Situs Newswatch 11/15/2017

Situs at Florida Multifamily Summit 
The 6th Annual Florida Multifamily Summit in Fort Lauderdale earlier this month brought together owners, investors and developers of multifamily real estate to discuss the future of and current issues facing the sector. Situs Associates Queenie Berriz, Joe Raia and Eric Davis were in attendance and offered a few brief observations.The opening remarks by Robert Given  provided meaningful insight into current investments and what the future may hold.

  • Capital Investments from international currencies, especially from the Middle East, Asia and Europe, have remained strong.
  • Seniors have shown strong demand in standard multifamily units, not just 55+ communities, to be close to dining and entertainment options as well as more building/community amenity options.
  • Prediction for 4Q2017/1Q2018 – robust market, picking up after a slower 4Q2016/2017.
  • Investors have been valuing potential acquisitions based on their most recent leases as opposed to renewals to understand growth in the market.
  • The market has seen more quick, cash acquisitions from foreign and domestic investors.

The keynote “Fireside Chat” was particularly enlightening featuring comments from Adler Group’s Ryan Bailine, David Adler, Michael Adler and Jonathan Raiffe. They focused on the technological advancements that improve tenant access to amenities, highlighting the increased use of apps to pay rent, request valet car authorize guest entrance and create ride-share groups. The presenters noted that these amenities are huge demand drivers, keeping residents satisfied and occupancy up.

Florida’s Most Active Developers Weigh in on Multifamily Growth
David Lyons (Moderator, Sun Sentinel), Michael Ging (Alliance Residential), Jeff McDonough (Stiles Residential Group), Henry Pino (Alta Developers), Todd Wigfield (Greystar), Scott Moss (Moss & Associates) and Hernando Perez (Franklin Street) met at the 6th Annual Florida Multifamily Summit to discuss the future of Florida, specifically Miami multifamily development. The residential development leaders shared the following insights:

  • The natural disasters that hit the region had a significant impact. Infill from displaced residents due to the various hurricanes has been on the lower end of the market. Approximately 5,000 hotel rooms were destroyed in the Caribbean, which is expected to result in an influx in demand for South Florida hotels and residential short-term rentals.
  • “Live-Play-Work” has been the mantra for developers as both baby boomers and millennials seek convenient living arrangements with more amenities and nearby entertainment options. The Brightline train service, running from downtown Miami to Orlando, is expected to open in Q4 2017 or Q1 2018. This will likely increase the demand for residential units due to the ease of travel the Brightline is expected to provide.
  • Investors are seeking more service/destination-oriented retail tenants such as nail salons, restaurants, urgent care centers, etc. for mixed-use developments. While developing a mixed-use property makes sense, design and construction of the project can be difficult. When a mixed-use property cannot be completed on one site, investors will seek sites next to or adjoining properties for those uses that their investment could not contain, such as an apartment project with ground floor retail next to an office building.
  • Factors that directly influence real estate development/growth include job and income growth in the area, availability of services, zoning and other political hurdles, and access/visibility of the site.
  • EB-5 investments are often difficult to utilize due to the timing of the transaction process and the need for multiple sources of capital.

Tax Overhaul Bills Keep ‘1031 Exchange’ and Adds Other Commercial Property Perks
The residential real-estate industry might be panicking about the Republican-backed tax overhaul making its way through Congress, but many in the commercial real-estate industry are delighted with what they see so far.

Owners of office buildings, malls, warehouses and other commercial property would benefit from lower taxes on their profits and would be able to avoid a 30% limit on deductions for interest expense that would be imposed on other businesses, based on two separate bills originating in the House and the Senate, respectively.

The Senate bill, unveiled last week, also would shorten the depreciation period for commercial property to 25 years from 39 years.

Just as important, none of the provisions that commercial real estate owners feared most were included in either proposal. For example, both the House and Senate bills would preserve the much-loved “1031 exchange” provision that enables sellers of real estate to defer capital-gains taxes by reinvesting the proceeds in “like-kind” properties.

Industry executives and lobbyists are cheering.

read more: WSJ

Dealmakers Are Going Mall Shopping, Even If You Aren’t
Struggling retailers may soon have fewer landlords. Two of the nation’s biggest mall owners — GGP Inc. and Macerich Co. — could feasibly be acquired in the near future.

Over the weekend, $21 billion GGP received a bid, albeit at a slim premium, from its biggest shareholder, Brookfield Asset Management Inc. And Macerich may be pushed into the arms of a suitor if Dan Loeb’s Third Point LLC, which last week disclosed a stake in the $9 billion mall-owner, can successfully agitate for change.

Despite the pain their tenants are enduring as consumers lean on e-commerce alternatives, these landlords are prime consolidation candidates because their portfolios are largely composed of “Class A” malls, which have the best possible growth prospects and seem most likely to stay relevant.

