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The US commercial real estate market is looking very cheap to foreign investors, who find their currency hedging costs aligning nicely with the direction of interest rates.

Currency hedging costs are driven by interest rate differentials between two currencies. Low US rates translate to lower costs for foreign investors looking to hedge the currency risk of their US investments. Here is why this dynamic is expected to continue.

 “Short-term and medium-term rates drive hedging costs,” Ciccy Yang, director of Global Markets for Hudson Advisors told listeners in CBRE’s weekly podcast. “And on that front, the Fed’s been giving very strong hints that more fiscal stimulus is needed to keep the economic recovery on track.”

If the stimulus is less than what the Fed prefers, Yang thinks it may have a more significant role in spurring the recovery. Its tools include more quantitative easing for an extended period and a further delay on the next Fed hike.

“The Fed currently forecasts that they’re going to be on hold until the end of their forecast horizon at year-end 2023 as per their dot plots,” Yang says. “In other words, they’re already forecasting short term rates will be bound to zero for quite a long time. Now, we already saw significant hedging cost declines from the beginning of this year when US rates fell significantly in the flight to quality and Fed easing on the back of the onset of COVID-19.”

The five-year annual hedging cost for Euro-based investors in the US has fallen 100 basis points this year to 1.2% today, according to Yang. In the same period, it has fallen 50 basis points to 2.6% for South Korean investors.

“There probably isn’t that much more room for these levels to fall further,” Yang says. “But given the likely expectation of accommodative Fed policy, it does feel like the lower currency hedging costs are generally here to stay in the near term.”

So far though, foreign investors are, for the most part, not biting.

In Q3, cross-border investment fell 71% year over year to $3.5 billion, according to Real Capital Analytics. This is still better than the low of $0.5 billion seen in the depths of the Global Financial Crisis.

The drop-off in cross-border investment might be partially the result of the types of properties being sold. Cross-border groups find it easier to purchase larger properties. Sales for assets priced greater than $50 million fell 61% year-over-year in the third quarter, while properties priced $5 million and below fell 39%, according to RCA.

Some foreign CRE investors, however, are stepping up their US  allocations. In the first nine months of the year, Korean investors accounted for 8.6% of all overseas investment in U.S. commercial real estate, up from 3.7% a year earlier, accordingto the Wall Street Journal,  citing Real Capital Analytics numbers.

South Koreans invested $1.56 billion, up from $1.24 billion a year earlier, trailing only Canadian and German investors, the WSJ said. A year ago, South Koreans ranked 10th among foreign investors in U.S. real estate.

 

Source: GlobeSt

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Amazon wants to build a 65,000 square-foot distribution center at the intersection of Woolbright Road and Military Trail near Boynton Beach but nearby communities are not exactly putting out the welcome mat.

Delray Dunes and Quail Ridge, two large golf-club communities, are gearing up for a major fight to kill the project.

Most Amazon facilities, they note, are in industrial centers, not adjacent to large residential communities. Amazon’s agent recently met with Village of Golf planners to request major changes to the town’s growth plan in order to accommodate the facility. Village of Golf Manager Christine Thrower said the process has just begun. Agents for Amazon were told to revise their plans to see if they can be made more palatable to area residents. Thrower said she expects the project to be discussed again at a meeting in January.

Amazon wants to build a 65,000 square-foot distribution center at the southeast intersection of Woolbright Road and Military Trail.

But the two communities along with the Coalition of West Boynton Residential Associations are expected to argue the location is not appropriate for an Amazon distribution center despite the nearly 100 jobs it may create.

The world’s biggest online retailer recently broke ground on a 1 million square-foot facility on 100 acres in the Palm Beach Park of Commerce, which lies west of Jupiter near the Beeline Highway. The company announced in July that it plans to open a delivery station in Boca Raton this year. Last October, it opened a 96,000-square-foot delivery warehouse on Belvedere Road near Florida’s Turnpike west of West Palm Beach.

With around 300 residents, the Village of Golf is one of the smallest communities in South Florida. It encompasses about 530 acres, including a Publix supermarket that is currently under construction. The supermarket, a self-storage facility, a gas station and retail outlets are all part of a master plan recently approved by the town as are the seven warehouses that Amazon wants to replace with one building.

The Village of Golf location would be an operation similar to Amazon facilities on Belvedere Road and in Pompano Beach in Broward County. Large tractor trailer trucks drop off packages to the facility that are then sorted and placed onto scores of delivery trucks.

“This is basically an around the clock 24/7 operation that is not suited for our community,” Delray Dunes said in a letter to the Village of Golf. “The high-intensity industrial use contained in a single 44-foot-tall building is not compatible with the surrounding communities and will impact all of us negatively.”

A number of Village of Golf residents also said they were opposed to the project during the recent meeting.  But Kelly Smallridge, president and CEO of the Business Development Board of Palm Beach County, told The Post that critics should understand that the 10-acre site is already approved for seven separate warehouse buildings that would generate far more traffic and employ far more people than the Amazon facility. Those seven warehouses would total 100,000 square feet as opposed to the 65,000 square-foot Amazon building.

Thrower said Amazon would need to either seek special exceptions or a zoning change to build one 65,000 square-foot building to replace the already approved seven buildings.

Delray Dunes noted that approving the plans would amount to a drastic reversal of a zoning code that has fostered “low density, neighborhood commercial development.” It questioned why the town would consider locating “industrial development” adjacent to Quail Ridge and Delray Dunes.

The Village of Golf has for the past 65 years held to a two-story height limit, even on its current commercial development in keeping with the surrounding residential neighborhood, Delray Dunes noted.

