Situs Newswatch 9/14

Trump Claims Fed Favors Clinton

Boston Fed President Eric Rosengren favors gradual interest rate hikes, adding that waiting too long risks some asset markets like commercial real estate to “become too ebullient.”

But, Republican Presidential nominee Donald Trump claims Fed Chief Janet Yellen is instead doing what President Obama and Hillary Clinton want by keeping interest rates low.

“Yellen and central bank policymakers are very political, and Yellen should be ashamed of what she’s doing to the country,” Trump told CNBC, adding, “the Fed is not even close to being independent.”

“Open discussion on how the Fed is approaching the crisis is important” says Situs Executive Managing Director Warren Friend. “The Fed tends to function more as a closed system, and this can tend to maintain a stalled culture.  As evidence, it was Paulson’s urging on the items that needed to be done that moved the Fed to “new” approaches.  This is the typical ‘reaction at a precipice’ that can turns people into celebrities or goats.”

By keeping interest rates low, the Fed has created a “false stock market,” Trump said rates are being kept lower to bolster Obama’s legacy. “Any increase at all will be a very, very small increase because they want to keep the market up so Obama goes out and let the new guy/girl raise interest rates … and watch what happens in the stock market.”

Situs’ Friend explains, “In the vein of, what Trump meant to say, the history of the Federal reserve being able to adjust its course in anticipation of the next stages of the business cycle have been abysmal.  And this is where the ‘politics’ of a decision may affect the Fed’s thinking; how many times in the past 50 years have we heard that the Fed does not want to be responsible for influencing the outcome of an election.  This ‘action’ of no action still influences the economy;  and the highly respected blog 538 tells us that all elections since the end of the depression have been determined based on the current economic environment.”

American savers are the worst hit by the Fed’s easy monetary policies, Trump said. “The ones who did it right — they saved their money [and] they cut down on their mortgages, … and now they’re practically getting zero interest on the money.”

As a real estate businessman, Trump said: “I love low interest rates,” but for the good of the nation, rates should be higher.

Friend reminds us, as Bill Clinton was fond of saying:“It’s all about the economy stupid!”

JP Morgan-Chase CEO Jame Dimon Says Fed Should Hike

Jamie Dimon says the Fed should just raise rates already.

It’s time to raise U.S. interest rates, says J.P. Morgan’s top dog, Jamie Dimon.

The prominent executive of the U.S.’s largest bank, speaking at the Economic Club of Washington on Monday, urged the Federal Reserve: “Let’s just raise rates.”

“The Fed finds itself in a pickle in considering when to push up short-term interest rates because of the uncertain effect it might have on the economy and financial markets in the short and long term,” says Ken Riggs, President of Situs RERC.  “Further, this uncharted territory is going to create volatile consequences for the markets, and markets do not like uncertainty.  However, GDP and inflation have stagnated and it is getting to the point where they have to raise rates and hope the markets are ready for the adjustment.”

Dimon said his own personal view is that a 25-basis-point increase would be merely “a drop in the bucket,” for Wall Street, implying that the market shouldn’t react negatively about the end of what has been a protracted period of easy-money policies. One basis point is equal to one hundredth of a percentage point.

Situs’ Riggs says, “There are pros and cons for Commercial Real Estate should the Fed raise short-term interest rates. On the one hand, rising interest rates mean that the cost of capital will increase and borrowers will have to pony up more money in interest if they want to invest in CRE. On the other hand, interest-rate hikes typically signal that the economy is in better shape which will lead to an increased demand (and subsequently higher pricing) in CRE. However, even if the Fed decides to raise interest rates, it is important to remember that rates will still be at historic lows and the availability of capital for CRE investment will be plentiful.”

The Wall Street Journal reports most Fed officials, lacking a strong consensus for action a week before their next policy meeting, are leaning toward waiting until late in the year before raising short-term interest rates.

Treasuries Catching a Cold?

When Japanese, European, and U.K. government bonds sneeze, U.S. Treasuries catch a cold?

Investors have been eschewing some longer-dated government debt as they fret over the willingness — and ability — of central banks to continue to fan economic growth through unconventional monetary policy such as bond purchase programs.

