Real Estate News

Ken Griffin and his new home at 3 Carlton Gardens

He shattered the record for most expensive home sale ever in Chicago and has spent a not-so-small fortune amassing a huge South Florida estate. Now billionaire Ken Griffin is making waves in the London residential market.

The hedge fund honcho behind Chicago-based Citadel bought a Central London mansion for $122 million, according to the Financial Times.

It is the most expensive home sale in London since 2011, when Lakshmi Mittal bought a home in Kensington Palace Gardens for $150 million, the Financial Times reported.

Griffin’s historic home, at 3 Carlton Gardens, is near Buckingham Palace. The home was once a wartime residence of Charles de Gaulle, has been the home of three British prime ministers and has been used by the intelligence agency MI6, according to Forbes.

The home’s original asking price was more than $186 million, but the ask was reduced to $161 million two years later. Home prices in the United Kingdom have fallen by over 18 percent since 2014, in part due to Brexit.

Douglas Elliman’s Tal and Oren Alexander, along with Knight Frank, represented Griffin in the sale. A spokesperson for Griffin’s Citadel declined to comment.

Griffin in late 2017 spent $59 million on four unfinished floors in the Gold Coast’s No 9. Walton, the most costly home acquisition in the city’s history.

In Palm Beach, Griffin has spent $230 million accruing properties in the beachfront area known as Billionaires Row. He has cleared the oceanfront properties to make way for a home that will be longer than a football field.

[Financial Times]Joe Ward

From left: Jorge Mas, Marcelo Claure, and David Beckham (Credit: Getty Images)

The city of Miami is facing another lawsuit stemming from David Beckham’s bid to build a Major League Soccer stadium.

This time around, a local attorney is alleging the city broke its own lobbying laws when dealing with the group behind the star soccer player-turned investor’s bid. In the November referendum, voters gave the green light to move forward with plans for the site, at the Melreese Country Club.

David Winker charges the city failed to require Beckham, his partners and his attorneys to register as lobbyists, according to the Daily Business Review.

In July, attorney Douglas Muir alleged in a lawsuit that the city didn’t follow its competitive bidding rules for the referendum.

Beckham and his partners aren’t just planning to build a soccer stadium for their Major League Soccer team. Their $1 billion project also calls for at least 750 hotel rooms and a minimum of 1 million square feet of office, retail and commercial space.

The ballot initiative waived competitive bidding for the property, and allows the city to negotiate and execute a 99-year lease with Miami Freedom Park LLC, an entity that includes the retired soccer star, Sprint CEO Marcelo Claure, and brothers Jorge and Jose Mas, for about 73 acres of the Melreese golf club site.

The latest lawsuit claims some Miami city officials behaved more like “PR agents and cheerleaders” for the stadium instead of demanding more transparency over who controls Miami Freedom Park LLC. Winker alleges that Beckham and his partners only registered as lobbyists after Winker filed an ethics complaint last year. Winker is also alleging the city violated a charter requirement for competitive bidding of the Melreese site.

The city said it’s working with the ethics department to ensure it complies with codes. An attorney for Miami Freedom Park called the allegations “frivolous” and meritless, according to the Business Review. [DBR]Katherine Kallergis

Amol Sarva in Paris (Credit: Wikipedia and Unsplash)

Knotel has acquired the largest co-working firm in Paris, giving the company a dominant market share position in the French capital.

The company, Deskeo, will rebrand under Knotel, CEO Amol Sarva told TechCrunch. The acquisition now gives Knotel a presence 10 times the size of WeWork in Paris, Sarva said.

Knotel has looked to Europe for making headway on its global expansion, and last year acquired Ahoy!Berlin, a co-working firm in the German capital.

The company was founded in 2016 by Amol Sarva and Edward Shenderovich, Knotel has pitted itself as a viable alternative to WeWork. But the firm, with a portfolio of 2 million square feet across 100 spaces and $160 million in funding, still has a distance to cover. By comparison, WeWork has raised over $10 billion and leases more than 5 million square feet in New York City — making it the largest office tenant in New York.

Knotel’s announcement follows an expansion by the firm in New York City, after it signed 160,000 square feet over the past month. The office space provider has locations in Los Angeles and San Francisco and London, and has plans to open in Brazil. [TechCrunch] — David Jeans

Condo sales are on the rise in Miami-Dade.

From January 13 to 19, the county recorded 103 closings for a total sales volume of $48 million, up from the previous week’s 77 closings for $23.5 million. Condos last week sold for an average price of about $466,000 or about $312 per square foot.

Topping the list of priciest sales over that period was a unit at Regalia in Sunny Isles Beach, which sold for $5.7 million, or more than $1,000 per foot, after only 34 days on the market. Devin Kay brokered both sides of the deal. The four-bedroom, 5,515-square-foot unit features a 2,100-square-foot terrace, a smart home system, 10-foot ceilings and Kreon lighting. It was on the market for $7.2 million.

The second most-expensive deal of the week was the $3.15 million sale of unit 4203 at Porsche Design Tower. After 101 days on the market, the Sunny Isles condo traded hands for about $800 per foot. The listing agents were Brenda Gramajo and Allen Davoudpour and the buyer’s agent was Melissa Barragan.

Here’s a breakdown of the top 10 sales last week. Click on the map for more information:

Most expensive
Regalia #8 | 34 days on market | $5.7M | $1,033 psf | Listing agent: Devin Kay | Buyer’s agent: Devin Kay

Least expensive
Williams Island #1709 | 211 days on market | $840K | $308 psf | Listing agent: Denise Rubin | Buyer’s agent: Joelle Oiknine

Most days on market
Ritz-Carlton Coconut Grove #1202 | 389 days on market | $1.09M | $489 psf | Listing agent: Nina Giambalvo | Buyer’s agent: Andres Leiser

Fewest days on market
Continuum North #1504 | 3 days on market | $2.9M | $2,018 psf | Listing agent: Maria Sifuentes | Buyer’s agent: Luciana Barreto

(Illustration by Studio Muti)

Over the past handful of months, the tech titans of Silicon Valley have launched an all-out blitz on commercial space in Los Angeles.

In October, Hudson Pacific Properties signed a deal with Netflix for the streaming giant to take the entire 13-story Epic building in Hollywood while it was still under construction. A month later, Kilroy Realty leased the entire office component of its nearby Academy on Vine project to Netflix, while it too was under construction.

In January, Tishman Speyer closed a deal for Facebook to occupy 260,000 square feet at the Brickyard campus in Playa Vista — more than twice what the social network said it would lease five months earlier. Only days later, Apple struck, reportedly engaging in talks to grab the remaining 150,000 square feet at One Culver in Culver City.

And in the biggest deal of the recent wave, Hudson signed up Google for all 584,000 square feet of the Westside Pavilion mall in West L.A., capping a four-month period in which Google increased its space in Los Angeles nearly sevenfold.

Just those five deals, part of a late-season acceleration of office leasing by major tech firms, added at least 1.6 million square feet to their growing L.A. portfolios.

“The leasing activity by these tech and media companies over the past 60 days has been unprecedented,” said Owen Fileti, senior executive director with L.A. Realty Partners. “This level of positive office space absorption is extraordinary, and it propels market expansion.”

The spate of transactions is part of a scramble for office space in L.A. that has been underway among Silicon Valley companies with growing ambitions — and matching deep pockets — to expand their operations. Leading the push are the so-called FAANG companies: Facebook, Amazon, Apple, Netflix and Google. They are locking up many of the largest and highest-quality spaces in Hollywood, Culver City and Playa Vista, driving up rents while helping to fuel residential development around their facilities.

The run on commercial space has been a boon for major developers like Hudson, Kilroy and Hackman Capital Partners. And yet the recent push also comes at a disquieting time in the tech industry that has even some beneficiaries — as well as observers — of the L.A. boom wondering whether the mad dash for space is a little too good to be true.

“I wake up every morning thinking this is the day that everything falls apart,” said Michael Hackman, the CEO and founder of Hackman Capital. “With all these people running around creating content, at what point do you reach saturation in the market?”

For Hackman, the ghosts of the first dot-com crash — when failing startup firms like Pets.com abandoned dozens of commercial spaces in the Bay Area — are real. “We are roughly around the same time frame in the cycle today as that downturn,” he said.

Christopher Rising, the president of Rising Realty Partners, another L.A.-based developer, agreed that the tech firms may be moving too quickly in their rush to scoop up available properties. “There is going to be a hiccup at some point,” Rising said. “I have no doubt that someone is going to stub their toe … and get overly optimistic about what their needs are.”

The nervousness reflects a growing tension in the commercial developers’ burgeoning relationships with the Silicon Valley firms. In many cases, the recent melding of tech and content that led FAANG and its ilk to set up shop in L.A. caught developers by surprise.

“If you had asked me five years ago would you see Apple and Amazon in Hollywood or L.A., I would have said, ‘Well, maybe a small sales office,’” said Robert Paratte, the executive vice president for leasing and business development at Kilroy.

Lately, seesawing valuations of major tech stocks have driven down the Nasdaq, fueled by a trade war with China and concern on Wall Street about the hyper-competition for the streaming video content market being led by Netflix. That’s not to mention potential regulatory concerns around Facebook and Google due to their expanding reach and ongoing privacy issues.

All of that has some commercial players wondering whether the sudden decline of Snap Inc., which led the firm to abruptly pull out of all of its office space in Venice Beach early last year, was more than a fluke. The L.A.-based tech firm exited 14 properties in one week and moved to Santa Monica. Only about 20 percent of that space has since been subleased.

“I worry that there is one company, like Snap, or a couple of companies, that just don’t make it,” Hackman said. “Then some of the dollars that are going into tech start to retrench, which creates more vacancy that didn’t exist before, and it starts to soften the market a little bit.”

Defensive moves

For now, the L.A. market has the exact opposite problem — too little space for the fast-growing demand.

Since 2001, the FAANG firms have locked up more than 3.6 million square feet of prime office space in Los Angeles — most of that in the past five years. Including the Westside Pavilion, Google has secured the most, with 1.2 million square feet. Netflix has 1.1 million square feet, Amazon’s got 590,000 for Amazon Studios, Apple has 490,000, and Facebook has inked 310,000, according to Michael Soto, the head of research for Southern California at Transwestern.

But that may not be enough new construction to satisfy the tech firms’ growth ambitions in L.A., said Carl Muhlstein, an international director at JLL. He believes the area is heading toward a shortage of available office space. “The development community didn’t realize there would be 4 to 5 million feet of active tenant requirements through 2020,” he said.

Rising said that the talk among developers is that up to five companies in the FAANG and legacy entertainment orbit are still hunting for spaces of 300,000 square feet or more on the Westside — but only two or three options remain. One of those had been the Westside Pavilion, which he said Google took in part to be closer to Hollywood and the major entertainment studios.

The tech firms have been making “defensive moves,”  locking up space they won’t occupy for another few years to box out competitors, brokers said. Netflix, for instance, has secured 683,000 square feet at two properties that won’t be available until 2020. Google scooped up all of the Westside Pavilion, but brokers indicated that the tech firm only plans to initially use a little over half the space.

Tenants are pre-leasing spec office spaces in a way that is unusual for L.A., brokers said. That has been especially true in Culver City, Hollywood and Playa Vista, the spots the tech firms are most focused on.

Developments that three years ago were 10 percent pre-leased before construction are now 30 to 50 percent pre-leased, “and even higher in Hollywood,” Fileti said.

FAANG effects

The neighborhoods where FAANG firms have moved in have seen soaring office rents. From 2013 to 2018, average rents rose by 106 percent in Playa Vista, to $5.59 per square foot a month; 66 percent in Culver City, to $4.35; and 35 percent in Hollywood, to $4.53, according to Soto at Transwestern. Santa Monica, one of L.A.’s original tech hubs, has seen its office rents grow by 49 percent to $6.06 in that five-year period, Soto said.

The vacancy rate in Hollywood has dropped to among the lowest levels in the city. In the fourth quarter, Hollywood had a 7.1 percent total office vacancy rate, compared to about 16 percent in Culver City and 17.7 percent in Playa Vista, according to Transwestern. The entire L.A. office market averaged a little more than 15 percent.

The moves are helping to spruce up formerly blighted parts of Hollywood in particular and make them more popular for millennials to work and live in. Residential rents have outpaced other areas of the city, rising by 18 percent for one-bedrooms in Hollywood over the past three years and nearly 13 percent in West Hollywood, according to surveys by Zumper, the apartment rental service.

Netflix’s arrival in Hollywood in particular coincided with a surge of infill residential development and apartment construction. More than 3,500 rental units have been constructed over the past five years, a more than threefold increase from the 1,116 units that were built from 2008 to 2013, according to data provided by Soto.

“Hollywood had block after block of surface parking lots and underdeveloped land, which today has been developed into thousands and thousands of apartments,” Muhlstein said.

BJ Turner, CEO of Dunleer Group — a Beverly Hills firm that develops low-rise apartment complexes with 25 to 70 units — has built a strategy around catering to young tech workers in and around Playa Vista, Culver City and Hollywood. Turner said Dunleer’s total apartment units have grown by two and a half times over the past three years. 

Where the tech firms chose to settle in the city was no arbitrary decision. They have strategically selected neighborhoods like Hollywood and Culver City to expand their L.A. footprints not only because of the access to Hollywood industry players but also because of relatively efficient entitlement regimes.

Santa Monica, which has a diverse tech economy that includes offices of major firms like Oracle and a number of startups, has not been as successful at attracting the FAANG firms. The city’s notoriously difficult entitlement process has severely limited new office construction. It takes an average of two years longer for commercial buildings to be entitled there than in Hollywood, developers said. There is also the issue of its traffic patterns and its distance from Hollywood studios.

In January 2019, Tishman Speyer closed a deal for Facebook to occupy 260,000 square feet at the Brickyard campus in Playa Vista.

For those reasons, “Hollywood is the new Santa Monica,” Paratte said.

The creative office space equation

The properties the tech giants are leasing have a lot in common. And that’s by design.

The structures have to be new, or like new, to lure the FAANG companies. “We are not dealing with second-gen space here,” Muhlstein said. “We start out with a shell.”

Developers say they have taken pains to respect the historical elements of sites like Columbia Square and Culver Studios. At the latter, Hackman said, his firm physically picked up four storied bungalows — where Steven Spielberg stayed during the making of “E.T.” and Alfred Hitchcock had an office — and moved them as is from the back to the front of the property to create a “historical area.”

The developers have also overhauled and added to their properties to fit the creative-office trend. Much of the design has been dictated by the ways in which the tech firms have configured their spaces in Silicon Valley. That means shying away from high-rises in favor of lower, more intimate architecture with lots of floor space.

“When you go vertical you have to use elevators, and by using elevators you are separating people,” Paratte said. Tech company workers “prefer to work in teams.”

New media companies also want workers to live in walkable urban environments, Hackman said. Amazon representatives emphasized to him that they wanted their employees to integrate within their communities.

Traffic has been a major motivator in the moves to Hollywood and Culver City in particular. Developers have tried to cater to younger tech workers’ preference to drive less and to live closer to work or public transit.

The design of Icon, which was built as a fortress behind studio gates, was resulting in a morning Uber traffic jam for Netflix workers. So in discussions with the streamer over expanding at Academy on Vine, which is built more like a campus, JLL showed Netflix representatives “how our turnabouts and multiple access points would be advantageous,” Muhlstein said. Academy will also offer nearby access to the Red Line train.

To target tech workers, Dunleer has shrunk unit sizes, installed smart home technology, offered shorter-term leases of six and nine months and limited parking lot sizes “because a lot of these folks are using Birds or Uber; they are not necessarily tethered to a car.”

To compete in the FAANG world, commercial brokers in L.A. have had to learn to understand the leasing tendencies of the tech clients. Fileti said he studies their real estate usage in the Bay Area and elsewhere, looking for “correlations” and applying “pattern recognition” in the same way venture capitalists research investment opportunities.

The big bet

While most of the leases the tech firms are signing are long-term — ranging from 10 to 15 years — developers are betting heavily on them sticking around L.A even longer.

They are orienting more and more of their space to tech clients.

