Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-64228 Thu, 20 Sep 2018 22:36:27 GMT Adapt Or Die: The Ways Landlords Are Bending Over Backward To Deal With A Shifting Retail World http://implode-explode.com/viewnews/2018-09-21_AdaptOrDieTheWaysLandlordsAreBendingOverBackwardToDealWithAShift.html In the first half of 2018, more than 2,500 store locations closed in the United States, according to JLL's retail outlook report from the second quarter, and nearly 600 more locations will close by the end of the year. Across the country, the closures of retailers like Sears and Toys R Us have dumped empty space on the market. Retail absorption declined nearly 60% in Q2 2018 from a year earlier as vacancy ticked up.

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space left open by department store closures is being filled by operators that offer either value or an experience. Former Macy's stores, for example, are being filled by Whole Foods or Life Time Fitness, according to JLL's report, while AMC Theatres and H&M have gone into space once occupied by Sears and JC Penney.

It's all part of the trend toward service-driven, experiential real estate. Consumers are looking for experiences; something that cannot be recreated online, or that can be posted on Instagram. Or both.''

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iehi-feed-64196 Sun, 09 Sep 2018 21:56:48 GMT In Charts: Disaster Is Inevitable When America's Stock Market Bubble Bursts http://implode-explode.com/viewnews/2018-09-10_InChartsDisasterIsInevitableWhenAmericasStockMarketBubbleBursts.html To keep it simple, the current U.S. stock market bubble will pop due to the ending of the conditions that created it in the first place: cheap credit/loose monetary conditions. The Federal Reserve inflated the stock market bubble via its record low Fed Funds Rate and quantitative easing programs, and the central bank is now raising interest rates and reversing its QE programs by shrinking its balance sheet. What the Fed giveth, the Fed taketh away.

The Fed claims to be able to engineer a "soft landing," but that virtually never happens in reality. It's even less likely to happen in this current bubble cycle because of how long it has gone on and how distorted the financial markets and economy have become due to ultra-cheap credit conditions.

I'm from the same school of thought as billionaire fund manager Jeff Gundlach, who believes that the Fed will keep hiking interest rates until "something breaks." In the last economic cycle from roughly 2002 to 2007, it was the subprime mortgage industry that broke first, and in the current cycle, I believe that corporate bonds are likely to break first, which would then spill over into the U.S. stock market.

... Because of the record debt burden in the U.S., interest rates do not have to rise nearly as high as in prior cycles to cause a recession or financial crisis this time around.

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iehi-feed-64194 Sun, 09 Sep 2018 17:52:09 GMT The Empty Storefronts of New York: A Panoramic View (UP TO 20% VACANCY!!) http://implode-explode.com/viewnews/2018-09-10_TheEmptyStorefrontsofNewYorkAPanoramicViewUPTO20VACANCY.html New York City's streetscape has been transformed -- visually and economically -- by the staggering numbers of vacant storefronts now dotting its most popular retail corridors. The Times set out with a panoramic camera to capture what this commercial blight feels like on the ground.

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A survey conducted by Douglas Elliman found that about 20 percent of all retail space in Manhattan is currently vacant, she said, compared with roughly 7 percent in 2016.

While a commercial crisis might more likely be associated with periods of economic distress, this one comes during an era of soaring prosperity, in a city teeming with tourism and booming with development.

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Particularly hard hit are gentrifying areas in Brooklyn and many of Manhattan's top retail strips in some of the world's priciest shopping districts, from Broadway in SoHo to Madison Avenue on the Upper East Side.

Yeah right, it's just a "period of prosperity" -- not a time of papered-over economic lacunae using cheap money...

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iehi-feed-64187 Thu, 06 Sep 2018 20:34:42 GMT WeWork Hung Up On Financing For $850M Trophy Fifth Avenue NYC Buy http://implode-explode.com/viewnews/2018-09-07_WeWorkHungUpOnFinancingFor850MTrophyFifthAvenueNYCBuy.html When WeWork announced the deal, the plan for the building was to reduce Lord & Taylor's footprint to 150K SF on the lower three floors, with WeWork occupying 500K SF on the top eight. In June, however, Lord & Taylor parent company Hudson's Bay Co., which is selling the property to the coworking giant, announced Lord & Taylor would leave the building entirely. 

