Real Estate News

Some U.S. retailers are closing stores in anticipation of potential property damage resulting from the George Floyd protests (Getty)

Some U.S. retailers are closing stores in anticipation of potential property damage resulting from the George Floyd protests (Getty)

Some retailers, hit hard by the coronavirus pandemic, are now contending with looting and vandalism in the wake of protests sparked by the death of George Floyd.

Major companies like Target, Walmart and Nike, along with small family businesses, have closed hundreds of stores or seen them damaged during the protests, which in some instances have turned violent, according to the Wall Street Journal. Adidas has announced it is temporarily closing all of its stores in the country, and Amazon is modifying its delivery routes in some cities to help protect its employees.

The protestors are focused on broad issues of social justice and racism, and several business owners and executives expressed support for them. A former Minneapolis police officer has been charged with third-degree murder and second-degree manslaughter in Floyd’s death.

Target, which is based in Minneapolis, closed more than 200 stores over the weekend, but some have already reopened with reduced hours. One of the company’s stores on Lake Street in south Minneapolis was one of the first businesses to be damaged in the protests last week.

Cynthia Gerdes, co-founder of the restaurant Hell’s Kitchen in downtown Minneapolis, had shut down in March because of the pandemic but was preparing to start offering takeout in July. However, she told the Journal she is now trying to determine how Floyd’s death and the subsequent protests will affect Minneapolis’ businesses going forward.

“It’s a double whammy,” she said. “It’s a gut punch.”

Stores in New York that were damaged during the protests included a Coach in Midtown; Chanel, Prada and Ganni locations in Soho; and a Walgreens, CVS, GameStop and bike store in the East Village, according to the New York Post. [WSJ, NYP— Eddie Small

The post Retailers consider store closures as protests sweep the country appeared first on The Real Deal Miami.

Todd Leebow and Glass in South Beach (Credit: AMM, Seaside Properties Group)

Todd Leebow and Glass in South Beach (Credit: AMM, Seaside Properties Group)

An Ohio family of steel magnates who tried to flip their South Beach condo for a big profit ended up selling it at a loss.

Property records show Majestic Steel Properties Inc. sold unit 1200 at Glass, at 120 Ocean Drive, to Samuel Susi of Boca Raton for $6.75 million.

Majestic Steel, led by Dennis Leebow and his son Matthew Leebow, paid $7.9 million for the three-bedroom, 3,389-square-foot unit in 2015 when the building was completed. The Leebows then tried to sell it in 2017 for $12.9 million.

It sold for 48 percent off the 2017 asking price and for 14 percent less than the Leebows’ purchase price. It most recently was listed for $9 million with Miltiadis Kastanis of Douglas Elliman. Ethan Pickett of Elliman represented the buyer. Both agents declined to comment.

Price cuts are becoming more common during the pandemic as some sellers try to cut short their losses.

The buyer, Susi, financed his purchase with a $5.4 million loan from Quicken Loans.

The unit features wraparound terraces, Gaggenau kitchen appliances, white oak flooring and custom Ornare closets.

David Martin’s Terra developed the 10-unit, 18-story boutique project and Rene Gonzalez designed it.

Majestic Steel Properties also owns unit 1100, which it acquired in 2015 for $7.3 million.

Cleveland, Ohio-based Majestic Steel USA has processing and distribution centers throughout the U.S., according to its website.

The post Ohio steel family sells South Beach condo for 48% off ask appeared first on The Real Deal Miami.

Arlene Reed is still reeling from a deal that took months to go into contract.

By the end of February, the Warburg Realty broker was helping guide a buyer through an accepted offer on a $3.9 million apartment in a new construction condo project on the Upper East Side. But before the parties inked the contract, New York woke up to the threat of coronavirus.

The stock market had taken a nosedive, businesses were shuttering left and right, and her buyer wanted a bargain.

“Generally, a seller would say, ‘get lost,’” Reed noted. “No one’s waiting two months for you.”

But these aren’t ordinary times. Instead, she wrangled a $100,000 credit for a renovation and a financing contingency that allowed the buyer to walk away unscathed if its lender didn’t fund the deal, and the sponsor agreed to pay the mansion tax. (They had also already agreed to pay common charges for a few years.)

Selling a high-end home in Manhattan can be trying even in the best of times, especially in a soft market with a glut of new development condos. Going into 2020, there was $5.7 billion in existing condo inventory on the market and another $33 billion worth of inventory in the shadows, according to a report by Halstead Development Marketing. Add a pandemic to the mix and you might as well give up trying — and that’s what some top brokers have done, decamping to second homes to wait out the disease from the comfort of the suburbs.

For those still trying to do deals, Covid-19 has not only upended the entire market, but also fundamentally changed the way they do business. While brokers were once traversing the city, going from one showing to the next, they’re now holding daily meetings over Zoom, navigating virtual tours and strategizing ways to stay competitive in a recession.

“I never thought that I’d be doing virtual tours from my childhood bedroom in Massachusetts,” Halstead Development Marketing agent Craig Dancewicz joked before showing off a 46-unit condo he’s handling in Astoria, Queens. The building, dubbed the Rowan, launched sales just six weeks before the pandemic shuttered its sales office.

And for luxury developers, the pandemic has only intensified the challenge of moving unsold inventory in a soft market — even more of a challenge now that buyers can’t see their potential homes in person.

At the end of April, Extell Development announced that it was offering discounts of up to 20 percent on all remaining units at its 815-unit One Manhattan Square condo in response to the pandemic — the first major developer to publicize such a move.

“While we have adapted to selling our residences through a virtual sales experience, we recognize that it is also important to incentivize our buyers with this program,” Gary Barnett, Extell’s founder and chair, said in a statement provided to The Real Deal.

Others are offering unheard-of contingencies that allow buyers to get back their deposits if the deal should hit a snag.

At the 46-unit Astoria condo, developer RockFarmer Properties is offering buyers who sign a contract during the shutdown the ability to walk away from the deal with a full refund of their deposit after they see the unit. Buyers will have a five-day window whenever the sales gallery reopens to come in person.

“It’s a no-lose situation,” said John Petras, a co-founder and managing principal of RockFarmer. His company is also offering a scaled 10 percent deposit at the Rowan, with 5 percent due upon contract signing and the rest due on Oct. 1.

The great pause

When it comes to who’s actually buying in the city’s sales market, the answer is murky.

Some are even questioning the veracity of data, particularly after listing portals removed their “days on market” calculation at the urging of trade organizations advocating on behalf of real estate agents.

One metric nearly everyone can agree on — in addition to the market being down — is that the number of properties up for sale has fallen as a result of the pandemic.

Even as early as March, when awareness of the coronavirus remained low, the volume of new home listings was notably less than a year earlier, according to an analysis by Jonathan Miller of appraisal firm Miller Samuel. The number of condos and co-ops listed in Manhattan in March typically grows by about 7 percent compared to the end of February, heralding the start of spring selling season.

This year, however, listings grew by only 2.2 percent in the first nine days of the month, Miller found.

By the end of the month, spooked sellers had pulled hundreds of homes off the market, according to data firm UrbanDigs. 

Douglas Elliman Chair Howard Lorber said his 7,000 agents are discouraging clients from listing homes now, while they’re unable to show the properties in person. “We don’t think it really makes sense [to list],” Lorber said on an earnings call for Elliman’s parent company, Vector Group, in early May.

When it comes to closed sales, Lorber said Elliman saw a “severe decline” in mid-March, as Gov. Andrew Cuomo’s ban on home showings went into effect, though it was later amended to allow virtual showings.

In response, Elliman and many other brokerage firms made hefty cuts in payroll costs and salaries in anticipation of plunging sales volume.

The Corcoran Group’s parent, Realogy, reported a 30 percent drop in New York City deals, while contract activity fell by 50 percent at its company-owned brokerages.

Though some brokers claim there are still buyers ready to lay down their money sight unseen, such deals are rare, and the majority that do close or go into contract began in earnest weeks, if not months, before lockdown.

Wendy Maitland, founder of the boutique brokerage Atelier WM, brokered one of only a handful of luxury contracts signed in Manhattan at the end of April.

The seller had initially accepted an offer in late February, but the buyer pulled out after the stock market plunged, she recounted in Olshan Realty’s luxury market report. A second buyer also backed out. Running out of options, Maitland later went back to the first buyer, this time offering a fresh round of concessions, and managed to cut a deal.

Such stories are rare: In the seven weeks after New York’s stay-home order came into effect, just 20 luxury contracts were signed, according to the latest market report, a stunning fall from the 158 during the same period last year.

An UrbanDigs analysis of property records and the Real Estate Board of New York’s Residential Listing Service shows the number of closed deals between March 23 and the end of April in Manhattan was down 71 percent year-over-year. Signed contracts dropped 76 percent.

The preliminary analysis of weekly reports by Olshan and UrbanDigs is only part of the picture, however.

Parsing what transactions are true products of the age of coronavirus (viewed, negotiated and closed amid the pandemic) is nearly impossible. It’s also debatable whether data recorded during the lockdown in New York City’s property records and industry databases is truly accurate.

“Even if there is a data point, nine times out of 10, its genesis was pre-Covid,” said  Miller.

“On top of it, we’re expecting unusual delays in the difference between the closing date and the reporting date, just because government employees are working from home, too,” he added. “So there’s all these hurdles to get over to get current, fresh, of-the-moment information.”

Reality checks

While it may take another month to get a clearer sense of April sales, existing contract data offers valuable insight into what it takes to keep deals alive in a pandemic — often grueling tests of resilience and perseverance.

Donna Olshan, who writes her firm’s weekly report about luxury contract signings in Manhattan, said that after the city went into lockdown, she was forced to throw out her numbers-driven formula because new contracts were in such short supply.

Instead, Olshan said, she’s taken to hitting the phones each week to get the backstories from brokers about their deals. Many describe multimillion-dollar contracts hanging on by a thread — buyers nervous about the market, demanding price cuts, and round after round of renegotiations.

Beyond the here and now is the urgent question of when everyone can go back to work. While some firms are making tentative plans, the uncertain timeline makes it more difficult to prepare for life after the most severe restrictions are lifted.

The city’s shutdown is slated to end in June, but it remains to be seen if the governor will extend it, and no one knows what a return to normalcy will look like, given new concerns about social distancing, sanitizing and density in office buildings.

There are also questions about how buying patterns will change and whether our collective concern about density will spell doom for Manhattan’s crowded condo buildings.

At HFZ Capital’s XI condo, the Douglas Elliman sales team had discussed the possibility of a bulk offering — a trend gaining traction in the pandemic as developers and investors hunt for opportunity.

For these kinds of deals to materialize, though, developers will likely have to entertain deep discounts.

“I have a list of people that want to buy in bulk, it’s just that I’m not seeing anybody that really is interested in selling in bulk at a price that investors would be interested in,” said Andrew Gerringer, who runs new business development at the Marketing Directors.

Art Hooper, president of development firm Ceruzzi Properties, said he was open to bulk opportunities at his Upper East Side condo, the Hayworth. “There are bulk buyers out there,” he said.” They’re in the market; they’re calling all the condo owners, not just us.”

In the townhouse market, some brokers are feeling confident that the pandemic will give their product the edge over condos.

“If there’s going to be a winner in the luxury real estate market, no question it’s going to be a house,” said Jed Garfield, a townhouse specialist with Leslie J. Garfield.

“You’d need to be a moron to think otherwise.”

Time for some action

It’s hard to find a group more optimistic than New York City brokers.

Celebrity broker Ryan Serhant of Nest Seekers International said that after an initial slump, he saw his business begin to pick up again one month into lockdown.

“For the first four weeks of quarantine, the market was very quiet … Everybody was in a wait-and-see mode,” he said. “[Now] we’re going into this strange new normal.”

New listings in Manhattan began to creep online at the end of April, including pop singer The Weeknd’s former Tribeca rental that appeared on the market asking $27.5 million in early May.

(Listings and contract signings, however, remained down.)

There have also been some preliminary signs that New York state’s housing market could be spluttering back to life.

In the first two weeks of May, the number of mortgage applications to buy homes in New York increased by 9 and 14 percent from the previous weeks, despite the number of applications still lagging a significant 51 and 43 percent, respectively, compared to the same periods a year earlier, the Mortgage Bankers Association reported.

And while it remains an open question if and when buyers may be comfortable touring apartments again, most believe that New York’s buyer’s market will continue unabated for the foreseeable future.

“I’m sure developers are scared to death,” said Reed of Warburg. “[But] when you’re working with your buyers? Run. Run, go get something.”

“If you’re working with buyers,” she added. “this is your moment.”

The post New York City’s residential reckoning appeared first on The Real Deal Miami.

Vector Group president and CEO Howard Lorber (Getty, iStock)

Vector Group president and CEO Howard Lorber (Getty, iStock)

Shareholders are sending Vector Group’s C-suite a message — and it’s aimed at their wallets.

On Thursday, the publicly traded parent of brokerage Douglas Elliman and new development firm New Valley asked its investors to bless the pay packages its top five executives received last year.

And for the second year in a row, shareholders balked.

A majority at Vector’s annual stockholder meeting rejected executives’ 2019 compensation, including $11.7 million showered on Elliman chairman Howard Lorber, Vector’s president and CEO. Four other executives earned a total of $7.4 million.

By comparison, Steve Roth, whose Vornado Realty Trust has a market capitalization nearly four times that of Vector’s, received compensation of $11.1 million in 2019, while Brett White, CEO of Cushman & Wakefield, which is worth 29 percent more, had a $9.3 million package.

Ryan Schneider, Lorber’s counterpart at Realogy Holding, whose market cap is 60 percent less, collected $8.8 million.

Kenneth Steiner, a retail investor who has owned stock in Vector for a decade, calls Vector’s pay “excessive,” particularly Lorber’s. He could not recall in his 25 years as a corporate activist seeing a majority of investors oppose compensation packages in two consecutive years.

“It’s a strong rejection of the compensation packages and a strong rejection of the board of directors,” Steiner said.

Steiner noted that such advisory votes on pay typically receive 95 percent to 97 percent approval. A prolific filer of shareholder proposals, Steiner has waged hundreds of campaigns on PepsiCo, Oracle, Exxon Mobil and other companies.

Last year, 50 percent of Vector’s investors voted against its pay proposal, while 49 percent approved it and 1 percent abstained. This year’s vote breakdown has yet to be publicly recorded.

Of thousands of public companies that conduct these votes, less than 1 percent fail to get majority approval in any given year, noted Stewart Reifler, a lawyer specializing in executive pay.

“If a company cannot get an 85 percent or above approval vote on ‘say on pay,’ then that’s a strong indicator the company has a fever,” Reifler said. “If a company’s ‘say on pay’ vote is below 50 percent, then, to paraphrase the Music Man, ya got some serious trouble in River City.”

“Say on pay” became a hallmark of annual shareholder meetings as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. While non-binding, the vote can pressure a company into reducing its largesse to executives.

Reifler described the annual rite as “like taking the temperature” of investor sentiment.

“Typically, when things are going great at a company, ‘say on pay’ votes are never an issue,” he explained. “However, when the activists have the battering ram at the castle door and when the company is poorly performing, it is then when we see shareholder anger at executive compensation and a corresponding negative say-on-pay vote.”

In Vector’s first-quarter earnings, its real estate businesses reported a net loss of $54.4 million, which was six times the size of its first-quarter loss a year ago. Lorber attributed the result to the Covid-19 pandemic.

Vector’s overall performance last year was flat, though its results in the real estate market were erratic from quarter to quarter. Starting this year, the company halved its quarterly dividend and eliminated its annual dividend.

Steiner said he hopes shareholders’ vote on pay will prompt Vector’s board of directors to act. “This is a strong signal to them that they’re not doing their job properly,” he said.

The board is chaired by Bennett LeBow, a financier who previously controlled one of Vector’s tobacco businesses, Liggett Group. Other directors include Lorber; Paul Carlucci, former advertising executive and publisher of the New York Post; Barry Watkins of communication firm Clairvoyant Media Strategies and advisor to Madison Square Garden Company; and Stanley Arkin, founding partner of his eponymous law firm and a private intelligence agency. Vector declined to comment on Steiner’s statements.

Though Steiner is sounding the alarm loudest, the company’s big institutional investors seem to be making noise behind the scenes. They include asset manager BlackRock, Vector’s largest shareholder with 12 percent of its common stock; investment giant Vanguard Group; and hedge fund Renaissance Technologies.

Vector’s board has tried to respond to investor concern. Before last year’s annual meeting, Vector informed stockholders it had gathered feedback from institutional investors and would review its executive compensation program. The results were to be published ahead of the 2020 stockholder meeting and recommended changes to executive pay would be made that year.

The review is still ongoing, but preliminary results were reported in Vector’s 2020 proxy statement.

The company justified its compensation by noting the challenge for determining appropriate pay given Vector’s disparate holdings — tobacco companies as well as real estate.

Though Vector reported that no “specific changes” have been made, it requested conversations with every institution that owned more than 2 percent of its stock. Participating investors requested more transparency and supported Vector’s intent to link compensation to long-term performance.

Vector said it would “carefully consider” the feedback and the impact of the Covid-19 pandemic as it firms up 2020 compensation. A spokesperson said it is in regular contact with institutional investors.

In response to the economic downturn, many real estate executives, including Vornado’s Roth and Cushman & Wakefield’s White, announced pay cuts, and some are taking zero salary. On average, most gave up about 20 percent of total compensation.

Reifler, the compensation attorney, noted that activist investors’ challenges to executive pay is not motivated by moral righteousness.

“The activists are there to make a buck, and there’s nothing wrong with that,” he said. “But let’s not be naïve and think they’re there for something else.”

Write to Erin Hudson at ekh@therealdeal.com

The post Howard Lorber’s comp is too damn high: Investors appeared first on The Real Deal Miami.

Simon and David Reuben with an aerial view of the San Juan resevoir (Credit: Wikipedia)

Simon and David Reuben with an aerial view of the San Juan resevoir (Credit: Wikipedia)

Fresh off a big retail deal in New York, British investors David and Simon Reuben have picked up a 618-acre property outside Spain’s capital Madrid.

Their private equity firm, the aptly-named Reuben Brothers, bought the parcel for an undisclosed price, according to Bloomberg. The property is in a pricey area about 46 miles from Madrid that borders the San Juan Reservoir. It’s a popular place for second homes of celebrities living in the capital, including Real Madrid manager Zinedine Zidane.

The firm plans to build 650 residential units and a hotel on about a third of that land, or roughly 300 acres. A spokesperson for the company called the development Canto Redondo and said Reuben Brothers “continues to explore further opportunities in the Spanish market.”

The firm also owns a hotel in Ibiza and about 900 acres of land on the nearby island of Mallorca.

The brothers are worth an estimated $11.7 billion and the coronavirus pandemic hasn’t stopped them from spending.

In late April, their firm swooped in and bought a retail condo on Manhattan’s Fifth Avenue from SL Green Realty about a month after a deal for the building with Jacob Chetrit fell apart. [Bloomberg] — Dennis Lynch

The post Reuben Brothers scoop up 618-acre property outside Madrid appeared first on The Real Deal Miami.

Number 22 Bishopsgate

Number 22 Bishopsgate

Some London developers could find themselves building office space for tenants that don’t exist, if they already aren’t.

The economic downturn brought on by the pandemic is also likely to mean at least a temporary end to the type of monumental office projects born from the optimism of the last several years, according to the Financial Times.

Number 22 Bishopsgate, a 62-story Class A tower that will be the tallest office block in the city when completed, could be the last of its kind for a while. AXA IM Real Assets was set to complete the project between March and June.

There’s around half a million square feet of space unleased in the tower. The firm’s head of development in the U.K., Harry Badham, said he’s confident about leasing because of the uniquely large floor plates and interest from renters looking to move in a year from now.

Chris Lewis, director at office tenant advisor DeVono Cresa, said the project “probably marks a high-water mark for skyscrapers,” but said developers will have a tough time justifying such large-scale projects in a post-coronavirus world and that the pandemic could discourage tenants from renting in a building fit for 12,000 people.

Work started on 5 million square feet of office space in London from October 2019 to March 2020. New projects could get nixed — around half of developers surveyed by Deloitte at the end of March said they planned to scotch them. All of those developers surveyed said they were pessimistic about the London office market. [FT] — Dennis Lynch

The post Trophy office towers could become a thing of the past in London appeared first on The Real Deal Miami.

Rana Creek Ranch (Credit: Hall & Hall)

Rana Creek Ranch (Credit: Hall & Hall)

A sprawling central California ranch owned by an Apple co-founder is on the market for $37.5 million.

Neither Steve Jobs nor his programming whiz partner Steve Wozniak ever owned this 14,000-acre property — it is owned by Apple’s second CEO and first big investor, Mike Markkula, according to Business Insider.

The now-76-year-old Markkulla and his wife bought the property in 1982 for $8 million. Five years earlier, the already-wealthy investor cut a $250,000 check to Apple in exchange for a 33 percent stake in the company and the enviable title as Apple employee number 3.

Markkula’s asking price is 37 percent lower than the $60 million he wanted for the sprawling property when he put it on the market in 2013. He put the property, named Rana Creek Ranch, back on the market in 2016 for $45 million.

The ranch has seven homes total and a working cattle ranch. There’s also a 2,900-foot landing strip and a helipad. It’s the largest landholding in Carmel Valley. The main house spans over 5,400 square feet.

Markkula made his fortune through stock options he took as a marketing manager for chip maker Intel and then-semiconductor giant Fairchild. He retired by the mid-1970s at the age of 32, but Jobs convinced him to come out of retirement to join Apple.

Wozniak credits Markkula’s business expertise for much of Apple’s success. After a three-year stint as CEO, Markkula served on the company’s board until 1997 when Jobs returned as CEO. [Business Insider] ­— Dennis Lynch

The post Lesser-known Apple co-founder re-lists 14,000-acre California ranch appeared first on The Real Deal Miami.

A mass timber project in Cleveland is now under construction and could be the nation’s tallest when completed. Harbor Bay Real Estate Advisors’ Intro development will rise nine stories with 298 residential units (Credit: Harbor Bay Real Estate Advisors)

A mass timber project in Cleveland is now under construction and could be the nation’s tallest when completed. Harbor Bay Real Estate Advisors’ Intro development will rise nine stories with 298 residential units (Credit: Harbor Bay Real Estate Advisors)

What will be the country’s tallest wood building is headed skyward in Cleveland.

Harbor Bay Real Estate Advisors is building the 298-unit, nine-story building dubbed Intro with mass timber throughout much of it, including load-bearing sections. The firm closed $144 million in financing in March and construction has now started, according to the Wall Street Journal.

Intro is one of a handful of mid- and high-rise mass timber projects proposed or under construction in the U.S. An affordable housing developer in Los Angeles is planning a 14-story mass-timber project in Downtown L.A.

Katerra is also utilizing mass timber materials, although it has had some trouble with warping of wood that it had shipped from one climate to another.

Building with mass timber is considered more environmentally friendly than using steel and concrete, which is standard in the vast majority of large structures in the country. The manufacturing process for steel and concrete has a carbon footprint about twice that of the process for preparing wood for construction.

There’s some concern that deforestation could be accelerated if mass-timber construction grows in popularity, though. Supporters say timber construction sequesters carbon in the buildings rather than releasing it into the atmosphere. An 85-foot-tall timber building in Portland, Oregon, claims to be as strong as a concrete building but one-fourth the weight. A planned 11-story, $29 million wood building in the same city was granted building permits but ran into financial problems in 2018 and was never built.

Because mass timber is not widely used, it can be hard for developers to get their hands on it. The wood beams and floors for Intro are being manufactured in Austria and shipped to Cleveland by boat, according to the Journal.

The Alphabet-owned development company Sidewalk Labs released plans for a mass-timber high-rise for Toronto earlier this year, but the fate of that program is uncertain now that the firm has scrapped a large development planned in the Canadian city. [WSJ] — Dennis Lynch

The post Mass timber project in Cleveland could be nation’s tallest appeared first on The Real Deal Miami.

TPG Real Estate Finance Trust CEO Greta Guggenheim and Starwood Capital CEO Barry Sternlicht (Getty)

TPG Real Estate Finance Trust CEO Greta Guggenheim and Starwood Capital CEO Barry Sternlicht (Getty)

Facing a cash crunch, TPG Real Estate Finance Trust has secured a major infusion a little over two weeks after it sold off nearly $1 billion of its commercial real estate debt.

The real estate investment trust announced that Starwood Capital is taking a stake in the company, providing it with up to $325 million in new capital.

Greta Guggenheim, TPG RE Finance CEO, said the investment will provide the firm with “with additional liquidity and flexibility to navigate the current economic environment.” Under the agreement, Starwood will hold preferred stock and warrants.

Earlier this month, TPG RE Finance announced it was selling off a billion dollars in CRE debt to fight off margin calls, amid the coronavirus crisis. That disclosure came at its first quarter earnings in which the company said liquidity constraints raised substantial doubt about its ability to continue “as a going concern.”

Real estate investment trusts like TPG RE Finance, hedge funds and private equity firms that have issued billions in construction loans, mortgages and bonds backed by property debt are now under increasing pressure. Businesses that had been shuttered by the pandemic are beginning to open, but mortgage payments are coming in late or being skipped altogether.

Starwood and its boss, Barry Sternlicht, have been on the lookout for investment opportunities, including the decimated hotel sector.

“We love distress markets from a buyer’s standpoint,” Sternlicht told The Real Deal in a recent interview. “I like markets like this where you have to hustle. Hopefully, we’re big enough now to help people survive, too. They can come to us, and we can give them capital.”

Contact Sasha Jones at Sasha.Jones@therealdeal.com

The post TPG RE Finance gets $325M infusion from Starwood appeared first on The Real Deal Miami.

Conrad Miami with Camilo Miguel of Mast Capital

Conrad Miami with Camilo Miguel of Mast Capital

Hotel operator HEI Hotels & Resorts announced that 154 employees at the Conrad Miami were laid off due to the coronavirus pandemic.

The WARN notice is dated May 25, one week before hotels are allowed to reopen in Miami-Dade County. Merritt Hospitality, an affiliate of HEI Hotels & Resorts, filed the letter this week, which states that the 154 layoffs are expected to exceed six months.

Mast Capital and Angelo Gordon & Co. paid $72 million for the 203-room luxury hotel at 1395 Brickell Avenue in 2017.

The layoffs add to thousands of others in retail, restaurants, hotels and resorts throughout the state, including at Walt Disney World Resort. A number of hotels in South Florida have been closed since mid- to late-March and will begin reopening on Monday, June 1.

Since the pandemic began, hotels that have laid off or furloughed employees include the Carillon Miami Wellness Resort, the Four Seasons Resort Palm Beach, the Eden Roc Miami Beach, the Palms Hotel and Spa, Circa 39, the South Seas and the Richmond Hotel, SLS South Beach, JW Marriott Marquis Miami, the JW Marriott Miami, the Trump National Doral Miami and the South Beach Hotel Group’s properties.

Hotel owners in Miami-Dade, Broward and Palm Beach counties have $4.2 billion in commercial mortgage-backed securities debt, based on an analysis by data provider Trepp. Hotels such as the Fontainebleau Miami Beach have entered special servicing, presenting new challenges for property owners.

The post Conrad Miami lays off 154 employees ahead of county reopening appeared first on The Real Deal Miami.

Maximus’ Robert Rosania and Former WeWork CEO Adam Neumann (Credit: Kevin Hagen/Getty Images; Ambrosetti)

Maximus’ Robert Rosania and Former WeWork CEO Adam Neumann (Credit: Kevin Hagen/Getty Images; Ambrosetti)

An investor in San Francisco’s largest residential complex is suing WeWork for abandoning its development plans and backing out of a pledge to invest $450 million.

The development at Parkmerced — which plaintiffs allege lost a year in closing additional investments, Bloomberg reported — was intended to showcase WeWork’s WeLive initiative, featuring amenities like media rooms, hot tubs, and offering happy hours and yoga classes. The plaintiff, Parkmerced Investors LLC, is seeking at least $100 million in damages.

The legal struggle is the second in as many months between the two parties. In March, WeWork sued Parkmerced’s developer, Maximus Real Estate Partners, for not returning a $20 million “exclusivity fee” as part of the botched development deal.

Adam Neumann, WeWork’s co-founder and former CEO, told Maximus Real Estate in 2015 that WeWork would one day “be bigger than Apple,” and he wanted in on the Parkmerced investment, according to Thursday’s court filings. In 2018, WeWork agreed to pay $275 million at closing and $175 millon six months later, but later backed out of the deal, Parkmerced Investors alleged.

The Parkmerced complex has also had its share of difficulty in recent months — the 3,000-unit apartment community, which is the largest multifamily property in San Francisco and the second largest multifamily property west of the Mississippi River, requested forbearance on its nearly $1 billion mortgage due to coronavirus-related financial hardship.

WeWork’s parent SoftBank has been in turmoil of late, but despite reporting record losses, doubled the compensation of its Vision Fund chief, Rajeev Misra. The conglomerate also moved two of the vision fund’s managing partners to senior advisory roles. [Bloomberg] — Georgia Kromrei

The post WeWork sued for backing out of San Francisco development deal appeared first on The Real Deal Miami.

Masks, one-way signs, spread-out open-air dining. Malls, stores and restaurants are reopening in South Florida, and changes are evident amid the pandemic.

The Real Deal’s South Florida Managing Editor Ina Cordle toured the Miami Design District with Craig Robins, Bal Harbour Shops with Carolyn Travis and Aventura Mall with Jackie Soffer on Saturday, May 23. After two months of forced closures of non-essential businesses and stay-at-home orders, shoppers were ready to venture out.

Robins, president and CEO of Dacra, said about 60 percent of the stores in the Design District are open, with more opening each day. Restaurants will be phased in. During the lockdown, he offered tenants the option to defer three months rent, allowing them to amortize the amount over the term of their leases. And he has five new leases in the works, including one for the Peruvian-Japanese restaurant Itamae.

Whitman Family Development’s Travis said 85 stores are open at Bal Harbour Shops with the remainder opening soon. The open-air shopping center has created new signage to direct shoppers one way on aisles, and is letting restaurants spread out in the courtyards. Sant Ambroeus, based in New York, will open its first Miami-area restaurant there soon.

And Soffer, chairman and CEO of Turnberry Associates, said that despite the lack of tourists in South Florida, local shoppers are taking up the slack at Aventura Mall. Long lines were visible at Zara, Louis Vuitton and other stores.

“People obviously want to go out, and they want to have experiences, and there’s only so much experience you can have at home at a computer….” Soffer said. “Shoppers want to be back in stores and diners want to be back in restaurants.”

The post Inside South Florida’s mall, retail and restaurant reopenings appeared first on The Real Deal Miami.

Elvis Dumervil and 12501 Northeast 13th Ave. (Credit: Twitter, Google Maps)

Elvis Dumervil and 12501 Northeast 13th Ave. (Credit: Twitter, Google Maps)

Elvis Dumervil’s real estate firm was fined by the U.S. Department of Labor’s Occupational Safety and Health Administration for failing to protect employees at a construction site in North Miami.

The fines come six months after a worker fell from an aerial lift 20 feet above the ground that led to the employee’s death at 12501 Northeast 13th Avenue in November. Prestige Estates Property Management LLC and Jesus Balbuena of Miami face $44,146 in penalties, according to OSHA. They have 15 business days to pay the fines or contest the findings.

Dumervil’s Prestige Estates bought the 91-unit apartment building a year ago for $10 million with plans to renovate the property. Dumervil has expanded his portfolio of North Miami and North Miami Beach apartment buildings since 2016, after his professional football career came to an end.

OSHA’s investigation into the November 2019 accident found that Prestige Estates and Balbuena failed to ensure that a fall protection system was used, failed to train employees to recognize and avoid fall hazards, and did not have an accident prevention program in place. Dumervil’s company was also cited for not reporting a hospitalization within 24 hours and a death within eight hours, as required.

OSHA Acting Fort Lauderdale Area Director Juan Torres said in a press release that “employers have an obligation to ensure the working conditions they ask employees to operate under are free of recognized hazards.”

The post Elvis Dumervil’s company fined in death of construction worker in North Miami appeared first on The Real Deal Miami.

A judge allowed Le Pain Quotidien to be released from 59 of its leases. (Getty, iStock)

A judge allowed Le Pain Quotidien to be released from 59 of its leases. (Getty, iStock)

Upscale bakery chain Le Pain Quotidien will be allowed to break 59 of its leases, in a decision the judge acknowledged is “unusual.”

The company filed for Chapter 11 bankruptcy protection, which allowed it to pare down debt and complete a $3 million sale to Aurify Brands pending court approval, Bloomberg reported.

“The relief requested is unusual, but these are unusual times,” U.S. bankruptcy Judge John Dorsey said of Le Pain Quotidien’s request for immediate freedom from its leases.