Hudson told investors in its 2018 filings that its two largest tenants were now Google and Netflix, which together accounted for 10 percent of the annualized base rent generated by its office properties at the end of 2017. That percentage will likely rise with Google’s recent lease of the Westside Pavilion. Hudson declined to be interviewed.

Soto said that the biggest threats to FAANG’s space grab are how the companies’ financial performance could affect their office space decisions, as well as the recent megamergers that are looming over the entire entertainment industry. Disney’s purchase of Fox and AT&T’s takeover of Time Warner have created anxiety about potential consolidation of property and staffing that could lead companies to ease back on their space requirements, he said.

Google is sitting on land around the Spruce Goose that could yield another 900,000 square feet of buildable space

Industry veterans like Paratte still recall vividly the fallout from the dot-com collapse. After the crash in late 2000, commercial vacancy rates in San Francisco had risen to 10 percent, including space for sublets, by the summer of 2001, according to figures from Cushman & Wakefield reported at the time. In 1999, during the heart of the boom, commercial vacancies had fallen to record lows of under 1 percent in some San Francisco neighborhoods, the New York Times reported.

Yet while those memories are chilling, back then many tech companies were living on their image. They often took space without having enough employees to fill it. “You had people sending proposals for full buildings, and the company hadn’t even completed its first round of Series A funding,” said Paratte, who at the time was a partner with developer William Wilson & Associates near San Francisco.

Many of the companies that wound up abandoning large spaces in San Francisco were far less established and well-capitalized than the FAANG firms of today, which, in the case of Google and Apple in particular, are sitting on hundreds of billions of dollars of cash.

“The dot-com era was a more diverse, rapid growth startup subset of companies,” Fileti said. “It was not nearly as concentrated of a list” as the major tech players moving into L.A.

And the FAANG firms are not alone in their quest for prime L.A. office space. A slew of other well-capitalized firms from the burgeoning video game industry are also in the mix, as well as virtual reality companies.

These days, the commercial industry is more preoccupied with a different question: What happens when the space runs out?

Rising said he believes the tech firms will increasingly be forced to move farther east, toward Downtown. “Hollywood is full, Culver City is full,” he said. “You are going to have to have someone go under for Hollywood to have some real vacancy.”

Or the media firms could venture farther south. Hackman Capital recently acquired a 30-acre property at 888 Douglas Boulevard in El Segundo, a former Northrop Grumman aircraft manufacturing facility. Hackman said he is readying a 380,000-square-foot building there for a media content client. “We have already had a number of media companies take a look at it,” he said.

But Rising and others see a southern push by the tech and entertainment companies as less likely, because of the complicated traffic patterns and long distance to Hollywood and the studios.

Building something from the ground up is unrealistic given the three-to-five-year entitlement process on the Westside. Google is sitting on 12 acres of land around the Spruce Goose hangar in Playa Vista it bought in 2014 that could yield another 900,000 square feet of buildable space, brokers said. But the tech giant has yet to put in motion plans to develop the property.

Hackman prepares for the future

For now, despite his concerns, Hackman is preparing for a future in which media production continues to thrive in the newly revived areas of the city.

The 62-year-old spent much of the holiday season camped in a midsized conference room at his West L.A. offices, working on details of the biggest deal of his 33-year career at the company: CBS Television City.

Hackman made a career of buying up and reselling troubled industrial properties around the world. Then a little over a decade ago he embarked on an urban infill strategy in Culver City to acquire and develop higher-quality commercial spaces, especially those with “high barriers to entry” in their entitlement processes.

Hackman has been investing heavily in building relationships with Apple and Amazon. He helped set up Apple’s Beats at a handful of buildings in Culver City and Amazon’s nascent Amazon Studios operation in the historic 14-acre Culver Studios, built in 1918. Before starting construction there, Hackman worked out a deal to purchase a neighboring property, Culver Steps, from Hudson Pacific, and then combined the properties for Amazon for a total of about 600,000 square feet.

Then, in December, Hackman agreed to purchase the 25-acre CBS Television City campus in Hollywood for $750 million. Hackman said the developer intends to operate the 780,000-square-foot studio, built in 1952, long-term.

“This is an ideal location for one of these larger content-creating companies to come in and make it their home and grow the capabilities at the site,” he said.

Hackman said he expects a big media tenant to eventually end up with the space. But for now, it will have to wait.

Along a hallway at Hackman Capital, he showed off rough schematics for possible plans for the property, including one scenario where the number of stages would be expanded, and another where multifamily housing would be added.

“Television was put on the map through this studio,” he said. “We are studying what needs to be done there to make it competitive for the next 50 to 75 years in this new and ever-evolving media content world.”

David Stokoe (Credit: Facebook)

A Utah real estate agent was shot and killed after he tried to evict tenants from a Salt Lake City apartment he owned.

David Stokoe, a 40-year-old associate broker at Ranlife Real Estate, was likely killed on Thursday when he went to the apartment to evict two tenants, Manuel Velasquez, and Jessica Reese, according to the Salt Lake Tribune. Police found Stokoe’s body in a hidden crawl space. Velasquez, a convicted felon, later admitted to the shooting and was arrested, police said.

Velasquez told police that Stokoe put him in a “very serious” chokehold after kicking down the front door to the apartment on Thursday. But Stokoe’s family told the newspaper that he wouldn’t start a fight and that they believed he was set up by his tenant.

During the struggle, Velasquez told police that he reached for a handgun and shot Stokoe multiple times, according to court documents cited by the Salt Lake Tribune. Velasquez is in jail on suspicion of murder, obstruction of justice, possession of a firearm by a restricted person and a felony-level discharge of a firearm offense.

A well-known South Florida broker was recently shot and killed by her brother-in-law, who later killed himself. [Salt Lake Tribune] Katherine Kallergis

City National Bank’s CEO Jorge Gonzalez and a rendering of the SEED School of Miami

A public boarding school in Opa-locka just secured a $9 million loan from City National Bank of Florida to build a new student dormitory complex.

The loan will fund a new two-story dorm for 400 students, as well as 16 faculty and staff members. The total cost of the project is $18.1 million, according to a release.

The SEED School of Miami is a college-preparatory school at 1901 Northwest 127th Street that serves 300 students in grades 6-12. The school was built on the site of the former Westview Middle School in Opa-locka.

By the 2020-2021 academic year, SEED School is projected to enroll 400 students in grades 6-12, with small class sizes of 15-18 students. Its first graduating class will be in 2021. Founded in 2014, it is the first public boarding school in Florida.

Miami-based City National Bank is South Florida’s second largest bank by assets. In October, City National took over the naming rights to one of downtown Miami’s most well known office buildings, the Miami Tower. The tower will serve as the bank’s headquarters.

A rendering of Atlantic Crossing

The Edwards Companies closed on construction financing for a $300 million mixed-use project in downtown Delray Beach.

The Columbus, Ohio-based developer took out a $94 million loan from Fifth Third Bank for Atlantic Crossing, a four-story complex under construction on a 9-acre site on Atlantic Avenue and Federal Highway. The financing includes $16 million that Fifth Third lent in 2016, records show.

The development will include 83,000 square feet of office space, 73,000 square feet of space for retail stores and restaurants, 261 rental apartments and 82 condominium units. Edwards Cos. filed a lawsuit in 2015 alleging the city deliberately stalled the project, which was first proposed in 2011. The developer and the city settled the lawsuit in 2017.

A rendering of Atlantic Crossing

The entire project is expected to be completed within five years of groundbreaking, or 2023. The luxury residential units would be completed in 2020 with the parkside residential units being delivered in 2022.

The site, which spans two city blocks, was assembled by CDS Holdings, led by Carl DeSantis. Records show Edwards paid $15.8 million for the land in 2016.

Development has ramped up in Delray Beach in recent years. A joint venture led by 13th Floor Investments, Key International and CDS International recently paid $33 million for the former Office Depot headquarters with plans to redevelop the property into one of the biggest projects in Delray Beach’s history.

Gary Keller (Credit: Keller Williams)

Keller Williams is likely going to launch its own iBuyer program during the second quarter of the year.

Gary Keller, who recently returned to his namesake firm as CEO, said during a presentation of Keller Williams’ technology plans for 2019 that the company would probably launch the initiative in Arizona, Inman reported.

He said he was reluctant to do it but feels like there isn’t another option.

“I feel like I have no choice now,” he said. “I can’t allow Opendoor or Zillow to go out and be the only player in the iBuyer space and then begin to dictate terms and build brand around ‘they buy houses.’”

He had talked with Opendoor about getting agents with Keller Williams exclusive access to the platform, but negotiations fell through. Instead, Opendoor will provide leads to buyers who don’t accept Opendoor’s offer, and KW agents will be allowed to put up signs on properties Opendoor is selling.

iBuyer programs offer direct-to-consumer home-buying and selling platforms. They generally provide sellers with quick all-cash offers and then do some minor renovations to the home to get it ready for a quick resale.

Keller Williams had been testing an iBuyer program last year and completed almost 100 deals through it as of September.  [Inman] – Eddie Small

Rudolph Giuliani and Donald Trump (Credit: Getty Images)

President Donald Trump’s discussions to build a skyscraper in Moscow extended until after he won the presidency, his lawyer Rudolph Giuliani said on Sunday.

Giuliani quoted Trump as saying that discussions on Trump Tower Moscow were “going on from the day I announced to the day I won” in an interview with the New York Times. He denied the report from Buzzfeed that Trump told his former lawyer Michael Cohen to lie about skyscraper negotiations to Congress but said the two men may have talked before Cohen testified.

It remains unclear when or if discussions about building Trump Tower Moscow officially ended. Trump’s aides continued meeting and having phone calls with Russians after he won, which special counsel Robert Mueller has been investigating. But the new report indicates that Trump was in talks for the deal when he was calling for an end to Russian sanctions and questioning the legitimacy of NATO.

Trump said in November that he saw nothing wrong with running for president and pursuing a business deal simultaneously.

“There was a good chance that I wouldn’t have won, in which case I would have gotten back into the business,” he said, “and why should I lose lots of opportunities?” [NYT]  – Eddie Small

From left: Niliana Nassar-Garcia and David Valdez

Blanca Commercial Real Estate brought David M. Valdez back as a senior vice president and chief operations director.

Valdez was previously a vice president of corporate services and real estate at Goldman Sachs in New York, a managing director at CBRE in New York, and a broker with the Codina-Bush Group in Miami.

Engel & Völkers hired Niliana Nassar-Garcia to oversee the new luxury division for the brokerage in Fort Lauderdale. She previously handled sales for Ocean Land Investments’ waterfront projects, including AquaVita Las Olas, AquaLuna Las Olas, AquaMar Las Olas, AquaVue Las Olas and AquaBlu Fort Lauderdale. Nassar-Garcia has closed more than $120 million in new construction sales over the last four years, nearly $60 million of which was in 2018.

Lennar Corp. promoted Fred Rothman to chief operating officer, taking over a role previously held by Jon Jaffe, president of Lennar. Jaffe will continue to oversee Lennar’s operations nationally, while Rothman will continue to oversee the company’s east homebuilding region and will take on a larger role in Lennar’s land acquisition program. Rothman joined Lennar in 2006.

Joe Rubin, a former director of acquisitions for American Landmark Apartments, joined Franklin Street as director of the company’s multifamily investment sales. Rubin will focus on multifamily sales in South Florida and up the Treasure Coast. He’s also worked for Ocwen Financial Corporation and Marcus & Millichap.

Franklin Street also named Mark Behling a retail investment sales senior associate.

Dwntwn Realty Advisors, led by Tony Arellano and Devlin Marinoff, hired Rayza Perez, who will focus on investment sales and leasing of industrial properties in Doral and Medley.

Ana Paula joined Blue Box Real Estate as a vice president in the company’s Miami office. She was previously a senior leasing associate at The Hogan Group, responsible for leasing and marketing the Waterford at Blue Lagoon Office Park.

The city of Miami promoted Joseph Ruiz to director of the zoning office and zoning administrator, City Manager Emilio Gonzalez announced recently. Ruiz has worked for the mayor’s office since 2017, and was chief of staff for then-Commissioner Francis Suarez’s District 4 office.

Derek Martin and Chrissy Valle are now part of Meyers Group’s leasing team for Avery Pompano Beach. Martin was hired as director of leasing and Valle was named community manager of the project, which is expected to open in March. Meyers launched leasing of the 144-unit apartment building in October.

Miami-based Atlantic | Pacific Companies promoted Jermaine Moncur to human resources director and Doribel Abreu to human resources manager.

Hard Rock Stadium grounds crew working on the Dolphins home field (Credit: NBC Sports)

The Miami Dolphins apparently are taking a homegrown approach to resolving problems with the turf on their field at Hard Rock Stadium.

The Palm Beach Post reported that the National Football League team quietly acquired land near West Palm Beach to grow sod for its home field at the stadium in Miami Gardens.

In May, an entity called South Florida Sod Farm paid $3.625 million for 80 acres just west of West Palm Beach in the town of Loxahatchee Groves, where residents have been speculating about plans for the land. Crews have cleared trees that once covered the land, located north of North Road between B Road and C Road.

Citing state records, The Palm Beach Post also reported that Todd Boyan, senior vice president of stadium operations for the Dolphins, is listed as the vice president of South Florida Sod Farm.

The Dolphins organization declined a request from the Post for comment on the sod farm project.

At a news conference in August, Dolphins president and chief executive officer Tom Garfinkel said the team was developing a sod farm “outside of West Palm Beach” to support Hard Rock Stadium and end reliance on outside sod vendors.

Garfkinkel also said the team’s sod farm should be supporting turf integrity at the stadium in time for the Dolphins 2019 season. He spoke at a news conference held to announce the team’s plan to construct a training facility next to Hard Rock Stadium.

The Dolphins organization was criticized during the team’s 2017 and 2018 seasons for the condition of the field at the stadium. [Palm Beach Post]Mike Seemuth

377 North Cleary Road in West Palm Beach (Credit: LoopNet)

West Palm Beach-based McCraney Property Co. sold a newly built complex of industrial buildings in western Palm Beach County near Florida’s Turnpike for $39.06 million, or $111 per square foot.

The new owner is an affiliate of Boston-based Cabot Properties, which paid $25.8 million in November to buy three other warehouse properties in Palm Beach County from McCraney.

McCraney sold Turnpike Business Park, which the company developed in 2017 on 30.9 acres in West Palm Beach near the turnpike’s exit to Southern Boulevard.

Built on speculation without tenants in place at 377 North Cleary Road, Turnpike Business Park is a cluster of five industrial buildings with a total of 352,586 square feet. Southern Glazer’s Wine & Spirits is among the tenants.

Cabot acquired the property with representation from a seven-man team at brokerage firm Cushman & Wakefield brokers: Christopher Thomson, Chris Metzger, Richard Etner, Matthew McAllister, Mike Davis, Rick Brugge and Michael Lerner. [South Florida Business Journal] – Mike Seemuth

Unit 2803 at Oceana Bal Harbour

A penthouse at an oceanfront condominium in Bal Harbour has been listed for sale for $18.95 million.

Unit 2803 at Oceana Bal Harbour is a 5,183-square-foot penthouse with the only private elevator in the building.

The owner, James F. Barton, bought the penthouse two years ago and spent $2 million on a build-out of the residence inspired by the interior design of the Baccarat Hotel in New York City.

The penthouse has three bedrooms, five and half bathrooms, two balconies, four parking spaces and maid’s quarters, plus a swimming pool and guest cabana on the rooftop.

Oceana Bal Harbour is located across the street from the upscale retail center Bal Harbour Shops.

The listing agents are Stephan Burke and Carol Cassis of brokerage firm Brown Harris Stevens Miami. – Mike Seemuth

(Credit: iStock)

Instead of flying out of town and checking into a hotel, wealthy travelers someday may check into a high-flying hotel that orbits Earth every 90 minutes.

Tech company Orion Span is developing a modular space station, called Aurora Station, as the world’s first luxury hotel in outer space.

Aurora Station will fly 200 miles above earth, allowing guests to see an average of 16 sunsets and sunrises every 24 hours.

The space hotel will be 12 feet wide and 35 feet long and will feature guest suites with padded beds, high-speed wireless Internet service, and high-quality cuisine, not space food in a tube.

