Commercial Real Estate: Investors give Trump tax cuts a sitting ovation

Investors give Trump tax cuts a sitting ovation

Situs RERC institutional survey respondents are mildly enthusiastic about the impact of the tax cuts passed last year by Congress – at least in the short term.

In 2Q 2018, Situs RERC began collecting data from institutional investors about the timing and magnitude of tax reform on the economy, financial markets and commercial real estate (CRE) market. Investors anticipated that there would be little (if any) impact of the tax cuts on CRE, with the largest share of respondents (43%) saying that any effect would be felt within six months. Only 7% felt that the tax cuts would have an impact on the CRE market more than a year out.

As the effects of tax reform became more evident, institutional investors became somewhat more optimistic about the magnitude of its impact on the CRE market. Average ratings increased from 0.01 to 1.14, on a scale of -5 (very negative effect) to +5 (very positive effect) between 2Q and 3Q. However, an even greater share of investors in 3Q believed the impact would only be short-lived. Half of participants thought that the positive effects of the tax law would be felt within six months and none of the respondents felt that it would be felt more than a year out.

The results were similar for the respondents’ predictions about the impact of the tax cuts on financial markets and the economy as a whole.

Regarding financial markets, the average rating for the impact of tax cuts almost doubled from 2Q to 3Q (from 0.79 to 1.43), but investors, in general, still anticipated only a small positive effect. In 3Q, even fewer investors believed that there would be a long-term effect of the tax cuts on the financial markets; no respondent believed that there would be an impact beyond 12 months.

As with the financial markets, investors became increasingly likely to believe that the tax cuts would only have an impact on the economy in the short term. While 50% of the 2Q respondents predicted an impact on the overall economy within six months, 75% of the 3Q respondents predicted an impact in the same time frame. Unlike survey responses for the CRE and financial markets, investors were somewhat more likely to say that tax cuts would impact the economy more than a year out (12%). The 2Q and 3Q average ratings for the impact of the tax cuts on the overall economy were similar at 0.93 and 1.00, respectively.

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Retail carnage continues despite strong economy

Despite the fact that the economy is in robust health and U.S. retail sales this holiday season are expected to increase by 4.8 percent over 2017, some retailers are still floundering. They have a lot riding on this upcoming holiday shopping season.

Following a record year of retail bankruptcies in 2017, the carnage continues with more bankruptcies this year as consumer shopping habits have changed and the sector feels the impact of some brick-and-mortar retailers that expanded too aggressively.

Meanwhile, other retailers that have adapted and are flourishing.

“A lot of what we’re seeing is the haves and have-nots,” says Robert Schulz, managing director and U.S. retail sector lead at S&P Global Ratings. “We’re in a very good economic environment. We have a relatively favorable view of the prospects for this holiday. Retail sales are growing, but you still have a bunch of companies struggling.”

Read more: National Real Estate Investor


Chinese exodus from U.S. real estate accelerates with sale of L.A. site

Chinese conglomerate Dalian Wanda Group has agreed to sell a glitzy development site in Beverly Hills, Calif., the latest sign that Chinese companies are bailing out of U.S. real estate after years of loading up on these properties.

A venture between London-based real-estate firm Cain International and Alagem Capital Group has agreed to purchase the eight-acre site, Cain’s chief executive officer, Jonathan Goldstein, said. The buyers have agreed to pay more than $420 million, according to a person familiar with the matter.

Brokers say the property, an empty lot that Wanda dubbed as One Beverly Hills, is one of the premier development sites in the Los Angeles area. The Wilshire Boulevard parcel is located near Rodeo Drive and Century City, and it already has entitlements for hotel and condominium development.

Wanda purchased the eight-acre parcel in Beverly Hills in 2014 for $420 million during a global expansion spree. The company had planned to develop a luxury residential building and boutique hotel on the site, but feuds with a local union and contractors stalled progress. Wanda put the property up for sale early this year as its debt mounted.

Based in Beijing, Wanda owns cinemas, real estate and many other businesses in China. In recent years, the company has acquired interests in U.S. real estate, including a controlling stake in Vista Tower, a skyscraper in Chicago currently under development.

Read more: Wall Street Journal


Amazon deal will disrupt plans for affordable housing in Long Island City

Amazon’s plans to expand into Long Island City may cost Mayor Bill de Blasio — and New York City — approximately 1,500 units of affordable housing.

Two sites that will house the future offices of the e-commerce giant were originally intended for residential development, before Amazon chose them in a nationwide contest for its new headquarters.

Most — if not all — of that intended housing is now off the table.

“The fact that massive public subsidies are helping eliminate affordable housing units is just the latest reason this bad deal needs to be torn up and thrown away,” said state Sen. Michael Gianaris, who represents Long Island City.

Plaxall, which owns land around the Anable Basin, was prepared to ask New York City for permission to build up to 4,995 new homes on a 14.7-acre site on the East River, 1,250 of which developers would have set aside for low- and middle-income New Yorkers. Most of that site will now be subsumed into Amazon’s office campus.

Read more: Politico


Why executives are spending millions to buy their banks’ stock

A significant number of bankers and directors view their companies’ stock as a bargain.

Insiders at more than 50 publicly traded banks have collectively spent nearly $10 million buying stock since early October, based on data compiled by FIG Partners and S&P Global Market Intelligence.

The moves follows a period where bank stocks have been pummeled; the KBW Nasdaq Bank Index has fallen by 9% in the last three months as investors react to sluggish loan growth and rising deposit costs.

A rise in insider purchases comes at a time when many banks are also authorizing repurchase programs. Both efforts are viewed as ways to communicate to investors that management teams and boards believe stock prices are undervalued.

Read more: American Banker


Nike debuts high-tech, immersive store format in New York

Nike’s newest retail concept is a high-tech, experiential showcase on Manhattan’s Fifth Avenue.

The six-level, 68,000-square-foot Nike NYC, dubbed a “House of Innovation,” combines innovative physical services and digital features via the Nike app to provide a personalized and futuristic shopping experience.

Nike is debuting several new tech features in New York, including “shop the look.” By scanning a QR code on a mannequin, shoppers can browse every single item on the display, check to see if their size is available in-store or online and see available colors. Then with just a tap, they can request for select products to be sent to a fitting room of their choice or receive the items from a store athlete at a designated pick-up spot.

Also, NikePlus members can skip the checkout line and pay for their purchases from within their Nike App using stored or new payment methods. Members can scan the item(s) of their choice, check out like a traditional Nike App purchase and receive the payment receipt within the app. Special “instant checkout” stations are positioned throughout the store so that shoppers may bag products if they choose before leaving. And if shoppers don’t want to haul their bags around the city, they can request to have their in-store purchases delivered to their home, hotel, office or any location of their choice in Manhattan, within the same day.

Read more: Chain Store Age


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