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Mogul Minute 6/6/2016
June 6 | 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:

  • Hilton Property Spinoff to Create Park Hotels & Resorts REIT (National Real Estate Investor)
    • Hilton is planning to spin-off its real estate into a REIT which would create the second-largest publicly traded REIT in the lodging industry. The REIT will be named “Park Hotels & Resorts” and is designed to increase shareholder value. The entity will hold most of Hilton’s properties and it is projected that EBITDA could be as much as $825M in 2016.
  • Odds for interest rate hikes plunge after major jobs report miss (CNBC)
    • After the Labor Department reported weak job numbers for May, the CME Group FedWatch tool of market sentiment dropped their probability of a rate hike down from 21% to 4%. The Fed is supposed to meet in two weeks to determine whether or not they will increase their federal funds rate.
  • Industrial Construction Hits Highest Quarterly Volume on Record (National Real Estate Investor)
    • According to a report by Colliers International, a record level number of industrial completions hit the market in the first quarter with 60.1 million square feet completed. The industrial market continues to have massive demand as the national vacancy rate is at 6.3% and first quarter net absorption was 10% higher than the first quarter of 2015.
    • Dwight Hotchkiss, Colliers’ national director for industrial sector cites two reasons for the sudden uptick in supply: the market’s caution in delivering new product following the recession and the increased demand from the expansion of e-commerce.
    • There is currently 185.5 million square feet in the pipeline across the nation, however almost 50% of it is concentrated in a few markets. Dallas/Ft. Worth and Chicago lead the way with 24.3M SF and 16.9M SF in development, respectively. Other markets among the leaders in construction are Atlanta, the Inland Empire, and Central Pennsylvania.
    • Demand is forecasted to remain strong over the next year or so. Hotchkiss adds, “It’s possible that maybe by the end of 2017 we’ll start to see more of a balance of supply starting to reach the level of demand, but I don’t think we’ll see that at least for the next 12-18 months. You look at the anticipated needs of [retailers] turning their strategy toward reaching same-day delivery, and decreasing store space, it all leads toward more of a demand for warehouse distribution product.”

  • US Investment Outlook Q1 (JLL)
    • Q1 saw significant capital market volatility due to a number of economic factors, however, strong property fundamentals and a historic level of active capital is expected to drive flat to moderate declines in activity throughout the year. Despite the volume declines, pricing has remained strong as spread levels are healthy and cap rates have compressed 31 basis points over the past year.
    • Among the things JLL is closely monitoring this year:
      • Impact of new regulations, referendums, elections, and the Fed
      • Shifts to currently controlled financing standards
      • Value-add underwriting
      • Weak points in property markets, notably in multifamily construction
    • The top 7 Investment themes for the quarter:
      • After a bumpy January and February spur heightened caution in markets, signs of stability emerge late in Q1
      • CMBS pricing follows the wave of market volatility with recent signs of needed stability
      • Capital deployment pressures heighten with increased caution, decline in deal flow and continued discipline
      • Slow start to 2016 in debt and equity markets parallels cautious investor sentiment
      • Meeting the gap: REIT performance pressures benefitting dry powder in markets
      • Cross-border down but far from diminished
      • Fear factor remains, despite market rebound and lower volatility
  • CMBS Late-Pays Rise For Third Month (Globestreet)
    • The May CMBS delinquency rate ended the month 12 basis points higher than the April rate marking the third consecutive month of an increase. This month’s increase was the largest from the past three months.

 

 
Written by Tim Ednoff, Associate 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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