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Google is buying more land parcels in downtown San Jose, reports The Mercury News. CNBC profiles activist investor Jonathan Litt. These are among today’s must reads from around the commercial real estate industry.

1. Amazon-Whole Foods Deal Hurts Grocery Stores in My District, Says Silicon Valley Congressman “Khanna spoke after he called for the Justice Department and the Federal Trade Commission to review the impact the deal would have on food prices and wages. On Monday, Amazon’s stock jumped to an all-time intraday high, three days after the company announced its blockbuster agreement to acquire Whole Foods. Khanna said Wal-Mart’s dominance in the grocery space has already had a negative impact on wages and local grocery stores.” (CNBC)
2. Opinion: Another Part of the Real Estate Market is Starting to Crumble “While the struggles of mall REITs are no secret given Amazon’s increased dominance of the retail sector, real estate investors may also contemplate putting apartment REITs on their warning lists. That’s because although apartment real estate investment trusts have done well this year — and since the end of the housing crisis, in general — rent growth is starting to slow. To understand the current situation of multifamily rental housing, some recent history is necessary. In the lead-up to the housing crisis, homeownership in the U.S. rose from 64% to 69% at its peak in 2005 and 2006.” (MarketWatch)
3. Google Village Property Buys Continue in Downtown San Jose “Google’s massive downtown San Jose development plan has prompted four more property purchases, including some that indicate the search giant’s area of interest has begun to widen. The property deals occurred just a few days ahead of a key San Jose City Council meeting, during which the council is scheduled Tuesday to approve the launch of exclusive negotiations with Google for the purchase of 16 government- and city-agency-owned parcels. The parcels would be part of a land assembly for the tech giant’s proposed tech campus and transit-focused village near Diridon Station and SAP Center.” (The Mercury News)
4. Infrastructure Spending Could Be Hindered by a Shortage of Skilled Labor “A joint report from lobbying group U.S. Chamber of Commerce and construction materials manufacturer USG Corporation shows commercial contractors anticipate they’ll have more trouble hiring workers during the second half of 2017. The USG and Chamber of Commerce Commercial Construction Index is a quarterly economic report that gauge the outlook for the commercial construction industry. Each quarter, researchers survey a panel of 2,700 commercial construction decision-makers and provide findings that are representative of the entire U.S. construction industry by geography, size, and type of company.” (Fortune)
5. Meet Jonathan Litt, the Real Estate Investor Pushing Retailer Hudson’s Bay to Change“His playbook has largely focused on finding ways to monetize real estate to enhance shareholder value. That was the case at BRE Properties, which sold to Essex Property Trust for $4.3 billion in 2013, as well as Associated Estates, which sold itself to Brookfield for $2.5 billion in 2015. It was also the case at MGM Resorts, which spun off some of its real estate through an initial public offering in 2016.” (CNBC)
6. Miami Owes its Life to Foreigners “Miami is done (well, never entirely) building residential or mixed use towers for money laundering foreigners. They are now building entire towns for them, and everyone else in between. The developers will call it ‘lifestyle properties,’ but it is even more than that. In Swire’s case in particular, the BCC and its surroundings is a work and entertainment complex that hires hundreds if not thousands of locals.” (Forbes)
7. DDR, Madison International Recap $1B Retail Portfolio “DDR Corp., of Beachwood, Ohio, and an affiliate of Madison International Realty, of New York City, have agreed to recapitalize a $1 billion, 52–shopping center joint venture previously owned by DDR and various partners through the DDR Domestic Retail Fund I, the two companies announced last week. In the transaction, Madison International Real Estate Liquidity Fund VI, an investment fund managed by Madison International Realty, acquired 80 percent of the joint venture’s common equity and a DDR affiliate retained 20 percent.” (Commercial Property Executive)
8. Amazon Is Finally Opening One of its Mega-Warehouses in New York “Amazon’s ability to quickly ship stuff to New Yorkers, from Kindle readers to kayaks, is about to get a major boost. The Seattle-based Web giant headed by billionaire Jeff Bezos is preparing to open a massive distribution hub in the Big Apple — the company’s first major facility in New York state — by summer’s end, The Post has learned. The Amazon ‘fulfillment center’ will span nearly 1 million square feet on the west shore of Staten Island.” (New York Post)
9. Whole Foods CEO Hints at Launching Another Brand Under Amazon “After Amazon completes its takeover of high-end grocer Whole Foods Market, it might launch another brand with different standards, the grocery chain’s chief executive said in remarks reported in a securities filing on Monday. Amazon plans to keep the natural grocer’s high standards, Whole Foods Chief Executive John Mackey said, adding, ‘They’re not stupid enough to go change that.’ The filing contained a transcript of a town hall meeting for Whole Foods employees.” (Fortune)
10. Seattle Office Building Commands $330M “Union Investment has acquired Midtown21, a 21-story, Class A office building in Seattle, from developers MetLife Real Estate and Trammell Crow Co., for $330 million. The acquisition will be transferred to the holdings of open-ended real estate fund Unilmmo: Europa, which focuses on investments in Europe but occasionally buys properties overseas. The fund also owns Seattle-based properties, Amazon Phase VI office building and Hilton Garden Inn Hotel.” (Commercial Property Executive)