And Quail Ridge said it was concerned about noise pollution caused by back-up alarms on trucks and other heavy equipment that “will pierce the peaceful nights that our residents enjoy.” Even more important is that approval of Amazon’s plans will “set the precedent for years to come in future development of that property as well as the remaining unsold property along Golf Road.”

 

Source: Palm Beach Post

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Integra Investments principal Victor Ballestas accidentally stumbled into the marina industry.

After having worked on numerous condominium developments, he co-developed a project in Bay Harbor Islands, near Miami, that had a marina component with 14 slips. Seeing the high demand for them, his firm went on to buy marinas in the Florida Keys and even develop a marina arm within the company.

“The boater demand is growing like crazy, but the supply of new marinas is obviously not moving too much,” Ballestas said during a Bisnow webinar about the future of marinas Nov. 4. “That supply/demand constraint is where we think that the opportunity lies in the space.”

Powerboat sales had already been seeing consecutive year-over-year growth this past decade, and the industry exploded since the coronavirus pandemic began. According to the National Marine Manufacturers Association, 115,000 new powerboats were sold in May and June alone, a 30% increase over the same time period last year. Additionally, Europe exports nearly $20B worth of boats each year. This is fueling demand for marina space.

“There’s nowhere to put ’em,” F3 Marina President John Matheson said.

Seahaven Superyacht Marina Harbormaster Marieke van Peer agreed. “The water space is so limited that the only way to go is up, in my opinion.”

Matheson’s company is developing marinas in the U.S. and Central America. A focus is on taking boats that are 30 to 50 feet in length, moving them to dry storage where they can be stored and retrieved with automated high-tech systems, and leaving space at docks for larger vessels.

 

F3 Marina is being developed as a 130-foot-tall, high-tech marina in Fort Lauderdale (PHOTO CREDIT: Miller Construction)

Miller Construction Co. CEO Harley Miller, whose company is building an F3 facility in Fort Lauderdale, had already built a similar automated self-storage facility for cars.

“Your boat and all of its dimensions and information is programmed in the computer,” Miller said. At the push of a button, it can be plucked and dropped into the water.

While seeing demand from new boaters, marina developers are also facing resentment from middle-class boaters who feel that access to the water is being hijacked by private interests.

“Developers can get around that by focusing on visual appeal,” Matheson said, “Particularly if it’s a dry stack marina, and in the case of F3 Fort Lauderdale, there’s a perception that these buildings are these old corrugated metal panel buildings with noisy forklifts flying boats around. Nobody wants to have that in their neighborhood, so we had to demonstrate that this is a completely different building.”

Optimum Asset Management USA Managing Director Matthew Barry is based in Miami and runs a fund out of Luxembourg. He is currently invested in the Monaco Yacht Club in Miami Beach, which has 39 residential units and 12 boat slips. Barry suggested that marina developers work harder to reach out to their adjacent communities.

“Get to know your neighbors, you get to know the land, you get to know the area surrounding it, and you find a public benefit. I think ultimately people aren’t necessarily against development,” Barry said. “They are against bad development. A public component can win over neighbors and politicians and bring up a neighborhood.”

One of the slips at Monaco Yacht Club is reserved for the whole building to use and a boardwalk along the back of the building allows public access directly to the water.

“While there are different considerations for all types of marinas, from boat storage facilities to destination marinas, developers should appeal primarily not to boat owners, but to their staff. Amenities like gyms can be key,” Van Peer said. “A happy crew is a happy captain, and a happy captain will keep coming back to the marina.”

 

Source: Bisnow

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First Industrial Realty Trust continues to bet big on South Florida’s industrial market, this time with a warehouse proposal in Margate.

First Industrial Realty Trust wants to build FirstGate Commerce Center in Margate.
(IMAGE CREDIT: RLC ARCHITECTS)

The city’s Development Review Committee will consider the site plan for FirstGate Commerce Center on Nov. 10. The 9.3-acre property is at the northwest corner of Copans Road and Banks Road.

FR5355 Northwest 24th Street LLC, an affiliate of Chicago-based First Industrial Realty Trust, acquired the vacant site from AutoNation for $8.6 million in late 2019.

The site plan calls for a 131,680-square-foot warehouse with a 32-foot clear height, surrounded by 186 parking spaces.

Chris Willson, senior regional director at First Industrial, couldn’t be reached for comment. The developer is working with RLC Architects and Sun-Tech Engineering on the project.

There’s been strong demand for industrial space during the Covid-19 pandemic as the sectors of e-commerce and trade grow. First Industrial also has a large warehouse project in neighboring Pompano Beach.

 

Source: SFBJ

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First Industrial Realty Trust aims to build two distribution warehouses in Pompano Beach, which has seen a flurry of industrial development recently.

The city’s Planning and Zoning Board will consider the plat application for the 19.4-acre site at 1001 and 1021 N.W. 12th Terrace on Oct. 28. It’s just west of Interstate 95.

FR NW 12 Terrace LLC, part of Chicago-based First Industrial Realty Trust (NYSE: FR), acquired the property for $19.8 million in 2019. It currently has 31,467 square feet of industrial buildings, which would be demolished.

The plat calls for two distribution warehouses totaling up to 500,000 square feet. It would be an expansion of First 95 Distribution Center, which will be delivered in early 2021 with 141,450 square feet.

Officials with planning firm Keith, which represents First Industrial in the application, declined comment.

Other pending industrial projects in Pompano Beach include the addition of industrial space to the redevelopment of the Isle Casino and an Amazon.com delivery station near Florida’s Turnpike. There’s been strong demand for space from e-commerce distributors during the Covid-19 pandemic as more people shop online.