Situs Newswatch 12/7

Trump Treasury Secretary Vows to Chop Dodd-Frank; Save Fannie & Freddie

Steven Mnuchin, Donald Trump’s Treasury Secretary designee, made much of his banking fortune amid the fallout of the 2008 financial crisis, buying and reselling a distressed bank in California.

Now, the 53-year old former Goldman Sachs banker will have the President-elect’s ear in an effort to roll back the Dodd-Frank Act, legislation put in place with the goal of preventing such a crisis.

Revising Dodd-Frank is “the number one priority on the regulatory side,” Mnuchin told CNBC.

“It’s pretty clear the Trump administration is going to roll back on Dodd-Frank, which is probably going to allow the banks to be a little bit more aggressive going forward, and that’s great for Commercial Real Estate finance,” says Situs Managing director Steven Bean.”

Few expect Trump to follow through on his populist campaign to completely scrap the legislation, but many forecast major regulatory changes. The law, which was passed to lower excessive risk-taking by banks, has fans even on Wall Street. But Trump is expected to target requirements on lending, disclosure and liquidity that he considers stringent.

“Some regulations are clearly needed and have pointed out some the shortcomings of the bank, but my biggest concern is that it has been said that the Great Recession was caused by a liquidity crisis.  Despite that, many of current rule changes have reduced market liquidity,” adds Situs’ Bean.

Mnuchin choice for Treasury by Donald Trump may have also increased the chances of Fannie Mae and Freddie Mac coming out of conservatorship.

“A resolution of the conservatorship of the GSEs appears likely with Mnuchin as Treasury secretary and Ben Carson as Trump’s Choice to head Housing”, says Bean.

As for Carson’s lack of experience in housing policy, Bean says that actually may be a positive,  “Sometimes the very best policy makers are those who listen and sometimes, good leaders who are not steeped in the subject matter are better listeners than those who believe they have all the answers”

Treasury-secretary designate Mnuchin said in a Fox Business Network interview that resolving Fannie and Freddie will be a top priority. “We will make sure that when they are restructured, they are absolutely safe and don’t get taken over again,” he noted.

Carson Is New Sign Trump Plans to Govern From the Right

President-elect Donald J. Trump is moving to repudiate vast parts of President Obama’s domestic agenda as he fills his cabinet with conservatives who have long records opposing the current administration on social programs, wages, public lands, veterans and the environment.

Mr. Trump’s selections to lead the Departments of Education, Commerce, Justice, and Health and Human Services, and the names under consideration for other federal agencies with broad authority over the lives of Americans, have cheered Republicans in Washington, who have spent eight years battling Mr. Obama’s administration.

“It’s a recognition that elections have consequences,” said Thomas M. Davis, a former congressman from Virginia, who said he was impressed by the ideological philosophy of Mr. Trump’s domestic agency appointments. “Republican philosophy says markets can do a better job. It’s a huge clash with Obama.”

Early Monday morning, Mr. Trump announced that he intended to nominate Ben Carson, a retired neurosurgeon, to be the secretary of housing and urban development. In that post, Mr. Carson, who enthusiastically backed Mr. Trump’s candidacy after dropping his own, will oversee the federal agency that fights urban blight, provides rental assistance and helps homeowners battle foreclosures.

If he is confirmed, Mr. Carson will embrace a starkly different approach to those problems, compared with housing secretaries during Mr. Obama’s tenure. He opposes government programs that he says encourage “dependency,” and he has been fiercely critical of housing programs intended to end segregation.

read more: NY Times

The Trump Whisperer is Big into Commercial Real Estate

As a gangly high school student, Jared Kushner did what most long-limbed kids of his size did: He joined the basketball team. The Frisch School, a well-known private school in Paramus, New Jersey, took pride in its athletic prowess and had a coach who took losing personally.

In Kushner’s senior year, after a particularly bad home loss, the head of the team seemed on the verge of desperation. It had been a middling season for the Frisch Cougars, and the players had performed particularly poorly that night. During a team meeting, the coach lost it.

“He went crazy and started yelling, saying he hated us,” recalled Arik Lifshitz, a real estate developer who was Kushner’s teammate at the time. As the clock ticked past 9 p.m., he announced that he was quitting.

Then Kushner’s father intervened. A regular at his son’s games and a big fish in local Jewish and real estate circles, Charlie Kushner was known as the Don Corleone of the community, a man who aspired to be a Jewish Kennedy, according to a 2009 New York magazine article. That evening, the elder Kushner strode into the room and talked the hot-headed coach off the ledge, gently reasoning with him, with his young son watching all the while.

“I’m not saying Charlie is the reason he didn’t quit, but I do recall Charlie leading the conversation,” Lifshitz said. “I kept looking at the clock hoping we could finish up and I wouldn’t get in trouble for getting home so late on a school night.”

Fast forward to 2016. Jared Kushner, who declined to comment for this story, has taken the mantle of diplomatic advisor to a plane and place that few, even his smooth-talking father, could have imagined. As the son-in-law to the famously volatile and moody president-elect, the 35-year-old real estate scion and media mogul has been portrayed as the most trusted consigliere in the campaign.

Indeed, in the waning days before the election, when the candidate was reported as being edgy and nervous about the outcome, Donald Trump sought out reassurance from those in his inner circle. The New York Times notably reported that he preferred “the soothing, whispery voice of his son-in-law.”

“We don’t have kings and queens in America, so we treat our presidents and first ladies like kings and queens,” Jeff Greene, the billionaire real estate mogul, recently told The Real Deal. “Jared will be the prince.”

read more: TheRealDeal

SITUS IN THE NEWS:

They Came Back For The Opportunity

HOUSTON—A trio of former Situs Group employees recently rejoined the firm after about a year at Cushman & Wakefield, and Steven Bean, executive managing director, US advisory & business development, has an explanation at the ready: Ultimately, he tells GlobeSt.com, what motivated the three to come back was “our growth and the diversification of our client base. We’re not one-trick ponies, and they saw that.”

