Will Yellen & Company Ruin the Party with March Rate Hike
After raising interest rates just twice in 10 years, the Fed 
is suddenly in a hurry to get moving on its next rate hike, and it’s expected a week from today.
In what looks to be an early spring migration, Janet Yellen and company have turned very hawkish overnight, warning a rate hike is likely next week, while Wall Street had been expecting a June hike. Yellen clearly stated on Friday, the last day she under law could talk before next week’s Fed announcement, that all signs point to a rate hike.
“The party is not over for Commercial Real Estate,” says Situs CEO Steve Powel. “Interest rates are still near historic lows, and there are still great buying opportunities.”
Rate increases in 2017 are expected to have less of an effect on cap rates than originally predicted, with experts forecasting that the current flat cap rate environment will continue. In this environment, sources say investors should instead watch out for the effects that interest rate increases will have on deal volume.
“While nobody likes paying higher rates to borrow, this hike will make it more profitable for banks to resume lending for Commercial Real Estate projects which in the recent past they questioned, says Situs Executive Managing Director Warren Friend.
Situs’ Powel advises, “Keeping future potential hikes in mind, we at Situs advise clients to consider picking up the pace of potential deals to get in before rates move out of reach.”
Getting Darker — Blame Real Estate?
A plan to rezone Midtown East could make the neighborhood 10% darker. The rezoning plan the city is seeking for Midtown East could eventually make streets in the district 10% darker.
That’s because an obscure formula known as the Waldram diagram, which is used by developers to calculate how much daylight a new building will block out, is being relaxed as part of the rezoning, allowing for taller and bulkier spires in the neighborhood.
According to Alex Duda, an architect who specializes in helping builders shape their plans to conform to the Waldram formula, the current equation would require the new, larger towers permitted by the rezoning to taper dramatically in order to block out less of the sky from the street below. But that type of design would discourage builders from raising new towers.
read more: Crains
Trillion-Dollar Manager Is Paring NYC, London Property Bets
David Hunt, chief executive officer of Prudential Financial Inc.’s PGIM, said the $1 trillion asset manager is scaling back commercial real estate bets in some major markets where competition drove up property prices.
“Whenever you see that kind of heating-up of demand, you have to scratch your head and say, ‘At what point does this become a little bit overblown?’” Hunt said Wednesday at a conference held by Citigroup Inc. “We have been selectively selling some of the big cities, so we’ve been a net seller of New York, of London, and of San Francisco.”
Manhattan landlords have been facing falling rents after a wave of construction. Hunt said the years-long push to invest in commercial property was driven by investors seeking higher returns in an era of low bond yields, while also searching for longer-duration assets.
PGIM is “very happily” investing in markets such as Munich and Austin, Texas, Hunt said. “We’ve liked a lot of second-tier cities.”
PGIM has offices in 16 countries and counts almost half of the 300 largest global pension funds as clients, according to its website. The unit of Newark, New Jersey-based Prudential also has operations that originate loans and bet on stocks and bonds.
read more: Bloomberg
Ten-X Research: Legal Marijuana Benefits to CRE Go Up in Smoke?
Over the last few years several states have legalized recreational marijuana usage, starting with Washington and Colorado before Nevada, Massachusetts and others joined last year. Even though these states legalized marijuana, it remained illegal on a federal level, though the government did not enforce this policy allowing states to set their own laws and policies.
The legalization of marijuana proved to be a benefit for commercial real estate, especially in Colorado and Washington, which given their head start have more developed cannabis-related economies than the later states to legalize. Colorado and Washington saw cannabis dispensaries and clubs aid retail absorption (in a cycle desperate for a brick and mortars catalyst), growers absorb warehouse and industrial space, and even a few ‘Bud and Breakfasts’ popped open.
However, it appears all of this is now under threat. The change in political party control at the Federal Government level has brought a new attitude towards federal enforcement of marijuana policy. The White House has stated it plans to enforce federal marijuana laws, under which the drug is still illegal. State level politicians claim the new Attorney General has stated that marijuana is not a priority for the administration, but the uncertainty and threat will now linger over the industry.
At the least, this will slow or halt the growth in the marijuana industry, as financial services will remain out of reach and landlords leasing to it will have much higher tenant risk. At worst, the federal government initiates a crackdown and decimates the industry entirely. Either way a positive demand driver for industrial and retail space in legal marijuana markets has been handicapped.
read more: Ten-X
Abercrombie & Fitch CEO: This Is What Sweeping Store Closures Across America’s Malls Means for Us
Even after a challenging holiday season, there are glimmers of hope for Abercrombie & Fitch.
Abercrombie reported fourth-quarter earnings of 71 cents a share on $1.04 billion in revenue, lower than estimates for earnings of 75 cents a share on $1.05 billion, according to analysts surveyed at Factset.
For the full year, Abercrombie reported a net loss of 6 cents a share, steeper than the loss of 4 cents a share Wall Street was looking for and revenue of $3.3 billion, in line with expectations.
The company’s same-store sales fell 6% in the U.S. for the fourth quarter versus estimates for a 3.5% slip. But there were two positive callouts that may have Wall Street cautiously optimistic on the year ahead.