Taking advantage of an impending boom in industrial space for marijuana growers — notably class-B and class-C warehouses — isn’t as simple as just snatching up properties and signing up tenants.

Does the growing legalization of recreational and medical marijuana represent a pot of gold for industrial real estate? It could, experts say, but only if investors quickly and carefully pounce on opportunities.

The industrial real estate frenzy tied to legalized marijuana is subsiding in Colorado, which has been the country’s hottest market in that category, but it’s primed to take off in California and Massachusetts — two heavily populated states where growing, selling and using recreational marijuana will be fully legal by early 2018.

California, Massachusetts and other states that have recently legalized recreational marijuana, medical marijuana or both are potential hot spots for industrial real estate, yet investors who linger on the sidelines too long are likely to be shut out.

That being said, taking advantage of an impending boom in industrial space for marijuana growers — notably class-B and class-C warehouses — isn’t as simple as just snatching up properties and signing up tenants.

For investors aiming to capitalize on the current trends, speed to market is key, says Jason Thomas, founder and CEO of Avalon Realty Advisors, a Denver-based commercial real estate and business brokerage firm specializing in the marijuana and hemp sectors.

“It’s really about finding the right property as soon as possible,” Thomas says. “And hopefully in an area that you have a high chance of being able to have it licensed with limited competition.”

On top of that, investors must pay attention to “local nuances” in marijuana markets that they’re eyeing, says Spencer Levy, Americas head of research at commercial real estate services company CBRE. For instance, state laws in Colorado aren’t the same as they are in California. On a more granular level, the same holds true for local ordinances in the Denver area versus those in Southern California’s Inland Empire region.

Some of the nuances to consider are whether a locality allows marijuana cultivation and, if it does, whether cultivation must be done in an enclosed space, Levy says. In addition, an investor must analyze the condition of the local industrial market and take into account that marijuana remains illegal under federal law, he adds. Federal law complicates financing and banking activities connected to marijuana operations.

If you learn from what has taken place in the Denver area’s weed-related industrial market, you’ll be far better off than if you dive blindly into such a risky venture, according to Levy.

Industrial space for marijuana operations “is an emerging industry, where there is high demand and the rules are still being written, so the opportunity is real but so is the risk — not just from the legal issues, but also from the pure operational issues,” Levy says.

That risk can lead to reward. According to a CBRE report published in early June, the average effective rental rate for marijuana-growing sites in the Denver area was $14.19 per sq. ft. on a triple net basis, based on a review of 25 leases signed between 2014 and 2016. That was two to three times higher than the average warehouse rental rate in the area’s top four cultivation sub-markets.

In the Denver area, marijuana growers occupied 4.2 million sq. ft. of industrial space in the fourth quarter of 2016, the CBRE report notes. That amounts to 3.0 percent of the region’s total warehouse market. In May 2016, Denver capped the number of cultivation and retail locations allowed in the city, limiting expansion to mostly adding space at licensed locations or buying licensed locations.

In Denver, industrial spaces for marijuana growers range from 5,000 sq. ft. to 80,000 sq. ft., with 10,000 sq. ft. to 20,000 sq. ft. being the “sweet spot,” says Thomas. In 2016, industrial properties occupied by marijuana businesses in the Denver market sold for $115 per sq. ft., a 25 percent premium over traditional class-B and class-C industrial spaces, according to CBRE.

The CBRE report indicates consolidation among marijuana growers in the Denver market has been occurring for a while, with established operators buying mom-and-pop growers to boost market share and realize economies of scale.