When they are not gazing out the windows, Aurora Station guests will be able play zero-gravity ping pong and participate in research that includes growing food.

Orion Span will charge at least $9.5 million per passenger for the 12-day trip, including a refundable $80,000 deposit. The company also requires passengers to undergo medical screening to make a reservation.

Orion Span plans to launch Aurora Station in 2021 and welcome its first guests in 2022. [New York Post]Mike Seemuth

(Credit: iStock)

Foreign investors in China’s commercial property market are on a buying spree as high borrowing costs restrain domestic investors.

The volume of commercial real estate acquisitions in China by foreign buyers jumped 62 percent last year to 78 billion yuan, or $9.1 billion, according to brokerage firm CBRE.

That was the largest amount since CBRE began tracking foreign investment in Chinese commercial real estate in 2005.

China has been trying to deleverage its economy, which has boosted the cost of borrowing and restrained domestic demand for commercial properties, according to Sam Xie, CBRE’s head of research in China.

As a result, foreign investors in commercial properties “have an edge in financing,” Xie told Bloomberg, and the deleveraging drive in China means many domestic companies are more likely to sell than buy.

Among other factors holding down domestic investment in China’s commercial real estate are rules changes in late 2017 that limit the ability of private equity funds to raise capital for property acquisitions.

Outside of China, however, private equity funds that invest in Asian property raised $15.6 billion in 2018, market research firm Preqin Ltd. reported.

CBRE research shows that overseas firms last year accounted for 31 percent of 2018 acquisitions of commercial property in China for $10 million or more.

Foreign buyers may have accounted for as much as 40 percent of commercial property purchases in Beijing and Shanghai combined, according to brokerage firm Colliers International.

Xie told Bloomberg that the bulk of foreign investment in China’s commercial real estate is centered in Beijing and Shanghai, but foreign buyers also are shopping for income-producing properties in Hangzhou, Nanjing and Wuhan, especially rental apartments and logistics facilities.

Francis Li, head of capital markets in Greater China for brokerage firm Cushman & Wakefield Plc, told Bloomberg the trend probably will continue this year as foreign buyers remain “a sweeping force in China commercial property investments.” [Bloomberg]Mike Seemuth

(Credit: Booking.com, iStock)

The failed roll-out of a Japanese robot-staffed hotel is a cautionary tale for those who think similar consumer-technology will revolutionize the hospitality industry.

The Henn-na, or “Strange,” Hotel in Sasebo, Japan, opened to much fanfare in 2015 as the world’s first robot-staffed hotel. But the android helpers there are being removed after complaints from guests who were frustrated the robots weren’t keeping pace with services like Siri or Alexa, according to the Wall Street Journal.

The “Strange” Hotel opened with 80 robots. Following an initial positive response they went on to add more to entertain guests, including a a team of human and dog robot dancers in the lobby. Soon, however, the robots began to create more work than they replaced, according to the Journal’s report. The hotel had to increase overtime for the human staff to manage.

Yoshihisa Ishikawa, who stayed at the hotel for one night, told the Journal he was constantly awakened by a “Churi,” a doll-shaped robot in his room saying, “Sorry, I couldn’t catch that. Could you repeat your request?” He realized his snoring was confusing the robot.

Another became frustrated that Churi could only perform basic tasks like adjusting the lights, and couldn’t search for answers to questions.

“She got a bad reputation,” Hideo Sawada, president of H.I.S. Hospitality, the hotel’s parent company, told the Journal. (In October, 2018, the company bought a hotel building 235 West 35th Street for $44 million.)

The hotel has now removed more than half of its 243 android assistants, including the main concierge robot and the much-maligned Churi.

Others in the hospitality industry, such as the Yotel and Aloft chains in the U.S., have also been exploring using robots and smart devices. Both chains use robots to deliver mail, toiletries and drinks to guests’ rooms. The Hilton in McLean, Virginia, has a robot concierge. [WSJ] – Decca Muldowney

The Hong Kong skyline (Credit: Unsplash)

Major global markets that once seemed insulated from the housing slump are getting caught in the slowdown.

Cities like London, Hong Kong and New York are grappling with a more tepid market, Bloomberg reported. According to a Knight Frank index of high-end properties in 43 cities, luxury residential prices are growing at the slowest rate since 2012.

“If New York and London are catching a cold, the primacy is large enough that they might have an impact on the overall market,” Albert Saiz, a professor of urban economics and real estate at the Massachusetts Institute of Technology, told Bloomberg.

Hong Kong property values are seeing the longest decline since 2008, while Sydney is experiencing the worst real estate downturn since the 1980s. In outer London neighborhoods, prices fell for the first time since 2011 — and in Manhattan, the median condo price recently slid before $1 million for the first time in three years.

Because home values in global cities tend to move in tandem, shifts in these markets have the potential to create a broader ripple effect internationally, the report said.

The slowdown comes after governments’ concerns about unsustainable price appreciation led to measures that sought to limit flows of international money. These moves to reduce foreign purchases have caused values to stall or fall in cities including Sydney, Melbourne, Toronto, Vancouver and Stockholm, according to the report.

In the U.S., developers’ focus on the high-end market has created an influx of million-dollar condos — while lower-end home prices have been driven up by limited supply. Now, in a climate of rising interest rates and financial market volatility, markets are slowing.

“For a long time, you could talk about big, important issues like Brexit or tax policy change in the U.S. — each one of them seemed to hit a major market but didn’t really cross over,” said Dan Conn, chief executive officer of Christie’s International Real Estate. “What happened this year is that the trade battles started to make this, instead of a regional conversation, much more of a global conversation.” [Bloomberg] — Meenal Vamburkar

Clockwise from the top: The Grand Hyatt in Istanbul, the Capri Palace Hotel in Capri, the Aldrovandi Villa Borghese in Rome and Ferit Şahenk  (Credit: Hyatt, Capri, Trovalia, and Wikipedia)

Ferit Şahenk, once Turkey’s richest man and owner of restaurants in New York and Miami, is in talks to sell some of Europe’s most famous luxury hotels to Dubai as part of a debt restructuring, sources told Bloomberg.

The buyer, Dubai Holding, is controlled by the emirate’s ruler Sheikh Mohammed bin Rashid Al Maktoum.

The hotels in question include two Italian properties – the historic Capri Palace, and the Aldrovandi Villa Borghese in Rome – as well as the Grand Hyatt in Istanbul. Şahenk sold another hotel, the Villa Magna in Madrid, to a Mexican firm in November for $241 million.

Through his conglomerate, Doğuş Group, Şahenk owns hotels, retail stores, restaurants, construction companies and high-end car dealerships around the world. As Turkey’s recent currency crisis has raised concerns about the company’s ability to service its debt, Doğuş has been selling off many of its real estate holdings.

“We understand Doğuş has a detailed plan to dispose of part of its real estate assets for a total of about 500 million euros in 2019,” wrote Standard & Poors analysts in October while downgrading the company’s credit rating to B-.

Via a subsidiary, Doğuş Restaurant Entertainment and Management (or d.ream), Şahenk is also the owner of two high-end restaurants in Manhattan – the Japanese restaurant Zuma at 261 Madison Avenue, and the “Salt Bae Steakhouse” Nusr-Et at 60 West 53rd Street. U.S. real estate moguls Alex Sapir and Rotem Rosen partnered with Şahenk at both restaurants. Both chains also have restaurants in Miami.

Last April, Doğuş sold a 17 percent stake in its restaurant business for $200 million to the Singaporean government and a London investment firm.

Dubai Holding’s hospitality arm, Jumeirah Group, owned the Essex House hotel on Central Park South between 2005 and 2012, converting more than 100 rooms into condos during that time. The company now has no properties in the U.S., but owns hotels across Europe and Asia, from Mallorca to Shanghai. [Bloomberg] — Kevin Sun

The Mall at Wellington Green (Credit: Loopnet)

A developer proposed an expanded apartment complex and a new commercial building in two nature preserves next to a shopping mall in Wellington.

Brefrank Inc. proposed change to Wellington’s master plan for development that would allow 140 new residential units and a 9,500-square-foot commercial building on the two preserves totaling 21 acres.

The 17-acre and four-acre preserves are next to the Mall at Wellington Green at 10300 Forest Hill Boulevard.

Changing the master-plan designations of the property would allow Brefrank to expand an apartment complex called Axis at Wellington Green onto the larger, 17-acre preserve.

New apartments would be built on eight acres of the preserve, leaving nine acres as wetlands.

Brefrank would put the commercial building on the four-acre preserve together with a one-acre lake.

The developer believes the lake could mitigate drainage problems in the area, according to Bob Basehart, Wellington’s director of planning, zoning and building.

Wellington planning and zoning staff are reviewing applications filed by Brefrank to advance its development plan.

After the staff review, the proposed project would be considered by Wellington’s Planning, Zoning and Adjustment Board, perhaps as early as March, and then by the Village Council. [Palm Beach Post]Mike Seemuth

Chicos store at The Gardens Mall in Palm Beach Gardens

Fort Myers-based women’s apparel retailer Chico’s FAS Inc. plans to close at least 250 stores in the United States over a three-year period.

Chico’s FAS did not identify where it would close stores operating under its three brands – Chico’s, Soma and White House Black Market.

The publicly held company has 124 stores in Florida, according to its Form 10-K filing last year with the U.S. Securities and Exchange Commission.

As of Nov. 3, Chico’s FAS had a total of 1,431 stores in the United States and Canada and 83 franchise locations in Mexico.

In a press release, the Fort Myers-based company called its plan to close at least 250 stores by 2022 a “strategic decision to re-balance the mix between its physical store presence and its digital network.”

Chico’s FAS also said the planned store closures will “allow the company to take advantage of its lease expiration cadence, while improving profitability and return on invested capital.”

In late November, Chico’s FAS reported a 40 percent decline in net income to $52.3 million in the nine-month period ended Oct. 28, from $73 million during the same period in 2017.

Net sales in the nine-month period fell 5.6 percent to $847 million last year from $895 million in 2017.

Chico’s FAS expects to announce its financial results for the fourth quarter of fiscal 2018 and the full year on March 6. – Mike Seemuth

(Credit: iStock)

The pace of home sales in the U.K. to first-time buyers accelerated in November, a financial trade association reported.

The number of mortgage loans to first-time home buyers rose to 36,200 in November, 5.8 percent more than in November 2017, according to UK Finance, a trade association that represents nearly 300 firms in the banking and financial services industry.

The volume of mortgage loans to first-time U.K. home buyers increased to £6 billion (US$77.2 billion) In November, a 9.1 percent increase from the same month in 2017.

UK Finance also reported that the average age and income of first-time home buyers was 30 years and £42,000.

Introduced in 2013, so-called “Help to Buy” programs allow first-time home buyers to qualify for mortgage loans by making down payments as small as 5 percent.

Jackie Bennett, the director of mortgages at UK Finance, said the November increase in mortgage loans to first-time home buyers stemmed from “a mixture of competitive deals and schemes including Help to Buy.” [Mansion Global] – Mike Seemuth

(Credit: Getty Images, Douglas Elliman)

The owner of South Beach restaurants Prime Italian and Prime 112 has listed his nearby townhouse on Collins Avenue for $4.4 million.

Myles Chefetz – who twice has been nominated for the Outstanding Restaurateur Award from the James Beard Foundation – listed his townhouse at Three Hundred Collins, a new condominium at 300 Collins Avenue in Miami Beach, with an asking price that equates to $1,840 per square foot.

The 2,397-square-foot townhouse, designed by Thomas Juul-Hansen, has a large backyard with a kitchen.

The listing agents are Dina Goldentayer and Joseph Schafer of Douglas Elliman.

Other residents of Three Hundred Collins include clothing designer Anthony Thomas Melillo, owner of the ATM apparel label, who paid $2.025 million for Unit 4E in September.

Two cosmetics executives also own a residence at the 19-unit condominium, completed in June. Richard Ferretti, global creative director for Bobbi Brown Cosmetics, and his husband James Gager, former global creative director for MAC Cosmetics and Jo Malone, paid $5.8 million for a 3,143-square-foot penthouse at Three Hundred Collins. [New York Post] – Mike Seemuth

 

(Credit: iStock)

Floods, wildfires and other types of extreme weather are threatening not only the real estate industry but also the mortgage industry.

Mortgage lenders are unprepared for widespread foreclosures as natural disasters increasingly hit areas where few borrowers have insured their properties against fire or flood damage, according to former Freddie Mac executive Ed Delgado.

Assessing credit risk is a fundamental function of the mortgage industry, but lenders lack an understanding of “weather risk and where those events can take place,” said Delgado, who now serves as CEO of Five Star Institute, a mortgage trade association.

After large-scale natural disasters, mortgage servicers usually suspend foreclosure actions temporarily and adopt loan-forbearance programs, which extend the terms of mortgage loans while allowing borrowers to avoid making a few monthly payments.

Forbearance and foreclosure suspensions are post-disaster guidelines for mortgage servicers from Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA), which insure or own most home loans.

But the mortgage industry has failed to quantify the potential losses if a large number of borrowers abandon homes due to damage or destruction caused by a major natural disaster.

In August 2017, for example, Hurricane Harvey flooded nearly 100,000 homes in the Houston area, and 80 percent of them lacked flood insurance because their locations weren’t prone to flooding.

After the hurricane, severe mortgage delinquency among owners of damaged Houston-area homes soared more than 200 percent, CoreLogic reported.

The Houston area avoided widespread foreclosures after Harvey because investors paid cash to buy many of the homes of delinquent mortgage borrowers.

Attom Data Solutions reported that investor acquisitions of 10 or more properties rose almost 50 percent in the year after Harvey. The post-Harvey investors ranged from small-scale house flippers to such large-scale buyers as HomeVestors of America and Cerberus Capital.

But Delgado says Harvey’s impact on Houston should serve a warning to mortgage lenders in the rest of the nation, because many of the damaged homes in the Houston area were located outside of FEMA flood plains, so the owners were not required to have flood insurance.

Though mortgage lenders rely on FEMA flood maps to assess the flood risk of properties, FEMA administrators admit the maps fail to account for extreme weather.

FEMA is supposed to update its flood maps every five years. But some communities resist reporting flooding problems to FEMA to prevent their insurance premiums from rising, according to David Maurstad, deputy associate FEMA administrator for insurance and mitigation. [CNBC]Mike Seemuth

Scott Gillen and The Mountain of Beverly Hills (Credit:Jeff Newton and A Bird’s Eye) 

The never-ending saga of the 157 acres of undeveloped land in Beverly Hills Post Office that can’t seem to find an owner willing to build on it will carry on at least a little while longer.

The ownership group behind the so-called “Mountain of Beverly Hills” have rejected developer Scott Gillen’s $400 million offer to buy the property, TMZ reported. A spokesperson for Gillen confirmed the report to The Real Deal.

Instead, Secure Capital Partners, an entity controlled by the Victorino Noval family, countered at $600 million. That’s still $400 million less than their initial monstrous ask of $1 billion last summer — the highest ever for a Los Angeles listing.

“I saw an opportunity to expand my brand in the city, something I’ve wanted to do for some time,” Gillen told TMZ. “If they’re smart, they’ll take the offer.”

Gillen, a luxury home developer, wanted to build six homes on the massive property, which currently has six graded pads. He’s building a similar development in Malibu, where he broke records when he paid $50 million for a 24-acre spread of undeveloped land. The Unvarnished founder is building five homes on the property.

Aaron Kirman at Compass, who has the Mountain listing, did not respond to requests for comment.

Many brokers in L.A. have scoffed at the idea that the owners will get anywhere close to $1 billion for the property, and spec builders have turned away from the property because of its many challenges. The Mountain, which has nearly 25 acres of usable land, may be closer in value to $300 million, The Real Deal previously reported. [TMZ]Natalie Hoberman

(Credit: iStock and Getty Images)

National experts predict Chicago will have the worst housing market in the country in 2019. But some local experts and industry observers say the situation is much more complicated than that.

Chicago is not the only housing market that will experience pains this year. Nationally, home prices are expected to grow modestly, but sales figures will fall, Danielle Hale, economist with Realtor.com, said at the Chicago Association of Realtors’ 2019 Market Outlook forum this week.