Aurify plans to reopen 35 of the Belgian brand’s 94 stores in the U.S., which employ about 1,000 workers. The locations have been closed since state and local governments issued shutdown orders at the beginning of the pandemic.

The popular chain was founded in 1990 and opened its first U.S. eatery in 1997. CEO Doug Saltzman, who joined Le Pain Quotidien in 2016 after 14 years at Starbucks, bought an Upper West Side pre-war duplex for $2.8 million the following year.

In deciding which of its leases to renegotiate, Aurify focused on underperforming stores and “assessed the impact of operating with a reduced portfolio of restaurant locations,” according to court filings, Bloomberg reported.

The buyer may also seek to renegotiate additional leases, an attorney for Aurify said in a court filing. [Bloomberg] — Georgia Kromrei 

The post Le Pain Quotidien freed from 59 leases in bankruptcy appeared first on The Real Deal Miami.

The Centers for Disease Control released new guidelines for offices as they reopen amid the coronavirus. (Getty)

The Centers for Disease Control released new guidelines for offices as they reopen amid the coronavirus. (Getty)

Sweeping new recommendations from the nation’s health protection agency would drastically alter how people work in offices.

The Centers for Disease Control and Prevention guidelines range from technical — increasing air circulation and guarding against mold and stagnant water — to cultural, like recommending employees abstain from “handshakes, hugs or fistbumps.” Scientists last week warned that stagnating water in office buildings, left empty for months in some cities, could lead to the proliferation of bacteria, including Legionnaires’ disease.

The guidelines also recommend against using public transit, and instead suggest employers incentivize commuting to work alone or via single-occupancy rides. The risk of using public transit can be reduced by staggering shifts, and workers should wash their hands immediately after making the trip.

Before coming to work, employees would have their temperature taken, and be screened for symptoms — but the CDC warns against congregating in groups while waiting to be screened.

While in the office, workers should wear masks at all times and maintain social distancing whenever possible. Office guests, too, should be encouraged to wear face masks. The agency recommends that seating and office desks be spaced at least six feet apart — but if that’s not possible, it advises the installation of transparent shields or other physical barriers.

The changes would eliminate many features of American office culture. Instead of sharing a common coffee pot, offices should turn to pre-packaged, single-serve items. And workers would be encouraged to eat outside, instead of in a communal lunch room.

Some firms, including Cushman & Wakefield, had already set out to reimagine offices.

Other companies, including Facebook and Twitter, may opt to send their workers home rather than reinvent an office to adhere to the recommended practices, in order to prevent the spread of the coronavirus.

Facebook CEO Mark Zuckerberg said that allowing its employees to work from home would enable it to draw from a larger pool of talent. The company estimated that over the next decade, half its workforce will be remote.

The post CDC recommendations would drastically alter offices appeared first on The Real Deal Miami.

Renderings of the projects with Aria Mehrabi

Renderings of the projects with Aria Mehrabi

UPDATED, May 29, 6:52 p.m.: Two Miami Beach developers are seeking design review approval for mixed-use projects in North Beach.

Robert Finvarb will go before the Miami Beach Design Review Board at a later date for a two-phased residential and retail project on 71st and 72nd streets, Abbott Avenue and Byron Avenue. Tuesday’s meeting was canceled.

The developer is seeking waivers and variances to reduce the frontage depth requirements, the minimum amount of building facade and to replace existing structures for the planned project at 409 71st Street, 430 72nd Street, 7124-7140 Abbott Avenue and 7117-7135 Byron Avenue, according to documents filed with the city.

The 14-story development would have commercial space on the ground floor and 232 upper level residential units. It would have an amenities space on the fifth floor that would feature indoor and outdoor fitness space, spa services, an outdoor kitchen and lounge areas, as well as a dog run on the upper rooftop. Arquitectonica is designing the project.

The residential component would include co-living studios and one-bedroom units, and non-co-living one- and two-bedroom units of up to 843 square feet.

Developer Aria Mehrabi of Pacific Star Capital is moving through the approval process for two buildings in North Beach.

At 6948-6988 Abbott Avenue and 6957-6965 Byron Avenue, Mehrabi’s North Beach Town Center Development LLC is proposing a Target-anchored mixed-use project with a 30,010-square-foot Target and 170 multifamily units above that. The development would also have a 175-space parking garage. The project would be more than 125 feet in height, which could be 12 stories tall.

At 6961-85 Abbott Avenue, 300-326 71st Street, and 6972 Harding Avenue, Mehrabi is proposing a 14-story mixed-use residential and retail project that would be built next to the City National Bank building. It would have 118 residential units.

The buildings would rise near the $220 million mixed-use project along Ocean Terrace planned by partners Alex Blavatnik and Sandor Scher.

Development in North Beach is ramping up. Matis Cohen and the Galbut family are planning to significantly make over Carlyle and Byron avenues with a 22-story tower from 71st to 72nd streets.

Correction: An earlier version of this story incorrectly identified the developer of 409 71st Street.

The post Robert Finvarb, Aria Mehrabi seek approval of mixed-use projects in North Beach appeared first on The Real Deal Miami.

Hypergrowth has been the mantra of flex-office-space players for years. WeWork became the largest private tenant in New York City by signing leases at an astonishing rate, and venture-backed rivals from Knotel to Industrious were similarly ravenous.

But when you’re a flex-space player bankrolled by the world’s largest commercial real estate services firm, you approach growth quite differently.

“We’re not in the business of land-grabbing,” Andrew Kupiec, CEO of Hana, said in a conversation with The Real Deal’s Hiten Samtani, discussing how his nascent firm is not designed for an “exit.”

“We’re underwriting this business in perpetuity,” Kupiec added. “We have a different endgame, and our endgame is to be additive to the core business [of CBRE]. It’s more about the long-term stickiness of the business.”

Kupiec and Samtani were joined by Georgia Collins, Hana’s EVP of occupier solutions, to discuss all aspects of the flex-space business, from how to overcome the newfound fear of shared spaces, to how Hana structures deals so it has skin in the game alongside landlords, to what the office building of the future could look like in major markets such as New York, San Francisco and Los Angeles.

Collins spoke about the power of the flex model for large companies, particularly those that have partially embraced the idea of a distributed workforce.

“The idea that enterprises could actually always stay within a building and that their needs could be met in some form or another, is really attractive,” she said.

The post “We’re not in the business of land-grabbing:” Hana CEO on the future of flex space appeared first on The Real Deal Miami.

Jeff Berkowitz, developer of Dadeland Station and Aventura Commons

Jeff Berkowitz, developer of Dadeland Station and Aventura Commons

PetSmart could get the heave-ho from two Miami-Dade shopping centers for allegedly owing $62,269 in rent.

Berkowitz Development Group, through two related entities, filed a pair of eviction lawsuits against the national pet retailer in Miami-Dade Circuit Court last week.

The Coconut Grove-based commercial developer alleges PetSmart hasn’t paid $25,611 in rent for its big box store at Dadeland Station in Kendall, as well as missing $36,658 in rent payments for a big box space at Aventura Commons in Aventura. The plaintiffs in the two lawsuits are Aventura Commons Associates and Dadeland Station Associates.

Berkowitz founder and Chairman Jeff Berkowitz and Mark Auerbacher, the attorney for Aventura Commons and Dadeland Station, did not return phone and email messages seeking comment. A PetSmart spokesperson also did not respond to requests for comment.

According to Datex Property Solutions, a software company that tracks commercial rents, PetSmart had paid 80 percent of its rents nationally as of May 8. The lawsuits state PetSmart was sent late notices on May 6 and May 8 and did not respond.

During the early weeks of the coronavirus pandemic hitting the U.S., South Florida commercial landlords showed a willingness to offer tenants rent deferrals or work out arrangements. That sentiment continued through April as several major landlords such as Pebb Capital, Tricera Capital and Avra Jain disclosed they were giving rent abatements to tenants. Some experts recently said landlords were still collecting upwards of 90 percent of their rents from commercial tenants who had qualified for Covid-19 related stimulus aid.

Andrew Rossman, a partner with the law firm Quinn Emanuel who is not involved in either lawsuit, said Berkowitz is taking an aggressive stance at a time he is seeing commercial landlords trying to work things out with their tenants.

“I haven’t seen a lot of instances where landlords are seeking to evict tenants,” Rossman said. “It’s an interesting strategy. But what happens if [PetSmart] leaves? What replaces it? More often, landlords are trying to work it out or taking a wait and see attitude.”

Jason Kellogg, a partner with the law firm Levine Kellogg Lehman Schneider and Grossman, who is not involved in the suits, said it’s possible Berkowitz and PetSmart could not agree on a rent abatement or rent deferral.

“I would imagine the landlord and PetSmart have been talking since day one of [the pandemic-related shutdown] and it has taken this long for the landlord to realize it’s not something they can accept.”

Kellogg said some landlords are also using nonpayment of rent caused by the pandemic to rip up leases they no longer find favorable.

“They are using force majeure clauses to terminate agreements,” Kellogg said. “I think it is more likely this landlord believes the lease with PetSmart is below market and is using the pandemic to get out of it.”

The post Berkowitz sues to evict PetSmart from Dadeland Station and Aventura Commons appeared first on The Real Deal Miami.

Capacity constraints may cause agony for restaurateurs and their landlords (iStock, Getty)

Capacity constraints may cause agony for restaurateurs and their landlords (iStock, Getty)

As restaurants move to open, owners are agonizing over capacity constraints and social distancing guidelines, which are expected to result in a decline in sales. In turn, their landlords are sure to suffer from heartburn wondering whether the rent checks are coming.

Of the 30 states that have allowed restaurants statewide to resume serving customers indoors, 15 have limited capacity to 25 percent or 50 percent, according to market-research firm Gordon Haskett. Restaurant executives expect the limits to last at least through the summer, traditionally one of the busiest seasons.

Although New York City has yet to set restaurant guidelines, a 75-seat sit-down restaurant would allow for just 20 diners after accounting for employees, under a 50 percent capacity limit, according to James Mallios, a New York City restaurateur and attorney told the Wall Street Journal. The number drops to around five diners at a 25 percent capacity limit.

“It’s like selling tickets just for the bleachers at Yankee Stadium,” said Mr. Mallios, whose restaurants include Amali and Calissa.

Some restaurateurs fear that if they can’t fill seats, they won’t be able to make rent, by far their largest fixed cost. Bars and entertainment venues have expressed similar concerns. Mayor Bill de Blasio has attempted to assist restaurants by signing a package of Covid-19 relief bills, including one that temporarily bars landlords from going after restaurant and store owners’ personal assets.

Co-owner of Texas-based M Crowd Restaurant Group Inc. Ray Washburne, opened most of his 25 Mi Cocina locations earlier this month at 25 percent capacity in accordance with Texas’s initial restrictions. He said other restaurateurs have since asked him if his company wants to take over their leases because they can’t make money at reduced capacity.

Sunil Dharod, owner of 75 Applebee’s restaurants in Texas and California, similarly said he has asked landlords for rent breaks and is considering closing 10 percent of his restaurants if steep sales declines persist.

“We will continue to lose millions of dollars. That will become very, very challenging,” he said. [WSJ] — Sasha Jones

The post Survival of the Fullest: Restaurants fear capacity constraints will kill them appeared first on The Real Deal Miami.

Douglas Durst, One Five One, and Tik Tok CEO Kevin Mayer (Getty, Google Maps, iStock)

Douglas Durst, One Five One, and Tik Tok CEO Kevin Mayer (Getty, Google Maps, iStock)

TikTok is coming to Times Square.

The parent company for the video-sharing app has inked a lease with the Durst Organization for 232,000 square feet at One Five One, formerly known as Four Times Square, according to the Commercial Observer. It is the first six-digit office lease in Manhattan since the onset of the pandemic.

Lenders still need to sign off on the deal to complete it, which should happen in a few weeks. The company will take seven floors at the 48-story building — five at the top and two at the base — leaving the property with about 326,000 vacant square feet.

The asking rents were unavailable, although law firm Skadden Arps, which previously leased the top five floors, paid between $105 to $135 per square foot.

TikTok, whose parent company is Chinese internet firm ByteDance, has about 400 employees in the U.S. Most are based in Culver City, Calif.

Its massive Manhattan office lease comes in the wake of tech giants including Facebook and Twitter announcing that at least some of their employees can continue working from home indefinitely. The deal could ease concerns that tech companies will not lease nearly as much office space as they did before the pandemic. [CO] — Eddie Small

The post The biggest new tenant in New York City is… TikTok appeared first on The Real Deal Miami.

Toll Brothers CEO Douglas C. Yearley Jr. (Credit: iStock)

Toll Brothers CEO Douglas C. Yearley Jr. (Credit: iStock)

As coronavirus battered the residential market, Toll Brothers said its second-quarter profits dropped nearly 42 percent from a year ago, to $75.7 million.

The luxury home builder reported that signed contracts dipped 22 percent as buyers complied with stay-home orders. Home sale revenue was $1.52 billion, down 11 percent from $1.71 billion in the second quarter of 2019.

The results were a reflection of “complex and challenging” circumstances sparked by the pandemic, CEO Douglas Yearley said during an earnings call. “Our second quarter was bifurcated by the effect of Covid-19,” he added.

For the six weeks ended March 13, Toll’s net signed contracts were up 43 percent year-over-year. That activity ground to a halt when sales centers were shut.

From March 16 to April 30, Toll said its net contracts plummeted 64 percent. In the most affected markets, including New York City, Seattle and California, net contracts declined 79 percent.

In New York City, properties still can’t be shown. “You can’t get by the doorman,” Yearley said.

Elsewhere, he said, buyers began to reappear in May. Deposits rose 13 percent over the past three weeks, compared to the prior year. Last week’s contracts were the most since 2005. And the CEO says homes have taken on more importance to people since the pandemic hit.

“I feel strongly that people are nesting, and this is not short-term,” Yearley said. “There is no place like home. Home is your sanctuary today.”

Toll finished the quarter with a backlog of 6,428 homes representing $5.5 billion in pending sales. Cancellations have remained low, around 3.1 percent, compared to 3 percent in the first quarter.

Toll said its luxury business was flat in the second quarter and business from empty-nesters was down, as expected. “That client was more inclined to shelter and be careful,” Yearley said.

Toll ended the quarter with $2 billion in liquidity as it pulled back on land acquisitions and enacted sweeping cuts, including furloughs. Toll said those measures generated $50 million in savings.

Earlier this year Toll withdrew its full-year guidance as the coronavirus created vast uncertainty. Many companies did the same, including competitor Lennar Corp. The Miami-based builder reported strong first-quarter earnings in March, when it said net earnings were $398.5 million, up from $239.9 million. But sales largely reflected the pre-pandemic environment.

Last month, Toll sold the Parkland Golf & Country Club in South Florida for $15 million.

The post Pandemic takes a Toll: Builder’s profits drop 42% appeared first on The Real Deal Miami.

Edgardo Defortuna and a rendering of La Playa de Varadero

Edgardo Defortuna and a rendering of La Playa de Varadero

Developer Edgardo Defortuna could launch sales of an oceanfront project in Sunny Isles Beach by the end of 2020, despite the pandemic.

Defortuna, president and CEO of Fortune International Group, is partnering with Château Group on the La Playa de Varadero condo development at 18801 Collins Avenue, which has been in the works for years.

Defortuna said there will be opportunities to launch some “well-positioned projects” possibly before the end of the year “just to capture the momentum of the pent-up demand that may be coming.”

La Playa de Varadero is zoned for two 56-story condo towers with 490 residential units and 1.15 million square feet. Defortuna said the developers could take advantage of reduced construction costs, which would bring unit prices down.

Fortune is also on the hunt for land, looking for waterfront sites in Miami, Palm Beach, Naples and Tampa, he said. The company is in talk with funds and financial institutions to deploy capital.

“We did that very, very effectively in the past crisis,” Defortuna said. “I think our source of capital is such that if the opportunity is right – either through private investors or some of the funds – the money wouldn’t be the bigger issue. The issue is finding the right opportunity.”

The Miami-based firm has offered letters of intent for a couple of properties on the west coast of Florida, but Defortuna said both sellers and Fortune “want to see what the world is like in a couple of months.” Both projects would be residential, including a condo building in the Tampa Bay market and another development in Naples.

During the pandemic, Fortune and its partner Château closed the majority of units that were presold at the Ritz-Carlton Residences, Sunny Isles Beach, and paid off a $212 million construction loan from Bank OZK for that project.

Fortune’s general brokerage business has fallen about 30 percent year-over-year, a smaller drop than expected, he said, due to coronavirus. But Defortuna said he’s a “firm believer things will get back to normal in a relatively short period of time.”

“You really can’t expect to steal anything,” he added. “No one is going to give anything away.”

The post Not stopping for the pandemic: Fortune, Château could launch Sunny Isles project by year-end appeared first on The Real Deal Miami.

Frederick Arnold, formerly of Convergex and Alex Dimitrief, formerly of General Electric (Getty, Twitter Navient)

Frederick Arnold, formerly of Convergex and Alex Dimitrief, formerly of General Electric (Getty, Twitter Navient)

A brewing dispute at WeWork is set to intensify after a Delaware court approved the co-working company’s decision to appoint two new directors.

WeWork told the court Wednesday that the company’s board planned to meet Friday to vote on the new appointments, the Financial Times reported. The candidates for the vacant board seats are Alex Dimitrief, formerly of General Electric, and Frederick Arnold, formerly of Convergex.

The appointments are expected to ramp up tensions between SoftBank and a special committee of the board, which recently sued SoftBank over its decision to terminate a $3 billion tender offer.

SoftBank, which has four of the eight filled board seats, questioned whether the committee had the authority to take such an action on the co-working company’s behalf. The new directors would be tasked with evaluating this question.

The special committee sought to block the appointments, however a court denied the request.

“We believe SoftBank has no basis to question the special committee’s authority to bring this action and we are pleased by the court’s recognition that any effort by SoftBank to challenge that authority must be presented to the court,” a spokesperson for the special committee said in a statement Wednesday.

In response, a spokesperson for the co-working company told the FT that “WeWork is pursuing best practices of corporate governance to determine what role if any WeWork should have in this contractual dispute among its shareholders. The court’s decision today allows that process to go forward.”

A trial date has been set for January 11. [FT] — Sylvia Varnham O’Regan

The post Tensions brew on WeWork’s board with appointment of new members appeared first on The Real Deal Miami.

Industrious' Mary Hogan Preusse and CEO Jamie Hodari (Twitter)

Industrious’ Mary Hogan Preusse and CEO Jamie Hodari (Twitter)

Flexible-office startup Industrious is moving closer to an initial public offering despite the perils of the coronavirus, which led the company to slash 20 percent of its workforce in early April.

The Brooklyn-based firm has added real estate veteran Mary Hogan Preusse to its board of directors and has been interviewing investment banks ahead of a potential spring or summer IPO, according to Bloomberg. CEO and co-founder Jamie Hodari said the date could change, the outlet reported.

Preusse, who is Industrious’ first female board member, is on the board of and independent director for a handful of large real estate investment entities that include Digital Realty Trust, Kimco Realty and Vereit. She was previously managing director and co-head of Americas Real Estate at APG Asset Management, at Dutch pension fund.

Discussing Preusse’s appointment, Hodari said “investors represent one point of view, but the unfortunate consequence is that you end up with a lack of gender diversity and potentially miss out on a thoughtful, independent voice.”

Despite the pandemic’s impact on business, Hodari said he expects revenue to grow as much as 25 percent this year. Industrious cut 90 employees last month — 18 percent of its workforce — and furloughed another 64 employees. The company is in the process of bringing those furloughed workers back.

Hodari said he believes Industrious’ focus on private offices over open co-working spaces — from rivals like WeWork — puts it in a better position moving forward. He added the coronavirus has shifted demand to those private offices.

The company raised $80 million in a Series C funding round last year from investors that included Brookfield Properties, Fifth Wall Ventures and Riverwood Capital. [Bloomberg] — Dennis Lynch

The post Industrious adds first female board member and eyes IPO appeared first on The Real Deal Miami.

Tal Frydman with Hamlet Plantation and The Continental Apartments (Credit: Hamlet via Jenco Properties)

Tal Frydman with Hamlet Plantation and The Continental Apartments (Credit: Hamlet via Jenco Properties)

Prism Multifamily Group, a Toronto-based firm that invests in apartment communities in the U.S., closed on two multifamily complexes in Broward County.

Prism paid $53.5 million for the Hamlet Plantation apartments at 4401 Northwest 10th Court in Plantation and The Continental Apartments at 1861 Northwest 46th Avenue in Lauderhill, according to a press release. Jenco Properties, based in South Florida, sold the communities, which have a combined 398 units.

The total price breaks down to about $134,000 per unit.

Newmark Knight Frank’s Tal Frydman, Avery Klann, Hampton Beebe, Tyler Minix and Jonathan Senn represented Jenco, which owned the complexes for 45 years. Prism plans to upgrade the units and add fitness centers to the properties, which are less than one mile apart from each other, Frydman said in the release. It also plans to rename the properties.

Hamlet Plantation was built in 1970 and is fully leased at an average price of $1,219 a month. The Continental Apartments, developed in 1971, is 99 percent leased at an average price of $1,250 a month. They include one- and two-bedroom apartments with impact windows and new roofs.

Prism focuses on acquiring Class B apartments on behalf of family offices in Canada. Last year, the company paid $47 million for the 291-unit Spectra at Tamarac apartment complex.

Though many landlords reported high collections of April rent, that could decline in the months to come when federal and local aid dries up, experts say. A CBRE report from late April found that underwriting is more conservative, and deals that are in the early stages are hampered by uncertainty over rent growth and collections.

About 80 percent of apartment households made full or partial rent payments as of May 6, according to the National Multifamily Housing Council’s survey of 11.4 million professionally managed units across the country.

Brokers and sellers in South Florida say the region will benefit from investors betting on a surge of relocations from denser, more expensive markets.

In February, prior to the pandemic, New York-based private equity firm Code Capital Partners bought an affordable apartment complex in Lauderhill for $44.6 million.

The post Prism Multifamily Group buys apartments in Tamarac, Plantation for $54M appeared first on The Real Deal Miami.

Hotel occupancy continued its recovery from the coronavirus, with rates reaching an average of 35% in the U.S. after Memorial Day weekend. (Getty)

Hotel occupancy continued its recovery from the coronavirus, with rates reaching an average of 35% in the U.S. after Memorial Day weekend. (Getty)

Hotels are slowly clawing their way back from pandemic purgatory.

National occupancy rates climbed to 35.4 percent between May 17 and 23, according to weekly data released by STR. That’s up from 32.4 percent the week prior, and it marks the sixth consecutive week that rates have improved.

Occupancy hit a low of roughly 21 percent in early April, and crossed the 30 percent threshold in the first week of May.

Jan Frietag, STR’s senior vice president of lodging insights, said it was “no surprise” that the highest levels of daily occupancy were recorded on Friday and Saturday, ahead of Memorial Day. All 50 states have begun re-opening at least some businesses and rolling back stay-at-home orders and other restrictions.

While hotel fundamentals are on the up, year-over-year figures show just how badly the industry has been battered by the coronavirus pandemic. Last week’s 35.4 percent occupancy rate marked a 50.2 percent plunge from a year ago. Average daily rate was down 39.7 percent and revenue per available room fell 69.9 percent year over year.

Fundamentals in many major markets are worse than the national averages, although four of the top 25 markets in the country — New York City, Tampa/St. Petersburg, Norfolk/Virginia Beach, and Phoenix — saw occupancy levels above 40 percent.

About 45 percent of hotel rooms in New York were occupied last week. RevPAR climbed about $2 to $54.47 and daily rate about 30 cents to $121.29.

Last week’s occupancy rate in the Los Angeles/Long Beach market climbed 2 percentage week over week to 37.8 percent. ADR and RevPAR also increased last week, hitting $105.88 and $40.04, respectively.

The state of California and local governments have rented rooms for vulnerable homeless locals throughout the pandemic as a way to safely house people and support a devastated hotel industry. More than 3,200 rooms have been rented in L.A. County alone, but logistical issues and personnel shortages have hampered the program.

Miami’s 29.3 percent occupancy rate was an improvement from 26.5 percent the week prior and the closest it’s been to 30 percent since the middle of April. ADR fell week over week to $80.50 from $81.15 a week earlier, but RevPAR climbed to $23.56 from $21.49 a week earlier.

Chicago went into the pandemic with a little over half of its rooms occupied and while last week was an improvement, the market is still performing poorly. Occupancy climbed 2 percentage points to 28.2 percent. ADR has been more or less flat at less than $72 all month. RevPAR improved last week to $20.19 from $19.17 a week earlier.

Oahu Island’s 12.7 percent occupancy rate was the lowest among major markets. But Orlando and Boston also had a bad week, with 22.5 percent and 22.8 percent occupancy rates, respectively.

The post Hotel occupancy hovers around 35% after Memorial Day boost appeared first on The Real Deal Miami.

After announcing that Facebook will move toward more working from home, Mark Zuckerberg has detailed why the plan will work in his company’s favor.

“The biggest advantages I think are access to large pools of talent who don’t live around the big cities and aren’t willing to move there,” the CEO told Andrew Ross Sorkin during a segment of CNBC’s “Squawk Box” on Thursday. “And there are a lot of people in the U.S. and in Canada and ultimately around the world that I think we, and other companies that go in this direction, will be able to access.”

Zuckerberg informed Facebook’s 45,000 workers of the shift toward a distributed workforce last week. The move could see about half the company move to remote work over the next decade.

In addition to talent acquisition, Zuckerberg said he also believed the plan would benefit the environment by cutting out commuting, and foster stronger retention at the company because staff would no longer be limited to the cities where Facebook has offices.

He told CNBC that the company would first make the option of working from home available to more experienced employees, because younger employees benefited from in-office training.

In the case of very senior staff, he said it may not be realistic for them to go completely remote — and that included himself.

“I would anticipate that I’m going to spend more of my time working remotely than I did before, but I don’t think that it would be feasible for someone like me, or in a role like me, to just work remotely all the time,” he said.

Zuckerberg’s announcement could have major implications for the office industry in New York, where the company leases more than 1 million square feet of office space. It has also signed on for 1.5 million square feet in Hudson Yards, and is near a deal to lease Vornado Realty Trust’s Farley Post Office redevelopment.

Other companies, including Mastercard, have also signalled plans to reassess their physical footprints. [CNBC] — Sylvia Varnham O’Regan

The post “Large pools of talent”: Mark Zuckerberg touts remote-work plan appeared first on The Real Deal Miami.

Rendering of The Kavista

Rendering of The Kavista

El Portal, a village composed of mostly single-family homes north of Miami’s Upper Eastside, is opening the door to commercial development after approving a mid-rise apartment project with ground-floor workspaces near Biscayne Boulevard and Northeast 83rd Street.

The village council voted last month for a development agreement with an entity managed by Barrington Brothers LLC, a local multifamily developer with projects in the Upper Eastside and Little Havana. As part of the agreement, Barrington, led by Arthur and Ken Barrington, will be able to build an eight-story structure with an option for two bonus stories.

The building would include 282 market rate rentals, ground-floor workspaces and 351 parking spaces, according to the development agreement. Called The Kavista, the proposed project would be built on two acres of vacant land at 471 Northeast 83rd Street.

The project is adjacent to the site of the former Little Farm trailer park, on land the village rezoned five years ago for mixed-use development with retail, restaurants and low-rise multifamily buildings.

“It’s in an area the village annexed and planned for greater intensity development,” said Ben Fernandez, a land use attorney representing Barrington. “This particular property is right next to the Little River Canal and it is perfectly suited for multifamily.”

Arthur Barrington, a managing director at the development firm, did not respond to emails requesting comment about The Kavista’s construction costs and financing. According to Miami-Dade property records, Barrington combined two lots it purchased in 2013 for a total of $1.1 million. Two years later, another developer, Wealthy Delight LLC, bought the Little Farm trailer park, which totaled just a little more than five acres, for $14.2 million.

According to its website, Barrington is a family-owned and operated real estate company that focuses on assets valued between $500,000 and $25 million. Family patriarch Bruce Barrington developed the 177-room and 297-private villa Hawk’s Cay Resort in the Florida Keys. He sold it for $79 million in 2007.

The firm currently owns two apartment buildings with a total of 128 apartments at 760 Northeast 85th Street in Miami’s Upper Eastside and a 24-unit apartment building near Marlins Park in Little Havana.

The post Barrington Brothers plans mid-rise apartment project in El Portal appeared first on The Real Deal Miami.

(Credit: iStock)

(Credit: iStock)

Home lending in the United States entered the coronavirus pandemic on solid footing, according to a quarterly report from real estate data provider Attom Data Solutions.

With interest rates hitting all-time lows in the first quarter, refinancings enjoyed the steepest annual growth, and also made up nearly half of all loans originated. Although the dollar volume of refinancings dropped by 16 percent from last quarter, it doubled from last year, reaching $329 billion.

The number of refinancing originations clocked annual gains in nearly all metro areas tracked by Attom. In New York, they grew by 71.2 percent over their level last year. Chicago, Los Angeles, Dallas and Houston also each clocked year-over-year growth in refinancings exceeding 50 percent.

Similar to refinancings, purchase mortgage originations were down from last quarter but up from last year. Purchase mortgage originations dropped 12 percent from Q42019 but increased 13 percent from Q12019, and gained in 62 percent of all metro areas examined by Attom.

Home equity lines of credit were the only loan type that fell annually and quarterly. HELOC mortgage originations dropped 20 percent from the previous quarter and 11 percent from last year.

The share of mortgages backed by the Federal Housing Administration dropped by 4 percent from last quarter and last year, comprising only 12.4 percent of all loans originated. Mortgages backed by Veterans Affairs, however, reached an all time high last quarter, backing 9.2 percent of all loans originated.

The first quarter of 2020 only reflects about two weeks of coronavirus-related market shocks, so these numbers tell little about what’s to come for residential mortgages in the coming months. Still, they show that residential lending was strong before the coronavirus pandemic hit the United States and major mortgage lenders announced they would tighten their lending standards.

More recent data from the Mortgage Bankers Association (MBA) suggest that homebuyers’ appetite is recovering as states move to reopen their economies. Last week, the volume of mortgage applications to purchase homes tracked by the Mortgage Bankers Association grew for the sixth consecutive week.

The post <i>TRD</i> Insights: Home lending in the United States was solid before the coronavirus pandemic hit appeared first on The Real Deal Miami.

Rendering of the project and Russell Galbut

Rendering of the project and Russell Galbut

Developer Russell Galbut now has full ownership of a group of properties near the Adrienne Arsht Center in downtown Miami, a portion of which would be part of a major redevelopment of land owned by the school board.

Companies tied to Galbut and his firm, Crescent Heights, paid $13.5 million for the parking lot at 127 Northeast 11th Street, just south of I-395; and $10.8 million for the northwest block of 13th Street and Second Avenue, near the school district’s headquarters, according to property records.

The Florida Department of Transportation and Miami-Dade are working on building a signature I-395 bridge that will have a 33-acre open park space underneath called the “I-395 underdeck.”

The Mirmelli family sold its stake in the land to the Crescent Heights LLCs. Galbut said the Mirmellis wanted to sell their interest in the properties – 55 percent in the 11th Street property and 50 percent of the 13th Street assemblage. The buyer financed the deal with a $22 million mortgage from Amerant Bank.

Galbut said there is “no clear timeline” on development, and he declined to comment on the Miami-Dade County School Board project. But if Miami-Dade County commissioners vote to extend the Omni CRA’s lifespan, that would generate sufficient cash to pay for the proposed home of the school board’s new headquarters, a 120,000-square-foot space in a Crescent Heights-developed project.

All told, Crescent Heights is proposing a mixed-use development with 120,000 square feet of office space, 1,100 residential units and parking on the school board site.

In exchange for a 1-acre piece of land, Crescent Heights would allow the school district to take two to three floors of office space, likely in the form of an office condo, and 600 parking spaces in the daytime, the Miami Herald previously reported. The land is valued at about $20 million, and the CRA would kick in about $42 million, for a grand total of $62 million. The Adrienne Arsht Center would be able to use the public parking garage at night.

Miami-based Crescent Heights’ other projects include the planned redevelopment of 3050 Biscayne Boulevard, north of the real estate firm’s headquarters at 2200 Biscayne Boulevard, and the luxury condo project and park planned for 500 Alton Road in Miami Beach.

The post Crescent Heights buys out partner on two downtown Miami sites appeared first on The Real Deal Miami.

Colony Capital CEO Tom Barrack (Getty, iStock)

Colony Capital CEO Tom Barrack (Getty, iStock)

Colony Capital is weighing its options for its portfolio of hotels.

The Tom Barrack-led company has hired Moelis & Co to evaluate alternatives for the holdings, which include full-service, extended-stay and select-service hotels, according to Bloomberg.

