Category: CRE (11)

Source: CoStar
By: John Doherty
Link: Amazon HQ2

After Amazon gave his county a painful snub in January, David Iannucci is stuck exactly where 19 communities may find themselves in coming months: trying to market sites that online retailer Amazon rejected for its new $5 billion second headquarters.

Iannucci, head of economic development for Maryland’s Prince George’s County, said he’s been in talks with “several dozen” companies since the world’s largest retailer rejected the county’s bid for its second headquarters, known as HQ2. Many of those companies are looking to move from nearby Washington, D.C., including tech and cybersecurity firms. Those companies aren’t promising to bring 50,000 jobs, like Amazon, though. More like 300 to 400 apiece. And here’s the real peril for other losing cities: After eight months, Iannucci still has no takers, just talkers.

Even so, he said the process has improved the county’s pitch in those talks: “This process reinforced our knowledge of our strengths. We see that there are things we could focus on and promote. That won’t stop.”

For cities from Boston to Atlanta, the effort to woo Amazon has led officials to come up with development plans for long-fallow areas they can quickly turn around and pitch as facility sites for other companies if they meet the same fate. In Newark and Denver, officials say they are positioned to attract other companies should Amazon reject them, Atlanta’s mayor is urging steps that could position the city to find other companies after a rejection, and Boston already has an alternative in place.

To a greater and lesser extent, the 20 finalist cities are beginning to grapple with an irrefutable truth: All but one will lose this commercial real estate beauty pageant. Most of the sites proposed as HQ2 homes are too large to quickly market to another company other than Seattle-based Amazon because the list of U.S. corporations needing that kind of space can be counted on one hand.

In some cases, the process of applying itself was edifying: Officials in finalist cities Newark and Denver both say the process raised their profile as legitimate hosts for corporate headquarters. They hope that could pay off down the line, even if Amazon passes them over.

“There is a lot of excitement in the development world about the possibilities for Amazon,” said Richard Dunn. He’s vice president of operations at Paramount Assets, an investment firm that owns about 40 properties in downtown Newark.

“Even making that list of the 20 basically tells the tale about the resurgence of Newark,” he says. “Now if Newark wasn’t in a resurgence stage, if it wasn’t for its renaissance, obviously Amazon wouldn’t be looking at Newark.”

Whether or not Amazon picks it, the proposal process has elevated the city’s profile not only nationally but internationally in a tangible way, local officials said, and they intend to build on that momentum.

“We’ve seen a huge uptick in the number of inquiries that are coming into our office,” said Aisha Glover, president and chief executive of the Newark Community Economic Development Council. “And then, just kind of anecdotally speaking to brokers around the city, they’ve been saying how the quality of the inquiries has changed. For them, the uptick in inquiries hasn’t been so dramatic, but the types of firms that been inquiring with them.”

The same goes for Denver. Sam Bailey, who, as vice president of the Metro Denver Economic Development Corp., is managing the state’s bid for Amazon’s second headquarters. He said there’s now a burgeoning pipeline of 31 active prospects for space that represents more than 12,000 jobs and about $1.5 billion in capital expenditures from entrepreneurs to Fortune 500 companies. Denver winning a spot on Amazon’s short list has been noted about 30 percent to 40 percent of the time in those discussions, Bailey said.

“We always looked at this as if we don’t win HQ2, we’re going to make the most of this opportunity to showcase to the world everything that is going on in our region,” Bailey said. It will put Denver on the minds of future executives looking for new corporate digs, he said. “The experience, the notoriety, the visibility – we could’ve spent millions of dollars and never have gotten the exposure we’ve had,” Bailey added.

Other finalists aren’t so sure. Austin, Texas, another member of the 20-region shortlist, has endured a long local debate about what inviting the corporate giant into their city might do to it: raise rents, increase traffic, mess up the balance of the artsy city’s culture.

“I don’t know that we want to be” Amazon’s second home, Austin Mayor Steve Adler admitted this past March.

A poll conducted by Elon University and American City Business Journals found 13 percent of Austin locals don’t want their city to host Amazon’s second headquarters, second only to Denver, at a whopping 17 percent.