WeWork initially was scheduled to close on the purchase last month, according to TRD, but Hudson's Bay granted its buyer an extension to Nov. 13 in exchange for another $25M deposit. In addition to its search for equity partners, Eastdil Secured is on the hunt for lenders to provide a $738M loan package to help fund the buy and an estimated $200M worth of renovations the building would need, Commercial Mortgage Alert reports.

While WeWork has billions in cash thanks to its venture capital investment from SoftBank, that money is not earmarked for property acquisition, according to TRD, which is why WPA and Rhone have raised at least $404M to buy property outside of WeWork's balance sheet. It is unclear how much of that equity will go into 424 Fifth Ave., and how much they are hoping to bring in from a third party.

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iehi-feed-64177 Thu, 30 Aug 2018 17:06:01 GMT Mounting Inventory And Skittish Buyers Pushing NYC Condo Developers To Cut Deals http://implode-explode.com/viewnews/2018-08-31_MountingInventoryAndSkittishBuyersPushingNYCCondoDevelopersToCut.html "These first-half numbers were really shocking," Stribling Vice Chairman Kirk Henckels said. He believes the improved co-ops numbers are the result of sellers in that sector seeing the writing on the wall and cutting asking prices.

"It's really the consumer saying ‘this is enough," he said. "New developments showed a huge decline, falling 54% while resale condos only fell 25%."

Already steep competition could be set to steepen.

Manhattan's new condo inventory is projected to hit 7,900 next year, The Real Deal reported earlier this summer, citing data from appraisal firm Miller Samuel.

That is a significant increase on the average from the last few years -- which has sat between 3,000 and 4,000 units -- and means it would take about four-and-a-half years to sell all the units.

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iehi-feed-64160 Mon, 06 Aug 2018 13:11:02 GMT Vornado's Roth Rings Bell of Distress In Retail Sector; Punts on Ultra-Lux NYC Condo Sales Progress http://implode-explode.com/viewnews/2018-08-06_VornadosRothRingsBellofDistressInRetailSectorPuntsonUltraLuxNYCC.html During Tuesday's call, Roth stuck to other topics, namely signs of distress in the retail sector, as assets bought at the top and loaded with debt have started to struggle. He said if he could buy retail today at a 10 percent discount to peak values from three or four years ago, he "wouldn't touch it with a 10-foot pole."

"This game plays out very slowly," Roth added, noting that the first cracks are appearing. "We're beginning to see lenders who are out of the money," he said. "We're beginning to see mezz lenders and debt funds and private lenders beginning to become aware of the fact that they are impaired."

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iehi-feed-64158 Sat, 04 Aug 2018 21:26:53 GMT Kushners Unload 666 Fifth Ave. to Brookfield in 99-Year Lease http://implode-explode.com/viewnews/2018-08-04_KushnersUnload666FifthAvetoBrookfieldin99YearLease.html Rather than pay the rent on an annual basis for the so-called leasehold, Brookfield will give Kushner Cos. an upfront sum that will allow the company to pay off outstanding debt on the building, according to people with knowledge of the matter who asked not to be identified because the details are private.

The Toronto-based investor is prepared to inject up to $700 million in equity and will essentially take control of the building unencumbered with a 100 percent leasehold, the people said. A Brookfield representative declined to comment.

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The building lost $25 million last year and has almost always been unprofitable. As a first step in its latest restructuring plan, Kushner Cos. said in June it would buy out Vornado. Vornado continues to own the retail portion of the property.

The cash infusion from Brookfield comes just in time, with a $1.2 billion mortgage on the property coming due in February.

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The company intends to update the aging property with lighter and airier offices that would command higher rents, the people familiar with the matter said. The update would be similar to those Brookfield has made to properties including Manhattan's old Daily News Building, they said, adding that the Kushner Cos. would not participate in gains from the work until Brookfield earns a return on its investment.