Sources familiar with the matter told the publication that Colony was looking to move away from traditional commercial real estate to focus more on digital infrastructure properties.

Colony declined to comment on the report. Earlier this month, it said an advisor was helping the company “evaluate strategic and financial alternatives to maximize the value of its hospitality assets.”

It was also reported earlier this month that Colony had defaulted on $3.2 billion in loans backed by hotel and health care properties. The properties accounted for three quarters of Colony’s real estate balance sheet.

The hospitality industry has been one of the hardest hit by the coronavirus pandemic. With travel stalled, some hotels temporarily closed while others suffered from abysmal occupancy rates — though those fundamentals have started to recover.

In April, Barrack warned that the real estate industry was on the verge of collapse because the government is letting renters and homeowners skip payments due to the coronavirus.

He plans to step down as CEO later this year. [Bloomberg] — Sylvia Varnham O’Regan

The post Colony Capital reconsiders hotel portfolio in bid to shift from traditional properties appeared first on The Real Deal Miami.

Cody Crowell, Via Flagler at the Breakers

Cody Crowell, Via Flagler at the Breakers

Frisbie Group sold a condo at its Palm Beach mixed-use project to one of the development group’s executives for $7 million.

Cody and Kristin Crowell bought unit 5 at Via Flagler by the Breakers at 221-231 Royal Poinciana Way from T3 Family Investments, which is tied to Frisbie Group, records show. Property records do not list the size of the unit, but marketing materials show the interior area will be 6,184 square feet, equating to a price of $1,131 per square foot.

Cody Crowell is the managing director of construction & asset management at Frisbie Group, according to LinkedIn.

The mixed-use project is still under construction. In early 2019, the Breakers Palm Beach paid $20 million for the retail and restaurant portion of the mixed-use project. Frisbie Group controls six condos on the second story of the development. The condos range from about 5,000 square feet to 6,000 square feet with four to five bedrooms. The condos have an underground parking garage and each one has a private elevator.

In April 2019, Dr. Stephen Sullivan, a Massachusetts ophthalmologist, bought two condos at the building for about $20 million.

The mixed-use project was previously occupied by Testa’s Restaurant, shops and a gas station before Frisbie bought it, according to the Palm Beach Daily News. Frisbie Group purchased the properties for $8.9 million in 2013, property records show.

Royal Poinciana Palm Beach is part of a revitalization of downtown Palm Beach. In April 2018, New England Development bought the nearby Bradley Park Hotel in Palm Beach for $15.4 million.

The post Frisbie exec snags condo at Via Flagler at the Breakers in Palm Beach appeared first on The Real Deal Miami.

Marcus & Millichap CEO Hessam Nadji and their Calabasas office.

Marcus & Millichap CEO Hessam Nadji and their Calabasas office.

Marcus & Millichap plans to lay off 20 percent of its workforce as the publicly traded commercial real estate brokerage goes through a restructuring.

The company, which is headquartered in Calabasas and has a market cap of $1.12 billion, revealed its pandemic response plan in a May 11 public filing. Part of the plan was “a reduction of the company’s employee workforce by 20 percent,” which comes to about 175 of an 877-person workforce.

The layoffs affect salaried staff. They would not impact brokers, who are independent contractors that earn their keep from sales, debt and leasing commissions.

The company has reported 53 of these layoffs to the California Employment Development Department over the past two weeks.

The affected employees mentioned in state filings are scattered across California. The head office in Calabasas saw the most pink slips, at 19. The layoffs are listed as temporary, but a return date for the workers is not provided.

Marcus & Millichap’s announcement comes as commercial brokerages nationwide face an economic disaster that has thrown into question the demand for office, retail, and pretty much any non-residential space. Eastdil Secured and JLL each announced layoffs of more than 30 employees earlier this month.

CBRE and Cushman & Wakefield, meanwhile, announced significant layoffs prior to the pandemic taking full flight.

A Marcus & Millichap representative responded to questions by pointing back to the company’s public reports, and stating, “Despite unprecedented challenges that COVID-19 presents for the country and business in nearly every sector, we remain focused on the health and well-being of our team and clients, and our continued delivery of industry leading services.”

The Securities and Exchange Commission filing, part of the company’s quarterly earnings report, does not say what positions will be eliminated or how the layoffs will be carried out. CEO Hessam Nadji did not mention the layoffs during the earnings call, and no one asked a question about them, according to a call transcript.

The filing does note that in “response to this period of business disruption,” we “instituted various controllable expense reduction initiatives” including base salary reductions for senior executives, management and key personnel, furloughs and layoffs “to preserve our balance sheet and financial position.”

These reductions include a 25 percent base salary cut for Nadji, and a 20 percent cut for other executive officers.

Marcus & Millichap went public in 2013.

The post Marcus & Millichap laying off 20% of workforce appeared first on The Real Deal Miami.

The FTSE Nareit All REITs index rose by 3.68 percent on Tuesday, outpacing the broader markets as the New York Stock Exchange reopened its trading floor following a two-month closure. (Getty; iStock)

The FTSE Nareit All REITs index rose by 3.68 percent on Tuesday, outpacing the broader markets as the New York Stock Exchange reopened its trading floor following a two-month closure. (Getty; iStock)

The reopening of the New York Stock Exchange trading floor Tuesday accompanied a burst of optimism in the stock market as the Dow rallied more than 500 points, or 2.2 percent. And real estate stocks helped power the increase.

The FTSE Nareit All REITs index rose by 3.68 percent on Tuesday, outpacing the broader markets. The index had previously risen by 6.9 percent over the past week, with all REIT sectors — from data centers to malls — seeing gains, according to a new report from Nareit. It was the strongest weekly return in six weeks.

Tech-related sectors such as data centers and infrastructure “have been little affected by the Covid-19 crisis, and last week’s gains added to their positive returns year-to-date,” the report notes. But “at the other end of the spectrum are several sectors that had a double-digit rebound from declines earlier this year,” such as hotels.

Since the start of 2020, data center and infrastructure REITs have seen returns of 14 percent and 11 percent, respectively, according to the latest data from Nareit. Meanwhile, retail is down 42 percent, lodging is down 45 percent and mortgage REITs are down 44 percent.

Retail’s struggles have been driven by massive shortfalls in rent collection. A Nareit rent collection survey from mid-May found that shopping centers in particular had collected less than half of all rent due in April and May, while free-standing retail properties have done a bit better, collecting about 70 percent.

“The prevalence of essential businesses such as grocery and drug stores among the tenant base for many shopping-center and free-standing REITs is a stabilizing factor for these types of retail properties,” Nareit’s report on the survey says.

Regional malls have struggled greatly, with Macerich collecting just 26 percent of its rent for April and 18 percent for May as of May 8, according to S&P. A seven-property regional mall portfolio owned by Starwood Capital — now facing multiple restructuring bids — has collected only about 20 percent of rent.

Another sector facing unique challenges from the pandemic is senior housing: Fitch expects monthly occupancy declines of 2 percent to 4 percent, which has led to ratings downgrades and higher leverage. Senior housing REIT Ventas announced Tuesday that it would eliminate over 25 percent of its corporate staff and cut executive salaries.

These uniquely affected sectors aside, analysts see reason for optimism regarding real estate stocks as a whole.

“Overall, the REIT sector entered this crisis with strong balance sheets and ample sources of liquidity,” Nareit senior vice president for research & economic analysis Calvin Schnure wrote last week, noting that REIT leverage ratios at the end of 2019 were near the lowest point in two decades.

“Having a strong financial condition at the start of any crisis improves the REIT sector’s ability to manage the challenges posed by the Covid-19 crisis.”

The reopening of the New York Stock Exchange trading floor — at 25 percent capacity, with legal waivers and a ban on public transportation — was largely symbolic, as the vast majority of buying and selling is done electronically and executed by computers.

The post REIT stocks rise as NYSE trading floor reopens appeared first on The Real Deal Miami.

Richard Branson (Credit: Virgin, Cindy Ord/Getty Images)

Richard Branson (Credit: Virgin, Cindy Ord/Getty Images)

Virgin Trains is proposing a major expansion of the commuter rail service, funded mostly by Miami-Dade County.

Virgin Trains USA is seeking $350 million from the county to build up to five train platforms between downtown Miami and Aventura, as well as related infrastructure that would be required, according to a county memo. The proposed stations would be in Wynwood/Midtown, the Miami Design District, Upper Eastside/El Portal, North Miami and Florida International University/Biscayne Boulevard corridor.

Brightline, as the train service that runs from Miami to Fort Lauderdale and West Palm Beach is currently called, shut down in late March due to the coronavirus pandemic and laid off at least 250 employees. The company is a subsidiary of Florida East Coast Industries, which is backed by the private equity firm Fortress Investment Group.

A resolution on the June 2 agenda for the Miami-Dade County Commission shows the county is in talks with Virgin Trains to extend the commuter rail service in the northeast corridor of Miami-Dade County, as first reported by the Miami Herald. Virgin Trains would design and build the platforms, determine whether it needs to acquire or lease land for parking, determine the design and build of a maintenance facility, and maintain the stations.

The expansion would be part of the county’s Strategic Miami Area Rapid Transit (SMART) transportation plan.

Virgin Trains would fund about $75 million, and the county would provide or source about $350 million in funding. Virgin Trains is proposing to receive a 4 percent development fee related to the design and construction of the maintenance facility, rail infrastructure, enhancements to the stations and the acquisition of rolling stock. Rolling stock refers to the trains or other vehicles used on a railroad.

The proposed agreement calls for an initial 30-year term with three 20-year renewal options for a maximum of 90 years, according to the county memo. Virgin Trains would also charge the county $29 million a year in rent that would increase every three years. Rent collection would begin once the rail service is operational at all five stops.

At the end of 2018, Brightline announced that Virgin Group made a minority investment in the company and would be providing rights to rename the system Virgin Trains USA. The rebranding from Brightline to Virgin Trains is ongoing, with completion expected by mid-2020.

Brightline has spurred major office, retail and residential development near its stations, but has struggled with ridership. The rail service is planning to expand to Orlando, as well as make additional stops in Aventura and Boca Raton. In March, the company said that the suspension of service has not affected construction of its planned Orlando rail line.

The post Virgin Trains seeks $350M to build five stations in Miami-Dade appeared first on The Real Deal Miami.

@properties’ Thad Wong, Mike Golden and Nest Realty’s Jonathan Kauffmann (@properties, Nest Realty; Seymour Johnson)

@properties’ Thad Wong, Mike Golden and Nest Realty’s Jonathan Kauffmann (@properties, Nest Realty; Seymour Johnson)

Chicago-based indie brokerage @properties has acquired a significant stake in Virginia-based firm Nest Realty, giving it a foothold in five additional states in the South amid an expansion push.

Terms of the deal were not disclosed, but Nest Realty’s leaders Jonathan Kauffmann, Keith David and Jim Duncan will retain an ownership stake in Nest and continue to oversee day-to-day operations, the brokerages said in a joint statement. Nest will also continue to maintain its brand identity in its markets, which include Charlottesville, Louisville and the Triangle region of North Carolina.

The companies pointed to @properties’ tech platform as a launching pad for franchising opportunities, which they said will be a major driver of revenue growth in the upcoming years. Nest, founded in 2008, has 15 offices across the south.

“Over the past 12 years, they have shown they can grow a brand both organically and through effective delivery of franchise services,” said @properties co-founder Mike Golden in a statement. “There’s also a great culture match between our firms.”

Apart from gaining access to @properties’ end-to-end tech platform, which includes a CRM as well as consumer-facing tools, Nest Realty will also be able to utilize @properties’ marketing system as well as training and coaching programs.

In 2019, Nest Realty claims its franchises tallied $1.4 billion in sales across about 350 agents. The acquisition will surely boost the bottom line of @properties, which stands toe-to-toe with Compass and Realogy franchises in several markets and has grown into the 10th biggest brokerage in America by sales volume, according to RealTrends.

With a wave of consolidation having hit residential brokerage over the last decade, @properties has looked to diversify its product offerings and appeal to independent brokerages across the south and midwest. In 2019, the 2,800-agent brokerage acquired a stake in Ansley Atlanta Real Estate, one of the top brokerages in Georgia. It also struck up a partnership with Guaranteed Rate to launch a mortgage lending arm and acquired a title insurance provider.

In a statement, @properties co-founder Thad Wong signaled more acquisitions to come. “Now is the time to grow,” he said. “Now is the time to focus on relationships and putting the best technology, training and resources into the hands of agents.”

The post @properties acquires stake in another Southern resi brokerage appeared first on The Real Deal Miami.

Greystar CEO Bob Faith in front of Greystar-owned DTLA building

Greystar CEO Bob Faith in front of Greystar-owned DTLA building

Greystar, one of the largest multifamily property owners in the country, is accused of gathering extensive financial and personal information on several prospective tenants without their knowledge or consent.

Eight tenants at Greystar-owned apartment buildings in Los Angeles have filed suit, saying the giant landlord broke California’s Investigative Consumer Reporting Agencies Act by concealing “the nature and type of investigative consumer reports they would procure from the plaintiffs.”

Greystar was sued last August for violating state consumer protection law, according to the lawsuit filed Friday in L.A. County Superior Court. But despite “being on notice that its conduct was unlawful, defendant Greystar California committed the above violations anyway,” according to the suit.

The complaint also names as a defendant RealPage, a Texas-based company that provides property management software for the rental housing industry. The firm is accused of furnishing Greystar with the investigative reports on the tenants.

The lawsuit focuses on five apartment buildings at which the alleged dossiers were collected. At each of the properties, Greystar procured “certain information on each plaintiff’s character, general reputation, personal characteristics, and/or mode of living, criminal, employment, and rental history.”

Greystar allegedly violated state law by not providing the prospective tenants with a copy of the report, did not tell the tenants when the report would be finished and did not disclose to the tenants that RealPage was involved — each a violation of state law. The suit also notes that Greystar used the tenants’ application fees to finance the probes.

The eight named plaintiffs are seeking $240,000 each in damages, $160,000 from Greystar and $80,000 paid by RealPage. The plaintiffs are also seeking damages for Greystar’s alleged “gross negligence” in violating the law after being accused before of breaking the consumer protection statute.

Messages left with plaintiffs’ lawyer Joseph Ollinger were not returned.

Greystar declined comment, saying it does not discuss pending litigation. The company owns 400,000 housing units worldwide; the National Multifamily Housing Council has called it the largest multifamily property owner in the U.S. Greystar also has $14 billion under development and $36 billion in assets under management, which includes a multibillion-dollar property portfolio in L.A. County.

Messages left RealPage were not returned. It was in the news earlier this year after hackers reportedly stole $10.5 million from it and transferred the funds to a Nigerian bank account.

The post Greystar probed tenants’ “character,” “reputation,” “rental history,” lawsuit claims appeared first on The Real Deal Miami.

Jim Cohen, Fontainebleau Development’s president of Residential, and Jeffrey Soffer, with SeaGlass Jupiter

Jim Cohen, Fontainebleau Development’s president of Residential, and Jeffrey Soffer, with SeaGlass Jupiter

Jeffrey Soffer’s Fontainebleau Development and its partner are launching sales of a new oceanfront luxury condo development in Jupiter Island, marking one of the first such projects on the ritzy island.

SeaGlass Jupiter Island, a 10-story, 21-unit project at 1500 Beach Road, is being developed by Fontainebleau Development and Perko Development Partners. It is on 170 linear feet of Atlantic Ocean beach and Intracoastal frontage and is near Blowing Rocks Preserve.

The developers want to attract wealthy homeowners from the area’s high-end single-family neighborhoods as well as buyers from the Northeast and from other parts of South Florida, according Jim Cohen, Fontainebleau Development’s president of Residential. Cohen said Fontainebleau Development will handle sales in-house.

“I’ve seen inquiries come up from Miami-Dade County, and there’s a trend of people wanting to move north,” Cohen said.

 Jupiter Island is a secluded waterfront town and home to some of the wealthiest residents in southern Florida. In 2017, Grammy-winning singer-songwriter Céline Dion sold a 5.7-acre oceanfront estate on Jupiter Island for $28 million, after listing it for $72.5 million.

Seaglass is designed by Swedroe Architecture, which built the Jupiter Yacht Club and three beachfront Jupiter Island towers that are often referred to as the “Three Cs:” The Cliveden, The Claridge and The Carlyle. New York-based Champalimaud Design is the interior designer.

Among other recent projects, Swedroe also designed Soffer’s Turnberry Ocean Club in Sunny Isles Beach, which is nearing completion; and the Shoreline, twin towers at Solé Mia in North Miami. Partner Joseph Swedroe said that 30 years ago the firm introduced private entry elevators, which have become commonplace in luxury condo towers.

SeaGlass’ prices range from $5.9 million to over $10 million, according to a press release. It will have three- and four-bedroom units, ranging in size from 3,781 square feet to 5,323 square feet.

The project will feature private terraces with summer kitchens and private air-conditioned, two-car garages for every residence. Amenities will include an infinity-edge heated swimming pool with a heated relaxation spa, a poolside sandy beach, a beachside summer kitchen and outdoor viewing terrace. Seaglass also will feature weight training and cardio equipment, and a yoga and meditation lawn.

SeaGlass is expected to break ground in the fall, and construction will take about 18 months, Cohen said.

Soffer launched Fontainebleau Development in March 2019 after splitting up interests in Turnberry Associates with his sister, Jackie Soffer.

The post Jeffrey Soffer’s Fontainebleau Development launches sales of Jupiter Island luxury condos appeared first on The Real Deal Miami.

Stephen Ross, chairman of Related Companies (Getty)

Stephen Ross, chairman of Related Companies (Getty)

Stephen Ross predicts the coronavirus pandemic will result in a “flood of cases going to the bankruptcy court.”

The chairman of Related Companies appeared on CNBC’s “Squawk Box” Tuesday to discuss the impact of the virus, and said he’s especially concerned about the effect on retailers and small businesses.

“Many of them probably don’t have the wherewithal to reopen,” he told CNBC.

Neiman Marcus, which anchors Hudson Yards, is one of Related’s most high profile tenants to declare bankruptcy. The retailer had said it was the pandemic that triggered the filing.

Ross said he doesn’t view the wave of bankruptcies as “induced by bad practices.”

“It’s really all driven by the pandemic,” he said on the TV segment.

Related CEO Jeff Blau previously told CNBC that the company had collected 35 percent of its overall retail rents as of mid-April. However, at its enclosed shopping centers, Related collected 20 percent of rents. It’s unclear how collections fared by the end of the month.

Blau has previously said that tenants who are able to pay rent should not take advantage of the current climate. “It’s a whole ecosystem. The people that can pay need to pay,” he said in April. “Landlords need to help out those that can’t.”
[CNBC] — Erin Hudson

The post Stephen Ross to retailers: Brace yourself for bankruptcies appeared first on The Real Deal Miami.

Rendering of the drive-in theater and Stephen Ross (Credit: Azeez Bakare Studios)

Rendering of the drive-in theater and Stephen Ross (Credit: Azeez Bakare Studios)

As Miami Dolphins owner Stephen Ross forges ahead with plans to host fans for the upcoming NFL season, he’s also planning to offer open-air and drive-in theaters at Hard Rock Stadium.

The drive-in theater will play Miami Dolphins footage and games, classic movies and will host commencement ceremonies and other events, all viewable from the comfort of your car. The drive-in events will be held inside the stadium and fit up to 230 cars, while the open-air theater can host small groups on the complex’s south plaza, according to a press release.

Ross, Related Companies’ founder and chairman, embarked on a $500 million renovation of the Miami Gardens stadium in 2015. It hosted Super Bowl LIV in February, and has hosted other events such as the Miami Open tennis tournament.

Earlier this month, the NFL franchise announced it is ready to have fans attend games for the upcoming season with cleaning and socially distant measures in place and reduced capacity, though the NFL hasn’t made a decision yet. Ross recently told CNBC that he thinks “there definitely will be a football season this year.”

The post Stephen Ross-owned Miami Dolphins plan drive-in theater at Hard Rock Stadium appeared first on The Real Deal Miami.

Barry Sternlicht and (from top) Capital Mall in Washington, Franklin Park Mall in Ohio and Plaza West Covina Mall in California (Credit: Capital via Starwood, Franklin via OCP Contractors)

Barry Sternlicht and (from top) Capital Mall in Washington, Franklin Park Mall in Ohio and Plaza West Covina Mall in California (Credit: Capital via Starwood, Franklin via OCP Contractors)

Map of the seven malls in the portfolio (Source: Tel Aviv Stock Exchange filing)

Map of the seven malls in the portfolio (Source: Tel Aviv Stock Exchange filing)

Starwood Capital’s seven-property regional mall portfolio, already beset by high vacancy rates and in deep trouble with Israeli investors, has hit a new low as the coronavirus has sunk rent collection to around 20 percent.

Now, with bondholders poised to accelerate payments and a senior lender threatening to foreclose, six competing proposals to restructure the assets have emerged, according to documents recently filed on the Tel Aviv Stock Exchange.

The first batch, submitted May 17, came from Global Fund Investments, Namdar Realty Group and Kohan Retail Investment Group. Starwood presented its own proposal a week later jointly with Mission Peak Capital, followed by Washington Prime Group and a joint venture of Pacific Retail Capital and Golden East Investors.

Starwood has seen its Israeli bonds downgraded three consecutive months, to C-, a rating low enough that bondholders can demand immediate repayment. Meanwhile, the firm has also defaulted on a $549 million CMBS loan that covers five of the properties, according to disclosures.

The bonds, which traded around a dismal 30 cents on the dollar for most of 2019, have fallen to around 15 cents during the coronavirus pandemic.

Washington’s letter of intent outlines a plan to buy a 75 percent ownership interest in the properties, with Starwood retaining the rest. Washington would assume management of the properties, including leasing, and would provide Starwood with $45 million.

Mission’s letter expresses support for a plan Starwood outlined in a May 24 term sheet, which would involve Mission injecting $5 million of new capital into Starwood to support its retail assets and start a restructuring agreement with its senior lenders.

Under this agreement, Mission would receive 30 percent of profits moving forward, and Starwood, which would stay on as the property manager, would be released from all liability and garner 20 percent of profits. The company’s bondholders would get the remaining half of profits along with $19 million in the trustee account.

Mission first approached Starwood Retail Partners in mid-May to discuss restructuring the company. Its letter lists the reasons it prefers Starwood’s plan: It offers the most cash to the company’s bondholders; it would allow the companies to act quickly on troubled properties; and firms making competing bids “suffer from a lack of credibility” and are more interested in paying themselves through fees instead of helping bondholders.

“The properties are in a dire financial situation where rent collections hover around 20% due to Covid-19 related closures,” its letter states. It adds that changing the property manager “would signal a sinking ship to tenants and embolden attempts to seek rent reductions and holidays,” and make foreclosures at the retail properties more likely.

Pacific Retail and Golden East Investors would distribute 65 percent of Starwood’s unrestricted cash balance for its bondholders and use the rest to support the company’s ongoing operations. Its proposal would entitle it to multiple management fees.

The letter says Pacific Retail has “unparalleled knowledge” of the seven mall properties it aims to manage, as it had run them before Westfield sold them to Starwood in 2013 for $1.6 billion. Contrary to Mission’s letter, it claims that special servicers do not see Starwood as the ideal manager for its mall properties and that Starwood has a “lack of conviction in its ability to create value from the properties.”

Starwood and Washington declined to comment. Representatives for Mission, Pacific Retail, Golden East Investors and Kohan did not respond to requests for comment. Global and Namdar could not immediately be reached.

In a recent interview with The Real Deal, Starwood Capital Group CEO Barry Sternlicht said the pandemic was “a dagger to the chest” for the retail industry but that the firm’s retail outfits were “not really significant investments.”

The post Competing bids for Starwood’s suffering retail appeared first on The Real Deal Miami.

Four Seasons Residences at The Surf Club with Tommy and Thalía Mottola (Credit: Craig Barritt/Getty Images)

Four Seasons Residences at The Surf Club with Tommy and Thalía Mottola (Credit: Craig Barritt/Getty Images)

The queen of Latin pop and her music producer husband picked up a new home in South Florida.

Mexican singer and actress Thalía, whose real name is Ariadna S. Miranda, and Tommy Mottola paid $8 million for unit 307 in the south tower of the Four Seasons Residences at The Surf Club in Surfside, property records show. Mottola, a former chairman and CEO of Sony Music Entertainment, is chairman of Mottola Media Group. The couple purchased the unit via TNT Miami LLC.

The four-bedroom, five-bathroom condo at 9001 Collins Avenue spans 3,948 square feet. It sold for $2,026 per square foot.

Thalía and Mottola, who was previously married to Mariah Carey, have been married since 2000. Thalía has sold more than 25 million records worldwide, according to ¡Hola! magazine. Mottola has worked with artists who include Carly Simon, John Mellencamp, Mariah Carey, Celine Dion, Gloria Estefan, Ricky Martin, Shakira, Jennifer Lopez and Marc Anthony.

At the Surf Club, their neighbors include WeWork CEO Sandeep Mathrani, Miami Heat president Pat Riley, Groupon founder Eric Lefkofsky, and former Publix CEO Charles Jenkins Jr.

The Surf Club features 150 condo units, a 72-room Four Seasons hotel, Le Sirenuse restaurant and a Thomas Keller restaurant. The oceanfront project was designed by New York architect Richard Meier along with Miami-based architect Kobi Karp.

The post Thalía and Tommy Mottola pay $8M for Surf Club Four Seasons condo appeared first on The Real Deal Miami.

Mark Zilbert

Mark Zilbert

Brown Harris Stevens Miami broker Mark Zilbert teased a new feature on his website called “The 100 Biggest Price Drops” late last week, resulting in the greatest number of hits that Zilbert.com has ever received.

Over the past two weeks, some sellers in Miami-Dade cut prices by nearly 50 percent, suggesting more price adjustments are on the horizon as showings begin to resume and brokers get back to the office. The report looked at all homes and condos priced at $500,000 and up that have dropped prices since May 11.

“It created a massive surge in traffic,” Zilbert said. “It’s a metric that apparently people really, really want to see.”

Between May 11 and Tuesday, May 26, the property with the biggest price haircut is the four-bedroom, three-bathroom house at 410 Southwest 27th Road in Miami. The 2,286-square-foot home is now asking $1.06 million, down 47 percent from $1.99 million earlier this year. It’s been on the market for 136 days. Similar homes in the neighborhood are priced closer to today’s asking price.

“Many, if not most, of these properties are decent deals, but the massive price drop is more a reflection of adjusting an unrealistic listing price down to one that is closer to market value,” he said.

Though Zilbert says there is no market data that suggests prices are dropping significantly across the board in Miami-Dade, there’s a perception among buyers that now is the time to buy.

“There is a massive buyer base that has their eyes on Miami, looking for price drops,” he said. “Buyers believe people are going out of business.”

A four-bedroom, three-bathroom unit at St. Tropez condo in Sunny Isles Beach is now asking $750,000, a 43 percent discount off the original ask of $1.32 million.

At Echo Brickell, lower penthouse 5101 is on the market for nearly $3.4 million, 38 percent off the asking price of $5.5 million. The developer sold the three-bedroom, 2,378-square-foot condo to the current owner for $4 million in February 2018, property records show. That means it’s now asking less than its original purchase price.

A recent report from Condo Vultures Realty found that luxury condos in Greater Downtown Miami sold for about $3.3 million on average in the first quarter, but the average asking price dropped in May to just over $2 million.

Zilbert added that though the discounts between the original asking price and today’s asking price may be significant, that doesn’t mean the price is now below market value. It could mean that a property was overpriced to begin with, and/or that it’s already gone through a few rounds of price reductions.

“I always tell a buyer, ‘pay no attention to the asking price,’ he said. “It’s all about perception.”

In an email preview of his new website feature, Zilbert said that many buyers have been calling him over the past few weeks looking for the best deals, hoping the pandemic will force sellers to act quickly.

It looks like buyers are already taking advantage. Though the number of condo closings has generally remained steady over the past few weeks in Miami-Dade County, closed sales dollar volume is on the decline.

“This is when the seller is most likely to cut the best deal because of uncertainty,” Zilbert said. “The opportunity is going to close up.”

The post Let’s make a deal? Some resi sellers in Miami-Dade slash asking prices appeared first on The Real Deal Miami.

SmartRent co-founder and CEO Lucas Haldeman (Credit: Facebook)

SmartRent co-founder and CEO Lucas Haldeman (Credit: Facebook)

SmartRent, a startup that develops “smart home” hardware and software for rental apartments, has raised $60 million to bulk up its offerings.

Tapping into demand for contact-free services, the company will use the fresh round of capital to add new products and grow its engineering and sales teams, co-founder and CEO Lucas Haldeman said. The Series C was led by Spark Capital, with participation from Fifth Wall, Energy Impact Partners, the Amazon Alexa Fund, Bain Capital Ventures and RET Ventures.

Founded in 2017, SmartRent has now raised more than $100 million to compete against companies like Latchable, the maker of Latch, and Google Nest. Haldeman, a former chief technology officer at Colony Starwood Homes, said SmartRent’s co-founders all came from real estate backgrounds and realized the proliferation of smart-home tools had been slow to reach the multifamily market.

“I had a bunch in my house, but no one had said, ‘Well, how do I control 40,000 or 1 million smart thermostats,’” he said. “So that’s what we built.”

SmartRent’s platform gives both landlords and renters access to digital locks, lights and thermostats. When units are occupied, tenants are fully in control. Landlords have digital control over vacant apartments. As such, SmartRent landlords can offer prospective tenants self-guided tours.

The startup also recently launched a tool to allow building, garage and elevator access — something to help multi-family operators manage a high volume of package deliveries.

According to Haldeman, SmartRent closed the round in mid-March. But he acknowledged the coronavirus pandemic has been a catalyst for increased demand. “We’ve seen this incredible groundswell,” he said.
Investors are also heartened by a shifting mindset in real estate. “The tailwinds of e-commerce, food and grocery delivery, and the broader digital economy were already significant entering 2020,” Will Reed, general partner at Spark Capital, said in a statement. “That demand has only accelerated as property owners and operators look for ways to make property tours contactless and handle deliveries in a seamless manner.”

Based in Scottsdale, Arizona, SmartRent currently employs 230 staffers, including 35 engineers. Haldeman said by the end of the year, he hopes to double the number of engineers and sales people. “We’ll be responsible in how we grow,” he said. SmartRent recently hired Darian Hong as chief financial officer and CJ Edmonds as chief revenue officer.

Haldeman declined to disclose the company’s revenue but said it’s on track to double in 2020. SmartRent is in 95,000 units, with almost 500,000 units in the pipeline.

“We’re getting to a pathway where we’re break-even,” said Haldeman, who attributed the massive backlog to two (unnamed) REITs that signed up to install SmartRent in buildings nationwide. To service those clients, SmartRent built out a national infrastructure that it has used to go after additional business nationwide.

For some of the biggest landlords, smart-home tools like access to heating and cooling, and water detection, promise to help reduce operating costs. In addition to buy-in from institutional clients, Fifth Wall partner Vik Chawla said SmartRent’s standout feature is an ability to shift control from renters to landlords and back, depending on whether the unit is occupied. “People have a very digital life as it relates to consumer purchases. The idea that they come home and have an analog experience, I don’t think will persist,” he said. “The trend toward digital experiences has only been accelerated as people sit at home.”

The post Smart-home startup raises $60M with multifamily play appeared first on The Real Deal Miami.

(Credit: iStock)

(Credit: iStock)

Homebuyers are back in the game as reopening continues.

The volume of mortgage applications to purchase homes increased by 9 percent last week, according to the seasonally adjusted weekly index kept by the Mortgage Bankers Association.

It marks the sixth consecutive week the purchase index has risen. According to Joel Kan, MBA’s executive at the helm of industry forecasting, last week’s increase was the highest since mid-March.

“The home purchase market continued its path to recovery as various states reopen, leading to more buyers resuming their home search,” Kan continued in a statement. The purchase index was up 8.7 percent compared to the same week in 2019.

New York led last week’s increase in purchase applications again with an unadjusted jump of 19.7 percent from the previous week. California saw purchase loans surge 11.6 percent week-over-week, while the state of Washington saw a 3.5 percent increase.

The gains came as mortgage rates ticked up slightly. The average contract interest rate for a 30-year mortgage of $510,400 or less was 3.42 percent, a 1-basis-point increase from the prior week. The rate for jumbo loans increased to 3.71, a jump of 5 basis points.

MBA’s adjusted refinance index showed the number of applications was flat after five weeks of declines. Refinance activity is still up year-over-year by 176 percent, however.

Overall, seasonally adjusted home-loan applications ticked up 2.7 percent. The MBA metric tracks 75 percent of the market.

Its share of refinancing activity fell again last week to 62.6 percent of loans, down from 64.3 percent.

Write to Erin Hudson at ekh@therealdeal.com

The post Six weeks, six jumps in mortgage applications to buy homes appeared first on The Real Deal Miami.