The full details of what Austin has offered to Amazon are between the city and the online retail giant, but if the mayor’s comments are any indication, Amazon was left wanting. On the day of Amazon’s shortlist announcement, Austin Mayor Steve Adler reiterated the reluctance of city leaders to extend tax breaks and other incentives in order to lure Amazon HQ2.

In other cases, the competition itself sparked questions about economic development. How far was a city willing to go to land a whale like Amazon: Would it offer free land, reduced taxes or no taxes?

Atlanta Mayor Keisha Lance Bottoms last month urged the City Council to support proposed incentives to make a site leaders see as critical to downtown Atlanta more appealing to developers.

Known as the Gulch, the site is a former railyard that covers 30 football fields worth of land near CNN Center and Mercedes-Benz Stadium, and has lain fallow for decades. While the city hasn’t officially confirmed it is the site for its bid for Amazon’s headquarters, several council members said they believe the incentives push is designed to help in the city’s bid to land HQ2.

With or without Amazon, Bottoms said the city has a “once in a lifetime” opportunity to redevelop the Gulch and stressed that developer CIM would assume all financial risks of the $3.5 billion development. She added that the redevelopment of the Gulch “will ultimately generate tens of millions of dollars a year in tax revenues” and create thousands of jobs. The mayor’s push for incentives so late in the Amazon selection process would leave the city in a stronger position to find alternative companies to occupy the site should it not be selected as home to HQ2, city leaders said.

Other cities are also not making the HQ2 battle their only priority.

In Boston, the primary site for a possible new headquarters is at Suffolk Downs, a 161-acre former horse-racing track that straddles Boston and the northern suburb of Revere. Long under-used, the site has been the subject of several redevelopment efforts over the years.

In 2017, Boston investment firm HYM Investments paid $155 million for the site. It was offered up as an HQ2 contender, but some preliminary plans have also called for a massive mixed-use project with apartments, for-sale homes and office and retail space.

Whatever happens, according to HYM, the firm will keep shopping the site.

That day-after thinking is starting to pervade most planners in HQ2 finalist cities. And Iannucci, of Prince George’s County, thinks that’s the right attitude.

His bid didn’t make it, but bids in nearby Washington, D.C., Montgomery County, Maryland and Northern Virginia did. Any of those sites, if picked, could have a spill-over effect – jobs, housing demand – for Prince George’s.

“We stand by ready to help [those finalists] any way we can,” he says.

Still, as 19 other cities will discover it hurts to be told no.

“Amazon was wrong about their conclusion about our workforce,” said Iannucci, a former Maryland state Secretary of Commerce. “We have feelings about that to this day.”

Contributing to this article are CoStar News Reporters Kyle Hagerty, Linda Moss, Jennifer Waters and Tony Wilbert.

Source: CoStar
By: Jacquelyn Ryan
Link: Oyster Point Tech

Los Angeles’ Kilroy Realty Corp. has closed on its $308 million acquisition of San Francisco’s life science development site Oyster Point from a development group led by China’s Greenland USA, the company announced today.

The 40-acre industrial site, entitled for 2.5 million square feet of development, spans the waterfront in South San Francisco.

The sales price provides an 80 percent return for Greenland’s group, which has done some demolition work since buying it fully entitled for $171 million two years ago from Shorenstein Properties and SKS Partners.

In recent years, the South San Francisco region’s commercial biotech market has expanded to more than 12 million square feet of office and laboratory space across more than 500 acres, accommodating a range of entrepreneurial start-ups and established companies such as Amgen and Genentech.

The area’s popularity with the life science community is so strong that the market’s Class A office and lab space has a vacancy below 3 percent, according to Kilroy.

Kilroy plans to build 11 buildings that will include a laboratory and more office space in phases across the newly-acquired property.

The site adjoins the real estate investment trust’s three-building Oyster Point Tech Center, a 146,000-squre-foot project that is home to DNA testing company 23andMe Inc. The firm acquired the site earlier this year for about $111 million, according to CoStar data.

On a combined basis, the overall project will give Kilroy a significant footprint in South San Francisco’s large and rapidly-growing life science community, home to more than 200 biotech companies.