“Now, a super-competitive market is separating winners from losers among growers there, and the modest easing up of demand is shrinking the premium that cannabis companies are being asked to pay [for industrial space],” says Tom Adams, editor in chief at Arcview Market Research, which specializes in the marijuana industry.

As legalization ramps up in California, Massachusetts and other states, those markets could experience a repeat of the “land grab,” as Thomas puts it, that occurred in Colorado. And it’s no wonder that there’ll be a gold rush of sorts in emerging marijuana markets, particularly California: Arcview Market Research forecasts that California’s legal marijuana industry will be worth $5.8 billion by 2021.

Levy recommends investors seeking to cash in on a marijuana-triggered spike in demand for industrial space in California and elsewhere approach the situation with a “long-term operational mindset” instead of a “pure speculator mindset.” An investor must stick to a solid business plan, so that the odds are higher for survival in this rapidly shifting market, according to Levy.

He emphasizes that marijuana-growing operations make up just a sliver of the class-B and class-C industrial market. But “if you can identify that sliver for which this is applicable, you’ve identified a very powerful force for tenant demand, capital markets demand and rent growth in excess of the remainder of the market.”

So far, private investors have been the ones profiting from that sliver of the industrial market, but a few institutional investors — such as StarGreen Capital and Tuatara Capital — are starting to show interest, according to Thomas.

Whether they’re private or institutional, investors will surely be keeping tabs on the industrial real estate market for marijuana-growing operations in places like California and Massachusetts. In such places, it takes three or four years for the marijuana-related industrial market to stabilize, Thomas says. “But during that time,” he adds, “it’s the Wild West.”

“From beginning to end, it could be a 10-year process,” Bruce Berkowitz, whose Fairholme Fund holds one of the largest stakes in the mortgage-finance giants, said in a June 16 interview.

(Bloomberg)—Five more years? That’s how long fund manager Bruce Berkowitz says it may take to resolve his legal battle with the U.S. government over Fannie Mae and Freddie Mac’s billions in profits.

“From beginning to end, it could be a 10-year process,” Berkowitz, whose Fairholme Fund holds one of the largest stakes in the mortgage-finance giants, said in a June 16 interview with Bloomberg Television.

It’s already been more than four years. Berkowitz, hedge fund manager Bill Ackman and several other investors sued the government over its 2012 decision — under the provisions of a crisis-era bailout — to seize all of Fannie and Freddie’s earnings. So far, federal judges have upheld the legality of that profit sweep.

Berkowitz said he’d like to see President Donald Trump release Fannie and Freddie from government control and turn them over to shareholders, moves the Obama administration resisted. If Trump’s Treasury Department doesn’t take action quickly, Berkowitz said he’ll bring his case to the U.S. Supreme Court.

The government took over Fannie and Freddie in 2008 as the housing market was crashing, eventually injecting $187.5 billion into the companies. Under the original bailout terms, the Treasury received a new class of “senior” preferred shares that paid a 10 percent dividend, along with warrants to acquire nearly 80 percent of the companies’ common stock.

In 2012, the government changed the terms. Instead of a 10 percent dividend, the government would receive nearly all profits, but there would be no payouts when the companies suffered losses.

Fairholme and other investors cried foul and sued in 2013. So far, judges have sided with the government. In February, an appellate court in a split decision mostly upheld a lower court’s decision to dismiss Fairholme’s case. While Berkowitz and the other investors have argued that the government lied about its reasons for implementing the 2012 profit sweep, the courts so far have said that such motives or evidence doesn’t matter.

Lawmakers in the Senate are currently at the early stages of developing legislation to revamp the housing-finance system, which has an uncertain outcome for shareholders even if it succeeds. Treasury Secretary Steven Mnuchin has said that it’s his “strong preference” to work with Congress on bipartisan reform, although he hasn’t ruled out taking action without lawmakers.

Violating Constitution

Berkowitz said he hasn’t discussed plans for overhauling Fannie and Freddie with Mnuchin. If the Trump administration doesn’t stop the profit sweep, he said Fairholme will “absolutely” go to the Supreme Court.

“When you go back and think about it, right, there are issues of breach of contract. There are constitutional issues. How do you create an agency that oversees Fannie and Freddie that doesn’t answer to any branch of government?” said Berkowitz, referring to the Federal Housing Finance Agency, which controls the companies.

Berkowitz said that not attacking the constitutional issues in the first place was a mistake in Fairholme’s legal strategy. “We should’ve argued it. It was so obvious. We argued the finer points,” Berkowitz said.

