Real Estate Daily News Buzz is designed to give news snippets to readers that our (yet to be award winning) editors thought you could use to start your day. They come from various business perspectives, real estate, government, the Fed, local news, and the stock markets to save you time. Here you will find the headlines and what the news buzz of the day will be.
Tuesday, the Dow Jones industrial average gained 117.65 points, or 0.7%, to 16,516.22. The Standard & Poor’s 500 index added 15.01 points, or 0.8%, to 1,938.68. The NASDAQ composite climbed 47.93 points, or 1%, to 4,685.92.
U.S. crude oil fell 97 cents, or 3.1%, to $30.44 a barrel in New York. Brent crude, a benchmark for international oils, fell 69 cents, or 2.2%, to $30.86 a barrel in London. Wholesale gasoline fell 2.8 cents to close at $1.085 a gallon, heating oil fell 2.5 cents to 99 cents a gallon and natural gas fell 13.9 cents to $2.257 per 1,000 cubic feet.
Cindy McCain’s Family, Hensley, Buys Tucson’s Golden Eagle - Phoenix-based Hensley Beverage Co. says it will acquire Tucson-based Golden Eagle Distributors in a merger of Anheuser-Busch InBev beer distributors. The deal — which includes Golden Eagle its non-alcohol products subsidiary, Spike Beverage Co. — is expected to be finalized in March, subject to standard approvals, Hensley and Golden Eagle said. Terms of the sale were not disclosed. Founded in 1955, Hensley is Arizona's biggest beer distributor. The company is led by chairwoman Cindy Hensley McCain, wife of Arizona Sen. John McCain. Besides Anheuser-Busch InBev beers, Hensley and Golden Eagle distribute local and regional craft beers, premium non-alcohol beverages and fine wines and spirits. Brands include Bud Light, Budweiser, Michelob Ultra, Goose Island and imports such as Stella Artois. Hensley says it will expand its sales and service of Anheuser-Busch InBev beverages across nearly all of Arizona through its retail customer base of 8,000 accounts and will become one of the largest beer distributors in the United States.
The Apartment Bubble Myth “Bubbles are difficult to spot a priori because it’s difficult to determine intrinsic value on a real-time basis. Therefore, it’s usually after the fact that it becomes apparent a bubble existed, and that’s why many people today incorrectly believe the apartment market is in a bubble. However, a careful examination of the current market relative to the last bubble will demonstrate that there is no bubble today.” (Multifamily Executive)
U.S. Real Estate 25% to 60% Overvalued: Analyst “Nearly a decade after the peak of the American real estate bubble, there’s no shortage of fear that we’ll repeat the whole nightmare again. For years now, economy watchers have fretted over the run up in student loan debt, while more recently the collapse in junk bond prices had analysts drawing parallels to what happened in the subprime mortgage market in 2008. But what if the next crisis isn’t just similar to the last one, but a word-for-word rip-off?” (Fortune)
Kohl’s Considers Going Private “Department stores have been under siege for decades, but lately their fortunes have hit a new low that could spark a wave of deal making that could sweep up companies such as Kohl’s Corp. Kohl’s KSS, a national department-store chain with roughly 1,200 stores, is debating whether to pursue more drastic action, such as taking itself private or breaking up the company, according to a person familiar with the situation. The discussions are preliminary and directors might opt not to explore such a strategy.” (MarketWatch)
Is 2016 the Year of the Next Recession? “Does the New Year’s market slide presage recession in 2016? That’ll be the chatter of this week, as analysts try to make sense of the wreckage. The majority of economists don’t see recession in the cards. But the majority of economists are usually wrong. So let’s tally the tea leaves.” (Fortune)
Apartment Vacancies Rise for the First Time in Six Years: Why? “Bozzuto admits he is concerned that so much of the new development is in luxury projects. Millennials and downsizing baby boomers alike demand the latest and greatest amenities, but there are a limited number of them who can afford all the bells and whistles. Job growth has been improving, but income growth has not.” (CNBC)
Retailer Joyce Leslie Files for Chapter 11 Bankruptcy “Joyce Leslie, a 69-year-old women’s clothing retailer with 47 stores in the New York metropolitan area, has filed for Chapter 11 reorganization. The company lacks a “sophisticated e-commerce platform” to compete in today’s market, it said in court papers. The family owned business opened in 1947 by Julius Gewirtz and his wife, Hermine.” (New York Post)
