Real Estate Daily News Buzz May 2, 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.
The Standard & Poor’s 500 index added 4.13 points, or 0.2 percent, to 2,388.33. The Dow Jones industrial average fell 27.05 points, or 0.1 percent, to 20,913.46. The Nasdaq composite jumped 44 points, or 0.7 percent, to 6,091.60.
Benchmark U.S. crude fell 49 cents, or 1 percent, to $48.84 a barrel in New York. Brent crude, used to price international oils, declined 53 cents, or 1 percent, to $51.52 a barrel in London. Wholesale gasoline lost 2 cents to $1.53 a gallon. Heating oil fell 2 cents to $1.49 a gallon. Natural gas dropped 6 cents to $3.22 per 1,000 cubic feet.
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 $39 billion in three-month bills at a discount rate of 0.845 percent, up from 0.820 percent last week. Another $33 billion in six-month bills was auctioned at a discount rate of 0.975 percent, up from 0.955 percent last week. The three-month rate was the highest since those bills averaged 0.900 percent on Oct. 27, 2008. The six-month rate was the highest since those bills averaged 0.990 percent 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 $9,978.64, while a six-month bill sold for $9,950.71. That would equal an annualized rate of 0.859 percent for the three-month bills and 0.993 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 changes in adjustable rate mortgages, rose to 1.07 percent last Friday, up from 1.03 percent at the beginning of last week.
Fed likely to leave rates alone but signal more hikes coming — With the U.S. economy on solid footing and unemployment at a near-decade low, the Federal Reserve remains in the midst of a campaign to gradually raise interest rates from ultra-lows. But this week, it’s all but sure to take a pause. The Fed is widely expected to keep its key short-term rate unchanged after having raised it in March for the second time in three months. Most analysts foresee the Fed raising its key rate again at least twice more before year’s end, a testament to the durability of the U.S. economic recovery and a more stable global picture. One reason for the Fed to stand pat this week is that even though the job market has shown steady strength, the economy itself is still growing in fits and starts.
MAIL BACK TUCSON SPECIAL ELECTION BALLOT BY NEXT WEEK – The City of Tucson will conduct its May 16 Special Election by mail. Ballots for Proposition 101 have been mailed to each active registered voter. All vote-by-mail ballots must be received by the City Clerk’s Office by 7 p.m. on Election Day in order to be counted. The last day to drop your ballot in the mail to ensure it is received on time by the City Clerk’s Office is Wednesday, May 10. You can also drop off your ballot on Election Day at any of seven voting locations. The purpose of the election is to submit a question to voters as to whether they want to authorize a temporary half-cent sales tax increase to fund improvements for roads and public safety. Proposition 101 information and maps: https://bit.ly/2nx0vlh
US construction spending slipped in March — U.S. builders trimmed construction spending slightly in March, one month after building activity hit an all-time high. Construction spending slipped 0.2 percent in March to a seasonally adjusted $1.218 trillion, the Commerce Department reported Monday. In February, it rose 1.8 percent to a record high of $1.22 trillion. The result in March reflected drops in nonresidential construction and in the government sector, which offset a strong increase in residential activity. Even with the slight decline, March activity was the second highest on record. (ABC)
US factories expand at slower pace in April — American factories grew for the eighth straight month in April but at a slower pace than in March. The Institute for Supply Management, a trade group of purchasing managers, said Monday that its manufacturing index slipped to 54.8 from 57.2 in March and 57.7 in February. The April reading was weaker than economists expected and was the lowest since December’s 54.5. But it was still solid: Anything above 50 signals that manufacturing is growing.
Dollar General acquires 300-plus stores “Dollar General Corp. has added to its portfolio through an acquisition. The Federal Trade Commission has approved the sale of 323 Dollar Express stores by Sycamore Partners to Dollar General, reported Reuters. The Dollar Express chain is made up of former Family Dollar stores that Family Dollar sold to Sycamore Partners in late 2015. Sycamore Partners bought the stores in 2015 when Dollar Tree sold the stores in order to win antitrust approval to buy the Family Dollar chain.” (Chain Store Age)
Exclusive: Blackstone’s GSO snaps up J. Crew debt in restructuring gambit “GSO Capital Partners, private equity firm Blackstone Group LP’s (BX.N) credit arm, is acquiring more of J. Crew Group Inc’s debt, hoping for a profitable trade that could also give the U.S. fashion retailer more time to stave off bankruptcy, people familiar with the matter said. Sales have been declining as J. Crew, whose ballet flats and cashmere cardigans were once a staple of middle-class U.S. wardrobes, struggles to keep abreast of changing tastes and faces fierce competition from cheaper online retailers. It now has $2.1 billion in debt. Most pressing is $567 million in unsecured bonds coming due in 2019. To cut that burden, J. Crew is trying to slash more than half the bonds’ value by placing the intellectual property of its eponymous brand into a new company, but holders of other debt are resisting the move.” (Reuters)