To contact the reporters on this story: Joe Light in Washington at jlight8@bloomberg.net ;Erik Schatzker in New York at eschatzker@bloomberg.net To contact the editors responsible for this story: Jesse Westbrook at jwestbrook1@bloomberg.net Gregory Mott

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© 2017 Bloomberg L.P

Experts predict Amazon will use the Whole Foods stores, in part, as hubs for grocery pick-up and delivery, helping Amazon resolve the “last mile” dilemma.

The proposed $13.7 billion acquisition of organic grocery retailer Whole Foods Market by e-commerce giant Amazon holds the potential to upset the grocery cart, so to speak. Yet retail real estate investors should cheer the Amazon-Whole Foods deal, experts say.

Experts predict Amazon will use the Whole Foods stores, in part, as hubs for grocery pick-up and delivery, helping Amazon resolve the “last mile” dilemma of how to get products from local shipping hubs to nearby customers. Without a substantial brick-and-mortar presence, Amazon has struggled to effectively operate its AmazonFresh grocery pick-up and delivery service. Industry observers also expect Amazon to improve efficiency at Whole Foods’ distribution centers by incorporating the e-commerce company’s technology.

The Amazon-Whole Foods deal presents an opportunity for retail real estate investors, according to Matthew Harding, president of retail real estate services firm Levin Management. The combo with the e-commerce behemoth will help lessen “this perceived threat that all brick-and-mortar retail will be dead by next January,” he says.

Amazon’s purchase of Whole Foods should instill confidence in retail real estate investors, especially those whose portfolios include grocery-anchored properties, Harding notes. “Grocery-anchored shopping centers have always been one of the more stable property types within retail,” he says.

While retailers in other categories, including Sears, Kmart, Payless ShoeSource and RadioShack, are collectively shuttering hundreds of stores as they lose ground to e-commerce players, the Amazon-Whole Foods deal underscores the vital role of brick-and-mortar in the future of retail, Harding says.

Although the acquisition will disrupt the grocery business, it will also create “arbitrage opportunities” to buy grocery-aligned properties, says Joe McKeska, president and co-founder of Elkhorn Real Estate Partners, which provides advisory and investment services for the retail real estate sector, including grocery properties. Elkhorn is a division of A&G Realty Partners, a commercial real estate advisory and investment group.

“I think there are opportunities,” McKeska says. “But I think you also have to be more selective and more careful and more thoughtful in terms of how you make those decisions.”

McKeska — previously a real estate executive at Southeastern Grocers, owner of the Winn-Dixie, BI-LO and Harvey’s chains — says that from a macro perspective, retail real estate investors will need to weigh which grocers are likely to survive the shake-up and which are likely to wither. From a micro perspective, investors should scrutinize grocery store locations and market share, he says.

“It’s a good time for investors to really take a hard look at what they have in their portfolio,” McKeska says, “and make sure that they are comfortable with the assets they have and that it fits their overall investment profile and risk profile accordingly, especially in light of all the changes that are taking place.”

Through the acquisition, Amazon will control Whole Foods’ 440 stores in the U.S., as well as its 11 regional distribution centers, according to the Wall Street Journal. Those will be coupled with Amazon’s two drive-up grocery stores and eight brick-and-mortar bookstores, as well as its more than 70 fulfillment centers nationwide.

The Amazon-Whole Foods marriage — whatever shape it takes — will force other players in the grocery business, like Albertsons and Kroger, to adapt to the new environment and accelerate their growth strategies, notes Harding.

“They’re in a competitive industry. They know that Amazon and other players like Jet.com have been encroaching on their business,” he says. “If anything, [the Amazon-Whole Foods deal] will increase the need to modernize and evolve. And not everyone will do that.”

Grocery retailers that fail to modernize will fall by the wayside, just as some players in other retail sectors already have, according to Harding. McKeska expects the Amazon-Whole Foods deal to be something of a catalyst for “a wave of consolidation” in the grocery industry.

That’s a view shared by executives at Kroger, the country’s second largest grocery chain and once a potential Whole Foods suitor. In a June 15 conference call with Wall Street analysts, Rodney McMullen, chairman and CEO of Kroger, said the grocery business is “probably at the front end of the next phase of consolidation.” Michael Schlotman, Kroger’s chief financial officer, added that the anticipated consolidation will allow the grocery chain to increase its footprint in existing markets.