“It’s going to be good but not great,” Hale said. “We had a record year in 2017, a bit of a slowdown in 2018 and we expect to see some further softening in 2019.”

The situation differs, however, the more locally you look. Even if the Chicago market as whole is forecast to have a down year, not every submarket will be affected the same, experts said.

“It’s not as dramatic here as its is on the coasts, but the market is slow,” said Steve Baird, president of Baird & Warner. “But everyone looks at what it was the year before, and it’s off a little bit.”

The Real Deal talked to a number of local and national experts about what they expect to see in the Chicago housing market. Here’s what they had to say:

Home sales

Most experts believe the volume of units sold will be down, but that there is no reason to panic.

After a number of strong years following the market crash, a downturn in the market was not a matter of “if,” Baird said.

“We’re now 10 years into a cycle, he said. “There’s going to be a downturn, the only question is when. So we’re basically predicting that the market will be off by low single-digits in terms of unit sales. The market itself is going to be off, but not by a whole lot.”

Matt Laricy, one of the city’s top producing agents and a partner at Americorp Real Estate, said a return to a more even market could be a gift in disguise for the industry, especially after crash and post-crash years saw the market bounce from horrible to great.

“We’re going to cool off, but it’s not the end of the world,” said Laricy, who is currently preparing a yearly market forecast video for his clients. “We just need to get to a normal market.”

Curt Beardsley, vice president of industry development at Zillow, said he thinks Chicago will have a better year in 2019 than in 2018, when home sales dipped slightly year-over-year.

“We actually think there’s going to be some more growth in next year than there was in the previous year, partially because of the constraints on inventory,” Beardsley said at the Realtors event. “A little bit more of it is going to open up. That will actually drive things better.”

Inventory

Most experts TRD consulted agree inventory will rebound in 2019 following years of historic lows. Hale said inventory is expected to be up 5 percent across the country. Laricy said he expects inventory to rebound much higher than that in some areas of Chicago.

While more available housing stock is a good thing for the industry, not all inventory is created equal.

“Supply is starting to come back, but it’s concentrated still in high-cost areas,” Hale said.

Before the housing crisis, new homes were about 12 percent more expensive than existing homes, Hale said. Now, new construction homes are 33 percent more expensive than the rest of the available supply, she said.

In Chicago, much of the new supply is concentrated in Downtown-area condo projects, many of which are loaded with luxury units.

“There continues to be a lot of headwinds to building multifamily,” Brandon Svec, market economist with CoStar Group, said at the Realtors event. “That’s why we see a lot of the new supply concentrated in the Class-A market.”

New units under construction right now could be of immediate benefit to the market, helping to ease inventory constraints and keep housing prices down. But the construction boom will pose a problem eventually, Svec said.

“Our expectation is we will start to see some of these projects that are currently proposed fall by the wayside,” Svec said. “Llooking forward probably six to eight quarters out in the future, we will see some pullback on new supply.”

The new inventory will be a good thing for buyers, who for years put up with bidding wars and homes flying off the market.

“I don’t think that buyers will feel that 24-hour gun-to-the-head” pressure, Laricy said. “Buyers will be pickier. They’ll have more options.”

The new market realities could cause sellers to be a bit more patient, said Jennifer Ames, one of the city’s top brokers and a partner at Engel & Volkers.

“The rules are changing, and buyers are more particular and more fickle than they’ve ever been,” Ames said. “People are a little less willing to stretch financially, and less willing to set down roots somewhere.”

Hot and cool neighborhoods

Whereas the overall Chicago housing market saw sales drop in 2018 by about 2 percent, luxury sales in the area grew.  The ultra-luxury market had a record year in 2018, with more $4-million-plus homes sold that year than in any year prior.

That trend will continue into 2019, and will help buoy the Downtown market, where much new luxury product is concentrated, Laricy said. His office is predicting a 1.5 percent growth in Downtown sales compared to last year, although price growth will slow, he said.

Other neighborhoods that could see strong home sales is Bronzeville and other South Side neighborhoods like South Shore and Woodlawn. Those areas could see boosts from Opportunity Zones and the planned Barack Obama presidential library, Svec said.

“We’re starting to see some meaningful growth on the South Side,” he said.

Millennials: The market’s ‘X’ factor

Some of the Chicago-area’s housing market success will hinge on the activity of Millennials, experts said.

Millennials already make up 45 percent of mortgage borrowers, compared to 37 percent for Gen X and 17 percent for Baby Boomers, Hale said. Their share of the housing market will only increase from here, Hale said.

The National Association of Realtors’ annual home-buyer profile has recorded an average homebuying age of 30 that has stood for decades, Hale said. In 2020, the largest group of Millennials will turn 30, which will be good news for an industry that may need it.

“That’s going to be a huge tailwind for the housing market going forward,” Hale said the Realtors event. “Now, they’re facing historic affordability challenges.”

Where Millennials will choose to buy will be interested. While young people have flocked Downtown, bringing with them corporations seeking skilled workers, Millennials will likely turn back to the suburbs when it comes time to buy, Svec said.

But because so many jobs have moved from the suburbs to Downtown, Millennials will likely look for housing in inner-collar suburbs that have urban amenities like public transportation and walkability, Svec said.

And though Millennials’ preferences when it comes to housing have vexed real estate professionals so far, research shows they still want a broker to help them navigate the homebuying process, Beardsley said.

“The Millennials are more inclined to use professional help than the previous generation … because they are also ones that have done so much research themselves,” Beardsley said. “They have turned the lights on and they know where the pitfalls are, and they want a professional to help them with the pitfalls.”

John Kocinski and Muhammad Ali (Credit: Getty Images and Wikimedia)

This week saw a flurry of new listings hit the market, ranging from $17 million to $55 million. Sellers also dropped the prices of some older listings, the latest sign of a slowdown in the Los Angeles luxury residential market.

The former home of the late heavyweight champion Muhammad Ali is being marketed for sale for just under $17 million. Located in the Hancock Park neighborhood, the Italian Renaissance estate boasts seven bedrooms and seven bathrooms within 14,500 square feet of space. The most-recent sellers are Michael Lawson, a retired lawyer and chief executive of a national civil rights group, and Mattie McFadden-Lawson, a philanthropist who sat on President Barack Obama’s Advisory Committee on the Arts. Ali and his family lived there from 1979 to 1986.

John Kocinski, a former Grand Prix motorcycle racer-turned-developer, is looking to unload his Holmby Hills mansion for $30 million. Designed by architect Richard Robertson III of Robertson Partners, the Mediterranean-style home spans 9,000 square feet. It includes four bedrooms, eight bathrooms, a theater, library, swimming pool and 800-bottle wine cellar. Kocinski, who has been buying and selling real estate for the past two decades, previously sold a home to comedian Eddie Murphy for $15 million.

Developer-to-the-stars Nile Niami put his own home on the market this week. The 14,000-square-foot property, listed for $55 million, includes six bedrooms and 10 bathrooms. He included his his usual extravagant amenities, such as a cold-therapy chamber and gym. The modern-style mansion is located in West Hollywood.

A Pasadena mansion used to film the original “Dynasty” television show has been discounted to $19.5 million, down from an initial ask of $28 million. The 17,600-square-foot property, dubbed the Arden Villa, includes 10 bedrooms and 11 bathrooms on four stories. Built in 1913, the property was designed by Marston & Van Pelt. An entity registered to Guang “Geoffrey” Ren, who purchased the home in 2013 for $20 million from “Spring Breakers” producer David Zander, is selling the home. In addition to “Dynasty,” the property has been a filming location for “Terms of Endearment” and “Billy Madison.”

The price of the former home of the late producer-director Garry Marshall, the creator of “Happy Days,” also dropped, to $15.9 million, from $18 million. The 3,190-square-foot home has five bedrooms, four bathrooms and about 40 feet of beach frontage, the Los Angeles Times reported. Marshall bought the pad, built in 1965, from the late Debbie Reynolds. It was been featured in Marshall’s “Valentine’s Day” romantic comedy.

Clockwise from top left: Sears avoids bankruptcy liquidation after its board accepted an auction bid from chairman Eddie Lampert, CBRE finds warehouse vacancy rates at their lowest levels since 2000, the Blackstone Group readies its largest-ever real estate private equity fund and leading homebuilder Hovnanian Enterprises is in danger of getting delisted from the New York Stock Exchange.

Sears avoids liquidation after board accepts chairman’s auction bid
All of the remaining assets of Sears Holdings Corporation have been acquired by chairman Edward Lampert for $5.2 billion, according to various news reports. The board of the bankrupt company accepted Lampert’s auction bid in lieu of competing proposals from liquidators, Bloomberg reported. The decision came after “two days of discussions… to determine whether Sears would be worth more dead or alive,” according to the outlet. The deal must still be approved by a U.S. bankruptcy judge. A hearing on the matter has been scheduled for Feb. 1. If it is approved, Lampert will have another opportunity to try to revive the ailing retail chain. He hopes to keep 425 stores open and save 45,000 jobs, a source told Bloomberg. [TRD]

CBRE finds warehouse vacancy rates at lowest level since 2000
A mere 7 percent of industrial space was vacant in the fourth quarter of 2018 — the lowest that vacancy rates have dipped since 2000, the Wall Street Journal reported, citing data from CBRE. The commercial real estate firm attributed the scarcity of available space in part to the growing e-commerce industry. Demand actually outpaced supply by around 6 million square feet during the fourth quarter last year. “In 2019, it will remain quite a competitive market for people to get hold of the logistics assets they need,” CBRE’s head of research for the Americas and global chief economist Richard Barkham told the newspaper. [TRD]

Blackstone’s $20B real estate fund set to be its largest yet
Buyout giant the Blackstone Group is gearing up to close a $20 billion real estate fund with around $60 billion in buying power, the Wall Street Journal reported. The fund, which will likely close in the first quarter of 2019, will be the private equity firm’s largest real estate fund to date. “They can buy private companies and they can buy [entire companies listed] on the New York Stock Exchange,” Evercore ISI analyst Steve Sakwa told the newspaper. The fund is something of an anomaly, as other real estate funds have struggled to raise money, according to the outlet. [TRD]

The Mooch parts ways with Opportunity Zone fund partner
Former White House communications director and Harvard Law School graduate Anthony Scaramucci’s SkyBridge Capital split this week with Emanuel “Manny” Friedman’s EJF Capital on a planned $3 billion fund to invest in Opportunity Zones. The venture, which was announced in November and poised to be structured as a real estate investment trust, fell apart as a result of EJF’s perceived lack of experience in managing real estate funds, according to The Real Deal‘s reporting. SkyBridge president Brett Messing told TRD that the separation with EJF was amicable. Both will now proceed with their own Opportunity Zone funds. Scaramucci, meanwhile, will soon appear as a contestant on “Celebrity Big Brother,” which premieres Jan. 21 on CBS. [TRD]

Leading national homebuilder in danger of getting stock delisted
One of the largest homebuilders in the country, Hovnanian Enterprises, could be delisted from the New York Stock Exchange as its debt piles up. The Matawan, New Jersey-based company, founded by chairman and president Ara Hovnanian, plans to carry out a reverse stock split to stay on the NYSE if it can get approval from shareholders at a meeting in March. On Thursday, Hovnanian’s stock price close at 66 cents, and the company will need its shares to trade above $1 if it hopes to stay listed. Hovnanian’s current financial woes can be traced back to the 1990s, when the company’s debt started to mount as it went into acquisition mode. [TRD]

MAJOR MARKET HIGHLIGHTS

Amazon eyes 10,000 square feet of space in Chrysler Building
The Chrysler Building is for sale, but Amazon is planning to ink a lease at the iconic office tower, the New York Post reported. The e-commerce and technology behemoth, which late last year announced plans for a second headquarters in nearby Long Island City, is expected to sign a lease for around 10,000 square feet of space in the building soon, though it’s not yet clear exactly when. News of Amazon’s likely tenancy came less than a week after news broke that Tishman Speyer and the Abu Dhabi government fund that own the Chrysler Building would be putting it up for sale after hiring CBRE to market the landmark skyscraper. [TRD]

Microsoft to contribute $500M to affordable housing in Seattle
One of the world’s largest companies has a plan to tackle a dearth of affordable housing in the Puget Sound region. Microsoft announced this week that it was ready to spend $500 million to fix a problem that it partly had a hand in creating in one of the nation’s priciest housing markets, according to the New York Times. The Redmond, Washington-based company has pledged to fund projects in Seattle and surrounding areas that provide more housing options for low-income and middle-class workers, as well as address homelessness. [TRD]

PG&E filing for bankruptcy and CEO steps down amid wildfire fallout
The California utility giant accused of starting the deadly Camp Fire in California this past fall plans to file for bankruptcy, Bloomberg reported. Geisha Williams, CEO of the San Francisco-based Pacific Gas & Electric Company, has also stepped down with general counsel John Simon stepping into the company’s top leadership role until it finds a permanent replacement. A number of California residents have hit PG&E with lawsuits claiming that the company’s equipment sparked the November fire that left 86 people dead and destroyed 21,000 homes in Northern California. State Attorney General Xavier Becerra is investigating those allegations. PG&E could be facing up to $30 billion in wildfire-related liabilities. [TRD]

Top NYC developer looks outside for new leader
Sush Torgalkar, a former COO of Westbrook Partners, has been named the new CEO of Extell Development Company, one of the largest commercial real estate developers in Manhattan. Extell founder Gary Barnett will continue to serve as chairman of the firm, but he did not provide a reason for recruiting Torgalkar to run the business. Torgalkar, 42, grew up in Cleveland as the son of Indian immigrants. He is known for his access to institutional investors and ability to navigate tricky deals, something in which Extell is well-versed. A recent analysis by The Real Deal found that Extell has more than 1,500 units in its New York pipeline. [TRD]

South Florida mansion owned by IHOP founder’s son hits market
The son of one of IHOP’s founders has put the South Florida mansion that he and his wife own on the market. Nathan and Jacqueline Finkel are seeking $7.25 million for their 21,656-square-foot home in a suburb of Fort Lauderdale. Abe Finkel, Nathan’s father, was one of the founders of IHOP, the pancake house restaurant chain that briefly flirted last year with a name change to IHOB as part of a burger promotion. The nine-bedroom, 11-bathroom home in the town of Southwest Ranches has a bowling alley, a theater room, a bar room, a library and quarters for maids and nannies. The property comes with a tennis court, gazebo and swimming pool. Mark Kaminsky and Kevin O’steen of the Kaminsky/Reyes Team at Coldwell Banker have the listing. [TRD]

Amid national expansion, Compass heads to Mile-High City
Despite already having offices in Aspen and Telluride, Compass is embarking on a further Colorado expansion with planned outposts in Denver and Boulder. The SoftBank Group-backed residential brokerage said it will open flagship offices in the two cities within the next few months. “Colorado is consistently named one of the fastest growing states in the country, netting more than 70,000 new residents per year over the past 5 years,” chief growth officer Rob Lehman said in a statement, noting that there’s “an enormous opportunity to elevate the real estate experience for agents across the state.” Compass has been rapidly expanding, opening offices across the country. [TRD]

R. Kelly evicted from Chicago warehouse he used as studio, residence
A judge signed an order evicting the R. Kelly from an industrial building in Chicago, the Chicago Sun-Times reported. The singer owed nearly $80,000 in back rent for the warehouse, which he used as both a recording studio and a residence. City attorneys claim the dual use violates zoning code and had been trying to gain access to the building, according to the outlet. R. Kelly has long been accused of abusing women and young girls, but a recently-aired Lifetime series, “Surviving R. Kelly,” has raised a new set of abuse allegations against the entertainer, all of which he has denied. [TRD]

Nonprofit shells out $2.5M for Muhammad Ali’s Michigan estate
An 81-acre estate in southwest Michigan that Muhammad Ali bought in the 1970s has a new owner, the Chicago Tribune reported. A Turkish nonprofit called the Turken Foundation, which is based in New York, bought the property from Lonnie Ali, the boxing legend’s widow, for $2.5 million, according to the outlet. Lonnie Ali initially listed the estate for $2.895 million, although the precise figure was $2,895,037, a tribute to her late husband’s 37 career knockouts. Ali, who died in 2016, purchased the property when he was living 90 miles away in Chicago’s Kenwood neighborhood. He continued to stay there even after Ali moved to Los Angeles and Arizona. One of the buildings on the estate has a boxing ring, the newspaper reported. [TRD]

Stuart Miller and Wynwood Green

Lennar Corp. paid $17 million for a site in Wynwood that’s currently home to the popular Wynwood Yard and the O Cinema movie theater.