Midtown Manhattan Office Vacancies to Rise as Large Spaces Empty “Midtown Manhattan, once the pinnacle of U.S. office markets, is facing a jump in large, empty work spaces as new towers open and tenants spread out across the city, including outer boroughs that businesses once shunned. By 2017, about 21 million square feet (1.2 million square meters) of Midtown’s Class A offices, or about 14 percent of the market, will probably be available, Keith DeCoster, director of U.S. real estate analytics for brokerage Savills Studley Inc., estimated.” (Bloomberg)
Who Would Foot the Bill for Cuomo’s Javits Center Plan? “Gov. Andrew Cuomo’s announcement last week of a planned $1 billion expansion of the Jacob K. Javits Convention Center on Manhattan’s West Side promised jobs and economic activity, but neglected to mention how it will be funded. And the debt on a previous renovation is not scheduled to be retired for another 30 years. The 1.2 million-square-foot expansion would likely bump Javits well into the nation’s top 10 convention centers by size.” (Crain’s New York Business)
Why Verizon’s 48 Data Center Portfolio Will Likely be Broken Up “For starters, Verizon has many more data center assets than 48, Rick Drescher, managing director of Technical Services at Savills Studley, tells GlobeSt.com. Which ones it plans to include in the portfolio is an open question, he says. ‘Data centers can become obsolete very quickly. I would guess that most of the assets Verizon is planning to market are not the kind of assets that a company like, say, Digital Realty would want.’” (GlobeSt.)
Real Estate Fundamentals in “Great Shape,” Says Analyst “Chris Lucas, a REIT analyst and senior managing director at Capital One, joined REIT.com for a video interview at REITWorld 2015: NAREIT’s Annual Convention for All Things REIT at the Wynn Las Vegas. Real estate fundamentals are in ‘great shape,’ according to Lucas: New development is under control, and demand remains fairly consistent across all the property types.” (REIT.com)
As oil plunges, energy companies cut jobs, postpone projects — The world’s biggest oil companies are slashing jobs and backing off major investments as the price of crude falls to new lows — and there may be more pain to come. Companies like BP, which said Tuesday it is cutting 4,000 jobs, are slimming down to cope with the slump in oil, whose price has plummeted to its lowest level in 12 years and is not expected to recover significantly for months, possibly years. California-based Chevron said last fall that it would eliminate 7,000 jobs, while rival Shell announced 6,500 layoffs. And it’s not even the big producers that will be affected most, but the numerous companies that do business with them, such as drilling contractors and equipment suppliers.
Oil keeps falling. And falling. How low can it go? — The price of oil keeps falling. And falling. And falling. It has to stop somewhere, right? Even after trending down for a year and a half, U.S. crude has fallen another 17% since the start of the year and is now probing depths not seen since 2003. “All you can do is forecast direction, and the direction of price is still down,” says Larry Goldstein of the Energy Policy Research Foundation, who predicted a decline in oil in 2014. On Tuesday the price fell another 3 per cent to $30.44 a barrel, its lowest level in 12 years. Oil had sold for roughly $100 a barrel for nearly four years before beginning to fall in the summer of 2014. Many now say oil could drop into the $20 range.
Gov’t to announce new safety relationship with automakers — Using the aviation industry as a model, automakers have agreed to work on fundamental changes in their relationship with the U.S. government in order to spot safety trends before they become problems and get new technology to the marketplace faster, a top safety regulator and a person familiar with the discussions said Tuesday. The process of issuing government regulations to correct safety problems takes too many years, Mark Rosekind, head of the National Highway Traffic Safety Administration, told reporters at the Automotive News World Congress in Detroit. By the time the regulations are issued, changes in technology make them out of date, he said. Rosekind alluded to the possibility that the auto industry will agree to safety culture changes and technology voluntarily rather than waiting for the arduous government rule-making process.