As if Amazon’s full-bore move into the grocery business weren’t enough, pressure on grocery retailers, including big-box mainstays Costco, Target and Walmart, is also coming from two German grocers that are expanding aggressively in the United States.

Discount grocer Aldi plans to remodel 1,300 of its 1,600 stores in the U.S. by 2020, and to add 900 more stores stateside by the end of 2022. Over the next five years, Aldi aims to invest $5 billion in new and remodeled stores. Meanwhile, discount grocer Lidl opened its first U.S. store on June 15 and intends to roll out as many as 100 stores along the East Coast by the summer of 2018.

At the same time, regional grocers Publix and Wegmans are broadening their footprints on the East Coast.

Not that long ago, Whole Foods had its own ambitious plans for expansion. In 2013, executives unveiled a strategy to grow to 1,200 stores nationwide. Later on, Whole Foods introduced a low-cost, pared-down concept called 365.

But in February, Whole Foods — amid a prolonged sales slump — abandoned the 1,200-store goal and announced the closure of nine stores. In the wake of the Amazon bombshell, McKeska wonders what will happen to the 365 format, which operates only four stores.

Even so, McKeska doesn’t think an Amazon-owned Whole Foods will pull back on opening more locations or redeveloping older ones. “I would be surprised if Amazon puts the brakes on that,” he says.

However, food industry expert Phil Lempert suspects Amazon will at least temporarily halt the addition of Whole Foods locations to take stock of the grocer’s expansion plans. The acquisition is scheduled to close in the second half of 2017.

“They’ll need some time to properly evaluate expansion locations,” Lempert says, “and look at what markets are over-stored and under-stored before they make a move.”

For his part, Neil Stern, senior partner at retail consulting firm McMillan Doolittle, says that under the Amazon umbrella, Whole Foods might wind up shrinking its footprint, although he emphasizes that Whole Foods’ leases will be secured by a “very financially sound owner.”

“While Amazon has very deep pockets, my guess is their first priority is to create omnichannel synergies versus adding more stores,” Stern says.

The big stumbling block is where the money will come from to repay the private capital that has come into the project.

President Trump’s campaign promise to leverage private capital to spur $1 trillion in new infrastructure spending over the next decade is thrusting this highly specialized investment niche into the spotlight.

Government real estate has exploded into a broad investment category that includes everything from toll roads and water treatment plants to single-tenant leased commercial buildings. Capital has been pouring into the space over the past five years with new funds and more new players that are putting more pressure on the supply of investment deals available.

The latest big addition is Blackstone, which launched its U.S. Infrastructure fund this year that it expects to grow to $100 billion. “Since the global financial crisis, people like real assets and they like infrastructure because the presumption is that these are business models and revenue streams that are secure,” says Joel Moser, CEO of Aquamarine Investment Partners, an institutional investor and manager of private equity in the real asset classes of energy, infrastructure and core real estate.

The challenge is that there is more capital than there are quality investment opportunities. “There is really not a big inventory of these traditional civil infrastructure assets,” says Moser. So what most infrastructure funds tend to invest in is energy, such as oil and gas pipelines. There is also a scattering of about half a dozen transportation projects that come to the market each year. “There is a huge disconnect between what investors think they want exposure to in North America and what is actually there,” Moser says.

Investors are now watching to see if the pipeline of investment opportunities might be poised to take a big leap forward. “There are a lot of people who are watching Washington to see if there is a real catalyst for infrastructure spending,” says Nathanial Sager, senior managing director, CTL and structured debt products, at Mesirow Financial in Chicago.

One factor that bodes well for new infrastructure development is that people generally recognize that there is a big need in the country to upgrade and replace critical infrastructure. “So regardless of whether this administration is successful, or the next administration, I think we are going to see increased activity in the (third-party) market, because there is going to be a huge demand for investment in infrastructure and essential government assets,” Sager notes.

Infrastructure has been an investable asset class globally for some time, but it has only taken off in the U.S. over the last decade. The first privatization of a U.S. highway occurred in 2005, with an investment group acquiring the 7.8-mile Chicago Skyway toll road.  That was followed by the Indiana Toll Road deal in 2006. “All of a sudden, the concept of infrastructure being an investable asset class in the U.S. exploded,” says Moser.

There have been numerous pilot projects around the country over the past decade, some successful and some failures, and the U.S. is still grappling with how to make privatization work, notes Moser. One challenge is that projects are not easy to finance. Lenders are wary about underwriting infrastructure projects with revenue risk, or those projects that are reliant on collecting revenue from operations, such as a toll road.

