Situs Newswatch 11/14

Trump Unlikely to Bite the Hand that Fed Him – the Real Estate industry

Donald Trump’s election upset is sending ripples across tech and other financial markets, but the real estate industry, where Trump ‘cut his chops’ and made his billions should be in great shape under the new President.

Situs CEO Steve Powel says “I feel the Trump presidency will ultimately be good for business, with less regulation and more thoughtful policy.”

Powel laments, “Unfortunately, with the gridlock between Congress and the President over the past eight years, it was hard to get thoughtful collaboration on policy, hence the continued need for Executive Orders. The nation has spoken, voting for a desire to change; with Congress and the Presidency being in one party’s hands, and a check-and-balance between each other, I am hopeful that there will be changes that don’t just support select special interest groups, but are more thoughtful about how to improve the lives of all Americans”

But Powel cautions, “America plays a significant role in the global economy, and my hope here is that restraint and patience are exercised, as the geopolitical issues facing the World are quite complicated and should not be dealt with by a swift slight of the hand or an impulsive twitter post.

Several industry executives predicted a Trump presidency would do little to upend years of rising real estate prices, foreign investment, and favorable tax breaks, considering that Trump has his roots in the business.

Adds Situs RERC President Ken Riggs,  “Under Trump, there will be winners and losers cutting across industries and nations, given the anticipated policy changes.  The election has clearly created uncertainty that did not exist before, but the tenor and conversation between Trump, the business world and the political arena should take on a positive direction.  Trump is a capitalist, made his mark on a life-time career in commercial real estate and most of all, will do anything to be a winner.  All the Trump dynamics suggest that commercial real estate will not be negatively impacted by his persona. However, this does not insulate us from the next CRE market cycle, which was set in motion long before the Trump factor, when we laughed at the prospect that he would be President. But look at who is laughing now and who is crying now!”

‘We have a New York City real estate guy in the White House,’ said Peter Hauspurg, the chairman and CEO of the commercial real estate brokerage Eastern Consolidated. He tells Crain’s NY:  “There’s a sense that he’s not going to pass policies that will hurt business, especially the one he came from.”

While many questions remain about how Mr. Trump will govern, a consensus emerged in many circles in Washington and on Wall Street about at least one aspect of his impending presidency: Mr. Trump is likely to seek vast cuts in regulations across the banking, health care and energy industries.

Mr. Trump has promised to spend $1 trillion on infrastructure projects, a position that was applauded by Caterpillar Inc., which also relies heavily on export markets. Caterpillar shares rose 7.7% Wednesday.

“This is going to be a president who will be the biggest regulatory reformer since Ronald Reagan,” Stephen Moore, one of Mr. Trump’s economic advisers said in an interview with the Wall Street Journal. “There are just so many regulations that could be eased.”

Situs Executive Managing Director Steven Bean reminds us, “In today’s global economy, I don’t give the President too much credit for the economy’s performance, because it’s just going to do what it’s going to do, whether the Chief Executive does what he is supposed to do or not.”

Trump Said to be Considering Dimon for Treasury Secretary

President-Elect Donald Trump’s advisers are considering JPMorgan Chase CEO Jamie Dimon for Treasury secretary, CNBC reported. But, Dimon isn’t interested, CNBC quoted one source as saying.

The JPMorgan CEO said Wednesday that Trump’s surprise victory and the U.K.’s Brexit vote are signs of frustration with a lack of economic opportunity that shouldn’t be ignored. Dimon was one of the few Wall Street leaders to indicate a presidential preference when he said last month while discussing his hopes for the next president that “she reaches across the aisle.”

After Brexit and Trump, Populists Target Next Dominoes in Europe

After success in Britain and the U.S., populists are setting their sights on the next five dominoes at risk.

Votes are looming within less than a year in Italy, Austria, the Netherlands, France and then Germany. Exasperation with the political and business establishment over a raft of grievances from inequality to immigration will likely shape all of these votes, with the outcome increasingly hard to predict.

“Now, I think, we are beginning to learn that the polls always under-report the extremist, nationalist candidate, ”Bob Janjuah, senior independent client adviser at Nomura, told Bloomberg TV’s Guy Johnson.

The populist surge first broke through the establishment barrier in Britain. Below is a timeline of its past triumphs, and the challenges of the coming 10 months.

