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10 Must Reads for the CRE Industry Today (Oct. 25, 2022)

New research from JLL indicates consumers are eager to shop in store this holiday season and to maintain a healthy level of spending. Net lease REITs are outperforming the broader real estate index, according to Seeking Alpha. These are among today’s must reads from around the commercial real estate industry.

  1. NETL: Net Lease Is Outperforming the Broader Real Estate Index This Year “Net lease REITs typically trade at an average FFO multiple of about 17x, but today they trade at an average FFO multiple of 12.2x. That implies almost 40% valuation upside back to its normal level. Assuming a 5% growth rate for NETL's holdings and that the 40% valuation upside is spread across the next five years, that implies total returns of 18% annually for NETL from its current price. That's 5% from dividends, 5% from growth, and 8% from valuation upside.” (Seeking Alpha)
  2. Commercial/Multifamily Lending Expected to Fall in 2022 Due to Ongoing Economic Uncertainty “Commercial/Multifamily borrowing and lending started the year on strong footing, but higher rates and economic uncertainty have impacted demand and activity during the second half of the year. According to our updated baseline forecast released earlier this month, total commercial and multifamily mortgage borrowing and lending is expected to fall to $766 billion this year, down 14 percent from 2021 totals ($891 billion). We continue to see significant changes, volatility, and uncertainty in the space, equity, and debt markets that drive commercial real estate values and transaction volumes.” (Commercial Property Executive)
  3. Builders Say They’re Ready for This Housing Slowdown. ‘I’ve Learned My Lesson’ “Finished homes are sitting on the market, hundreds of thousands of new ones are expected to be completed in the coming months, and many builders are cutting prices. Existing-home prices are declining from their springtime peaks, and single-family home construction in September fell 18% from a year earlier. During the earlier housing downturn, which was triggered in part by the collapse of the subprime-mortgage market, about half of all home builders disappeared. Home builders that lived through that said they learned some hard lessons, and that the current slowdown won’t lead to another industry implosion.” (The Wall Street Journal)
  4. TREP IV Raises Over $6.8 Billion for Fourth Fund in Opportunistic Series “TPG Real Estate (TPGRE), the dedicated real estate platform of global alternative asset firm TPG, announced today it has closed its latest opportunistic real estate equity fund, TPG Real Estate Partners IV (TREP IV). The fund was oversubscribed, hitting its hard cap and securing more than $6.8 billion of total commitments. TREP IV was formed as a continuation of TPGRE’s opportunistic real estate fund series. Its strategy focuses on thematic investing primarily in property‐rich platforms and strategic portfolio aggregations in the US and Europe. Since inception, TPGRE has invested and committed approximately $9.1 billion of equity in line with this strategy.” (Business Wire)
  5. Invitation Homes Eyeing a $1B Joint Venture “Invitation Homes is floating RSVPs to potential partners for a joint venture as the housing market teeters. The single-family rental firm is looking for a partner on a $1 billion joint venture, Bloomberg reported. People familiar with the matter told the outlet the landlord is working with Eastdil Secured to find a possible partner. Invitation Homes is in the early stages of its search for a joint venture partner.” (The Real Deal)
  6. What’s Ahead for Retail This Holiday Season: JLL “Just when it seemed that the pandemic-induced surge in online shopping would keep the majority of U.S. consumers out of the stores during the holidays for good, the tide has turned. According to JLL’s Retail Holiday Survey 2022, most consumers are more eager to venture out beyond their laptops to do holiday shopping in 2022 than they have been in two years.” (Commercial Property Executive)
  7. Goldman Sachs Launches Chinese Infrastructure Real Estate Joint Venture “Goldman Sachs has launched a joint venture in China with local logistics company Sunjade in a bid to boost investment in Chinese logistics and infrastructure real estate assets, the U.S. bank said on Monday. The bank is forming the new unit via its investment arm Goldman Sachs Asset Management, which has invested more than $50 billion globally in real estate businesses, according to a company statement.” (Reuters)
  8. ‘Why Bother with a Real Map?’: Here Are Dubious Sites NIMBA Bay Area Cities Propose for Housing “As Bay Area cities furiously write plans describing how they’ll meet state housing goals, some have offered up outlandish or logistically impossible sites.” (San Francisco Chronicle)
  9. The Company Once Known as Restoration Hardware Is Opening Restaurants. Why? “On a recent night at the Dining Room at RH Guesthouse New York — a restaurant from the home-design company formerly known as Restoration Hardware — the server began her tableside spiel with a paean to the surroundings: ‘Welcome to our very beige space.’ The room, she explained, was built from white oak and Italian travertine. Each table, chair and light fixture was custom made. The hearth was carved from a single slab of stone. Creating the space — which looks like a high-end art museum without any of the art — took nearly seven years, she said.” (The New York Times)
  10. Real Estate Interests Drive Congestion Pricing in Manhattan to the Finish Line “New York’s ambitious plan to toll drivers who enter Manhattan below 60th Street is on track to launch by the end of next year with heavy support from the real estate community blunting complaints from political leaders and motorists. State and federal agencies are this fall determining the environmental impact of the congestion pricing law after several weeks of contentious public hearings. During those hearings, drivers often whined about the cost of proposed tolls, which could range between $9 and $23 per day, while demanding discounts and exemptions.” (Commercial Observer)
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