Real Estate Daily News Buzz February 1, 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.

The Dow Jones industrial average surged 396.66 points, or 2.5%, to close at 16,466.30. The Standard & Poor’s 500 index rose 46.88 points, or 2.5%, to 1,940.24, as more than 480 of its component stocks rose. The NASDAQ composite index jumped 107.28 points, or 2.4%, to 4,613.95.

Benchmark U.S. oil added 40 cents, or 1.2%, to $33.62 a barrel in New York. Brent crude, a benchmark for international oils, gained 85 cents, or 2.5%, to $34.74. In other energy trading, wholesale gasoline picked up 2.4 cents, or 2.2%, to $1.103 a gallon. Heating oil added 2.4 cents, or 2.3%, to $1.055 a gallon. Natural gas rose 11.6 cents, or 5.3%, to $2.298 per 1,000 cubic feet.

Legg Mason Inks Three Deals in Bid to Diversify Revenue Stream “Legg Mason Inc. has signed three new deals in less than 24 hours in a continuing bid to bolster its stable of money management businesses. It is acquiring the equivalent of a 20% stake in Precidian Investments as the Baltimore-based firm tries to expand its lineup of ETFs and bought a majority stake in real-estate specialist Clarion Partners LLC, acquiring 83% of the business for $585 million.” (Wall Street Journal)

Hey, Hedge Fund Managers, You Should Have Started a Mortgage REIT “Executives who run mortgage real estate investment trusts have it good. Many probably don’t need to worry about losing their jobs, closing their funds or taking a pay cut, even after a terrible 2015, when a Bloomberg index of 41 companies plunged almost 20 percent. Including reinvested dividends, the firms lost about 10 percent collectively. Mortgage-REIT executives are uniquely positioned when their firms fall on hard times.” (Bloomberg)

Farm to Market: Taking Stock of the Agricultural Land Grab “Individual investors, for the most part, have stayed away from the big agricultural bets being placed on global food demand increasing over time, driving up land prices even further. Institutions, like the mega pension fund TIAA-CREF, the super-wealthy investor set and overseas agricultural giants are still snapping up land this year, and potentially scouting what will seem like bargains years from now as farm real estate values have started to decline.” (CNBC)

What Does Real Estate Have to Do with Oil? “While the U.S. and OPEC continue production and oil remains around $30 per barrel, OPEC countries, whose main export is petroleum, are facing very difficult consequences. Since oil is the predominant stream of revenue in OPEC countries and it is now providing less than a third of the revenue to governmental budgets, these countries are, for the first time in years, operating at a deficit and facing rising unemployment.” (Seeking Alpha)

Powerball Jackpot: Powering Real Estate? “Powerball jackpots could power a lot of investment… and these days, commercial real estate is one of the more promising investment categories. With that in mind, our analysts at CrediFi set out to have some fun and craft three alternative investment approaches, factoring in that the winning tickets were sold in California, Florida and Tennessee. Of course, these may be of use to others as well, whether using approaches centered on (illiquid) building-level debt and equity, or more liquid capital markets securities.” (Forbes)

The Kleptocrat in Apartment B “If officials can definitively establish that any of these apartments or houses were purchased with funds that were misappropriated or otherwise tainted, there could be a basis for seizing the property, through the Kleptocracy Asset Recovery Initiative. There’s no reason to think that, on its own, Treasury’s efforts to pierce the veil of anonymity in real-estate transactions might also burst the Manhattan housing bubble. But if I were a real-estate professional who catered largely to wealthy foreigners, I’d be thinking about the lesson of those Swiss watchmakers.” (The New Yorker)

Real Estate M&A Reaches New Peak “The year just past left more than a few commercial real-estate records in the dust, including merger and acquisition activity. SNL Financial says 2015 established a new high-watermark (34) for the number of M&A deals announced in real estate, although the dollar volume of SNL-covered deals came in second to 2007’s $113.6 billion. The 34 M&A deals SNL reported for calendar ’15 compares to 26 in ’07 and is more than twice the 16 registered in 2014.” (GlobeSt.)

Bloomingdale’s to Open Second International Store “Macy’s announced that a Bloomingdale’s store will open in spring 2017 in Kuwait as part of the company’s strategic partnership with Al Tayer Group LLC. This will be Bloomingdale’s second international location (the first opened in Dubai in 2010) and ahead of Macy’s and Bloomingdale’s stores scheduled to open in Abu Dhabi in 2018 – all in partnership with Al Tayer.” (Chain Store Age)

Global Direct Commercial Investment Totals Over $700 Billion in 2015 “Based on a new report by JLL, total direct real estate investment reached just over $700 billion in 2015 – on par with 2014 levels – with further modest expansion predicted for 2016. Institutional investors continue to allocate significant capital to real estate, and they are broadening their investment to include segments such as student housing, healthcare and the private rented residential sector in markets outside the U.S.” (World Property Journal)