A subsidiary of the giant homebuilder purchased 1.26 acres at 48, 56, 64, 70, 82, 90 and 98 Northwest 29th Street, as well as 63 Northwest 28th Street, property records show. David Lombardi, principal of Lombardi Properties and one of Wynwood’s pioneering land owners, sold the site.

Lennar is planning to build an 11-story, 189-unit apartment building as part of a development called Wynwood Green. Wynwood Green will also include nearly 17,000 square feet of commercial space and 324 parking spots. The properties surround a site owned by The Related Group and Tony Cho, records show.

Wynwood Yard is one of the more well-known attractions in the trendy arts district. The outdoor venue features an array of food and beverage concepts and a performance stage. O Cinema is a nonprofit independent movie theater that operates out of a converted warehouse.

Both properties are expected to be shut down. Wynwood Yard is planning to open a new site in Downtown Doral in the spring of 2019.

Lennar became the largest homebuilder in the country last year after it acquired CalAtlantic in a deal worth about $9 billion.

Frank Rodriguez Melo, Stefano Garofoli and Costantino Cicchelli and an Overtown property they acquired

An investment group is making a long-term play in Miami’s Overtown thanks in part to its Opportunity Zone designation.

BrickOne Group, led by Costantino Cicchelli, Frank Rodriguez Melo and Stefano Garofoli, paid about $5.4 million for the three buildings with 66 apartment units at 149 Northwest 11th Street, 1232 Northwest First Place and 1201 Northwest Second Avenue in Miami, Melo said. The deal breaks down to about $81,250 per unit.

Cedano Realty Advisors and Marcus Millichap brokered the sales. Bahia Apartments LLC, led by Horacio and Marcela Segall, sold the buildings, property records show.

Melo said the competition for smaller properties in the neighborhood is strong. “There are very limited opportunities to begin with in Overtown. We had to act very quickly,” he added.

The properties are also about three blocks away from Brightline’s MiamiCentral station.

BrickOne Group plans to buy about 300 to 500 more affordable apartment units in the next two years, with a heavy focus on units in Opportunity Zones. The program, part of the federal tax overhaul, provides tax incentives to developers who invest in historically distressed neighborhoods throughout the U.S. There are 8,700 communities that have been designated as Opportunity Zones, and 67 of those are in Miami-Dade County.

In South Florida, developers who plan to take advantage of the program include Richard LeFrak and the Soffers at their planned $1 billion SoleMia project, Tony Cho and his partners at Magic City in Miami’s Little Haiti neighborhood, as well as others in Little Haiti.

The program’s biggest advantage is that it allows investors or developers to defer or possibly forgo paying capital gains taxes, or taxes resulting from the sale of certain types of assets.

Melo said he and his partners plan to maintain the apartments they just purchased, a mix of one and two-bedroom units asking between $800 and $900 a month in rent.

Bob Swindell, Mike Salzman, Tere Blanca, Nitin Motwani and David Martin (Credit: Rebecca Lattanzio)

Co-living startup Common is expanding to Miami, developer David Martin announced at The Real Deal South Florida’s transportation and real estate event this week.

Martin, president and co-founder of Terra, Brightline Chief Development Officer Mike Salzman, Miami Worldcenter developer Nitin Motwani, Blanca Commercial Real Estate CEO Tere Blanca, and Greater Fort Lauderdale Alliance CEO Bob Swindell were joined by Ina Cordle, moderator and managing editor of The Real Deal South Florida, at Brightline’s MiamiCentral station on Wednesday for a panel discussion on how transportation is impacting the real estate industry.

Martin and Grass River Property just broke ground on Grove Station, a mixed-use, transit-oriented project planned next to the Coconut Grove Metrorail station. The development will have 130,000 square feet of retail space and 350 apartments, some of which will be managed by Common.

The co-living company, whose competitors in South Florida include PMG’s X Social Communities, will be entering the Miami market at the Coconut Grove project. Rooms will be priced about 30 percent below a studio, Martin said.

“As a lot of these cities start investing in east-west corridors, we’re seeing a change in psychology about transit,” he added. The Metrorail runs east to west and connects near MiamiCentral at the Historic Overtown/Lyric Theatre Station.

Brightline launched service in West Palm Beach a year ago, later opening the Fort Lauderdale and Miami stations. Salzman expects the Orlando leg will start operating trains in 2022 and will eventually include a stop at Walt Disney World.

In December, Brightline recorded more than 100,000 riders, he said. Tri-Rail will connect at the MiamiCentral station, crossing over onto Florida East Coast Railway lines at Northeast 79th Street sometime over the next 12 months. That could add 5 million people to MiamiCentral, according to Salzman.

Brightline will soon rebrand as Virgin Trains USA. The private passenger train operator announced last year that Richard Branson’s Virgin Group took a minority stake in the company. But the initial public offering will be delayed to the government shutdown, Salzman said.

Crowd at the event (Credit: Rebecca Lattanzio)

Near MiamiCentral, thousands of residential units are underway within a few blocks. Blanca compared the potential transformation to what happened in the Brickell neighborhood once residents moved in. “That spills out very quickly into restaurants, stores. It becomes a community really quickly,” she said.

At the nearby Miami Worldcenter, CIM Group and Falcone Group completed Caoba, a 444-unit rental building. Next up is Paramount Miami Worldcenter, a 60-story condo tower. Hines is also developing an office building at Worldcenter “because of the train,” Motwani said.

“In order to really connect and fill 350,000 square feet of office space, you really have to have a regional impact,” he added.

Motwani referred to Miami Worldcenter as “the hole in the doughnut,” because of all the development that has taken place close by, including the Phillip and Patricia Frost Museum of Science and the Perez Art Museum Miami, as well as MiamiCentral.

Blanca, who handled leasing at MiamiCentral, said “we probably could be charging a higher premium” for new office space, citing a 40 percent increase in Class A rents over the last five years in Miami.

Development has also heated up near Brightline’s Fort Lauderdale and West Palm Beach stations.

Swindell and Motwani said one hurdle the region faces is the perceived barriers of crossing county lines.

“We’re competing with Dallas and Atlanta. Growing up in Fort Lauderdale and moving to Miami, you realize how real that barrier is,” Motwani said. “We need to do a better job of talking about South Florida.”

Keith Larsen contributed to this report.

Sam Zell and Adam Neumann (Credit: Getty Images)

Adam Neumann, CEO of the recently rebranded We Company, is facing more blowback for leasing he has ownership interest in to WeWork.

Billionaire real estate investor Sam Zell said WeWork’s size gives them “public responsibilities, including governance,” in an interview with Bloomberg television Thursday.

The Equity Group Investments founder was referring to reports that The We Company’s CEO Adam Neumann is still personally buying buildings that are leased to the company’s co-working arm, WeWork, first reported by The Real Deal in March last year.

In that deal, Neumann partnered with fashion designer Elie Tahari to buy a stake in 88 University Place, before leasing it to WeWork.

Neumann is now making millions from by leasing properties in which he has an ownership stake back to WeWork, according to a report this week from the Wall Street Journal. He has been expanding his investments, buying multiple properties in San Jose, California, where WeWork has plans for a campus, including a residential section for its WeLive business.

WeWork has defended the deals, saying they were disclosed to investors after being approved by the board and an independent committee. But according to the Journal report, the practice has sparked concern among some investors over potential conflicts of interest.

However, Zell said those deals “would never have occurred if WeWork was a public company and scrutinized accordingly.”

Zell speculated that The We Company might face difficulty in a future market downturn. “I think the last business like this was the savings and loan business,” he told Bloomberg Television, “Am I being too subtle?” [Bloomberg] — Decca Muldowney

 

George Gleason, Chairman of Bank OZK and New York City (Credit: Bank OZK)

Bank OZK, among the most aggressive real estate lenders in the country, has signaled it could continue to make big construction loans in 2019. The news, which came as part of the Arkansas bank’s fourth quarter earnings report, comes amid a general nationwide slowdown in the housing market.

During an earnings call on Friday, CEO George Gleason said the bank was seeing strong sales on the condo projects it was involved in, especially developments in Miami. From 2013 to 2017, Bank OZK provided more than $1 billion in Miami loans from 2013 through 2017, according to previously-released information.

Gleason’s comments stand in contrast with many indicators and reports that Miami’s luxury condo market is struggling amid a surplus of luxury condos, which is driving down prices.

The regional bank, formerly known as Bank of the Ozarks, has become one of the biggest condo lenders in New York, Los Angeles and Miami and is widely seen as barometer of how those real estate markets are performing.

In October, Bank OZK provided a $558 million construction loan to Trump Group — no relation to the president — for its The Estates at Acqualina project in Sunny Isles Beach. The loan was the largest condo construction loan in Miami-Dade County this cycle.

Gleason said the bank could continue to do large credits like the Trump Group loan in the future if presented with the right opportunity.

The company’s stock jumped more than 13 percent on Friday in early trading. That compares to its previous earnings report.

From July to September, Bank OZK made two big write-offs on real estate loans from about a decade ago. The news sent the stock down 24 percent, and raised concerns about the broader credit quality of the bank’s loan portfolio. From October through December, the bank reported no major write-downs of real estate loans.

This time around, the news was better. Its fourth quarter earnings per share were 89 cents, beating analysts expectations of 84 cents.

It did report a drop in net income of 21.3 percent to $115 million, compared to the fourth quarter in 2017. During that period, Bank OZK received a one-time tax benefit of nearly $50 million.

Donald Trump and Michael Cohen, Donald Trump with sketches of Trump Tower Moscow (Credit: Getty Images (Trump, Cohen) and Buzzfeed (sketches))

President Trump told his former personal attorney Michael Cohen to lie to Congress about when negotiations ended on Trump Tower Moscow in order to obscure Trump’s involvement, according to a bombshell news report published Thursday night.

Two federal law enforcement officials told Buzzfeed News that Michael Cohen told the office of the special counsel Robert S. Mueller III about the lies after investigators gathered evidence from Trump Organization witnesses, internal company emails, text messages and other documents.

Cohen then admitted to the special counsel that, after the election, Trump personally told him to lie about the timeline of the condo project and say negotiations ended two months earlier than they did, the report claims.

These new revelations contradict statements Trump was publicly making about the deal at the time. In October 2016, Trump said he had no business deals with Russia. But Buzzfeed’s sources say Trump and his children, Ivanka and Donald Jr., were receiving regular updates from Cohen about the project. Trump had at least 10 face-to-face meetings with Cohen to hear updates about the potential deal, according to the Buzzfeed report.

They say Trump even backed Cohen’s plan to meet with Russian President Vladimir Putin to speed-up negotiations. “Make it happen,” Trump told Cohen, according to Buzzfeed’s federal law enforcement sources.

In November, 2018, Cohen pleaded guilty lying about to Congress about when the deal ended. Cohen’s claims that negotiations ended in January, 2016 were an attempt to “minimize links between the Moscow Project and Individual 1 in hopes of limiting the ongoing Russia investigations,” said special counsel Robert Mueller, referring to the investigation’s pseudonym for the president.

Felix Sater, a former Trump associate, previously said the Trump Organization considered his idea to offer Putin the $50 million penthouse in the skyscraper.

In light of the new report, some Democrats leaders are calling for an investigation and raising the possibility of impeachment.

“The allegation that the President of the United States may have suborned perjury before our committee in an effort to curtail the investigation and cover up his business dealings with Russia is among the most serious to date,” Rep. Adam B. Schiff (D-California), chairman of the House Intelligence Committee, wrote on Twitter. [Buzzfeed] – Decca Muldowney

250 Harbor Drive in Key Biscayne

A Greek shipping family sold a waterfront Key Biscayne mansion for $10.1 million, property records show.

George and Lambros Katsoufis, acting as trustees of the Fani Katsoufis trust, sold the three-story, 10,600-square-foot home at 250 Harbor Drive to Eduardo Salazar Mallory and Marcela Belismelis Alvarez.

Salazar is tied to Getcom International Investments, a Spanish investment manager. Earlier this month, Avianca Holdings disclosed the sale of its 50 percent equity stake in Getcom, according to Nasdaq.

Fani Katsoufis’ late husband, Paris Katsoufis, led the Dolphin and Majesty cruise lines in Miami in the 1980’s and 1990’s. He also founded Kyma Ship Management in 1997, where he worked until his death in 2017, according to his obituary.

The Key Biscayne property last sold in 1985 for $438,000, records show. The three-story, seven-bedroom home was built in 1992 and includes a five-car garage, master suite, a pool, spa and dock, and marble and walnut floors. Previous listings advertise it as a renovation project or a teardown. The house sits on a 20,000-square-foot lot.

Nelson Gonzalez of EWM Realty International had the listing. It was most recently on the market for $10.8 million, according to Realtor.com.

Last summer, Canadian concert promoter Michael Cohl sold his waterfront mansion at 960 Harbor Drive for $20.6 million to José Antonio Cañedo White, a founding partner at Mexico’s Axis Capital Management.

In August, former Citigroup executive Mark Rufeh sold his home at 398 Harbor Drive for $11.1 million. It sits on a similarly sized property as 250 Harbor Drive.

(Credit: iStock)

It’s not the avocado toast eating into millennials’ down payment budgets.

A recent report from the central banking system found that the dramatic rise in student debt is at least partially responsible for the drop in homeownership levels, the Wall Street Journal reported.

Homeownership in the U.S. has fallen significantly since its pre-recession peak, with the rate among young people lagging particularly far behind.

The Fed study, which examined a period from 2005 to 2014, found that homeownership among people ages 24 to 32 fell by 9 percentage to 36 percent. The Fed attributed two of those percentage points, or a fifth of the total decline, directly to student debt. That’s the equivalent of 400,000 borrowers who were unable to buy a home by 2014 because of student debt.

There are two ways ballooning student loans, which have now reached $1.5 trillion, are keeping buyers off the market. Borrowers who fell behind on their debt payments had more trouble qualifying for home mortgages, while those who did manage to meet those student loan payments were left with less disposable income to save on a downpayment.

In a separate paper published on the same day, the Fed also found that student debt is pushing more millennials from rural areas to cities, accelerating rural decline.

Nevertheless, millennials may still have a shot at buying a home. In the years since 2014, the end of the period examined by the Fed, mortgage investors like Fannie Mae have been experimenting with initiatives to make it easier for debt-burdened former students to purchase their first homes.

Since hitting a bottom of 62.9 percent in 2016, the national homeownership rate has been trending upwards for the past two years. Freddie Mac recently predicted that homeownership among young adults could rise as high as 60 percent by 2025, or 56 percent in a less optimistic scenario.

Over the past decade, student debt has risen to account for more than 10 percent of all debt in the U.S., surpassing both auto and credit card debt to become the nation’s largest debt category. [WSJ] —Kevin Sun

(Credit: Wikimedia)

Do-it-yourself projects by homeowners are a multi-billion-dollar growth area within the U.S. economy and the bread and butter of corporate giants like Lowe’s and Home Depot.

And for good reason: When done right, DIYs are great, saving you money and time. They can even be fun and give you a sense of pride in what you’ve accomplished. But they can also be rolling disasters when they go off the rails.

David Pekel, president and CEO of Pekel Construction and Remodeling in Wauwatosa, Wisconsin, has gotten frantic calls over the years from homeowners pleading for urgent help because their DIY job went seriously south. “We really need someone to come out to our house to save our marriage, right now!” yelled one panicked spouse whose partner had messed up a major repair.

In another case, an owner inadvertently connected the plumbing from a new bathroom to the home’s sump pump discharge in the basement. Uh oh. The sump pump, designed to expel excess rain water, was now connected directly to a toilet in an upstairs room. Flush! For as long as it could before getting clogged, it pumped raw sewage into the yard, creating a stinky and unhealthy mess.

