(Bloomberg) — Boeing Co. is thinning its corps of vice presidents and winnowing real estate holdings, including a splashy outpost near the Massachusetts Institute of Technology, as the planemaker works furiously to counter plunging aircraft sales and mounting costs for the grounded 737 Max.
About 170 midlevel executives, 70 of them based at Boeing’s commercial airplane division, are taking a buyout offer that includes a year’s salary, according to people familiar with the matter. The first of the vice presidents and senior managers to accept the terms will leave the company Oct. 2, followed by a second wave later in the year.
The cuts go deeper and wider than the 19,000 jobs pared earlier this year when the coronavirus pandemic sent air travel into an unprecedented collapse. Stemming the cash outflow has become a paramount concern for Boeing, and the company is also wringing savings from investments in futuristic technology as well as its businesses and organizational structure.
Boeing is shedding assets “like King Midas in reverse,” said Richard Aboulafia, an aerospace analyst with Teal Group.
The biggest and most controversial of the cost-saving measures mulled by Boeing would be to build the 787 Dreamliner at a single site, most likely its South Carolina factory, and close a second final-assembly line in Everett, Washington.
The decision on production amid a steep plunge in wide-body jet deliveries is expected to be announced as soon next month, according to two of the people, who asked not to be named because they weren’t authorized to speak publicly.
Au Revoir Chateau
Boeing also is jettisoning holdovers from the days when it was flush with cash. One example: a lavish executive retreat, modeled after a French chateau, in the countryside near St. Louis. The Boeing Leadership Center is closing indefinitely, with 81 workers from chefs to waiters losing their jobs, according to a WARN report.
Chief Executive Officer Dave Calhoun and Chief Financial Officer Greg Smith warned in July that the company faced a shrinking market that’s likely to remain depressed for years. The Chicago-based company could see a staggering $23.3 billion cash outflow this year, according to an estimate by Melius Research analyst Carter Copeland, before the resumption of Max deliveries starts to fill the company’s coffers in 2021.
Smith, who’s orchestrating the shakeup, said in August that Boeing needs to be “clear-eyed about the market” and how to mitigate its risks.
Boeing signaled last month that a new voluntary exit offer would take workforce reductions well beyond the 10% it initially targeted. The package was aimed at the commercial aircraft and services businesses, the most damaged by the pandemic, as well as the corporate operation, which employed 37,862 people at the start of the year. Fewer employees in the company’s defense, space and government business were eligible for the buyouts.
Boeing is trimming research and development spending in part by phasing out Boeing NeXt, a two-year-old unit focused on futuristic concepts from flying cars to a supersonic business jet.
Aurora Flight Sciences, among the highest profile of the ventures, remains a wholly-owned subsidiary with work proceeding “full steam ahead,” a Boeing representative said.
But the company has tapped the brakes on the Autonomous Flight Research Center it had planned to open this year in MIT’s Kendall Square Initiative in Cambridge, Massachusetts, near the university’s campus.
Boeing is trying to sublease about half of the 100,000 square-feet space it had secured, said Peter Conway, director of research for Boston-based Lincoln Property Co., which doesn’t represent Boeing or the landlord. Aurora no longer plans to move its Cambridge-based team to the building, Boeing said.
The company plans to decide by year-end whether to maintain or monetize its stakes in three ventures:
- Aerion, which is developing a supersonic business jet
- SkyGrid, which is making an air-traffic management system for drones
- Wisk, a joint venture with Kitty Hawk Corp., an autonomous flight venture backed by Google founder Larry Page.
“It’s a different world now,” said Stephen Perry, an investment banker who specializes in aerospace and defense deals at Janes Capital Partners. “They’re all cash-draining businesses in the short run, with an uncertain future.”
Boeing, Perry said, needs to focus on its core businesses because it’s “in a fight for survival.”
©2020 Bloomberg L.P.
Toronto Real Estate: Rental Prices Continue to Go Down – RE/MAX News
The Toronto real estate market has a reputation for being hot! Jam-packed with amenities, there are so many reasons why homebuyers and renters flock to this dynamic, metropolitan city.
Yet, the COVID-19 pandemic has caused shifts for some parts of the market. For instance, no longer are certain segments eager to rent in the Toronto market, leading to sliding rental prices. Further, precautions to ensure safety during the virus even caused some to reevaluate their current lifestyles, impacting activity within the Toronto rental market as a whole.
RELATED READING: Is Toronto in store for a condo buyer’s market this fall?
