Valuation Management — A Growing Need in Europe
Following the financial crises, the implementation of the Alternative Investment Fund Managers Directive (AIFMD) and the events that occurred within the open-ended fund industry after the U.K. voted to leave the EU, added scrutiny has been placed on Real Estate Fund Managers — in particular, those classified as Alternative Investment Fund Managers (AIFM).
For the past 10 to 15 years, new investor reporting requirements in the US have led to greater independence and transparency for the valuation process, and that trend is expected to take off in Europe in the next few years. For the most part, the European open-end real estate funds industry has historically relied on its asset and/or portfolio managers to manage the valuation process.
However, this can lead to several problems:
According to Taco Brink, Managing Director and Head of Situs RERC Europe, “Without independent valuation management, even an unintended bias can occur during the review process. This bias, whether perceived or actual, is damaging to the industry as a whole. Investors want to see a fully independent and transparent valuation policy and procedures documentation. This includes the review process in place for internal and external valuations.”
Situs RERC provides clients with real estate experts who have globally recognized accreditations (MRICS, MAI, CRE) and in-depth knowledge of the real estate valuations industry on a global level. Brink adds, “We look out for the best interests of all related parties, making it an even playing field for all involved.”
To learn more about how your firm can benefit from independent valuation management, click here.
Stop Blaming Millennials for Real Estate Problems
Last year, for the first time ever, there were more women in their early 30s having babies than younger moms.
Beyond the social impact of postponed parenthood, this trend is also affecting the commercial and residential real estate industries.
“College-educated millennials are more likely to have their path to homeownership blocked by financial constraints such as higher student loan obligations, high rents, limited access to affordable credit, wage and income stagnation, and high home prices,” says Situs Assistant Vice President Jennifer Rasmussen. “Remember, millennials are at least five years behind — economically — their parents. Many millennials entered the job market during the Great Recession and many became marginally attached to the labor market. Wages have only just begun to improve for this cohort.
“These are just some of the socioeconomic reasons that the millennial generation has put off starting a family — and entering the housing market,” adds Rasmussen, who has a Ph.D. in psychology.
Situs’ Rasmussen talked about this and more on the Jim Bohannon Radio Show, click here to listen to part 1.
Millennials Are Helping America Save More Money
After almost a decade, Americans may finally be turning the corner on saving money. More than 30 percent of them say they have enough tucked away to cover six months’ worth of expenses — a seven-year high for this measure of financial calamity preparedness, a financial planning favorite.
Meanwhile, the percentage who concede in response to an annual survey that they have no savings fell to a six-year low of 24 percent, down from 28 percent last year.
“Ever since the recession, we’ve noticed in surveys that people realize how important it is to have emergency savings, but for so many years post-recession they just weren’t making any progress,” said Greg McBride, chief financial analyst at Bankrate.com, which released the survey on Tuesday. Now a broader swath of people are finally making headway, he said.
The poll of 1,003 Americans, conducted by Princeton Survey Research Associates International, showed impressive savings habits among millennials, particularly younger ones, McBride said. Thirty-one percent of Americans age 18-26 have enough saved to cover three to five months’ worth of expenses. (Some, however, are likely living at home or with roommates — or counting their trust funds.)
read more: Bloomberg
Home Sales Through the Roof, but Inventory Problems Mount
Existing-home sales are were up 1.1 percent in May over April and 2.7 percent year-over-year, according the National Association of Realtors, with new-home sales numbers for May due this morning (Friday) expected to rebound after April’s sharp decline. Existing-home sales last month rocketed to their third highest monthly level in a decade, but the news is not good for first-time buyers as chronic inventory shortages pushed home prices to new highs.
The median house price for an existing home increased to an all-time high of $252,800, a 5.8 percent jump from one year ago, reflecting the lack of homes on the market.
The number of homes on the market rose 2.1 percent, but supply was down 8.4 percent from a year ago. Housing inventory has dropped for 24 straight months on a year-to-year basis.
