- How a tech bust almost killed one of North America’s biggest real estate projects — and what saved it “Technology companies are flocking to Kemper Development Co.’s Lincoln Square expansion project in downtown Bellevue, Wash., from Valve to WeWork, and now potentially Pokémon. The original Lincoln Square, however, hit many speed bumps along the way. In fact, the dot-com bust threatened to stop the project for good, before Kemper Development took it over in the early 2000s. Last week, the Washington chapter of real estate industry group NAIOP gave a peek behind the curtain about everything that went wrong with the original Lincoln Square project, which was one of the biggest in North America at that time, and what happened to put it back on the right path. Important players in the Lincoln Square project also shared what they learned from the dot-com era, and how that period compares to today’s tech boom. In the late 1990s, Vancouver-based developer Ian Gillespie’s firm Westbank Projects Corp. and international developer Lend Lease started planning the $360 million project, which was then set to include a 27-story office tower and a 42-story tower with condos above a hotel. Both towers were planned to sit above 330,000 square feet of specialty retail including restaurants, a 12-screen movie theater and 60,000-square-foot health club.” (GeekWire)
- Meet the Chinese Billionaire Who’s Moving Manufacturing to the U.S. to Cut Costs “While it has been said for a long time that the U.S. is bleeding manufacturing jobs overseas, particularly to China, some businesses have been moving operations the other way round. And now, the head of a leading Chinese glass maker making the same move has openly questioned if his country really is such a lucrative destination for offshore factories, reports Hong Kong newspaper South China Morning Post. ‘Overall speaking, the tax burden for manufacturers in China is 35% higher than in the U.S.,’ Cao Dewang told China Business Network in an interview. He added that a combination of cheap land, reasonable energy prices and other incentives means that, despite higher manufacturing costs, he can still make more money by making glass in the U.S. than by exporting Chinese-made panes to the U.S. market. His company, Fuyao Glass, has invested over $1 billion stateside, according to the /react-text Post react-text: 239 , the most significant move of which is opening its U.S. factory in the Ohio town of Moraine, a suburb of Dayton, back in October. The glass maker is re-purposing the town's former General Motors assembly that had been standing empty since late 2008, as the Dayton Daily News reports.” (Fortune)
- Dying Limited Stores May Not Be Only Struggling Retailer to Liquidate in 2017 “Struggling icons of your local mall may be about to close up shop next year. First up on the chopping block could be one-time hot 1980s brand Limited Stores. The chain is planning to file bankruptcy within weeks and most likely liquidate its business, according to a Bloomberg report. It has retained Kirkland & Ellis as its legal adviser and Guggenheim Securities and RAS Management Advisors to assist in a debt restructuring and any asset sales. Limited Stores, Kirkland & Ellis and RAS Management Advisors didn't return requests for comment. Guggenheim Securities declined comment. The now roughly 240-store women's apparel chain was spun off from L Brands (LB) in 2007 in a leveraged buyout by private equity firm Sun Capital Partners.” (The Street)
- Trump backs out of real estate projects around the world, but that may not be enough to avoid conflicts “The Trump hotel in Baku, Azerbaijan, would be “among the finest in the world,” Donald Trump promised two years ago, another example of ‘our involvement in only the best global development projects.’ But the dream of a world-class Trump Baku died this month, with Trump saying he was backing out of the deal because of delays and blown deadlines caused by the developer, a 34-year-old with close family connections to the country’s government. The demise of Trump Baku is not an isolated decision. With his inauguration less than a month away, President-elect Trump’s company has pulled out of a few international business deals that might have created especially sticky conflicts and controversies for his administration. In addition to Azerbaijan, the company began to back out of a deal in another former Soviet republic, Georgia. It also canceled a hotel project in Rio de Janeiro that had been mentioned in a fraud investigation. And just days after the election, the Trump Organization shut down four companies formed this year seemingly in anticipation of a hotel deal in Jidda, Saudi Arabia.” (Los Angeles Times)
- How U.S. Real Estate Sales Could Be Affected By China's Capital Controls “Chinese buyers have become a familiar and formidable force in real estate, both in the residential market as well as mega hotel or commercial deals. Now stricter capital controls from China threaten to dampen appetite or change the marketplace. Late last month, China's State Council--the country's most powerful government body--sent a notice to all government departments requiring them sign off on all foreign acquisitions over $10 billion or $1 billion if it's outside of the acquirer's "core" business. The notice also said to halt foreign real estate purchases more than $1 billion by state-owned enterprises. Though the rules are not new, market watchers suggest that the notice indicated that the rules would be more strictly enforced. The stepped up oversight comes as China is seeking to clamp down on the outflow of capital from the country, which hit a new high in October this year, fueling depreciation of the RMB. The RMB hit an eight-year low versus the dollar last month. With the renminbi on track for the biggest one year fall ever, Chinese investors and companies alike have been eager to diversify overseas, into other currencies.” (Forbes)