(Credit: iStock)

(Credit: iStock)

Some lucky landlords have secured bailout funds through the federal government’s Paycheck Protection Program — all thanks to a legal loophole.

The program, created through the CARES Act and administered by the Small Business Administration, specifically excluded businesses that primarily develop or lease real estate from the program. However, dozens of real estate companies have received tens of millions of dollars in PPP funds by applying through related business arms, including property management or construction, the Wall Street Journal reported.

Time Equities is one such real estate company. CEO Francis Greenburger said that its PPP lender, which provided the firm with $3.6 million, didn’t check whether Time Equities was eligible. The company owns stakes in or controls 30 million square feet of property, and offers services including building management, leasing and construction management.

“It was really a self-approved process based on the guidelines they set forth, which were so vague as to be basically impossible to understand,” said Greenburger.

California multifamily owner Trion Properties received roughly $765,000 from the program, which its co-founder Max Sharkansky said was needed to make up for revenue that would have normally come from property sales or refinancings.

Veritas Investments, one of the largest landlords in San Francisco, received $3.6 million in PPP funds, but has promised it would pay back the full amount rather than apply for loan forgiveness.

House Speaker Nancy Pelosi, whose district includes San Francisco, said “Larger companies like Veritas…which has billions in assets and access to liquidity through other sources, were not the intended beneficiaries of PPP loans.”

Some landlords have faced criticism for receiving the funds. Facing pressure, companies tied to Texas hotelier Monty Bennett have said they will return the $68 million received through the program. One of the companies had backed out of a hotel sale once it learned it would be a recipient of the funds.

Of the $342 billion in PPP loans approved, real estate received 3 percent, or $10.7 billion. The program is set to get a $310 billion refill.

However, not all landlords will have the same luck securing funds through the program. Smaller companies aren’t as likely to have separate ownership and property management entities. [WSJ] — Danielle Balbi

The post Loophole allowed big-name landlords to get bailout funds appeared first on The Real Deal Miami.

Closed condo dollar volume continued to plummet last week in Miami-Dade County.

A total of 51 condos sold for $18 million last week. That’s compared to 49 units that sold for $30 million the previous week. Condos last week sold for an average price of about $355,000 or $270 per square foot.

A unit at Icon South Beach led the week. Unit 1503/1504 in the Miami Beach condo tower sold for $2.9 million, or $778 per square foot. It was listed with Michael Wiesenfeld for 18 days before it sold. Robin Kluge represented the buyer of the four-bedroom, 3,694-square-foot unit.

Grove at Grand Bay unit 4015 marked the second most expensive sale of the week. After 88 days on the market, the condo sold for $2.55 million, or $568 per square foot. The listing agent was Ronn Glanz, while Nina Millman brought the buyer.

Here’s a breakdown of the top 10 sales from May 17 to May 23. Click on the map for more information:

Most expensive
Icon South Beach #1503-1504 | 18 days on market | $2.9M | $778 psf | Listing agent: Michael Wiesenfeld | Buyer’s agent: Robin Kluge

Least expensive
Turnberry Village #104 | 190 days on market | $380K | $223 psf | Listing agent: Ariane Cohen | Buyer’s agent: Andres Kaufman

Most days on market
Artech Residences #202 | 360 days on market | $531K | $294 psf | Listing agent: Sadia Chocron | Buyer’s agent: Greg Nosovsky

Fewest days on market
The Plaza #2711 | 5 days on market | $455K | $353 psf | Listing agent: Judith Zeder | Buyer’s agent: David Deleon

The post Miami condo sales volume nosedives in mid-May appeared first on The Real Deal Miami.

From left: SL Green CEO Marc Holliday, Land & Buildings Investment Management founder Jonathan Litt and Vornado chairman Steven Roth (Unsplash; Land & Buildings Investment Management; Getty)

From left: SL Green CEO Marc Holliday, Land & Buildings Investment Management founder Jonathan Litt and Vornado chairman Steven Roth (Unsplash; Land & Buildings Investment Management; Getty)

Activist investor Jonathan Litt, who in recent years has pushed to turn around struggling retailers, now has a new sector in his sights.

Litt’s hedge fund, Land & Buildings Investment Management, is taking short positions in New York City landlords Empire State Realty Trust, SL Green Realty and Vornado Realty Trust, the Wall Street Journal reported.

“Numerous headwinds have weighed on New York office landlords in recent years as rent growth has stalled and values plateaued,” Litt wrote in a four-page statement on the hedge fund’s website, noting that 2018’s SALT tax deduction cap and WeWork’s struggles have compounded these challenges.

“Now in 2020, this existential hurricane has become a Category 5, as NYC is the epicenter for Covid-19 in the United States – and Empire State Realty Trust is poised to bear the full brunt of this storm,” he continued. The statement does not mention the short positions.

Major tech tenants like Twitter and Facebook, who as recently as late 2019 were emerging as a major force in New York’s office leasing market, have announced that they are reconsidering their need for office space in light of the coronavirus pandemic. Manhattan office leasing volume in the first quarter was 47 percent below the 10-year average, according to JLL.

Empire State Realty Trust chairman and CEO Anthony Malkin told the Journal that his firm thinks “New York City will remain attractive” over the long term. Vornado and SL Green did not respond to requests for comment. [WSJ] — Kevin Sun

The post Activist investor Jonathan Litt is shorting big NYC office landlords appeared first on The Real Deal Miami.

NAI/Merin Hunter Codman Chairman Neil Merin and Golden Bear Plaza

NAI/Merin Hunter Codman Chairman Neil Merin and Golden Bear Plaza

UPDATED, May 27, 2:10 p.m.: A Palm Beach Gardens office complex built by Jack Nicklaus’ development company sold for $49.8 million.

Terra Funding GB, tied to Alliance HSP, sold the 243,000-square-foot Class A office complex for $204 per square foot to a joint venture between Waterfall Asset Management and MHCommercial Real Estate Fund, according to a press release. The Waterfall Asset Management and MHCommercial Real Estate Fund bought a leasehold interest in Golden Bear Plaza, which means the group only purchased the office buildings, but not the land.

The seller was represented by the CBRE Capital Markets team of Christian Lee and José Lobón.

The property, including the land, last sold for $62.3 million in 2017, according to a release.

Golden Bear Plaza consists of three buildings developed between 1985 and 1990 by the development firm of famed golfer Jack Nicklaus. The property has panoramic views of the Intracoastal Waterway and the Atlantic Ocean. Tenants include AT&T, Otis Elevator Co., Pike Electric, Dycom Industries, NextEra Energy, SlimFast and Zimmer Biomet 3i. The property is 90 percent occupied, according to the release.

NAI/Merin Hunter Codman will provide property management and leasing services for the new ownership group.

MHCommercial was formed in the fall of 2019 by Dung Lam, Neil Merin and Jordan Paul, principals of West Palm Beach-based NAI/Merin Hunter Codman. On the Palm Beach Gardens deal, the firm partnered with Waterfall, a New York-based registered investment advisor with about $8.8 billion in assets under management, according to the release.

Bryn Mawr, Pennsylvania-based Alliance HSP is led by Clay Hamlin, III, Jay Shidler, and Richard Previdi. Through its affiliates, the company owns or has invested in over 2,000 properties with a total of more than 150 million square feet, according to its website.

Correction: A previous version of the story incorrectly stated that the property sold at a loss. 

The post Golden Bear Plaza office complex in Palm Beach Gardens sells for $50M appeared first on The Real Deal Miami.

Despite record-low interest rates, tightened mortgage lending standards which may hamper the economic recovery. (iStock)

Despite record-low interest rates, tightened mortgage lending standards which may hamper the economic recovery. (iStock)

The Federal Reserve’s move to cut interest rates to near zero in mid-March was expected to give the housing market a much-needed boost. But things may not work that way.

The $2 trillion CARES Act, which allowed homeowners with loans backed by government agencies to request forbearance for up to a year, has had unintended consequences for the mortgage industry’s complex ecosystem, the Wall Street Journal reported. That may hamper the post-coronavirus economic recovery.

Major banks have moved to tighten standards on home loans, and the market for unconventional home loans has largely dried up. Although low interest rates had earlier led to expectations of a surge in mortgage lending, the volume of mortgage refinancings has not risen significantly — although loan applications for new home purchases have continued to rise.

Furthermore, mortgage rates are about one percentage point higher than expected given current Treasury-bond yields, another reflection of tightening in the mortgage market.

“It was a quick reaction to try to help people, but there are some serious negative effects that weren’t contemplated until just now,” Ian McDonald, a Fairway branch manager in Minnesota, told the Journal regarding the Cares Act.

McDonald is working with a client who’s homebuying plans were disrupted after he agreed to seek forbearance but backed out before missing any payments, leaving a negative mark on his credit report. Homebuyers with credit scores above 800 have also run into unprecedented hurdles due to tightened lender standards.

The Federal Housing Finance Agency has defended its policy moves. “Lenders’ lines of credit would have tightened and borrowers’ ability to get mortgages would have suffered” if it hadn’t acted, agency spokesman Raphael Williams told the Journal. [WSJ] — Kevin Sun

The post Tightening mortgage market threatens economic recovery appeared first on The Real Deal Miami.

Ivan Chorney and Michael Martirena

Ivan Chorney and Michael Martirena

A top team at One Sotheby’s International Realty joined Compass. The Ivan and Mike Team, which was One Sotheby’s No. 2 team in 2019, joined Compass earlier this month. The four-person team, led by Ivan Chorney and Michael Martirena, closed more than $100 million in sales last year.

David Bateman left NAI Partners in Houston to become managing director of CBRE for Broward and Palm Beach counties. Bateman will oversee CBRE’s three offices and more than 70 employees. He previously led agency leasing operations for the Houston brokerage. Arden Karson, who joined CBRE as senior managing director for South Florida in 2017, will be stepping down, according to a spokesperson.

CBRE promoted William “Tripp” Gulliford to executive managing director of Florida. He will report to Chris Connelly, CBRE’s Group President, Americas Advisory Services. Gulliford will oversee CBRE’s eight Florida offices and the growth strategy for its advisory services. He was previously senior managing director of CBRE’s north Florida region, and before that was managing director of EverBank Commercial Advisors.

Land use and zoning attorney Anthony Recio returned to Weiss Serota Helfman Cole & Bierman as a partner. Recio took a three-and-a-half-year sabbatical at a Buddhist retreat. He primarily represents developers, investors and lenders in South Florida, and has experience with tax credit financing guidelines and has worked with local governments.

Melsie Ordoñez joined Stantec as buildings engineering principal in its Miami office. Ordoñez will oversee and support engineering for hospitality, institutional, and aviation projects while developing the local healthcare, lab-research facility and ports-marine markets for Stantec.

Fortune Development Sales and Shoma Group named Maria Elena Plasencia director of sales for Ten30 South Beach, a 43-unit project in Miami Beach. Plasencia has worked on projects that include Residences by Armani/Casa and Porsche Design Tower. She’ll be based out of Ten30’s sales center at 1116 15th Street, which is set to open at the end of June.

William Domsky joined Lee & Associates as principal, focusing on industrial and office sales and leasing in South Florida. Domsky was previously with CBRE, where he handled corporate real estate advisory service and tenant representation in New York and Long Island. At CBRE, he completed leases and sales valued at up to $47 million.

Berger Commercial Realty/CORFAC International hired two senior property managers, Ian Miranda and Erica Portes, to work on the company’s Seagis portfolio in Miami-Dade County. Most of the portfolio is industrial real estate. Miranda previously managed the Miami Tower in downtown Miami. Portes was a senior property manager for Prologis.

The post Movers & Shakers: Top One Sotheby’s team joins Compass, shakeup at CBRE & more appeared first on The Real Deal Miami.

Steve Schonfeld, Bellaria condominium complex (Credit: Google Maps)

Steve Schonfeld, Bellaria condominium complex (Credit: Google Maps)

After buying the most expensive estate in Palm Beach history last year, billionaire hedge funder Steven Schonfeld has decided he has no need for his condo on the island.

Schonfeld sold penthouse four at Bellaria, at 3000 South Ocean Boulevard, for $6.5 million, records show. Carribean Pearl, a Delaware LLC, purchased the unit.

The waterfront condo totals 4,951 square feet, equating to a price of $1,312 per square foot, records show.

Schonfeld purchased the condo for $6.3 million in December 2014, according to records. It has three bedrooms and four-and-a-half bathrooms.

The building was constructed in 2006, records show.

The property was listed by Christian Angle, according to Realtor.com.

In December, Schonfeld and his wife Brooke bought a sprawling 10-bedroom waterfront estate at 1415 South Ocean Boulevard as a vacation home for $105 million. The home has nearly 35,000 of under-air square feet, 350 feet of oceanfront and about 230 feet of water frontage on the Intracoastal Waterway. It also includes an ice cream parlor. Beauty mogul Sydell Miller sold the lake-to-ocean property.

Schonfeld runs the New York-based hedge fund Schonfeld Strategic Advisors. He has a reported net worth of $1.2 billion.

The post Hedge funder Steven Schonfeld sells Palm Beach condo appeared first on The Real Deal Miami.

Spruce co-founder and CEO Patrick Burns (iStock; Spruce)

Spruce co-founder and CEO Patrick Burns (iStock; Spruce)

As the coronavirus pandemic has highlighted the inefficiencies of traditional pen-and-paper closings, another startup has secured funding in its quest to digitize and streamline title and escrow procedures.

Digital title startup Spruce has raised $29 million in new funding as part of a Series B funding round, the firm announced last Thursday. Scale Venture Partners led the funding, in which Zigg Capital and Bessemer Venture Partners also participated.

“In these uncertain times, innovative mortgage lenders and real estate companies that support digital transactions are providing essential services to consumers, ensuring that critical moves are still possible and refinancing loans to help cover necessary expenses,” Spruce co-founder and CEO Patrick Burns said in a statement.

The New York-based startup, founded in 2016, had previously raised $20.1 million in Series A funding — a $4.5 million tranche in 2017 and $15.6 million in 2018, both led by Bessemer.

Also on Thursday, San Francisco-based digital title startup States Title Inc. announced that it had raised $123 million in a new funding round that valued the company at $623 million. [TechCrunch, Inman] — Kevin Sun

The post Title insurance startup Spruce raises $29M in Series B appeared first on The Real Deal Miami.

 Javier Cervera Sr.

Javier Cervera Sr.

Javier Cervera Sr., principal at the Miami real estate brokerage Cervera Real Estate, died on Sunday at home with his family after a battle with cancer. He was 89.

Javier and Alicia Cervera Sr

Javier and Alicia Cervera Sr

Cervera, a pilot and plantation owner, married Alicia Cervera Sr. in 1954 in Cuba. He was part of the resistance group against Fidel Castro, and was able to leave Cuba after he was tipped off that police officers were on their way to arrest Cervera at his home, according to an obituary provided by the family. The couple fled to Miami in 1961, where their daughters, Veronica and Alicia, who lead Cervera Real Estate today as CEO and managing partner, respectively, were already living with their grandparents. Son Javier Cervera Jr., who is president and CEO of Cervera Real Estate Ventures, was born in 1967.

Javier Sr., a prominent member of Miami’s real estate community, first worked for Maurice Ferre, leading his transportation company. He entered real estate when he and Alicia Sr. purchased a waterfront property on Brickell Avenue. In a 2014 interview, Cervera’s daughter Alicia Cervera Lamadrid, said her parents’ purchase of their first property, getting it rezoned and selling it “helped them get out of the initial shock of arriving in the country with little money in their pockets.”

Cervera also developed the Square Shopping Center in Key Biscayne. Five years ago, Cervera started an aviation trading company called Ameravia Inc.

Andres Asion, broker and owner of Miami Real Estate Group, called Cervera “a mentor and father figure” in a post on Facebook.

A celebration of life mass is planned for Cervera Tuesday morning at St. Theresa Church of the Little Flower that is limited to Cervera associates and staff due to social distancing.

The post Javier Cervera Sr., who helped his wife form Miami brokerage after fleeing Cuba, dies appeared first on The Real Deal Miami.

110 Atlantic Avenue, Scott Schuster (Credit: Google Maps)

110 Atlantic Avenue, Scott Schuster (Credit: Google Maps)

Healthcare and real estate entrepreneur Scott Schuster sold a home in Palm Beach for $8 million.

Schuster and his wife, Heidi, sold the 4,105-square-foot home at 110 Atlantic Avenue for $1,948 per square foot, records show. Andrea Salvi, an attorney acting as trustee of the Twin Hearts Palm Beach Realty Trust, purchased the home.

The non-waterfront property is next to an oceanfront lot where the musician Bon Jovi is building a new home, according to the Palm Beach Daily News. It is near North Ocean Boulevard.

Built in 1982, the house has four bedrooms and four-and-a-half bathrooms. It features a library and a poolside cabana along with a pool and spa, according to Realtor.com.

The seller was represented by Christian Angle and the buyer was represented by Dana Koch of the Corcoran Group, according to Realtor.com.

The house last sold for $4 million, records show.

Schuster is the president of Wingate Healthcare, a provider of nursing and supportive care to seniors in residential homes in Massachusetts and New York State.

Coronavirus does not seem to be slowing down sales in the ultra wealthy town of Palm Beach. Earlier this month, luxury homebuilder Mark Pulte sold a lakefront estate at 446 North Lake Way for $33.2 million, and the trust of the late business mogul Morton Mandel sold his Palm Beach estate at 1063 North Ocean Boulevard for $25.4 million.

The post Healthcare entrepreneur sells Palm Beach home for $8M appeared first on The Real Deal Miami.

94100 Overseas Highway in Tavernier is listed for $24.5 million.

Made famous in movies and TV shows like the Humphrey Bogart and Lauren Bacall classic “Key Largo” and the Netflix thriller “Bloodline,” the Florida Keys cater to homebuyers who want to escape South Florida’s hectic lifestyle and boat, fish or dive — or simply chill.

Coldwell Banker Schmitt Real Estate’s Brian Schmitt, who has been a broker in the Keys since 1983, said out-of-town buyers continue to flock to the Upper Keys, those closest to Miami — Key Largo, Tavernier and Islamorada — in search of a relaxing, laid-back retreat.

“It’s the color and the quality of the water and what you can do on the water that is attractive to people,” said Schmitt, whose firm, the largest in the Upper Keys, became a Coldwell Banker franchise in 1986.

During the 12 months ending in January, 134 homes priced over $1 million traded in the Upper Keys, excluding Ocean Reef Club. That’s up 25 percent from 107 during the previous 12-month period, according to data from the Multiple Listing Service, compiled by Coldwell Banker Schmitt Real Estate. The average price was $1.615 million, down from $1.815 million, yet total dollar volume rose 11 percent due to the rise in the number of sales. Homes sold for an average of 15 percent less than their original list price.

“There’s more demand based on the number of sales transactions, but sellers are having to reduce their prices to a greater degree to attract a buyer and do a deal,” said Schmitt, who has five offices throughout the Keys, including two in the Upper Keys — in Key Largo and Islamorada.

Meanwhile, luxury inventory is dropping. At the end of January, there were 213 residential properties priced over $1 million for sale in the Upper Keys, versus 240 a year earlier, Schmitt’s data shows.

That’s a healthy sign for the market, brokers say. “There was a pickup in activity, new construction came on the market, and that sold rather quickly,” said Joy Martin, owner and broker of American Caribbean Real Estate.

While the market will no doubt feel some impact from recent upheaval in the stock market, the peak selling season in the Keys is traditionally December through April, as well as July and August, said Martin, whose firm has 35 agents and two offices in Key Largo and Islamorada.

The competition

In all, more than a dozen brokerages compete for listings and sales in the Upper Keys.

“It’s collegial, but it’s still fierce,” said Schmitt, who has 115 active agents and 15 staff. About 1,250 agents vie for about 2,800 transactions annually in all of the Florida Keys, he said.

According to a 2019 market-share ranking by Schmitt’s firm, using Multiple Listing Service data, Coldwell Banker Schmitt held the top spot in the Upper Keys with 314 sales or 16.1 percent of the market. Next was American Caribbean with 202 sales or 10.3 percent market share, followed by Ocean Sotheby’s International Realty with 134 sales or 6.9 percent.

Owned by Russell Post for 10 years, Ocean Sotheby’s International Realty has offices in Islamorada, Marathon and Key West, with a total of 40 agents, including 12 at his office in Islamorada. “The market has been good in the Upper Keys, a steady market over the last three years,” he said.

Broker John Gallant, who previously owned Blue 9 Realty and recently became a license partner of Engel & Völkers Islamorada, said that with a relatively smaller pool of agents in the Upper Keys, the competition is “a lot less cutthroat and more collaborative than in Miami or Fort Lauderdale.”

“Here, if you’re not professional and at least not polite and courteous, you will have a reputation that will run you out on a rail,” he said.

Key buyers

South Florida buyers rank as the top source for luxury vacation home purchases in the Upper Keys. After that come buyers from states along the Atlantic seaboard, New England and Midwestern states that border the Great Lakes, Schmitt said.

Though waterfront Keys properties compete as vacation homes with luxury second homes and condos in Miami Beach and other South Florida areas, the buyers are vastly different.

In the laid-back Keys, the main activities are diving, fishing and drinking, Gallant said.

“It’s not an area that is super attractive to people who don’t share that interest,” he said. And he sees an inverse relationship between what you have and how you dress. “If you see someone who looks borderline homeless, that guy has millions.”

South Florida developers Sergio Rok, Scott Robins and Michael Swerdlow are among those who have long treasured the Upper Keys for second or third homes.

“It’s tranquility. It’s truly getting away from city life,” said Rok, whose father, real estate investor Natan Rok, bought the family’s Islamorada compound in 1987.

Robins and his wife, Deborah, have owned an oceanfront estate on Plantation Key, one of the islands making up Islamorada, for 20 years. Spanning about 2 acres, the property includes a four-bedroom home, tennis court, pool, beach and 300-foot dock where Robins keeps his 35-foot-high fishing boat.

Swerdlow, too, remains a fan of the region, though five years ago he sold his oceanfront estate and private marina in Islamorada. The property holds the record for the priciest sale ever in the Upper Keys, closing for $13.125 million in 2015.

“When I had the house, I would spend 100 days a year there because of the fishing,” Swerdlow said, adding that he holds the record for the largest bonefish ever caught in the United States on a fly rod. It was 15 pounds, 8 ounces.

Price check on the Isles

The priciest home on the market today in the Upper Keys, by far, is the 13-acre bayfront estate at 94100 Overseas Highway in Tavernier, listed for $24.5 million. Compass agents Audrey Ross and Arline Tarte have the listing.

Sales at the higher end of the market have been slow in the past year. Only one residential sale closed at over $5 million in the Upper Keys last year, after 353 days on the market.

According to Martin, “2019 for luxury for us didn’t have the same momentum as previously.”

Brokers wonder what the future holds. For now, the effects of coronavirus on the market remain to be seen.

Schmitt said some buyers are probably being more cautious about making large investments because of the volatility of the financial markets. Yet others may want to take advantage of the lowest interest rates in 50 years.

“When you see something that has some sort of global impact, every market could have a trickle-down effect,” Martin said. “We’re watching it very closely.”

The post What it’s like to sell a luxury home in the Upper Keys appeared first on The Real Deal Miami.

As businesses shutter across South Florida and unemployment skyrockets to record highs, landlords are facing a difficult dilemma: How to offer rent deferrals to tenants and at the same time pay their mortgages?

Landlord Shane Neman said he has offered deferrals to commercial tenants, but claims two of his lenders have yet to give him final guidance on whether he can modify his loans and delay his mortgage payments.

“Most mortgages are due the first of the month. If lenders don’t give clarity, the landlords are going to be scared that they are going to be in default and start hiring lawyers,” said Neman, the founder of Miami-based Neman Ventures, which owns more than two dozen large-scale properties across the U.S., including a cold-storage industrial facility in Miami’s Allapattah neighborhood.

BankUnited CEO Raj Singh

BankUnited CEO Raj Singh

Neman’s reality is one that is playing out between landlords and lenders in South Florida as the world battles the novel coronavirus pandemic. President Trump is set to sign a $2 trillion stimulus package with provisions to help small businesses, which could provide relief to landlords. And other federal programs may also provide aid. But concerns are growing that banks are going to pull credit lines from non-bank lenders and that deals as a whole will halt until the pandemic ends.

“This is just such a big shock to the system. The entire economy is going to get remade one way or another,” said Raj Singh, the CEO of Miami Lakes-based BankUnited, South Florida’s largest bank in terms of assets.

The deferral debate

Singh said that his bank is going to be allowing borrowers to defer payments, but he is also waiting to see what government assistance is available through Congress’ stimulus package that the House of Representatives passed on Friday.

“Right now is a very cloudy place, but we know that a lot of help is coming,” Singh told The Real Deal on Thursday.

Eddy Arriola, chairman and CEO of Miami-based Apollo Bank, said he is giving 90-day deferrals to borrowers and is working with them on loan payments.

Apollo Bank chairman and CEO Eddy Arriola

Apollo Bank chairman and CEO Eddy Arriola

Lenders like Arriola said the crisis is affecting numerous businesses outside of the hospitality and restaurant industries, potentially having a wider impact on the real estate market.

“We have many [borrowers] that have doctors’ practices and non-emergency care centers, and they are getting hit really hard,” said Arriola, adding that many of these borrowers own their offices.

For lenders, another issue is that real estate deals are halting, since businesses have shut down and there are too many unknowns about the impacts of the virus.

“There is so much uncertainty about underwriting properties, cash flow, pricing and capital markets liquidity that it is going to be very difficult to get deals done,” said Paul Fiorilla, research director with Yardi Matrix, a Scottsdale, Arizona-based commercial real estate data and research firm.

The $2 trillion stimulus bill, however, could provide relief for lenders and landlords.

The bill has $377 billion set aside to help small businesses through S.B.A. loans, according to the New York Times. Borrowers would not have to repay portions that were spent on paying employees, a mortgage, rent or utilities. The banks making the loans would then be reimbursed by the Treasury Department, the Times reported.

Foreclosures avoided

Ken Thomas, a long-time South Florida independent banking analyst, said the last thing banks want to do now is go through the foreclosure process. Instead, banks are going to look at modifying loans rather than classifying them as troubled.

“Banks are going to be very careful about foreclosing on the loan, it’s the last thing they want,” Thomas said. “It ruins things for years.”

J.C. de Ona, Southeast Florida division president for Conway, Arkansas-based Centennial Bank, said his bank is offering deferrals for 90 days and is working to restructure loans.

“We are not even thinking about foreclosures,” de Ona said.

Brett Forman, who leads operations in the Eastern U.S. for Trez Capital, a Vancouver-based nonbank lender with $3.8 billion in assets under management, said in some cases his company is asking for more collateral on loans or is seeking to get paid early on some of its construction loans.

“We believe in our relationships,” Forman said. “We are being firm, but fair.”

Forms of relief

In addition to Congress, banks can also rely on the Federal Reserve. The Fed has signaled that it will continue to pump liquidity into banks, after announcing two weeks ago that it would buy close to $700 billion in securities, including $200 billion in mortgage-backed securities. The Fed also signaled that it will not put a limit on this program.

Other federal programs are also seeking to give landlords a break. The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, announced this week that the two mortgage insurers will give multifamily landlords a break on their loans on the condition that they do not evict renters who are low on money because of the pandemic. The U.S. Department of Housing and Urban Development has also said that it will give a 60-day moratorium on evictions for single-family homeowners with FHA-insured mortgages.

So far, South Florida banks have yet to report their first quarter earnings to regulators or investors. Initial reports give some glimpse into banks’ exposure. OceanFirst Financial, a $10.2 billion asset bank headquartered in Toms River, New Jersey, said it has about $1.6 billion in lending exposure to coronavirus-impacted entities, according to a regulatory filing that was first reported in the industry publication American Banker.

Non-banks’ risks rise

But concerns are growing, more so over non-bank lenders than banks, since banks have the ability to borrow from the Federal Reserve’s discount window.

Ratings agency Fitch has warned that non-bank lenders, in particular, could be in trouble if mortgage forbearance becomes widespread. In New York, the Cuomo administration has introduced regulations requiring banks to provide mortgage relief to homeowners. This has yet to be enacted in Florida, but is something that could cause additional strain on non-bank lenders.

“The pressure on the non-bank mortgage sector is particularly acute at present,” the ratings agency said in a press release, announcing that it had put seven non-bank lenders on negative-rating watch.

Added Apollo Bank’s Arriola, “Every single downturn, those are the guys to get hit. Some non-bank lenders are going to have real troubles.”

The post South Florida lenders and landlords battle new coronavirus reality appeared first on The Real Deal Miami.

Jeff Greene and a rendering of 550 North Quadrille Boulevard (Credit: Arquitectonica International via Facebook)

Jeff Greene and a rendering of 550 North Quadrille Boulevard (Credit: Arquitectonica International via Facebook)

Two weeks ago, billionaire developer Jeff Greene threatened to stop construction of a two-tower, 30-story mixed-use project in downtown West Palm Beach.

Greene, who told the Palm Beach Post in late April that he would “leave the shell up” because the city was resistant to approve a zoning request, is changing his tune. Now, he’s saying that he will build the project at 550 North Quadrille Boulevard as is, but at a slower pace, if he can’t get the property rezoned. Greene wants to change the project’s zoning from hotel, office space and multifamily to all multifamily.

“I blame myself because I did start the project, and I was overly optimistic,” he told The Real Deal. “No one had a gun to my head to start these two towers.”

Greene, a former Democratic gubernatorial candidate and billionaire real estate investor who made a fortune during the subprime mortgage crisis, is now locked in a political fight with the city’s mayor, Keith James, who argues that Greene is making demands at the eleventh hour. Greene made a deal with the city in 2016 when it made a zoning change to increase the project’s height, James argues.

“My view is ‘no.’ You got the benefit of your bargain and now you need to fulfill your end of the bargain,” James said. “You basically kept building ‘till you got to 28 stories and then you come to me and say, ‘Ah I can’t really do what I said I was going to do.’ It doesn’t work that way.”

Greene’s $250 million development has been in the works for about five years and would mark the real estate mogul’s largest project in the city. The development is north of Related Companies’ Rosemary Square and Brightline’s West Palm Beach station, near the Flagler Memorial Bridge that connects the mainland to Palm Beach.

In early 2016, the city approved a zoning change to the property that allowed Greene to build 30-story towers, in place of 10 stories allowed at the time. In exchange, Greene, betting on West Palm Beach becoming a world class city, would build a hotel and office project. He hired the Miami architecture firm Arquitectonica to design the skyscrapers, which looked like towers of stacked blocks.

But his plans have drawn skepticism from day one. Critics, who have been pointing to a lack of demand for new office space, question why Greene waited until now to try to force a change in zoning.

He now wants both towers to be multifamily. (One tower was already planned to have 328 apartments.) Greene, who is building on spec and was seeking to finance once it was finished, said his bankers “led me to believe that when this was completed, they would be able to finance 80 percent of my costs.”

“Most lenders are more comfortable taking back multifamily than unfinished office space or an unoperated hotel,” Greene added.

Supply problems

Meanwhile, Greene’s broker, Cushman & Wakefield, has not secured any tenants for the 200,000 square feet of office space, Greene said.

The lack of tenants is a textbook example of supply and demand, according to industry experts.

West Palm Beach’s Central Business District has 673,350 square feet of Class A office space under construction, with an average asking rent of $54.39 per square foot, according to Colliers International South Florida’s first quarter report.

Neil Merin, chairman of the commercial real estate firm NAI Merin Hunter Codman, said the city has shown that it can only absorb one new Class A office building every 10 years.

To go forward with the office component of the One West Palm project “seems to be silly,” Greene said. He’s already invested $100 million into construction.

In addition to Greene’s project, Related Companies is building 360 Rosemary, a 20-story, 300,000-square-foot office building in Rosemary Square. The New York developer also plans a second office project, a 25-story, 270,000-square-foot Class A tower project called One Flagler at 154 Lakeview Avenue, near the intersection of South Flagler Drive and Okeechobee Boulevard. Billionaire Charles Cohen of Cohen Brothers Realty also confirmed he’s moving forward with plans to develop a 24-story, 490,000-square-foot office building in West Palm.

Merin said only “in good years” can the West Palm office market absorb 100,000 square feet.

And if Greene doesn’t get his zoning change and is forced to move forward with office space, a battle could ensue for rent concessions to lure tenants into new buildings, Merin predicts. West Palm’s vacancy rate for Class A office space was 17 percent last year. With Related’s and Greene’s project, it could reach 35 percent, according to Merin.

Mayor James said Greene should have come to the city sooner if he had concerns about oversupply and wanted to change the project’s designs.

“He’s a businessman. He came to us with that deal,” James said. “Whatever crystal ball he may have, he’s the one who anticipated what the demand was going to be going forward.”