“Kilroy Oyster Point is a significant opportunity to expand our West Coast life science platform in a prudent and disciplined manner,” said John Kilroy, the REIT’s chairman and chief executive, in a statement. “It offers all the advantages we look for in new development – a strong location in a world-class market serving a dynamic industry with all the services and amenities required to attract today’s young, urban innovative workforce.”

The property adds to the company’s 13.9 million-square-foot portfolio in Los Angeles, Orange County, San Diego, the San Francisco Bay Area and greater Seattle.

Source: CoStar
By: Randyl Drummer
Link: Office Market 2020

Office completions are expected to peak this year and begin trending lower amid signs of a slowdown in U.S. office demand, a declining working-age population and an extended economic recovery entering the late stages.

That slowdown in construction is a good thing for office investors as it should keep supply in check and help extend the stable growth seen in office rents and sale prices.

Total office space under construction fell 7% in the first quarter of 2018 to 141 million square feet, down from 152 million square feet during the first quarter a year ago. The drop in construction occurred even as the national office occupancy rate continued to cruise in the first three months of the year at just under 90 percent, according to data presented at CoStar’s First-Quarter 2018 U.S. Office Review and Forecast.

“It’s been a remarkable cycle, especially lately, with very little movement in occupancy over the past year,” said CoStar Managing Consultant Paul Leonard, who presented the first-quarter office market analysis along with CoStar Portfolio Strategy Managing Director Hans Nordby.

With demand largely in check with supply in most metros, the national office market remains in a period of stability, Leonard said. While, annual rent growth has fallen well below the market peak of 5.6 percent, average office rents continue to increase at a healthy 2.1 percent clip.

“We’re expecting very little rise in vacancy over the next few years, maybe one or two tenths of a percentage point through 2019,” added Leonard. “That’s why we’re continuing to see good rent growth even though demand growth is beginning to slow.”

While new construction is trending lower, office deliveries are expected to peak in 2018 as several large build-to-suit projects, such as Apple’s mega campus in Cupertino, CA, reach completion. Office construction levels are expected to slow considerably in 2019 and 2020, Leonard added.

“Construction starts are down year-over-year and have been basically flat for two years,” Leonard said. “Uncertainty in the remaining length of the cycle, coupled with diminished rent growth, will give enough developers pause, slowing the supply trend overall.”

Despite the decrease in office construction activity, the level of speculative construction, which involves new development without a tenant commitment, is continuing to ramp up.

This is partly due to several high-profile built-to-suit projects reaching completion, resulting in a slow increase over the past year in the amount of space available for lease as a percentage of total office space under construction, Leonard said.

While the increase in speculative activity bears watching and certain markets, such as San Francisco, continue to see elevated office construction levels, the decline in new construction activity overall is good news for the market, Nordby said.

“The total amount of office space which is under construction is trending downward before the market hits the wall,” Nordby added.

Source: CoStar News
By: Randly Drummer
Date Posted: September 21, 2017

The commercial real estate industry’s chief lobbying group Tuesday urged lawmakers to take a measured approach in deciding on changes to how commercial property and other corporate assets are taxed, cautioning that the elimination of the deduction for interest on debt and reducing the tax rate for pass-through business income could cause severe damage to the U.S. economy.

While supporting a broad acceleration of economic growth through tax reform that would boost real estate construction and development and spur job creation, Congress “should be wary of changes that result in short-term, artificial stimulus and a burst of real estate investment that is ultimately unsustainable and counterproductive,” Real Estate Roundtable President and Chief Executive Officer Jeffrey DeBoer said in testimony before the Senate Finance Committee.

“Real estate investment should be demand-driven, not tax-driven,” DeBoer said. “In short we should avoid policies that create a sugar high that is fleeting and potentially damaging to our future economic health.”

Meanwhile, the Senate Finance Committee focused on business interest deductibility and other corporate tax issues in what could provide a clue to what measures will be included in a tax-reform outline that Republican tax writers plan to release next week.

DeBoer and others, including Troy Lewis, the immediate past chair of the tax executive committee of the American Institute of Certified Public Accountants, warned that scrapping the deduction would increase the cost of capital, disrupt credit markets, hurt small businesses that lack access to equities markets and discourage investment in commercial development and other business activities.

