News

Landmark Links July 30th – Here We Go Again

Must Read Much of the boom in the bridge lending market has been fueled by demand for CLOs or collateralized loan obligations.  These securities are backed by real estate loans with higher risk profiles (think re-positioning and bridge on unstabilized properties) than what would be allowed in a CMBS pool, while offering higher returns to investors.  The CLO market – which largely disappeared in the years following the crash – is booming and yield -starved investors can’t get enough. As investor demand has increased, the quality of the loans that are getting packaged into the deals has decreased, raising red flags.

Economy

Glut: Auto sales are slowing, leaving dealers with bloated inventory more selective about purchasing new vehicles to put on their lots.

Upside Down: Investors are willing to pay a premium – and ultimately take a loss – on negative-yielding debt because they need the reliability and liquidity that government and high-quality corporate bonds provide.

Positive Trend: The economic expansion may seem long in the tooth but key demographic indicators still point to prolonged growth over the next 15 years.

Commercial

Prime Beneficiary: The tech sector and its ongoing boom continues to make Silicon Valley a top commercial real estate growth market.

Dual Purpose: Retailers are experimenting with in-store mini distribution centers in an effort to better-utilize their existing space.

Residential

Keep it Simple: When it comes to new apartments, the best amenity may just be lower rent as opposed to all of the bells and whistles that developers have been adding this cycle.

Priced Out: Demand for homes from millennials is rising.  However the high cost of housing – not student debt – is the biggest impediment to would-be buyers.

Foot in the Door: Struggling real estate brokerage Realogy Holdings has launched a new referral partnership with Amazon:

Under the new program, known as TurnKey, home buyers searching for an agent on Amazon.com will be directed to a Realogy agent in their market. These buyers get up to $5,000 of smart home devices and free home services from Amazon, from unpacking and cleaning to furniture assembly and smart home setup.

Profiles

Big Data: Uber is launching a restaurant “accelerator” in London to fill the selection gaps it sees on Uber Eats.

Doubling Down: Softbank is actively raising a second technology megafund, the sequel to its $100 billion Vision Fund, with investors as diverse as Apple, Goldman Sachs and the Kazakhstan government jumping aboard early on.

Endorphins: Researchers at Yale and Oxford may have proven that exercise is more important to your mental health than your economic status is.

Chart of the Day

Cause and Effect:

  1. New entry level homes are not being built.

                 Source: Calculated Risk via The Daily Shot

2. As a result, would-be entry level home buyers end up renting, creating massive                   demand and sending vacancy to record-low levels.

                 Source: The Daily Shot

3. Rental cost growth substantially exceeds inflation for an extended period of time.

                 Source: @theterminal via The Daily Shot

WTF

Frankenstein Sausage Party: A raid on a Phoenix body-donation company by the FBI led led to this work-of-art opening sentence in an AZ Central article:

A head sewn onto a mismatched body, a bucket of limbs and a cooler filled with penises are among items found by FBI agents during a raid on a Phoenix body-donation business.

Conspiracy Theory of the Day: A man accused of killing his wife claimed that a powerful group infected him with mayonnaise which made him do it because meth. (h/t Steve Sims)

I See No Issue: Pro-meat London were fined for eating raw squirrels outside of a vegan food market in London.  So much for freedom of expression (h/t Beth Barnard)

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com