Concerns about oversupply contradict Palm Beach County’s economic development board’s pitch of recent years. It has pushed developers to build more Class A office properties in West Palm, in hopes that it would appease Wall Street investors and hedge funds to relocate to the city.

The board has tried to persuade wealthy hedge funders and investors with homes in Palm Beach to bring their company’s operations to West Palm. In 2016, Greene said, “How can a city with this much wealth and education have so few amazing buildings, restaurants and hotels?”

So far, few, if any, well-known hedge funds have relocated their primary offices to high-end office developments in Palm Beach County. Hedge funds aren’t looking for huge spaces, but instead, smaller offices. Paul Tudor Jones leased 10,800 square feet at 109 Royal Palm Way in Palm Beach in 2016, according to the Palm Beach Daily News.

“Nobody’s moving down and taking 50,000 feet,” Greene said.

Coronavirus impact

As the pandemic continues to pummel South Florida’s economy, and companies reduce their need for office space, West Palm’s high-end office market could face even harder times.

“At $50 to $60 a foot… The numbers just don’t pencil out,” said Peter Reed, managing partner of Commercial Florida Realty Services.

Greene said that building a hotel also no longer makes sense. Downtown West Palm has four new hotels, and “people have generally adapted new habits,” that pose a challenge for hotels that depend on meetings and conventions, he said.

Construction of the two-tower project has reached the 28th floor, and once the building tops off in a few weeks, Greene said he’ll determine what to do next. Greene is hesitant to install glass or elevators until after he applies for a rezoning.

He could also sell the office building. “We’re willing to get our money out of this,” he said.

“The smart thing is that it should get finished,” he added. “It will get finished.”

The post Billionaire Jeff Greene battles with WPB mayor over unfinished office building appeared first on The Real Deal Miami.

(Illustration by Pablo Lobato)

Bob Zangrillo walked out of federal court on a rainy day in Boston in late March 2019 wearing a black heavy coat, a charcoal suit and a blue tie. His face was drawn, forehead furrowed.

The gloomy scene was a far cry from Zangrillo’s carefree days as a playboy in Los Angeles just a few years ago, when he roamed shirtless at Burning Man-themed birthday parties and hosted Coachella after-parties attended by hordes of models and so-called influencers. Zangrillo claims to have made a fortune investing in companies like Facebook and Uber, and had presented himself as the youthful Silicon Valley investor and a Gatsby-esque figure in an Instagram age. And he’s a major stakeholder in Miami’s sprawling Magic City project.

But if the 52-year old looked sober and sullen walking out of court a year ago, he had every reason to be. As part of the sprawling federal investigation nicknamed Operation Varsity Blues, which led to charges against celebrities like Felicity Huffman and Lori Loughlin, Zangrillo had just been charged with mail fraud. He pleaded not guilty.

And while the Norwalk, Connecticut, native faces jail time over the college admission scandal, the Federal Trade Commission (FTC) is also after him, bringing civil charges in January. The FTC alleges Zangrillo chaired a company that ran scam websites set up to look like government agency portals. Zangrillo pleaded not guilty, with his lawyers arguing that he was just a passive investor.

When investors get themselves into the kind of legal trouble that ends up in a chyron on cable news, the developers on projects they’ve funded often quickly distance themselves out of fear that the project will struggle to score financing. It is unclear how much money Zangrillo has put into Magic City, but he and his family were the largest equity backers as of last year. His current legal troubles have developers practicing the art of social distancing.

Bob before the big time

A graduate of the University of Vermont and Stanford Business School, Zangrillo moved to New York in 1995. There he became the CEO of InterWorld, an e-commerce software supplier that worked with Nike and FedEx. At InterWorld, he also started UGO Networks, an entertainment company focused on gaming, which InterWorld sold to Hearst for an estimated $100 million, according to Forbes.

Zangrillo founded his private investment firm Dragon Global in 2008 and moved the company to Miami in 2010. The company says its current and predecessor funds have managed $1 billion in companies with over $500 billion of market value. Zangrillo also claims to be one of the last late-stage venture growth investors in Facebook as well as an investor in Uber, Jet.com and Twitter, according to his company’s website.

For his part, Zangrillo certainly plays the role of a Silicon Valley venture capitalist to his 10,800 followers on Instagram. On some days he is taking ice baths and practicing the Wim Hof method; on others he is showing off his water jetpack or meeting with Los Angeles megamansion developer Mohamed Hadid.

Many of his posts also show off his 11,508-square-foot waterfront estate on Miami Beach’s Di Lido Island. Zangrillo paid $7 million to acquire the property before building a house there for his primary residence in 2016.

Zangrillo, who has shied away from the media attention, declined multiple interview requests through a spokesperson, who did offer one comment: “Mr. Zangrillo’s commitment to fostering a positive and ethical workplace has never wavered, nor has his commitment to the city of Miami and its opportunity to be a global hub of innovation.”

Burning Man

Part of the vision for Magic City had its origins in the desert of Nevada. Zangrillo is a “Burner,” an enthusiast of Burning Man, the annual festival in northwest Nevada  known as much for its ecological message and art installations as it is for its thrill-seeking, power scooter-riding hedge funder attendees.

It was at Burning Man that Zangrillo and his business partner Tony Cho first displayed a silver-colored, 12-foot-high wooden structure spelling out the word “Magic,” which would ultimately become the entrance to the Magic City Innovation District in Little Haiti. The pair, who met through a mutual friend, agreed that Cho, who owns the brokerage Metro1, would be the face of the project, while Zangrillo would help recruit tech companies for it.

In December 2017, Zangrillo and Cho brought on Miami-based development group Plaza Equity Partners along with Lune Rouge, a company led by Guy Laliberté, co-founder of Cirque du Soleil. As the plans solidified, the group attempted to get a Special Area Plan (SAP), which allows property owners who control more than 9 acres of land to apply for zoning changes.

Renderings of the Magic City Innovation District

Under the SAP, the development would include 2,630 residential units, 2 million square feet of office space, 432 hotel rooms and 340,000 square feet of retail, in addition to a pop-up park and sculpture garden at the site in the middle of Little Haiti, at 6001 Northeast Second Avenue.

The development group turned to Miami’s favorite construction lender, Bank of the Ozarks, now known as Bank OZK, for its first round of financing — a $32 million loan issued in February 2018. By that time, the regional bank out of Little Rock, Arkansas, had become one of the most active condo construction lenders in Miami, New York and Los Angeles.

The news hit in March 2019 that Zangrillo was named as part of the college admissions scandal. Later in the month, Zangrillo backed out of his role as managing board member of Magic City. He was replaced by Zach Vella of the New York-based Vella Group.

“He doesn’t have any involvement,” said Vella in an interview with The Real Deal in March 2020. “All decisions are made by the board members, and Bob is completely passive.”

“He needs time to focus on current issues,” Vella added.

Some aren’t convinced that he’s distanced enough from the project.

“Just because they filed that paper in March that he’s no longer the principal in the project doesn’t mean that he is not benefiting from the project,” said Meena Jagannath, an attorney with Community Justice Project, which has filed a lawsuit against the development group for Magic City.

Zangrillo’s still doing some business for his own company, Dragon Global, though it’s unclear if that work intersects with the interests of Magic City. In May, he sought permission from  federal court to go to Montreal for a planned trip that “involved meetings with a large current Dragon Global investor and negotiations to invest in at least two such companies.” The motion did not disclose who he was meeting with, but it’s notable that his colleague on the Magic City project, Guy Laliberté has his company headquarters in the Canadian city.

An ownership chart first revealed by Miami blogger Al Crespo showed that MCD Dragon held the largest equity stake the Magic Innovation District Project, at 35 percent.

Zangrillo personally held a stake of 54 percent in MCD Dragon, while a trust that lists Zangrillo’s daughters, Ashley, Alexa and Amber, held 42 percent, and Los Angeles billionaire investor Neil Kadisha owned 3 percent.

Zangrillo also still has some role, at least, in picking out the artwork for Magic City. Twice in August the investor posted about the project on his personal Instagram account. In early December, he tagged graffiti artist Tristan Eaton in a post that read, “New Art acquisition. Cannot wait to collaborate on Art for the Magic City Innovation District 👍🙏 The original @tristaneaton❤.”

OnPoint Global

Zangrillo is more than a backer of the Magic City project. He was chair and one of the lead investors for OnPoint Global, one of Magic City’s first anchor tenants, which leased a warehouse near the heart of the development last June.

OnPoint Global had the largest lease out of the first five tenants to sign at Magic City, taking up 12,000 out of 18,650 square feet. OnPoint was also featured prominently in marketing materials and in interviews that the development group conducted with the Miami Herald.

The company describes itself as a “leading worldwide data-driven, online publisher and service-based e-commerce provider with offices in the United States and Latin America.”

But federal officials allege, in charges filed in December, that OnPoint Global was operating a scheme to defraud people who were seeking government services. The scam allegedly included using sites like DMV.com (instead of .gov). In some cases, the FTC  claimed, OnPoint would charge people to buy information that was already publicly available.

The feds alleged the money man for the operation was Zangrillo, who they claim chaired, co-owned and invested in the company and personally received more than $2 million in distributions and salary from OnPoint Global and its subsidiaries. A federal court in Florida ruled in January that “the websites were patently misleading,” granting an injunction and freezing assets tied to the scheme.

Zangrillo’s lawyer Matthew Schwartz of Boies Schiller Flexner said that Zangrillo was not involved in the day-to-day operation of the company.

“In his role as an investor and limited partner in numerous organizations, Mr. Zangrillo monitors his investments under his companies’ investor rights but has no role in the day-to-day operations of his portfolio companies,” said Schwartz.

Jeff Schneider of Levine Kellogg Lehman Schneider + Grossman, who has acted as a receiver in other FTC cases and is not involved in the OnPoint Global case, said it is significant that the FTC brought the charges against someone as high-profile as Zangrillo. 

“It is surprising to take on so much of a public figure,” said Schnieder. “Even tangentially, these cases are generally 25-year-olds operating in boiler room spaces.”

Former OnPoint Global CFO Bob Bellack said that Zangrillo was not involved in the day-to-day decisions at the company and described his role as being dedicated to bringing investors to the company and providing mentorship to employees.

“His role was pretty typical of any VC [venture capitalist] with a company,”  said Bellack.

Yet one former employee of OnPoint Global told The Real Deal he would often see Zangrillo around the office and disputes the notion that Zangrillo was not aware of what was going on.

“I saw Bob Zangrillo walking through the offices at least once a week for 52 weeks,” said Ryan Marshall, who worked at OnPoint Global for a year as head of talent acquisition. “He was involved in major decisions … he invested a lot of money into the company.”

Cho said in an interview with The Real Deal that Magic City has no immediate plans to remove OnPoint Global as a tenant and will let the case play out.   

On the horizon

At issue right now is how much the college admissions case and the FTC case have hurt Zangrillo and the rest of the development group at Magic City. Miami is rife with developers, investors and brokers who have faced accusations of fraud. It is a city known for giving second chances.

But for now, Zangrillo is backing off. Last month, Avra Jain, developing a $200 million mixed-use project near the Miami River with Zangrillo, said that he was no longer involved in the project.

“Bob Zangrillo was not a managing partner, nor has he been involved in the day-to-day,” Jain said, declining to comment further.

Even when distanced from Magic City, Zangrillo’s troubles could impact the project’s ability to secure permanent financing beyond the loan from Bank OZK. 

David Eyzenberg of the commercial real estate investment bank Eyzenberg & Company, who helps arrange financing for real estate projects, said Zangrillo’s legal troubles will make it more difficult for the group to get financing from a traditional bank.

“If you are a traditional lender you are trying to avoid noise. If you have shareholders, you don’t want noise,” said Eyzenberg.

Andrew Ittleman, an attorney with Miami-based Fuerst Ittleman David & Joseph who is an expert on money laundering, said Zangrillo’s criminal and civil charges could also cause the other developer partners to take on personal guarantees for the project.

“There is not another way to put it; it does not make things easier for the borrower,” he said.

Especially in a world facing extreme upheaval in the wake of the novel coronavirus, what is the appetite for lending to an ambitious development like Magic City? Time will tell. But for now, it appears the project is scrubbing its ties to Zangrillo, who is set to face trial in October for the college admission scandal charges.

Based on his Instagram posts,  Zangrillo doesn’t seem too concerned.

“Life is about balance,” Zangrillo wrote in an October 2019 post. “Too much money or knowledge may not allow you to see the entire picture of life.”

The post Could Bob Zangrillo’s legal troubles imperil Magic City? appeared first on The Real Deal Miami.

A photo illustration of 620 Arvida Parkway (Credit: Compass, iStock)

A photo illustration of 620 Arvida Parkway (Credit: Compass, iStock)

As the rest of the country was shutting down in March, South Florida’s top brokers were getting phone calls from wealthy out-of-towners looking for high-end homes they could rent — preferably with a pool and spacious backyard, and possibly a tennis court.

The majority of inquiries came from New York, though some also came from other states hit hard by the pandemic, including Michigan and Illinois.

Another unexpected source of rental and broker fee income? Those already living in South Florida condos were looking for space where their kids could run around, away from common areas and elevators. At least two condo dwellers requested and rented the backyards of homes with pools, for $25,000 and $30,000 a month. One family requested to rent an empty lot for sale in Miami Beach, so their children could use it as a playground while parks were closed.

During the first weeks of the pandemic, luxury brokers closed on rentals ranging from $15,000 a month up to $85,000 a month for waterfront homes in Miami Beach and in other high-end markets such as Palm Beach.

“The lease part of the business has definitely picked up,” said Danny Hertzberg, part of the Jills Zeder Group at Coldwell Banker. “There was anticipation that the luxury rentals were going to pull way back. The inventory has never been more limited, and prices are higher than at the start of the year.”

Brokers who normally handle tens of millions of dollars in residential sales a year have shifted their focus to leasing single-family homes, as closings — regardless of price — dropped significantly in April. Though leases are harder to track, brokers are reporting an uptick in rentals and hoping those clients will eventually turn into buyers.

In April, sales of luxury condos in Miami-Dade County plummeted 53 percent to 46 closings, according to MLS data provided by Berkshire Hathaway HomeServices EWM Realty. In the same period, 53 single-family homes in Miami-Dade County priced at $1 million and up sold, marking a 35 percent annual decline.

Peter Zalewski, a principal at Condo Vultures and founder of CraneSpotters, is predicting condo pricing will fall.

“The day of reckoning is coming,” he said during a recent TRD Talks Live webinar. “You’ve got a bunch of people looking to take down stuff,” Zalewski added, “and they’re not going to be nice, and they’re not going to pay you what you think it’s worth.”

Extended getaways?

Dora Puig, a broker and owner of Luxe Living Realty, said she closed six rental contracts in the first few weeks of the pandemic. She secured a three-month extension on a $20,000-plus a month rental on the Venetian Islands, and another extension for a rental unit at the Four Seasons Residences at the Surf Club in Surfside, for more than $28,000 a month.

One Sotheby’s International Realty agents Albert Justo and George Burns, top producers at the Miami-based brokerage, received calls from renters looking for homes asking between $15,000 and $70,000 a month.

“We already had a steady traffic of New Yorkers coming down, but more so during this crisis,” Justo said. “Certain tenants are already renting, and they extended their leases.”

Some notable sales have also closed in the past two months. In late March, David and Victoria Beckham closed on a $19.8 million unit at the One Thousand Museum condo tower in downtown Miami designed by the late Zaha Hadid.

But the pace of sales doesn’t compare to before the pandemic, and the South Florida market is still grappling with a glut of condos. In April, condo inventory in Miami-Dade more than doubled compared to the same period in 2019. For units priced below $1 million, there were nearly 20 months of supply as of last month, up about 100 percent year-over-year.

Ron Shuffield, president and CEO of Berkshire Hathaway HomeServices EWM Realty, said pending sales rose in the first week of May compared to the first week of April, when South Florida was on lockdown. The supply surge is also temporary, he noted.

It doesn’t help that many condo buildings have shut down their amenities and restricted move-in and move-outs during the lockdown, in many cases halting showings and slowing down the approval process for renters and buyers. That has led to single-family home sales outpacing condo sales for the first time since 2003, though Shuffield said that it’s “way too early” to tell if the trend will continue.

International buyers, who have been having a difficult time traveling to South Florida, are noticeably absent from the market, as well.

Though brokerages and agents were quick to flex their remote marketing skills, pushing out e-blasts with virtual tours and open houses, many high-end buyers won’t pull the trigger on a purchase without walking the property themselves, Hertzberg noted. He added that the shift toward video will likely lead to potential buyers touring fewer properties in person.

“A lot of people are really trying to buy,” Hertzberg said. “It’s very challenging to live in New York City right now.”

For now, many are predicting, and hoping, that renters who signed six- to 12-month leases will make offers on the properties they’re leasing or look to purchase other homes nearby. Unlike the Hamptons, where the temperature can dip into the 20s in the winter, South Florida brokers maintain, Miami is a desirable destination year-round.

“People are now realizing how … doable it is, to work from home,” argued Phil Gutman, president of Brown Harris Stevens Miami. “Why go back? South Florida will be a huge beneficiary from the coronavirus pandemic.”

Big-ticket sales

In April, Leon Medical Centers founder Benjamin Leon Jr. sold his waterfront mansion at 620 Arvida Parkway in Gables Estates for $49 million — marking the second most expensive single-family home sale ever in Miami-Dade.

That same month, Pharrell Williams also paid $30 million for a waterfront home at 700 Casuarina Concourse in the same gated community, reportedly rushing to close so he could stay there during the quarantine.

620 Arvida Parkway

620 Arvida Parkway

The same is happening in Palm Beach. Broker Jim McCann, of Premier Estate Properties, has gotten daily inquiries primarily from the Big Apple. Initially, callers wanted to rent houses, but now people are focusing more on buying properties and relocating — fueling a long-term trend driven by Florida’s favorable weather and lack of personal income tax.

In May, Douglas Elliman agent Cyril Matz sold a unit on Fisher Island for $13 million, including $800,000 for the furniture. The buyer, a businessman from Ohio, only toured the unit once, prior to the state shutting down. Matz said the contract went hard on March 10, and he thought the buyer would cancel, but the deal went through.

23 Tahiti Beach Island Road

23 Tahiti Beach Island Road

Though some agents experienced a freeze in business, that is now starting to trickle back in as cities and counties roll out their reopening plans.

Nelson Gonzalez, a top broker in Miami Beach with Berkshire Hathaway HomeServices EWM, said his requests for rentals have started to shift back to homes for purchase. He had four deals under contract prior to the pandemic, and while three claimed force majeure, Gonzalez said he has two new buyers.

“We’re showing with masks and gloves and booties,” he said, “but we’re doing showings.”

Shuffield said the data for April only shows a snapshot of the full year, and he is optimistic that South Florida will bounce back faster than other major U.S. markets. He called the pandemic a health crisis, not a financial crisis, but still acknowledged the pain that many agents and brokerages are experiencing.

“April is going to be a month people are not going to like,” Shuffield said, referring to when the final data is reported. “For the last six months, we’ve been on the trajectory for a fabulous 2020, and we may still have a fabulous 2020.”

The post Staying on the sunny side: South Florida resi brokers see upside in coronavirus appeared first on The Real Deal Miami.

Sir Frederick Barclay and the Ritz London (Photo by Kirsty O'Connor/PA Images via Getty Images, Ritz London)

Sir Frederick Barclay and the Ritz London (Photo by Kirsty O’Connor/PA Images via Getty Images, Ritz London)

A high-stakes drama worthy of a soap opera — complete with hidden cameras and big inheritances — is playing out with the Ritz Hotel in London as a backdrop.

Twin billionaires Frederick and David Barclay bought the five-star hotel in 1995 for 75 million pounds. Now, the aging brothers and their respective children are feuding over the sale of the property.

In the saga’s latest update, Frederick this week released hidden camera video footage allegedly showing his nephew Alistair planting a listening device in a room where Frederick and his daughter met to discuss the Ritz sale, according to Bloomberg.

Frederick’s attorney, Hefin Rees, has alleged in court that Alistair and his two brothers are trying to freeze out his daughter, Amanda, from the sale. They sued in January, around the same time Alistair allegedly planted the bug.

The listening device reportedly captured 94 hours of audio over several months, allowing Frederick’s three nephews to anticipate “every move in advance [and] plan their business strategy around that.”

Frederick and Amanda have said they received a 1.3 billion pound offer for the hotel from Saudi Arabia-based Sidra Capital. David’s sons say that isn’t true and claim that their relatives’ talks about “sensitive commercial matters” with outside parties have “the potential to be disruptive and damaging to the family’s business interests.” [Bloomberg] — Dennis Lynch

The post Sabotage, secret cameras and intrigue: Inside the Barclay family’s feud over the London Ritz appeared first on The Real Deal Miami.

Cadillac Fairview CEO John Sullivan and the RCB Centre in Toronto (Google)

Cadillac Fairview CEO John Sullivan and the RCB Centre in Toronto (Google)

One of Canada’s biggest office landlords has dished on the precautions it’s taking as it prepares for a “measured” return of workers to its buildings.

Cadillac Fairview Corp Ltd. owns and manages 80 properties in the country and is the landlord for some of Canada’s biggest banks. Canadian bankers can expect a much different environment when they go back to their offices, according to Bloomberg.

For one, the firm is working with tenants to schedule staggered start and end times to avoid crowding in lobbies and other common areas. Employees will have to wear face masks in elevators and will be “strongly encouraged” to do so in common areas.

Elevators will be limited to four people at a time and riders will find antimicrobial films over the elevator buttons. Cadillac Fairview is also looking to utilize a smartphone app so that people can schedule elevator rides, hopefully avoiding crowding.

Every major office landlord and office tenant has had to draw up strategies for returning workers. Approaches differ. Many companies have remodeled their spaces, spreading out desks and creating clearly defines avenues for foot traffic. Staggered work schedules are also popular.

Cushman & Wakefield’s Netherlands branch put together a social-distancing safe office concept a month ago. [Bloomberg ­— Dennis Lynch

The post This Canadian office giant has a strategy for a return to work appeared first on The Real Deal Miami.

Bars, restaurants and live entertainment venues around the world are now weighing their reopening options. Some owners say they can’t cover the cost of operating at reduced capacity. (Getty)

Bars, restaurants and live entertainment venues around the world are now weighing their reopening options. Some owners say they can’t cover the cost of operating at reduced capacity. (Getty)

As the U.S. and countries across the globe begin easing some restrictions on nonessential businesses, bars, restaurants and live entertainment venues face tough decisions.

Some are planning to open at whatever capacity local authorities will allow, while others are on the fence about opening up at all because of the financial constraints, according to the Wall Street Journal.

Business owners say they need to run at higher capacities than social-distancing guidelines allow to cover the costs of operating. Bars typically need more customers in the door than restaurants because their patrons usually spend less than patrons who come in for meals, according to the Journal.

Michael Grieve, who manages the Sub Club in Glasgow, Scotland, said he doesn’t plan to open until social distancing guidelines are dropped completely. He said the 410-person capacity club is about “a shared emotional, and at its best euphoric, experience” that can’t be achieved with social distancing in place.

He said he needs over 90 percent capacity to turn a profit. Others say they just want to open and in the short-term, will accept whatever business comes their way. Weeks of closures have meant many businesses are on the brink of failure.

At The Brass Tap craft beer bar in Austin, Texas, general manager Lewis Smith said: “The place will look empty but it doesn’t matter to us so long as it can get started back up.”

Restaurants could fare better. Many jurisdictions are allowing eateries to have higher capacities than bars, as long as tables are spread out at an appropriate distance and they meet other operating guidelines. [WSJ] ­— Dennis Lynch

The post Facing the music: Entertainment venues, restaurants weigh reopening options appeared first on The Real Deal Miami.

A Maryland home formerly owned by Mike Tyson and ex-wife Monica Turner is on the market for $8.5M. The home overlooks the Congressional Country Club, which has hosted U.S. Open golf tournaments. (Getty; Google)

A Maryland home formerly owned by Mike Tyson and ex-wife Monica Turner is on the market for $8.5M. The home overlooks the Congressional Country Club, which has hosted U.S. Open golf tournaments. (Getty; Google)

A Maryland home once owned by boxing great Mike Tyson is on the market for $8.5 million.

Tyson and his former wife, Dr. Monica Turner, bought the home in the mid-1990s and lived there for several years before divorcing in 2003 — the same year Tyson filed for bankruptcy. Turner kept the home, which is about 30 minutes outside Washington, D.C., according to the Wall Street Journal.

Turner has expanded the main house over the years and it now spans 19,000 square feet. It includes a gym, pool, sports court, media room and piano room. A massive closet in the spacious master bedroom suite features a dry cleaner–style conveyor belt for clothes.

Turner, a pediatrician who had a son and daughter with the former heavyweight champion, also added an adjacent lot to the property. The grounds overlook the Congressional Country Club. Turner said she’s selling the home because her youngest child has graduated from college and the house is too big for her.

Around the time the two divorced, Tyson — who had burned through his more than $300 million in career prize money — sold an even larger Connecticut estate to rapper 50 Cent for $4.1 million. The rapper sold the property last year for $2.9 million after it had spent more than a decade on the market. [WSJ]

The post Mike Tyson’s former Maryland home hits the market for $8.5M appeared first on The Real Deal Miami.

 Charif Souki and Aspen Valley Ranch (Credit: Columbia, Shaw Construction)

Charif Souki and Aspen Valley Ranch (Credit: Columbia, Shaw Construction)

Natural gas mogul Charif Souki has put his sprawling Colorado ranch on the market for $220 million.

Souki spent the last seven years building out the 813-acre property into what he called a “mini country club” for his family, replete with tons of amenities and recreational toys, according to the Wall Street Journal. If sold at his asking price, it would be among the most expensive residential sales ever recorded in the U.S.

Souki has built seven homes on Aspen Valley Ranch totaling 34,000 square feet and 31 bedrooms. There’s a central clubhouse with a dining room that can accommodate 14 people and a commercial kitchen.

He converted a barn into a game house complete with arcade games, air hockey, foosball, and storage for ATVs, snowmobiles and dirt bikes.

Souki said the property is large enough that he’s hardly noticed the friends that have been sheltering in place on the property since the coronavirus pandemic hit.

“We’re confined in paradise,” he said.

As with many large properties, the ranch has high maintenance costs. It requires a staff of 25 and maintenance is tracked digitally.

Souki bought the property for $27 million from a bank that foreclosed on it when the previous owner declared bankruptcy. He said he always planned to sell it once he completed renovation and additions.

Souki, who was born in Egypt and raised in Lebanon, moved to the U.S. in the 1970s. He founded Cheniere Energy out of Houston and his company developed the first terminals to liquefy natural gas and export it from the U.S., according to the Journal. [WSJ] — Dennis Lynch

The post Natural gas mogul lists 813-acre Colorado ranch for $220M appeared first on The Real Deal Miami.

As lockdowns lift and the work-from-home debate ranges on, office landlords are eager to get back to leasing and building out their spaces.

“We have various construction projects we want to get back to,” said Grant Greenspan, senior vice president of leasing at the Kaufman Organization.

In New York, all nonessential construction work and in-person real estate showings are on hold until Gov. Andrew Cuomo gives the green light for those activities to resume. When they do, Greenspan acknowledged there will be challenges with showing commercial spaces.

“Obviously, it’s a little more tricky if the tenant is occupying the space,” he said. “We’re going to have to be more cognizant of their concerns.”

In the meantime, office leasing brokers have been doing their best to adapt to virtual showings. Stephen Schlegel, market director for the tri-state region at JLL, said the lockdown has pressed brokers to try new technologies quicker than they would have otherwise.

“We can’t imagine a set of circumstances that would have pressed us to develop those technologies the way we are now,” he said.

One of the big questions around virtual showings is how willing tenants are to lease spaces of significant size without ever physically visiting them.

Ryan Simonetti, CEO of the flexible-workspace and conference-space company Convene, said his company has long offered visual tours of its spaces. In the past several weeks, the number of deals done virtually has become much larger, as members seeking the flexibility of short-term commitments sign up.

Simonetti said members are more likely to close an all-virtual deal up to a certain point: usually for about 10 or 20 people, maximum. After that, he said, it becomes a harder proposition. “We are seeing people’s appetite to consume space digitally growing,” he said. “But it’s a different story for bigger requirements.”

JLL’s Schlegel said it will be some time before brokers return to the old ways of doing business.

“Given the restrictions on going to buildings, the notion that you’re going to take tenants to six buildings a day is just not realistic,” Schlegel said.

The post Here’s what the office industry is up to as lockdowns lift appeared first on The Real Deal Miami.

Miami Beach Votes To Reopen Pools (Credit: iStock)

Miami Beach Votes To Reopen Pools (Credit: iStock)

The city of Miami Beach voted to urge Miami-Dade County to allow pools in multifamily and condo buildings to reopen.

The resolution wouldn’t force pools to reopen, but give property managers and condo associations the option to do so. The city can’t act alone, though. Miami-Dade County will ultimately decide when pools can reopen.

The city’s resolution, put forth by Miami Beach Commissioner Mark Samuelian, calls for social distancing requirements and applicable CDC guidelines on health and safety. Any building that would reopen its pool deck would have to maintain a plan to ensure it complies with occupancy limits and other requirements.

Property management companies and condo associations have been planning for the reopening, in some cases removing pool furniture or spacing it out to comply with social distancing requirements. Some residents have been frustrated that common amenities such as pools and gyms have been shut down. It’s still unclear when gyms will be able to reopen in Miami-Dade.

Shortly after the city also voted to allow for hotels and beaches to reopen on June 1, during Friday’s commission meeting, the county announced it would target June 1 as the reopening date in coastal municipalities countywide.

Hotels in Miami-Dade, with the exception of essential lodgers, were ordered to close March 23. Miami-Dade County Mayor Carlos Gimenez ordered pools and gyms to close on March 30.

The post Miami Beach votes to reopen pools in resi buildings, but needs the county to sign off appeared first on The Real Deal Miami.

Anbang’s Andrew Miller, Mirae’s Peter Lee and (from left) JW Marriott Essex House, the Westin St. Francis in San Francisco and the Four Seasons in Jackson Hole (Credit: Marriott, Westin, Four Seasons)

Anbang’s Andrew Miller, Mirae’s Peter Lee and (from left) JW Marriott Essex House, the Westin St. Francis in San Francisco and the Four Seasons in Jackson Hole (Credit: Marriott, Westin, Four Seasons)

The saga of Anbang Insurance Group’s sale of its $5.8 billion U.S. hotel portfolio has yet another wrinkle.

The would-be buyer, South Korea’s Mirae Asset Global Investments, is now countersuing the entity in control of the Chinese insurer’s assets for the return of its $582 million deposit, accusing it of breach of contract and committing fraud.

It comes after Anbang slapped Mirae with a suit last month intended to get the court to enforce the purchase contract. Anbang claimed Mirae’s termination of the deal was “a classic case of buyer’s remorse” in the face of a global pandemic that frustrated its efforts to secure debt financing.

In a court hearing earlier in May, an attorney representing the insurer’s interest said that Mirae “bet that they could get better terms if they waited and waited and negotiated and negotiated. And, lo and behold, they bet big and they lost big.”

Mirae’s attorneys hit back with a complaint on May 20, accusing Anbang of deliberately concealing further ownership claims of the 15 hotels — problems stemming from a bizarre case of deed fraud that came to light in September.

The Korean investment firm claims in February it was ready to pay a $50 million non-refundable fee to lock in acquisition financing from a consortium led by Goldman Sachs, when the lender’s attorneys uncovered a series of trademark disputes between Anbang and several of the same parties named in the deed fraud case. The parties used alleged arbitration awards from these trademark cases to claim ownership of Anbang’s hotels.

Anbang claims it only learned of these actions in December, and by mid-January it obtained a default judgment that prevented any of the parties from making further ownership claims to any properties noted in the fraudulent filings.

But Mirae’s lengthy countersuit questions the authenticity of the ownership claims. It also put forward a theory connecting the entities claiming ownership of the hotels to former Anbang chairman Wu Xiaohui, who was jailed in 2018. Mirae’s claim that a “Chinese power play” could be behind the disputed deeds is based on an agreement that bears Wu’s signature. (Anbang’s attorneys had blamed the deed fraud scheme on an Uber driver in San Francisco, according to Mirae’s complaint.)

Anbang’s suit called the document in question a “fabrication” and, in court, its attorneys accused Mirae of “jumping into bed with a bunch of fraudsters” by suggesting its legitimacy.

Regardless of the validity of the scheme, Mirae claims that because it wasn’t informed of full scope of the disputed ownership issues the asset manager suffered “shock (and embarrassment)” and its lenders and title insurance companies “immediately pulled their commitment letter and demanded a full explanation.”

