Situs Newswatch 5/3/2017

A WASHINGTON, DC, ADVISORY FIRM FOCUSED ON HOUSING POLICY AND REGULATIONSitus, the premier global provider of strategic business and technology solutions to the real estate finance industry, today announced the completion of its acquisition of The Collingwood Group (“Collingwood”), a Washington, DC-based advisory firm led by the former head of FHA, and partners who have held senior leadership positions in HUD, Fannie Mae, Freddie Mac and FHFA, focused on housing policy and regulation.

By acquiring Collingwood, Situs obtains regulatory policy experience and insight across the residential housing and multifamily finance industry. “Collingwood is a thought leader in the housing industry, and we are excited to have them join the Situs team,” said Steve Powel, CEO of Situs. “This acquisition expands our professional service offering beyond the commercial real estate sector, providing residential housing expertise and advice to manage complex credit risks and address continuing regulatory challenges. Further, the Collingwood team provides a presence in Washington, DC, to better serve our existing GSE’s relationships.”

“Collingwood has an established track record and credibility for providing consulting and advisory services in the housing industry,” said Brian O’Reilly, President of Collingwood. “Joining Situs enables us to also provide fulfillment services to our clients, and offers these clients the same level of industry expertise in the commercial real estate sector. The acquisition will also accelerate our growth in the strategy, risk management and regulatory-compliance area.”

“We are delighted to partner with such an experienced and well-regarded team,” said Stephen Friedman, Chairman of Stone Point Capital, a financial services-focused private-equity firm and the majority owner of Situs.  “Collingwood has deep experience and specialized expertise in the policies and regulations impacting the housing industry.  These capabilities will complement Situs’s service offerings in the commercial real estate sector and will significantly broaden Situs’s overall position as a leading provider of risk management and operational support services to the real estate finance industry.”

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Click here to learn more about The Collingwood Group.

Honey: I’m Taking the Elevator Upstairs to the Office

When Joshua Bryan leaves his apartment to go to work, he travels up three stories, to the 40th floor of his building in Chicago’s South Loop neighborhood, reports the Wall Street Journal. There, he settles into a workspace with television screens, a kitchenette and sweeping views of Lake Michigan. For meetings, Bryan books a first-floor conference room with teleconference equipment and interactive white boards for presentations.

“Call it the home office of the future that’s here today,” says Steven Bean, Executive Managing Director of Situs. “This is an example of Commercial Real Estate developers doing what they do best. Innovation like this is the way for developers to stay fresh, keep up demand for new real estate and, of course, make money.”

With more Americans working from home, architects and developers are designing spaces that spare residents from conducting business at a Starbucks. Developers say amenities such as communal offices and gyms also keep revenue in the building, rather than residents paying for them elsewhere.

In 2016, 15 million workers, or 10 percent of the American workforce, were self-employed, according to the U.S. Bureau of Labor Statistics. Along with telecommuters, consultants and others with flexible schedules, they make up a sizable market of renters and home buyers in need of living space that fits their lifestyle. For single-family houses, home builders are now conceiving floor plans with fully wired “flex space” suitable as an office area. In apartment buildings, they are installing work lounges inspired by the creative work environments of the tech world — less business center and more cyber-café — with big windows, hip furniture and, often, free coffee.

Says Situs’ Bean, “This evolution clearly makes sense.  We’ve gotten used to watching movies on our big flat screens at home and shopping on our computers and mobile devices. Turning our apartment buildings into multi-use facilities is just a small step from that.”

Trump Weighs Breaking Up Wall Street Banks

President Donald Trump said he’s actively considering a breakup of giant Wall Street banks, giving a push to efforts to revive a Depression-era law separating consumer and investment banking.

“I’m looking at that right now,” Trump said of breaking up banks in a 30-minute Oval Office interview with Bloomberg News. “There’s some people that want to go back to the old system, right? So we’re going to look at that.”

During the presidential campaign, Trump called for a “21st century” version of the 1933 Glass-Steagall law that required the separation of consumer and investment banking. The 2016 Republican party platform also backed restoring the legal barrier, which was repealed in 1999 under a financial deregulation signed by then-President Bill Clinton.

A handful of lawmakers blame the repeal for contributing to the 2008 financial crisis, an argument that Wall Street flatly rejects. Trump couldn’t unilaterally restore the law; Congress would have to pass a new version.