DeBoer noted that interest on the cost of borrowing is an ordinary and necessary business expense that has always been deductible. PLacing restrictions on capital markets would discourage business expansion, he asserted, and said the impact would fall disproportionately on developers and other entrepreneurs in small and medium-sized markets.

“As interest rates rise, the harm to the economy will grow,” DeBoer said.

While shortening real estate depreciation from the current 30 years to 20 years would spur investment, DeBoer also warned that a proposal to allow full expensing of depreciation is “a risky and untested proposal.”

Tax experts such as Scott Hodge, president the Washington, D.C.-based Tax Foundation; and Donald Marron of the Urban Institute and Urban-Brookings Tax Police Center, said reform of the corporate tax code, including cutting corporate tax rates from 35% to 20%, would provide a dramatic boost to the economy.

Marron cautioned, however, that adding to the federal deficit in order to cut corporate taxes would likely offset the economic benefits.

“Policymakers should be realistic about near-term growth from business tax reform,” Marron said. “The growth effects of more and better investment accrue gradually. If reform is revenue-neutral, revenue raisers may temper future growth. If reform loses revenue, tax cuts mixed with reform, deficits may crowd out private investment.”

Link to article: CRE Tax Code

Source: BisNow
By: Chuck Sudo
Date Posted: August 25, 2017

Industrial real estate is in a golden age of low vacancies and cap rates, record demand and a packed pipeline across the country. E-commerce remains the biggest disruptor in the sector, providing opportunities for developers and investors as well as new headaches.

Read more at: https://www.bisnow.com/national/news/industrial/amazon-is-the-best-thing-to-happen-to-industrial-real-estate-in-years-and-the-sectors-biggest-disruptor-78236?rt=46489&utm_source=MorningBrief&utm_medium=email&utm_campaign=20170828_san-francisco_morningbrief&be=sarah%40calcosf.com?utm_source=CopyShare&utm_medium=Browser

Source: CoStar News
By: Randyl Drummer
Date Posted: July 20, 2017

Investors continued to buy less commercial real estate in both the second quarter and the first half of 2017 compared to the same periods a year ago, a trend that started in 2016 as steady fundamentals that have resulted in generally robust occupancies and rental rate gains have boosted valuations across most property types.

However, CRE investment sales are still running about 10% above the historical sales volume average over the past 10 years, according to preliminary U.S. investment sales data collected by CoStar’s nationwide research team. In the second quarter, preliminary volume fell to $106.7 billion compared with $129.2 billion in second-quarter 2016.
The lodging property sector saw the biggest decline in the first half of the year compared with hotel property sales in the same period in 2016, including a significant drop in the second quarter from year-prior totals. Retail and multifamily also post sales volume declines of more than 20% in the first six-month period of 2017.

The drop-off in U.S. apartment transaction volume from previous peak levels is consistent with slowing rent growth and the market’s perception of oversupply, particularly at the top of the multifamily market, noted CoStar research strategist John Affleck.

That being said, even as buyers and sellers have continued to benefit from low interest rates, which supported the trading volume among all types of commercial property that resulted in the record-shattering pace of the last two years. With interest rate beginning to trend upward, the low-financing advantage enjoyed by property investors is expected to gradually diminish in coming quarters.

“Higher interest rates have investors reevaluating commercial real estate’s core appeal this cycle: a wide spread in a low-yield world,” Affleck added. “The maturity of the economic cycle and the new administration also raise uncertainty.”

While industrial sales volume declined by double digits in the second quarter, the warehouse and light industrial market ended the first half of this year with the smallest decline among the major property types.

Conversely, office sales volume was roughly even in the second quarter of 2017 compared with the same period a year earlier, and was down only slightly in the first half compared to the first two quarters of last year and down by an even lower percentage for the trailing four-quarter period ending June 30, 2017.

Despite the modest declines in the sales volumes, “indications from our clients, especially lenders, are that the pipeline for 2017 is very strong for the remaining part of the year,” said Walter Page, CoStar director of U.S. Research, office.

Page also noted that office sales over the past year don’t factor in an additional $30 billion in new office real estate expected to deliver in 2017 due to the 90 million square feet of expected office deliveries within the top 54 U.S. metros.

