JP Morgan Chase, the nation's largest bank, announced plans to close roughly 300 branches by the end of 2016, roughly 5 percent of its overall footprint. According to the National Real Estate Investor, JP Morgan Chase is looking to cut costs and optimize its branch network and plans to change how it services its retail customers by emphasizing mobile banking and more tech-savvy automated teller machines, illustrating a larger trend within the banking industry: a greater focus on branch efficiency and technology. The commercial real estate industry is taking note, as this means thousands of shuttered branches.
The flood of equity financing available in the hotel market is driving pricing up, dropping capitalization rates and affecting the availability and types of transactions getting done, according to speakers at a general session at the North America Hotel Investment Conference. Investors are starting to look in new directions, as equity sources fight over deals and get pushed out into other market segments. Higher prices for hotel assets mean lower cap rates and fewer transactions. As a result, investors that would usually only invest in large, full-service assets are now interested in select-service products and in secondary and tertiary markets because the numbers are good and the risk is less.
A recent ruling from the U.S. Bankruptcy Court will allow Atlantic City, NJ to collect up to $30 million in unpaid property taxes from the former Revel Casino Hotel. According to The Wall Street Journal, Judge Gloria Burns lifted the bankruptcy code's shield on protecting Revel from litigation and creditor collections, with the caveat that the city wont be able to tack on penalties.
The latest report from the Mortgage Bankers Association shows that there is a lot of mortgage debt available to commercial real estate investors, and lenders are plentiful. According to the National Real Estate Investor, "The mortgage markets have been helped by low interest rates, improving property prices and strengthening fundamentals." This environment has led to more borrowers qualifying for loans and more lenders making capital available.
The apartment sector has dominated the national commercial real estate market for the past three years. With steadily improving occupancies and modest improvements in rents, the sector has consistently been the strongest performer. However, the hotel market seems to be taking over the top stop in the national commercial real estate market. Hotels led all other major commercial property types in terms of sales price gains both in the first quarter of 2014 and in 2013, according to data released by Real Capital Analytics, and hotel sales volume surged 27 percent in April compared to the previous year. Because hotels benefit the most from an improving economy, the sector's strength indicate that investors are trying to get in front of a good economy going forward.
The U.S. Internal Revenue Service said that bitcoins, the best-known virtual currency, should be treated as property and not as currency for property tax purposes. In a statement, the IRS said that tax principals applied to property transactions should be applied to transactions for bitcoins, which means the virtual currency would be taxed as ordinary income or as assets subject to capital gains taxes, depending on the situation. Bitcoin, which began circulating in 2009, is generated by computers and lacks control by any government or central bank. The currency been under a lot of scrutiny since a Tokyo-based exchanged filed for bankruptcy after losing approximately $650 million worth of customer bitcoins, which has led to calls for more guidance on U.S. tax treatment.
CoStar, a leading commercial real estate information company, reports that a strong interest from overseas and domestic capital is projected to spur a growing number of U.S. hotel sales in secondary markets in 2014. Hotel properties can expect another year of strong investment activity, thanks to high demand, improving room rental performance and a large supply of capital from REITS and private equity sources. Jones Lang LaSalle predicts an abundance of equity and debt capital should drive a 5% to 10% increase in global hotel transaction volumes in 2014.
By Sharif Mitchell, Senior Managing Consultant / Area Leader, New York City
& Cameron Moore, Senior Managing Consultant / Area Leader, Atlanta
As we approach the end of 2013, commercial real estate lenders are eager to find out whether they have reached or exceeded their goals in providing funding for real estate transactions. According to the Commercial Observer, one thing is certain: CMBS investment bankers have exceeded last year’s output, yet it is not certain if the Wall Street shops will reach a $100 billion in gross lending. There are also the traditional savings and commercial banks, mortgage REITs, private equity funds and insurance companies, as well as new players in town who joined and/or increased their volume of financing this year.
The office market in Washington D.C. has been less than ideal, thanks to the short-term shocks to the region including sequestration, the government shutdown and mandates that federal agencies must decrease their real estate profiles. While this hasn't deterred investors from commercial real estate in the area, it has shifted their interest to retail space and other non-office properties, which pose less of a near-term risk. According to the Washington Business Journal, the sale of a pair of Northern Virginia retail sites could be the leading edge of that trend, in which the Sterling Plaza and Sterling Plaza II was sold for $26.5 million, as well as the Lake Montclair Center in Prince William County for $19.2 million.