Pekel, president of the 6,000-member National Association of the Remodeling Industry, better known as NARI, says Americans are constantly bombarded by messages from big box retailers, cable TV shows and You Tube videos telling us, in effect, “Get off your butt, you can do it yourself. It’s not that hard. Just follow the directions.” Inevitably, in some cases the directions turn out to be not that simple and the job itself is beyond the training or capabilities of an ordinary homeowner. Nobody advertises that cold reality.

So how many DIY projects turn out to be disappointments? You can find videos and TV shows online that illustrate the perils, but now a new study of 2,000 homeowners who said they’d had problems with their DIY efforts provides some hard numbers. It also offers insights about what types of fix-ups are most popular and which ones are most likely to fail or produce poor results.

Nearly two-thirds of participants in the survey said they had regrets about at least one of their projects. In a third of the cases, the job they did was botched badly enough that they had to call in a professional to re-do their own work. Sponsored by Improvenet, an online referral network for remodelers, the survey found that installing floor tiles ranks among the most popular DIY projects — 20 percent of the respondents said they had done it — but it was the number one “most regretted” project. Painting interior walls was by far the most common type of DIY (40 percent of owners had tried) but it ranked number 10 out of the 32 most regretted. Adding trees or shrubs to yards was by far the least regretted/most popular project, tried by one-fifth of the respondents and ranked next to last on the regrets scale.

One of every 12 consumers (8 percent) said they actually “caused damage to my home” as the result of their work. One in 16 (6 percent) revealed that they suffered some type of bodily injury in the process. More than half (55 percent) reported that things took longer than anticipated to complete, and 50 percent found it “physically harder” than they thought it would be. Seventeen percent said they spent more money than expected.

When DIY projects cost more than owners anticipated, the average overrun pushed the final expense to nearly double their original estimate. When projects took longer than estimated, the average extra time they spent was nearly a day — 22 hours.

The study categorized the types of projects most likely to defy DIYers’ expectations — sort of a “special caution needed” list. Here are the projects most likely to:

Get you injured: Installing a fireplace or windows or repairing a foundation.

Cause damage to the house: Replacing a ceiling, installing a roof or repairing a foundation.

Exceed your technical expertise, thereby increasing the odds that things could go badly: Installing anything electrical, installing a backsplash or building furniture.

The message here isn’t that you should avoid DIY. Rather you should take a sober look in advance at how your own technical and physical skills match up with what you have in mind. When the match doesn’t look all that favorable, call in a pro.

Mitchell Hochberg and David Lichtenstein

Lightstone Group is joining the ranks of real estate companies launching their own debt platforms.

The firm announced Thursday that it is setting up Lightstone Capital, which will aim to address inefficiencies and roadblocks that borrowers are dealing with in the current market. Lightstone hopes to close at least $500 million worth of transactions in its first year.

Lightstone president Mitchell Hochberg said the company wanted to launch the new platform to take advantage of its experiences on the equity side of real estate. He added that their experience buying debt would let them evaluate complicated transactions better than traditional lenders.

“We’re able to, as an owner/developer, evaluate complex deals in a way that many other lenders are not able to do,” he said.

The platform will specialize in mezzanine and first-lien loans for construction and bridge financing projects. Its target loans range in size from $3 million to $100 million in markets including New York, Miami and Los Angeles. The firm will consider strong projects in smaller markets as well.

Eugene Rozovsky, formerly of Madison Realty Capital, will oversee Lightstone Capital, which is already working on its first handful of loans.

Multiple other real estate companies have recently made similar moves. Slate Property Group and The Carlyle Group recently launched a new $750 million lending company called SCALE Lending, and Silverstein Properties launched Silverstein Capital Partners last year to provide real estate loans. And Madison Realty Capital has been lending for years.

Hochberg said more development companies were looking to do this in order to diversify their businesses.

“When you look at the risk adjusted returns in the equity markets today that are on the debt side, there are some very compelling opportunities,” he said, “and I think it just makes a lot of sense for all of us to do that.”

Lightstone recently purchased the future site of the Lower East Side’s Moxy Hotel at 151-153 Bowery and 331-337 Broome Street for $56.6 million. The firm also received a $113 million loan from Goldman Sachs for its 430-unit rental project in Gowanus at 365 Bond Street, one of the largest outer borough loans in December.

Aras Agalarov and Fisher Island (Credit: Wikipedia)

The ripple effect from the Trump-Russia investigation led to a problem for the Miami real estate holdings of Azerbaijani-Russian oligarch Aras Agalarov, a friend of President Trump.

Morgan Stanley is suing Agalarov in a $2.8 million foreclosure action tied to a condo on ritzy Fisher Island, the wealthiest ZIP code in the U.S.

Morgan Stanley was one of three banks that froze Agalarov’s U.S. bank accounts last fall due to concerns over millions in transfers to those accounts from Russia, Agalarov’s New York attorney Scott Balber confirmed.

“The mortgage was being paid by automatic debit from one of those accounts, and it wasn’t realized immediately what effect that was having,” Balber said.

He said Agalarov has paid Morgan Stanley in full and is current on the mortgage payments, although that is not reflected in public documents filed with Miami-Dade Circuit Court. The court’s website says the foreclosure case is open and the most recently filing was Jan. 4.

Morgan Stanley’s lawsuit alleges that Agalarov defaulted on the terms of a mortgage for unit 7642 at 7600 Oceanside starting July 1 and hasn’t made a payment since then. The lawsuit says the bank sent a default notice on Aug. 20. As of Nov. 30, Agalarov owed $2,786,000 in outstanding principal on the note and mortgage, plus interest, late fees, escrow advances and title search expenses, according to the lawsuit.

The foreclosure suit also names the building’s association and Fisher Island community association as defendants.

Agalarov has been described as a friend of Russian President Vladimir Putin as well as President Trump. He’s a billionaire who founded one of Russia’s leading development firms, the Crocus Group. Forbes has pegged Agalarov’s net worth at $1.6 billion.

In December, Agalarov sold another Fisher Island unit, at Palazzo Del Sol, for $8.5 million.

Agalarov and his famous son, pop star Emin Agalarov, hosted Trump for the 2013 Miss Universe pageant in Moscow. They also played a key role in arranging a Trump Tower meeting that included Donald Trump Jr., Jared Kushner, campaign manager Paul Manafort, a Kremlin-linked lawyer Natalia Veselnitskaya, and others, according to congressional testimony.

Neil Reisman (Credit: Palm County Jail)

West Palm Beach developer Michael McCloskey’s CFO admitted to embezzling more than $300,000 to maintain his gambling addiction, according to police.

Neil Reisman forged McCloskey’s signature on at least 155 checks made out to “cash” over a 14-month period, and spent the funds at the Seminole Casino Coconut Creek, the Palm Beach Post reported, citing a West Palm Beach police report.

Reisman, 60, of Boynton Beach was arrested and charged Sunday with grand theft of more than $100,000. He remained at the Palm Beach County Jail, with his bail set at $15,000, according to the newspaper.

After McCloskey, CEO of FRI Investors, discovered the check forging, Reisman provided a written and videotaped confession admitting to his gambling addiction. He was fired but the company helped him get treatment, according to the Palm Beach Post.

McCloskey’s real estate investments include the former Bank of America building in West Palm Beach, which he and his partner purchased for $23 million in 2016.  [Palm Beach Post]  — Ina Cordle

From left: Calum Weaver, Gerard Yetming and Evan Shapiro

UPDATED, Jan. 17, 7:30 p.m.: Amid heated competition in South Florida’s multifamily market, the volume of apartment building sales has experienced a steady drop over the last two years. The decline reflects decreasing profit margins due to higher sale prices per unit, experts say.

There were more than 350 multifamily deals totaling more than $5.5 billion in 2016, said Calum Weaver, managing director for Cushman & Wakefield’s Multifamily Group, during a commercial real estate conference on Wednesday. A year later, investor appetite weaned with just under 300 multifamily deals representing a total value of $4.4 million. The decline continued in 2018 with only about 250 multifamily transactions taking place for a total of $3.9 billion.

“The market peaked in 2016 and has gone down gradually in the last two years,” Calum told attendees at the 2019 CCIM Commercial Real Estate Outlook Conference. “Still, the $3.9 billion in 2018 represents the third-highest transaction volume in South Florida during the last 13 years. We have been on a roll.”

Calum said while deal momentum is slowing down, asking rents are not and vacancy rates are at all-time lows. “We have seen record rental and vacancy rates the last nine years and we expect that trend to continue going forward. In the B and C Class space, you can get 20 percent rent increases.”

Florida’s population growth and a drop in the state’s homeownership rate is fueling the demand for more apartments, Calum added. “The key thing about multifamily is that the demand side is taking care of itself. Homeownership rate is diminishing so that means the demand for rentals is through the roof.”

During a separate panel discussion on 2019 development trends, Colliers International Executive Vice President Gerard Yetming said the homeownership rate in South Florida stands at 59 percent, 10 points lower than it was 10 years ago. “We have more and more renters,” Yetming said. “One of the biggest challenges is affordability. About 63 percent of the Miami metro households are cost-burdened rental households. That’s higher than New York City.”

With rising construction and land costs, developers have to find ways to boost income by allowing short-term rentals, building smaller units and renting individual units to multiple renters, experts said.

Evan Shapiro, a managing director with Property Markets Group, highlighted the company’s foray into just renting bedrooms and pairing up roommates with its X Miami brand. “Land and construction prices are not going down, so how do we make a viable business plan?” Shapiro said. “We do need to increase the rent per square foot, but how do we do it in a way we don’t harm the individual renter? You have smaller units or you have roommates.”

An earlier version of this story incorrectly identified Evan Shapiro’s company. 

Clippy holding a bunch of money in Seattle (Credit: Unsplash and Pixabay)

Maybe you’ve heard that the tech industry has helped exacerbate a housing affordability crisis across many of the U.S. hottest housing markets. In its own back yard, Microsoft is ready to spend $500 million to fix a growing problem it had a hand in creating.

The move is the largest effort by a tech company to directly address affordable housing and inequality in the areas where the industry is concentrated, the New York Times reported. Microsoft will fund construction for homes that will be attainable for middle- and low-income residents.

The tech giant’s plan comes after Amazon pushed to block a new tax in Seattle that would have forced large businesses to pay a per-employee tax to fund affordable housing and homeless services, the report said. Microsoft, which is based in nearby Redmond, Washington, didn’t take a position on it.

Microsoft began researching the area’s housing after the tax fight last summer — and hired a consultant to determine how to focus its effort. Home prices in the region have nearly doubled in the past eight years while less has been done to address middle-income and low-income housing.

Amazon head Jeff Bezos has has supported homeless service providers through his personal foundation, the report said. And Salesforce chief executive, Marc Benioff, helped fund a proposition in San Francisco to tax businesses to pay for homeless services — which voters approved but Twitter CEO Jack Dorsey opposed.

The debate about the tech industry’s growth exacerbating inequality also cropped up in New York City, after Amazon announced plans for a new campus in Long Island City, but made no pledge to support affordable housing. The company’s move to Queens immediately created increased interest in the area’s condo market — but sparked concerns about the city’s ability to create or preserve affordable housing. [NYT] — Meenal Vamburkar

Here’s what you need to know about the state of the luxury real estate sector from CNBC.

Dezer Development’s Gil Dezer dabbled in topics like President Trump, Russian buyers and Florida’s beneficial tax laws in an appearance on CNBC’s Squawk Box on Thursday.

Dezer, whose projects include the Porsche Design Tower and the planned Residences by Armani/Casa in Sunny Isles Beach, appeared on the show for a segment on South Florida’s luxury real estate market. “Florida’s Millionaire Migration” discussed how wealthy Northeasterners are buying property in South Florida to establish residency in a state where there is no state income tax.

“A business owner making a million dollars a year will actually be saving enough money in taxes to support a $2 million mortgage in Miami,” said Dezer, who is president of Dezer Development. “That’s really what’s driving sales right now.”

Dezer, who is close with President Trump and has licensing agreements with the Trump Organization on a number of properties in Sunny Isles Beach, said buyer demand for these properties is still going strong. Not only does Florida have a lot of Trump supporters, but South American buyers also like the president and are buying units at Trump-branded buildings, Dezer said.

Fittingly, the conversation turned to Russia. Sunny Isles Beach, where Dezer Development is based, has a high concentration of Russians, and many Russians own units in the luxury condo towers.

Dezer said he is seeing a slowdown of these Russian buyers due to recent sanctions. He is, however, seeing an uptick in Russian-born New York residents who are moving to Florida.

“The Brighton Beach Russians are definitely coming down,” he said.

Recent reports show that the luxury condo market in South Florida is still saddled with high amounts of inventory, however, which is driving down sale prices.

EWM reported that there is 17 years of inventory of condos priced at $5 million and up in Sunny Isles. Overall, Miami-Dade County faces nearly five years of supply of high-end units.

A fourth quarter 2018 report from Douglas Elliman released on Thursday showed that the median luxury condo price in Miami Beach fell to $2.2 million, down 12.4 percent from the same period of the previous year.

From left: EJF’s Manny Friedman and SkyBridge’s Brett Messing and Anthony Scaramucci (Credit: HFM Global, SkyBridge Capital, and Getty Images)

SkyBridge Capital and EJF Capital touted their planned $3 billion Opportunity Zone fund as a unique entity, saying it would be structured as a real estate investment trust in order to develop across states and property types.

But a month after a big rollout, Anthony Scaramucci’s SkyBridge pulled the plug on the partnership amid concerns from distribution partners about EJF’s lack of experience managing real estate funds.

“This endeavor was going to be their first dedicated real estate fund,” said Brett Messing, SkyBridge president, referring to EJF.

SkyBridge’s distribution partners wanted “to see a track record or a return stream from a fund that was a dedicated real estate fund,” Messing said.

The partners knew going into the fund that this might be an issue, but they still experienced more pushback than they thought, he said. “We thought we could overcome it, and the resistance that we received was greater than we collectively anticipated,” he said, “so parting ways made sense.”

The Opportunity Zones program, which has been gaining momentum in recent months, offers tax deferrals and benefits to investors who park their money in assets located within designated low-income neighborhoods. There are more than 8,700 designated zones nationwide. The program has stirred interest among developers and investors, though final regulations have yet to be released.

Concerns about EJF’s experience appeared to indirectly surface on a conference call last month that Scaramucci — a SkyBridge partner — and EJF’s Manny Friedman had in December, to solicit investors for their fund. During that call, Scaramucci could be heard asking: “Who the hell is EJF and their expertise as it relates to real estate?” But he also called Friedman “one of the exemplary investors of his generation” in an apparent attempt to reassure investors that the company was qualified to be a sub-adviser on the fund.

Friedman focused on the business itself during the call, saying they had “first mover advantage.”

In September, EJF rolled out its own $500 million Opportunity Zone fund. It aimed to make the fund available to wealth management platforms, allowing it to raise more money and increase its investor pool. In October, EJF hired hedge fund and private equity manager Asheel Shah as its senior managing director and head of real estate. EJF did not respond to multiple requests for comment.

Messing described the split as disappointing but amicable. EJF will now focus on its own Opportunity Zone fund, and SkyBridge will continue to move forward with its fund. SkyBridge still intends to raise $3 billion and will move forward with a different sub-adviser that the hedge fund hopes to announce in the coming days.

“They have their own fund, so they’re going to market their fund,” Messing said of EJF. “We are going to carry on. We have identified a manager that has a long and impressive track record.”

Other real estate companies are also setting up Opportunity Zone funds, including Youngwoo & Associates and RXR Realty, which are both looking to raise up to $500 million.

Gino Blefari andRon Peltier (Credit: Twitter)

Berkshire Hathaway’s behemoth brokerage HomeServices of America is getting new leadership as it expands its footprint across the country.

Gino Blefari has been appointed CEO of the company, Inman reported. He was previously CEO of HSF Affiliates, the subsidiary that operates the Berkshire Hathaway HomeServices and Real Living franchise networks. Former CEO and founder Ron Peltier will become the company’s executive chairman.

