joint bank deposit guarantees, and also lacks solidarity across national boundaries, Stiglitz was quoted as saying by Die Welt newspaper.

“There will still be a euro zone in 10 years, but the question is, what will it look like? It’s very unlikely that it will still have 19 members. It’s difficult to say who will still belong,” the paper quoted Stiglitz as saying.

“The people in Italy are increasingly disappointed in the euro,” Stiglitz was quoted as saying. “Italians are starting to realize that Italy doesn’t work in the euro,” he added.

He said Germany had already accepted that Greece would leave the euro zone, noting that he had advised both Greece and Portugal in the past to exit the single currency.

Concerns about the euro zone have escalated in Germany in recent months amid growing concern about a shift away from austerity in southern Europe, the loose money policies of the European Central Bank and the rise of the right-wing Alternative for Germany party

read more: Reuters

WalMart Takes on Amazon with Brick and Mortar Stores in Tact

Wal-Mart Stores Inc. hasn’t joined the list of retailers who have plans to shut stores, but the retail giant has said it will slow the number of new stories it adds to its fleet.

Experts approve, believing that WalMart’s physical locations are an asset—not an obstacle – that the retailer will maximize in its market share struggle with Amazon.com.

“We expect Wal-Mart to leverage physical assets to drive seamless shopping across online and offline channels,” Cowen & Company wrote in a Monday note. “Customer loyalty across multiple channels, a broadline product offering, un-Amazon-able service options (pharmacy, auto, health care visit, others) should drive attractive overall spend and basket size economics.”

Wal-Mart  announced during its investor meeting last Thursday that it will pull back on new stores in fiscal 2018, expecting to build 35 new supercenters and 20 Neighborhood Markets. Last year, the company built 69 supercenters and 161 Neighborhood Markets. Capital expenditure for Walmart U.S. in fiscal 2017 will be $6.4 billion, down from $6.8 billion in fiscal 2016, and drop in fiscal 2018 to $6.1 billion.

read more: MarketWatch

New York Housing Group Questions Loss of Tax Break

The dissolution of a property tax break worth more than $1 billion in foregone revenue annually led developers to warn that New York would become a city of condos, as less-lucrative rental buildings become more expensive to build.

During a roundtable with reporters over the summer, the city’s deputy mayor for housing, Alicia Glen, corroborated that concern, saying no new rentals had been brought on the market since the exemption, known as 421-a, expired in mid-January.

“Since 421-a was suspended, there has not been one single market-rate rental started in New York City. That’s a fact. Only starts right now are condos,” Glen said at the time.

Now an organization that promotes the development of affordable housing says that warning is something of a myth.

The Association for Neighborhood and Housing Development, an umbrella group that includes nonprofit developers focused on below-market-rate housing production, released a brief analysis concluding that developers are still filing plans to build rentals in the outer boroughs, albeit at a relatively slow rate.

There was no overall tally to back up the report, but the group highlighted news articles that chronicled rental permits sought by developers since the 421-a tax break expired.

“The suspension of the 421-a exemption was expected to have a major and immediate impact on the real estate market, with the big real estate lobby predicting dire consequences. In the past few months, we have been learning some new facts about what is happening in some new construction markets and the impact may not be what we were told it was going to be,” the organization wrote in a blast email on Friday.

Among the examples cited are a seven-story, 12-unit building in Bedford-Stuyvesant, Brooklyn, which would likely include rental apartments. A Brooklyn-based LLC filed applications for the project in mid-April.

The group also highlighted building applications filed in September for a seven-story apartment building on Kingsbridge Road in the Bronx for a project that is likely to include 40 rentals.

read more: Politico

Bid to Save Trump Taj Mahal Comes up Craps 

Billionaire investor Carl Icahn said Monday he was “sad” that he was unable to save New Jersey’s Trump Taj Mahal from closing, costing nearly 3,000 people their jobs, about a month before a key state referendum on whether new casinos could be built in the state.

Earlier this year, Icahn had said he planned to invest up to $100 million in the Taj Mahal, but said “obviously it would not be judicious to proceed with those investments” ahead of the referendum, which was scheduled for Nov. 8.

At that time, Icahn said approving the opening of two new casinos in northern New Jersey–the vote is scheduled for Nov. 8–would “destroy thousands of jobs in Atlantic City and South Jersey.”

On Monday, Icahn said the Taj Mahal’s closure was related to the rejection of his latest offer to the union of striking workers.

“After our last offer [to the union], which included medical, was rejected, it was simply impossible to find a workable path forward that would not have required funding additional investments and losses in excess of $100 million over the next year,” Icahn said Monday in a statement published on his website.

“Despite our best efforts, which included losing almost $350 million over just a few short years, we were unable to save the Taj Mahal,” Icahn said. “Like many of the employees at Taj Mahal, I wish things had turned out differently.”

read more: MarketWatch