“While the sales data is tracking property sales, the true level of capital transactions would count new construction as well,” Page added.

U.S. office fundamentals are tracking at a steady and balanced clip, with average vacancy holding at about an average 10.2% for each of the last four quarters, Page noted.

“The last time we had four quarters in a row with the same vacancy rate was back in 2003 and 2004, when vacancy was 12.5%,” Page said, adding that CoStar’s forecast calls for vacancy to remain in the 10.2% to 10.5% range until 2019 as delivery of new office supply is expected to track with demand and net absorption.

The preliminary data shows both suburban and CBD office properties logged increases in the average price per square foot between the first and second quarters of 2017, according to CoStar Vice President of Research Dean Violagis.

Industrial: E-Commerce Continues to Drive Warehouse Demand

Likewise, the U.S. logistics and light-industrial property market remains in healthy balance, with more than $33 billion in U.S. industrial sales recorded in the first half, down only slightly from the same period in 2016.

“Investor appetite remains strong for industrial properties in large part because of the compelling e-commerce demand story,” noted CoStar Portfolio Strategy Managing Consultant Shaw Lupton. “With industrial construction in balance with supply, rent growth remains uncharacteristically the highest of any property sector.”

Logistics occupancies have seen little change over the past few quarters, ending the second quarter of 2017 at 93.4% as second-quarter absorption totaled a strong 42.8 million square feet, driving the 12-month trailing average to 182.3 million square feet.

Strong interest from the capital markets should keep industrial yields low, even in the face of rising interest rates, Lupton concluded.


Retail: Store Closures Affecting Investor Appeal

The ongoing spate of store closure announcements this year have had a measurable impact on the liquidity of U.S. retail properties, with investment volume decreasing by significant percentages in the second quarter and first half of 2017 compared to the same period a year earlier, according to CoStar Portfolio Strategy managing consultant Ryan McCullough.

The retail market posted its second straight quarter of flat fundamentals in the second quarter, with vacancies holding at 5.2%. Demand has lagged behind supply growth since the start of the year as the market officially transitions to a “late expansion” phase in the real estate cycle, lowering rent growth expectations for landlords, McCullough said.
However, the announced closures by dozens of national chains, including Sears, Kmart, Macy’s, JC Penney, RadioShack, Payless ShoeSource and most recently, Gymboree, have not had a similar effect on pricing, McCullough noted.

Retail property pricing has increased by 8.5% over the past four quarters, according to the equal-weighted CoStar Commercial Repeat Sale Index (CCRSI).

“This divergence is perhaps an indication that investors taking a more critical eye toward asset quality, being more selective about acquisition targets but still valuing performing assets highly,” McCullough said.

Both composite indices within the CoStar Commercial Repeat-Sale Index (CCRSI) posted gains in May, even as slower growth at the top end of the CRE market continued while overall absorption moderated and transaction volume continued to trend downward.

The equal-weighted U.S. Composite Index, which reflects more numerous but lower-priced property sales typical of secondary and tertiary markets, increased 1.3% in May, contributing to an annual gain of 16.7% in the 12-month period ending in May 2017.

Meanwhile, the value-weighted U.S. Composite Index, which reflects the larger asset sales common in core markets, advanced by just 0.3% in May, for a total 4.8% gain for the 12-month period ending in May.

Link to article: 2017 Sales Volume

California to Consider New Legislation on Dual Agency
Bills Supported by Brokerage Industry Rivals Could Clarify Disclosure Requirements in Dual Agency Transactions – Or Restrict Practice Outright

By: Randyl Drummer
April 6, 2016

A pair of bills addressing dual agency broker representation have been introduced in the California State Assembly. If taken up and passed, the proposed legislation has the potential to upend and reshape the way commercial real estate brokerages do business in California, and influence real estate practices in other states across the country.

As reported by CoStar on Friday, Assembly Bill 1059, introduced by Assemblywoman Lorena Gonzalez Fletcher, D-San Diego, would add a section to the California Civil Code prohibiting a brokerage firm, broker or any of the broker’s or brokerage’s licensees from acting as a dual agent in its representation of both the buyer and seller or any of their principals in the same commercial property transaction. The bill is scheduled for a hearing before the Assembly Judiciary Committee on May 2.