Wonder if this results in a softening of the administrations recent "anti-Canadian" stance...

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iehi-feed-64141 Tue, 24 Jul 2018 02:48:41 GMT Thor Equities loses control of $50 million property (R.E. EMPIRE FLAILS AMIDST RETAIL DOWNTURN) http://implode-explode.com/viewnews/2018-07-23_ThorEquitieslosescontrolof50millionpropertyREEMPIREFLAILSAMIDSTR.html The takeover appears to be a costly loss for Thor, which purchased the 41,279-square-foot rental apartment and retail building at the corner of East 71st St. for $52.5 million in 2013. After acquiring the 4-story building, which has roughly 15,000 square feet of retail space on the ground and basement levels and 34 apartments above, Thor added upgrades, repainting the facade, installing a roof deck for residents and substantially renovating the retail space. After the upgrades, Thor leased a portion of the space to New York Sports Club and a Sprint cellular phone store, but the bulk of the most valuable section along Third Avenue has sat vacant.

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Losing the property is the latest in a string of bad news for the firm. Thor lost its interest in three valuable retail properties that had been purchased for almost $900 million after defaulting on an $85 million loan from its partner GGP in the properties, according to The Real Deal. In March, Thor and a partner dumped a 70-unit apartment building on the Upper West Side for $65 million--a $2 million loss from what they paid for the property four years ago.

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iehi-feed-64140 Mon, 23 Jul 2018 22:50:23 GMT Existing-home sales slide for third-straight month in June, touch 5-month low as housing sputters http://implode-explode.com/viewnews/2018-07-23_ExistinghomesalesslideforthirdstraightmonthinJunetouch5monthlowa.html With fewer homes available for purchase, there's little path up for sales. June marked the third consecutive month in which sales declined. It was the lowest selling rate since January, and was 2.2% lower than a year ago

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With such lean inventory, prices are getting bid up. The median price of a home sold in June was $276,900, a fresh all-time high, and 5.2% higher than in June 2017. Higher prices--along with somewhat higher mortgage rates--are handicapping less aggressive buyers. First-timers made up 31% of all transactions in June, roughly the same level they've been stuck at throughout the recovery, and well below the 40% share they generally enjoyed before the housing crisis a decade ago.

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iehi-feed-64138 Sun, 22 Jul 2018 15:33:59 GMT New York City Will Force Airbnb to Disclose Information on Hosts http://implode-explode.com/viewnews/2018-07-22_NewYorkCityWillForceAirbnbtoDiscloseInformationonHosts.html The law, which passed 45-to-0 in a city council vote Wednesday, is designed to help enforce existing rules banning short-term rentals. Mayor Bill de Blasio has said he supports the bill. Earlier in the day an Airbnb host backed financially by the company filed a lawsuit against New York City, accusing officials of retaliating against him for speaking out in support of home rentals.

Chris Lehane, head of global policy at Airbnb, said the policy will subject innocent hosts to over-policing and violates their privacy. Lehane, a former adviser to President Bill Clinton, lashed out at the council in a conference call with reporters and accused the bill's supporters of putting the interests of hotel owners and unions above regular New Yorkers. "This is a bill that really is designed to benefit the hotel industry," he said.

The debate over Airbnb's role in New York has raged for years, with housing advocates saying short-term rentals contribute to rising rents and gentrification, while the company argues it helps homeowners afford their mortgages. Regulation hasn't stopped the rise of the San Francisco-based company, which is valued at about $31 billion and has faced resistance from local governments practically since it started a decade ago.

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iehi-feed-64131 Thu, 19 Jul 2018 16:24:05 GMT Housing Permits Soften, Starts Plummet http://implode-explode.com/viewnews/2018-07-19_HousingPermitsSoftenStartsPlummet.html iehi-feed-64129 Wed, 18 Jul 2018 22:49:09 GMT Millennial Homeownership Headwinds Worrisome for Future http://implode-explode.com/viewnews/2018-07-18_MillennialHomeownershipHeadwindsWorrisomeforFuture.html UI put some numbers to the demographic and social differences displayed by the generation. First, being married increases the probability of owning a home by 18 percentage points after accounting for other factors. If the marriage rate among that age group in 2015 had bbeen the same as in 1990, Millennial homeownership would be about 5 points higher.