The advantages of owning real estate in a single-member LLC “Single-member limited liability companies (SMLLCs) are limited liability companies (LLCs) with only one member (owner). As with a corporation, operating a business or investment activity as an LLC generally protects your personal assets from exposure to liabilities related to the activity — under applicable state law. However, SMLLCs offer some unique tax attributes that make them ideal real estate ownership vehicles. Here’s the story on their advantages. Advantage: Disregarded SMLLCs are ignored for federal income tax purposes Under IRS regulations, the existence of an SMLLC is generally ignored for federal income tax purposes. In other words, the SMLLC is a so-called disregarded entity. The federal income tax treatment of a disregarded SMLLC is super-simple: its activities are considered to be conducted directly by the SMLLC’s sole member (owner).” (MarketWatch)
Exclusive: Convene Raises $68 Million to “Starwood-ify” offices “Increasingly, venture investors view real estate as the next industry to be transformed by disruptive technology. But as they start investing in the category, they might find that traditional real estate investors, including Brookfield Property Partners, one of the country’s largest landlords, are already ahead of them. Convene, a New York City-based startup, is Brookfield’s only startup investment, and today Brookfield has doubled down on the bet. Brookfield led a $68 million Series C investment in the company alongside Conversion Venture Capital and ArrowMark Partners, the companies tell /react-text Fortune react-text: 236 . The Durst Organization and Elysium Capital Management also participated. Convene previously raised $45 million in funding. Brookfield is “eager to explore working with and investing in” exiting startups, a company spokesperson said.” (Fortune)
Economy Watch: Commercial Property Valuations Gain in April “Commercial real estate valuations nationwide grew by an average of 1 percent during April, representing the industry’s strongest price growth since the election in November, according to Ten-X’s latest Commercial Real Estate Nowcast. The monthly uptick comes after generally tepid growth in valuation during the months after the election, including a 0.5 percent increase in March. The report also noted that CRE pricing has now risen 9.6 percent over the last 12 months, which is the strongest rate of annual growth since early 2016. According to the Nowcast, the hotel sector experienced a surprising pop in pricing, surging 1.3 percent during April. That places prices 1 percent above their April 2016 levels, breaking a streak of 11 consecutive months with negative annual growth.” (MultiHousing News)
Miami’s real estate drawing Middle Eastern buyers “Every month, the Miami Association of Realtors announces the top 10 foreign countries that use its website to search for Miami real estate. As you might expect, this list typically features the “usual suspects” month after month, such as Colombia, Canada, Brazil, Venezuela, Argentina and France. However, the most recently published report (from January 2017) included an unfamiliar newcomer: Turkey, ranked at No. 7. Miami has always attracted foreign buyers, and we are very used to seeing strong interest from Latin America and Europe. But this marked the first time I can remember that a Middle Eastern country was included among that report’s top 10. While time and circumstances could make this inclusion an outlier, it is also a fairly good demonstration of Miami’s rising profile among wealthy and sophisticated real-estate buyers from that part of the world — a trend in which I have been fortunate to participate.” (Miami Herald)
A&E buying seven Queens buildings for $83M “A&E Real Estate Holdings is in contract to buy a seven-building Queens portfolio for $82.8 million, in its latest grab at the few remaining New York City multifamily holdings of global alternative asset manager Ares Management, sources told The Real Deal. The portfolio holds 343 rental apartments and spans 272,500 square feet. A&E is set to close this summer on the purchase for about $241,000 per unit and just north of $300 per square foot. The addresses are 22-73 41st Street in Astoria; 132-70 Sanford Avenue and 151-10 35th Avenue in Flushing; 41-41 44th Street and 47-07 39th Street in Sunnyside; and 40-11 – 40-19 79th Street and 42-29 Judge Street in Elmhurst.” (The Real Deal)
Two DC Office Buildings Sell For $259M “Westbrook Partners and TIER REIT recently sold 1325 and 1341 G St. (the Colorado Building), two Class A office buildings in Washington, D.C.’s East End submarket, to UNIZO Holdings Co. for $259 million. HFF represented both parties in the 440,419-square-foot, off-market transaction…TIER REIT has exited four non-target markets year to date, and currently operates in eight markets across the U.S. In January, the REIT completed three transactions totaling $217.7 million, including selling two office buildings in Philadelphia and Burbank, Calif.” (Commercial Property Executive)
How Amazon is disrupting grocery “Of all Amazon’s retail ambitions — an online juggernaut that began with books and has expanded to everything under the sun — its grocery effort remains somewhat undercooked, despite a decade in the space…But it’s not just the size of the market, analysts say. As a high-frequency purchase, grocery makes a lot of sense for Amazon. ‘They want that consistent customer back in the fold. Most consumers look at grocery shopping as utilitarian. It’s not passion purchases, it’s ‘my standards, my staples,’ so to some degree any time you remove the pain points you win. Grocery is ripe with opportunities,’ Brendan Witcher, Forrester analyst, told Retail Dive. ‘Anyone can become a grocer, and Amazon has the benefit of having deep pockets, and most grocers don’t have that.’” (Retail Dive)
Another hotel tower is in the works for Plano’s $3 billion Legacy West “Plano’s $3 billion Legacy West Development isn’t finished growing. A project on the way will add a second hotel for visitors to the mixed-use development. Investor Sam Moon Group plans to build a boutique hotel in the Legacy West Urban Village on Headquarters Drive at Communications Parkway. The planned hotel will be across the street from Liberty Mutual Insurance’s huge new corporate campus at Legacy West. JPMorgan Chase’s campus is in the next block. The two office projects will employ more than 10,000 people.” (Dallas Morning News)