Real Estate Daily News Buzz March 14, 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.

U.S. stocks held steady in a calm day of trading Monday at the beginning of a week full of events that could cause market swings. The Federal Reserve may raise interest rates, more countries around the world may move to shake up the economic status quo and several high-profile updates on the U.S. economy are due.

On Monday, the Standard & Poor’s 500 index edged up by 0.87 points, less than 0.1 percent, to 2,373.47. The Dow Jones industrial average fell 21.50 points, or 0.1 percent, to 20,881.48. The Nasdaq composite rose 14.06 points, or 0.2 percent, to 5,875.78. The Russell 2000 index of small-company stocks rose 5.02 points, or 0.4 percent, to 1,370.28

For the year, the S&P 500 is up 134.64 points, or 6 percent.. The Dow is up 1,118.88 points, or 5.7 percent. The Nasdaq is up 492.67 points, or 9.2 percent. The Russell 2000 is up 13.15 points, or 1 percent.

Interest rates on short-term Treasury bills rose in Monday’s auction to their highest levels in more than eight years. The Treasury Department auctioned $36 billion in three-month bills at a discount rate of 0.780 percent, up from 0.745 percent last week. Another $30 billion in six-month bills was auctioned at a discount rate of 0.910 percent, up from 0.835 percent last week. The three-month rate was the highest since three-month bills averaged 0.900 percent on Oct. 27, 2008. The six-month rate was the highest since those bills averaged 0.990 percent on Nov. 10, 2008. The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,980.28, while a six-month bill sold for $9,953.99. That would equal an annualized rate of 0.792 percent for the three-month bills and 0.927 percent for the six-month bills. Separately, the Federal Reserve said Monday that the average yield for one-year Treasury bills, a popular index for making changs in adjustable rate mortgages, rose to 1.03 percent on Friday, up from 0.97 percent on Monday, March 6.

TUCSON TO GET NONSTOP FLIGHTS TO AND FROM SAN JOSE – Southern Arizonans will get nonstop access to another Bay Area airport in August. That’s when Alaska Airlines introduces daily nonstop service between Tucson International Airport (TUS) and Mineta San Jose International Airport (SJC). Last week’s announcement was part of the largest new market announcement in the history of Alaska Airlines. The flights to and from San Jose will be on 76-seat Embraer 175 jets (no middle seats). Twelve of those seats are in first class, with the rest in coach. From Tucson International Airport: https://bit.ly/2mCBupu

TUCSON’S MAJOR ROADS GETTING BETTER – A new report shows Tucson is in the middle of major American cities when it comes to the condition of roads. The latest urban roads report from TRIP, a national transportation research group, found that of 70 urban areas with populations above 500,000, Tucson came in at 35th place. The same report in 2013 ranked Tucson’s roads the fifth-worst in the country. The City of Tucson’s road improvement efforts have been funded mostly through its voter-approved, five-year, $100 million Road Recovery bond program. The City is asking voters in May to consider a proposed half-cent city sales tax to help continue road repair efforts. Proposition 101 would provide $100 million for road restoration, repair, and resurfacing. The rest of the package, $150 million, would be spent on vehicles, equipment, and facilities for the Tucson Police Department and Tucson Fire departments.

Ruby Tuesday says it will explore strategic alternatives including a sale or merger, and that a key sales figure fell in the latest quarter. The restaurant chain says it’s at the start of its strategic review and it doesn’t plan to make more public comments until the process is completed. It said it can give no assurances to the outcome or timing. Its shares surged nearly 18 percent in after-hours trading. The company reported preliminary results for the quarter ended Feb. 28, with sales down 4 percent at established locations. The metric is considered a key indicator of financial health because it strips out the volatility of newly opened and closed locations. Ruby Tuesday Inc. had 613 locations as of Nov. 26 in 42 states, 14 international markets and Guam.

Offering states flexibility to increase market stability and affordable choices – Monday, the Department of Health and Human Services (HHS), in partnership with the Department of the Treasury, suggested ways to help foster healthcare innovation by giving states greater flexibility. “States need the flexibility to develop innovative healthcare models that will improve patient access to care, increase affordability and choices offered, lower premiums, and improve market stability,” said Health and Human Services Secretary Tom Price, M.D. “Today’s letter highlights State Innovation Waivers as opportunities for states to modify existing laws or create something entirely new to meet the unique needs of their communities.” Section 1332 of the Affordable Care Act (ACA) permits a state to apply for a State Innovation Waiver to pursue innovative strategies for providing its residents with access to high quality, affordable health insurance. The Departments are promoting these waivers to give states the opportunity to develop strategies that best suit their individual needs. Through innovative thinking, tailored to specific state circumstances, states can lower premiums for consumers, improve market stability, and increase consumer choice.