Here are some of the trends in the Toronto condo market which could explain why rental prices continue to trend downwards:
Toronto Real Estate Early in the COVID-19 Pandemic
A sharp contrast to the purchasing market which seemed to rebound in a few months and had record-high sales in September, the Q2 rental market in Toronto was clearly affected by the COVID-19 pandemic. This has had prolonged effects on this segment of the market overall. By the end of the second quarter, there were 24.8 per cent fewer apartment rentals on the market compared to Q2 of 2019.
State of Toronto Rental Prices
According to the Toronto Regional Real Estate Board (TRREB), in Q2 the average one-bedroom condominium apartment rent was $2,083, down five per cent from Q2 2019. Meanwhile, the average two-bedroom condominium apartment was renting for $2,713, which is a 5.6-per-cent decrease from the same quarter the previous year.
There are several reasons why rental prices are being pushed down in the Toronto market:
- Condo supply has brought a lot of inventory back to the market.
- Job loss during the pandemic could have reduced financial power for renters, causing many to stop searching.
- Restrictions on showing homes could have also halted renters from searching for an appropriate unit.
- Less migration due to COVID-19 border control has resulted in fewer new immigrants renting in the city.
- Students have been spending less time in the city due to post-secondary school closures or the shift toward online learning models.
Rising Toronto Rental Inventory
As the virus raged on, there was a continuation of rental listings versus rental transactions, leading to growth of the overall market. This has resulted in less competition in the market due to increased inventory and perhaps lowered demand thanks to changing housing preferences.
According to the TRREB, the number of condominium apartments on the market was up by 42 per cent year over year. Now that renters now have more choice, this has led to year-over-year declines in average rents in Q2.
Yet, condo owners are considering either turning their properties into long-term rentals or selling altogether. This could result in further supply in the coming years.
Typically, landlords have had the upper hand in this market, often resulting in bidding wars. Yet, for renters who have the financial means, recent conditions allow them to benefit from a more balanced market.
Shifting Preferences Emerge in Toronto Housing Market
During the early stages of the COVID-19 pandemic, an unprecedented shift took place. Due to social distancing and other public safety protocols, people were forced to spend the majority of their time confined to their condos.
The boundary between home and workplace was quickly blurred when many businesses pivoted to remote working arrangements and schools shut their doors, prompting parents to homeschool.
Many condo and apartment dwellers were uncomfortable with the shared spaces of a multi-unit living environment such as a lobby, elevators and other facilities. The required close proximity to others induced fear and anxiety.
For those who rent condos in Toronto, the time spent cooped up inside led to increased desire for larger floor plans and access to green space. While the benefits (and glamour) of city-living were long sought after, the limitations of a city lifestyle were quickly realized during the pandemic.
This shift is evident in the increased demand in neighbouring suburban areas like Durham region.
Low Interest Rates
The Bank of Canada slashed its benchmark interest rate to 0.25 per cent; great news for those looking to jump into the housing market. Renters who have been sidelined pre-pandemic due to expensive housing, may now be able to borrow money at a reduced rate. These move up buyers can be another factor explaining lower demand for rental units and the resulting downward trend in rental rates.
The Toronto real estate market has historically been a popular, highly competitive place to rent a property. Yet, demand and activity in this segment of the market have declined. While COVID-19 exposed challenges to city living, there are also seismic shifts in the attitudes people have toward their living arrangements. As homebuyers are setting their sights upon properties and communities promising more indoor and outdoor living space, some renters are also following this trend, leading to decreasing rental demand and prices within the city.
Saint John tenants nervous about Historica real estate deal – CBC.ca
A major real estate transaction in uptown Saint John has many tenants concerned.
Hazen Property Investments has sold 20 of its buildings to Historica Developments.
They include the McArthur on Germain Street and another 12-unit building on the west side to name just a couple.
“My gut feeling was anxiety — stress,” said Jeff Arbeau, who has been renting from Hazen for years.
Hazen is known for good-quality units at reasonable prices.
Historica is known for fixing up older buildings and turning them into luxury units.
We kind of realize there’s probably too many high-end expensive units that most people, we understand, can’t afford.– Keitch Brideau, Historica
Their prices “far exceed” Arbeau’s price range.
Historica rents typically range from $1,200 to $2,000 a month, while Hazen’s are $400 to $700.
“It would have a massive impact ability on my ability to live,” said Arbeau.
Many of his neighbours are also worried.
The information package they received from the new owner asked for debit pre-authorizations for rent payments and promised continued “exceptional” service but didn’t make any assurances about future rental fees.
“They don’t have to worry about it,” said Keith Brideau, president and founder of Historica.
Brideau said his company is not planning to increase rents for any current tenants or to change fees for parking, heat or lights.
That’s because he won’t have to recoup investments for any major upgrades.
