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Mogul Minute - 4/26/2016
April 26 | 2016

Here at RealtyMogul.com, we keep our finger on the pulse of all things real estate, from finance to technology and everything in between. We make a point of sharing interesting articles and think pieces among RealtyMogul.com staff to help our team stay abreast of the market, and ahead of the curve.

So we thought, why not share some of these insights with you, our partners?

Got A Minute? Here’s some recommended reading with key points from the content:

Despite Slowing Growth, Multifamily Story is Solid (Globestreet)

  • Some of the larger multifamily REITS have begun reporting their first-quarter earnings and the sentiment continues to be positive despite moderating growth
  • More bigger picture highlights:
    • Barclay’s analysts believe that investors may have overestimated the impact of new supply
    • Despite three consecutive quarters of rising vacancy, a trend not seen since 2010, the Barclays team is predicting above-inflation rent growth through 2017
    • “We believe that single-family housing does not currently represent an attractive value proposition while large age cohorts among the Millennials and Boomers favor apartment living.” – Wes Golladay, RBC Capital Markets
    • Urban rental growth continues to outpace suburban rental growth and the B assets continue to outperform the A assets, but the gap is narrowing for both sets of data
    • RBC sees the West Coast and most of the Sunbelt markets as outpacing the industry while some oversupply concerns were noted in New York City and the West Coast tech hubs

Struggling Twitter puts two floors of Chelsea HQ on sublease market (The Real Deal)

  • After initially signing a lease for 140,000 square feet in a pair of adjacent buildings in 2014, the struggling technology company is looking for takers for two floors (~24,000 SF) at its east coast HQ in the Chelsea neighborhood of NY
  • This comes after Twitter cut 336 jobs (8% of its employees) in October as several top execs left and the company’s stock price plummeted
  • The tech company has not only struggled with monetizing their user base but also to retain its declining user base. The company also put a full floor of its San Francisco HQ on sublease earlier this year

Why Companies are Returning to Big Cities (WSJ)

  • Reversing a pattern that began in the 1960s of businesses moving to the suburbs in search of significant real estate cost savings and a quieter way of life, more and more companies are moving their offices back to more urban environments.
  • Among the four reasons cited:
    • Trends in workspace configurations – New “creative office” buildouts are designed for more collaboration, team building, and greater flexibility. The newer buildouts are typically designed for less square footage per person helping to decrease rent costs
    • Large and diverse talent pools – Companies want to keep and retain their young talent and have realized that a significant portion of millennials is attracted to cities and urban environments. Cities also typically tend to have a more diverse population which will help companies expand their talent pool and better serve their increasingly diverse customers
    • Ecosystems of advisors and services – Companies can benefit from the large network of professionals that are located in cities including consultants, lawyers, bankers, accountants, etc.
    • Maintaining a competitive edge – Cities are generally more livelier and is an environment that cultivates ideas and creativity. “A city environment can help business stay abreast of customer needs and respond to the competition.”

Oil companies lose whopping $67 billion (CNN Money)

  • According to the Energy Information Administration research, the massive drop in oil prices has caused a combined $67B loss (across 2015) among 40 publicly traded US oil companies
  • Although oil has recently rebounded to ~$42/barrel, the report sees continued struggles throughout early 2016 as there does not appear to be a clear path to the current supply/demand imbalance issues that hamstring the industry
  • As one would expect, the oil companies with higher levels of debt are struggling the most. “In fact, the high debt group of companies wrote down reserves by 21% last year, compared with a more modest 6% reduction by the other group.”
  • Although the reported losses are significant, note that the report has excluded oil companies with significant offshore operations such as ExxonMobil and Chevron. These two companies both posted profits during 2015
  • This will continue to impact markets such as Houston that have a heavy concentrations of tenants in the oil industry.
Tim Ednoff Headshot
Written by , Associate - Commercial Equity at RealtyMogul.com

Tim evaluates investment opportunities as well as performs due diligence and writes content for various equity and debt transactions. Outside of the office, Tim is an avid sneaker collector, a passionate health and fitness advocate, and a dedicated podcast enthusiast.

 
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