“I am a little bit disappointed to hear that the current administration’s $1 trillion infrastructure plan is in no way connected to some new expenditure of federal dollars,” says Moser. Private capital is always willing to make a risk-adjusted return, and there is no lack of capital in the marketplace. The municipal bond market, for example, is very liquid with lots of capital. Adding a new form of capital in terms of private or institutional equity doesn’t really change anything.

The big stumbling block is where the money will come from to repay the capital that has come into the project. If someone builds a new bridge, does the revenue pay a yield on the bond or does return for investors come from a government tax or perhaps user fees? Ultimately, that funding needs to be a government policy decision, says Moser. “So all this discussion about private sector finance is a red herring,” he says. “The only way there will be $1 trillion in infrastructure in America is that if government, at one level or another, decides that there will be.”

MarketWatch asks if San Francisco is facing a bubble. Co-working spaces begin to take off in suburban office buildings, reports the Wall Street Journal. These are among today’s must reads from around the commercial real estate industry.

1. Everyone’s Asking San Francisco: Can You See a Bubble if you’re in a Bubble? “The spreading grip of the technology sector on the San Francisco Bay Area means the boom reaches to every service sector that well-paid techies consume. But what that really means is that when a tech boom becomes a bubble, it’s a real-estate bubble, a restaurant bubble, a luxury-vehicle bubble, even a public-services bubble, writes Charles Hugh Smith.” (MarketWatch)
2. CoWorking Spaces Spread to the Suburbs“Communal co-working office spaces such as the ones offered by shared-office giant WeWork Cos. are red hot in big U.S. cities like New York. Now they are making inroads in the New Jersey suburbs. Co-working startup Vi Coworking LLC opened a site in June at a redevelopment project at Fort Monmouth, after finding success with a 5,000-square-foot co-working space it launched a little over a year ago at the Bell Works redevelopment.” (Wall Street Journal, subscription required)
3. Commercial Mortgages: Commercial Real Estate Values Are Peaking “Much like one of Tennessee’s state songs ‘Rocky Top,’ commercial real estate values are peaking and it is a little rocky at the top. It is not uncommon to read a headline reporting surging stock, gold or bond prices while simultaneously reading about investors’ fear that a great drop off is imminent. The same is true of commercial real estate. The more values surge, somehow, there is greater fear that a cliff is right around the corner.” (Richmond Times Dispatch)
4. Office Oversupply Looms, but Global Economies Look Solid, Commercial Real Estate Economist Says “As the world’s economies rebound, developers have embarked on a construction spree that will create a “scary” amount of office space, says Kevin Thorpe, global chief economist at commercial real estate brokerage Cushman & Wakefield. Some 700 million square feet of office space is under construction worldwide, and Thorpe fears an oversupply. ‘This massive wave of supply is absolutely going to create pain in the world’s office sector,’ Thorpe said Thursday at the National Association of Real Estate Editors’ conference in Denver.” (Chief Investment Officer)
5. Architect Rafael Vinoly Talks About 432 Park Avenue, New York “Architect and former Wallpaper* Awards judge Rafael Viñoly worked with the developer team, Macklowe Properties and the CIM Group, to produce the design for an impressive 96-story high slender structure, featuring elegant 10ft by 10ft square windows. In this short film (below), Wallpaper* catches up with Viñoly in his studio in New York to hear the thinking behind New York’s tallest skyscraper—as well as the tallest building in the Western Hemisphere—behind One World Trade Center.” (Fortune)
6. 3 Big Reasons Why Amazon Needs Whole Foods “Amazon has been trying unsuccessfully to break into the grocery industry for 10 years. It launched AmazonFresh in Seattle in 2007 to see if it could persuade consumers to buy bananas online the same way they buy toothpaste online. While AmazonFresh has expanded to Los Angeles and San Francisco, it hasn’t really caught on across the country.” (CNBC)
7. Women in Business Q&A: Heidi Burkhart, President and Founder, Dane Real Estate“Heidi Burkhart is the President and Founder of Dane Real Estate. Burkhart formed Dane, an affordable housing real estate brokerage, in 2008 when she was 26. Today the company has facilitated the closings in excess of 11,000 affordable housing units and over $1.5 billion in transactions. Dane has had tremendous success rehabilitating properties nationwide but focuses heavily on the New York City area.” (Huffington Post)
8. Can Airbnb Professionalize Without Losing the Personal Touch? “Airbnb was born under the banner of the “sharing” or ‘on-demand’ economy, and much of its immense brand cachet was built on travelers’ desire to ‘belong’ rather than just be tourists. But as the company works to standardize customers’ experiences across an array of different rentals, the company might be eroding some of the warmth that set it apart from traditional hotels.” (Fortune)
9. Tax Developments Could Place Chill on Real Estate Deal Flow “Commercial real estate deal makers are facing a potential tax change that could severely impact profits, and even place a chill on commercial real estate investment overall. Taxes on carried interest, the profits secured by general partners, have been stable at 20 percent since the 1990s. Now, there are proposed changes in the works that, if enacted, could see that tax raised to 39.6 percent, almost doubling the tax general partners pay on investment profits. Some fear this change could place a chill on deal makers’ willingness to make bold investments in new projects.” (Commercial Observer)
10. Queens Landlord Demands Tenants Prove Their Immigration Status or Face Eviction“Prove you’re a citizen — or get out. A letter from a Queens landlord to tenants of a Corona building raises the threat of eviction to anyone who can’t show they’re in the U.S. legally. The notice, sent to residents of all 23 apartments at the corner of 42nd Ave. and Junction Blvd. last week, demands each leaseholder appear at the building’s management office with photo ID, Social Security card, ‘proof of your status in US (Green card or Passport)’ and proof of employment.” (New York Daily News)