Trump officials, including Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn, have offered support for bringing back some version of Glass-Steagall, though they’ve offered scant details on an updated approach. Both Mnuchin and Cohn are former bankers who worked for Goldman Sachs Group Inc.

read more: Bloomberg

Auto Dealers Back Out of Real Estate, Blame (You Guessed It): E-Shopping

AutoNation, the largest seller of new vehicles in the U.S., is making a $500 million bet on the used-car business. To pay for it, the dealer chain is selling what has long been the industry’s most precious asset outside of the cars: property.

The Fort Lauderdale, Fla.-based company’s move follows a broader trend in the business. As car buyers increasingly use smartphones and internet tools to shape shopping decisions, several large chains are paring property holdings as they shrink the amount of inventory they keep in eyeshot of the showroom.

Auto dealers own or lease about $130 billion of real estate in the U.S., according to Kerrigan Advisors, an advisory firm that helps dealers sell their businesses. Dealers traditionally have sought land on high-traffic roads with enough space to store gobs of inventory, requirements that led to significant real-estate investments.

AutoNation, for instance, owns $3 billion of real-estate assets. It will sell some of it to help raise as much as $500 million to create a line of stand-alone used-car stores called “AutoNation USA,” which the company says could deliver higher margins than the new-car business.

“It’s a very prudent approach to brand extension,” AutoNation Chief Executive Mike Jackson said in an interview.

Car sellers are seeing buying behavior rapidly change, with shoppers sometimes spending more time searching for better deals while in the showroom instead of looking at a dealer’s inventory. Aware of this trend, inventory is being stored off-site on cheaper land.

Nearly 90% of car shoppers use the internet to shop for a vehicle, according to a 2016 study by the third-party shopping site conducted by the research firm IHS Automotive. Of the customers who use their smartphones at a dealership, the study found 59% are comparing prices for vehicles at other dealerships while 38% are comparing inventory at other dealerships.

read more: Wall St Journal

In case you missed it earlier this week, Situs Asks: Does deregulation make your company more likely to outsource?


Amid Brick-and-Mortar Travails, a Tipping Point for Amazon in Apparel

If future anthropologists want to study the rubble of early-21st-century retail, a good place to start will be what did to apparel shopping in the few years before and after 2017.

The outlook for physical retailers is grim, the sector roiled by store closings, layoffs and bankruptcies. This year, Amazon will surpass Macy’s, which last year announced it would shut 100 stores, to become the largest seller of apparel in America, by several analysts’ estimates.

It is looking at ways to keep expanding, too. Amazon is exploring the possibility of selling custom-fit clothing, tailored to the more precise measurements of customers, and it has considered acquiring clothing manufacturers to further expand its presence in the category.

If there are tipping points in retail — moments when shopping behavior swings decisively in one direction — there’s a strong case to be made that apparel is reaching one now, with broad implications for jobs, malls and shopping districts.

Those moments often occur around the time that online shopping reaches about 20 percent of total national retail spending in a category, the research firm L2 has concluded after studying the evolution of e-commerce. Online clothing and accessory shopping’s share of retail hit 21 percent last year, according to estimates by Cowen and Company, a stock research firm.

Amazon now has an intriguing patent for an “on demand” clothing manufacturing system that can pump out custom-made suits, dresses and shirts.

“I do think this year is the year apparel e-commerce takes off,” said Cooper Smith, an analyst at L2.

Apparel has been something of an e-commerce laggard. In years gone by, buying clothing over the internet was only for the fearless, with most shoppers unwilling to take the risk that a dress or a pair of shoes would fit poorly or look terrible on them.

It took time, but shopping habits for clothing are shifting profoundly.

Amazon’s solution was to improve clothing selection, pour money into photography to give internet shoppers a better representation of garments and offer free returns on most apparel so customers could order untroubled by the thought of sending items back.

read more: NY Times

NYC’s Retail Market Continues to Take Prisoners

The more than two dozen chain and department store restructuring and closures announced this year have sent ripples across America. But while locals may be worried, New York City has not yet been too adversely affected.

During the past six months — while powerful brands like Nike, Victoria’s Secret and Foot Locker have grabbed NYC flagships and headlines — just as many other building owners were grumbling quietly about the lack of interest in their properties.

That has led to lower asking rents, “whisper” rents and even multimillion-dollar contributions toward renovations — something that store owners had previously declined to provide. “This is the most challenging [environment] that we’ve seen in two decades,” says Faith Hope Consolo, chairman of Douglas Ellliman Retail. “Even more than post-Lehman.”

That was back in 2008 and 2009, when Lehman Brothers went bankrupt and nearly all the banks were giving up prime corners spots. Needless to say, those vacancies were filled — but now there are other empty spots from Fifth and Madison avenues to Bleecker Street and from Soho to the Meatpacking District.

