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 added 72.66 points, or 0.4 per cent, to 18,491.96. The Standard & Poor’s 500 index rose 9.12 points, or 0.4 per cent, to 2,179.98. The NASDAQ composite gained 22.69 points, or 0.4 per cent, to 5,249.90.
U.S. benchmark crude oil rose $1.28, or 3 per cent, to $44.44 a barrel in New York. Brent crude, the benchmark for international oil prices, added $1.38, or 3 per cent, to $46.83 a barrel in London. U.S. crude had fallen 9 per cent over the last four days. Wholesale gasoline rose 3 cents to $1.30 a gallon. Heating oil also gained 3 cents to $1.41 a gallon. Natural gas remained at $2.79 per 1,000 cubic feet.
Stocks rise as tepid jobs report stokes hopes for low rates — U.S. stocks rose Friday as investors found some positive aspects in a middling employment report. Job growth slowed in August, and traders hope that will convince the Federal Reserve to wait before raising interest rates. Stocks started the day with big gains following the Labor Department’s job report. Energy companies rose more than the rest of the market as oil prices broke out of a four-day slump. The gains were broad, but the stocks that rose the most were utilities, which would stand to benefit if interest rates remain low. Kate Warne, investment strategist for Edward Jones, said the jobs report was good but not great. That actually helped send the market higher because a very strong report could have pushed the Fed to raise interest rates as early as this month. Some investors fear that could jeopardize an uneven economic recovery. (AP)
Foreign investors still love U.S. commercial real estate “It should come as no surprise to anyone working in the business today that foreign investors look at commercial real estate as one of the smartest places for their dollars. There is plenty of uncertainty across the globe. But commercial properties in the United States, because they are so stable these days, offer overseas investors a safe harbor for their capital. Marcus & Millichap recently released its third quarter foreign investment report, and found that though overseas investment in U.S. commercial real estate has eased from peak levels, it remains elevated when compared to historical norms. One of the more interesting facts from the report? While it’s the large, high-profile investments that garner the most press, the majority of acquisitions that foreign investors make are of smaller assets that these buyers purchase through funds and domestic intermediaries. These acquisitions don’t generate headlines, but they are providing a solid boost to the country’s commercial real estate market.” (REJournals.com)
US hiring slowed in August, yet Americans’ outlook brightens — U.S. employers slowed their hiring in August after two blockbuster months and barely raised their workers’ pay, a pullback that may lead the Federal Reserve to leave interest rates alone until late this year. But several surveys suggest that Americans are growing more optimistic about the job market, a trend that could boost spending and energize the economy in coming months. Employers added 151,000 jobs in August, a modest gain after an increase of 275,000 in July, the most in eight months, and 271,000 in June. The unemployment rate remained at 4.9 per cent for a third straight month, the Labor Department reported Friday. (AP)
Retailers scramble as shipper bankruptcy puts goods in limbo — Some major retailers are scrambling to work out contingency plans to get their merchandise to stores as the bankruptcy of the Hanjin shipping line has thrown ports and retailers around the world into confusion. They don’t have a lot of time. Giant container ships from the South Korean-based Hanjin shipping line are marooned with their cargo of what experts say are lots of TVs and printers, but also loads of home furnishings and clothing. Hanjin, the world’s seventh-largest container shipper, filed for bankruptcy protection Wednesday and stopped accepting new cargo. With its assets being frozen, ships from China to Canada were refused permission to offload or take aboard containers because there were no guarantees that tugboat pilots or stevedores would be paid. It’s also been a factor in shipping rates rising and could hurt some trucking firms with contracts to pick up goods from Hanjin ships. The South Korean giant represents nearly 8% of the trans-Pacific trade volume for the U.S. market. While some retailers may already have merchandise for the holiday season affected, experts say what’s most important is that the issue be resolved before the critical shipping month of October. (AP)