Vornado and Related will put about $630 million of their own money into the makeover. They plan to recoup their investment by leasing about 700,000 sq. ft. of new commercial space.

(Bloomberg)—Vornado Realty Trust and  Related Cos. completed a deal to redevelop Manhattan’s landmark James A. Farley Post Office Building, part of a $1.6 billion plan to create a modern transit hub across Eighth Avenue from the overcrowded Pennsylvania Station.

The two real estate companies, among the largest property owners in that area, will work with construction company Skanska AB to convert the eastern portion of the Farley Building into Moynihan Station, a skylit annex to Penn Station that would serve Amtrak and Long Island Rail Road passengers. The developers signed a lease with the state of New York, which owns the 1.4 million-square-foot (130,000-square-meter) Farley Building, the Empire State Development Corp. said in a statement Friday.

The project, to be completed by late 2020, will help to relieve pressure and overcrowding for the 650,000 people who use Penn Station every day. New York Governor Andrew Cuomo warned of a “summer of hell” as Amtrak Corp., which owns Penn Station, does track work starting next month.

“It is a magnificent building, outside and inside,” Cuomo said on a conference call with reporters. “We’re talking about 90-foot ceilings. This is a grander hall than at Grand Central Terminal. Remember, more people go through Penn than LaGuardia, Kennedy airport and Newark airport combined.”

Infrastructure Adviser

Vornado and Related will put about $630 million of their own money into the makeover, according to the statement. They plan to recoup their investment with revenue from leasing about 700,000 square feet of new commercial space — offices, retail and dining — in the Farley Building. The rest of the money for the project will come from an array of government sources, including $550 million from New York state.

Vornado is the biggest landlord in the Penn Station area, with more than 8 million square feet of buildings around and on top of the existing transit hub, including 1 and 2 Penn Plaza. The real estate investment trust is led by Steven Roth, who is co-chairman of President Donald Trump’s infrastructure task force, trusted with guiding a projected $1 trillion in investment in public projects. Large infrastructure investments planned included the digging of a new rail tunnel under the Hudson River.

A call to Mark Semer, a Vornado spokesman, wasn’t immediately returned.

Related, whose chairman is billionaire Stephen Ross, is leading the $25 billion Hudson Yards development project west of Penn Station. The Farley Building makeover “will continue the dynamic transformation of the west side and offer unique, large-floorplate class A office space in a historic location with unrivaled access to transportation and vibrant retail amenities,” Jeff Blau, Related’s chief executive officer, said in the statement.

To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net To contact the editors responsible for this story: Daniel Taub at dtaub@bloomberg.net Christine Maurus

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© 2017 Bloomberg L.P

Following are some of Anbang’s largest purchases.

(Bloomberg)—Anbang Insurance Group Co. notched up more than $10 billion of foreign acquisitions during a three-year global takeover binge, a campaign that brought Chairman Wu Xiaohui into the orbit of Wall Street and Washington elites before coming to a halt as Chinese authorities moved to rein in acquisitive insurers.