Appeals Court Upholds Decision to Evict Rent-Stabilized Airbnb Host “The legal gray area that is Airbnb’s operating space in the city is a bit less foggy after a panel of judges shot down an appeal from a Related Companies tenant who was evicted for listing his rent stabilized apartment on the home-sharing website. The ruling is significant in a city with more than 1 million rent-regulated apartments, where Airbnb is battling a perception as an outlaw company.” (The Real Deal)

US economy is expected to strengthen after weak 4th quarter — The U.S. economy struggled to grow in the October-December quarter as consumer spending, business investment and exports slowed. Yet despite global weakness and shrunken oil and stock prices, many economists expect growth to accelerate on the strength of healthy job gains. The economy grew at an annual rate of just 0.7% last quarter, less than half the 2% growth rate in the July-September period, the government said Friday. Though the slowdown late last year could renew doubts about the durability of the 6 1/2-year-old economic expansion, most analysts said they expected the slump to be short-lived.

Japan introduces negative interest rate to boost economy — The Bank of Japan on Friday said it will charge lenders that leave too much cash on idle deposit with it, introducing a negative interest rate policy for the first time as it seeks to shore up a stumbling economic recovery. The central bank said it is imposing a 0.1% fee on some new commercial bank deposits with the BOJ, effectively a negative interest rate. It hopes that will encourage commercial banks to lend more, rather than keeping cash at the BOJ, and stimulate investment and growth in the world’s third-largest economy.

US stocks soar to finish tough month as tech stocks climb — Stocks soared on the last trading day of January, with Microsoft, Visa and other tech stocks making the biggest gains in a broad market rally Friday. Indexes rose throughout the day and finished with their biggest gains in about five months. Asian stocks jumped after the Bank of Japan moved to stimulate the economy, and European markets also rose. In the U.S, tech stocks climbed following strong quarterly results from Microsoft and Visa. Materials companies and banks also made large gains, and the price of oil rose for the fourth day in a row.

US paychecks show little sign of accelerating in 4th quarter — U.S. paychecks increased moderately in the final three months of last year, yet the gain was little changed from the sluggish post-recession trend. The employment cost index, which tracks wages and benefits, rose 0.6% in the October-December quarter, the Labor Department said. That’s the same as the previous three months. In the past year, salaries and benefits have risen just 2%, the same annual pace as the previous two quarters. That is below the roughly 3.5% rate that is consistent with a healthy economy.

Survey: US consumer confidence slips in January — American consumers lost some confidence this month after the stock market tumbled and the economy showed signs of weakness, the University of Michigan said Friday. The university’s index of consumer sentiment slipped to 92 in January from 92.6 last month. A year ago, the index stood at 98.1. Richard Curtin, chief economist for Michigan’s surveys, blamed a drop in stocks that caused an “an erosion of household wealth, as well as weakened prospects for the national economy.”

Caterpillar closing 5 plants, cutting 670 jobs — Caterpillar says it plans to close five plants, causing a net reduction of about 670 jobs in Illinois and several other states, as part of a broader cost-cutting campaign announced last year. The mining and construction equipment company will cut about 230 jobs for office and production workers at a major manufacturing campus in East Peoria, Illinois, where Caterpillar says it’s consolidating some manufacturing and transferring some work to outside contractors. Another 120 employees there will be placed on indefinite layoff.

Nissan to recall Altimas for third time to fix hood latches — Nissan is recalling nearly 930,000 Altima midsize cars worldwide — some for a third time — to fix a latch problem that could let the hood fly open while the cars are moving. The new recall covers cars from the 2013 to 2015 model years including 846,000 in the U.S. Nissan says paint can flake off the latch, exposing bare metal. Over time, the latches can rust and cause the secondary hood latch to remain open. If the main latch isn’t closed and the car is driven, the secondary latch may not hold the hood down.

American Airlines posts record profit for 4Q, all of 2015 — American Airlines reported a record profit for the fourth quarter and all of 2015 as a sharp drop in fuel prices more than offset lower revenue. The world’s biggest airline said Friday that its full-year earnings were the highest for any carrier when one-time items were excluded. American is poised for another big year: airline officials said they expect to save another $2 billion on fuel in 2016.

Falling oil prices push Chevron to first loss since 2002 — Chevron suffered its first money-losing quarter since 2002 in the final three months of last year, as plunging crude prices chopped more than one-third from its revenue. Cheaper energy is great for consumers, who save with every fill-up, but oil-producing nations and big exploration companies like Chevron and Exxon are paying the price. Chevron is cutting spending, laying off workers, and looking to sell even more of its assets. The problem with that strategy: It’s a buyer’s market right now for oil facilities, with too many for-sale signs.

Xerox reports sales decline and plans to split company — Xerox reported its 15th consecutive quarter of declining sales on Friday and announced plans to split the company into two businesses. The move will reverse a six-year-old effort by the printer and copier maker to boost sales by providing outsourced business services to corporate customers. Xerox said Friday that it will spin off the services operation it acquired when it bought Affiliated Computer Services Inc. in 2010. Xerox has been under pressure from activist investor Carl Icahn, who has argued that its business outsourcing service would be more valuable as a stand-alone company. Xerox says it will split into two independent companies by the end of the year.