“[Mirae] had no indication that the issues plaguing [Anbang]’s ability to convey ownership of the properties ran much deeper than a lone Uber driver,” the complaint states. “[Anbang] gambled that it could conceal the [litigation] targeting the properties from the [Mirae], and force a quick closing on the transaction before [the litigation] would come to light and before the coronavirus pandemic decimated the hotel industry for years.”

There is also a significant part of Mirae’s claims of breach of contract that takes issue with recent management of the properties by Dajia Insurance Group, the company formed to manage Anbang’s assets after Chinese regulators took control of the insurer in 2018.

Mirae claims that Dajia’s halting operations at the15 hotels due to coronavirus constitutes a violation of the sales contract’s requirement for the properties.

Forced closures due to the virus have shuttered hotels across the country, and as a result occupancy has fallen off a cliff, while billions in loans have been sent to special servicing. Earlier this month, the $800 million sale of one of South Florida’s largest hotels was called off.

On May 8, Vice Chancellor J. Travis Laster granted Anbang’s motion to expedite the case, setting a trial date for later August.

Laster, who was also the judicial officer who issued the January default judgement against the entities claiming ownership of Anbang’s hotels, expressed skepticism during a hearing that Mirae could prove its allegations about the ownership claims.

“Those folks have vanished into the ether,” he said of Anbang.

“It may be because they never existed in the first place. It may be because they are fraudsters. It may be because they are somewhere in China. I don’t know. But it doesn’t seem to me that that’s going to be a wide-ranging source of discovery,” he said, noting that the case will likely rest on Mirae’s allegations of business interruption related to Covid-19.

It makes the disputed sale of Anbang’s hotels one of the most high profile court cases where the effect of the pandemic is a central issue. The three-day trial will start on Aug. 24.

Write to Erin Hudson at ekh@therealdeal.com

The post Buyer’s remorse?: How Anbang’s $5.8B hotel deal went sideways appeared first on The Real Deal Miami.

Softbank's Marcelo Claure, Masayoshi Son and Rajeev Misra (Getty; iStock)

Softbank’s Marcelo Claure, Masayoshi Son and Rajeev Misra (Getty; iStock)

As SoftBank reports a loss of nearly $18 billion — the largest in its history — and prepares to sell off $42 billion in assets, a long-simmery internal feud is complicating matters further.

The tensions arose in 2018 between Marcelo Claure, now SoftBank’s Chief Operating Officer, and the chief of Softbank’s Vision Fund, Rajeev Misra, when Claure was under consideration for the fund’s board and investment committee, Bloomberg reported. In doing due diligence for the position, Misra’s reportedly team hired a Swiss firm to do a background check on Claure, which focused on his potential ties to money laundering and drug cartels in Bolivia. The investigation cleared Claure’s name, and found he didn’t have any illicit ties or criminal history — except for a bar fight in the 1990s — but the focus of the investigation angered Claure and heightened tensions at the firm.

A Vision Fund spokesman told Bloomberg that one of the fund’s limited partners, not Misra, requested the background check and Misra wasn’t involved in determining its focus.

Bloomberg’s reporting follows a February report by the Wall Street Journal that alleged that Misra orchestrated a campaign of sabotage against two other rivals at SoftBank, Nikesh Arora and Alok Sama. Misra allegedly leaked negative information about them and arranged an unsuccessful “honey trap” attempt against Arora in Tokyo. Misra has denied the allegations.

In addition to the cloak-and-dagger scandals, because the Vision Fund’s structure was not intended to withstand such volatility in the markets, some are questioning Misra’s leadership of the $100 billion technology fund. About $40 billion of the fund is in the form of preferred shares which pay out 7 percent to investors each year. Misra has defended his strategy for the Vision Fund, telling CNBC in March that the portfolio would recover within 18 to 24 months. (A spokesperson for SoftBank denied to Bloomberg that Misra made such statements.)

“Misra and Masa go back a long way, but gratitude should only last so long,” Justin Tang told Bloomberg, head of Asian research at United First Partners in Singapore. “If Misra is not the problem, he’s at least a big part of it.” [Bloomberg] — Georgia Kromrei

The post Internal feud at SoftBank casts doubt on Vision Fund appeared first on The Real Deal Miami.

(Credit: iStock)

(Credit: iStock)

Residential sales fell across the board in South Florida in April as the region was under a shelter-in-place order. A number of sales were canceled or put on hold, and travel was restricted due to the coronavirus pandemic.

Condo sales in Miami-Dade County were impacted the most with a 48 percent year-over-year drop, according to the Miami Association of Realtors. Overall, condo sales performed worse than single-family home sales, likely in part because buildings shut down showings and slowed or paused move-ins and move-outs.

In a previous interview with The Real Deal, Ron Shuffield, president and CEO of Berkshire Hathaway HomeServices EWM Realty, acknowledged, “April is going to be a month people are not going to like.” But he said he was encouraged by the fact that pending sales rose in the first week of May compared to the first week of April.

Despite the steep decline in sales in South Florida in April, prices continued to rise in each county.

Miami-Dade
Residential sales decreased 40.1 percent, year-over-year, in April in Miami-Dade to 1,576 closings. That’s also a 32 percent drop when compared to March, when 2,323 residential properties traded hands.

In April, single-family home sales fell by 31.6 percent year-over-year to 865 closings. Condo sales declined by nearly 48 percent to 711.

Single-family home dollar volume dropped by 24.2 percent to $508.6 million. Condo dollar volume decreased 46.8 percent to $296.9 million.

The median price of single-family homes increased 7.3 percent to $382,000, while condo prices increased 6.9 percent to $265,000.

Broward
Total home sales fell, year-over-year, by 37.4 percent to 1,965 in April. In the previous month, residential sales totaled 2,835, marking a nearly 31 percent month-over-month decline.

Single-family home sales decreased 36.1 percent, year-over-year, in April to 985, and condo sales declined 38.8 percent to 980.

Sales dollar volume fell for single-family homes to $468.7 million, a 33.8 percent decline. Condo dollar volume decreased 37 percent to $231.2 million.

The median price of single-family homes in April was $382,000, a 6.1 percent annual increase. For condos, it was $183,500, a nearly 8 percent increase.

Palm Beach
Residential sales in Palm Beach County decreased 33.8 percent, year-over-year, to 2,052 in April. That’s a 27.6 percent decline from March when sales totaled 2,836.

Single-family home sales declined by 30.5 percent annually to 1,191. Condo deals declined 37.8 percent to 861.

Despite some big ticket sales, single-family home dollar volume decreased 30.2 percent to $690.7 million. Condo dollar volume decreased 34.1 percent to $297.7 million.

The median price for houses grew by 4.3 percent to $365,000, and by 5.4 percent to $195,000 for condos.

The post Home sales dropped big time in South Florida in April appeared first on The Real Deal Miami.

An illustration of Vornado's Steven Roth and Facebook's Mark Zuckerberg

An illustration of Vornado’s Steven Roth and Facebook’s Mark Zuckerberg

On Thursday, Mark Zuckerberg took direct aim at real estate’s holiest of holies: The L word.

“Over time, location will hopefully be less of a factor in how many people work,” he said in a note on Facebook, the $659 billion social media giant he built and leads. “And we’ll have the technology to feel truly present no matter where we are.”

Zuckerberg was announcing the beginning of Facebook’s permanent shift to a distributed workforce, a decision that could see up to half of the company’s 45,000 employees go remote in the next few years. It’s likely to set off a ripple effect among tech companies and rock office markets across the country.

Consider New York, where Facebook occupies more than 1 million square feet of office space at Vornado’s 770 Broadway and Orda Management Corp.’s 225 Park Avenue South. It has also signed for 1.5 million square feet at Related’s Hudson Yards campus, and is reportedly near the finish line for another 740,000 square feet at Vornado’s Farley Building redevelopment.

Last year was the third straight that tech leasing in Manhattan surpassed 3 million square feet, according to CBRE, and was the biggest year for tech leasing on record. In San Francisco and Seattle, tech firms accounted for half or more of new office leases signed in 2019, and about a fifth in New York and Los Angeles.

Now, leases are hard contracts — companies can’t just walk away from them, though many will try. What’s more likely to happen is that building owners will be forced to invest even more in health and safety facilities because tenants will demand that for their employees — and landlords have little leverage.

“Those rules where a landlord for the last 100 years would say, ‘You have a lease, and these are the terms of the lease, and you’re going to live by those terms,’ — those are out the window,” Cushman & Wakefield CEO Brett White said in a recent interview with Fifth Wall Ventures. “They are being forced to do things to support their tenants that they never envisioned, whether it’s rent reductions, rent abatements — landlords in this pandemic have learned very quickly that their existing tenant base is critically important.”

But even if these gleaming towers with their stripped-down aesthetics and open plans have a 10-year grace period thanks to current leases, what happens next? Owners have long counted on tech companies to spread like weeds — or memes — in their office buildings: Facebook started off with just 100,000 square feet at 770 Broadway in 2013, and has grown seven-fold since.

Landlords have also counted on a sort of virtuous cycle in tech leasing: Snag one big name and reap the rewards of the whole ecosystem moving to your ’hood. And that impact isn’t felt just on the office floors. A young, wealthy tech workforce with heaps of disposable income is a godsend for retail. Recall the pre-pandemic scenes at José Andrés wildly expensive Mercado Little Spain or Estiatorio Milos on a weekday afternoon.

“Any real estate decision is location-driven, but with tech tenants, what we’ve found is that that tends to be one of the primary drivers,” Colliers International’s Stephen Shapiro said in December. “In banking or in legal or accounting, you don’t necessarily get that same sense that all the talent wants to be in a two-block radius.”

But if one of the most well-capitalized, profitable companies on Earth doesn’t feel the need to make it to the office every day, how will other firms justify the costs?

The list of companies that have announced a permanent shift toward remote work is filled with heavyweights: Twitter, Shopify, Square. But that’s not the half of it. Consider firms such as Mastercard, Google and Zillow, which have announced that work-from-home is the reality for at least this year, and possibly beyond.

Whereas lost productivity was cited as one of the key reasons that remote work would never work, some tech leaders are now turning that rhetoric on its head. Zillow CEO Rich Barton tweeted that “my personal opinions about WFH have been turned upside down over the past 2 months.” MasterCard’s chief people officer, Chris Fraccaro, told Reuters that companies may find their offices at a third of capacity even once this pandemic is past. Joan Burke, chief people officer of DocuSign, went even further, telling the New York Times that “working from home is a great thing for the company and for the employees, who don’t want to get back in cars and commute for two hours. That’s lost productivity.”

The other upside of going remote for these tech firms could be financial: They paid top dollar for workers in New York and San Francisco because they believed that was necessary to land top talent. In the shift to a remote workforce, they will become more open to hiring anywhere, and anywhere that is not New York or San Francisco is cheaper. Zuckerberg told Bloomberg the company would “localize everybody’s comp on January 1,” which could mean tens of millions of dollars in savings.

Office landlords have bet the farm on tech companies, buying out lesser tenants and stockpiling space in the hopes of their expansion, designing buildings from scratch with them in mind, and offering generous concessions to name-brand firms. The great irony is that these are the companies that are finding it easiest to make the forced transition to remote work during the pandemic: Much of their core work is already distributed across engineering teams globally. The cloud is already part of their DNA.

I’ve been working on a fully distributed/remote basis since leaving a big company in ‘07. I’ve never actually met our back office/CFO equivalent, nor have I ever been in the same room as our corporate lawyers or investment bankers.

— Chris Sacca (@sacca) May 21, 2020

Venture capitalist Chris Sacca, an early investor in Facebook and Kickstarter

The lumbering giants of banking and law are having a harder time with remote work, and their employees and leaders are raring to go back to the office. But these industries are not signing large leases at nearly the rate that Big Tech is: According to CBRE, tech accounted for nearly one-third of the largest 100 leases in the U.S., compared to financial services and insurance at 13.5 percent, or legal, at about 2 percent.

Shortly after Facebook signed at Hudson Yards in November, Stephen Winter, who oversees leasing for Related at the megacomplex, said the deal meant the execution of their business plan was now “beyond perfect.”

“Because now,” Winter said, “it seems that every single major tech company wants to be in and around 34th Street.”

There’s a lot of dust yet to settle, and reports of the death of alpha office markets have always turned out to be greatly exaggerated, but it is worth pondering: If Big Tech can truly be everywhere, does it need to be anywhere in particular?

Write to Hiten at hs@therealdeal.com

The post Revenge of the hoodies: Big Tech may be breaking up with Big Office for good appeared first on The Real Deal Miami.

4238-4276 Northwest 7th Street in Miami, Avison Young’s Michael Fay, John Crotty, David Duckworth, Brian de la Fé, Emily Brais and Berkley Bloodworth

4238-4276 Northwest 7th Street in Miami, Avison Young’s Michael Fay, John Crotty, David Duckworth, Brian de la Fé, Emily Brais and Berkley Bloodworth

Ocean Bank is listing a 3-acre site near Le Jeune Road in Miami by its headquarters that could be developed into a mixed-use project.

The bank is listing the 10-parcel site at 4238-4276 Northwest 7th Street for $16.5 million, according to a spokesperson for Avison Young. The Le Jeune Station site allows for eight stories and 260 residential units to be built, but has upzoning potential to be developed into a 300-unit residential complex with more than 625,000 square feet, according to a press release.

Avison Young’s Michael Fay, John Crotty, David Duckworth, Brian de la Fé, Emily Brais and Berkley Bloodworth are representing Ocean Bank.

Records show the bank bought the properties between 1984 and 1995.

Ocean Bank, one of Miami’s largest community banks with over $4 billion in assets, is led by A. Alfonso Macedo. The site is across the street from Ocean Bank’s headquarters building, which it also owns.

The property is also near Miami International Airport and Melreese Country Club, a public golf course where a David Beckham-led development group plans to build a Major League Soccer stadium complex.

Nearby, Sergio Pino’s Century Homebuilders is building 230 multifamily units and about 200,000 square feet of office space at 850 Le Jeune Road.

The post Mixed-use Le Jeune Road dev site heads to market for $17M appeared first on The Real Deal Miami.

Stagnant water in office buildings may pose risk to returning workers (iStock; CDC)

Stagnant water in office buildings may pose risk to returning workers (iStock; CDC)

Workers abandoned their office buildings in mid-March to heed stay-at-home orders. But their absence may allow for the accumulation of other health risks.

A new study, conducted by Purdue University researchers Dr. Caitlin Proctor and Dr. Andrew Whelton, argues that standing water — and bacteria — may proliferate in unused office buildings, the New York Times reported. That could open the door to other diseases, the biggest concern being an outbreak of Legionnaires’ disease, caused by the virus Legionella, which has a death rate of about one in 10, according to the Center for Disease Control.

“Not every building will have issues but based on what we know, enough of them probably will,” Dr. Proctor said.

Some areas of the country have been under shelter-in-place orders for two months, including New York, which shut down on March 22. Hotels, gyms and other commercial properties could be at risk as well.

The study assessed 21 different guidelines for office building managers to keep their buildings safe, developed during the coronavirus pandemic — not all of which are “created equal,” said Dr. Proctor. Typically, office building managers add small amounts of disinfectant to the water, but that can dissipate after even one weekend of stagnation, Whelton said.

Other steps building managers can take include flushing out old water to bring in a new supply, using a high dose of infectant or raising the temperature enough to kill bacteria.

Bill Rudin, CEO of Rudin Management, said that taking such safety steps are standard procedure in his company’s buildings.

“Our engineers go through the building testing systems all the time,” he said. “That’s standard procedure.”

In 2015, New York City suffered its worst outbreak of Legionnaires’ disease in its history. More than 120 people were infected and 12 died. The outbreak concluded when health officials identified the culprit: a contaminated cooling tower at the Opera House Hotel in the South Bronx. [NYT] — Georgia Kromrei

The post Empty office buildings may give rise to other health risks appeared first on The Real Deal Miami.

Joyce Bromberg (Convene via Twitter)

Joyce Bromberg (Convene via Twitter)

Convene’s top design executive is stepping down after more than 10 years with the firm, the company announced Thursday.

Joyce Bromberg, Convene’s chief design officer, is resigning, just as the flex-space company braces for a gradual reopening of its 30-plus locations.

The reason for her departure was not immediately clear, but according to a press release, she described her time at Convene as “the best part of my career and truly a privilege for me to help design great spaces, create strategies, and to allow work to be about love.”

According to Convene, Bromberg came out of retirement to join the firm in 2010, where she eventually led a team that designed Convene’s locations and created the company’s workplace strategy.

Convene, along with other flex-office companies, has grappled with a dramatic drop in business due to the coronavirus pandemic. In March, the firm laid off a fifth of its workforce, or about 150 employees.

Workplace design will likely play a large role in how businesses navigate a return to their offices. Earlier this month, the firm revealed plans to reduce office capacity by 50 percent and to reconfigure its spaces to allow workers to maintain social distancing.

Convene — backed by investors including RXR Realty, the Durst Organization and Brookfield Asset Management — has locations in New York, Los Angeles, Chicago, Boston, Philadelphia and Washington, D.C.

Write to Kathryn Brenzel at kathryn@therealdeal.com.

The post Convene’s top design exec steps down appeared first on The Real Deal Miami.

Bed Bath & Beyond is planning to reopen 600 U.S. stores as states begin to wind down shelter-in-place orders. (Getty)

Bed Bath & Beyond is planning to reopen 600 U.S. stores as states begin to wind down shelter-in-place orders. (Getty)

Bed Bath & Beyond is planning to reopen 600 stores across the country, the latest chain retailer to unlock its doors as states wind down shelter-in-place orders.

The home-goods company estimates about half its stores will be open by June 13 — subject to local regulations — and it will roll out curbside delivery at an additional 600 stores. Curbside pickup will be available at 90 percent of its 1,500 stores across the U.S. and Canada, the company announced Friday. It estimates the measures will bring back 11,000 employees who are currently furloughed due to measures around the pandemic.

“Our financial flexibility allows us to take this patient, market-by-market approach, while we invest in rebuilding our business and introducing new services for our loyal customers,” Bed Bath & Beyond president and CEO Mark Tritton said in a statement.

Tritton joined the company in November after activist investors pushed out its top executives. In December, he restructured the leadership team, letting six executives go. And in January, Bed Bath & Beyond sold about half its real estate assets to private equity firm Oak Street Real Estate Capital and then leased back the space.

The reopening of hundreds of stores comes as the retail industry — already crippled under competition from ecommerce — faces increasing pressure on all sides, made worse by the coronavirus crisis. A number of big retail chains, including Neiman Marcus, J.C. Penney and J. Crew filed for bankruptcy in the last month.

With stores closed across the country, rent collections among 135 major chains plunged 58 percent in April. Mall giant Macerich reported that it collected only 26 percent of April rent payments across its 47 shopping centers. And now, some malls that have reopened are seeing only a fraction of normal foot traffic.

The post Bed Bath & Beyond to reopen 600 US stores appeared first on The Real Deal Miami.

Miami Beach Mayor Dan Gelber and City Manager Jimmy Morales (Credit: Nicholas Hunt/Getty Images, and Mike Coppola/Getty Images)

Miami Beach Mayor Dan Gelber and City Manager Jimmy Morales (Credit: Nicholas Hunt/Getty Images, and Mike Coppola/Getty Images)

UPDATED, May 22, 4:43 p.m.: Hotels and beaches in Miami Beach and throughout Miami-Dade County could open June 1.

The Miami Beach City Commission voted unanimously on Friday morning to allow hotels and beaches to reopen next month. Shortly after the vote, the county announced it would target June 1 as the reopening date in coastal municipalities countywide.

A group of coastal mayors and city managers in Miami-Dade met virtually on Friday and plan to meet again on Tuesday to go over the proposed plan. They were from North Bay Village, North Miami Beach, Aventura, Miami Beach, Bal Harbour, Golden Beach, Key Biscayne, Bay Harbor Islands, Surfside, Sunny Isles Beach, according to a county spokesperson.

Miami-Dade entered Florida’s first phase of reopening on Monday, but Miami Beach, Miami and Hialeah waited until Wednesday to begin allowing non-essential businesses to reopen. Restaurant dining rooms in those three cities will be able to reopen May 27.

Hotels in Miami-Dade, with the exception of essential lodgers, were ordered to close March 23.

The county’s guide to reopening hotels includes increased cleaning protocols in the rooms, common areas and check-in desks. Hotel employees will be required to undergo training to comply with the new regulations. Guests will be required to only congregate with people from the same household, and both guests and workers will also have to wear masks in all common areas. Like in other businesses, elevators will allow fewer people, and valet will not be an option where onsite parking is available.

Many hotels in South Florida have laid off or furloughed all or the majority of their employees since the county ordered hotels to close.

Hotel owners in Miami-Dade, Broward and Palm Beach counties have $4.2 billion in commercial mortgage-backed securities debt, based on an analysis by data provider Trepp. Hotels such as the Fontainebleau Miami Beach have entered special servicing, presenting new challenges for property owners.

Miami Beach City Manager Jimmy Morales said he would recommend that beaches open with social distancing guidelines in place and would allow concessions to operate. Beachgoers would not be required to wear masks, but would not be able to congregate in large groups.

The Florida Keys will reopen to visitors on June 1, allowing hotels and vacation rentals to operate at 50 percent capacity.

The post Miami-Dade targets June 1 opening date for hotels, beaches following Miami Beach vote appeared first on The Real Deal Miami.

Easton Group’s Jose Hernandez-Solaun and and aerial of the site

Easton Group’s Jose Hernandez-Solaun and and aerial of the site

UPDATED, May 27, 10:45 a.m.: A company tied to the Easton Group bought an 8.4-acre property in Hialeah Gardens for $8.2 million.

Doral-based Easton Group bought the vacant land off the Florida Turnpike and Northwest 144th Street for $976,190 per acre, records show. A company tied to Ebsary Foundation Co., led by Richard Ebsary, sold the property.

Easton Group is planning to build a 266,000-square-foot warehouse on the property at Northwest 144th Street and an adjacent property, which will be used for e-commerce, according to Dalton Easton, who helped arrange the deal. The warehouse will start construction in the first quarter of 2021, according to Easton.

The land was last purchased for $3.8 million in 2016, records show.

Easton Group bought the adjacent property in September for $5.6 million, records show.

Easton Group was founded by Edward Easton in 1974. The firm handles commercial real estate sales, marketing, investment, brokerage, property management and development, according to its website. Its projects include International Corporate Park, a 300-acre master-planned business park west of Miami International Airport; and Seneca Commerce Center, a 48-acre master-planned office and industrial project in Broward County.

South Florida’s industrial market continues to remain one of its hottest asset classes. More developers are pushing west to Hialeah Gardens as land becomes scarce in the rest of Miami-Dade County. In October, Foundry Commercial purchased an 18-acre site in Hialeah Gardens, where it plans to build a 320,000-square-foot speculative industrial development.

The Hialeah Gardens and Medley submarket has 1.2 million square feet of warehouses under construction, according to Colliers International South Florida’s first quarter report. Warehouses in the submarket have a vacancy rate of 5.7 percent, according to the report.

The post Easton Group picks up land in Hialeah Gardens for $8M appeared first on The Real Deal Miami.

Seritage Growth Properties stopped construction at Esplanade at Aventura because of the pandemic, and now Mexican restaurant Carolo wants to break its lease.

Seritage Growth Properties stopped construction at Esplanade at Aventura because of the pandemic, and now Mexican restaurant Carolo wants to break its lease.

While most construction projects in Miami-Dade are chugging along, work came to a halt at Esplanade at Aventura during the past two months of the coronavirus pandemic. As a result, a Mexican restaurant operator wants to break its lease with landlord Seritage Growth Properties.

The publicly traded REIT is redeveloping the former Sears site at 19505 Biscayne Boulevard into Esplanade at Aventura, a 215,000-square-foot shopping plaza. While the project will be adjacent to Aventura Mall, it is not affiliated with the mall’s owners Turnberry Associates and Simon Property Group.

A rendering of Esplanade at Aventura

A rendering of Esplanade at Aventura

Carolo Holdings sued subsidiary Seritage SRC Finance LLC in Miami-Dade Circuit Court on Monday, alleging it can terminate the lease because construction is at a “standstill.” Carolo, which agreed to lease 13,114 square feet roughly a year ago, is seeking the return of a $1.7 million cash deposit the company provided Seritage while waiting for a letter of credit approval.

Craig Barnett, a Stearns Weaver Miller shareholder representing Carolo, said Seritage refused to provide a timetable for when construction would resume, and then denied Carolo’s request to tear up the lease amicably.

“Given all that is happening in the current situation, it is more important than ever for landlords and tenants to work cooperatively,” Barnett said. “Carolo Holdings attempted to do just that with this landlord. Unfortunately, the landlord refused and left no alternative.”

Matthew Fernand, Seritage’s executive vice president and general counsel, and Avi Benayoun, a Greenberg Traurig shareholder representing the REIT, did not respond to phone and email messages requesting comment.

According to the complaint, Seritage stopped construction on March 23, citing concerns for the safety of workers building Esplanade at Aventura. Carolo alleges Seritage hit the pause button out of concern for its own financial strength and the economic viability of the project in the wake of the pandemic. Seritage has refused to reconsider its suspension of construction until the end of May, the lawsuit states.

Earlier this month, Benayoun wrote letters to Barnett asserting Seritage did not breach the lease agreement and that suspending construction was a prudent move.

“We should mention that the landlord is appreciative of your partnership to this point and hopes that the parties can work together to get through this unique and unprecedented situation,” Benayoun wrote on May 7. “The landlord looks forward to moving forward with the development and having your client’s restaurant be a part of the shopping center.”

Benayoun also noted that Seritage is continuing to hold regular construction and planning meetings with its construction manager, contractors and tenant coordinator, some of whom remain on-site.

Seritage is a spinoff of Sears that acquired 180 former Sears and Kmart stores across the country and is redeveloping the former big box spaces. Between February and mid-March, the company’s stock price plummeted from the high $30s to trading below $10 a share, where it has remained. On Wednesday, Seritage’s stock price closed at $7.63 a share.

Other signed tenants at Esplanade at Aventura include co-working space firm Industrious; The Loyal by Michelin-starred chef John Fraser; Jarana, by Peruvian chef Gaston Acurio; Joey Restaurant; and Pinstripes, an entertainment concept with bowling and bocce.

The post Esplanade at Aventura work stoppage leads to lawsuit by Mexican restaurant appeared first on The Real Deal Miami.

Barry Sternlicht (Photo by Emily Assiran)

Barry Sternlicht, who has amassed an estimated net worth of $3 billion over the years, is co-founder, chairman and CEO of Starwood Capital Group. The investment firm manages more than $60 billion in assets, and Sternlicht is launching a public company focused on special acquisitions that will hold a $600 million IPO in May. Sternlicht is now on the hunt for discounted properties, including distressed hotels. The Brown University and Harvard Business School graduate got his start in real estate investment at JMB Realty. Sternlicht was laid off from the company in 1990, following the market’s collapse, and went on to launch Starwood the next year with his partner at the time, Robert Faith. In one of their first deals, they bought apartments from the Resolution Trust Corporation — which the federal government formed to hold and liquidate properties owned by failed savings and loans in the wake of the S&L crisis. Starwood, which is building its new headquarters in Miami Beach, now employs more than 4,000 people across 16 offices on three continents. Over the past three decades, the company has acquired and developed more than 150 million square feet of office, retail and industrial space, 300,000 hotel rooms and 180,000 multifamily units. Starwood has also invested about $7 billion in energy infrastructure and $230 million in oil and gas. While the company has largely withstood the pandemic so far, Starwood has had to furlough some of its hotel workers. Sternlicht told The Real Deal he’s optimistic the hospitality industry will rebound from the pandemic, but said he’s more skeptical about the future of retail and voiced his many frustrations with Amazon. In a wide-ranging Zoom interview from his home in South Florida, the billionaire CEO also talked about everything from his stance on restarting the economy and his relationship with Donald Trump to his father’s harrowing experience during World War II.

DOB: November 27, 1960
Lives in: Miami Beach
Hometown: Stamford, Connecticut
Family: Divorced with three children

I always start with the hardest question: What is your full name? Barry Stuart Sternlicht.

Where were you born? Long Island. Stamford, Connecticut, is really where I grew up. I moved there at like 4 or 5 years old.

What were you like as a kid? Happy and a frustrated jock. I was pretty good at most sports but not great at anything. I actually taught tennis to earn a living during my summers before college.

Were you a good student? Yeah, I was a pretty good student. I always leaned toward the humanities. My major at Brown was called Law and Society. I used to call it Lost in Society because it was a major that combined economics, political science, history and philosophy.

Your father was a Holocaust survivor. Did he ever discuss that with you? Yes, but not until I was 38. I took him back to Poland. I think that was when he first told me that he killed someone during the war. He was not in a camp. He was lucky to survive in the mountains, and he was liberated by the Russians.

How do you think that experience shaped his worldview and how he raised you? I think he had a hard time trusting people. He always felt a little bit like an outsider, even though he married a gal from Brooklyn. He obviously taught me to be tough. My worst day was probably better than his best day during that eight- or nine-year period. He was angry, though — he really had a lot of anger against the Poles for their behavior during the war.

How did you get started in real estate investment? I really didn’t start in real estate until after business school. I had an offer from Goldman Sachs, which I didn’t take, and I went to JMB Realty instead. I always walked a little less conventional route, and that was the less conventional route.

Let’s fast-forward to the present, with Covid-19 continuing to wreak havoc on the world. What’s your next big move as an investor? I don’t know. Well, I’m not going to tell you. Too many of my competitors are going to hear about this. I think a crisis is a terrible thing to waste. I was exceptionally bullish on CNBC on March 13 and said we’d have a very quick recovery.

Are you referring to your comment about the pandemic being World War III for 90 days? Yup. I got that right. But with the fallout from Covid in the real estate markets, it will take time to figure out which tenants survive and which tenants don’t. The equity markets reprice overnight, and the real estate markets don’t.

You’ve said Starwood will look to be opportunistic during the pandemic. Does that mean you’ll look to buy properties at discounted prices? We will. We’ve probably laid out half a billion dollars in the last 45 days, but we haven’t bought any individual assets yet, although we have been actively acquiring public equities and CMBS securities. When it looks like the world is totally ending, that’s the hardest time to actually push the button and buy something.

Are there certain types of assets that you’ve got your eye on? We have a pretty deep background in hotels, and I’m willing to buy cheap real estate in the hotel space because I believe in the asset class. I think I know what we can do with them. Our thinking is: “Okay, where will we be in 24 months? Let’s not worry about the slope of the recovery right now.”

What’s your outlook on distress bets these days? We love distress markets from a buyer’s standpoint. I like markets like this where you have to hustle. Hopefully, we’re big enough now to help people survive, too. They can come to us, and we can give them capital.

Barry Sternlicht in the Zoom interview with The Real Deal’s Eddie Small

How do you feel about restarting the economy? Do you think it’s time to start lifting some of the social distancing restrictions? Yes. We have to reopen the economy, and we have to do it soon. People who are at risk should stay home, but the vast majority of people are probably not at risk. We have to open with protocols, and we have to watch the results really carefully, but that can be zip code by zip code. The medical experts, they’re the same people who told us that 2.5 million people would die. They’ve since revised their forecasts.

Have you had to lay off any workers or cut salaries? Not at the parent company or the asset manager. At our most impacted assets like hotels, we had no choice.

If you had to boil it down to one point, what is your biggest concern about the pandemic in the long run? I’ll give you two. One is treating money as if it’s free and doesn’t matter. I do think we should spend trillions of dollars. I just think we should be super careful about how we spend it.

What’s the second one? I worry about fear-mongering. I heard a mayor say the other day that she’d keep her city closed until a vaccine was found. That may not be until next year — the country would be in a depression. You cannot keep [more than] 30 million people on unemployment. The whole financial system will collapse. We can keep our hotels closed for a few months. We can’t keep our hotels closed for a year and a half.

What has been the pandemic’s biggest impact on Starwood so far? I suppose hotels, but I think it’s just temporary there. We have some retail outfits, but they’re not really significant investments. For retail, this was a dagger to the chest.

Do you see a way forward for retail after all this? Walmart’s big enough to survive. Target and Costco seem to be doing fine. But I don’t want to walk down Main Street in Greenwich and see a Costco. I’m not interested in seeing an Amazon outlet. I like the mom-and-pop stores. I have to say, I’m not a fan of Amazon. They’re demolishing the Main Streets of America, and they could behave a lot more benevolently to communities.

Are there any Starwood assets that you think are well-positioned to hold up during the pandemic? We have apartments, and so far they’ve held up really well. We have 98 percent of the rent, so I’m pretty happy about that. Our best-performing asset, the one I’m happiest about, is a company we call InTown Suites. It’s classified as a hotel, but it’s a low-end extended stay, so people use it as an alternative to housing. We have 196 properties, 24,000 keys, and we’re 80 percent occupied.