The three returnees all are based at Situs’ global headquarters in Houston. They’re VPs of CRE diligence and advisory Sonia Horton, a 15-year company veteran and Linda Le, who worked for a decade at Situs before joining Cushman & Wakefield; and Lisa Brunner, who reports to Horton. All three rejoined Situs in October.

Surveying the commercial real estate environment from the standpoint of Situs—a global advisory firm with roots extending back to the Great Depression—Bean observes, “It’s interesting what we see out there, with some of it being driven by the low-yield environment. Some of these companies that haven’t traditionally been outsourcers—think more of the balance sheet firms—especially those that have been in the CMBS space, where maybe their transactional volume has been down this year, have been looking at their platforms and trying to rationalize some of their costs, their overhead.

“This is a pretty human capital intensive business,” he continues. “Situs has always been in a position of becoming strategic partners with firms and helping them maximize their efficiency by being their overflow provider, and in some cases handling all of the back office functions.”

Of Horton, Le and Brunner, Bean says, I think they came back for the opportunity and for our culture.” Hde adds that within Situs’ advisory group, “we have created a lot of specializations. Our advisory group is about 225 people. When you get to be that big, you have to be specialized. We have 17 different practice areas inside of our team.”

read more: Globest.com

Harsh Political Winds Test Euro’s Stability and Future

The euro rallied from early losses following Italian voters’ rejection of government-backed constitutional changes, but the volatile day raises concerns about how the currency survives an era of populist politicians and diverging economies.

The referendum’s failure meant the resignation of Italian Prime Minister Matteo Renzi. Mr. Renzi’s antagonists, the antiestablishment 5 Star Movement, have questioned the common currency and called for a non-binding referendum on Italy’s membership in it.

The referendum sets up a political vacuum in Italy that could be treacherous for the country’s banks. A plan to rescue the weakest, Monte dei Paschi di Siena SpA, is likely scuttled, and it may need to be nationalized. If other banks stumble, and if concerns rise for banks outside of Italy, the euro could be stressed further.

European stock markets rose Monday, except for Italy’s, which was hurt by sharp falls in banking shares and ended down 0.2%.

Monday’s calm trading, outside of Italian banks, suggested investors believe the vote on its own doesn’t challenge the eurozone. There was no clamoring for havens: Long-term German bonds weakened, as did gold. Italian bonds also fell, and their yields rose more than Germany’s. That gap signals some concern about Italy, though the gap widened only modestly.

read more: Wall St Journal

Brexit Could Delay Half of London Commercial Property Developments

Up to half of planned commercial developments in central London could be delayed over the next few years due to concerns about Brexit, and overall investor returns will be flat in 2016, estate agents Savills said on Tuesday.

Commercial property was one of the first sectors to be hit in the immediate aftermath of the June 23 public vote to leave the European Union, with investors pulling cash out of funds and forcing many to be temporarily suspended.

Savills said that across Britain there could be a decline of up to 40 percent from 2017 until 2021 in development activity of retail, office and industrial property, with up to 50 percent delayed in central London.

“This would definitely be Brexit-related – a mix of lender, developer and occupier risk-aversion,” Head of Commercial Research Mat Oakley told Reuters.

Returns for investors, primarily made up of the rents they receive and the growth in the value of the asset, will rise by just 0.4 percent this year, compared to an increase of 13.2 percent in 2015, Savills said.

There would be a slow recovery over the next few years with returns increasing by 1.4 percent next year, 5.3 percent in 2018 and 7.8 percent by 2021, it added.

“We were forecasting a declining total return more than a year ago, but Brexit has resulted in a sharper than expected correction in capital values,” said Oakley.

Demand for luxury homes in central London, where a high proportion of buyers are foreign and domestic investors, has also been hit in recent months due to increased property taxation and the uncertainty created by Brexit.

read more: Reuters

Pop-Ups Serving as Band-Aids for U.S. CRE

When 87 Christopher Street hit the NYC market in August, the owners hoped to snag a long-term retail tenant. But after months rolled by and the space stayed vacant, the owners moved to plan“It’s an opportunity for the landlord to capture some short-term cash,” said Jason Fein, a partner at ABS Partners Real Estate TRData LogoTINY who represents the ownership. And while they continue to look for a long-term tenant, “things always show better when they’re alive,” he added.

Uncertainty continues to plague the city’s retail market. Asking rents have dipped across large parts of Manhattan, according to a recent retail report from the Real Estate Board of New York. Availability rates increased year-over-year in almost every retail submarket of the borough last quarter, according to an analysis by Cushman & Wakefield. Faced with a market in which tenants aren’t signing up for pricey long-term leases, landlords have had to adjust, and are more open to short-term leases.

“The reality is that there are some vacant spaces that are spending a long time on the market,” said Meagan Bonan, a Cushman retail broker whose clients are increasingly asking her to look out for short-term tenants. Pop-ups, she added, “bring cash flow to a space and allow ownership to really wait for the right tenant long-term.”

Concern that Manhattan’s retail market is a bubble about to burst has been brewing for some time, and many of the city’s major shopping districts — like Fifth Avenue between 42nd and 49th Street, Madison Avenue, Times Square, Meatpacking and Soho — have availability rates of more than 20 percent. “Some landlords ask very aggressive rents and tenants say, ‘huh, no, I need to make money,’” said Lisa Rosenthal a broker at Lansco Corporation.

read more: TheRealDeal

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