Yesterday, the Department of Housing and Urban Development concluded a probe into The Appraisal Foundation. The yearslong investigation centered on whether the process to become an appraiser, particularly the requirement to clock 1,000 hours with a mentor, prevents people of color from entering the industry. 

Ultimately, TAF admitted no fault but agreed to adjust its training and certification procedure, establish scholarships and actively recruit from diverse communities. 

The appraisal industry is 94.7% white and only 0.6% Black, the least racially diverse of 800 occupations surveyed by the Bureau of Labor Statistics. 

Bisnow has spent the last few months diving deep into the appraisal industry, as we see the sector as the tip of the spear in the valuations reset happening now. Determining exactly what any property — especially office — is worth is a particular challenge in a world reshaped by the pandemic, and the value set will ripple through the sector and into communities via tax assessments.

But the industry is nearing a crisis, as its aging workforce isn’t being replenished by fresh faces quickly enough. The median appraiser is 60 years old, and 80% are over 50. The industry is still in growth mode, but barely.

“Unless things change and we create ways and incentives to trigger a higher rate of entry into the profession, then it's over,” Miller Samuel CEO Jonathan Miller told Bisnow last month. “That's coming within the next decade.”

Appraisers we have spoken to called out exactly what HUD accused TAF of: Finding a mentor is incredibly difficult, and newbies to the field spend years earning basically nothing trying to get certified. 

Meanwhile, appraisers have lost trust in TAF. The training and certification — and constant recertification — process is being perceived by many as a cash grab by the nonprofit, and people in the industry told us they don’t think TAF is looking after their best interests. 

It appears the sector is at an inflection point, and we’re still digging. Look for more coverage in the next few weeks.

— Kayla Carmicheal, Catie Dixon, Jay Rickey and Mark F. Bonner

Not getting The First Draft in your inbox? Click here to sign up. Got any feedback for us? Email firstdraft@bisnow.com.

On Our Radar

• JPMorgan, Citigroup and Wells Fargo posted their earnings this morning. While JPMorgan and Wells Fargo experienced a decline in quarterly profits, Citigroup saw an increase, largely attributed to the bank's cost-reduction strategies. 

• Bank earnings will continue to roll in next week. Goldman Sachs will report on Monday, and Morgan Stanley and Bank of America are releasing quarterly numbers on Tuesday.

• ICYMI: Big banks, small banks … they are all taking huge CRE hits. While smaller troubled banks have made the biggest headlines, 300 more banks are still vulnerable because of their commercial real estate positions. And big banks are becoming less and less immune to their CRE holdings. 

• Retail sales growth slowed from May to June but accelerated year-over-year. That’s according to the latest CNBS/National Retail Federation Retail Monitor. Online sales led the way, rising 1.78% month-over-month and 23.08% YOY.

• Foreign direct investment in the U.S. dropped to $148.8B in 2023. That’s a 28% decrease from 2022, according to preliminary statistics released today by the Bureau of Economic Analysis. The majority of investments were acquisitions of existing businesses, with chemical and electronics manufacturing receiving significant focus. 

• The BOMA International Conference starts tomorrow in Philadelphia. It runs through July 16 and culminates in the TOBY Awards that night, recognizing excellence in property management. Sunday’s opening keynote address features radio and television personality Michael Smerconish. 

Mailbag

The Supreme Court overturned 1984’s Chevron v. Natural Resources Defense Council on June 28, which gave federal agencies control over how they interpret vague laws relating to business regulation. The ruling has a deep economic impact, ultimately affecting commercial real estate. Here’s what one of our readers has to say about it.

"Now that SCOTUS section is over, many federal agencies should be really thinking about the impact to their role in rulemaking and enforcement. However, many businesses and nonprofits should be paying attention to how the SCOTUS' rulings will have an impact on many of the agencies' Inspector Generals (IGs) and their roles in enforcement, recommendations, and investigations."

Frederick Lee 
ClearCompliance Group LLC
Los Angeles

Do you have thoughts you’re dying to share? Send us a note (firstdraft@bisnow.com) and we may publish it in the Mailbag section of The First Draft each week. Keep your email below 100 words and we may run it with your name and company (no anonymity here). 

This Morning's News

PEOPLE — Stephen Ross Steps Down From Related To Launch New Florida Firm (Bisnow): Stephen Ross is relinquishing his role as chairman of Related Cos. and spinning off its Southeast division into a new company under his control. The new firm, Related Ross, will be HQ’d in West Palm Beach, Florida. He will still be involved in Related Cos. as a non-executive chairman and is not selling off any of his stake in the firm he founded. See Ross’ plans for South Florida.