- New York REIT Lands $760M Financing, Prepares to Sell Assets “New York REIT Inc., an office and retail REIT that is planning to liquidate, has closed on $760 million in financing from Credit Suisse secured by 12 assets that will be used to repay debt, buy the remaining equity interest in Worldwide Plaza and fund the company’s dissolution. The REIT began making plans for the liquidation in August after a planned merger with JBG Cos., a major Washington, D.C.-area landlord, fell through due to activist shareholders’ concerns. The merger, proposed in late May, had called for NYRT to acquire the majority of JBG’s properties and its management business and create a REIT with an enterprise value of $8.4 billion. JBG later found a partner in Vornado Realty Trust, which announced in November it was spinning off its D.C.-area office portfolio and merging it with JBG in a deal also valued at $8.4 billion. Meanwhile, NYRT shareholders led by Michael Ashner and Steve Witkoff, joint owners of WW Investors LLC, opposed the JBG deal calling it “one of the worst strategic transactions proposed to stockholders by a REIT board in recent memory,” according to Bloomberg. They had been vocal opponents of the REIT’s external manager, which was connected to Nicholas Schorsch, who resigned from the board of NYRT and 12 other companies in late 2014 after his real estate empire collapsed following an accounting scandal at his flagship company, American Realty Capital Properties Inc.” (Commercial Property Executive)
- Economy Watch: Architects Still Fairly Busy in November “Following a modest increase after two months of contraction, The American Institute of Architects’ Architecture Billings Index (ABI) turned in another small increase in demand for design services in November, the organization reported on Wednesday. The November ABI score was 50.6, not much down from 50.8 in the previous month. This score reflects an increase in design services, but only a slight one (any score above 50 indicates an increase in billings). The ABI is a leading economic indicator of construction activity, reflecting the roughly nine- to 12-month lead time between architecture billings and construction spending. Survey participants are asked whether their billings increased, decreased or stayed the same in the month that just ended as compared to the prior month, and the results are then compiled into the ABI. The index scores are centered around 50, with scores above 50 indicating an aggregate increase in billings, and scores below 50 pointing to a decline. Separately, the AIA’s new projects inquiry index was 59.5 in November, up from a reading of 55.4 the previous month, which also points to an increase in future architectural activity.” (MultiHousing News)
- U.S. reaches $7.2B settlement with Deutsche Bank “The U.S. Justice Department and Deutsche Bank reached a $7.2 billion settlement over the bank’s role in the pre-crisis sale of mortgage securities. The authorities had initially sought $14 billion, but were apparently eager to settle the matter before the Trump administration takes over in January. Deutsche Bank will pay the government $3.1 billion in cash immediately, and contribute the remaining $4.1 billion over time to a so-called consumer relief fund. The settlement removes one potential conflict of interest for Trump, who owes around $300 million to Deutsche Bank’s private banking arm on four real estate loans. However, Bloomberg noted Thursday the the U.S. Attorney General is still investigating the bank over stock trades for wealthy Russians.” (The Real Deal)
- Walgreens acquisition of Rite Aid expected to close in early 2017 “Walgreens Boots Alliance’s acquisition of Rite Aid took a big step forward with announcement of the divestiture of 865 Rite Aid stores to Fred’s Pharmacy for $950 million. The transaction now has an expected closing date of early 2017. In its 2017 fiscal third-quarter earnings release, Rite Aid said that Walgreens is ‘actively engaged in discussions’ with the U.S. Federal Trade Commission to close the transaction quickly, but ‘there can be no assurance that the requisite regulatory approvals will be obtained, or that the transactions will be completed within the required time period.’ The Fred’s agreement was entered into to respond to concerns identified by the FTC in its review of the proposed acquisition of Rite Aid by WBA which was announced in October 2015. As for its latest earnings, Rite Aid reported net income for the quarter ended Nov. 26 of $15 million, compared to a net profit of $59.5 million in the prior-year period, while revenues for Q3 dipped slightly year over year to $8.1 billion. Retail Pharmacy Segment revenues were $6.5 billion and decreased 3.1% compared to the prior year period primarily as a result of a decrease in same-store sales. Same-store sales for the quarter decreased 3.4% versus the prior year, consisting of a 4.7% decrease in pharmacy sales and a 0.4% decrease in front-end sales.” (Chain Store Age)
- Three skyscrapers planned near L.A. Live in downtown Los Angeles by Chinese developer “Chinese developer City Century filed an application with city officials this week to build three residential towers across from L.A. Live as breakneck growth rolls on through downtown Los Angeles. The complex, called Olympia, could cost as much as $1 billion and house as many as 1,367 apartments or condominiums over shops and restaurants along Olympic Boulevard. It is the third high-rise residential project in the works downtown for City Century, the Los Angeles subsidiary of Shanghai real estate developer Sheng-Long Group. ‘We’re seeing opportunities in L.A. as the entertainment, media and fashion hub,’ said Stuart Morkun, executive vice president of City Century. ‘There is a growing desire by a new generation of professionals who want an urban lifestyle,’ Morkun said. ‘Downtown can provide that.’ The design for Olympia by architects Skidmore, Owings & Merrill calls for slim towers of 43, 53 and 65 stories that would be connected at the lower levels with dining, shopping and landscaped outdoor spaces.” (Los Angeles Times)
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