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10 Must Reads for the CRE Industry Today (July 16, 2019)

Blackstone is in talks to buy one of the world’s largest building materials suppliers, reports the Wall Street Journal. Deutsche Bank will downsize its new space at Time Warner Center, according to the New York Post. These are among today’s must reads from around the commercial real estate industry.

  1. Blackstone Close to Deal to Buy CRH Division “Global buyout firm Blackstone Group Inc. is in advanced talks to buy the European distribution arm of CRH, one of the world’s largest building-materials suppliers, according to people familiar with the matter. The sale price couldn’t be learned. The deal would cap CRH’s monthslong review of the business as the company tries to simplify its global operations and bolster profits. It also follows CRH’s move last year to sell its U.S. distribution business to Beacon Roofing Supply Inc. for $2.63 billion.” (Wall Street Journal, subscription required)
  2. Fannie, Freddie Need Explicit Government Guarantee, Securities Industry Group Says “A prominent financial industry group has written to leaders of the effort to overhaul Fannie Mae and Freddie Mac, the mortgage guarantors under federal control, arguing that the two enterprises must have an explicit government guarantee of the bonds they sell to investors if the mortgage market is to continue to function smoothly. ‘Our members believe that market participants will no longer consider an implicit guarantee... as equivalent to an explicit guarantee,’ said Kenneth Bentsen, Jr., president of the Securities Industry and Financial Markets Association, known as SIFMA.” (MarketWatch)
  3. How to Invest in Real Estate to Build Long-Term Wealth “Before getting in to any type of real estate investment, get the rest of your financial house in order — establish an emergency fund, pay off consumer debt, and automate your retirement savings. Real estate is a particularly expensive investment, so you need to have cash on hand for a down payment (or to buy the property outright) and a reserve to dip into if and when something needs fixing, which should be entirely separate from your everyday emergency fund.” (Business Insider)
  4. IKEA to Close its Only U.S. Factory “Furniture company IKEA is closing its only manufacturing site in the U.S., shifting the operations to Europe where it says production costs are lower. The company’s Danville, Va., facility will be closing in December, resulting in about 300 job cuts. The plant, which opened in 2008, produces wooden shelves and storage units sold in IKEA stores in the U.S. and Canada.” (Wall Street Journal, subscription required)
  5. Deutsche Bank Cutting Space at New Office Prior to Move “Embattled Deutsche Bank is downsizing so fast it’s giving up some of its relocation space at Time Warner Center before it even moves in. The German giant has already returned two floors to landlord Related Companies, sources told Realty Check. Although the floors contain only about 60,000 square feet of the 1.1 million square feet Deutsche has leased at the Columbus Circle tower, banking and real estate insiders said it could presage future reductions through sublease.” (New York Post)
  6. Recession Fears Rise for Middle-Class Families “The average family doesn’t feel as good today as yesterday. Middle-class Americans are less optimistic about their economic prospects than they were just six months ago, according to a new report from CUNA Mutual Group. Although the majority of those polled said they feel relatively stable overall, they graded their chances of achieving the American dream as a ‘C,’ down from a ‘B-minus’ in the fall, the insurance provider found.” (CNBC)
  7. These Real Estate Execs Are Donating Big This Campaign Season “As the campaign season heats up, a preliminary list of second-quarter Federal Election Commission contributions reveal a number of real estate executives and developers made donations of varying amounts. The Real Deal gathered the data from the FEC’s website and ordered the donations by dollar amount, from highest to lowest. The data does not include state and local contributions, and only captures donations filed before Friday, July 5. The final deadline to file donations is July 15.” (The Real Deal)
  8. Foreign Property Investors Hedge Bets Declining as U.S. Interest Rates Dip “According to CBRE, with the sharp drop in U.S. interest rates in 2019, the differential between U.S. rates and those in countries with lower-yielding foreign currencies has narrowed, contributing to lower hedging costs for foreign investors acquiring U.S.-dollar-denominated assets. Across eight major global currencies, the annual cost of hedging against U.S.-dollar (US$) depreciation has decreased year-to-date for all but the Australian dollar (AU$).” (World Property Journal)
  9. Upstate NY Mall Changes Hands for $30M “Douglas Development Corp. has purchased a super-regional shopping mall in a suburb of Buffalo, N.Y., with plans to revitalize the struggling asset. The Washington, D.C.-based development firm led by Douglas Jemal acquired the 961,800-square-foot Boulevard Mall in the Erie County town of Amherst for nearly $30.1 million. The transaction included the $6 million sale of an adjacent Wegmans grocery store. HFF, which has since been acquired by JLL, marketed the mall property in conjunction with Ten-X on behalf of LNR Partners.” (Commercial Property Executive)
  10. U.S. Property Trust Vornado Challenges Arcadia’s Restructuring Plan “Philip Green's fashion empire Arcadia Group said on Tuesday it received applications from legal entities of U.S.-based property group Vornado challenging two of its seven planned Company Voluntary Agreements (CVAs). Arcadia said the challenges to the CVAs, which were approved in June by the majority of creditors, were ‘without merit’ and it would defend itself against them. Vornado, a landlord to some of the Topshop and Topman stores in New York, was not available to respond to Reuters request for a comment outside of business hours.” (Reuters)
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