Capstak's Weekly Wrap Up | April 21

by Capstak

1) Bisnow | Financing A Crime: Marijuana Businesses Struggle To Borrow While The Drug Is Still Illegal At The Federal Level

Since most banks are federally insured, and cannabis is still illegal federally, how will banks be able to lend to dispensary and grow operations? According to Dominic Sergi, president and CEO of real estate investment firm Clear Height Properties and co-founder of medical marijuana cultivator Cresco Labs, these businesses are forced to skirt the law and make the federal government think they are a normal business. This creates an opportunity to private investors, who can buy properly zoned real estate, then lease it out for a premium. According to research firm New Frontier, the marijuana industry will grow to over $24 billion by 2025 – that is, if they can find affordable capital.

 

2) National Mortgage Professional | Commercial Real Estate Development Created 6.25M Jobs in 2016

According to a study by the NAIOP Research Foundation, “Commercial real estate supported 6.25 million American jobs and pumped $861 billion into U.S. GDP during 2016.” Office construction spending increased over 28 percent to $36.6 billion last year, and industrial construction had its sixth consecutive year of increased expenditures, gaining 12.7 percent from 2015. Retail construction expenditures, not surprisingly, decreased 7 percent to $17.2 billion in 2016, “The importance of commercial development to the U.S. economy is well established, and the industry’s growth is critical to creating new jobs, improving infrastructure, and creating places to work, shop and play,” said Thomas Bisacquino, NAIOP president and CEO.
 

3) Bisnow | Republican Tax Reform Plan Puts 1031 Exchanges On The Chopping Block

This was our most read Capstak Edge article of the week, and for good reason. IPX1031 president, John Wunderlich, predicts, “Investors will be locked into their investments because of recapture taxes. They will hold onto their properties longer rather than face the negative tax consequences.” In the place of 1031 exchanges, Republicans are proposing immediate expensing. Which would allow investors to offset the taxes due on the first property by immediately writing off the improvements on the new property. But, unlike the 1031, immediate exchange does not land value into consideration – which can be up to 90 percent of some investment type’s value. Looks like we’ll have to wait until the dust settles from the lobbying efforts to see what the future of the 1031 exchange holds.
 

4)  Crains New York | An Airbnb for empty retail space launches in NYC

As retail continues to struggle, the market for matching empty retail spaces with pop-up-store candidates is growing. Appear Here, the self-proclaimed Airbnb of retail space, announced the opening of its New York office. Appear is not just filling vacant storefronts, but also turning them into experiences. "Every city faces the same trends. Leases are getting shorter. Vacancy rates are getting higher. Shopping is moving online. And yet on the weekend people still want to go to beautiful streets and drink lovely coffee and be entertained," said Ross Bailey, Appear Here's CEO. So far, the company has worked with over 80,000 brands, including Under Armour, Nike, Coca-Cola and Kanye West.
 

5) New York Times | Why Facebook Keeps Beating Every Rival: It’s the Network, of Course

On Tuesday, Facebook showed Snap, Snapchat’s parent company, that size matters. Mark Zuckerberg owns three social networks with over a billion users, Facebook, WhatsApp, and Messenger, along with the 600 million user Instagram network. “And because he has the network, he always wins.” At Facebook’s developer conference, Zuckerberg basically unveiled Snapchat’s best features on Facebook’s own platform. Why does that matter? Instagram’s stories feature, similar to Snapchat’s My Story (and developed after), had 200 million daily users, which is 40 million more users than all of Snapchat. This leads to the question, what’s the next company, or entire industry, that’s going to get Facebooked?

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