And yes, e-commerce will no doubt continue to siphon traffic away from brick-and-mortar retailers. But it’s important to remember that the vast majority of shopping still takes place in the physical world.

read more: NREI

Coming to Your Local Mall: Online Retailers Beloved by Millennials
Landlords of top U.S. malls used to rent most of their space to the biggest national retailers, which boasted the best credit and the most desirable selection of goods.

Now they are looking beyond big chains and toward lesser-known retailers and startups that started online but have amassed customers and brand recognition.

The reason: such retailers tend to offer novel products that resonate with web-savvy customers, particularly millennials, a massive group of potential customers landlords are eager to cultivate.

Century City, a recently opened 1.3-million-square-foot open-air mall in west Los Angeles, has a larger-than-average number of tenants that started out as e-commerce retailers. Candy boutique Sugarfina, clothing retailers Bonobos — now a unit of Wal-Mart Stores Inc. — and Untuckit, eyeglass retailer Warby Parker and Amazon Books all have opened stores in the center, which had been renovated by Westfield Corp.

Some of these stores are showrooms and don’t carry inventory so customers will have their purchases delivered to them or they could pick up their purchases at the store at a later time. Such stores take up less square footage since they have don’t need to hold inventory at the back of the store.

read more: WSJ

The ‘Second-Most’ Important Job at the Fed Will Soon Be Vacant. Here’s Who May Get It
Replacing New York Fed President Bill Dudley may be one of the most controversial Fed appointments in recent memory.

Dudley, who is in his mid-60s, announced his retirement last week, likely by the spring or summer, and speculation is already rife in markets about who will get his job.

Some call it the second-most important job in the Federal Reserve system. It’s so critical that during the creation of the Dodd-Frank financial reform legislation, some in Congress proposed to make it a presidential appointment.

The head of the NY Fed oversees supervision of the big money center New York banks and executes the market trades needed for the Fed to hit its benchmark funds-rate target. It was the bank that did most of the heavy lifting for the Fed to acquire the trillions in assets under the quantitative easing program, and it will be on the front line of selling those assets as the Fed now unwinds its balance sheet.

Most important, the NY Fed president is first among equals of the 12 regional bank presidents. The president serves as the vice chairman of the Federal Open Market Committee, which sets monetary policy, and always has a vote. The other regional presidents rotate as voters.

read more: CNBC

Don’t Count Out Community Bank Regulatory Relief Just Yet
As I (author Scott Heitkamp) reached out to my community banking colleagues in Florida following Hurricane Irma — some of whom had just contacted me about my bank’s recovery from Hurricane Harvey — I realized there’s nothing a united community banking industry can’t do. While some community bankers and Washington advocates doubt the likelihood of achieving meaningful regulatory relief in the 115th Congress, the many regulatory relief measures advancing on Capitol Hill leave plenty of room for optimism.

In addition to overturning the Consumer Financial Protection Bureau’s rule restricting access to consumer arbitration agreements, policymakers have advanced several multi-pronged measures to relieve local institutions from excessive regulatory burdens. The House in June passed the Financial Choice Act, authored by House Financial Services Committee Chairman Jeb Hensarling, R-Texas, which contains roughly two dozen provisions offering relief from mortgage-lending, call-report and data-collection mandates.

While the comprehensive CLEAR Relief Act continues gaining cosponsors in the House and Senate, Hensarling’s committee recently advanced a slate of more targeted pro-community bank bills — all but one of which passed on a bipartisan vote. Among them were measures to exempt low-volume community bank mortgage lenders from new Home Mortgage Disclosure Act requirements, expand community bank exemptions from escrow and servicing rules, and increase the CFPB’s exam threshold from $10 billion to $50 billion in assets.

read more: American Banker

Not Sexy, But Investors Should Consider the Simplicity of Self-Storage
Recently, the boring world of self-storage somehow became one of the most sought-after ways to invest in real estate.

It doesn’t sound sexy, but, like anything with a good return, it actually is.

In days past, it used to be that those looking to invest in real estate were mostly interested in apartment property, real estate investment’s “gold standard.”

There are many reasons to branch out, one of which is, you guessed it, millennials.

Millennials, one of the largest groups in history, can’t afford single-family homes (which are going up in price), but they still want to move out of their parents’ houses. This brings the demand for apartments up, setting off an excess supply of apartment construction, in part due to the slowing of job expansion.

So why purchase shares of a REIT that focuses on the self-storage industry?

For one, it’s recession-proof. This was proven by Forbes 400-member B. Wayne Hughes when he built a $2.4 billion fortune on self-storage. He was clearly doing something right. You can’t argue with that.

read more: Forbes

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