ENTERTAINMENT — Bally's Billion-Dollar Sale (MarketWatch): Gaming & Leisure Properties said Friday it will acquire Bally's Kansas City Casino, Bally's Shreveport Casino & Hotel and land under Bally's permanent Chicago casino in a $1.6B sale-leaseback. An additional deal between the two firms includes construction financing for the Chicago Casino Resort. Learn the intricacies of the deal.

INVESTMENT — REIT Mid-Year Insights (Nareit): REITs are in a healthy position for the rest of 2024 thanks to stable operations, tight balance sheets and occupancy rates, according to a new report from the National Association of Real Estate Investment Trusts. REITs outperformed private real estate by almost 33% over the last six quarters. Dig into the report.

FINANCE — Blackstone’s Big Loan Sale (BNN Bloomberg): Blackstone is set to sell $2B of commercial mortgage-backed securities backed by a portfolio of 19 apartment properties to finance its acquisition of Apartment Income REIT. The news comes three months after Blackstone's purchase.

SPORTS — Why Are So Many NBA Vets Entering CRE? (Sportico): Three NBA vets, all first-round draft picks, have founded a commercial real estate firm focused on property conversions. See who is going from the NBA to CRE.

HOSPITALITY — Hotel Property Trades Soar (CoStar): Transactions involving hotel properties surged to more than $5.7B in Q2, a steady increase from $4.2B the previous quarter. Discover key factors impacting the hotel sector.

RETAIL — How A Retail Investor In Texas Became A Believer In Poland (Bisnow): Texas is considered a hot CRE ticket by most, but one investor is ditching the Lone Star State for a place he said has much more opportunity — Poland — and he’s trying to take other U.S. investors with him. Read the full story here.

MULTIFAMILY — Apartment Market Is Hot And Cold (CoStar): While apartment demand reached a nearly three-year high, rent growth has remained relatively sluggish. Rent prices are expected to remain subdued this year, especially in the South. Here's why.

INVESTMENT — Corten Real Estate's New Fund (Philadelphia Business Journal): Corten Real Estate, a firm co-founded by leaders at Buccini/Pollin, has raised $283M for a new fund focusing on multifamily investments. Read into the details of the fund.

RETAIL — Chicago Movie Theaters Keep Shuttering, Posing Costly Challenge For Landlords (Bisnow): There are only 15 movie theaters left within Chicago city limits, a sharp drop from 100 a century ago. A recent wave of closures is leaving landlords in a bind, as theaters have unique designs that make them difficult to repurpose. Here’s what happens when the curtains close on a movie theater.

CONSTRUCTION — Construction Material Costs Are Going Down (Associated Builder and Contractors): The latest Producer Price index is out — prices for construction materials decreased by 0.3% in June, while nonresidential construction input prices declined 0.4%. Catch up on the latest data.

ECONOMY — Wage Growth vs. Inflation (CoStar): Shelter inflation cooled considerably, according to the Bureau of Labor Statistics’ latest report, and wages are now outpacing inflation in several metropolitan areas. Compare and contrast the two.

PEOPLE — The Man Behind The Sak-Neiman Marcus Merger (WSJ): Richard Baker, a real estate scion, is playing a pivotal role in shaping the future of retail — especially with his latest purchase. Learn more about Baker.

MARKETS — Real Estate Stocks Rally To Best Day Of 2024 (Bloomberg): Real estate stocks experienced the best trading day of the year yesterday fueled by optimism over potential interest rate cuts. Get into the details.

OFFICE — X HQ Sublease Plans (KRON 4 - San Francisco): Elon Musk has reportedly hired JLL to sublease X’s entire 800K SF HQ in San Francisco, though the property hasn’t been listed yet. The space that might be up for grabs.

LEGAL — Trump Judge Subpoena (NBC New York): A court says Trump's lawyers can subpoena communications between a real estate lawyer and Judge Arthur Engoron to see if there were improper discussions about the case. Read more here.

***

The First Draft is produced by Director of Newsletters Jay Rickey, Managing Editor Catie Dixon, Editor-in-Chief Mark F. Bonner and Deputy Newsletter Editor Kayla Carmicheal, with an assist from ChatGPT. We’d love your feedback! Email us at firstdraft@bisnow.com.