The skepticism helped send yields on Japanese government bonds and German bunds spiking last week, and on Friday the sell-off reached the U.S. Treasury market, where the benchmark 10-year note posted its worst two-day performance since July as yields jumped 14 basis points.

The rout has sparked a flurry of analyst commentary as the higher U.S. yields haven’t been accompanied by changing expectations of Federal Reserve policy. Instead, analysts at  JPMorgan Chase & Co. suggest the sell-off in U.S. government debt is taking place as higher yields in Japan and Europe make Treasury bonds less attractive by comparison.

“From a medium-term perspective, we are beginning to think the risks around rate levels have begun to shift, for a number of reasons,” JPMorgan analysts led by Jay Barry wrote in a note published late on Friday. “First, developed market central banks have disappointed again, highlighted by [last] week’s lack of action from the European Central Bank. Second, as a corollary, Treasuries no longer appear as attractive to foreign investors compared to home currency bonds as they did earlier this year.”

read more: Bloomberg

Wells Fargo May Have Company on Bogus Account Charges

The news that Wells Fargo secretly created hundreds of thousands of accounts generated outrage across the country.

Wells Fargo said “we regret and take responsibility for any instances where customers may have received a product that they did not request.” It’s refunded $2.6 million, or an average of $25, to customers who were impacted.

But a look at a database of customer complaints finds that issues of account openings and closings are not limited to that bank — raising at least the possibility the practice could go on elsewhere. The database, from the Consumer Financial Protection Bureau, shows over 30,000 complaints on the issue of “account opening, closing or management.”

The complaints are against lenders big and small, and not surprisingly, there are thousands of complaints lodged against the major institutions. Under the “account opening, closing or management” heading, Bank of America,  had the most number of complaints, at 4,901, followed by Wells Fargo at 4,450, J.P. Morgan Chase at 3,169 and Citi , at 2,260, a MarketWatch analysis finds.

Representatives of Bank of America and Citi declined to comment, and J.P. Morgan didn’t return a message.

read more: Marketwatch 

We’re in the Money

Incomes in the U.S. surged in 2015, delivering the first increase for family households in eight years.

The median annual household income—the level at which half are above and half are below—rose 5.2% from a year earlier, or $2,800, after adjusting for inflation, to $56,500, the Census Bureau said Tuesday.

The boost leaves household incomes around 1.6% below the 2007 level, before the last recession began.

The report also said the official poverty rate in 2015 was 13.5%, down 1.2 percentage points from 14.8% in 2014.

Swiss pension fund to buy Normandy’s Chelsea office building for $150M

The U.S. real estate arm of Swiss pension fund AFIAA is in contract to pay $150 million for a 12-story Chelsea office building, just three years after Normandy Real Estate Partners rescued the then-vacant property from foreclosure, sources told The Real Deal.

Normandy TRData LogoTINY and partners Waterbridge Capital and Japan-based NTT Urban Development have been in the process of giving the 138,000-square-foot Class A property at 125 West 25th Street a $20 million upgrade. Indoor cycling fitness startup Peloton signed a lease late last year for 40,750 square feet across the top four floors of the building.  Then, earlier this month, the company tacked on an extra floor, growing to roughly 52,600 square feet total.

The all-cash deal is slated to close for north of $1,000 per square foot. The $150 million price is nearly triple the $54.5 million that Normandy paid for it at a foreclosure auction in 2013.

Eastdil Secured’s Adam Spies and Doug Harmon represented the sellers. Broker Samuel Lefkowitz is brokering the deal. They declined to comment, as did Normandy. A representative for AFIAA could not be reached.

The Swiss investors have been increasingly allotting funds for foreign real estate purchases, in the U.S. and elsewhere. AFIAA began expanding into the U.S. in 2005. The real estate purchase is AFIAA’s first in New York City, though the fund has made acquisitions in Philadelphia and Washington, D.C.

read more: The Real Deal

At a Rebuilt World Trade Center, a Friendship Fades

Some of the biggest names in business and politics gathered last month at the Westfield World Trade Center’s opening gala. They dined at downtown’s new Eataly and watched singers John Legend and Leslie Odom Jr. perform in the spacious transportation hub named the Oculus.

There was one notable exception: Larry Silverstein, the private developer most closely associated with the rebuilding of the World Trade Center complex and owner of two of the three office buildings on the site today.

