Real Estate Daily News Buzz January 10, 2017

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 76.42 points, or 0.4 percent, to 19,887.38. The Standard & Poor’s 500 index slid 8.08 points, or 0.4 percent, to 2,268.90. The Nasdaq rose 10.76 points, or 0.2 percent, to 5,531.82.

U.S. benchmark crude oil fell $2.03, or 3.8 percent, to close at $51.96 a barrel in New York. Brent crude, which is used to price oil sold internationally, slid $2.16, or 3.8 percent, to close at $54.94 a barrel in London. In other energy trading, wholesale gasoline lost 6 cents to $1.57 a gallon and heating oil fell 7 cents to $1.64 a gallon. Natural gas futures shed 18 cents, or 5.5 percent, to $3.10 per 1,000 cubic feet.

CITY COUNCIL TO DECIDE ON TAX INCENTIVE FOR DEVELOPMENT NEAR TUCSON CONVENTION CENTER – The Mayor and Tucson City Council tomorrow will discuss whether to grant a tax incentive to HSL Properties to help build apartments and retail at the downtown site where La Placita Village stands today. The business complex would be torn down to make room for the new development. HSL is asking the City for the Government Property Lease Excise Tax (GPLET) incentive that allows for eight years of property tax abatement. The application outlines that project-generated construction sales tax revenue would be used toward public improvements. HSL says the project would create 150 construction jobs that pay between $30,000 to $65,000. The proposed development would include 246 market-rate apartments. Construction is expected to cost an estimated $42 million and take 28 months to complete. In a letter sent to neighbors, HSL said demolition would begin this May. Before that can happen, the project is required to go through an independent audit process which the Tucson City Council must approve.  Mayor and Council agenda materials (item 3):

Mars buying pet health care company VCA in $7.7B deal — Mars is buying the pet health care company VCA in a deal valued at around $7.7 billion. Mars will pay $93 for each share of VCA Inc. That’s a 31 percent premium to the Los Angeles company’s Friday closing price of $70.77. The companies said Monday that the deal also includes $1.4 billion in debt. VCA has nearly 800 animal hospitals and 60 diagnostic laboratories in the U.S. and Canada. Mars Inc. is the food and drinks company that owns the Wrigley brand and it also has a pet care division.

UnitedHealth buying Surgical Care for $2.3 billion — UnitedHealth Group is buying surgical center operator Surgical Care Affiliates for about $2.3 billion in a cash-and-stock deal that will add to its outpatient holdings. The nation’s largest health insurer will add Surgical Care to its Optum health services unit, which has 20,000 affiliated physicians and hundreds of facilities. Surgical Care operates 205 surgical facilities and partners with about 3,000 physicians. The acquisition will be funded with between 51 percent and 80 percent of UnitedHealth stock. The remainder will be in cash.

McDonald’s sells China business in deal worth up to $2.1B — Fast-food giant McDonald’s is selling a controlling stake in its China business to a group of investors led by state-owned Chinese conglomerate Citic in a deal worth up to $2.1 billion, the companies said Monday. The transaction is part of a global business overhaul being carried out by the American company to keep up with changing tastes that have resulted in declining sales. Under the terms of the deal, Citic Ltd. and its investment management unit Citic Capital will acquire 52 percent of the business while another partner, Washington-based private equity firm The Carlyle Group, will own 28 percent. McDonald’s will retain a 20 percent stake.

Credit card spending jumped in November — Consumers increased their borrowing in November at the fastest pace in three months. Total borrowing in November climbed $24.5 billion, compared to a smaller $16.2 billion in October, the Federal Reserve reported Monday. The increase pushed total debt to a fresh record of $3.75 trillion. The acceleration reflected a big jump in the category that covers credit card debt, which rose $11 billion, compared to a much smaller $2.4 billion increase in October. It was the largest monthly advance since March and was a good sign at the start of the holiday shopping season.

2017: Year of the Renter “New York renters would be the first to tell you that rents go in only one direction: up. But after a long and relentless climb to historic highs, the momentum has stalled. With renters unwilling, or unable, to pay ever higher sums, rents have largely flatlined. And it seems we have come to the year of the renter’s market. In Manhattan, Brooklyn and Queens, inventories and vacancies are up, and landlords are offering new tenants discounts, like several months of free rent and no broker’s fee. In the Bronx and Staten Island, rents are holding steady because those boroughs did not experience the same rapid rent escalations or volume of new development. But that could change when new rental buildings open in both boroughs this year and in 2018.” (New York Times)

The Limited Is Closing All 250 of Its Stores “And another bites the dust. Women’s apparel chain The Limited on Sunday began closing all 250 of its stores across the United States and is slashing 4,000 jobs, the latest casualty of shopping’s move online and the growth of fast fashion chains.  And just like Chico’s, Ann Taylor and other women’s apparel stores struggling with big drops in sales, The Limited has been struggling with shifts in consumer behavior and interest, a greater number of rivals and longer store leases. ‘In an increasingly challenging environment for mall-based retail and women’s apparel, we are very disappointed that the company has had to make the difficult decision to close its retail locations,’ Sun Capital said in a statement.” (Fortune)