Jason Hughes, president and CEO of San Diego-based tenant representation firm Hughes Marino and a vocal critic of dual agency transactions, said he approached Gonzalez Fletcher’s office after the high court’s decision last fall about potential legislation to ban dual agency. Hughes said he recently formed a new nonprofit organization called the Association for Commercial Tenants (ACT) to advocate for the rights of businesses and tenants in commercial transactions.

“For the last 100-plus years, the commercial brokerage industry’s primary constituent has been landlords, but the real consumers are tenants,” Hughes tells CoStar. “Companies that lease or purchase office, industrial, manufacturing, retail, R&D, lab, and other space have always been on the short-end of the receiving stick in the commercial real estate industry. I fully support this bill and I know there are thousands of companies who lease and purchase commercial space who support it also.”
Industry Supported Bill Focuses On Disclosure

Another bill introduced last Friday in the California State Legislature, rather than ban dual agency outright, proposes to clarify and expand current disclosure requirements and has received early support from a lobbying group representing the broader CRE brokerage and business communities. AB 1626, introduced by Assemblywoman Jacqui Irwin, D-Thousand Oaks, would clarify the disclosure responsibilities of associate licensees and supervising brokers in dual agency transactions.

The Irwin bill, currently scheduled for Judiciary Committee hearing on April 25, would more clearly define when a dual agency condition exists and specify the fiduciary duties of licensees engaged in such transactions under existing state law.

Both bills are in response to a decision by the California State Supreme Court last November upholding a lower-court ruling that a listing broker had a fiduciary duty to both the buyer and the seller in a dual agency transaction. In the case, Hong Kong businessman Hiroshi Horiike sued Coldwell Banker and its agents in a dispute over the square footage of a Malibu home purchased by Horiike in 2007.

“We see Assemblywoman Irwin’s bill as the serious legislation that’s trying to address the concerns in the Horiike case,” said Matthew Hargrove, senior vice president of governmental affairs for the California Business Properties Association (CBPA), a legislative advocacy group representing CRE owners, tenants, developers, brokers, contractors, attorneys and other industry professionals.

“The real estate industry is already working with many advocates on the consumer side to look at the policy implications of what the Supreme Court said what needs to be fixed, in the statute and in practice, to make sure that the lessons handed down in the Horiike case are actually implemented,” Hargrove added.

The CBPA, which boasts a membership of 10,000, describes itself as the designated legislative and regulatory advocate for several major industry groups, including the International Council of Shopping Centers (ICSC), Building Owners and Managers Association of California (BOMA California) and CCIM of Northern California.

While a commonplace practice for decades in both residential and commercial deals in the U.S. and around the world, several states in recent years have moved to regulate or ban dual agency real estate transactions in order to limit potential conflicts of interest and increase transparency in property sales. California, where dual agency deals are legal, adopted Senate Bill 1171 in January 2015, which requires disclosure to clients of dual agency relationships in commercial property transactions.

Hughes played a leading role in the passage of SB 1171 but said the Horiike decision demonstrates that dual agency in CRE deals needs to be banned rather than regulated. In supporting the Gonzalez Fletcher bill, Hughes noted a statement published last month by the Royal Institution of Chartered Surveyors (RICS), a global real estate accreditation body that certifies property and construction professionals, that advances more stringent conflict-of-interest requirements for its members, including an official ban on dual agency in the United Kingdom.

While a handful of states such as Colorado, Kansas, Florida and Wyoming in some form specifically prohibit dual agency, Hughes noted that about a dozen states closely follow California’s example on real estate regulation.

“Prohibition of dual agency would truly level the playing field for tenants, offering them legitimate transparency and conflict-free representation, something that should have happened decades ago,” Hughes said.
Lobbyist: Ban Would ‘Upend’ CRE Industry

However, the CBPA’s Hargrove argues that AB 1059 is too extreme a measure and would upend and disrupt the entire commercial real estate industry in California, while failing to address the core issue of fiduciary responsibility raised by the Supreme Court in the Horiike case.

