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Mogul Minute 4/29/2016
April 29 | 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:

Press Release – (Board of Governors of the Federal Reserve System)

  • As expected, the Fed held rates steady on Wednesday marking the third consecutive meeting that rates have not budged.  Among reasons for the lack of movement, the Fed cited improved labor market conditions, but moderating economic activity as inflation continues to run below the Fed’s 2% long-run objective.
  • In March, the Fed revised the number of expected rate increases downward from four to two. A fair amount of skepticism remains that such raises will become effective in the near future as the Fed expects economic activity to expand at a moderate pace with inflation continuing to remain low due in large part to declines in energy and import prices.

Alphabet’s Next Big Thing: Building a ‘Smart’ City (WSJ)

  • Alphabet, the parent company of Google, is putting the final touches on a proposal to get into the business of city building and developing giant new districts of housing, offices, and retail within existing cities. The group that is running this proposal is Sidewalk Labs, Alphabet’s urban technology-focused subsidiary. The group was formed by Alphabet executive Larry Page and Daniel Doctoroff who worked in New York’s economic development department during the first six years of Mayor Michael Bloomberg’s term
  • Sidewalk would potentially identify economically struggling municipalities and partner with them to build up the districts which would have a tech focus and hold tens of thousands of people. The aim would be to “create proving grounds for cities of the future, providing a demonstration area for ideas ranging from self-driving cars to more efficient infrastructure for electricity and water delivery”
  • Details are vague and the proposal will likely encounter several obstacles, but Sidewalk would be hoping to develop these cities without restraint from city regulations

Core may not be the answer – (PERE)

  • Global total returns for real estate investing totaled 10.7% last year, its highest levels since 2007. The figure has been rising for each of the past four years. Capital growth accounted for more than half of the total return during 2015, the highest portion since 2006
  • With concerns of a market correction coming, one traditional investment strategy is to flock to assets in core market where returns are more income driven rather than capital appreciation. However, the author argues that core assets may not necessarily be the answer as concerns over a significant correction may be overblown as interest rates remain low, significant capital is still awaiting deployment in real estate, and construction levels are still below the long-term average
  • The author also cautions investors on taking opportunistic-level risk given moderating rental rates and anticipated cap rate depression in the coming years. At this point in the cycle, investors can no longer expect to generate returns based on the ‘rising tide’ of a rebounding real estate market. Instead, strong opportunistic returns will now depend on active asset management rather than passive market timing

Department Stores Need to Cull Hundreds of Sites, Study Says (WSJ)

  • Research from Green Street advisors suggest about 1/5th of all anchor space in US malls would need to be closed if stores wanted to match the productivity they had from a decade ago. Sales at the nation’s department stores averaged $165 a square foot last year, a 24% drop since 2006. Over the same period, the stores reduced their physical footprint by 7% in aggregate
  • Below is a chart showing the number of estimated store closings that would need to occur by chain:

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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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