Situs Newswatch 5/1/2017

CRE Clients Relying on a New Type of Outsourcing

“Commercial Real Estate is foremost a ‘people’ business — it’s where people live, work and shop. With that environment changing all the time, Situs is the expert to keep the client’s business ahead of the fierce competition,” says Nicole Bozich, Managing Director CRE Advisory Services at Situs.

In today’s world, “outsourcing” is a loaded word, associated with moving jobs out of the US, but the outsourcing model is evolving.

The CRE market has become so sophisticated that businesses can’t afford not to outsource the grueling, expensive analysis and paperwork.

The Situs “secret sauce” is that the company has experts in numerous outsourcing facilities. In other words, your back office is our front office.

“It just makes sense. Our scale makes us more nimble and more efficient, and we use the latest technological advances,” says Situs’ Bozich. “We have front offices in major metropolitan areas, as well as domestic and offshore operation centers.”

This allows banks and CRE investors to concentrate on the aspects of transactions that drive their profitability, such as relationships, structuring, pricing and closing the deal.

“We, as a company that specializes in Commercial Real Estate underwriting and asset management, invest in the latest and best technologies to keep the client and us at the forefront of CRE management and investment,” says Situs Executive Managing Director John Weaver.  “Banks and the CRE industry can rely on us to keep them in step with the latest technology.”

Explains Weaver, “Because Situs takes responsibility for all of the underwriting and asset management details, our clients — whether they are banks, insurance companies or private equity investors — have the luxury of spending their time making strategic decisions regarding their assets or collateral.”

And, if companies are counting on Washington to eliminate your paperwork by deregulating — think again.

They’ll need Situs even more.

“Deregulation promises to provide our clients with more volume and new challenges, which makes outsourcing even more indispensable for your business,” Bozich says.


Situs Asks: Does deregulation make your company more likely to outsource?


Sell Your U.S. Home, Make Big Bucks

Sell while the selling is good!

Homeowners who sold in the first quarter of this year realized an average price gain of $44,000, an average 24 percent return on the purchase price.

ATTOM Data Solutions, a fused property database, says this is the highest average price gain for home sellers in terms of dollars and percent returns since 2007.

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“The first quarter of 2017 was the most profitable time to be a home seller in a decade, and yet homeowners are continuing to stay put in their homes longer before selling,” says Collingwood Group Managing Director Tom Booker, who will talk about this and more tonight (Monday) on the nationwide Jim Bohannon Radio Show at 11 p.m. ET.  “This is clearly a sign of an inventory imbalance, which can only be fixed by relaxing regulations on community bankers  so they can lend to  builders and developers while also thinking of builders as a real source of local economic development that yields jobs, higher tax revenue and greater housing inventory.”

ATTOM also reports: Among 97 metropolitan statistical areas with at least 1,000 home sales in Q1 2017 (and with previous sales price information available), those with the highest average price gain since purchase realized by home sellers during the quarter were San Jose ($356,500 average price gain), San Francisco ($276,750 average price gain) and Los Angeles ($187,000 average price gain).

tim cavuto 11-16-1.jpgThe Collingwood Group Chairman Tim Rood appearing on Fox Business Network’s Cavuto said, “Unfortunately, this sales pace is not sustainable because inventories are actually going down. Existing homes sales will likely hit a wall over the summer unless something changes to increase inventory. Moreover, there remains too much uncertainty for current owners to know whether this is the right time to sell and whether they’ll find anything that makes economic sense and is suitable.”

The S&P CoreLogic Case-Shiller National Home Price Index released Tuesday showed that in February home prices rose 5.8 percent from the same month a year earlier. That put prices nearly 40 percent above their level at the bottom of the housing crash in February 2012.

February’s Case-Shiller report showed home prices hit a new high for the fourth consecutive month, and experts explained the spring home-buying season is off to a fast start.

But in Britain: Home Prices Dive Again

U.K. house prices fell for a second month in April, adding to signs of consumer weakness, according to Nationwide Building Society.
The 0.4 percent decline, the biggest since 2012, followed a 0.3 percent fall in March. It reduced annual growth to 2.6 percent, the weakest since June 2013, the lender said in a report on Friday.

The cooler property market may be a sign households are “starting to react to the emerging squeeze on real incomes or to affordability pressures in key parts of the country,” said Nationwide chief economist Robert Gardner said. It “may be part of a broader trend.”

U.K. retail sales fell the most since 2010 in the first quarter and a report from YouGov and the CEBR published Friday said household sentiment fell this month to the lowest since July. A separate survey from GfK also showed a decline in optimism, though GFK said confidence is “surprisingly stable” given accelerating inflation and stagnating wages.

At Barclays, economists said they expect household optimism to “soften” this year, in part because of falling real incomes.