US trade deficit fell in July — The U.S. trade deficit fell in July as imports declined slightly and exports rose to the highest level in 10 months, a possible sign that global demand for American products is starting to rebound. The deficit declined to $39.5 billion, 11.6 per cent lower than June’s $44.7 billion deficit, the Commerce Department reported Friday. Imports dropped 0.8 per cent to $225.8 billion, reflecting in part lower oil imports. Exports climbed 1.9 per cent to $186.3 billion, the highest level since last September, led by increased sales of American farm products. The politically sensitive deficit with China increased 1.9 per cent to $30.3 billion, the highest level since November. Republican presidential nominee Donald Trump has accused China of engaging in unfair trade practices which he says have cost millions of American jobs. (AP)
US factory orders up 1.9 per cent in July, best in 9 months — Orders to U.S. factories increased in July by the largest amount in nine months, propelled by a big jump in demand for commercial aircraft. The key category that tracks business investment plans posted the best increase since January. Factory orders rose 1.9 per cent in July, the Commerce Department reported Friday. It was the biggest one-month gain since last October and was led by a surge in orders in the volatile category of commercial aircraft. Orders in the category that serves as a proxy for business investment increased 1.5 per cent, the best showing since January. Economists are hoping that after a period of weakness, business investment will begin to rebound in the second half of this year. Supporting that view, demand for oil field equipment rose for a third month. (AP)
Yum says it will sell stake in China unit ahead of spinoff — Yum Brands says it will sell a stake in its China unit, which the parent company of KFC and Pizza Hut is spinning off later this year. The company said Friday that it struck deals to sell stakes to private equity firm Primavera Capital Group, and online and mobile financial services provider Ant Financial Services Group for a total of $460 million. It said Primavera founder Fred Hu will also become non-executive chair of Yum China’s board. The deal and the spinoff are expected to be completed on Oct. 31. The company says shares of Yum China will begin trading on the New York Stock Exchange the next day under the ticker “YUMC.” (AP)
Industrial Real Estate Sector Enjoying Strong Year “Colliers’ annual report on industrial real estate transactions in North America called 2016 one of the strongest years to date in the sector. Rosenberg noted that the growth in absorption of industrial space has been strong, which has been matched by healthy build-to-suit and speculative construction…‘The demand has been so high that there are 60 million square feet under construction right now for future demand,’ Rosenberg said. He pointed out that in 2011 speculative construction across North America amounted to just 600,000 square feet. Demand drivers for industrial space include e-commerce and the prolonged economic expansion in the U.S., according to Rosenberg. Importantly, e-commerce requires different types of industrial space compared with standard distribution centers, which are designed to ship pallets of goods, he said. Rosenberg also noted companies are working to make their supply chains more efficient, boosting new industrial construction.” (REIT.com)
Student housing ups the ante on amenities “This type of student living is fast becoming standard at large public universities across the country. Residential developers are pouring money into the sector, upping the ante on amenities and seeing occupancy rise. Approximately 47,700 new beds are expected to come to market in privately owned, student housing properties for the fall 2016 semester, with universities in the Southeast the primary target, according to Axiometrics, an apartment research firm….Enrollment is particularly strong at state universities, which are actively recruiting out-of-state students in order to meet higher costs and offset budget cuts. Those students are filling up off-campus housing at a fast clip, and the schools can't afford or even keep up with construction. That is why companies like Chicago-based CA Ventures, a residential real estate developer with student apartments in several states, are getting a fresh look from investors. ‘The interest really started two or three years ago. A lot of the capital — institutional investors — needed to be educated on the space itself and what it meant to be in student housing. We had to do a lot of convincing that it wasn't all 'Animal House' structures, but actually really stable cash flow properties,’ said J.J. Smith, chief operating officer of CA Student Living. ‘Now that we have educated the institutional world, we're seeing a lot of capital interested in these properties.’ Luxury student housing is really in its infancy, and developers like Smith see a long runway ahead. Markets can shift, year to year, as some campuses meet capacity, but there are always others lying in wait. Developers used to focus on more affordable, garden-style apartments farther from campus.” (CNBC)