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Yet the researchers also found that even among white households that are married, with children, and even with substantial income, the homeownership rate is 2 to 3 percentage points lower than earlier generations.  Obviously other factors are at play, some of them defined as attitudinal.

The preference of educated Millennials to move to more expensive urban centers has contributed to their lower homeownership rate.  In high-cost cities the housing supply is inelastic and within large metro areas, Young adults additionally migrate to the counties with a more urban environment where prices have increased more than in surrounding areas.  This shift in preference was mostly observed among those who are higher educated. The supply of affordable housing has declined overall during the last decade, but this is especially true in areas where Millennials prefer to live.

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Obtaining a mortgage has become more challenging over the last ten years. The process is unwieldy, and underwriting has not adapted to the unstable and non-traditional labor market and tightening credit standards.

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iehi-feed-64120 Tue, 17 Jul 2018 00:42:01 GMT NYC "Billionaire's Row" Hotel Sells At Massive Loss After 5 Years http://implode-explode.com/viewnews/2018-07-16_NYCBillionairesRowHotelSellsAtMassiveLossAfter5Years.html Arden Group entered contract to acquire the 29-story, 240-key hotel at 120 West 57th Street for $41 million. When the deal closes in the third quarter, New York REIT will have liquidated its entire portfolio, except for a 50.1 percent stake in One Worldwide Plaza. Ark Partners developed the Viceroy in 2013, and that same year, sold the leasehold for $148.5 million to New York REIT. The deal marked the first hotel purchase for the real estate investment trust, then known as New York Recovery REIT.

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In addition to Vicecroy's mounting expenses, the Manhattan hotel market is in a radically different place. The borough saw a slump in RevPAR -- or revenue per available room -- and pricing power, but there appears to be turning around in recent months.

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iehi-feed-64109 Fri, 13 Jul 2018 00:27:45 GMT Report: Michael Cohen Buys $6.7 Million Apartment in NYC http://implode-explode.com/viewnews/2018-07-12_ReportMichaelCohenBuys67MillionApartmentinNYC.html iehi-feed-64107 Thu, 12 Jul 2018 16:26:22 GMT Are NEW Chinese buildings really FALLING DOWN? (VIDEO) http://implode-explode.com/viewnews/2018-07-12_AreNEWChinesebuildingsreallyFALLINGDOWNVIDEO.html iehi-feed-64066 Thu, 28 Jun 2018 17:42:19 GMT NYC Poised To 'Significantly' Crack Down On Illegal Use Of Airbnb http://implode-explode.com/viewnews/2018-06-28_NYCPoisedToSignificantlyCrackDownOnIllegalUseOfAirbnb.html Christian Klossner, executive director of the Office of Special Enforcement for the city, said during the hearing that 20 to 30 percent of Airbnb listings operate with commercial frequency. According to Klossner, the new bill would "significantly" enhance the city's ability to crack down on illegal commercial hosts. Mayor Bill de Blasio is also in support of the legislation.

Funny that the city itself is admitting what AirBnB itself argues: that the overwhelming majority of hosts use it for occasional extra income (e.g., when they themselves travel). Looks like AirBnB is just a convenient scapegoat for an otherwise very messed up real estate market -- "The Rent Is Too Damned High" long predates AirBnB. NYC's government should look in the mirror and ask themselves whether they're really facilitating the development the market demands (you know, that whole "supply" thing)...

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iehi-feed-64065 Thu, 28 Jun 2018 17:36:02 GMT Freddie Mac seeks widespread expansion of 3% down mortgages http://implode-explode.com/viewnews/2018-06-28_FreddieMacseekswidespreadexpansionof3downmortgages.html In San Francisco, you are now considered "low income" if you make less than $117,000 a year.  That makes sense when a standard home sells for $1.5 million.  So now we have Freddie Mac attempting to push 3% down mortgages on a much larger scale since many people are priced out.  What can possibly go wrong?