The June 23 vote to leave the European Union was the watershed moment, as voters defied the massed ranks of the British establishment and the advice of global institutions from the International Monetary Fund to NATO. The reverberations are still being felt in Britain as uncertainty clouds Prime Minister Theresa May’s plans four months after she came to power.

Fast forward to Donald Trump’s win, and “the revolution continues,” Nigel Farage, acting leader of the U.K. Independence Party and an architect of the Brexit vote, said in a phone interview. “Two massive upsets in 2016. The unholy alliance of big business, big banks and big politics is I believe coming to an end.”

The first test is less than a month off. Italians vote on Dec. 4 in a constitutional referendum that Prime Minister Matteo Renzi says will make governments more stable and streamline legislation. Renzi’s promise to resign if he loses has helped turn the plebiscite into a vote on his premiership. Opinion polls, if they are to be believed, predict a narrow defeat for Renzi, which would boost the anti-establishment Five Star Movement. It could also trigger early elections next year — meaning that governments accounting for more than 75 percent of the euro area would be in play in just one year.

read more: Bloomberg

Oh Canada

The Canadian Real Estate Association says it’s seen nearly three times more web traffic than normal from Americans over the last few days.

Last November, it saw about 10,400 Americans per day searching for homes in Canada. Over the last few days, the average surged to 27,700, with a further spike on Wednesday morning.

Zillow said it saw a 1,200 percent spike in people Googling “Zillow Canada” after the election results came in Tuesday night (even though Zillow doesn’t operate in Canada). Washington state and Seattle were among the leading sources of queries.
Similarly, the Google search term “Canada homes for sale” surged 1,011 percent after Trump opened his lead over challenger Hillary Clinton.

The Canadian immigration site crashed on Tuesday night due to a surge in traffic.
One Realtor even posted an ad in the local paper that read: “Moving to Canada? We’ll sell your house!” above pictures of the candidates.

But don’t expect that to translate into a mass migration, said Ralph McLaughlin, chief economist at the real estate website Trulia.

Warning Sign: Mall Landlords Dive Deeper Into Retail Assets

The largest mall and strip center landlords in the U.S. are trying to combat a wave of store closures by dipping into their own pockets.

Some are acquiring retailers outright, while others are buying up space from department stores and snapping up other retail locations.

Chicago-based General Growth Properties, the second-largest real-estate investment trust by number of properties, said it bought five stand-alone stores from Macy’s Inc. for $48 million since the beginning of the third quarter.

“We’ve been pretty opportunistic here,” said General Growth Chief Executive Sandeep Mathrani, noting that his interest was sparked by Macy’s August decision to close 100 stores to focus on digital investments. He doesn’t rule out further acquisitions but added that the firm will be careful in its selection.

General Growth also has purchased space from Sears Holdings Corp. in the past.

Retail property landlords are battling a storm in the retail sector sparked by consumers’ changing shopping habits. To win, they must identify which new investments could best recapture shoppers’ attention.

They also must convince investors that snapping up properties and companies are promising growth strategies that improve their competitiveness.

“Investors are trying to figure out how much of this is reactionary or defensive and how much of it is to push the quality of the portfolio. We’re in the middle of the transition,” said D.J. Busch, an analyst at Green Street Advisors, a real-estate research firm.

General Growth has replaced Macy’s stores with those of Dick’s Sporting Goods, department store chain Belk Inc. and Lifetime Fitness. The Macy’s at Tysons Galleria in Virginia will continue to operate on a short-term lease.

Landlords also are diving directly into the retailing business. In September, General Growth and Simon Property Group joined a consortium to acquire Aéropostale Inc., one of their tenants, which helped the clothing retailer stave off liquidation.

read more: Wall St Journal

Office Pileup Gets Worse in Houston

Houston’s once-thriving office market is quickly losing energy.

Amid a steady drumbeat of layoffs, mergers and bankruptcies in the oil-and-gas sector, Houston landlords are being hammered by vacancies and sagging rents that are plunging the office market into its worst state since the oil bust of the 1980s.

Two years after a collapse in oil prices, the increasingly painful hangover shows how the malaise is spreading beyond the boardrooms of energy companies and into the property sector, portending years of pain as vacant office space and cut-rate subleases pile up.

In all, 28% of the city’s office space now sits empty or otherwise available for lease, up from 20% in early 2012, according to real-estate services firm JLL.

Sublease space, meanwhile, has surged to 12.4 million square feet—more than four Empire State Buildings—from 2.6 million in 2012.