Low-income shoppers are in worse shape than you thought “During the second quarter, Dollar General said that combined with food deflation, these cutbacks dented its same-stores sales between 0.6 and 0.7 percent. Though a reduction in the number of people enrolled in food stamps did not play a material role in Dollar Tree's comparable sales slowdown, its target consumer "continues to be under a lot of pressure," CEO Bob Sasser said. Yet the picture remains muddy. Like the dollar stores, Wal-Mart leans heavily on low-income shoppers to fuel its sales gains. But unlike its small-shop competitors, Wal-Mart U.S. recorded its biggest comparable sales gain in four years during the second quarter. ‘Everybody's trying to figure this out,’ Joe Feldman, senior managing director at Telsey Advisory Group, told CNBC. ‘I do think that there's something broader than just simply saying Wal-Mart's taking share.’ Indeed, Dollar Tree and Dollar General — which are in the midst of robust expansion plans — are growing their overall sales at a faster clip than the rest of the market. That indicates they're grabbing market share, said Craig Johnson, president of Customer Growth Partners.” (CNBC)
Chicago’s shuttered public schools are being scooped up by developers “In a blog post on Medium, the Chicago Department of Planning and Development (yes, the DPD apparently blogs now) offered a first look at one of these adaptive reuse projects. They offer some details on how the process works: developers express interest in a property, seek landmarking designation for tax credits and waivers, and then begin the renovation. A suburban developer, Svigos Asset Management, is currently working to renovate the Elizabeth Peabody Public School at 1444 W. Augusta Blvd. and the John Lothrop Motley Public School at 739 N. Ada St. — of which both have addresses the highly coveted West Town area. The group is also working on getting landmark status for the Lyman Trumbull Elementary School in Andersonville for an adaptive reuse project there. The developer is renovating these schools and turning them into new residential developments. In their post, the DPD reveals photos of the former James Mulligan School being transformed into apartments. To be fair, the Mulligan School has been shuttered for much longer than the schools that were closed a few summers ago. However, the building is nearly ready to go and the DPD indicates that the building’s new owner is gearing up for pre-leasing.” (Curbed Chicago)
Sealy & Co. Nabs 1.5 MSF Industrial Portfolio in Dallas “Sealy & Co. has acquired an 18-building portfolio consisting of 1.48 million square feet of functional industrial space located in four prime industrial submarkets of Dallas. The assets were acquired as part of the Sealy Strategic Equity Partners LP portfolio. ‘The industrial portfolio acquisition is a fitting addition to the current SSEP portfolio, providing functional properties and further tenant diversification,’ Scott Sealy Jr., Sealy & Co.’s vice president of business development, said in a prepared release. ‘Sealy will continue to create value by executing a tailored investment strategy, rolling below market rents to market, and will hold or sell the properties opportunistically.’ According to a recent industrial market report published by Colliers, the Dallas industrial market continues to ride a rising tide of increasing rents and strong demand in the second quarter of 2016, propelling the area to the highest levels of construction in the nation. So far in 2016, over 2.9 million square feet of spec ‘big box’ warehouses have been delivered, and these properties are 55 percent leased.” (Commercial Property Executive)
Gramercy Closes $207M Office Portfolio Sale “Gramercy Property Trust has closed on the sale of three single-tenant office buildings in Princeton, N.J., Burlington, Mass., and Bloomington, Minn., and one single-tenant industrial facility in Phoenix, Ariz., for a total of $206.7 million. The weighted average remaining lease term for the four sold properties was 10.1 years at closing, and the blended exit cap rate was 7.4 percent on the next 12 months NOI. With these latest dispositions, part of the company’s previously announced plan to dispose of select non-core assets following the merger with Chambers Street Properties, Gramercy Property Trust has now sold approximately $1.3 billion worth of single- and multi-tenant assets in the U.S. and Europe so far this year, including properties in Phoenix, Virginia and New Jersey. On a recent earnings conference call, Gordon DuGan, Gramercy Property Trust CEO, said that acquisitions will drive the balance of Gramercy’s activity for the rest of the year, noting he “expects the company to be a net acquirer” of assets and especially so in the fourth quarter of 2016.” (Commercial Property Executive)
