Real Estate Daily News Buzz April 5, 2016
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.
Monday, the Dow Jones industrial average fell 55.75 points, or 0.3%, to 17,737. The Standard & Poor’s 500 index fell 6.65 points, or 0.3%, to 2,066.13. The NASDAQ composite index was down 22.75 points, or 0.5%, to 4,891.80.
Benchmark U.S. crude fell $1.09, or 3%, $35.70 a barrel on the New York Mercantile Exchange. Brent crude, used to price international oils, lost 98 cents to $37.69 a barrel in London. In other energy markets, heating oil fell 4 cents to $1.089 a gallon, wholesale gasoline futures fell 2 cents to $1.377 a gallon and natural gas rose 4 cents to $1.998 per thousand cubic feet.
Starwood Goes Back to Marriott “Marriott might have come out on top, but the price tag on the merger is nothing to sneeze at. Fitch Ratings announced that it continues to see positive ratings momentum for the company—but that could change should Marriott find itself in another bidding war. ‘Marriott’s conservative and creditor-friendly approach to structuring and financing its offer were considered in our Positive Outlook. Marriott had limited cushion within our rating sensitivities to increase leverage much beyond what was contemplated in its revised offer,’ Stephen Boyd, senior director with Fitch Ratings, told Commercial Property Executive. Both Starwood and Marriott are urging their respective shareholders to give the proposed merger the thumbs-up in the form of an affirmative vote during a special meeting scheduled for April 8.” (Commercial Property Executive)
Federal Housing Officials Warn Against Blanket Bans of Ex-Offenders “Julián Castro, the HUD secretary, is expected on Monday to announce guidance that details his agency’s interpretation of how the fair housing law applies to policies that exclude people with criminal records, a group that is not explicitly protected by the act but falls under it in certain circumstances. Federal officials said landlords must distinguish between arrests and convictions and cannot use an arrest to ban applicants. In the case of applicants with convictions, property owners must prove that the exclusion is justified and consider factors like the nature and severity of the crime in assessing prospective tenants before excluding someone.” (The New York Times)
PulteGroup CEO plans retirement, as founder seeks change — Richard J. Dugas Jr. will retire next year, a decision the homebuilder attributes in part to a leadership change demanded by the company’s founder and grandson. Dugas has served as CEO since 2003 and chairman of the company’s board since 2009. The Atlanta-based company said Monday that Dugas decided to retire in May 2017, due in part to the actions of company founder Bill Pulte and his grandson, Jim Grosfeld, who was appointed to the board at the founder’s request. PulteGroup Inc. said Bill Pulte, who founded the company in 1950, and Grosfeld had recently demanded an immediate CEO change and a different direction for the company.
Myopic, cheap landlords getting left behind in real estate market “A big challenge for Phoenix’s commercial real estate market has been older and sometimes smaller space that has been empty and without a lot of interest because of smaller parking availability or designs, layouts and locations that are not desirable to tenants and their workers. Property owners and developers who are changing the script and investing in improvement such as open floor plans, larger and improved windows and amenities that are more likely to draw interest than landlords waiting on a tenant to come to them with a plan, said Mike Beall, executive managing director for Cushman & Wakefield.” (Phoenix Business Journal)
Construction Spending Edges Downward “U.S. construction spending dropped 0.5 percent in February compared with January, according to the Census Bureau on Friday. The monthly decline was full due to a drop in nonresidential construction spending, which was off 1.4 percent, while residential construction gained 0.9 percent. Most categories of nonresidential construction spending were down for the month, but not all. In fact, there was some strength in office construction for the month, which was up 3.8 percent, the most of any nonresidential category. Other nonresidential gainers for the month were lodging, health care and transportation.” (Multihousing News)
Office Property Market Posts Strong First-Quarter Growth “The U.S. office market grew at a strong pace in the first quarter, an indication of strength in the economy as employers continue to expand. The amount of occupied office space grew by 10 million square feet in the quarter, and 45 million square feet over the prior 12 months, the strongest yearlong period since 2007, according to real-estate research firm Reis Inc.” (The Wall Street Journal)
Landlords to Enjoy Greater Negotiation Leverage for Big Block Office Leases in U.S. “According to CBRE’s research of the largest U.S. office markets, commercial tenants in most markets are unlikely to see an up-tick in the number of large block options during the balance of 2016. In fact, just three of the 21 markets surveyed indicated expectations for an increase: suburban Houston due to softness in the energy industry, and suburban Dallas/Ft. Worth and downtown Seattle due to active construction pipelines. By comparison, the number of blocks increased in six markets during the previous six months. Houston is the only market expecting an increase in large block availabilities in both Class A and Class B space.” (World Property Journal)
Staples Finds New Use for Its Stores: Office Space “Staples Inc. has found a new use for some of its roomy office-supply stores: make parts of them into offices. The retailer is joining other chains including Sears Holdings Corp. and Macy’s Inc. that have carved off sections of their stores to other companies in an effort to improve store productivity and to give shoppers, increasingly tempted to buy online, another reason to stop by.” (The Wall Street Journal)
Yardi Matrix: Dallas’ Outsize Growth “Rapid growth is the theme for the multifamily market in Dallas. Employment gains in diverse industries are driving demand for units. That, in turn, is producing rent increases and new development across the Metroplex. Last year’s strong hiring in the hotel, restaurant, retail and transportation industries has encouraged rent growth in the working-class Renter by Necessity segment, while the metro’s expanding high-paying industries have sustained strong absorption of luxury units. As a result of this diversification, Dallas will not be as affected by the oil price collapse as some of its neighbors. The metro is in fact expected to achieve net job gains in 2016 and outperform the state average.” (Commercial Property Executive)
More rent-controlled buildings are being demolished to make way for pricier housing “Looking to cash in on a booming real estate market, Los Angeles property owners are demolishing an increasing number of rent-controlled buildings to build pricey McMansions, condos and new rentals, leading to hundreds of evictions across the city. More than 1,000 rent-controlled apartments were taken off the market last year — a nearly threefold increase since 2013, according to a Times analysis of housing data. Evictions from such units have doubled over the same time. Across L.A., more than 20,000 rent-controlled units have been taken off the market since 2001, city records show. “ (The Los Angeles Times)
How secret offshore money helps fuel Miami’s luxury real-estate boom “Mossack Fonseca specializes in creating offshore shell companies for the world’s richest and most powerful people. The firm’s leaked records offer a glimpse into the tightly guarded world of high-end South Florida real estate and the global economic forces reshaping Miami’s skyline. And MF’s activities bolster an argument analysts and law-enforcement officials have long made: Money from people linked to wrongdoing abroad is helping to power the gleaming condo towers rising on South Florida’s waterfront and pushing home prices far beyond what most locals can afford.” (Miami Herald)