Staples, Inc. (NASDAQ: SPLS) and Platinum Equity – Monday announced a definitive agreement under which Platinum Equity will acquire Staples’ business in Australia and New Zealand for an undisclosed sum. The transaction is expected to close in the second calendar quarter of 2017.  Staples is a leading supplier of business products, services and solutions in Australia and New Zealand. The company serves a diverse variety of customers, ranging from small-and-medium businesses to large enterprises, including federal, state and territory levels of government in both countries. Morgan Stanley is acting as exclusive financial advisor to Staples. Corrs Chambers Westgarth is acting as legal advisor to Staples. Baker McKenzie is acting as legal advisor to Platinum Equity.

Meritage announces last call at Madera Highlands in Southwest submarket – Last remaining home in the Symphony Collection. One final home. Tosto plan offering 2,278 SF is available for quick move-in now, priced in the mid $200s. Homes are still available in the gated neighborhood at Encore at Madera Highlands. Call 877.552.4028

Fed’s on thin ice in a Trump administration, expert says “Don’t blame the Federal Reserve if it looks jittery these days. The U.S. central bank is holding its breath waiting for a tweetstorm from President Donald Trump they are sure is coming. Fed Chairwoman Janet Yellen has decided to pick up the pace of interest rate hikes this year, and some Republicans are already muttering darkly that the Fed seemed perfectly happy to hold interest rates low for President Obama but seem unwilling to continue the favorable treatment now that the GOP has recaptured the White House. Sarah Binder, a professor of political science and George Washington University and a senior fellow at the Brookings Institution, says that Trump is more likely to pounce if the economy deteriorates than now.” (MarketWatch)

Most Commercial Property Investors in U.S. Are Net Buyers in 2017 “According to CBRE newly released Americas Investor Intentions Survey 2017, the prospect of increased U.S. economic growth combined with less regulation, means that investor sentiment for commercial real estate investment is marginally more positive than last year, despite the potential for rising interest rates. The 2017 survey results reveal that investors will remain actively engaged in real estate investment this year, with the majority (67%) intending to be net buyers (more acquisitions than dispositions). The percentage of net buyers has increased since 2015 (60%) and 2016 (65%). The vast majority of these investors (83%) intend to maintain or increase their purchasing activity in 2017. Slow global economic growth that could undermine occupier demand (22%) was identified as the greatest risk factor for real estate investors, just ahead of rising interest rates (21%). Concern about property being overpriced and “a bubble waiting to burst” (16%) is a distant third among the list of potential threats. Investors are relatively unconcerned about the potential effects of government policy measures.” (World Property Journal)

BMW Supplier Expands Operations in SC “Gestamp is expanding its existing facility in Union, S.C., in an effort to bring $129 million in new capital investment and lead to the creation of 130 jobs. The project from the international manufacturer of metal automotive components is expected to meet increased demand from local automotive original equipment manufacturers. ‘This new project multiplies our size in South Carolina with a remarkable investment that shows how committed we are with our future operations at the Union County plant,” Jeff Wilson, Gestamp North America’s CEO, said in a prepared statement. ‘The United States is a strategic market for us, where we have six plants in five different states, and we want to grow in this country with the major car manufacturers. This is an important step forward.’ Gestamp will be adding more than 300,000 square feet of space to its current operations, which are located at One LSP Road, and is designed to serve the existing BMW and Volvo Cars operations in the state. The company will also be constructing 123,000 square feet of new space and adding another 182,000 square feet by leasing an existing building.” (Commercial Property Executive)

Consumer Debt Nears Pre-Crash Levels “Debt is back, says new data from the Federal Reserve Bank of New York. U.S. households increased borrowing in 2016—bringing student loan and auto lending balances to new records. But don’t panic yet. Credit scores and delinquency rates look better now than they did in 2008.” (Fortune)

JP Morgan, Stream Realty Tackle $135M Makeover “Trammell Crow Center, an iconic office high-rise in the blossoming Arts District of downtown Dallas, will soon take on a new life. Property owners Stream Realty Partners and J.P. Morgan Asset Management have revealed plans for the $135 million transformation of the 1.2 million-square-foot asset into a mixed-use destination. Developed by Trammell Crow in 1984, the Skidmore, Owings & Merrill-designed Trammell Crow Center is a local architectural jewel, holding the distinction of being the city’s very first postmodern skyscraper, according to the Texas State Historical Association. With HOK onboard for the redesign, the 92 percent leased office tower’s architectural integrity will be maintained. Stream and J.P. Morgan have tapped HKS to bring the vision of the new segment of the project to life.” (Commercial Property Executive)