Flushing developer refis LIC skyscraper project with $100M from Bank of China “Chris Jiashu Xu refinanced a Long Island City development site with a $100 million loan from the Bank of China, property records show. The Flushing-based developer plans to build a 79-story, 779,000-square-foot mixed-use tower at 23-15 44th Drive. Rising 984 feet, it is slated to be the neighborhood’s tallest tower. Xu bought the site from Citigroup last year for $143 million. The new mortgage replaces a Ladder Capital acquisition loan. Dubbed Court Square City View Tower, the building will feature 660 apartments and 100,000 square feet of commercial space, according to the developer’s website. Xu’s United Construction & Development Group filed plans for the project in February. They have yet to be approved.” (The Real Deal)
Experts predict city's midtown east rezoning plan will depress the value of air rights “The city's plan to rezone midtown east will devalue air rights in the area, according to real estate experts. Last week, the city released a preliminary proposal to rezone the area, bounded by East 39th and East 57th streets to the north and south, and Madison and Third avenues to the east and west. The idea is to foster the creation of new office towers by allowing developers to build bigger in exchange for making improvements to transit and public spaces. A key component of the rezoning hinges on allowing landmarked property owners to sell air rights to any property owner within the district. The change would send a flood of air rights onto the market, causing their price to plummet as interested buyers are faced with more options. Currently landmarked property owners are able to sell rights only to owners on the same block or across the street, with little success so far. By opening up the possibility of selling to a wider pool of buyers, the city is also making air rights more plentiful, according to Bob Knakal, chair of New York investment sales at commercial brokerage Cushman & Wakefield. According to the city, 3.5 million square feet of air rights in midtown east will be up for grabs. ‘All of a sudden there will be a significant supply,’ he said.” (Crain’s New York Business)
Racing against the recession “At the beginning of 2013, Joseph Chetrit and David Bistricer set the city’s real estate circles abuzz when they outbid 21 competitors to buy the Sony Building on Madison Avenue for an astonishing $1.1 billion. The team planned to convert the massive 850,000-square-foot office tower into luxury condos, a hotel and retail space. The cherry on top of the 37-story building, it was later revealed, would be a record-shattering $150 million penthouse. ‘It’s 2007 all over again,’ Dan Fasulo, the former head of research at Real Capital Analytics, told the New York Times at the time, adding, ‘It’s a real trophy in a great location, but that’s a big number for a transitional asset.’ Turns out the price tag may have indeed been too big. This past April, amid ever-heightening concerns about the state of the luxury condo market, the duo pulled the plug on the project, electing to sell the building for $1.4 billion to a partnership led by the Olayan Group. The Saudi family-run company is planning to maintain the Sony tower as an office building. In a phone interview last month, Bistricer told The Real Deal that it was ‘a lot easier to transact’ than to move forward with a condo conversion. But he added that there would ‘always be a market’ for high-end luxury in the city. Market watchers, of course, took a more skeptical view.” (The Real Deal)
Samsung recalls Galaxy Note 7 after battery explosions — Samsung recalled its Galaxy Note 7 smartphones on Friday after finding some of their batteries exploded or caught fire. Samsung’s Note 7s are being pulled from shelves in 10 countries, including South Korea and the United States, just two weeks after the product’s launch. Customers who already bought Note 7s will be able to swap them for new smartphones in about two weeks, said Koh Dong-jin, president of Samsung’s mobile business. The recall, the first for the new smartphone though not the first for a battery , comes at a crucial moment in Samsung’s mobile business. Apple is expected to announce its new iPhone next week and Samsung’s mobile division was counting on momentum from the Note 7’s strong reviews and higher-than-expected demand. (AP)
FDA bans antiseptic chemicals from soaps; no proof they work — The federal government Friday banned more than a dozen chemicals long-used in antibacterial soaps, saying manufacturers failed to show they are safe and kill germs. “We have no scientific evidence that they are any better than plain soap and water,” said Dr. Janet Woodcock, the Food and Drug Administration’ drug center director, in a statement. Friday’s decision primarily targets two once-ubiquitous ingredients — triclosan and triclocarban — that some limited research in animals suggests can interfere with hormone levels and spur drug-resistant bacteria. The 19 banned chemicals have long been under scrutiny, and a cleaning industry spokesman said most companies have already removed them from their soaps and washes. The FDA said it will allow companies more time to provide data on three additional chemicals, which are used in most antibacterial soaps sold today. (AP)