How long do you think it will take for the hospitality industry to recover from this? It’s going to vary [depending on] the kind of asset you have and your location. I expect high-end resorts to do okay. The large fly-to markets and the large convention businesses will come back last. That’s Vegas and New Orleans and Chicago’s convention center base.

Do you see demand for office space going down after this, especially with so many people now working from home? The faster you reopen the economy, the faster people get back to their old habits. We might have less demand for space if companies are nervous about the economy and don’t need to expand, but they’re probably going to offset that by social distancing themselves a little bit. I think we’re down to like 220 square feet per employee, but they’ll go back to the 250 or 300 square feet you had 10 or 15 years ago. You’ll inch your way back that way.

You said before the pandemic that a bubble in tech stocks could impact office leasing by some of those companies. Does the same theory apply now? As long as those tech companies are growing, there’s going to be demand for office space, regardless of what’s going on. The government is busy trying to get money to the unemployed, as it should be, rather than breaking apart Google or Amazon. I do not know how it can get much better for those companies.

Are you bullish on any particular company stocks these days? I might have been one of the more vocally bullish people on the equity markets. But I did not expect the market to be down 10 percent from where it was pre-Covid.

You had been warning of a recession well before the pandemic. Are we in it now? Yeah. I thought that the country would slow its investment cycle this year. I didn’t realize you’d have Covid to deal with. There are two things I worry about coming out of this. One is our relationship with China. The outcome of that relationship is critical not only for U.S. economic growth but for the world. The second thing is the political climate. We’re going to have an election. It isn’t going to be kumbaya, I love you, you love me. This is going to be ugly.

Do you consider yourself a Republican, or are you more flexible ideologically? What are you, crazy? I’m an independent. I’m socially liberal and fiscally conservative. I think capitalism is the best form of government, but I think it needs to be regulated.

How would you rate the Donald Trump presidency so far? There’s one positive thing I’d say about the Trump presidency: If you’re a businessman, you’re no longer demonized. What I objected to under the Obama administration was the thought that we were morally corrupt for succeeding. I do think there are certain things that the federal government can uniquely do, like defense spending, and there are national priorities, like energy. We still don’t have an energy strategy.

What about a national pandemic strategy? Well, we had one [for an influenza pandemic] under Bush, and it was abandoned and dropped, so I guess we need one now.

When did you first meet Trump? I’ve known him for decades. He came to the opening of the first W Hotel on Lexington Avenue in 1998, so I probably met him around 20 years ago.

Do you consider him a friend? I consider him a friend, but I don’t talk to him as president. I haven’t been involved in the administration. I’m pro-choice, and the environment is another very important issue to me. It’s complicated.

What is the biggest mistake you’ve made in your career? Randsworth, that’s easy [JMB acquired the London property owner for $425 million in 1989, and by 1992, Citicorp forced it into bankruptcy, according to Forbes]. It really wasn’t my mistake, but I got blamed for it.

More recently, we bought some retail assets. I probably didn’t have the right management team for them, and I didn’t realize how quickly the retail space as we knew it would be reorganized and dismantled.

What do you like to do to unwind? I golf. My tennis career is still around. I work out and bike, and I travel and drink wine.

You have two sons and a daughter. Do you get to see and talk to them on a regular basis? I see them all. My daughter’s an hour away right now. I am divorced, though. I was married for 25 and a half years.

Are you still in touch with your ex-wife? All the time.

Are you dating anyone these days? I’m going to pass on that question.

Where do you live? I live in Florida, in South Beach.

Do you have any other homes? Yes. I have a home in New York City and on Nantucket.

Are you abiding by the stay-at-home rules in Florida? Well, I’m working from the house, but I’ll drive this weekend to play golf in a neighboring county. So it’s stay-ish at home for me.

What are you most looking forward to doing once the pandemic ends and social distancing restrictions ease up? Traveling. Going to Europe for the summer. I’m also excited to get back to the office. I’m not one of those people who’s in love with working from home. I like having people around me.

This interview has been edited and condensed for clarity.

The post The Closing: Barry Sternlicht appeared first on The Real Deal Miami.

States Title CEO Max Simkoff (iStock, States Title)

States Title CEO Max Simkoff (iStock, States Title)

A San Francisco startup that’s digitizing mortgage, title and escrow said it raised $123 million — sinking another nail into the coffin of time-consuming and cumbersome real estate closings.

The funding round brings States Title Inc. valuation to $623 million, according to Bloomberg. The round was led by Greenspring Associates, with participation from Foundation Capital and FifthWall Ventures.

Greenspring’s Jim Lim said that stay-at-home orders meant to curb the coronavirus pandemic have “highlighted the fact that there’s probably a better way to do real estate closing.”

States Title was founded in 2016 and counts bank and non-bank lenders among its clients. In 2018, the firm received regulatory approval in California to branch out into title insurance, a notoriously opaque part of real estate deals.

Led by CEO Max Simkoff, States Title has raised $230 million, including the recent round. Last year, it acquired North American Title Group and North American Title Insurance Co.

Historically, the title industry was dominated by the so-called Big Four: Fidelity National, First American, Old Republic and Stewart Information Services Corporation. (Fidelity nearly bought Stewart for $1.2 billion last year, until the deal fell through.)

But fintech firms have set their sights on the archaic business, with startups like Spruce and OneTitle angling for market share.

[Bloomberg] — E.B. Solomont

The post States Title raises $123M to digitize title, mortgage and escrow appeared first on The Real Deal Miami.

With property tax deadlines quickly approaching or having already passed many state and local governments are in a bind.

Taxes from real estate bring in huge chunks of revenue to cover essential services for municipalities, which are at a high need during the pandemic. And without that money, some cities may have to float bonds or file for bankruptcy. A small share of the property taxes are designated to state services, which poses an additional problem at the state level.

At the same time, many residents are still cooped up at home, and commercial real estate owners are now grappling with red ink, as stores, restaurants, gyms and other retailers increasingly fail to pay rent. For multifamily landlords, unemployed tenants present a similar problem. And for some hotels and tourism companies, the situation’s even worse.

Counties around the U.S. have proposed a variety of different solutions — from delaying tax payments to completely reassessing property values — but the money will have to come from somewhere to continue funding essential services.

And while many have compared the coronavirus to Sept. 11, 2001, and the 2008 financial crisis, a growing number of experts believe the impacts on real estate could be far worse. Some say the hardest hit companies may not survive, especially those without corporate backing.

“Do they ever come back, or is this the end of that era?” said Julio Gonzalez, founder and CEO of tax engineering firm Engineered Tax Services. “The whole landscape is changing.”

Weighing the Big Apple

There’s no doubt New York City has been hit the hardest by Covid-19.

To help homeowners, the city is offering some payment plans and deferral programs for property taxes. But the first half of property tax payments are still due on July 1.

For the 2019 tax cycle, New York City billed $30 billion in property taxes, according to tax experts in the area.

Under current tax laws, all payments must be made on time, and those who miss the deadline are charged 18 percent interest compounded daily. Hotels, theaters and shopping centers — which have been especially hard hit — are still expected to pay on time despite having no active income for the last several months.

“Not only are my clients crying out for cancellation or postponement, they need an announcement now so that they can use these anticipated tax funds to pay for salaries, maintenance and operations,” said Joel Marcus, a partner at the NewYork-based real estate tax and litigation law firm Marcus & Pollack.

Surveying the Sunshine State

Florida is not going to see the real effects of the coronavirus until the next tax cycle due to the “lien date.” This is a date set by the state to assess property values. Next year’s lien date is Jan. 1, 2021. In addition, many Florida property owners already paid this year’s taxes because the state gives taxpayers a 4 percent discount if they pay in November when the bills arrive.

But Logan Gans, a partner at the law firm Shutts & Bowen in Miami, said that he anticipates the next tax cycle to be much more difficult — especially for the decimated tourism industry.

Florida property tax rates are based on two components: the property value set on Jan. 1, 2020, and the millage rate, which is the amount a property owner has to pay in taxes for every $1,000 of their property’s assessed value.

Miami proper billed about $2 billion in property tax revenue in 2019, and of that amount, $445 million is put toward city services, according to tax experts in the area.

Not only were properties valued before the coronavirus hit, but many counties are overstressed with the pandemic and need more money to pay for essential services, which will affect the millage rate, according to Gans.

“If the federal government isn’t going to help the state and local governments out, then the counties are going to have to raise revenues themselves or else go into bankruptcy,” he said.

The City of Deferred Dreams

In Los Angeles County, annual property tax bills are paid in two installments — the first was due in December and the second was due this April. Both deadlines had a 10 percent interest rate attached to delinquent payments.

Gov. Gavin Newsom announced an executive order to waive late payment penalties on property taxes if the taxpayer can prove a correlation between coronavirus and ability to pay. But it appears this relief is not available to taxpayers who were in default on certain property taxes prior to March 2020, said Kevin Moore, of the local law firm Kevin J. Moore & Associates.

For the 2019 tax cycle, Los Angeles County billed about $2 billion in property taxes, according to tax experts in the area.

Moore said that multifamily properties have been hit the hardest. “Banks are not lending or refinancing on these types of property for fear that tenants will not be paying rent and the owner cannot evict,” he noted.

Michael Lebeau, an attorney at Bewley Lassleben & Miller, said the state’s tax codes include a provision that could potentially provide property tax relief for regions that have experienced a natural disaster. But California courts have held that it only applies if the governor declares a disaster and there is physical damage as well as restricted access to property.

In the era of coronavirus, it’s unclear whether this disaster relief will apply to the current circumstances.

Windy City Headwinds

Chicago is taking a different approach in trying to remedy the issue of property taxes during the pandemic. On April 3, Cook County Assessor Fritz Kaegi said he would reassess the entire county from top to bottom. That’s roughly 1.8 million parcels of land.

“How he’s going to do that is a mystery to all of us,” said George Relias, founder of Chicago-based law firm Relias Law Group. “The speculation is that he’s going to have to use some kind of mass appraisal methodology, like a percentage across the board to reduce assessments.”

Relias said if this is the approach Kaegi takes to reduce property values, it will not end up saving taxpayers money. He said the tax rate will increase to compensate for the reduced values.

About $6.7 billion in taxes were billed for the 2018 cycle, of which about $1.5 billion goes to city services, according to local tax experts.

Meanwhile, some retail landlords are offering relief to tenants by extending their leases to allow time for the tenant to pay back what is owed.

Along with retail, Relias said office space is “going to be crushed” in the long run, which may result in adaptive reuses of buildings

The post How the pandemic is shaking up property taxes in 4 major markets appeared first on The Real Deal Miami.

Luis Castillo, Eric Williams, Danny Finkle and 6701 Red Road

Luis Castillo, Eric Williams, Danny Finkle and 6701 Red Road

A fund managed by Zurich Alternative Asset Management purchased the Whole Foods-anchored retail portion of a building in Coral Gables, as demand for South Florida’s grocery-anchored shopping centers continues to be strong.

The Zurich-managed fund paid $46.75 million for the nearly 60,000-square-foot retail share of Plaza San Remo, The Real Deal has learned. Prudential Insurance Company of America sold the commercial condos at 6701 Red Road, property records show.

JLL’s Danny Finkle, Luis Castillo and Eric Williams represented the seller. In addition to Whole Foods, other tenants include Pediatric Associates and Oxxo Care Cleaners.

The price breaks down to $783 per square foot.

The seven-story mixed-use building was completed in 2007 and includes a parking garage and medical office space that was not part of the sale.

Sean Bannon, managing director of U.S. Real Estate for Zurich, said in a release that the property offers the fund’s international investors “an attractive yield, term and credit” and that Zurich will continue to invest in South Florida.

The property is across Red Road from the Shops at Sunset Place, which is expected to be redeveloped. Last year, the South Miami City Commission voted in favor of several ordinances that will allow a partnership between Federal Realty Investment Trust, Grass River Property and The Comras Company to transform the roughly half-a-million-square-foot shopping center into a mixed-use project featuring a reimagined mall, a pair of apartment buildings and a hotel.

In April, Publix Super Markets, which owns and operates a store near Whole Foods, paid $23 million for the site of a new store nearby that’s expected to replace its existing location.

Retail landlords with grocery stores as tenants are likely breathing a sigh of relief, since grocery stores have been allowed to stay open over the past couple of months during the pandemic.

The post Whole Foods-anchored retail in Coral Gables sells for $47M appeared first on The Real Deal Miami.

Mastercard CEO Ajaypal Singh with 150 Fifth Avenue and Facebook CEO Mark Zuckerberg with Moynihan Station in New York (Getty; Google Maps)

Mastercard CEO Ajaypal Singh with 150 Fifth Avenue and Facebook CEO Mark Zuckerberg with Moynihan Station in New York (Getty; Google Maps)

Facebook and Mastercard are the latest major employers to rethink their office needs as remote work grows in appeal.

Mark Zuckerberg informed Facebook’s 45,000 workers on Thursday that the tech giant would shift toward more working from home, the Wall Street Journal reported. Over the next decade, the Facebook chief expects that nearly half of the company’s employees will no longer be working in offices.

Mastercard, too, is reassessing its physical footprint and mulling a consolidation of its operations, according to Reuters. Once social distancing measures are relaxed, some companies may see office occupancy reach only 30 percent, Mastercard’s Chief People Officer Michael Fraccaro told the outlet.

Since the coronavirus pandemic forced businesses across the U.S. to shutter, both companies’ employees have been working from home. But as employers become accustomed to remote work — and realize the potential cost savings in shrinking their office holdings — more companies have decided to do so permanently.

This month, Twitter CEO Jack Dorsey said most of its employees could work from home once the spread of the pandemic subsides. Should that trend continue, office landlords in major U.S. cities would face a reckoning.

VIDEO: Office landlords: Don’t eat before watching this

Though Mastercard owns its headquarters in Westchester, New York, it has offices across the globe — including L&L Holding’s entire 200,000-square-foot, 11-story office building at 150 Fifth Avenue in the Flatiron District.

Facebook, meanwhile, leases millions of square feet of office space across the country. Though the tech company owns much of its sprawling campus in Menlo Park, it has recently gobbled up big spaces in newly built offices on Manhattan’s West Side. Last year, it signed a lease for 1.5 million square feet across three towers at Related Companies and Oxford Properties’ Hudson Yards. At 50 and 55 Hudson Yards, the company is paying a base rent of $130 and $116 per square foot, respectively.

Plus, it’s still nearing a deal to sign a lease for 700,000 square feet at Vornado Realty Trust’s redevelopment of the Farley Post Office.

Manhattan Borough President Gale Brewer said on a recent TRD Talks Live web discussion that anxiety was growing among the city’s commercial real estate community.

“People have not only learned to work at home and enjoyed it, but guess what,” she said, “it’s going to save money for the company that is renting at a vast cost per square foot.” [WSJ, Reuters] — Danielle Balbi

The post Facebook, Mastercard rethink office footprint appeared first on The Real Deal Miami.

Mall of America in Minnesota (Farragutful via Wikipedia)

Mall of America in Minnesota (Farragutful via Wikipedia)

The country’s largest shopping mall has reportedly fallen behind on its $1.4 billion mortgage, posing a threat to the wider bond market.

The Mall of America in Minnesota, which features more than 500 stores across 2 million square feet, missed mortgage payments in both April and May, according to the Financial Times.

The mall has been shut since March because of the pandemic, and has reportedly notified its mortgage servicer, Wells Fargo, about hardship stemming from the closure.

Retailers across the country have been hit hard by the pandemic, which has led to mass store closures and layoffs. Earlier this month, Neiman Marcus, the anchor tenant at Related Companies’ luxury Hudson Yards mall, filed for bankruptcy. J. C. Penny, another major department store chain, filed for bankruptcy last week.

The pressure on retailers has implications for the commercial mortgage-backed securities market, which distributes loans through bonds.

The FT reports that upward of one in five loans bundled into commercial mortgage-backed securities are currently on “watch lists” that are recorded by mortgage-servicing companies.

Last month, Don Ghermezian of Triple Five Group — owner of Mall of America — said in an interview that “many malls will be headed into default” if they can’t secure federal assistance.

The mall is set to reopen in June. [FT] — Sylvia Varnham O’Regan

The post Mall of America falls behind on $1.4B mortgage appeared first on The Real Deal Miami.

(Credit: iStock)

(Credit: iStock)

Luxury condos in Greater Downtown Miami sold for about $3.3 million on average in the first quarter, but the average price dropped in May to just over $2 million, suggesting opportunities for buyers.

The 36.3 percent price difference between the average closed price and the current listing price is a snapshot of pre-pandemic and current buyer and seller expectations in Greater Downtown Miami, according to Peter Zalewski, principal at Condo Vultures Realty and a bulk investor, who compiled the data.

The spread suggests that the luxury condo market is “dead in the water,” Zalewski said. In a TRD webinar last month, he warned that condo pricing will fall.

The MLS statistics he referred to cover Miami’s Brickell, downtown, Arts & Entertainment District and Edgewater. The figures compare closed sales in the first three months of the year to inventory and asking prices as of May 11. They do not include new development sales.

There were 593 active listings of luxury condos priced at $1 million and up, and nearly 85 months of supply, or seven years, as of early May. In the first quarter, 21 luxury deals closed, according to the data.

Some sellers may be pulling listings from the market amid the pandemic, or holding off on listing their luxury condos.

Zalewski said that though the first quarter data includes closings from March, when Covid-19 began to impact the market, it will give the best indication of how the market was performing prior to the pandemic.

“The first quarter of 2020 was effectively the peak of winter buying season,” he said. In addition, Miami hosted Super Bowl LIV in February, bringing wealthy buyers down to South Florida.

Residential sales throughout Miami-Dade, Broward and Palm Beach counties rose in the first quarter, according to the Miami Association of Realtors.

Though the average price of active listings of luxury condos fell compared to sale prices in the first quarter, the reverse occurred for the entire Greater Downtown Miami market, including sales and listings at all prices.

The average asking price of condos as of May 11 was $772,050, but the average closing price in the first three months of 2020 was $524,375. That marks a nearly 43 percent spread between the two.

The overall market also has a supply problem, Zalewski’s report shows. With 3,447 units on the market and 147 closed sales in the first quarter, there are about two years of supply of condos in Greater Downtown Miami.

The post Luxury condo prices drop in downtown Miami amid lockdown appeared first on The Real Deal Miami.

 Rendering of Father Marquess-Barry Apartments with Matt Rieger

Rendering of Father Marquess-Barry Apartments with Matt Rieger

Housing Trust Group closed on financing for a senior affordable housing development in Miami’s Overtown neighborhood.

HTG broke ground on the project, called Father Marquess-Barry Apartments, at 301 Northwest 17th Street. The 60-unit development is named after the late Rev. Canon Richard Marquess-Barry, the former pastor of The Historic St. Agnes Episcopal Church in Overtown, who died in March from coronavirus.

The financing includes a $13 million construction loan from TIAA Bank that will be replaced by $9.4 million in 9 percent Low Income Housing Tax Credit Equity that Raymond James is providing; a $6 million Freddie Mac loan through Walker & Dunlop; and $2 million in HOME funding from Miami-Dade County. The three-story project is expected to be delivered in April.

The affordable and workforce housing development will have one-and two bedroom apartments for residents who are 62 years of age or older. Six units will be reserved for residents earning at or below 28 percent of the area median income; 48 units for those earning at or below 60 percent of AMI; and six workforce housing units will be for those earning between 60 percent and 120 percent of AMI. Rents will range from $372 a month to $1,200 a month, and units will range from 684 square feet to 969 square feet.

Matt Rieger, president and CEO of HTG, said in a press release that the coronavirus pandemic has “exacerbated the city’s already dire affordable housing crisis” and that need for new affordable housing has never been greater than it is now.

HTG, along with Miami-Dade and the late Father Barry’s nonprofit, Rainbow Housing Corp., are partnering on the project. HTG secured a 99-year lease for the property, which is across the street from its Courtside Apartments.

Amenities will include a club room, fitness center, library and media center, lockers for package deliveries and an indoor mailroom, and bike racks.

HTG is working on plans to redevelop two existing public housing projects nearby in Overtown: Rainbow Village Apartments and Gwen Cherry 23C. Miami-Dade granted the developer a ground lease for the 10.4-acre property, and HTG could build more than 1,300 new affordable housing units on the site.

Earlier this year, HTG closed on financing for a $25 million affordable housing community in West Kendall, called Paradise Lakes Apartments. HTG also closed on $25 million in financing for Village View, a new senior affordable housing development in Fort Lauderdale’s Flagler Village.

The post HTG scores financing for senior affordable housing in Overtown appeared first on The Real Deal Miami.

With home sellers also staying on the sidelines amid the public-health crisis, the market is now giving rise to bidding wars. (iStock)

With home sellers also staying on the sidelines amid the public-health crisis, the market is now giving rise to bidding wars. (iStock)

You’d expect demand for new homes to shrink dramatically during a pandemic. But with sellers also staying on the sidelines and homes being trickier to list in a public-health crisis, the market is now giving rise to an unlikely phenomenon: bidding wars.

“Since the pandemic began, demand fell off a cliff,” Taylor Marr, an economist at Redfin, told Bloomberg. “What most people overlook is that sellers also pulled back.”

About 40 percent of homebuyers across several markets found themselves bidding against other buyers on properties, with markets such as San Francisco and Boston seeing even fiercer competition, the publication reported, citing data from Redfin.

The number of active listings shrank by almost a quarter in April, compared to the same time last year, according to the report. Existing home sales are also expected to drop 20 percent month over month in April, according to Bloomberg.

“I’m encouraging my sellers to put their property back on the market,” Sally Forster Jones, a broker in Los Angeles with Compass, told the publication. “The fact that there’s limited inventory is to their advantage right now.” She noted that two of her clients bid on homes priced at $800,000 and just under $1.5 million, and both properties received more than 30 offers and are in contract above ask.

Mark Zandi, chief economist at Moody’s Analytics, predicted that home prices would eventually succumb to the economic shock wrought by the pandemic. Zandi estimated that up to 2 million homeowners could lose their homes. [Bloomberg] — TRD Staff 

The post The return of the bidding war appeared first on The Real Deal Miami.

A photo illustration of Goldman Sachs CEO David Solomon (Getty; iStock)

A photo illustration of Goldman Sachs CEO David Solomon (Getty; iStock)

Big money will be deployed into cash-deprived real estate funds that have been hit by the coronavirus pandemic.

Goldman Sachs announced it closed a $2.75 billion fund, known as Vintage Real Estate Partners II, vastly exceeding the investment firm’s $1.25 billion target. The fund will target the real estate secondaries market, such as limited partnerships and other real estate funds that need capital in order to stay afloat or make new deals.

The announcement comes at a time when many real estate owners have been impacted by the coronavirus and stay at home orders throughout the country. Retail and hotel property owners have been particularly hit hard by the pandemic and have left owners struggling to make debt payments.

Goldman Sachs managing directors Harold Hope and Sean Brenan said an area of focus is on real estate owners who need liquidity in order to weather the economic downturn.

“There are going to be some good properties that have some short-term struggles and they are going to need additional capital,” said Hope. “We partner with the owners of those properties… to allow them to get to the other side of COVID.”

The fund could also invest in real estate partnerships that are looking to buy new properties, but are struggling to get financing since banks and lenders hold off on making new loans due to uncertainty around pricing.

“Some of the deals that are really attractive have to happen really quickly, if you need to do it quickly you need a lot of capital,” said Hope.

As of March, the fund has already made five investments, but 90 percent of the fund’s money has not been invested, according to Brenan. Goldman Sachs declined to disclose their investments.

Vintage Real Estate Partners II has an investor base of institutions and high net worth individuals and is the second real estate secondaries fund raised by the group. The team’s first real estate secondaries fund, Vintage Real Estate Partners, closed on about $900 million in capital commitments in November 2016. The group has been investing in real estate secondary transactions since 2010.

By investing in real estate funds, Hope and Brenan can see how property owners are faring during the crisis. Hope said, however, while there has yet to be the level of distress as in past crises.

“We are seeing some investors that are pretty distressed, but if we compare it to previous crises it doesn’t seem to be as widespread,” said Hope.

Large private equity firms and investment firms are ramping up their funds to invest in distressed real estate. Blackstone has said that it has already bought up $11 billion in the public equities market and liquid debt across the firm and said it has $152 billion in dry powder that it can invest, according to its most recent earnings call. Brookfield Asset Management said it will invest $5 billion in struggling retailers and Pacific Investment Management Corp announced it will raise $3 billion for a distressed fund.

The post Goldman Sachs to juice cash-strapped RE owners with $3B fund appeared first on The Real Deal Miami.

A rendering of the project at 2717 Van Buren Street

A rendering of the project at 2717 Van Buren Street

A French developer advanced plans to build a 78-unit cluster of rental apartments and townhouses on city-owned land west of downtown Hollywood near city hall.

Hollywood commissioners, in a unanimous vote Wednesday, directed city staff to negotiate a land-sale and development agreement with Prestigia Real Estate FJM Inc. The entity is part of family-owned Prestigia Immobilier International Group, founded in 1989 and based in Reims, France.

Prestigia offered to pay $1.2 million to acquire a 1.89-acre parking lot at 2717 Van Buren Street from the city of Hollywood. A local appraiser hired by the company estimated in October 2019 that the property is worth $960,000.

“Our proposal is higher than our appraisal because we really want to develop this project and settle down in Hollywood to become a major actor in the continued renaissance of the city,” Jihad Salahdine, COO of Prestigia Real Estate FJM, told commissioners during the meeting.

Prestigia submitted the only proposal in response to the city’s request for proposals to acquire and redevelop the underused parking lot that is about two blocks southwest of city hall.

The planned development would have two four-story apartment buildings with a total of 63 units and two three-story townhouse buildings with a total of 15 units. The development also would include 111 parking places and a pool, according to a 108-page development proposal that Prestigia submitted to the city.

Monthly apartment rents would range from $1,195 for 57 one-bedroom, one-bathroom units to $1,570 for six two-bedroom, two-bathroom units. Monthly rents for the 15 townhouses would be about $2,300.

Prestigia is currently developing another South Florida project called Prestigia Pompano, designed as a mixed-use property with 51 residential units. The company, which is waiting for a permit to start construction, paid $800,000 for the development site at 30 Northeast 5th Street in Pompano Beach in a multi-parcel deal recorded Jan. 28, according to property records.

The Prestigia development in Hollywood, designed by locally based Kaller Architecture, would create an “urban-village environment with lush landscaping,” Raelin Storey, the city’s communications, marketing and economic development director, told commissioners. “This would be a new housing type for the immediate neighborhood, with high-end exterior and interior finishes,” she said.

Prestigia expects to spend $16.8 million to develop the four-building residential complex, which would have about 85,000 square feet of interior space. Financing would include $4.9 million of equity and an $11.3 million mortgage, according to Prestigia’s proposal.

The company expects to obtain long-term mortgage financing from Société Générale, and a construction loan from Miami-based International Finance Bank. Fort Lauderdale-based Moss Construction would be the general contractor, and Miami-based Lloyd Jones would be the property manager.

The post French developer plans to build a cluster of rentals in Hollywood appeared first on The Real Deal Miami.

Jamie Dimon of JPMorgan, Southland Mall and Investcorp co-CEOs Rishi Kapoor (top) and Hazem Ben-Gacem (Credit: Getty; Southland; Investcorp)

Jamie Dimon of JPMorgan, Southland Mall and Investcorp co-CEOs Rishi Kapoor (top) and Hazem Ben-Gacem (Credit: Getty; Southland; Investcorp)

As retail continues to be battered by coronavirus, one South Florida mall owner has given up seeking relief and is now trying to hand the keys over to its lender.

The owner of Southland Mall in Cutler Bay is attempting to turn the property over to JPMorgan Chase after most of its retail tenants claimed they could not pay April rent, according to the data provider Trepp.

Southland Mall’s $65 million commercial mortgage-backed securities loan went into special servicing in early April and is now in default, according to Trepp. Its owner, private equity firm Investcorp, initially asked its special servicer KeyBank for relief, but now believes the property will be “unsustainable,” according to Trepp. Investcorp declined to comment.

Malls and retailers across the country are being ravaged by the impacts of coronavirus, which have led to closures and stay-at-home orders. Large national retail chains like J.C. Penney, J. Crew and Neiman Marcus are seeking to restructure through bankruptcy.

One of Southland Mall’s tenants is J.C. Penney. Its other large anchor tenants include TJ Maxx, Regal Cinemas and LA Fitness. Southland Mall, at 20505 South Dixie Highway and formerly known as Cutler Ridge Mall, opened in 1960. It was renovated in 2005.

The mall has had trouble with its loan in the past. In 2018, its $67.5 million loan was transferred to special servicing and the borrower extended the maturity date until May 2019. Two of the mall’s large tenants have left in the past few years: K-Mart in 2017 and Sears earlier this year. The loan now has a balance of $65.1 million.

More properties in South Florida that were financed through CMBS loans could be turned over to lenders in the coming weeks and months, experts say.

CMBS loans are secured by a mortgage on a commercial real estate property. The loan is accumulated into a pool of loans and sold as bonds to investors.

When the borrower misses a payment or requests modifications, CMBS loans are taken over by a third-party firm known as a special servicer. By entering special servicing, the CMBS loan can be reworked or restructured, or the special servicer can find another operator to take over the property. Industry experts say that modifying CMBS loans can take months or years, and during that time the borrower cannot refinance or take on additional debt.

CMBS loans are often deemed riskier than conventional loans because of the difficulty in modifying them due to obligations the borrower has with bondholders.

South Florida’s retail market has an outstanding CMBS loan balance of $6.3 billion, according to data provided by Trepp.

The post Investcorp wants out of struggling Southland Mall appeared first on The Real Deal Miami.

American Campus Communities CEO Bill Bayless

American Campus Communities CEO Bill Bayless

The shift among some colleges to online classes has been met with skepticism in academia but it could also spell trouble for student housing investors.

Housing geared to students has historically been considered a safe investment, but the uncertainty around the coming school year has some questioning that thinking, according to the Wall Street Journal.

Overall, pre-leasing rates for student housing properties in April was relatively unchanged from a year ago, at around 65 percent, according to the report. But some landlords have fared worse than others.

Student Housing Solutions, a company with properties near three Florida campuses — including Florida State University — said it has leased about 60 percent of its units compared to 75 percent this time last year.

The 23-campus California State University system and Eastern Washington University are among the larger institutions to move primarily to online courses for the fall, which will cut into occupancy levels at surrounding apartment properties. Harvard Medical School is putting together some courses for students as well.

Investor anxiety could be contributing to dips in share prices for major student housing investors. American Campus Communities, which owns or manages more than 200 properties nationwide, has watched its share price drop 20 percent since March 13, even as CEO Bill Bayless says leasing hasn’t slowed much compared to last year.

Coronavirus or not, cracks were beginning to show in the student housing investment sector before the pandemic hit — about 3.9 percent of student housing-backed CMBS debt was delinquent at the end of November 2019. [WSJ]Dennis Lynch

The post School’s out for summer. But will student housing rebound in the fall? appeared first on The Real Deal Miami.

 Millions of new jobless claims were filed last week, as all 50 states have now begun the complicated process of reopening their economies for business. (Getty, iStock)


Millions of new jobless claims were filed last week, as all 50 states have now begun the complicated process of reopening their economies for business. (Getty, iStock)

All 50 states have now begun the long and complicated process of reopening their economies, but millions of new jobless claims are still pouring in.

Another 2.4 million people filed for unemployment last week, according to seasonally adjusted figures from the Department of Labor. New York and Florida were among the states that had the largest increases in new claims. Since states began shutting down nonessential businesses in mid-March to slow the spread of the coronavirus, nearly 39 million people have filed for unemployment.

On top of last week’s figure, which includes only claims submitted to regular state unemployment programs, another 2.2 million people applied through the federal Pandemic Unemployment Assistance program.

The new federal program provides assistance to self-employed and gig-economy workers — from real estate agents to Uber drivers — who were ineligible for traditional unemployment benefits.

“The Pandemic Unemployment Assistance program is giving us a view into a segment of the workforce that’s harmed during a recession that we don’t typically get,” Moody’s Analytics economist Dante DeAntonio told the Wall Street Journal. “It gives us a better handle on the scope of what’s happening.”

The latest employment numbers come as companies large and small have continued to layoff employees at unprecedented rates. The economic fallout has also led to record declines in retail sales and increases in mortgage forbearance, as well as lingering concerns about low-income tenants’ ability to pay rent.

New York, Florida, Georgia and Washington were the states to see the largest increase in new jobless claims last week. In commentary provided to the Labor Department, Florida noted “layoffs in the agriculture, forestry, fishing, and hunting, manufacturing, wholesale trade, retail trade, and service industries,” while New York’s commentary pointed to “layoffs in the transportation and warehousing, educational services, and public administration industries.”