Economy Watch: BLS Data Points to Strong Employment Market “Besides reasonably good job growth for December, and a higher monthly spike in wages than in many years, Friday’s employment report by the Bureau of Labor Statistics included other data nuggets highlighting the state of the job market (and of the retail industry). For instance, according to the BLS, retailers hired seasonal workers at a lower pace during the 2016 holidays than in the last few years. Perhaps retailers were a little worried about the sales season (which was decent, as it turned out), or about their longer-term prospects—such as Macy’s, which is closing a lot of its stores this year. There is also The Limited, which just last week closed all of its stores. In any case, retailers hired 673,000 net workers in October, November and December, down from just over 739,000 for the same period last year.” (Commercial Property Executive)

Report: Prince left behind $25 million in real estate, a cash horde, and 67 gold bars “It turns out that Prince wasn’t just an incredible musician, but also a prolific real estate investor—and maybe a closet gold bug. The enigmatic singer had acquired $25.4 million worth of real estate and other personal property at the time of his death last year, according to a file released on Friday by Carver County District Court, reported on by the Star Tribune. Carver County is located southwest of Minneapolis, Minnesota. Records from the ongoing probate case also revealed Prince stockpiled cash and 67 gold bars, while eschewing stocks.” (CNBC)

Trump’s son-in-law poised to resign as CEO of real estate company “Jared Kushner, the son-in-law of President-elect Donald Trump, is preparing to resign as chief executive from his real estate development company, his attorney said Saturday in a statement, in a move designed to reduce conflict-of-interest concerns as Kushner ponders a position in the White House. Although plans are not yet final, the statement from WilmerHale partner Jamie Gorelick said that Kushner “is committed to complying with federal ethics laws.” Kushner would also “divest substantial assets” and “recuse from particular matters that would have a direct and predictable effect on his remaining financial interests.” Kushner’s planned move was first reported by the New York Times in a story exploring his pursuit of a joint venture with a Chinese financial group to redevelop a Manhattan property.” (Washington Post)

Check out where Trump’s billionaire appointees are living in… “[VIDEO] Billionaire presidential appointees and super rich politicos are descending on the nation’s capital thanks to President-elect Trump.” (CNBC)

CitizenM developing pre-fab hotel on the Bowery “Hotel developer and operator citizenM is planning the 20-story, 300-room project at 185 Bowery. A Dutch company constructed the building in Poland and shipped it to New York in 210 pieces.  CitizenM, which has nine hotels operating and 14 in development, has used modular construction to build the majority of its properties in Europe, where the technique is widespread, the Wall Street Journal reported. While the method isn’t always less expensive than traditional construction, it does allow for quicker assembly. CitizenM’s hotel, co-owned by Brack Capital Real Estate, is expected to take three to four months to finish, compared to six to nine months using traditional methods. It will also cut down about 1,200 truck deliveries to the site.” (The Real Deal)

HPI Closes Fourth Multifamily Equity Fund “On the last day of 2016, Hamilton Point Investments closed its HPI Real Estate Fund IV LLC (HPI Fund IV). Altogether, the Reg D private equity fund raised $85 million through 27 independent broker-dealers and registered investment advisors. Thus far, the fund has acquired seven multifamily properties. A further four apartment acquisitions are scheduled to close in January and February of the New Year. HPI expects to fully deploy the remainder of the fund’s equity in one additional acquisition during the first quarter of 2017. The fourth fund is a successor to three other successful funds. HPI Fund I went full cycle in 2014 with a 14.5 percent IRR net to investors, while HPI Fund II went full cycle in 2016 with a 14.6 percent IRR net to investors. Both funds had hold periods of just over four years. HPI is targeting a late 2017 liquidation of HPI Fund III, which would result in another four-year term. Investors are still eager to put equity into multifamily. “HPI saw no decline in its ability raise and deploy capital in 2016, despite the DOL Fiduciary Rule, FINRA Rule 1502 and REIT and BDC sales dropping by as much as 75 percent for the year,” said HPI co-founder David Kelsey.”(MultiHousing News)

Downtown LA construction boom is largest in nearly a century “The Downtown LA skyline has changed considerably in just the past few years, with the Wilshire Grand now nearly complete and the first of four buildings in the towering Metropolis complex just about move-in ready. Plenty of other major projects are on the way—in South Park and beyond—and the pace of new development is now on pace to eclipse the skyscraper boom that reshaped the area in the 1980s, according to the LA Times. In fact, the Times reports that the number of large projects since 2010 is the highest Downtown has seen since the 1920s. In all, 79 developments of 50,000 square feet or larger have been built or are under construction since the beginning of the decade. That compares to 64 projects in the ‘80s and 155 in the ‘20s. Still, while developers from all over the world descend upon Downtown, the pace of growth citywide is still well below where it was in decades past. That’s particularly true in one crucial area: housing.” (Los Angeles Curbed)

Grant Park apartment tower gets $203 million construction loan “Developer Crescent Heights has started putting up one of Chicago’s tallest residential buildings, after landing a $203 million loan. Crescent Heights unveiled the name of the 76-story building, One Grant Park, and said in a statement today that it has begun construction. The 792-unit luxury apartment project is backed by a $203 million construction loan from Little Rock, Ark.-based Bank of the Ozarks, Crescent Heights spokesman Abe Tekippe said. The loan is for the first phase of a planned two connected towers. Crescent Heights has not disclosed specific plans for the second connected tower or for an expected third phase just east of the connected towers. Miami-based Crescent Heights said One Grant Park will open in early 2019. Rising to 829 feet, the building at the southern end of Grant Park will be among Chicago’s 20 tallest.” (Crain’s Chicago Business)