“The situation is getting worse,” said Bruce Rutherford, an international director at JLL who advises energy companies. “We’re actually expecting even more sublease space to come on the market in the coming eight to 12 months.”

The trouble extends from small engineering and drilling companies to oil giants and their namesake towers.

Marathon Oil Corp. is seeking subletters for three floors in the Marathon Oil Tower. BG Group Place has 11 floors available for sublease where BG Group—acquired by  Royal Dutch Shell PLC—is exiting.

The same goes for Shell at its longtime home of One Shell Plaza. The company is offering 900,000 square feet of space for sublease as it retreats to its offices west of the downtown. A Shell spokeswoman said the move was “an effort to meet the ever-changing market conditions and optimize resources.”

Meanwhile, a downtown tower previously occupied by Exxon Mobil Corp. is completely empty, offering dim prospects for its owner, Shorenstein Properties LLC. And ConocoPhillips, one of the country’s largest shale oil producers, is seeking tenants for an entire brand new 22-story building that it never moved into.

read more: Wall St Journal

Primark Steps Up U.S. Expansion

Europe’s cheapest fast-fashion retailer is pushing harder into the U.S.

Primark, which has long offered shoppers in the U.K. and other European markets trendy clothes at bargain-basement prices, has set its sights beyond the handful of stores it opened in the U.S. last year, including one at the original site of cut-rate retail pioneer Filene’s Basement.

Primark owner Associated British Foods PLC said awareness of the Primark brand has grown in the U.S., where its offerings include $10 women’s jeans and $3 men’s cotton T-shirts. It now has five stores, most recently opening in regional malls in Connecticut, New Jersey and Pennsylvania. A spokeswoman said Primark plans to open three new U.S. stores, in Burlington, Mass., Braintree, Mass., and New York’s Staten Island borough, and will expand its Boston store by 31%, to 92,400 square feet.

read more: Wall St Journal

Blackstone Agrees to Buy IVG’s OfficeFirst for $3.6 Billion

Blackstone Group LP agreed Tuesday to buy a real estate subsidiary of Germany’s IVG Immobilien AG, in a U-turn after two of IVG’s owners torpedoed a deal two weeks ago.

Blackstone, a private equity giant, will pay around €3.3 billion ($3.6 billion) for OfficeFirst Immobilien AG, people familiar with the matter said.

The deal ends a turbulent autumn for IVG, which is one of the biggest property companies in Germany. In October, it abandoned an initial public offering of OfficeFirst because of investor concerns over falling share prices of German property companies.

Shortly afterward, IVG turned down an offer from Blackstone, kicking off a spat among its roughly 30 hedge fund owners.

OfficeFirst has 97 properties worth roughly €1.3 billion, excluding liabilities, and was formed this year. The deal Tuesday will add 15 million square feet of mostly office space in six major cities, including Berlin and Frankfurt, to Blackstone’s property assets.

IVG was once Germany’s largest commercial real-estate company. In 2014, the company was taken over by creditors, as rising debt pushed it toward insolvency.

Blackstone approached IVG about buying OfficeFirst after the flotation plans failed. But IVG’s biggest owners, Anchorage Capital Group and Marathon Asset Management LLP, turned down the offer, people familiar said at the time. That pitted Anchorage and Marathon against other owners, these people said.

read more: Wall St Journal

Call it Bed Bath & Booze

The home and accessories retailer, Bed Bath & Beyond, plans to create a restaurant serving wine and beer at its upcoming 120,000-square-foot Liberty View Industrial Plaza store in Sunset Park, Brooklyn.

This move will expand BB&B’s offerings and allow shoppers to swig away and better experience the goods as they roam the aisles.

It will also create an eatery area that can be used by other tenants in the Salmar Properties-owned project, including Saks and Amazon.

The cafe will be in a large common area on the second floor outside its main store entrance. The large floor plan will for the first time bring together BB&B along with its Buy Buy Baby, Cost Plus World Market grocery and Harmon cosmetics divisions.

Many of the objects will be made in Brooklyn while the Market’s test kitchen will also feature Brooklyn food.

“This will be a very exciting development,” said Timothy King of CPEX, who represents the retail space in the 1.2 million- square-foot building.

Branding consultant Paul Millman of SideTrip Media filed the New York State Liquor Authority permits for a restaurant with on-premises consumption by BB&B, together with the entity “Foundry Food Brooklyn.”

read more: NY Post

Have a prosperous week ahead!

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