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WeWork's soft rescue; $4.6B lodging REIT planned; Facebook's $1B housing play


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WeWork's soft rescue; $4.6B lodging REIT planned; Facebook's $1B housing play

S&P Global Market Intelligence offers our top picks of U.S. real estate news stories and more published throughout the week.

WeWork's bailout

* Embattled coworking giant WeWork Cos. Inc. got timely support after shareholder SoftBank Group Corp. announced a $9.5 billion funding package that will give the Japanese lender a fully diluted economic ownership of approximately 80% in The We Co. unit. As part of the deal, SoftBank COO Marcelo Claure will become WeWork's executive chairman, while co-founder and former WeWork CEO Adam Neumann will become a board observer. The rescue deal, however, will not give SoftBank control of WeWork.

* Later in the week, reports emerged that WeWork is looking to cut up to 4,000 jobs, representing almost 30% of its global workforce and that the company aims to refocus on three primary markets, namely the U.S., Europe and Japan. WeWork will reportedly pull back from China, India and most of Latin America, along with other regions.

* In Canada, Alphabet Inc. unit Google LLC chose not to go ahead with WeWork's location at 357 Bay St. in Toronto and instead signed a multiyear deal with WeWork rival IWG PLC for about 24,000 square feet at the Spaces location in Royal Bank Plaza in the city's financial district, Bloomberg News reported, unnamed sources.

New horizons

* Carey Watermark Investors Inc. and Carey Watermark Investors 2 Inc. are merging in an all-stock transaction to establish a $4.6 billion, internally managed nontraded lodging real estate investment trust that will have a portfolio of 33 assets. Following completion, expected in the first quarter of 2020, Carey Watermark Investors 2 will be the surviving entity and will be renamed Watermark Lodging Trust.

The merged entity will complete an internalization transaction with W. P. Carey Inc. and Watermark Capital Partners LLC, as a result of which the entity will become self-managed.

* Real estate developer Howard Hughes Corp. aims to sell approximately $2 billion of noncore assets over the next 12 to 18 months and appointed Paul Layne as its new CEO, concluding the strategic review it launched earlier in 2019. The developer will also eliminate its holding-company-type organizational structure and move to a decentralized regional management model.

* Industrial Property Trust Inc. will hold its annual stockholder meeting Dec. 11 to vote on, among other things, its planned sale of almost all of its assets to affiliates of industrial landlord Prologis Inc.

* RW Holdings NNN REIT Inc. and Rich Uncles Real Estate Investment Trust I will convene separate meetings Dec. 17 for their respective shareholders to vote on the companies' proposed merger, which is expected to close in late December 2019 or early January 2020.

Facing housing crisis

* Facebook Inc. agreed to commit $1 billion over the next decade to help address the affordable housing crisis in California though a partnership with California Governor Gavin Newsom and the State of California. The investment will be used to build 20,000 new housing units "to help essential workers such as teachers, nurses and first responders live closer to the communities that rely on them," Facebook CFO David Wehner said in a blog post.

Consolidating act

* Consolidated-Tomoka Land Co. moved to shift its investment focus to higher-return multi-tenant office and retail properties in "strong" metropolitan statistical areas and select growth markets across the U.S. and announced plans to rebrand as CTO Realty Growth Inc. The Florida-based real estate company also unveiled Alpine Income Property Trust Inc., a newly formed independent single-tenant net-lease REIT sponsored by Consolidated-Tomoka that filed a registration statement with the SEC with respect to its proposed IPO on the New York Stock Exchange.

Consolidated-Tomoka plans to sell or contribute a portfolio of 20 of its single-tenant net-lease income properties to the new REIT.

* Separately, Consolidated-Tomoka sold a controlling stake in its Crisp39 SPV LLC unit that holds approximately 5,300 acres of undeveloped land in Daytona Beach, Fla., for $97 million to Flacto LLC, Magnetar Longhorn Fund LP and Magnetar Structured Credit Fund LP.

Marketing space

* A JBG Smith Properties subsidiary is selling the 1.47 million-square-foot U.S. Department of Transportation headquarters building at 1200 New Jersey Ave. SE in Capitol Riverfront in Washington, D.C., for $760 million to the General Services Administration, the Washington Business Journal reported. The deal is expected to close in March 2020.

* Office REIT Paramount Group Inc. tapped Cushman & Wakefield to market its 36-story office building at 900 Third Ave. in Midtown Manhattan, N.Y., for more than $400 million, Crain's New York Business reported.

Earnings call coverage

With the earnings season picking up pace, S&P Global Market Intelligence reporters tuned in to conference calls hosted by some of the larger players in the real estate sector.

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