Mr. Silverstein in 2001 was close friends with Frank Lowy, the Westfield Corp. chairman when they decided to jointly bid on the World Trade Center. They took control less than two months before the Sept. 11 terrorist attack destroyed it.

One of the casualties in the rebuilding process was Messrs. Silverstein and Lowy’s friendship. Their interests, which were aligned when they bought the complex, diverged during the rebuilding.

Mr. Lowy, 85 years old, who built his company in Australia before taking it global, expressed regret in his 2015 biography, “A Second Life,” over how the friendship deteriorated. By the end of the rebuilding, he said, “nothing was left of what we had.”

He and Mr. Silverstein remain key stakeholders in the rebuilt site, and they say their relationship remains cordial.

New plans were revealed for the performing-arts center planned for Ground Zero, nearly 15 years after the Sept. 11, 2001 terrorist attacks on the World Trade Center. Photo: Luxigon

In an interview, Mr. Silverstein played down their disagreements, saying he didn’t attend the Westfield opening because he was in Europe. “Stuff happens all the time,” he said. “You always have issues that arise and that have to be handled.”

read more: Wall Street Journal

Why Renters Could Have a Bigger Voice in the 2016 Election

Renters have historically held little sway in federal elections because they vote in such small numbers. But as the ranks of U.S. renters swell and a bigger share of them are voting, that could be changing.

Renter votes increased 49% between 1996 and 2012, while owner votes only increased 23%, according to an analysis of U.S. Census data by Apartment List, a rental listing website.

Nonetheless, just 22% of votes cast in the 2012 election were by renters, according to the analysis. But as the renter population grows, Apartment List estimates that one-third of eligible voters in this election could be renters. Based on historical voting patterns, renters would likely cast about one-quarter of the votes—a small but meaningful increase from the last election.

Historically, renters are said to vote in smaller numbers because they are more transient than owners, so tend to be less invested in the policies that help shape their communities.

Apartment List found that even controlling for length of residence, renters were still less likely to vote.  An owner who has been in his or her home for one to two years is still more likely to vote than a renter who has lived there for more than five years.

Renters are also less likely to vote because they tend to be younger, and that age cohort is notoriously difficult to get to the polls. In this election, millennial voters are for the first time poised to match baby boomers as a share of the electorate.

Some of the jump in renter participation in the previous two elections was likely due to a surge of younger voters who came out for Barack Obama in 2008, and to a lesser degree in 2012. There was a slight drop-off in the share of renters who voted between his election in 2008, when 52% of renters voted, and 2012, when 49% of renters voted.

There are good reasons why policy makers have focused on encouraging home ownership. Historically, owning a home has been the best way for middle-class families to build wealth and save for retirement. But affordable-housing advocates argue that has come at the expense of ignoring a growing rental crisis.

“You notice in [Hillary] Clinton and [Donald] Trump’s stump speeches, they don’t talk about renters very much. Everyone talks about the American dream and home ownership,” said Andrew Woo,  director of data science at Apartment List.

read more: Wall Street Journal

Where to Stay for $39 a Night in New York City? 

It may have a great view of Manhattan, but this vacation rental sits in parking spaces in Long Island City, Queens, and has no bathroom. And it has a bit of that old car smell.

Still, Jonathan Powley’s listing on Airbnb does have its perks. The views really are fantastic, and at $39 a night ($49 on Fridays and Saturdays), visitors to New York City would be hard pressed to find a cheaper accommodation. The rental, though, is actually a decommissioned yellow cab with a bed in the back.

“People spend anniversaries in there,” Mr. Powley, who lives in Long Island City, said. “It’s very romantic.”

Mr. Powley said the taxi and the motor homes he had previously listed on the vacation rental website were in demand. The taxi was booked for most nights that he made it available, he said, and it had attracted visitors from as far as Singapore and as near as Carroll Gardens in Brooklyn.

The price is the primary appeal of the taxi, some guests said, because even low-end hotels in the city can cost hundreds of dollars a night. Mr. Powley’s offering represents a cheap refuge, however unusual, for the cash-conscious traveler.

“It’s fun to be able to say that you slept in a cab,” Tabitha Akins, 29, a former guest, said. “On purpose anyway.”