“Confidence with regard to the wider economy could also deteriorate as consumers begin to understand the impact on the U.K. economy” from leaving the European Union, Fabrice Montagne and Andrzej Szczepaniak said in a note on Friday.

In addition to the inflation squeeze from the weaker pound, the housing market may also be seeing payback for years of solid price gains that outstripped wage increases. That’s making it far harder for new buyers to enter the market.

Nationwide said the typical home now costs 6.1 times average earnings. That’s above the long-term average of 4.3 and close to the record 6.4 recorded in 2007, just before the financial crisis.

read more: Bloomberg

Brexit: Foreign Banks Reduce Lending to U.K. Commercial Real Estate

North American banks cut new lending for U.K. commercial property by more than half last year as a market slowdown reduced the number of big deals being done.

Banks focused more on refinancing existing loans than extending new credit, a trend that favored domestic firms, according to a survey of 77 lenders by De Montfort University. U.K. banks and building societies were the only group to record an increase in lending in a market hurt by the vote to quit the European Union.

“North American banks active in the U.K. are generally focused on providing acquisition finance in larger transactions, of which there were far fewer last year, partly because of Brexit,” Jon Rickert, investment director at money manager GAM Holding AG, said in an interview.

The weakness of Britain’s commercial mortgage-securities market also prompted a “general rethink by several North American banks around the resources they want to commit to the U.K.,” he said.

Lenders from across the Atlantic extended 3.3 billion pounds ($4.2 billion) in new credit to British commercial property deals in 2016, down 56 percent from the previous year, according to De Montfort’s survey, published Thursday. German and other international banks cut new lending by 18 percent and 25 percent, respectively.

U.K. commercial-property investment shrank by more than a quarter last year with investment at the lowest level since 2012, researcher Costar Group Inc. said in February. The overall volume of new loans fell 17 percent to 44.5 billion pounds, with uncertainty in the run-up to the June 23 referendum on EU membership weighing on first-half activity, according to De Montfort.

read more: Bloomberg

U.S. Economy Sputters

The U.S. economy grew at the slowest pace in three years during the first three months of the year, underscoring the challenges facing the Trump administration.

Gross domestic product, the broadest measure of goods and services produced in the U.S., rose 0.7 percent, at a seasonally adjusted annual rate, in January through March, the Commerce Department said Friday. That marked the economy’s weakest quarter since early 2014.

The main factor behind the latest slowdown: sluggish consumer spending that grew by the smallest amount since late 2009. Rising inflation also cut into Americans’ paychecks.

read more: Fox Business

Fannie and Freddie, Back in the Black

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Fannie Mae and Freddie Mac were among the biggest disasters of the financial crisis. In September 2008, nine days before Lehman Brothers failed, the federal government took over the mortgage companies; it eventually spent more than $187 billion bailing them out. For decades, the companies had provided an implicit government backstop to the U.S. mortgage market, buying loans from private lenders and guaranteeing payments to investors. That helped spur a steady rise in homeownership — until the subprime crisis hit and Fannie and Freddie were on the hook for billions in losses.

But that changed.

Bloomberg reports the U.S. Treasury has now received billions in profit. There’s now a pitched battle over who should get those profits. The companies’ pre-crisis common and preferred stocks still trade over-the-counter, and investors who snapped up the shares, such as hedge fund managers Bill Ackman and John Paulson, say Treasury is breaking the law by taking the money. The fight goes back to a change the Barack Obama administration made to the bailout terms in 2012.

MarketWatch reports Treasury Secretary Steven Mnuchin on Wednesday said the Trump administration would tackle housing finance reform after it addresses tax reform, setting the stage for Washington to lay to rest the last unfinished business from the financial crisis.

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“While reform of Fannie Mae and Freddie Mac was once very difficult to envision, both houses of Congress have clearly signaled that they plan to tackle the issue and the Trump Administration has publicly stated their support, so collectively they may be able to pull it off,” says the Collingwood President Brian O’Reilly  “Clearly, the topic remains politically charged and energizes each party’s base, but discussions between Congressional staffers and the industry are already underway, so we could see some movement in 2018, perhaps.”

Adds Collingwood’s O’Reilly, “Obviously, any solution will require a long runway for execution, which everyone knows, but perpetual government control must come to an end and the right people in Washington appear to be engaging in a legitimate policy dialogue to start that process.”

Lawmakers vowed to overhaul the companies and some planned to wind them down completely. But more than eight years later, Fannie and Freddie still operate under government control — and they’re now a bigger part of the system, guaranteeing payment on just under half of all U.S. mortgages, up from 38 percent before the crisis.

Mall Madness: The Hedge Fund Manager Who’s Shorting Them

As a youth Eric Yip spent weekends working in a small shop at the bustling Burlington Center Mall, where his parents sold housewares and rock band T-shirts. That has given Mr. Yip the insight to make one of the most talked-about trades on Wall Street: a “short” wagering that many malls across America are doomed.