“Why is anyone surprised?” asks the Collingwood Group Managing Director Tom Cronin, appearing on Westwood One Radio Network. “Rates continue to be near historic lows, there are 6.5 million job openings, inventory is light and there is tremendous pent-up demand. Sure, the problems are still out there. Housing permits are down, housing starts are down, credit continues to be tight (albeit the GSEs are working responsibly to expand credit), regulation restricts lending on entry-level purchases (points and fees) and the cost of this regulation inhibits development in the low/mod/first-time buyer space. These problems exist across the spectrum; they are not all federal. We need a focused agenda to deal with this or we’ll still be talking about this in five years.”
At the current sales rate, it would take 4.2 months to clear inventory, down from 4.7 months one year ago. The median number of days homes were on the market in May was 27, the shortest time frame since NAR began tracking data in 2011.
Despite robust demand for housing, the sector has shown some recent signs of strain. Homebuilding fell for a third straight month in May to its lowest level in eight months, the Commerce Department reported last week.
Remember AIG? — It’s Back and Now in the Mortgage Game
AIG is back — this time in the mortgage business.
But American International Group isn’t originating new loans; instead the company has been buying up high-quality jumbo mortgages, and now plans to securitize them.
According to a report from Fitch Ratings, AIG is preparing to bring its first residential mortgage-backed securitization to market — a $511.98 million offering backed by 850 jumbo mortgages.
And while AIG is new to the securitization game, the quality of the RMBS deal itself is one of the strongest since the crisis.
According to Fitch, the deal, which is called Credit Suisse Mortgage Capital 2017-HL1 Trust, has underlying borrowers with “strong credit profiles, relatively low leverage and large liquid reserves.”
But just how strong are the borrowers’ credit profiles?
Fitch states in its report that the pool has a weighted average original FICO score of 779, which is higher than any transaction rated by Fitch since the crisis.
Meantime, ratings agency Standard & Poor’s has revised its outlook to negative from stable for AIG.
You’ll recall that in 2008, the U.S. government’s bailout-loan to AIG was the largest ever made. The company repaid the loan and $6.7 billion in interest and fees, but the bailout ultimately cost more than $180 billion in taxpayers’ money
Low Interest Rates Should Continue, But …
Boston Fed President Eric Rosengren says low interest rates pose financial stability concerns that central bankers and the private sector must take seriously.
In a speech in Amsterdam to a conference co-sponsored by the central banks of Sweden and the Netherlands, Rosengren said lower rates may be a more permanent feature on the economic landscape because they reflect broad population trends. As a result, financial firms, such as insurance companies, “will need to factor in the possibility of lower rates, particularly during economic downturns and flatter yield curves.”
For their part, central bankers must understand that financial stability concerns “have implications for monetary policy responsiveness to negative shocks.” And supervisory policies also need to factor in greater macroeconomic risk, he added.
read more: MarketWatch
Amazon Shops Locally, But Spreads Fear Globally
Amazon is coming to get you no matter where you are. From London to Sydney, investors have interpreted the technology giant’s $13.7 billion acquisition of Whole Foods as a warning shot to local grocers. Yet a more bullish interpretation is also possible: Amazon is coming to buy you.
For a deal centered on 430-some stores based mostly in the U.S., Amazon’s bid for Whole Foods WFM 1.27% has spread collateral damage surprisingly far. Shares in Australia’s Woolworths fell 3.5% Monday — the first day investors had to respond to Friday’s news. In Europe, shares in Amsterdam-listed Ahold Delhaize plunged almost 10% Friday afternoon, while Tesco ’s stock fell 5%.
Ahold Delhaize makes almost two-thirds of its sales in the U.S., so will be directly affected if Amazon uses Whole Foods to accelerate its U.S. grocery push. For the others any effect is longer-term: The deal simply signals Amazon’s ambitions.
But the Whole Foods deal also flags the difficulty of making e-commerce work in food without a store base. If Amazon wants to roll its U.S. strategy out in Europe or Australia, it could buy a local grocer. Admittedly, market leaders like Tesco or Woolworths seem less likely targets than niche players like London-listed Morrison, which already supplies Amazon’s U.K. grocery arm. Morrison shares have risen since the Whole Foods deal broke.