Developer secures $300 million for downtown Manhattan condo project “The Lightstone Group secured a $305 million loan to build an 800-foot-tall condo tower in lower Manhattan. The company sourced the construction loan from Mack Real Estate Credit Strategies, a specialty lender. With financing in place, the tower will begin rising at 130 William St. in September, Mitchell Hochberg, the president and chief operating officer of Lightstone told Crain’s. The project, which will likely be completed by fall 2019, will cost about $600 million to erect. Developers across the city have raced to construct condo spires with apartments costing millions of dollars apiece. With so many similar projects on the market, observers feel there is a glut of pricey units and developers will have to slash prices to sell apartments, possibly thrusting projects into financial turmoil. Hochberg said 130 William St. will be different. Lightstone worked through a complex process of assembling several properties to create the development parcel and the firm was able acquire the sites for below-market land prices, giving it leeway to sell the units in the building at a lower price than the competition. ‘I think the high-end market is challenged right now,’ Hochberg said. ‘But we do think that if you’re priced well, which we think we will be, and located well and deliver a product that has value and good design, there’s always going to be a lot of people who are interested in buying.’ Lightstone aims to sell units at an average of about $2,000 per square foot, a high price tag but still below the $3,000-plus per foot that other luxury projects are seeking.” (Crain’s New York)

Coalinga Mayor Says City Real Estate Booming After Commercial Cannabis Growing Approved  “The city of Coalinga is seeing big growth in real estate after voters in November approved commercial cannabis cultivation. Coalinga’s mayor says commercial properties are being bought up so quickly that the fees collected are helping relieve the city of its crippling debt. It has been four months since voters in Coalinga voted to allow medical marijuana cultivation, and Coalinga mayor Nathan Vosburg is thrilled about the economic outcome it is already starting to bring. ‘Things are looking good,’ he said. ‘We’ve had a great start, and we expect to continue.’ That’s because the city sold the Claremont Custody Center to Ocean Grown Extracts — a company that plans to turn the prison into a cannabis manufacturing facility. Vosburg says the city was able to pay off more than $3 million worth of debt. “We sold the prison for $4.1 million, but we had an $800,000 debt at the end of the year that we were going to be in debt for this year, so that takes us to a negative $300,000,” he said. On top of that, commercial real estate is booming as well. And Vosburg says they have gotten hundreds of calls from people wanting to build in these locations.” (ABC30)

Modern marvel: How Toyota poured 5 centuries of work into its Plano campus — during a labor shortage “When the first Toyota employees start moving into the auto giant’s new North American headquarters in late April, they’ll be setting up shop in a modern marvel. Yards of poured concrete that would pass 475 AT&T Stadiums end to end, 17,000 tons of reinforcing steel — the equivalent of 1,700 Dallas city buses. Acres of glass, literal tons of Texas limestone. But the most impressive part about the project isn’t the materials. It’s not the 7.75-megawatt solar power system or the interior color palette designed to reflect the indigenous Texas environment. It’s that, in a region where builders are struggling mightily to find construction labor, as many as 2,000 workers are out at the 100-acre Plano site at a given moment.” (Dallas News)

Report details the development-rich year that was 2016 for Downtown LA “In Downtown LA, 2016 was a banner year for construction that ended with a bang, according to a new report from the Downtown Business Improvement District. “Having been doing this for as long as I have, I have not seen a year where there has been such dramatic growth,” the BID’s President and CEO Carol Schatz, who has worked in Downtown for over two decades, told Los Angeles Downtown News. A quick trip through Downtown offers many signs that construction in the neighborhood is not slowing down. And, now, this new fourth-quarter report provides some data to quantify the omnipresent boom. Here’s what the report found: In the year as a whole, construction was finished on 2,671 residential units, and work began on 4,000 more. In the fourth quarter of the year, 7,645 new residential units—1,200 of them condos—were proposed for DTLA, a spike that had previously been explained as developers trying to get proposals in the pipeline in case Measure S passed. The measure, which would have called for a two-year building moratorium, was defeated on Tuesday. Rents in office spaces in the subset called Class A, which is the kind of offices that comprise tall towers, climbed, too, and, overall, office space vacancy rates dropped 4.5 percent from the year before, down to 16.8 percent.” (Los Angeles Curbed)

BFC’s nonprofit partner on Bedford-Union Armory project raises concerns “The nonprofit that BFC Partners selected to team up with on the Bedford-Union Armory redevelopment in Crown Heights is raising some concerns amid scrutiny. Caple Spence, executive director of Crown Heights’ Local Development Corporation, has an employment contract that gives him a 10 percent share of the charity’s profits and 20 percent of profits from developer fees – a rarity in the world of nonprofits, Crain’s reported. It was unclear whether the Local Development Corporation or BFC would get the developer fees for the project and if the revenues would be divided between the two, according to Crain’s. In 2014, the nonprofit reported revenue of roughly $752,000, but Spence raked in about $1.15 million in total compensation.” (The Real Deal)