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Nine Must Reads for CRE Investors Today (Jan. 27, 2022)

NMHC reports that higher interest rates have started to impact multifamily fundamentals. Mike Lafitte is leaving his post as global group president of CBRE’s client care business and CEO of Trammell Crow, reports CoStar News. These are among today’s must reads from around the commercial real estate industry.

  1. Work-from-Home Trend Leads to Property Tax Turmoil in Office Sector “In the context of a real property tax appeal, the valuation of office buildings can be complex. Typically, an arms-length or comparable sale is the best evidence of value in a tax appeal proceeding. Since there aren’t many arms-length purchases of single office buildings today, they are commonly valued by capitalizing the property’s rental income stream minus property-based expenses. As a result, the actual rents collected are critical to the building valuation.” (REBusiness Online)
  2. Rents Fall, Transactions Slow: NMHC Survey “Apartment market conditions lost ground according to the January 2023 Quarterly Survey of Apartment Market Conditions from the National Multifamily Housing Council. Falling below the breakeven level of 50 were the Market Tightness (14), Sales Volume (10), Equity Financing (20) and Debt Financing (25) indexes. Monthly rents have fallen nationwide, a reflection that the Federal Reserve’s interest rate hikes are exerting the impact they were intended to have on prices, NMHC reported.” (Multi-Housing News)
  3. The Typical American Renter Is Now Rent-Burdened “The typical American renter is now rent-burdened — meaning that 30 percent of the median U.S. income is required to pay the average rent, according to a new report from Moody’s Analytics. ‘This 30 percent is a symbolic threshold, a milestone,’ said Thomas LaSalvia, the director of economic research at Moody’s. Reaching this threshold puts typical American renters — who earn the median income and pay the average rent — where they have never been before, Mr. LaSalvia said.” (The New York Times)
  4. Blackstone Earnings Fall as Firm Misses Asset Target “Blackstone Inc.’s income fell during the fourth quarter, and the investing giant’s assets under management came in shy of the $1 trillion target it expected to reach in 2022 as fundraising weakened in some of its strategies aimed at individual investors. The New York investment firm reported net income of $557.9 million, or 75 cents a share, compared with a profit of $1.4 billion, or $1.92 a share, during the same period a year earlier. A drop in the value of Blackstone’s real-estate investments contributed to the profit decline. Valuations fell by 2% and 1.5% from the previous quarter for its two main strategies.” (The Wall Street Journal)
  5. Why the Renter’s Bill of Rights Won’t Help Much “According to government figures, 44 million households rent their homes. Most see the pressure they are under. People who own a home, if they bought before the fall of 2021 probably have a relatively low interest rate on their mortgage, likely have a long-term loan that makes that aspect of ownership stable and predictable in cost. Renters have no such promise. One of the financial principles for those who invest in real estate is to raise rents over time, because that increases their annual income and also the ultimate value of the property.” (Forbes)
  6. The Role of Real Estate Investment Trusts in Staffing U.S. Nursing Homes “In 2021 real estate investment trusts (REITs) held investments in 1,806 US nursing homes. REITs are for-profit public or private corporations that invest in income-producing properties. We created a novel database of REIT investments in US nursing homes, merged it with Medicare cost report data (2013–19), and used a difference-in-differences approach within an event study framework to compare staffing before and after a nursing home received REIT investment with staffing in for-profit nursing homes that did not receive REIT investment. REIT investment was associated with average relative staffing increases of 2.15 percent and 1.55 percent for licensed practical nurses (LPNs) and certified nursing assistants (CNAs), respectively.” (Health Affairs)
  7. Global Group President of CBRE to Depart World’s Largest Brokerage “Longtime CBRE leader Mike Lafitte is departing the world's largest real estate services firm by revenue next month, saying that after about 40 years in the industry he's looking forward to serving on boards, investing and seeing whether any business opportunities catch his eye. Lafitte, global group president of Dallas-based CBRE's client care business and CEO of Trammell Crow Co., CBRE's development arm, is leaving the company where he has worked for more than 25 years on Feb. 17, according to a Securities and Exchange Commission filing from Wednesday.” (CoStar News)
  8. Amazon Makes Key Real Estate Hire “Amazon declined to comment but a source with direct knowledge of the situation said the hire is the start of a years-long transition that will end with the retirement of John Schoettler, the company's longtime real estate chief.” (Austin Business Journal)
  9. Sam’s Club to Open 30-Plus New U.S. Stores, Five Distribution/Fulfillment Centers “Sam’s Club is embarking on its most aggressive expansion in years. The Walmart Inc.-owned membership warehouse club retailer plans to open more than 30 new clubs across the United States during the next several years. The first location, which is planned for Florida, is slated to open in 2024.  The company is also expanding its fulfillment and distribution center network. Sam’s Club, which operates approximately 600 stores in the U.S., including Puerto Rico, has not opened a new club in years.” (Chain Store Age)
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