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14 Must Reads for Real Estate Investors (Aug. 4, 2023)

The Wall Street Journal analyzed the fundamentals in the industrial real estate sector. Several executives pushed back on the narrative about the troubles facing the commercial real estate sector. These are among the must reads from around the real estate investment world to end the week.

  1. How Brookfield made $2B in defaults disappear “The company privatized Brookfield Property Partners in 2021, allowing it to be selective about what it discloses about its real estate holdings. Things that were once a big deal can now be positioned as a drop in the bucket. The L.A. office portfolio, for example, which once made up 35 percent of Brookfield Property Partners’ core U.S. office holdings on a square footage basis, is nowhere to be found in its most recent quarterly or annual reports. The defaults are not mentioned.” (The Real Deal)
  2. Why Warehouse Rents Keep Going Up While Demand Is Dropping “The gap between falling demand and rising prices is in part the result of particular dynamics of the industrial real-estate market, experts say, where warehouse operators and their customers typically sign deals for three to five years, basing leasing decisions on long-term prospects rather than short-term market conditions.” (The Wall Street Journal)
  3. Are Investors Overreacting to Weakness in Commercial Real Estate? “Currently, the cap rate for REITs is 50 basis points higher than private real estate. Historically, this has indicated a buying opportunity in the sector especially as some of the macro headwinds of the sector seem to be dissipating with the vast majority of real estate prices holding steady and the Fed in the final innings of its rate hike cycle.” (FINSUM)
  4. Vornado CEO Roth: Investors Have 'Short-Sighted And Emotional' View Of Office “In the last few months, Vornado has spent $29M buying back more than 2 million of its own shares after announcing a $200M stock buyback earlier this year. Roth, who previously said he had resisted buybacks ‘for years and years,’ said Tuesday that the current view on office is similar to that of malls five years ago.” (Bisnow)
  5. ‘Sentiment Around Office Is Worse Than The Reality’: Boston Properties Stock Up On Q2 Earnings “Boston Properties President Doug Linde said that usage of its office buildings picked up last quarter, with 80% of the desks in its New York City buildings being used at least once a week, 75% in Boston and 70% in San Francisco.” (Bisnow)
  6. A Harry Markowitz tribute: Modern Portfolio Theory and the case for U.S. real estate “Applying MPT to commercial real estate, we present a scatterplot of the average returns and standard deviations of differently weighted portfolios across the U.S., APAC and Europe. This shows that the optimal commercial real estate portfolio would include more than 50% exposure to U.S. real estate with the balance favoring APAC.” (CBRE)
  7. Development Is Hard to Execute in Black Communities. Churches Are Stepping In. “Black churches nationwide are working to break this injurious pattern by spearheading real estate developments in their own backyards that can do this — and more. In truth, these institutions have played a significant and effective role in the lives of Black people living in the U.S., and community development, for more than two centuries.” (Commercial Observer)
  8. Look deeper into private markets to find equity-like returns “Real estate is a well-known private investment asset, but there are other options such as infrastructure, private credit, and other niche asset classes like legal and intellectual property claims. Infrastructure could mean investing in a pipeline that supplies water to a major city. In good times and bad, people pay their water bills. It’s an investment that’s expected to deliver a return in the mid-teens while also offering inflation protection.” (Smart Business)
  9. Ikea Parent Takes Coworking Concept Global With Industrious Partnership for First US Outpost “It may be known for its meatballs and do-it-yourself furniture, but home furnishings giant Ikea is breaking out of its typical blue and yellow box with plans to launch its fledgling coworking concept in the United States.” (CoStar)
  10. Greenlaw, Shopoff called “preferred developers” in Anaheim probe “Laguna Niguel-based firm JL Group published the report, after the Anaheim City Council commissioned the firm to lead an independent investigation into political corruption at CIty Hall in light of the FBI probe.” (The Real Deal)
  11. Elon Musk's giant 'X' sign is going to cost his landlord fees for building without a permit “San Francisco's Department of Building Inspection told Insider that the property owner of the building located at 1355 Market Street will be charged fees for the lack of permits related to the recent erection and dismantling of Musk's massive ‘X’ sign atop the building.” (Insider)
  12. How Primark Built a Thriving Fashion Business Without Selling Online “E-commerce is booming, but Primark is increasing its revenue by focusing on retail stores. WSJ’s Trefor Moss explains how Primark has gained a foothold in the U.S. fashion industry by pushing customers to shop in-store.” (The Wall Street Journal)
  13. New York City Is Poised to Make Outdoor Dining Permanent, With Caveats “The City Council is expected to approve a bill on Thursday that would allow restaurants to continue to offer outdoor dining in roadways under a new licensing system, but not during the winter months.” (The New York Times)
  14. Nike in partnership to open network of fitness studios “Nike Studios are intended for a wide range of individuals, from seasoned gym veterans to those just beginning their fitness journeys. The locations will also sell merchandise.” (Chain Store Age)
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