The prior week’s new unemployment claims, which had been 2.98 million, was revised to 2.7 million in light of several data issues, including one that saw Connecticut overstate its weekly total by a factor of 10. [WSJ] — Kevin Sun

The post Brokers, gig workers add to swelling unemployment ranks appeared first on The Real Deal Miami.

Peter Brant, Robert S. Taubman, and 1820 South Ocean Boulevard (Credit: Sylvain Gaboury/Patrick McMullan, John Sciulli, via Getty Images, and Google Maps)

Peter Brant, Robert S. Taubman, and 1820 South Ocean Boulevard (Credit: Sylvain Gaboury/Patrick McMullan, John Sciulli, via Getty Images, and Google Maps)

Taubman Centers Chairman and CEO Robert S. Taubman sold an oceanfront Palm Beach estate for nearly $47 million to a paper mogul.

Taubman’s AAT BB LLC sold the 10-bedroom, 19,068-square-foot mansion at 1820 South Ocean Boulevard to White Birch Farm Inc. The buyer is tied to Peter Brant, chairman and CEO of White Birch Paper, a top newsprint manufacturer with pulp and paper mills in Canada and the U.S. Brant, who founded the Greenwich Polo Club, is also a developer and philanthropist.

The Ocean Boulevard estate was listed earlier this year for $52 million with Lawrence Moens of Lawrence A. Moens Associates. It sold for $46.75 million, or about $2,452 per square foot.

The Addison Mizner-designed property stretches from the Intracoastal Waterway to the ocean with an underground tunnel to the beach, like many homes on that stretch of Palm Beach. The 3.28-acre property includes two pools, a tennis court, and dock. Interior renovations were recently completed, according to the listing.

Built in 1926, Alfred Taubman purchased the estate in 1989 for $5.5 million, records show.

Simon Property Group announced prior to the pandemic that it was planning to acquire Taubman Centers for $3.6 billion. The deal is expected to close later this year.

A few big-ticket sales have closed in Palm Beach during coronavirus.

Luxury homebuilder Mark Pulte sold the Palm Beach estate at 446 North Lake Way for $33.2 million, and a company tied to the Estée Lauder family acquired the mansion at 1063 North Ocean Boulevard for $25.4 million.

The post Taubman family sells Palm Beach estate to paper mogul for $47M appeared first on The Real Deal Miami.

(Illustration by Alexis Manrodt)

(Illustration by Alexis Manrodt)

The lobby inside the Milstein family’s office building next to Grand Central Terminal looks like something from a tech influencer’s Instagram account. Intimately arranged lounge seating and workstations, canopied by large plants, are flanked by trendy amenities, including a bar, a library-like study area and an amphitheater.

The grand lobby of the 1.1 million-square-foot tower is the result of a $100 million renovation the Milsteins unveiled two years ago at 335 Madison — designed as a selling point for commercial tenants, including Facebook, that want their employees to interact face to face.

But as building owners across New York and other major cities prepare for workers to return from their Covid-19 seclusions, open floor plans and common areas present challenges in the era of social distancing.

“Lobbies are going to go from places where landlords wanted tenants to congregate to, candidly, places where the fewer people congregating, the better,” Bruce Mosler, chairman of global brokerage at Cushman & Wakefield, said about the short-term impact across properties.

A representative for Milstein declined to comment on the landlord’s plans to operate the 29-story building once New York City’s roughly 1.5 million office workers start heading back to work.

But it’s a question that building owners and property managers across the country are now grappling with: How can people safely return to buildings that in many cases were designed to pack employees in as closely as possible?

Property managers are coming up with tight schedules to stagger tenants’ arrival times to avoid the typical morning rush, limit the number of passengers who can ride in an elevator while avoiding long waits, and allow them to vigorously clean high-touch areas like doors, fixtures and turnstiles.

And they’re doing so under the specter of potential future coronavirus outbreaks once people return — as well as an existential threat that some office tenants may decide working from home is more efficient than leasing large spaces.

Pre-pandemic, average office rents in Manhattan were just over $80 a square foot with some paying as much as $100 and up, according to CBRE. In other major office markets like Chicago and Washington, D.C., average asking rent figures were $42.93 and $59.58 during the first quarter, according to the brokerage.

Kathryn Wylde of the Partnership for New York City, which represents more than 100 of the city’s largest private companies, said offices are going to require major overhauls when workers return.

“There’s going to be a lot of design changes, different protocol,” Wylde said. “They’re going to need more square footage. They’re going to need different layouts. They’re going to need different partitions.”

Intangible efforts

The Empire State Building is considering installing an air-filtration system that uses polarized ions to neutralize viruses and other contaminants in the air for its famed observatory.

The technology’s proponents say it’s been proven effective at reducing the presence of viruses like the swine flu and SARS and should help to reduce the risk of spreading the coronavirus.

“As far as our technology is concerned, it’s not a silver bullet,” said Steve Levine of AtmosAir, the company installing the system in the iconic skyscraper. “You give yourself one more layer of overall protection.”

Empire State Realty Trust CEO Anthony Malkin said the building will take other precautions, such as requiring all visitors to be pre-registered.

“It’s going to be like Studio 54,” he said. “If you’re not on the list, you don’t get in.” 

While building owners in New York expect a phased return with only a portion of companies’ workforces to come back in the initial stages, it’s not exactly clear how and when that will happen.

Gov. Andrew Cuomo is starting the process of reopening the state, laying out four phases for different kinds of companies to reopen. He said the state’s various regions will begin based on reaching certain health benchmarks but added it will be “a long time” for the New York City area to get there.

Even then, some office tenants seem hesitant to hurry back. The tech company Slack, for instance, said it plans to return employees to its offices in September. Zillow CEO Rich Barton told his 5,000-plus employees in April that they can work from home through the rest of 2020.

“I would not expect office workers to be back for the most part before September,” Wylde said in reference to New York City.

Some major landlords, however, are preparing for an earlier return. RXR Realty’s Scott Rechler, for one, said he’s getting his buildings ready for workers to come back in the first half of June. He noted that one of the major challenges is reducing the number of touch points that could help spread the virus.

“We’re going touchless as much as possible,” Rechler said. “On Day 1 we might have to keep the doors physically open.”

Big commercial brokerages like Cushman & Wakefield, JLL and Newmark Knight Frank are advising landlord and tenant clients on how to reconfigure their spaces, where maintaining a 6-foot free zone around each person will be the new norm.

Suggestions include removing interior doors completely so workers aren’t constantly touching handles; removing every other chair from seating areas or “checkerboarding” workstations to create more room; and even conducting in-office staff meetings via video so that employees can Zoom in from different conference rooms.

Some solutions seem alien to normal work life.

“In Asia, we’ve seen people get in elevators and turn toward the wall,” said Cushman & Wakefield’s tri-state president John Santora. “Now you can’t make people turn away. It all depends on someone’s individual comfort level.”

Some building owners are planning to use back doors or freight entrances to relieve pressure on main lobbies. Others will bar visitors to buildings and require food deliveries to be picked up outside.

And then there’s the issue of what to do with sick tenants. Some building managers plan to use infrared thermometers to check for elevated temperatures — a practice that raises questions about personal privacy.

John Gilbert, chief operating officer of Rudin Management’s smart-building management system Nantum, said he’ll start by conveying to tenants that they need to ask workers who show any signs of infection to stay at home.

Rudin will also enforce safety protocols, such as having building staff make sure people are maintaining proper social distancing, Gilbert noted.

“No one’s going to be allowed into a Rudin building without a mask,” he said. “Our security guards are going to become foot traffic cops.”

Existential crises

Looming over the immediate challenge of returning tenants to work is a broader threat to office buildings.

Twitter sparked a frenzy on the internet in Mid-May after its CEO Jack Dorsey told staffers in an email that some of them would be able to permanently work from home, even after the crisis is over.

Many companies are finding that they have effectively transitioned their employees to working from home, and many see the significant costs of leasing large swaths of office space as a budget item that can be reduced in the future.

Among others, Morgan Stanley’s James Gorman and BlackRock’s Larry Fink have said they can see a future where companies keep a large portion of employees working remotely.

“The supply and demand for office space may change significantly,” Warren Buffett said at Berkshire Hathaway’s annual investors meeting, which was held remotely in April.

“A lot of people have learned that they can work at home, or that there’s other methods of conducting their business than they might have thought from what they were doing a couple of years ago,” he added. “When change happens in the world, you adjust to it.”

If a meaningful shift toward more work-from-home policies results in tenants taking less space, that could drive down office rents and property values.

Of course, the real estate industry has faced similar threats before. With the dot-com boom of the late 1990s and early 2000s, many predicted teleconferencing would be the future of work. And again after the terrorist attacks of 9/11, many worried that companies would be too frightened to return to Manhattan skyscrapers.

For now, the debate appears to be breaking down along ideological lines.

Ronald Dickerman, president of the real estate private equity firm Madison International Realty, said the latest views around social distancing could encourage companies to take more space. For years, tenants had densified their offices, packing more employees per square foot into open office plans, or going even further to line workers up side by side on long benches or rotate multiple employees through the same workspace through “hot desking.”

He and others believe that trend had already started to reverse before the virus pandemic and could be accelerated now. “I do not think the office building is a dinosaur,” Dickerman said.

Joe Du Bey, CEO of the office management startup Eden, said the largest companies can most likely afford expensive reconfigurations to their spaces — whether it’s putting up plexiglass partitions and redesigning their floor plans or taking more square footage per employee. For smaller companies, he said, it may not be economically feasible.

Du Bey added that most companies will have their convictions one way or another.

“I think it’s going to be more of a binary conversation,” he said. “Are you a company with an office or not?”

The post The big debate intensifies: Are office buildings outdated or obsolete? appeared first on The Real Deal Miami.

Rich Barton, Howard Lorber, Jay Hennick, Brett White

Rich Barton, Howard Lorber, Jay Hennick, Brett White

As the economy starts to re-open, real estate players are hungry for cash.

On Tuesday, CoStar said it would sell $1.25 billion worth of stock, becoming the latest in a half-dozen companies seeking to shore up their balance sheets with new debt and equity.

In the past week, commercial brokerage Cushman & Wakefield said it’s selling $400 million in senior notes. Colliers International, Zillow and Vector Group — the parent company of Douglas Elliman — are also in the market for new capital.

“As long as the capital markets are still open and money is flowing on the debt and equity sides, companies want to position themselves in such a way that they can get through whatever might occur,” said Yousuf Hafuda, a Morningstar analyst who covers real estate stocks. He said the Fed’s fiscal stimulus has stabilized the market in general, but there is still a wide range of potential outcomes.

For CoStar, which already had $1.9 billion in cash on its balance sheet, the offering strengthens its position as it seeks additional acquisitions.

“They are still exposed to the overall commercial real estate industry, which is experiencing difficulties,” said Hafuda. “But I think they’re definitely one of the companies positioned to do well. Their competitive position is just so strong.”

Similarly, Zillow had $2.6 billion in cash on its books before announcing a $1 billion offering of stock and convertible notes. The listing giant hinted at future acquisitions, but it also said it planned to resume home-buying, a capital intensive business it suspended during the outbreak. “We are beginning to see our passing lane,” CEO Rich Barton said during a May 7 earnings call.

Byron Carlock, head of real estate at PricewaterhouseCoopers, said federal intervention in the economy won’t last forever. “There’s a defensive desire to be prepared if this pandemic comes back in the fall,” he said.
Fueled by interest rates near zero, many companies are turning to the debt market. “Debt is as cheap as we’ve seen it in our lifetime,” Carlock said.

Corporations issued $265 million in debt between March 11 and April 27, compared to $108 billion a year prior, according to data firm Intelligize.

Meanwhile, investors with cash have been eager to pounce on opportunities in hard-hit industries, including travel. “Cash is at a premium right now,” Jim Woolery, head of M&A and corporate governance at law firm King & Spalding LLP, told the Wall Street Journal.

For some companies, extra cash may be necessary to fund operations.

Vector, which raised $52 million by selling common stock, earmarked the proceeds for “general corporate purposes.” But in its most recent quarterly report, the company said it doesn’t expect its real estate business to generate positive cash flow this year due to Covid-19. (Its tobacco business will be cash flow positive.)

Park Hotels and Resorts, which is offering $500 million in senior secured notes, said it would use the proceeds for general corporate purposes and to pay down a fully-drawn $1 billion credit line.

For Colliers, which is offering $200 million in convertible notes, there are previously-announced deals to consider. The company said it will use proceeds to repay a portion of its credit facility, which “will then be available to be drawn, as required, for working capital, acquisitions and associated contingent purchase consideration and general corporate purposes.”

Stephen MacLeod, an analyst at BMO Capital, noted that Colliers is expected to close this year on Dougherty Financial Services and Maser Consulting. Those acquisitions give Colliers “compelling growth prospects,” he wrote in a May 19 research note.

Cushman & Wakefield, meanwhile, described its $400 million offering of senior secured notes as an opportunistic move.

The commercial brokerage had $1.4 billion in liquidity on its balance sheet at the end of the first quarter, with “ample liquidity and a diversified revenue base” to fund operations through a downturn, CEO Brett White said during a May 8 earnings call.

In a statement, a Cushman spokesperson said, “We have determined this [is] an opportunistic time to raise capital at a price that’s advantageous to the company.” Cushman reported net income of nearly $7 million during the first quarter of 2020, down 70 percent year over year. Revenue was flat at nearly $1.9 billion.

The post Real estate firms are raising billions in debt and equity. Here’s why appeared first on The Real Deal Miami.

Stay Alfred CEO Jordan Allen

Stay Alfred CEO Jordan Allen

Stay Alfred, a hospitality startup that raised $62 million, is closing its doors for good.

Ending weeks of speculation and rumor, CEO Jordan Allen said revenue dried up during the coronavirus pandemic, and in March, the firm failed to raise $30 million in funding that would have let it stay open. It was also unable to sell off assets.

“At one point, we were a $100 million company. And now, it’s over,” Allen told the Spokane Business Journal, which first reported the company’s closure.

Founded in 2010, Stay Alfred — not to be confused with Hello Alfred, a startup that coordinates errands and other tasks — generated $100 million in revenue from short-term rentals last year, Allen said. That was up from $66.5 million in 2018.

Before the pandemic hit, the Spokane, Washington-based firm had 221 employees and operated 2,500 units in 33 cities.

The company shut down social media accounts last month, fueling rumors that the business was closing for good. At the time, a spokesperson told The Real Deal that Stay Alfred had to close properties and furlough employees because of Covid-19, but that the company would remain in business.

Stay Alfred is now operating with a skeleton crew of 50 employees who will help wind down the business. Allen said the company will help customers who had booked rooms find other accommodations.

Travel ban and stay-home orders meant to slow the spread of the virus have pummeled the hospitality industry in particular. Stay Alfred competitors Lyric and Sonder have laid off staff.

Airbnb, which raised a $2 billion financial lifeline earlier this month, also had to lay off 2,000 employees after projecting a 50 percent drop in revenue. [Spokane Business Journal] — E.B. Solomont

The post Stay Alfred, VC-backed hospitality startup, closes for good appeared first on The Real Deal Miami.

Hudson’s Bay CEO Richard Baker (Credit: Getty; iStock)

Hudson’s Bay CEO Richard Baker (Credit: Getty; iStock)

The special servicer for an $850 million CMBS deal has accused Hudson’s Bay Company of engaging in a “clandestine corporate shell game” as it took the department store operator private, a move that undermined the creditworthiness of the loan, which now faces default. And as with many other real estate-related court cases lately, Covid-19 is a focus.

The CMBS loan provided by JPMorgan Chase, Bank of America, and Column Financial is secured by 24 Lord & Taylor stores and 10 Saks Fifth Avenue stores across 15 states. As the parent company of both brands at the time, Hudson’s Bay was the tenant at all 34 stores and a partial landlord through a joint venture with mall operator Simon Property Group.

Hudson’s Bay was also the guarantor of rent payments at the stores. But over the past several months, the now-private company “engaged in deliberate and concealed corporate restructurings that stripped assets” from the original parent company and “transferred them to newly formed, foreign entities,” special servicer Situs claimed in its federal lawsuit against Hudson’s Bay. That alleged action violated “loan documents and related guarantees,” according to the complaint, filed Monday in New York on behalf of the CMBS trust.

The suit also accuses Hudson’s Bay of improperly using the coronavirus as an excuse for not addressing concerns about the asset transfer, which it called “an opportunity to try to smokescreen their numerous breaches of their obligations.” A number of real estate-related lawsuits have emerged in recent weeks that allege defendants improperly use Covid-19 as an excuse to break off signed deals or terminate leases. In late February, Hudson’s Bay shareholders approved the move to take the company private in what was seen months earlier as a $1.3 billion deal.

Hudson’s Bay said it rejects the lawsuit’s accusations. In a statement, a company spokesperson said the Simon Property joint venture was the loan borrower while Hudson’s Bay was “simply a guarantor of lease obligations” under the terms of the joint venture. “To suggest that HBC has violated any loan document provisions is categorically false,” the spokesperson added.

“Empty shell”
Situs claims to have only discovered the alleged scheme in April after Hudson’s Bay fell behind on rent payments. Following negotiations to address the shortfall, Situs says it was informed that a signature block on a document had to be changed because Hudson’s Bay Company, the entity that guaranteed rent payments, no longer existed.

In its place, the lawsuit says, was “an empty shell” called Hudson’s Bay Company ULC, all of whose assets and liabilities had been transferred to a Bermuda-based limited partnership whose general partner is controlled by Hudson’s Bay CEO Richard Baker, and whose limited partners include the Abu Dhabi Investment Council.

Situs says that these transfers were improper because loan documents required the CMBS trust to approve of — or at least be informed of — the transactions. Hudson’s Bay, for its part, says the restructuring was “driven entirely by tax considerations” and that the servicer’s concerns are “irrelevant distractions,” according to correspondence included in the lawsuit.

But Situs claims “defendants simply do not have the right to deliberately and secretly violate the contractual restrictions on such corporate maneuvers and then, when caught, declare it to be all fine.”

Situs did not respond to a request for comment.

The CMBS loan was transferred to special servicing on April 23, “due to the borrower’s failure to make the April debt service payment,” according to servicer commentary provided to Trepp.

The special servicer is now seeking a declaratory judgment to void the allegedly improper transfers, a temporary restraining order to prohibit Hudson’s Bay from engaging in additional restructurings and transfers, and an order expediting discovery for documentation of the transfers.

Situs pointed to reports that Lord & Taylor may liquidate its stores upon reopening following coronavirus-related shutdowns nationwide, and that Hudson’s Bay may attempt to acquire bankrupt rival Neiman Marcus.

Hudson’s Bay sold Lord & Taylor to clothing rental service Le Tote last August for $100 million, but remains the guarantor for rent payments at the Lord & Taylor properties in the loan portfolio.

Locations of the 34 stores included in the CMBS deal. Source: Trepp

Locations of the 34 stores included in the CMBS deal. Source: Trepp

The post “Corporate shell game”: Special servicer says Hudson’s Bay undermined $850M loan appeared first on The Real Deal Miami.

Sara Patterson and Compass CEO Robert Reffkin (Credit: Getty Images)

Sara Patterson and Compass CEO Robert Reffkin (Credit: Getty Images)

Sara Patterson, the top human-resources executive at Compass, is out after just three months at the residential brokerage.

In an email to staff Wednesday seen by The Real Deal, CEO Robert Reffkin said the brokerage hired Brad Serwin, a Glassdoor executive, as general counsel. But he noted that the firm also “parted ways” with Patterson, a former Walmart and Gilt executive, who was hired as chief people officer in February.

Serwin replaces David Carp, who left in April. Serwin, Reffkin said, “will help us continue to grow while laying the foundation for an eventual IPO.”

Reffkin also noted that Patterson would be replaced by Margaret Smith, who has been at Compass for three years and most recently served as head of talent.

Compass slashed spending after the coronavirus shut down activity in key markets. In March, it laid off 15 percent of its staff after projecting a 50 percent drop in revenue for the next six months. It also reduced salaries by 10 to 50 percent.

Last year, one of its biggest departures was COO Maelle Gavet, who left just a few months after Compass’ top marketing and product executives resigned or were forced out.

Having raised $1.5 billion from investors, most prominently SoftBank, Compass was valued at $6.4 billion in July. But that number has come under scrutiny after WeWork’s botched IPO. The co-working firm, once valued at $47 billion, was this week valued at $2.9 billion.

During an appearance on CNBC on Wednesday, Reffkin conveyed optimism in the market and in his own firm’s prospects. Year-to-date revenue is up 47 percent year-over-year, he said, adding that “we’re seeing an accelerated shift from traditional companies to tech-enabled companies.” In the email to staff, Reffkin noted that Compass was starting a cloud-based initiative that would allow them to support “customers” virtually and “launch in new markets more quickly and in areas we might not have previously considered.”

The post Compass’ chief people officer is out appeared first on The Real Deal Miami.

Anabella Smith, Louis Archambault, Scott Goldstein

Anabella Smith, Louis Archambault, Scott Goldstein

At Zyscovich Architects’ headquarters in downtown Miami, returning to work will be a little different.

Guided by arrows, employees and guests will enter the office one way, and exit another. Packages will be rerouted to a room on a separate floor to be unpacked and disinfected. And workers will be encouraged to eat their lunches at their desks.

Like going to a restaurant or entering a residential building, going to work after two months of sheltering in place will include new health and safety guidelines. Employees will have to enter wearing masks, and forget about working out at the building’s gym, or hanging out in the conference center.

In South Florida, companies are slowly beginning their return to the office building. Unlike going to a store or a restaurant, where you may spend an hour or two, going to the office for the full day may cause more anxiety for employers and their employees.

Zyscovich, though considered an essential business, has had most of its employees working from home during the coronavirus pandemic, said Anabella Smith, partner and director of interior design. The architecture and design firm has been preparing for weeks to bring people back to the office, remodeling the restrooms and kitchen, marking where people can be seated in conference rooms and in the workspace, and making sure there are hand sanitizer stations near restrooms and elevators.

(Click to enlarge)

“We want them to come back to work feeling safe,” Smith said.

The company, led by Bernard Zyscovich, is getting calls from clients asking about redesigning their spaces and projects for a post-coronavirus world. Yet, Smith said that some developers are “very positive this is temporary, and we have to keep living our lives.”

Publicly, most developers are still moving forward with plans to build new office projects in South Florida. But brokers and lawyers agree that there will be opportunities for tenants to negotiate new lease terms, and for buyers to pick up distressed properties.

For now, office workers throughout South Florida will be required to wear masks upon entering buildings. Deliveries will be handled differently, with some buildings requiring employees to meet their deliveries in lobbies or at the entrances to properties.

Cervera Real Estate is back at work as of Wednesday, with the exception of one office housed inside a Coconut Grove hotel, according to a spokesperson. The brokerage’s new office policy requires masks at all times, six feet of social distancing, and provides hand sanitizer at all entrances. Cervera is also capping the number of sales associates and customers that can be inside its offices or sales centers at any given time.

Though tenants are starting to trickle back into some buildings, there’s still “a lot of concern, obviously, about going back to an office at this point,” said Scott Goldstein, executive managing director at Colliers International South Florida, who focuses on tenant representation. The office is where most workers spent the majority of their wakeful time prior to coronavirus, he said.

“There’s still a real fear, so employers are giving the opportunity for their employees to work from home … until the end of the year in some cases,” Goldstein said. Companies are creating shift schedules and modified in-office working hours, providing personal protective equipment and spacing out desks. Gone are the days of unassigned workspaces. Twitter’s announcement that it will allow some employees to work from home forever sparked intense debate about the future of the office market, he said.

Buildings are also keeping their amenities areas closed, such as gyms and shared conference centers, which have been increasingly prevalent for the last five years. Some will have temperature checks upon entering buildings.

Goldstein believes that the impact to the office market will affect tenants and landlords in the short term, until a vaccine exists.

“There’s a lot of talk about how many people are going to be working virtually,” he said. “I’ve been working virtually for two months now, and I’m frothing at the mouth to go back to the office.”

Coronavirus is forcing office users and providers to address the impact that another pandemic can have, so that the market is better prepared for the next one, Goldstein added. Property owners have been installing touchless technology in their buildings and improving disinfecting and cleaning protocols.

Colliers is offering a service in which someone shoots video of a tenant’s space, and then creates customized recommendations within 48 hours on how the space can be safer and cleaner, which some clients have started using.

Landlords and tenants will have to take precautions to avoid any liability moving forward, said Louis Archambault, a partner with Saul Ewing Arnstein & Lehr. He advises his clients to follow state and local guidelines, in addition to those put out by the Centers for Disease Control and Prevention.

“The virus is potentially weaponized in individuals coming into your property. What did those individuals do to protect themselves? Did they wear masks?” Archambault said. “We all have to be mindful of what we’re doing to protect each other.”

The post “There’s a lot of concern about going back to an office”: how companies are returning to work in South Florida appeared first on The Real Deal Miami.

In the best of times, construction is a complicated business. Labor problems, demanding developers, financing issues, bad weather — any number of things can disrupt a project. Now add a global pandemic, government-ordered shutdowns and a collapsing economy.

In New York, the epicenter of the coronavirus pandemic in the U.S., changes to construction rules whipsawed developers and contractors. Confusion about government orders and fear of Covid-19 also plagued projects in South Florida, Los Angeles and Chicago, but mostly they forged ahead.

Still, an Associated General Contractors of America survey found more than half of contractors have furloughed or terminated employees since March, largely because 63 percent saw projects halted. Here’s a look at what’s gone down and what’s ahead in four major construction markets.

New York: City’s last in line

Since New York Gov. Andrew Cuomo ordered nonessential workers to stay home in March, his stance on construction has evolved.

Initially, all construction was considered essential. But on March 27, after critics charged that workers were at risk, Cuomo scaled back what was considered “essential construction,” defining it as infrastructure, affordable housing, health care facilities and emergency work needed to stabilize a building site. The state defined “affordable housing” fairly liberally: projects where at least 20 percent of the units will be income-restricted.

The state later opened the door for even more projects to continue by allowing work that was in service to another essential business, such as a grocery store, medical facility or a financial institution. Developers and general contractors have also been able to apply to the city’s Department of Buildings to continue work on their sites if the project does not explicitly fall within the state’s guidelines.

As of May 14, more than 7,800 construction sites throughout New York City qualified as essential under the state’s rules. More than 4,000 of those were approved separately by the buildings agency, but inspectors have cracked down on sites where unauthorized work was taking place. Related Companies’ 50 Hudson Yards was among those shut down.

Cuomo in late April said construction and manufacturing would be the first industries to reopen, though not everywhere at once. Sparsely populated areas where the virus was under control would be first, meaning New York City could be last. Reopening was allowed to begin May 15 in the Southern Tier, Mohawk Valley, North Country and Finger Lakes regions.

The industry is eager to make up for lost time and argues that New York needs it. Industry leaders in New York City are pushing for 24-hour scheduling — rarely allowed because of noise concerns — to catch up and facilitate social distancing on job sites.

“Construction always leads the economy out of the recession,” said Barry LePatner, founder of construction law firm LePatner & Associates. “If you want to jump-start the economy, you want to put lots of workers back to work at high-paying jobs.”

Regions must meet seven different requirements before reopening, including a 14-day decline in hospitalizations, or fewer than 15 hospitalizations per day, and a 14-day drop in coronavirus-related hospital deaths, or fewer than five per day. New York City isn’t expected to meet those requirements until June. — Kathryn Brenzel

South Florida

Florida Gov. Ron DeSantis deemed construction an essential business and allowed it to continue throughout the pandemic, though some smaller cities decided to shut it down over concerns that workers could spread the virus.

But different rules on how the sites are supposed to be run, who should be wearing what personal protective equipment and what sites could stay open led to confusion that kept contractors and subcontractors on edge for a period of time. Contractors feared what a statewide shutdown could do to the labor force, which has been recovering from the effects of the 2008 downturn when many workers left the industry for good.

Generally, however, the industry was unscathed. Most companies did not lay off or furlough employees, said Peter Dyga, executive director and CEO of Associated Builders and Contractors’ Florida East Coast Chapter.

Few developers chose to close their sites. After workers tested positive for the coronavirus at Sergio Pino’s construction jobs in Miami-Dade, he shut down all of his projects, had them professionally cleaned and disinfected, and provided testing for Covid-19 to his workers upon their return.

In early April, Miami Beach shut down construction sites for failing to follow social distancing guidelines, issuing stop-work orders for two commercial projects. Municipalities such as the city of Miami and Miami-Dade County issued emergency orders requiring that all construction workers wear masks.

Projects had trouble complying with guidelines as some tasks require workers to be closer than six feet apart. Contractors struggled to get materials. And most cities stopped processing new permit applications for one to two months, which could have an impact on contractors and developers by late August or early September.

“There’s a gap that’s coming,” Dyga said. “At some point that’s going to hit the industry.” — Katherine Kallergis

Los Angeles

On the last weekend in March, a construction worker at the forthcoming Inglewood stadium for the NFL’s Rams and Chargers tested positive for the coronavirus. Los Angeles Mayor Eric Garcetti and county officials promptly sent public inspectors to construction sites throughout L.A. and hatched various rules, such as crew members not being able to share equipment.

But work at the $5 billion stadium went on, as has construction throughout L.A. County.

“I wouldn’t say it’s business as usual,” said Peter Tateishi, CEO of the California Association of General Contractors. “But most projects are going forward.”

“We have had to evolve,” Tateishi added, particularly on vertical projects on which crew members’ standing six feet apart from each other “disrupts the normal flow and cadence. It’s a different way of working.”

California Gov. Gavin Newsom issued an executive order in March deeming construction an essential activity. The San Francisco area imposed restrictions on commercial and market-rate housing projects that were not lifted until May, but L.A. County erected no such roadblocks.

The result is that projects such as the football stadium and renovations to the Los Angeles County Museum of Art and Westwood’s Hammer Museum have moved ahead. So have various residential projects, from spec mansions in Bel Air and Holmby Hills to affordable housing complexes in El Serreno and Skid Row.

AECOM CEO Michael Burke boasted during a May earnings call that the mammoth engineering and construction firm’s local projects were advancing and that only 18 of its 50,000 worldwide projects were canceled because of coronavirus.

Still, the toll that the economic downtown will have on construction in L.A. County is unclear. Tateishi said financing is not being pulled from ongoing projects, “but we are seeing financial challenges from a future standpoint.” — Matthew Blake

Chicago

Chicago could be among the last American cities that fully reopens to business following the coronavirus shutdown, but construction work has not stopped.

Developers working on some of the dozens of residential and office projects throughout the city — including such megadevelopments as Related Midwest’s The 78 — have been pushing ahead during the crisis. And even new projects, such as the 813-foot-tall Salesforce Tower in Wolf Point, have received building permits and quickly begun construction.

Gov. J.B. Pritzker’s statewide stay-at-home order in effect since March 21 — which he modified and extended through May — allows only essential business activity to operate in Chicago. On that list is construction, building management and maintenance, and airport operations.

“Over 90 percent of job sites are still open,” said Tom Cuculich, the executive director of Chicagoland Associated General Contractors, a trade group that represents 10,000 members and worked on $12 billion in projects last year. “The ones that aren’t are the ones that just couldn’t operate safely mainly due to social distancing issues.”

Construction crews are following federal health and safety guidelines and observing social distancing, Cuculich said. Contractors are deploying hand-sanitizer and hand-washing stations, staggering shifts, adding temperature checks and even thermal imaging technology at some sites, he noted. Overall productivity remains high, according to Cuculich, but there are new logistical challenges: Hoists at high-rise developments can only carry so many people while observing social-distancing guidelines, for example.

One of the projects that has continued without a hitch is a massive residential development planned by McCaffery Interests and Community Builders at the site of the demolished Harold I. Ickes Homes. The 11-acre mixed-income “Southbridge” campus on the Near South Side would eventually see 877 rental and for-sale homes and 60,000 square feet of retail space.

While construction can proceed statewide, developers have run into other problems, notably lenders who have tightened their belts. That was the case with a major residential project in Skokie, about 15 miles north of downtown Chicago. Murphy Development Group last month acquired the 153-unit project from Greenspire Capital and investor Norm Hassinger after a $45 million construction loan for the $73 million luxury rental and retail complex never materialized. Murphy Development, one of Chicago’s most active developers, is now pitching the project — on which work began in May 2018 — to other lenders.

Although he’s confident in the strength of the Chicago market, Cuculich said there is some anxiety about the future. Population declines, high property taxes and building restrictions have spurred some developers to build elsewhere in recent years.

“Many of my members have projects on the books this year and are looking at projects upcoming in the pipeline,” Cuculich said. “There were already concerns about jobs going elsewhere. People are optimistic that financing will be loosened up but right now it’s a concern.” — James Kleimann

The post Construction industry looks for solid ground appeared first on The Real Deal Miami.