Wu’s responsibilities have now been handed over to other senior executives, and Chinese authorities have asked banks to suspend some business dealings with the insurer after the chairman was detained. The move makes Wu the latest of several tycoons to run afoul of officials cracking down on financial risk-taking.

None flew higher than Anbang’s Wu, or crashed so precipitously. He burst onto the U.S. scene in October 2014, with the record $1.95-billion agreement to buy New York’s landmark Waldorf Astoria hotel. Five months later, he took on Marriott International Inc. with an 11th-hour rival bid for Starwood Hotels & Resorts Worldwide, before walking away a few weeks later. Wu bought real estate and financial services companies in Asia, Europe and North America, including the purchase of Strategic Hotels & Resorts as well as an office building in midtown Manhattan to house Anbang’s U.S. headquarters.

The list of deals Anbang didn’t complete is about as long. Besides Starwood Hotels, Anbang failed to complete a purchase of Fidelity & Guaranty Life last April and talks for a potential investment in a Manhattan office building co-owned by the family of President Trump’s son-in-law Jared Kushner broke off in March. In Europe, deals involving Anbang that didn’t go ahead include Portugal’s Novo Banco, Hypo Real Estate AG in Germany and Heron Tower in London. China’s cross-border purchases overall plunged 67 percent during the first four months of this year, according to data compiled by Bloomberg.

Following are some of Anbang’s largest purchases:

U.S. AND CANADA:

Waldorf Astoria Hotel in New York– 100% owned– Paid $1.95 billion– Acquired February 2015 — Condo conversion started in March will take about three years

717 Fifth Avenue in New York, Anbang’s U.S. headquarters– Office portion 100% owned– Paid about $415 million– Acquired around May 2015

Strategic Hotels & Resorts Inc., based in Chicago– 100% owned– Deal valued at about $6.5 billion at time of agreement– Acquired September 2016– Owns about 15 hotels, including marquee assets like San Francisco’s Westin St. Francis (valued at $1 billion by Real Capital Analytics Inc.), JW Marriott Essex House in New York ($705 million) and the InterContinental Chicago ($508 million)

Bentall Centre in Vancouver– 100% owned, bought in two stages– Terms not disclosed– Agreed in May 2016 to buy remaining 33 percent in a deal valuing the complex at more than C$1 billion ($754 million), according to people familiar with the matter

InnVest Real Estate Investment Trust, one of Canada’s largest hotel owners– Stated acquirer was Bluesky Hotels & Resorts Inc., which may have ties to Anbang, people with knowledge of the matter said at the time — Paid C$2.1 billion ($1.6 billion)– Acquired May 2016

70 York Street in Toronto, 17-story office building– 100% owned — Paid C$110 million — Acquired September 2015

EUROPE, MIDDLE EAST AND AFRICA:

Fidea NV, Antwerp, Belgium– Paid 369 million euros — Acquired May 2015

Delta Lloyd Bank, Brussels, Belgium– Paid 206 million euros — Acquired July 2015, now known as Nagelmackers

Vivat NV, Utrecht, Netherlands– Paid 1 euro for initial acquisition, agreed to invest 1.35 billion euros to recapitalize company– Acquired July 2015

Other European assets– Anbang used Vivat to purchase more than 500 million euros of office properties in cities including Amsterdam and Utrecht from Blackstone Group LP, people with knowledge of the matter said in October 2016– The Dutch unit also acquired $1.1 billion of residential mortgages from Rabobank in deal announced in March 2016

ASIA PACIFIC:

Tongyang Life Insurance Co. in South Korea– Paid more than 1.1 trillion won ($969 million) for controlling stake– Acquired in September 2015

Allianz SE’s insurance operations in South Korea– Paid 1.6 million euros– Acquired in December 2016

–With assistance from Scott Deveau.To contact Bloomberg News staff for this story: Hui-yong Yu in Seattle at hyu@bloomberg.net ;Jack Sidders in London at jsidders@bloomberg.net ;Zhang Dingmin in Beijing at dzhang14@bloomberg.net ;Hannah Dormido in Hong Kong at hdormido@bloomberg.net To contact the editors responsible for this story: Ben Scent at bscent@bloomberg.net ;Daniel Taub at dtaub@bloomberg.net ;Yue Qiu at yqiu47@bloomberg.net Christine Maurus

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