The change comes as HomeServices of America has been growing nationwide. Last year, the brokerage acquired Ebby Halliday, the largest indie brokerage in North Texas. And this month, it acquired one of its parent company’s own franchisees, Berkshire Hathaway HomeServices Florida Realty — expanding its Florida footprint by 1,750 agents and 40 offices.

Through acquisitions, the company grown to 900 offices with 42,000 agents, the report said.

Blefari joined the real estate industry more than 30 years ago. He previously held a leadership role at rival NRT — and founded Silicon Valley-based Intero Real Estate Services, which was acquired by HomeServices of America in 2014.

The brokerage’s management change follows other recent C-suite shakeups. Earlier this month, Keller WIlliams said Gary Keller is returning as CEO of his namesake brokerage, replacing John Davis who was in the role for nearly two years. And Century 21 CEO Nick Bailey announced he would be stepping down. He held his role for nearly two years, but did not say if he was moving to another firm. [Inman] — Meenal Vamburkar

From left: Michael Fay and John K. Crotty (Credit: Avision Young) 

UPDATED, Jan. 17, 3:05 p.m: A portfolio of eight properties in Wynwood is on the market for $50 million, offered as a potential site for a major mixed-use project with apartments, a hotel, Class A office and retail space.

The 1.7-acre portfolio includes 146 and 153 Northwest 25th Street, 2431-2455 Northwest 2nd Avenue, and 172 Northwest 25th Street and includes industrial and retail buildings.

Avison Young’s Florida Capital Markets team of John Crotty, Michael Fay, David Duckworth, George Vail and Brian de la Fé was tapped to sell the portfolio, owned by the family trust of Doris Friedopfer. The properties were previously on the market unpriced by Cushman & Wakefield, but the brokerage was unable to secure a deal with a buyer.

Listing the portfolio with a price makes it more attractive to potential buyers because it shows the seller is more serious about selling, according to Crotty, who is responsible for spearheading the marketing of the property.

Crotty and Fay said they believe the potential buyer will likely be a large national real estate developer who will look to turn the properties into a major mixed-use project with apartments, retail and Class A office space and a hotel. It it zoned as a T-5 zoning which would allow for 240 multifamily units, Crotty said. A new developer could also build 38,250 square feet of office and 14,240 square feet of retail.

The properties are in the heart of Wynwood, where asking retail rents have spiked to $100 per square foot, according to Fay and Crotty. The site is within walking distance from the Wynwood Walls and other popular food destinations like Coyo Taco and Panther Coffee.

A number of new projects are being proposed in Wynwood, including the 65,000-square-foot Cube Wynwd office and retail project that is expected to be completed this year. Related Group’s 285-unit Wynwood 25 is also set to be completed this year.

In addition, Sterling Bay recently closed on an $81 million construction loan for 545wyn in December, a mixed-use project it is planning in Wynwood. The building will include 298,000 square feet of Class A office space, 26,000 square feet of retail space and 420 parking spaces.

(Credit: iStock)

American lenders last year initiated foreclosures on the lowest percentage of American homes since 2005, raising hopes that the worst of the last housing crisis might be in the rearview mirror.

The 52,069 properties targeted for foreclosure in December represented a 19 percent drop year over year and the sixth consecutive month of year-over-year-decline after a brief spike in July, according to a report from ATTOM Data Solutions.

In total, about 625,000 homes faced foreclosure in 2018, a fraction of the nearly 2.9 million recorded at the peak of the foreclosure crisis in 2010, the report showed. Overall, lenders initiated foreclosures on 0.47 percent of American homes last year, a 0.4 percentage point decline from 2017 and a 13-year low.

ATTOM tallied default notices, scheduled auctions and bank repossessions to reach its totals.

The “plummeting” numbers are evidence that “most of the distress from the last housing crisis has now been cleaned up,” according to Todd Teta, ATTOM’s chief product officer.

But the numbers didn’t decline in every part of the country. Filings picked up 13 percent last year in Florida, the epicenter of the foreclosure crisis a decade ago. The state registered one of the highest foreclosure rates in the nation in 2018, with about 0.71 percent of homeowners defaulting on their loans.

New Jersey, which has posted the country’s highest foreclosure rate every year since 2015, saw 1.33 percent of homeowners default last year, according to the report. Illinois came in third place at 0.74 percent.

The average foreclosure lasted 811 days during the fourth quarter last year, 216 days shorter year over year, suggesting fewer bad loans were issued during than in previous years. Florida registered the country’s second-longest average foreclosure time during the fourth quarter, at 1,311 days, behind only Hawaii.

The foreclosure numbers are mostly consistent with ATTOM’s mid-2018 report, which found foreclosure numbers dropping in the New York and Chicago metro areas but ramping up in Los Angeles and South Florida, indicating lenders could be loosening their criteria in those markets. Foreclosure activity rose sharply in New York City in 2017, reaching its highest level there since 2009.

The falling nationwide foreclosure numbers coincide with a steady drop in mortgage delinquencies, buoying confidence in the wider economy even as the U.S. housing market shows signs of slowing.

Renderings of Metronomic’s projects, Ricky Trinidad and Miguel Pinto

Developer Ricky Trinidad closed on the land for three residential projects in Little Havana and North Bay Village.

In Little Havana, Trinidad’s Metronomic Inc. bought a 7,200-square-foot lot at 620 and 622 Beacom Boulevard for TriniSuites Dos y Medio, a five-story, 20-unit rental building next to Miami Dade College’s InterAmerican Campus, according to a release. The firm recently paid $900,000 for the site, a source said.

The project is part of a seven-building development Metronomic is building in Little Havana. It recently broke ground on the third building, TriniSuites Calle Ocho. They’re expected to be completed by the first quarter of next year. The majority of the units at TriniSuites Calle Ocho will be studios ranging from 536 square feet to 688 square feet, plus four one-bedroom, 816-square-foot units.

Metronomic also acquired the 10,605-square-foot site at 2551 Southwest Ninth Street to build Maximo Gomex Apartments, a two-story, eight-unit rental building with units ranging from 640 square feet to 928 square feet and 11 parking spaces. The developer expects to break ground by the second quarter of this year. Metronomic paid $750,000 for that property.

Miguel Pinto and Tatiana Escobar of APEX Capital Realty brokered the land sales in Little Havana.

In North Bay Village, Metronomic closed on the nearly 14,000-square-foot site of Metronomic Place Dos, a planned five-story, 20-unit rental building at 880 and 7890 Northeast Bayshore Court. That project will have studios and two-story studio lofts ranging from 890 square feet to 1,255 square feet. Amenities will include a lobby, gym, business center, amenity deck with a dog park and penthouse terrace.

The North Bay Village rental building is also expected to break ground by the second quarter of this year.

Metronomic is also working on residential and mixed-use projects in Coconut Grove.  The company is under contract to purchase a large assemblage in the West Grove where it’s planning Grand Plaza, a $74 million, mixed-use project on 12 lots at 3280 to 3461 Grand Avenue.

Adam Neumann (Credit: Getty Images)

The We Company’s CEO Adam Neumann is still personally buying buildings that are leased to the company’s co-working arm, WeWork, stoking conflict of interest concerns among some of the company’s investors.

The setup has reaped Neumann millions in landlord payments from his own company, according to the Wall Street Journal.

The Real Deal reported the first deal of this type last March, in which Neumann partnered with fashion designer Elie Tahari to buy a stake in 88 University Place, before leasing it to WeWork. IBM eventually signed with the flexible office space company to take eight floors within the building.

More recently, Neumann has invested in multiple properties in San Jose, California, on a site where WeWork holds future plans for a campus, which will include a residential section for its WeLive business, the Journal reported.

It is an unusual position for an executive at such a large company to serve on both the landlord and tenant sides of these deals. The Journal reported that multiple investors held concerns for a conflict of interest about the arrangement, due to the potential that the company’s CEO could act in self-interest, rather than that of the company.

The board has previously stopped at least one such deal. In 2013, the CEO sought to buy a 5 percent stake in 210-220 North Green Street in Chicago, where WeWork was negotiating a lease. Citing a conflict of interest, the company’s board blocked the move, and WeWork instead paid for the stake, according to the Journal’s report.

In a debt offering prospectus issued last year, WeWork said that Neumann had stakes in several buildings in which it paid leases to, according to the Journal report. Between 2016 and 2017, the company said that it paid $12 million rent to buildings “partially owned by officers” of WeWork, with $110 million remaining on the life of these leases.

WeWork has said that these deals are disclosed to investors after being approved by the board and an independent committee.

Neumann, whose personal fortune is pegged at $4.1 billion by Forbes, is the largest shareholder in WeWork, which last week was valued at $47 billion by its largest investor, SoftBank Group. The Japanese conglomerate committed another $2 billion to the company after walking back an initial $16 billion planned investment, an announcement which was followed by a WeWork rebranding itself as The We Company.

The CEO has made other private investments that have been earmarked for WeWork use, including a $65 million purchase of a development site in Chelsea, in which he and partners were said to have considered building a WeLive from the ground up. [WSJ] — David Jeans 

Part of the Miami skyline (Credit: iStock)

South Florida’s residential markets continued improving in the fourth quarter of 2018 with a few weak spots, including Miami Beach.

That Miami Beach market took a dip, but sales on the mainland were up, according to Douglas Elliman’s fourth quarter residential report. In Palm Beach and Wellington, condominium sales surged.

The South Florida market is “still in the process of improvement as opposed to something that’s fully improved, unlike most of the rest of the country,” said Jonathan Miller, who authored the reports.

Miami Beach and barrier islands

In Miami Beach and the barrier islands, residential sales fell 10.4 percent year over year to 678 in the fourth quarter of 2018. Condo sales dropped 15 percent to 606, while single-family home sales rose a 64 percent to 72 closings. That area also includes Sunny Isles Beach, Bal Harbour, Bay Harbor Islands, Surfside, North Bay Village, North Beach, Key Biscayne and Fisher Island.

The median sale price of a condo in those markets was $330,000, a nearly 12-percent decline from the previous year. For a single-family home, it was $1.6 million, up 10.7 percent. Both property types also sat on the market for much longer, up 93 percent to 139 days for condos, and up more than 150 percent to 208 days for a house.

Condo sales rose in Sunny Isles, Bay Harbor Islands, Key Biscayne and Fisher Island. They fell in Bal Harbour, Surfside, North Bay Village and Miami Beach.

Miami coastal mainland

On the mainland, residential sales rose more than 10 percent to 3,518 closings. The median sales price increased about 6 percent to $320,000. Another sign of improvement is that the share of purchases with conventional financing was the highest it’s been in five years, Miller said.

Condo sales jumped 14.3 percent to 1,763, and the median sale price was about $250,000 – up 6.3 percent compared to the previous year. Single-family home sales rose 7.2 percent to 1,755. The median sale price of a single-family home increased 6.4 percent to $385,000.

Palm Beach

Condo sales surged in Palm Beach, but home sales plummeted. Condo closings rose 80.6 percent to 65 sales. The median sale price of a condo jumped nearly 22 percent to $615,000, while the median sale price of a single-family home dropped 30.5 percent to $4.7 million. Only 12 single-family homes sold in Palm Beach, marking a 43 percent decline from the previous year.

Delray Beach

In Delray, the condo market suffered slightly with a 0.7 drop in closings, down to 553, and a stagnant median sale price of $130,000. Single-family home sales rose 2.2 percent to 274 with a median sale price of $413,300 – up 10.8 percent.

One of the key architects of the Opportunity Zone legislation, Steve Glickman, will join Skybridge Capital’s Anthony Scaramucci and Youngwoo & Associates’ Young Woo, among others, at The Real Deal‘s Future City 2019 for a workshop exploring the ins and outs of the Opportunity Zone program. The workshop is among 20 that will be held at the event.

Glickman was a senior economic advisor to President Obama and his firm, Develop Advisors, works with entities looking to raise and deploy capital into Opportunity Zones. Scaramucci, a financier who had a very short tenure as White House communications director, has been busy building a multi-billion-dollar Opportunity Zone fund, while Youngwoo & Associates launched their own OZ fund with EquityMultiple in September.

The trio, along with other experts, will parse the tax and legal implications of the program, as well as other key aspects important to the industry. They join a group of 200 C-level executives in the fields of development, tech, construction, design and finance to network with and learn from the top minds and biggest dealmakers in the country at Future City 2019, taking place at the Baha Mar resort from Jan. 27-29.

Some of our other confirmed attendees and thought leaders include: Don Peebles, John Catsimatidis, Michael Stern, Morris Moinian, Bruce Mosler, Sharif El-Gamal, Edgardo DeFortuna, Bob Knakal and more.

The industry is changing at a faster pace than ever before as a result of new technology, new sources of funding, new policies and new attitudes, and top thought leaders will be hosting workshops at the event enabling an understanding of these seismic shifts at a high-level, as well as their practical day-to-day applications.

In addition to 20-plus learning sessions, there will be programming to facilitate networking including golf, fitness activities, group meals and keynote speeches, cocktail events and plenty of other entertainment.

If you are VP level or higher, please email Bahamas@TheRealDeal.com for further details. Space is limited and subject to approval. 

(Credit: iStock)

The practice of dual agency is too confusing to be allowed in the real estate industry. Or, so says one watchdog group.

The Consumer Federation of America is calling for states to ban the practice and make disclosures less confusing, Inman reported. Buyers and sellers often don’t understand the role their broker plays, the group said in a report.

“Today, many homebuyers and sellers do not know whether their agent is representing their interests, those of the other party, or those of neither,” said Stephen Brobeck, the report’s author and a CFA senior fellow, in a statement.

A national survey found that most consumers believe agents are “always” or “almost always” required to represent the interests of the buyer or seller they’re working with. But many agents’ relationships are more complex through practices like dual agency, in which an agent represents both sides of the deal, or transactional agency, in which an agent works with both the buyer and seller but has no fiduciary responsibility to either party.

The survey also found that 55 percent of consumers don’t understand agency terms that define their roles and the implications they have. Dual agency can occur when brokers employed by the same firm represent the buyer and the seller in a deal. It can also happen when a seller’s broker finds a buyer or tenant for a property and represents both parties.

The issue of dual agency was central to legal action taken against brokerage Houlihan Lawrence last year. A class-action lawsuit accused the firm of “predatory behavior,” making dual agency part of its fundamental business plan and obscuring its agents’ roles.

Dual agency isn’t uncommon, especially in markets where a few firms dominate, and it’s legal in New York. But improper disclosures and lack of transparency can lead to unethical, or illegal, situations. [Inman] — Meenal Vamburkar

Douglas Gallagher and 13061 Lerida Street (Credit: Redfin)

When it comes to buying one particular five-bedroom, five-bathroom waterfront house in Gables by the Sea, one Miami couple isn’t taking no for an answer.

On Jan. 8, Juan Carlos and Natalie Mederos sued the property’s current owner, Douglas Gallagher, for backing out of a deal to sell them the house for $2.19 million last month. The Mederos are seeking a court order to force Gallagher to close and turn over the property.

“He wants to rescind the contract, but won’t give a reason why,” said David Winker, the attorney representing the Mederos. “It’s a pretty unusual case in that rarely does the seller back out at the last minute. I’ve only seen it happen during a boom when someone will come along with a bigger offer.”

A Coral Gables businessman, Gallagher is the brother of former Florida Insurance Commissioner Tom Gallagher and he is married to Vietnamese Princess Thi-Nga. They own the Poetic Moon winery in Napa Valley and are very active in South Florida’s social scene. According to Zillow, the Gables by the Sea house is currently listed for $2.5 million and is billed as a “Yachtman’s Paradise” featuring 92 linear feet of dock and seawall with direct ocean access. Gallagher’s lawyer Nicholas Siegfried declined comment.

According to the lawsuit, the Mederos entered into a residential sales contract and put down a $200,000 deposit to buy Gallagher’s house at 13061 Lerida Street for $2.2 million. After three addendums, the price was negotiated down to $2.19 million, the complaint alleges.

The Mederos allege Gallagher breached the contract on Nov. 9 by refusing to allow them to conduct an insurance inspection. Instead, Gallagher hired his own inspector who produced a report containing a number of alleged falsehoods. For instance, the report allegedly stated that the home’s entire plumbing system was replaced in 2005 when the property still has its original cast iron pipes, some of which leak, the lawsuit claims.

