A major retailer shutting down stores, a federal regulator being pressed for transparency and living in a Mercedes-Benz (but not a car). From the wild and wooly world of real estate, here are the Hits and Misses for the week of Feb. 25 to March 1.
Miss: No Miracle on 34th Street. The saddest news out of the retail real estate sector this week was the announcement that Macy’s will be closing 50 of its stores by the end of the year and another 100 over the next three years. The department store chain announced it would enhance and upgrade its remaining 350 stores and would also open 15 new Bloomingdale’s stores and 30 new Blue Mercury cosmetics stores. “We have to focus on making sure that we have the best stores, not the largest number of stores,” said CEO and Chairman-Elect Tony Spring – which might make financial sense for the company but will not please the Macy’s employees losing their jobs or the mall managers who are soon going to find themselves with very large vacancies.
Hit: In Search of Missing Details. Kudos to Federal Newswire, an online media organization, for filing a Freedom of Information Act (FOIA) request demanding that the Consumer Financial Protection Bureau (CFPB) to produce the full list of organizations that received payments from the Civil Penalty Fund that was created when the agency was established in 2011. The Civil Penalty Fund collected $1.9 billion in fiscal year 2023, which is more than the $1.49 billion collected from the fiscal years 2012 through 2022, but the FOIA request said the CFPB “only the names of companies targeted by bureau enforcement actions and total amounts collected and allocated by the Civil Penalty Fund. It does not list the specific groups who received payments from the fund for ‘consumer education and financial literacy.’” For an agency that endlessly faults financial services companies for their alleged lack of transparency, the CFPB doesn’t seem to be practicing what it preaches.
Miss: In Search of Comfort: The most uncomfortable data report this week came from Zillow, which determined today’s homebuyers need to make more than $106,000 to “comfortably afford” a residential property purchase. That sum is 80% more than the money required for the same purchase in pre-Covid January 2020, when a household earning $59,000 annually could “comfortably” afford the monthly mortgage on a typical home by spending no more than 30% of its income with a 10% down payment. Of course, back in January 2020 we didn’t have ridiculous inflation and mortgage rates hanging around the 7% mark. In a word: Ouch!
Miss: Xenophobia in Ottawa? The government of Canadian Prime Minister Justin Trudeau caught many people by surprise with its recent decision to extend the nation’s ban on foreign purchases of residential property for two more years. Reuters reported the 2022 ban was extended 11 months prior to its expiration date. Trudeau’s popularity is sinking among Canadian voters, and many of his critics are wondering if this ban extension is meant to show he is trying to do something to address the nation’s housing affordability and supply crises. Janice Myers, CEO of the Canadian Real Estate Association said there was “no analysis, evidence or data” to show foreign ownership had a negative impact on housing affordability while Derek Holt, head of capital markets at Scotiabank, accused the Trudeau government of peddling “a purely xenophobic measure aimed at politically scapegoating foreign buyers that were an immaterial share of home purchases.”
Miss: Warehouse of Horrors. The discount retail chain Family Dollar will fork over more than a few dollars after the U.S. Department of Justice found the company was selling products from a warehouse that was infested with rodents for years. The company was fined $41.6 million for its health violations at an Arkansas distribution facility where investigators found more than 1,200 dead rodents and evidence of a significant live rodent population. The fine was the largest monetary criminal penalty in a food safety case, according to the department. Dollar Tree CEO Rick Dreiling insisted his company was “continuing to move forward on our business transformation, safety procedures and compliance initiatives.” Let this be a lesson to anyone who owns or manages a warehouse – make sure you know what’s going on inside the property before the Justice gang comes calling.
Hit: Living in Your Car’s Brand. For many people, driving a Mercedes-Benz is the ultimate status symbol. But in Miami, some residents will be able to take the luxury automaker’s brand home with them – literally. Mercedes-Benz has teamed with the real estate firm JDS Development Group to unveil Mercedes-Benz Places, a 67-story mixed-use residential project that is one of the largest projects currently under construction in Florida. The development will also include retail, office space and a 174-key hotel. Eva Wiese, head of Mercedes-Benz Customer Solutions GmbH, said, “We want to develop exclusive residences with our partner that are undeniably Mercedes-Benz and create a new mode of urban living with vibrant communities. Ultimately, we want to create places to come home to, in a location worth living in.” But who wants to guess how many of the parking spaces will be filled with Mercedes-Benz cars?
