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24 REAL ESTATE OUTLOOK In its latest report titled, "2019 Global Alternatives Outlook," JPMorgan Chase sheds light on global trends and opportunities in the real estate industry. e report indicated that several investors in the U.S. real estate market have "tilted their new allocations to value-added properties in the search for higher returns, reaching an inflection point." e key driver of this shift is a considerable increase in construction costs for property improvement or development that is thinning the return premiums for construction risk—leading to a limited supply of new core properties. is has allowed some stabilized, fully leased core properties to sell below the now elevated cost of building new unleased assets, the report stated. According to the report, since early 2016, the income from leases of existing U.S. core assets has been growing at a faster annual rate (4 percent to 5 percent ) than core property values (2 percent to 3 percent), since early 2016. JPMorgan Chase anticipates the rising construction costs to help support the increase in rental incomes. As new properties have to charge higher rents to be viable in the face of rising construction costs, existing core properties are forecasted to raise rents with less risk of losing tenants. However, according to the report, the upward spike in construction cost is likely to limit new space available for lease—another positive for rent growth. It indicated a further upside in core rents and valuations, given the econ omy and demand continue to hold up. Speaking of REITs, the report stated that volatility has returned to the equity markets including the REIT space. It pointed out that REIT equity is far more volatile than the value of its underlying real estate, on account of its varied investor base comprising ETFs, hedge funds as well as momentum players. JPMorgan Chase indicated that investors may want to consider investing throughout the REIT capital stack and buying the debt— approaches that will meaningfully reduce a REIT portfolio's volatility and offset the leverage embedded in REIT equity. e report also suggests the use of liquidity and volatility of the REIT market to potentially enhance returns. "Even in a market that is largely priced to perfection, knowledgeable, experienced global investors with a broad toolbox can find a robust set of attractive real estate opportunities," the report reads. At a macroeconomic level, the report highlighted that tighter labor markets and rising wages have begun pushing prices higher across the developed world, while weaker currencies and higher commodity prices have lifted inflation in emerging markets. U.S. economic growth is forecasted to average around 3 percent through the middle of 2019. Globally, core real estate returns have averaged just over 10.5 percent since late 2010, the report revealed. Valuations have been a significant driver of those returns, however, leaving much of the real estate market fairly priced. DEVELOPMENTS IN BANKRUPTCY AND TITLE PRACTICES e Legal League 100 recently held a webinar titled "Bankruptcy and GSE Updates: 2018 Wrap Up and 2019 Outlooks," focusing on the developments in bankruptcy and title practices. Presented by Keena Newmark, Managing Attorney of Bankruptcy Operations, Padgett Law Group and Steven Kelly, Managing Attorney of Bankruptcy, Stern & Eisenberg, the webinar covered critical updates on GSE regulations and the latest shifts in foreclosure and bankruptcy practices. Addressing the trends in 2018, Newmark spoke of developments within the F.R.B.P (Federal Rules of Bankruptcy Procedure) 3002.1 space. e webinar also discussed important aspects some of the most notable bankruptcy cases such as In re Dukes, Ritzen Group v. Jackson Masonry, In re Tribune Media Company, and In re Vietre. Touching upon GSE updates, Newmark spoke about FHFA prohibition of Fannie Mae and Freddie Mac from using VantageScore because of conflict of interest with the company's backers. "e proposed rule would prohibit an Enterprise from approving any credit score model developed by a company that is related to a consumer data provider through any common ownership or control," she said. Kelly addressed the changes over the recent past in the leadership of the CFPB, FHFA, and Ginnie Mae. e webinar also discussed FHFA's announcement to increase the 2019 maximum conforming loan limits. It also shed light on single security and common securitization platform—a joint initiative by Fannie Mae and Freddie Mac— under the direction of FHFA, to develop a single mortgage-backed security, that will be issued by the Enterprises to finance fixed-rate mortgage loans backed by one-to-four unit- single-family properties. e single security initiative will go live on June 3, 2019. e Legal League 100 is a premier professional association of financial services law firms in the United States. With more than 100 member law firms spanning nearly 50 states and an organic, firm-driven leadership structure, the Legal League 100 is dedicated to driving progress in the mortgage servicing industry. e webinar served as a platform to explore the developments that financial services attorneys need to know right now and how they should be preparing for impending changes. You can download the full webinar recording at LegalLeague100.com.

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