“Under state law on the commercial side, you already have to disclose when there’s a dual agency situation in no uncertain terms,” Hargrove said. “We think those disclosures are right and appropriate, and we are concerned about how the political communications supporting AB 1059 are trying to undermine or claim that dual agency is nefarious. I absolutely disagree with that.”

“Under AB 1059, every single transaction would need to have two real estate agents,” Hargrove added. “It would disadvantage tenants by taking away the choice they now have to work with the real estate agency of their choice. Under current state law, you already have to disclose to tenants that you’re a dual agency, which allows the tenant to make their own decision.”

Hughes countered that AB 1626 is a “nothing burger bill” served up by advocates for the large brokerages and CRE groups that want to have it their way in maintaining the status quo.

“This is their way to proactively address the problem through misdirection and confusion with language that actually creates less accountability for brokers and adds more conflicts of interest, lack of transparency and consumer exposure than there is now,” Hughes said. “This is a legacy sponsored bill that continues to help the industry while hurting small business.”

While tenant representation firms would clearly benefit from a law prohibiting dual agency, the political influence and deep roots in the California market likely gives the advantage to legislation supported by the global full-service CRE brokerages and real estate lobbying groups, noted Katie R. Jones, real estate attorney with Walnut Creek, CA-based Miller Starr Regalia.

That being said, California agency law clearly requires more guidence from the Legislature in the wake of the Horiike decision, Jones said.

“The way the law is drafted now, based on current disclosure requirements, it’s an extreme challenge if not impossible for dual agents to adequately uphold their fiduciary responsibilities,” Jones said. “It makes more sense to find a solution that doesn’t upend the entire industry.”

Link to article: CoStar-Dual Agency Legislation

Source: CoStar News
By: Mark Heschmeyer
Date Posted: December 20, 2016

Fred’s Inc. (NASDAQ: FRED) has signed an agreement with Walgreens Boots Alliance Inc. (NASDAQ: WBA) and Rite Aid Corp. (NYSE: RAD) to purchase 865 stores and certain assets related to store operations located across the eastern and western United States for $950 million in cash.

Closing of the transaction is expected to take several months after Walgreens Boots Alliance’s proposed acquisition of Rite Aid is completed. The deal is also subject to approval by the Federal Trade Commission as well as customary regulatory approvals and closing conditions.

The pending $17.2 billion merger between Walgreens and Rite Aid first proposed in the fall of last year has lingered while the FTC analyzed its competitive impact. This past October, Walgreens Boots Alliance and Rite Aid announced an extension of their end date for the merger agreement to Jan. 27, 2017.

Walgreens executives continue to signal their confidence in closing the merger and have always expected that they would have to sell from 500 to 1,000 stores to help seal federal approval.

Shareholder approval is not required.

The store divestiture to Fred’s Pharmacy, if approved, is targeted to close during the first half of 2017 and will position Fred’s as the third-largest drugstore chain in the U.S. and create a new national competitor. Memphis-based Fred’s Pharmacy currently operates 647 discount general merchandise stores and three specialty pharmacy-only locations in 15 states in the southeastern US.

In connection with this transaction, the company said it has received financing commitments from BofA Merrill Lynch and Regions Bank to fund the purchase price, transaction-related costs, ongoing business operations and anticipated capital investments.

“This will be a transformative event for Fred’s Pharmacy that will accelerate our health care growth strategy,” said Fred’s Pharmacy CEO Michael K. Bloom, “We have been working for several months on integration plans to ensure a seamless transition.”

Fred’s appointed Michael Bloom as its new CEO last summer. One of his first moves was to hire Chris McDonald as vice president for real estate. McDonald previously was senior category manager at CVS and has extensive real estate experience from her time at Chase Bank and Walgreens.

In aggregate, the 865 stores are generally representative of Rite Aid’s pre-divesture store performance with respect to both sales and EBITDA. Fred’s Pharmacy expects that the acquired stores would be accretive to earnings and generate substantial cash flow.

Fred’s Pharmacy said it expects to keep certain store and certain field and regional team members, contingent on consummation of the transaction. Post-acquisition, the company will operate the acquired stores and will retain the Rite Aid banner through a 24-month transition.

A.T. Kearney served as a strategic advisor to the CEO and board and provided financial and operational diligence related to the transaction.