Investors have overreacted to this kind of news before. As brokerage Morgan Stanley points out, Tesco’s shares fell 15% over the two weeks following Walmart ’s 1999 announcement that it was buying U.K. chain Asda. The fears proved unfounded, and Tesco shares went on to double over the following half decade or so.
Ocado — an internet grocer active in the U.K. — best illustrates the difficulty of interpreting Amazon’s move. Having fallen on the news, its shares rose 11% Monday. Some may argue that Amazon could now be more interested in Ocado’s logistics; or you could say it showed Ocado’s pure online model didn’t work. Tomorrow’s market whim is anyone’s guess.
Love at First Sight: Amazon’s Whole Foods Acquisition
Whole Foods Chief Executive John Mackey said Amazon’s pursuit of the health food chain began with “a blind date” more than six weeks ago, a whirlwind courtship that culminated in Amazon’s largest acquisition by far.
In a town hall meeting at Whole Foods’ Austin, Texas, headquarters on Friday, the day the deal was announced, Mr. Mackey and other executives applauded the “historical moment” for Whole Foods, saying that the two companies hit it off right away, according to a security filing transcript.
“We just fell in love,” Mr. Mackey said, according to the transcript. “It was truly love at first sight,”
New details emerged Monday regarding the timeline of events leading up to the $13.7 billion deal, showing that it was a somewhat spontaneous decision. The deal came together so rapidly — the companies signed a confidentiality agreement April 27 — that Amazon’s strategy for the acquisition is still largely in the air, according to people familiar with the matter.
Even so, Mr. Mackey said at the town hall that, as part of Amazon, other store formats might emerge under a different name that don’t necessarily meet the brand’s high standards for natural and organic foods.
The acquisition is “gonna change our culture. I mean, it’s the truth. It’s inevitable. But it doesn’t necessarily mean it’s a bad thing,” he said.
Amazon has shed little light on its plans for the chain of stores since it announced the deal. “We admire the quality standards of Whole Foods. And I think it would be crazy to change them,” said Jeff Wilke, chief executive of world-wide consumer at Amazon, at the Whole Foods town hall.
An Amazon spokesman declined to comment on the town hall. Whole Foods also declined to comment.
Mr. Mackey told his employees Friday that a year and a half ago he had a vision about the deal. “I dreamed that we merged with Amazon,” he said. “I woke up. I told my wife about it. And she said, ’That’s crazy.’”
In reality, Amazon informally looked at acquiring Whole Foods last year, according to people familiar with the matter. At the time, Amazon wasn’t certain Whole Foods had enough stores to move groceries on the scale the e-commerce giant wanted.
Albertsons Companies Inc., the nation’s No. 2 grocery-chain behind Kroger Co. , began talking to Whole Foods earlier this year, after activist investor Jana Partners LLC began a campaign in February urging Whole Foods to sell. Mr. Mackey, though, wasn’t interested in selling. Albertsons declined to comment.
About a month and a half ago, a consultant connected Amazon Chief Executive Jeff Bezos and Mr. Mackey, after the two companies had started talking about a potential deal, according to people familiar with the matter.
The deal came together after Mr. Mackey flew to Seattle with a group of Whole Foods executives. “We talked for 2½ hours. I think we could have talked for 10 hours,” Mr. Mackey said at the town hall.
read more: Wall St Journal
Amazon Finally Opening Warehouse in NYC
Amazon’s ability to quickly ship stuff to New Yorkers, from Kindle readers to kayaks, is about to get a major boost.
The Seattle-based web giant headed by billionaire Jeff Bezos is preparing to open a massive distribution hub in the Big Apple — the company’s first major facility in New York state — by summer’s end, The NY Post has learned.
The Amazon “fulfillment center” will span nearly 1 million square feet on the west shore of Staten Island, amping up Amazon’s access to millions of online shoppers in Manhattan, Brooklyn, Queens and Long Island, sources close to the situation said.
The bold move — coming on the heels of Amazon’s surprise $13.7 billion acquisition of Whole Foods announced Friday — marks a new chapter for Amazon in one of the company’s most crucial markets.