Jim Cramer sat down with four market experts to talk about how to play the Trump tax plan. Click here to check out their recommendations.
First, international sales declined by only 4%, compared to the third quarter when they plunged a staggering 10%. CEO Fran Horowitz, who was officially appointed to the role in early February, said sales internationally improved “measurably.”
Second, while Abercrombie & Fitch’s comparable store sales fell a whopping 13%, Hollister’s same-store sales saw a 1% growth. Considering how challenging the mall environment was during the holidays, sales growth at Hollister, which is the company’s largest chain, may have come as a nice surprise to investors.
Abercrombie’s shares surged 14% on the news.
read more: The Street.com
FinTech: Construction Goes Mobile
Raken, a San Diego-based developer of a mobile app for construction site reporting, has raised $2 million in new VC funding. Rincon Venture Partners led the round, and was joined by Eniac Ventures and Spider Capital.
read more: San Diego Biz Journal
Book It: Developers Eye Deals with Libraries
In New York City, where vacant land is scarce and the demand for new housing relentless, developers and city officials are experimenting with a novel approach to finding space – in public libraries.
Throughout the city, libraries have become an increasingly attractive option to builders, housing officials and politicians looking for any square footage they can seize to construct new homes. In many cases, the deals mean dollar signs for developers, builders and cash-strapped libraries alike. But the emerging trend, celebrated by many advocates and public officials, has also spurred controversy among residents and community activists, who oppose the sale of these public assets to private developers. In three recent arrangements that are currently in various stages of a lengthy land use process, revenue from property transactions would fund structural repairs to aging libraries in Brooklyn Heights, Sunset Park and Inwood. The Center for an Urban Future, a non-profit think tank, has pushed the effort; the group released a report in 2014 identifying 10 libraries prime for residential development among the 217 across the city. The analysis also bemoaned the sorry state of the buildings, which had $1.1 billion in capital funding needs at the time, ranging from broken ventilating systems to water leaks. ‘Libraries are basically the 21st-century settlement house. Kids, seniors, job seekers, English learners-everyone uses libraries, especially in working class communities. And they are in some of the worst shape they’ve ever been in and despite that fact, libraries are more popular than ever,’ Matt Chaban, the Center’s policy director, said in an interview last week.
read more: Politico
Welcome, Airbnb Guest! Your Neighbors Are the Trumps
The apartment has spacious windows, a sleek kitchen and expansive views of Manhattan. It boasts a prime location close to Central Park and Rockefeller Center and promises all the excitement of a luxury apartment in Midtown Manhattan.
And it was available for a substantial, but not completely unheard-of, price of about $300 to $450 a night through the home rental website Airbnb. Renters would just need to go through an extensive Secret Service screening downstairs.
The rental was inside Trump Tower.
The listing was taken down last week hours after The New York Times contacted Airbnb for comment. But the apartment had been available to rent since at least last September — long after the building that helped make Mr. Trump famous was turned into an operation center for his campaign. And it remained available, and as its Airbnb listing noted, quite popular, for about a month and a half after Mr. Trump’s inauguration.
More than 500 people had viewed the listing in the week before it was removed, and the apartment had been booked for much of March, April and May.
read more: NY Times
Waldorf Hotel Checks Out for Now
While reading : Click here for Xavier Cugat & his Hotel Waldorf-Astoria Orchestra
New York’s famed Waldorf Astoria has shut its doors to undergo an extensive renovation over the next two to three years, bringing to a close a chapter of the historic luxury hotel.
The final guests checked out Wednesday as the hotel’s owners prepare to convert more than a third of the 1,413 rooms into luxury condominiums, according to a spokesman.
The hotel has been a symbol of high society Manhattan since the original building’s construction in 1893 (the current hotel was built in 1931), and has been home to such celebrities and dignitaries as Cole Porter, Marilyn Monroe, Frank Sinatra, President Herbert Hoover, Gen. Douglas MacArthur and Edward, Duke of Windsor.
The current owner of the Waldorf Astoria, Chinese insurance giant Anbang, bought the hotel from Hilton in 2014 for $1.95 billion, and plans to turn 500 hotel rooms into 321 apartments across 31 floors, and outfit the building with a new fitness center, retail space and restaurant, according to plans filed Thursday.
The building itself is a New York City landmark, and the city is currently considering whether or not to designate several interior areas of the hotel as landmarks. Initial construction will not affect the parts of the hotel that are landmarked or under consideration, according to a statement from Anbang.
And yes The Waldorf–Astoria Orchestra played mainly at the Waldorf Astoria New York. In addition to providing dinner music at the famous hotel it made over 300 recordings and many radio broadcasts. It was established in the 1890s, and was directed by Joseph Knecht, later by Jack Denny and others, and then Xavier Cugat from approximately 1933 to 1949.
Still Ahead
Thursday
Challenger Job-Cut Report 7:30 AM ET
Weekly Jobless Claims 8:30 AM ET
Gallup Good Jobs Rate 8:30 AM ET
Friday
February Jobs Report 8:30 AM ET
Have a prosperous day ahead!
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