Link to article: Walgreens Rite Aid Merger

Source: Wall Street Journal
By: Jon Hilsenrath
Date Posted: August 17, 2016

WASHINGTON—Federal Reserve officials, playing a waiting game on the economy, sought to keep their options open at a July policy meeting as they tried to reconcile differences over whether it was time to raise short-term interest rates again.

Federal Reserve_web

The Fed’s Wednesday release of minutes from its July 26-27 meeting suggested a rate increase is a possibility as early as September, but that the Fed won’t commit to moving until a stronger consensus can be reached about the outlook for growth, hiring and inflation.

Several officials, still not yet confident that inflation will rise to the Fed’s 2% objective after running below target for four years, weren’t prepared to consider a rate increase. Others, believing the U.S. is close to a fully recovered job market, thought a rate increase would soon be warranted, according to the minutes.

“Members judged it appropriate to continue to leave their policy options open and maintain the flexibility to adjust the stance of policy based on incoming information,” the minutes said.

The Fed raised its benchmark federal-funds interest rate from near zero in December, and began the year expecting to nudge rates up four more times in quarter-percentage-point increments in 2016. It hasn’t moved because of recurrent worries about growth, hiring and turbulence overseas.

Investors have doubts about the Fed’s willingness to move again. Futures traders place an 18% probability on a rate increase in September, 20% on a move by November and 50% on a move by December.

Stocks, bonds and the U.S. dollar could all be jolted when the Fed does actually push rates up again, since borrowing costs affect so much in the economy—including how much it takes to buy a home or car or finance a big corporate project.

The Fed next meets Sept. 20-21. Since its last meeting, economic data have been mixed. Jobs data for July were strong—payrolls rose 255,000—but retail sales and inflation indicators for the month were soft, leaving open the possibility of a prolonged Fed divide that could further delay the next rate move.

Despite the mixed economic backdrop, some notable officials this week have sought to remind investors that the time for another rate increase was drawing near.

“I think we’re getting closer to the day where we’re going to have to snug up interest rates a little bit. And that’s good news,” New York Fed President William Dudley, a close adviser to Chairwoman Janet Yellen, said on the Fox Business Network on Tuesday. Dennis Lockhart, a middle-of-the-road official whose views often reflect the committee consensus, said Tuesday he wouldn’t rule out a September move.

“Most of the fundamentals underpinning growth of consumption are pretty solid,” Mr. Lockhart said. “Early indications of third-quarter GDP growth suggest a rebound,” he added. “I don’t believe momentum has stalled.”

Some of the Fed’s worries have receded in recent weeks, including whether markets would convulse after Britain’s June decision to leave the European Union.

“Participants generally agreed that the prompt recovery of financial markets following the Brexit vote and the pickup in job gains in June had alleviated two key uncertainties about the outlook,” the minutes said.

Most Fed officials expect growth to pick up in the second half of the year, but several still harbor doubt, especially because inflation has run below the Fed’s target for so long. The Labor Department reported Tuesday that the Consumer Price Index was unchanged in July and up 0.9% from a year earlier. The previous three months it was up 1.1% from a year earlier.

The central bank divided into three camps at its July meeting, the minutes show: those who aren’t ready to move rates up, those who are ready, and those who say the moment is getting closer.

Several officials “preferred to defer another rate increase in the federal-funds rate until they were more confident that inflation was moving closer to 2 percent on a sustained basis,” the minutes said.

Others believed the U.S. was “at or close” to full employment, meaning a state where unemployment was low, fully recovered from recession and at a point where if it falls much more it could cause more inflation. These people believed a rate increase “was or would soon be warranted.”

“By far the most significant part of the minutes was the point, repeated at least twice, that (official) forecasts had changed little during the intermeeting period,” Roberto Perli, an analyst with Cornerstone Macro Advisers, said in a note to clients.

Back in June they all expected to raise rates this year. If none of them changed their forecast in a material way, it must mean they still see a rate hike this year as appropriate, he said. “A move by December was and remains a good base case,” he said.

Some Fed officials also worried that a prolonged period of very low rates could cause investors to misallocate investments or misprice risk, possibly leading to a destabilizing financial bubble and bust.

Link to article: Fed’s July Minutes