Longstanding squabbles with state officials over taxes had hampered Amazon’s New York expansion, but an even bigger roadblock has been the sky-high price of real estate, sources said.
“It’s taken them a while to get to New York, where you just can’t easily find 1 million square feet,” said Marc Wulfraat, president of MWPVL, a logistics consulting firm in Quebec.
But “if you look at where they have been investing lately, it’s all the major cities where they have a need to lower their shipping costs,” he added.
While terms of Amazon’s deal in Staten Island couldn’t be learned, it appears to have been a shrewd one, as the site had been eyed for an 82,500-seat NASCAR racetrack that got nixed because of political infighting.
Now, Staten Island pols are salivating over the group of warehouses being built by Matrix Development Group. Amazon’s 975,000-square-foot fulfillment center is expected to be the first of four warehouses on the site.
An announcement could come within two months.
France’s Carrefour in Amazon Spotlight
Carrefour SA, which pioneered the big-box supermarket combining food and general merchandise in the 1960s, has been stepping up efforts to fuse e-commerce and in-store shopping. Amazon.com Inc.’s $13.7 billion deal for Whole Foods Market Inc. raises the ante for the French retailer.
Carrefour this month named a new chief executive officer, turning to 44-year-old Alexandre Bompard, who has been leading electronics retailer Fnac Darty SA since 2011. His mission, which is taking on additional urgency in the wake of the Amazon deal, is to expand his new employer’s online presence while revamping its tired “hypermarkets.”
Such stores have gone from being Carrefour’s backbone to its Achilles heel, struggling with competition from Amazon as well as nimbler big-box operators like Societe d’importation Leclerc SA, discounters and higher-end grocers like Grand Frais.
“The hypermarket concept needs to be fundamentally rethought in terms of what it’s bringing to the market and in terms of differentiation from online,” said Joelle de Montgolfier, retail consultant at Bain & Co.
French retailers, with Carrefour among the leaders, have been more successful in e-commerce. Click-and-collect services have flourished in France for more than a decade, making the industry more advanced in that respect than the U.S. Carrefour has more than 500 sites where online shoppers can pick up their groceries, while Wal-Mart Stores Inc. started introducing the option in 2014.
Bompard takes over as new French President Emmanuel Macron, bolstered by a strong legislative majority, aims to loosen up the country’s rigid labor market and stimulate the digital economy.
At Fnac, Bompard wowed investors by steering the retailer in a high-tech direction and by leading the acquisition of appliance chain Darty. Together, Fnac and Darty’s e-commerce receive nearly as many visitors as Amazon in France, according to a study by Mediametrie and French e-commerce federation Fevad. Shares in Fnac Darty roughly tripled since its 2013 IPO, and digital prowess has spared it from going the way of Borders bookstores, which succumbed to Amazon.
read more: Bloomberg
Air Rights Available for NY’s Penn Station Replacement
Potential additional funding is available for the $1.6 billion train hall planned for the James A. Farley building, but the fate of the financing’s source remains up in the air.
The post office on Eighth Avenue has 1.5 million square feet of air rights that were not part of the deal reached between the state and the development team tapped to transform the building (Vornado Realty Trust, Related Companies and Skanska). State officials said that the financing of the train hall doesn’t depend on any air rights sales.
But on Monday New York senior Sen. Chuck Schumer mentioned the development rights alongside the “good chunk of federal funding” that is expected for the project.
“There will be private dollars. The air rights are going to bring in a whole lot of money,” Schumer said during a press conference at the newly opened West End Concourse.
He didn’t specify the amount expected, but previous estimates place the value of the air rights between $450 million and $500 million. In 2016, developers paid $292 per square foot on average for rights in Manhattan, according to TenantWise.
A 2005 version of the plan for Farley, known then as Moynihan Train Station, actually transferred a majority of the air rights across the street from the post office — where a Duane Reade now stands — for a residential building. That arrangement ultimately fell through. Vornado, which owns 8 million square feet of office space in the area surrounding Penn Station, seems like a potential buyer for the air rights that can be transferred to an adjacent site. Representatives for the company declined to comment.
read more: The Real Deal
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