“They’ve done an excellent job of taking care of their properties,” said Brideau. “Some of them are real gems.”
As tenants move out, he said, units will get things like fresh paint, refinished floors, and new countertops.
Future tenants, might be charged $50 to $150 a month more than the current rates.
“We definitely aren’t going to be pricing people out of the market,” said Brideau.
Historica is looking to expand into the “middle market,” he said, where rents range from $500 to $1,000 a month.
“We kind of realize there’s probably too many high-end expensive units that most people, we understand, can’t afford.”
Arbeau said another concern of his is about losing the “mom and pop” service he had from Hazen.
“You can contact them with a need, and they’ll get to you right away,” he said. “They know your name. They help you any way they can.”
Brideau said his company is aiming to match or improve the level of service.
“I’ve spent many a Christmas Day in a furnace room trying to get a furnace going with my dad,” said John Hazen, general manager of Hazen Property Investments.
Hazen’s grandfather bought the company’s first building 100 years ago.
Hazen said he had a heavy heart about the sale, but it was a good business opportunity and the right choice for his family.
Hazen had 13 employees. That’s being reduced to about seven.
Some of the people losing their jobs were close to retirement, he said, and all are receiving severance packages based on their years of service.
Hazen still has 270 units, including Regency Towers on the east side, some on Coldbrook Crescent, and one on the west side.
Municipal leaders have been inundated with messages about the Hazen sell-off.
Their buildings are “little micro-communities,” said Coun. Donna Reardon, who represents Ward 3, which includes the uptown and central peninsula.
“Those neighbours will look after each other,” Reardon said. “People who are in them are there for a long time. … If you’re there seven or eight years, you’re one of the newbies in a lot of Hazen’s buildings.
“So, that is upsetting to think that your neighbours may have to move, or you may have to move out.”
Everyone’s “major concern,” she said, “is that rent will go up extraordinarily.”
There aren’t any rent control mechanisms available to the city, but Reardon said she expects the market will control itself to some degree.
“He can skyrocket the rents, I suppose,” said Reardon, “but what will the market bear in Saint John?”
Reardon said she’d be interested in exploring best practices across the country on rent controls, but she is reluctant to do anything that would stifle development and growth.
Information Morning – Saint John22:06Historica developer pledges no rent hikes
Some are worried that Historica may own too big a share of the local housing market and that this will give it monopoly-like power over prices and availability of apartments.
Historica now owns nearly 40 buildings containing a total of about 400 units.
Brideau estimated that represents five per cent or less of the rental market.
Julia Woodhall Melnik’s big concern is potential gentrification — the displacement of people who live uptown because it’s affordable.
“Where are they displaced into?” asked the assistant professor and director of the laboratory for housing and mental health at UNB Saint John.
The north end is one possibility, said Woodhall Melnik, but deficiencies in the public transit system would make it difficult for vulnerable populations to get to uptown services.
Saint John promotes itself as having relatively low housing prices when it comes to buying, she noted, but limited rental stock means rents are less affordable.
Woodhall-Melnik is hoping developers and landlords will take advantage of government funding available for rent subsidies and affordable housing developments.
Information Morning – Saint John15:33We continue the conversation on affordable housing
Brideau agreed affordable housing is a big issue and said he “would like to be part of that solution.”
He said Historica might announce something on that front within the next year.
Brideau said more construction is happening now in Saint John than he’s seen in the last 20 years. He noted one non-profit building is going up now on Wellington Row.
Reardon said affordable housing is “on everybody’s radar.”
She noted there are still many vacant lots in peninsula neighbourhoods.
Toronto's hot real estate market may cool down in coming months – Toronto Sun
A new survey shows the aggregate price of a home in the GTA increased by 11% year-over-year to $922,421 in the third quarter of 2020.
This Royal LePage House Price Survey says the median price of an average two-story home increased 12.2% year-over-year to $1,082,502 in the third quarter of this year.
The price of a bungalow jumped 10.6% year-over-year to $887,156.
During the same period, condominiums in the GTA saw prices rise 6.8% year-over-year to $599,826.
Strong home price gains were seen in Toronto where the price of a home rose 11.1% year-over-year to $975,980.
The median price of a standard two-story home rose 15.5% year-over-year to $1,483,510. And the price of a bungalow increased 11.3% year-over-year to $974,295.
The average price of a condominium increased 4.9% year-over-year to $644,903 during the same time frame.
“Demand from the delayed spring market has continued through the third quarter,” said Debra Harris, vice president for Royal LePage Real Estate Services Limited. “The seasonal slowdown is expected in the coming months, but given the recent strength of September, we will likely see a more brisk fourth-quarter market than the previous year.”
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