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Life Storage a possible takeover target; US data center investments soar in 2017

Commercial real estate

* Citing people familiar with the matter, Bloomberg News reported that self-storage real estate investment trust Life Storage Inc. could be "an attractive target" for its bigger rivals like Public Storage and Extra Space Storage Inc., especially since activist investor Jonathan Litt's Land & Buildings Investment Management LLC believes Life Storage "is both underperforming and undervalued."

Following an agreement with Land & Buildings, Life Storage Chairman Robert Attea and President Kenneth Myszka, both co-founders of the company, will retire from the board following the company's 2018 annual meeting of shareholders.

* According to CBRE's latest U.S. Data Center Trends Report, investments in U.S. data centers reached more than $20 billion in 2017, which is higher than the previous three years' combined volume. The investments include all single asset, portfolio and merger transactions.

* The recent takeover offer by French mall landlord Klépierre for U.K. peer Hammerson PLC indicates that U.S. mall giant Simon Property Group Inc., Klépierre's largest shareholder, is among those "betting that mall stocks have gotten too cheap," The Wall Street Journal reported.

Simon Property CEO David Simon is the chairman of Klépierre's supervisory board. The publication noted that a number of property industry executives are betting that malls have a healthy future if acquired for the right price.

* Anbang Insurance Group Co. Ltd. filed an offering plan for 352 condominium units at the famed Waldorf Astoria hotel in Manhattan, N.Y., which the Chinese conglomerate is partly converting into luxury residences, The Real Deal reported, citing filings with the New York state Attorney General's office. In a test-the-market application from 2017, Anbang had indicated that there would be 409 condo units, and the report pointed out that the luxury market has slowed down since.

The 1,413-room hotel closed in 2017 for the revamp and will have 350 hotel rooms and suites on the lower floors, the report noted, citing construction plans filed with the city's Department of Buildings. The condos will be on the 14th through 43rd floors.

* Bloomberg News featured a report on the difficulties HNA Group Co. Ltd. is expected to face as it attempts to sell the 245 Park Ave. tower in Manhattan that it acquired for more than $2 billion in 2017.

Citing Gregory Kraut, managing partner of K Property Group, a prospective buyer that examined the property, the news outlet noted that the 1.7 million-square-foot 1960s-era building may need more than $1 billion of improvements. These include roughly $850 million in upgrades and roughly $230 million in tenant space renovations over time.

JPMorgan, which occupies more than 40% of the property in a lease expiring in 2022, is planning a bigger rebuild of its Manhattan headquarters at 270 Park Ave. and may consolidate its employees there by 2024. The 245 Park Ave. tower has a roughly 13% vacancy rate, the report noted, citing CoStar Group Inc. data.

* Brookfield Property Partners LP Chairman Ric Clark said at the Real Estate Board of New York's spring members' luncheon that the Republican tax reform has negatively impacted New York City's condo market but has so far been positive for the office market, The Real Deal reported.

At the panel discussion on "mega trends" in the city's real estate, SL Green Realty Corp. co-chief investment officer Isaac Zion said he thought the tax reform "gave corporate America and large office tenants a sense of optimism," according to the report.

* A Journal report touched on how a number of smaller retailers in Manhattan have begun buying up their retail space amid falling prices. Such acquisitions reflected roughly 8% of the 2017 dollar volume of retail condo sales, up from roughly 3% in the previous year, the publication noted, citing Real Capital Analytics data.

According to the report, brokers said more retailers are exploring the idea of owning their space, including restaurants, galleries and medical offices, tempted by falling prices of retail real estate. The average per square foot price for retail condos was $1,605 as at the end of 2017, a 60% drop from its peak in 2015, the report noted, citing Real Capital Analytics.

* Spotify is close to leasing roughly 75,000 square feet at the former Federal Bureau of Investigation Boston Division headquarters building in Boston's Center Plaza, the Boston Business Journal reported, citing multiple real estate industry sources with knowledge of the deal.

* A partnership led by Hines filed site plans with the city of Dallas for what could be the tallest building in the Victory Park project, The Dallas Morning News reported. The apartment and retail tower could rise up to 39 stories on a vacant lot in the project, with 347 apartments and 9,500 square-feet of retail space. The developer is seeking minor zoning changes for the tower.

After the bell

* Amazon.com Inc. is looking into buying some locations from troubled toy retailer Toys R Us Inc. to expand its presence in the brick-and-mortar retail space, Bloomberg News reported, citing unnamed sources.

Housing

* In its first-quarter U.S. RMBS sustainable home price report, Fitch Ratings warned that rising mortgage rates are not likely to stop the overall upward trajectory of U.S. home prices, although price growth is expected to slow down in some markets. The rating agency attributed the increasing prices to strong economic growth and constrained supply.

Fitch Managing Director Grant Bailey pointed out that the Dallas housing market has displayed the most significant overheating in the past two years and now stands between 15% to 19% overvalued.

The Dallas Morning News noted that Fitch has been sounding warnings about Dallas' overheating housing market since 2015.

The day ahead

Early morning futures indicators pointed to a mixed opening for the U.S. market.

In Asia, the Hang Seng rose 0.11% to 31,549.93, while the Nikkei 225 dropped 0.47% to 21,380.97.

In Europe, around midday, the FTSE 100 climbed 0.19% to 7,055.97, and the Euronext 100 increased 0.22% to 1,021.43.

On the macro front

The Redbook is due out today and the Federal Open Market Committee meeting will begin today.

Now featured on S&P Global Market Intelligence

Q&A: For owners of weaker Toys R Us locations, 'decisiveness is key': S&P Global Market Intelligence caught up with Hessam Nadji, president and CEO of Marcus & Millichap, to hear his read on the impact Toys R Us' liquidation will have on the retail real estate market.

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