On the other hand, Robert K. Futterman of RKF, says, “The Flatiron [District] is a great market and one of the strongest in the city.” But as Futterman has said in the past, the building owners had leverage over the tenants; “Now,” he notes, ”they have to kiss the tenant’s tuchuses to keep them.”

Tourist-favored places are facing challenges as visitor numbers have dipped slightly for various economic reasons. But this year’s expected total of 61.8 million travelers — 13.1 million from other countries — is huge and not to be dismissed. Luring them here are bargains found citywide. “They can now get a better bang for their buck than they would have a month or two ago,” says Heidi Learner, chief economist of Savills Studley.

read more: NY Post

Millennial Milestone: More Young People Buying Homes

For the first time in a decade, more new U.S. households in the first quarter chose to buy homes than to rent, suggesting a long-term decline in homeownership rates might be coming to an end.

The Wall Street Journal reports 854,000 new-owner households were formed during the first three months of the year, more than double the 365,000 new-renter households formed during the period, the Census Bureau said Thursday.

That is the first time since the third quarter of 2006 that the number of new homeowners outstripped that of new renters.

Meg_Burns_15627_crop-512x640-e1412380412188.jpg“This is a good start; the figures suggest that the pendulum is perhaps finally swinging in the right direction,” says the Collingwood Group Partner Meg Burns. “However, states must still do more to loosen costly regulations that are hampering builders from constructing new ‘starter’ homes for first-time buyers and millennials. Furthermore, in a well-functioning market, we’d see more purchase activity in the affordable price range, resulting from ‘trade-up’ transactions as well as new construction. Both are crucial to full economic recovery.”

To be sure, the overall homeownership rate ticked down to 63.6 percent in the first quarter from 63.7 percent in the fourth quarter.

But economists were encouraged by the increase in new households that have joined the ownership ranks.

The homeownership rate peaked at just over 69 percent in the mid-2000s before falling to a 50-year low of 62.9 percent in the second quarter of 2016. It has hovered around 63.5 percent for the last couple of quarters, below the long-term average of around 65 percent.

Any lasting increase could be good for the overall U.S. economy. Buying a home contributes more to the economy than renting. More workers are required to build a single-family home than a rental unit, and homeowners spend more on renovations than renters.

Go South, Young Man (and Woman)

Susan Gifford moved last August from Rome, New York, to Garden City, South Carolina, where she lives in a home two miles from the beach. “The weather was the motivating factor, getting away from winter,” the 67-year-old retired teacher said.

Almost 600,000 Americans moved from the Midwest and Northeast to the Sun Belt states last year, the most since 2005, according to Brookings Institution demographer William Frey. Migration is boosting growth along Southeast and Western coasts as well as Nevada and Arizona, reflecting a healthier national economy that has made it easier to re-locate.

Retirement centers Myrtle Beach, South Carolina, and The Villages near Orlando were the fastest growing metro areas in the U.S. in the year ended July 1, while a flow of younger workers have led to employment booms in Florida, Georgia and Nevada, all growing at almost twice the rate of the nation.

“There’s been a renewed push of people moving to the Sun Belt,” said IHS Markit economist Karl Kuykendall. “The 2009 recession slowed it down because of the housing slump and severely hurt resident mobility. More people are back to moving south and west for better jobs, and there is retiree migration as well.”

read more: Bloomberg

Power CRE Designers are All About Green Spirit

In New York City, where it’s harder to get access to fresh air and residents don’t typically have a sprawling backyard (we’re not all Staten Islanders here!), bringing light, air and plants to the buildings has become more important than ever, and that’s what the top architects and designers are doing in 2017.

Some firms are doing it by adding more terraces to their projects, or green roofs, and then there are others that are changing the game completely. Take ODA New York’s design of 305 East 44th Street, a residential condominium tower that has full-floor gardens weaved in between the apartments. Or FXFOWLE’s design of Circa Central Park, a residential building at the northwest corner of Central Park, which has a curving design on the corner facing the park, so residents can get amazing views of the greenery.

Of course, getting air and light isn’t the only thing that architects have to contend with at their projects. For CetraRuddy’s John Cetra, he is concerned with how the sun affects buildings’ color and texture when the light hits the structure. That’s why he designed The Moinian Group’s rental at 572 11th Avenue with white terra-cotta up to the seventh floor.

These are the power designers in the city. The projects are different in a lot of ways, but the common thread seemed to be an embrace of green spirit.

read more: Commercial Observer

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