These days, Burlington Center is a silent place. Of around 100 stores, only about a dozen remain open. Macy’s and J.C. Penney are gone, leaving Sears as the last anchor tenant. Vacant properties surround a dry fountain whose centerpiece, a life-size bronze elephant, used to spout water onto its back.

The mall’s ghostly presence has spurred a financial wager that Mr. Yip, now a New York hedge-fund manager, is pitching to investors many times his size. Starting in late 2015, he began visiting shopping centers across the U.S. to take their vital signs. Concluding that dozens faced a fate akin to Burlington Center’s, as internet shopping becomes more dominant, he placed a bearish bet on an obscure index linked to the performance of bonds that are backed by commercial mortgages.

So far, so good. A slice of the index, which Wall Street calls the “CMBX 6,” has tumbled 6.3% since the start of this year, according to IHS Markit . The decline is good news for anyone shorting the index, or betting on it to fall, as he is.

Mr. Yip’s hedge fund, Alder Hill Management LP, gained 8% in the first quarter of 2017, said people familiar with its performance, fueled in part by the bearish bets on two index slices.

Mr. Yip has been pitching his idea to other investors. Earlier this year, he circulated a 58-page report that mapped out a dire outlook for regional shopping centers and said more than two dozen whose debt was reflected in the index were likely to default. He presented his thesis to a group of investment firms at a lunch in Midtown Manhattan.

read more: Wall St Journal

Mall Challenge: Device Answers Age-Old Question  Does This Look Good on Me?

Amazon seeking a bigger slice of the clothing market, is casting itself as a style adviser.
The Seattle-based online retailer introduced the Echo Look, a new version of its artificial-intelligence powered speakers that includes a camera. The company said the $200 device, which is only available via an invitation for now, will enable consumers to take videos and photos of their outfits and compare them via algorithms.

But Amazon’s plans are likely much broader than offering fashion advice, experts say. Potential applications range from becoming a virtual home-fitting room to a communications and security system for companies — all ways to more deeply integrate

When the original Echo was first released in 2014, it was marketed as a “glorified MP3 player,” said Werner Goertz, an analyst at technology research firm Gartner Inc. In the years since, Amazon has added thousands of new functions, from ordering pizza to turning on the lights.

Amazon has also been looking to grab a bigger piece of the apparel market, creating its own private label brands and making inroads into fashion at the expense of department stores and some specialty retailers.

read more: Wall St Journal

Big Caffeine Fix

Starbucks Coffee Company is going big in the Windy City — in a space that is currently  home to one of the city’s iconic retail flagships.

The coffee retailer will open a four-level, 43,000-sq.-ft. Starbucks Reserve Roastery on Michigan Avenue in Chicago in 2019, in the building currently occupied by Crate & Barrel. The home goods chain, which has operated a store on the site for 27 years, is expected to close its door in early 2018.

The Chicago Roastery will be the company’s third Roastery location in the United States.  The concept, which debuted in late 2014 in Seattle, will open in Manhattan in 2018. International locations are in the works for Shanghai, opening late 2017, and Milan and Tokyo, slated to open in 2018.

The Chicago building is owned by a venture of Crate & Barrel founder Gordon Segal. Segal sold his majority stake in the company in 1998.

“Howard (Schultz) and I share the same passion for the companies we created, each centered around the customer experience and a relentless attention to detail,” Segal stated. “This building has a unique way of becoming a beacon for a brand, and I can’t think of a better retailer than Starbucks to offer Chicago something new and exciting with its Reserve Roastery.”

read more: Chain Store age

Week Ahead

A very busy week ahead, culminating with the “big kahuna” of government reports, the jobs report (for April). But before that we find out whether Janet Yellen and company are on track to raise rates again as the Fed ends a two-day meeting with its announcement Wednesday. And before all that we invite you to join Collingwood Managing Director Tom Booker tonight (Monday) as he talks all things housing on the Jim Bohannon Nationwide Radio Show.

Here’s the way the week shapes up:

Today 

  • National Secondary Market Conference & Expo, New York Marriott (through May 3)
  • Collingwood Managing Director Tom Booker joins Jim Bohannon Radio show from the MBA Conference, 11 p.m. ET
  • Construction Spending 10 a.m. ET

Tuesday

  • Fed meeting begins

Wednesday

  • ADP Employment Report 8:15 a.m. ET
  • Gallup U.S. Job Creation Index 8:30 a.m. ET
  • Fed Announcement 2 p.m. ET

Thursday

  • Challenger Job-Cut Report 7:30 a.m. ET
  • Weekly Jobless Claims 8:30 a.m. ET

Friday

  • Jobs Report 8:30 a.m. ET

Have a prosperous week ahead!

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