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You have closing costs and in many cases, there are commissions to pay out once escrow closes. These may range from 3 to 5 percent. So when you purchase a home with a 3 percent down payment, you are essentially putting yourself in a zero or negative equity position from day one if you needed to sell.

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iehi-feed-64013 Sun, 10 Jun 2018 17:38:56 GMT Kanye West to be "one of the biggest real estate developers of all time" http://implode-explode.com/viewnews/2018-06-10_KanyeWesttobeoneofthebiggestrealestatedevelopersofalltime.html The rapper turned designer, entrepreneur and now developer revealed his newly-formed architecture studio's first project, a prefabricated affordable housing scheme, via one of his collaborator's Instagram account this week, according to the Architect's Newspaper.

The public release of the renderings come weeks after West filmed an interview where he spoke about his plans to build a real estate empire. In a lengthy taped conversation between him and radio and television personality Charlamagne Tha God, West said, "I'm going to be one of the biggest real estate developers of all time. Like what Howard Hughes was to aircrafts and what Henry Ford was to cars."

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But it was only last month, via Twitter, that he announced his new venture to bring architectural design in-house: "We're starting a Yeezy architecture arm called Yeezy home," he tweeted. "We're looking for architects and industrial designers who want to make the world better.

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iehi-feed-64008 Sat, 09 Jun 2018 14:29:29 GMT The priciest rentals are also the loneliest http://implode-explode.com/viewnews/2018-06-09_Thepriciestrentalsarealsotheloneliest.html The vacancy rate for the country's most expensive apartments is more than double the rate for lower-priced pads, as builders have flooded the high-end of the market while supply remains tight for more modest product.

The most expensive 10% of U.S. rentals had a vacancy rate of more than 13 percent during the first quarter of the year, according to a CoStar Group study cited by Bloomberg News.

For the rest, the rate was around 6 percent. CoStar's study excluded subsidized rentals and focused on the 54 largest metropolitan areas in the country.

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There are now 537,000 apartments und construction -- the most going back at least to 2000, according to the study. But those units are disproportionately located in expensive submarkets.

"Capital around the world is enamored with U.S. multifamily, and a lot of that is manifesting itself in high-amenity, high-asking-rent" apartments, said CoStar's Michael Cohen. "The market is missing some other opportunities."

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iehi-feed-63997 Thu, 07 Jun 2018 14:04:22 GMT How WeWork became the most hyped startup in the world http://implode-explode.com/viewnews/2018-06-07_HowWeWorkbecamethemosthypedstartupintheworld.html When Softbank first expressed interest in discussing business, Neumann insisted that Son should visit WeWork's headquarters in person. "It wasn't because we were trying to be cheeky," he says. "It was because part of what we do is energy -- and I can't put energy on a piece of paper."

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Not everyone is convinced, however. Some of its critics say that WeWork should be treated like a traditional property company, not a Silicon Valley unicorn. WeWork doesn't actually own most of it spaces, but takes out long leases on buildings, which it then offers out in smaller chunks and on shorter terms. This can be a risky model: serviced office provider Regus (now IWG) thrived in the dotcom boom only to suffer when the bubble burst, filing for bankruptcy protection for its US business in 2003.

"The problem was catastrophically falling rents," IWG CEO Mark Dixon, who founded the company in 1989, tells me later. There was no real fall in demand, he says, but a disjoint in cost base. "If you sign leases that are too long and you're fixed at double the market on your liability side on leases, you basically lose all your margin." Today, IWG remains one of WeWork's main competitors, and, with over 3,000 locations to WeWork's 200, it is much bigger. IWG has been publicly traded since 2000; at the time of writing, it has a market cap of £2.2 billion. Dixon insists that he is not worried about WeWork. "There's no magic ingredient that they have that everyone else doesn't have," he says. IWG launched its first space under co-working brand Spaces, which is closer in style to WeWork than its more formal Regus offices, in 2015. I ask what he makes of WeWork's $20 billion valuation. "Well, it's a great story," he says.

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