Starbucks expects China to surpass US as its largest market — Starbucks said it expects China to eventually overtake the U.S. as the coffee chain’s largest market. The Seattle company said it is on track to open 500 stores in China this year. It expects to have a total of 3,400 stores in China by 2019. Starbucks currently has 2,000 stores in China, making it the company’s second largest market after the U.S. The company has more than 12,000 stores in the U.S. that it either operates or licenses to others.
Senate rejects Rand Paul’s ‘Audit the Fed’ legislation — The Senate on Tuesday blocked legislation calling for tougher audits of the Federal Reserve, rebuffing an attempt by Republican presidential candidate Rand Paul to give lawmakers greater oversight of the central bank’s moves on interest rates. The 53-44 vote fell short of the threshold to overcome a Democratic filibuster. But the Kentucky Republican, who is seeking the GOP’s nomination for president, was joined by independent Sen. Bernie Sanders of Vermont, a candidate for the Democratic nomination for president who occupies the opposite end of the political spectrum from Paul. The measure calls for the Government Accountability Office, a watchdog agency for Congress, to scrutinize the Fed’s monetary policy and offer recommendations to lawmakers on ways to address any perceived problems.
US job openings rose in November; hiring, quits rise — U.S. employers advertised slightly more jobs in November as overall hiring edged up and more Americans quit their jobs in signs of a healthier environment for workers. The Labor Department said Tuesday that the number of job postings rose 1.5% to a seasonally adjusted 5.4 million. That figure has slipped after peaking at a record 5.7 million in July, but stands 11% higher than a year ago.
‘Fast food’ becoming a dirty term in restaurant industry — Fast food is becoming a dirty term. As smaller players challenge fast-food chains like McDonald’s and Burger King, they’re fighting to set themselves apart by describing their food as “fast-casual,” “fine casual,” “fast crafted” and even “fan food.” That’s even though they follow the same basic format: People standing in a line to order and pay a cashier for their food. The new phrases are being embraced as companies try to position their offerings as fresher or higher quality to distance further their menu items from the stigma that fast food is greasy, cheap and unhealthy. Even traditional fast-food chains acknowledge they have an image problem. McDonald’s Corp. has said it wants to transform into a “modern, progressive burger company.” And Yum CEO Greg Creed has noted the need for the company’s Taco Bell, KFC and Pizza Hut chains to redefine the meaning of fast food, which is seen as industrial and impersonal. In the meantime, others are cooking up phrases to telegraph that they are anything but fast food.
MetLife mulls spinoff or IPO of life insurance business — MetLife says it plans to carve off its U.S. life insurance business via a sale, spinoff or an initial public offering as the parent company challenges harsher regulatory oversight. The New York company said the potential stand-alone business would have about $240 billion in total assets and represent about 20 per cent of its operating earnings. MetLife Inc. would keep its property-casualty and other businesses under the proposed plan. MetLife has been challenging its designation as a “systemically important” entity that’s deemed “too big to fail,” and therefore subject to greater government oversight and, MetLife says, exorbitant costs.
US border agents begin inspecting US-bound trucks in Mexico — U.S. border authorities have started working on Mexican soil to inspect trucks entering the U.S. as part of a new enforcement program intended to reduce congestion and speed cargo crossings. The effort was launched Tuesday at a facility in Tijuana, Mexico, with U.S. Customs and Border Protection personnel looking over a shipment of strawberries headed to San Diego. Mexican authorities are also staffing the facility. Mexico initially resisted letting U.S. officials carry guns as part of the change. In April, Mexican lawmakers approved changes to the country’s firearms law to permit foreign customs and immigration officials to be armed on the job.
PC sales fall for fourth consecutive year — The PC industry had another down year in 2015, as global shipments fell for the fourth-consecutive year despite new models and the release of Microsoft’s Windows 10 operating system. Even holiday sales had a limited impact on shipments during the final months of 2015. Analysts at the Gartner research firm estimate manufacturers shipped 288.7 million personal computers in 2015, down 8 per cent from 2014. Gartner says Apple was the only major computer maker to see an increase in global shipments last year, while Lenovo, HP, Dell and Asus all saw declines.