Despite meeting all their obligations, Gallagher’s lawyer informed the Mederos on Dec. 10 that his client would not be closing the transaction. Both sides attempted to mediate, but could not break the impasse, the lawsuit states.

Florida law allows buyers to request a judge to force sellers to consummate a real estate contract, Winker said. “A judge can force him to hand over the property,” he said. “If he loses, he has to sell the house plus pay all of my clients’ attorney fees so the stakes couldn’t be higher. “

Medici Living Group CEO Gunther Schmidt and a Quarters living space

A German company is attempting to force its way into the ever-tightening co-living industry.

Medici Living Group raised $300 million as part of a joint venture with investment firm W5 Group to develop 1,500 units across the U.S. under its co-living brand, Quarters, the Berlin-based company said Tuesday.

The company is entering a crowded U.S. co-living industry, a concept developed about a decade ago to provide shared living spaces. Quarters, which currently has locations in New York, Chicago and Berlin, provides shared apartments, under terms similar to sublease agreements, that are maintained and offer amenities and services. Contracts can be as short as three months.

Co-living has been met with mixed reviews in different markets. Startup Common Living has a few locations in Brooklyn and announced it will open its first Manhattan location this year at an 11,000-square-foot space at 424 West 47th Street. The company, which has raised $63.4 million is partnering with YD Development for the Hell’s Kitchen development, dubbed Common Clinton.

Other co-living players include Ollie and British startup the Collective, which have raised $17 million and $450 million, respectively. The We Company, formerly WeWork, has also entered the space with the launch of its WeLive business in 2016. But the venture is struggling, and currently only two locations are open, one in New York, the other in Washington DC.

Despite this, Quarters has pitched itself as “the WeWork of co-living,” as it expands globally. Last month it announced that it had raised $1.14 billion for its co-living expansion in Europe. That investment was backed by Luxembourg-based CoreState Capital Group, which manages $28 billion in assets and is owned by Ralph White, the founder of W5 Group. W5 Group is also a shareholder in Medici Living Group.

Quarters currently has 1,800 rooms, but the company said the combined $1.4 billion in funding will enable it to open 9,000 rooms in the U.S. and Europe. This year it plans to enter Washington D.C., San Francisco, Los Angeles, Chicago, Boston, Philadelphia, Denver, Austin, Seattle and Miami. The company said the locations will be a combination of retrofits and new construction in cities with over 1 million people.

At a Quarters co-living location that opened in Chicago last April, apartments accommodate as many as five people, with a kitchen, one or more bathrooms and bedrooms sized between 77 to 198 square feet. Rents at the Fulton Market location, which has space for 175 residents, reportedly ranged from $1,200 per month, before utilities, wireless internet and Netflix subscription.

Elysee Miami under construction at 788 Northeast 23rd Street

Two Roads Development is bringing in Douglas Elliman to sell out Elysee Miami, more than three years after Cervera Real Estate launched sales at the luxury Edgewater condominium tower, The Real Deal has learned.

Elysee Miami, which is under construction at 788 Northeast 23rd Street, will also unveil a new bayfront sales gallery next month, in a 5,500-square-foot indoor-outdoor space at Biscayne Beach Residences.

Construction of the 57-floor Elysee has reached the 18th floor, according to Two Roads partner Reid Boren, whose firm is developing the tower in partnership with entities managed by the New York investment firm DW Partners. The 100-unit project is now nearly 50 percent sold, and is expected to be completed in 2020.

Boren said he switched to Douglas Elliman in part because of its network of agents spread throughout the country. Elysee has seen a resurgence of domestic buyers, especially from the Northeast, he said.

“We have a great relationship with the Cerveras and they did an amazing job with us and are a super talented group, and this seemed like a good time to make this switch,” Boren added.

Jay Parker, CEO of Douglas Elliman Florida, said the brokerage’s strategy will be to reach out to both domestic and international buyers and “pick up where Cervera left off and close out the building.”

Cervera did not respond immediately to a request for comment.

Elysee was designed by Bernardo Fort-Brescia of Arquitectonica, with common areas and amenity interiors by Paris-based designer Jean-Louis Deniot, marking his first high-rise condominium design project in the U.S.

Half-floor and full-floor units, with three to five bedrooms, range from 2,300 square feet to 4,000 square feet and are priced from about $1.5 million to more than $10 million.

Condos at Elysee will have private elevators and foyers, with 10-foot to 12-foot ceilings and east-west facing terraces. The project’s seventh-floor amenity level will feature a lap pool and refreshment bar; outdoor summer kitchen and barbecue terrace among others. Elysee will also have an Owners Sky Lounge spanning the 30th floor, with a lounge and bar area, library/private theater and wine room.

Two Roads completed Biscayne Beach in Edgewater in 2017, and plans to convert Elysee’s new sales gallery into a restaurant when Elysee is sold out, Boren said.

Edgewater itself is in the midst of a transformation, with new high-rise condo projects recently completed or in the works, including Related’s four Paraiso towers and OKO Group’s Missoni Baia as well as new apartment buildings such as Mill Creek Residential’s planned tower at the site of the Unity on the Bay Church.

Executive Managing Directors of Stockbridge Capital Group Terry Fancher and Sol Raso with an aerial shot of Pompano Beach (Credit: Stockbridge and iStock)

UPDATED, Jan. 17, 10:27 a.m. Stockbridge Capital Group paid $62.25 million for the Powerline Business Park in Pompano Beach.

Stockbridge bought the 443,720-square-foot industrial park at 4100 Powerline Road for $140 per square foot. Pompano Beach-based Industrial Development Company sold the property.

Powerline Business Park includes 24 small-bay industrial buildings developed between 1983 and 1994. The 26.4-acre park was 96.8 percent occupied at the time of sale, according to a press release. Tenants include First World Imports, CMC Bakery and Bernoti Corp.

Cushman & Wakefield’s Mike Davis, Scott O’Donnell, Rick Brugge, Michael Lerner, Dominic Montazemi and Greg Miller represented the seller.

Jason Hochman of Cushman and Wakefield’s equity, debt and structured finance group, assisted Stockbridge Capital Group in securing a $31.1 million loan from State Farm Insurance Company.

Last May, San Francisco-based Stockbridge bought the Quaye at Wellington, a 32-acre, 350-unit apartment and townhouse complex at 9840 Quaye Side Drive for about for $120 million.

South Florida’s industrial market is one of its best performing asset classes due to the scarcity of land and strong demand, attributed in part to e-commerce. In Broward County, vacancy rates were 3.9 percent in the third quarter of 2018, according to a report by Colliers International South Florida. Warehouse and distribution rental rates averaged $8.04 per square foot. – Keith Larsen

A closing Sears store and Edward Lampert (Credit: Getty Images)

Hundreds of Sears stores could remain open if a bankruptcy judge approves Chairman Edward Lampert’s $5 billion bid for the ailing retailer.

The Sears Holdings board picked Lampert’s offer over competing bids from liquidators after weeks of negotiations and two days of closed-door discussions in New York, sources told Bloomberg.

The board was poised last week to ask the court for permission to liquidate before pivoting at the last minute and agreeing to give Lampert one more chance to sweeten his offer for the 126-year-old retailer.

Lampert, head of hedge fund ESL investments, upped his offer by $150 million in response, Bloomberg said. He’s proposing keeping 425 stores nationwide open.

The winning bid is the latest in Lampert’s long list of maneuvers to turn the embattled company, based in Hoffman Estates, around.

Since engineering the 2005 acquisition of Sears by Kmart, Lampert has slashed expenses, sold off assets and closed hundreds of money-losing stores.

But it wasn’t enough. Sears filed for bankruptcy protection in October after years of declining sales and store closures, pummeled by the rise of e-commerce.

Since the bankruptcy filing, the once-mighty retailer has announced several more rounds of store closures. [Bloomberg] — John O’Brien

WeWork’s Adam Neumann and OKO Group’s 830 Brickell (Credit: Getty Images and Buzz Buzz Home)

WeWork signed a lease at OKO Group’s planned 830 Brickell development, which will mark its seventh co-working site when it opens in early 2021, The Real Deal has learned.

WeWork will occupy 10 floors spanning 146,000 square feet at the planned 830 Brickell across from Brickell City Centre, where WeWork already operates a co-working site. The new space will be its second largest in the Southeast and could be the largest in Florida, according to a WeWork spokesperson.

The company has been growing rapidly in Miami since opening its first office on Miami Beach’s Lincoln Road in 2015. It now has two locations in Miami Beach, three in Miami and another planned for Coral Gables.

The announcement comes amid major changes at WeWork. Last week, WeWork announced it will rebrand as “The We Company” and is weighing the prospect of an IPO much sooner than expected, according to a report by the Financial Times. Earlier this month, it was reported that the company’s main backer, Softbank Group, plans to drastically reduce its planned investment.

OKO Group, led by Russian billionaire Vladislav Doronin is developing the 830 Brickell project, which is planned to be completed in early 2021, according to a WeWork spokesperson. Doronin has not released updated plans for the development, and his spokesperson declined to comment. Previous plans showed the building would be 712 feet tall, with a mix of luxury residential and retail portions.

Doronin’s firm acquired the 0.8-acre development site across from Brickell City Centre as part of a land swap with his former partner Ugo Colombo. The two were originally involved in a joint venture for both 830 Brickell and Brickell Flatiron, but the swap gave full ownership of Flatiron to Colombo and 830 Brickell to Doronin.

Issi Romem new Chief Economist of Truila

Residential listings portal Trulia hired Issi Romem as its new chief economist at a time when indicators show the U.S. housing market is cooling down. 

Romem will head the the San Francisco-based company’s Housing Economics Research team, which provides research, analysis, and commentary about the housing market across the country.

Romem jumped to Trulia after four years as chief economist for BuildZoom, a platform for homeowners seeking contractors. He is also a fellow at the Terner Center for Housing Innovation at the University of California, Berkeley.

He wrote in a Trulia blog post Tuesday that some of the most interesting topics in the U.S. housing market are the housing price differences between the country’s most- and least-affordable cities, along with land use reform, which could have a direct impact on how cities encourage growth.

A lack of buildable land, construction supply costs, and labor costs are all contributing to one of the most significant housing shortages in decades, experts say. Housing construction per household is near its lowest level in 60 years.

Chief economists typically act as the public face of the data-crunching operations at many real estate big data companies. Stan Humphries helped define the role within the real estate space during his years at Zillow by following the example of economists at major Silicon Valley tech firms like Google.

Other real estate data firms have done the same and some economists have bounced between different firms in the space. Former Trulia Chief Economist Ralph McLaughlin started his own company last year and then was hired as deputy chief economist at CoreLogic. Redfin hired a former Amazon economist, Daryl Fairweather, as chief economist in October.

Burt Handelsman and Worth Avenue in Palm Beach

Burt Handelsman’s $550 million real estate portfolio will be split with his ex-wife and children in the fallout of his nasty divorce.

A judge divided the holdings of the 91-year old Handelsman, which includes many properties on famed Worth Avenue in Palm Beach, such as the sites of Ralph Lauren, Jimmy Choo, Lily Pulitzer and Findlay Galleries, according to the Palm Beach Post. The stores were given to his 90-year-old wife Lucille.

Lucille Handelsman decided to end the nearly 70-year relationship with her husband due to Burt’s infidelity, according to the Palm Beach Post.

Palm Beach Circuit Judge Scott Suskauer said Burt demonstrated “a pattern of dishonesty” and was a“chronic fabricator.”

The judge said Burt called his adult children who were also in the family business, “his enemies.” Burt allegedly tried to go against them by negotiating long-term leases with a specious businessman, according to the Palm Beach Post.

Burt will keep the pair’s home in White Plains, New York, and a golf course in the Catskills valued at $8.5 million, according to the newspaper. Lucille, in addition to the Worth Avenue holdings, was awarded property on Atlantic Avenue in Delray Beach.

In total, the judge ruled on 18 different pieces property valued at about $210 million and also split the couple’s cash, stock and artwork. The rest of the holdings were divided among his wife and children during negotiations. [Palm Beach Post]Keith Larsen

Metaprop’s Zach Aarons and Leila Collins (Credit: iStock and Twitter)

MetaProp, the New York-based real estate tech accelerator, is looking to bolster the creation and protection of affordable housing with a new initiative.

The firm will partner with Enterprise Community Partners, a national nonprofit that focuses on affordable housing, to invest in startups that address the undersupply of affordable homes and make credit and illiquid capital more accessible.

Leila Collins, MetaProp’s “investor-in-residence,” said the firm would commit $5 million to startups that focus on addressing the affordability housing crisis over the next 12 months. Enterprise would not disclose its financial commitment to the partnership.

“We are going to make technologies that make it easier to build housing that’s affordable, and the financing for purchasing a home less onerous,” said Zach Aarons, MetaProp’s co-founder .

As home prices outpace wage increases, the country’s home affordability index hit its lowest level in a decade. Major metro areas saw steep declines in the fourth quarter of 2018, including Los Angeles, which saw its affordability index drop 12 percent. Miami-Dade County and Chicago’s Cook County saw their levels drop 10 percent, and New York saw an 8 percent dip.

In New York, the Department of City Planning flagged that a lack of affordable housing was impacting the city’s growth. Over the past decade, the city added 708,000 new jobs, but only 378,000 new housing units have come online in the five boroughs, a shortage that forces an estimated 100,000 people per year to move further out to the suburbs.

MetaProp and Enterprise did not disclose any startups that may be in line for the funding, but said it will be determined over coming months.

Enterprise, which was founded over 30 years ago, has previously built 470,000 homes and invested $28.9 billion in related causes.

Since launching in 2015, MetaProp has raised $45 million and has a portfolio of around 30 companies. One of these startups, tech-focused appraisal firm Bowery Valuation, last week raised $12 million in a series A funding round.

Anthony Scaramucci and Manny Friedman

Anthony Scaramucci’s SkyBridge Capital has split up with EJF Capital on the firms’ planned $3 billion Opportunity Zone fund.

The reasons for the split were not immediately clear, and SkyBridge plans to move forward on its fund with a new partner, according to sources familiar with the two companies. Scaramucci’s company is currently looking for the new partner.

The Opportunity Zones program, part of December 2017’s tax overhaul plan, offers tax deferrals and benefits to investors who park their money in assets located within designated low-income neighborhoods.

Scaramucci, the one-time White House communications director, announced plans to launch the fund late last year. He planned to set it up as a real estate investment trust and have EJF act as the sub-adviser.

The entity had been soliciting money from a “small batch” of clients and friends, but opened investment up to “everybody” who wants in, Scaramucci said on a conference call last month.

He previously said it would demand a minimum commitment of six years and invest in real estate projects of all sizes.

The move to raise such a massive fund comes as other real estate companies, like New York-based developers Youngwoo & Associates and RXR Realty, have looked to raise up to $500 million.

EJF and Skybridge could not immediately be reached for comment. Scaramucci, meanwhile, could not be reached because he is currently appearing as a contestant on Celebrity Big Brother.

From left: Scott Sherman, Ben Mandell, and Jaime Sturgis in front of The Hive

UPDATED, Jan. 16, 12:05 p.m.: Tricera Capital and RRE Investments paid $13.25 million for two properties in Fort Lauderdale’s Flagler Village, setting land records on a per-square-foot basis, according to the broker.

Tricera, an investment firm led by Scott Sherman and Ben Mandell, and RRE paid about $6.63 million each for Flagler Uptown and the Hive mixed-use buildings, said Jaime Sturgis, CEO of Native Realty. Sturgis brokered both deals, which closed on Tuesday. The buyers financed the deals with a $10.2 million loan from Bancorp, according to Aztec Group. Aztec’s Charles Penan, Howard Taft and Brell Tarich arranged the five-year, interest-only loan.

Flagler Uptown, a repurposed 18,000-square-foot warehouse at 750 North Flagler Drive, sold for $362 per buildable square foot and $267 per square foot for the land. It’s leased to Invasive Species Brewing, Wells Coffee and Montce Swim, a bikini shop.

The Hive, a 15,000-square-foot property at 900 North Flagler Drive, traded hands for $428 per buildable square foot and $228 per square foot for the land. It’s leased to the Glitch Bar, Red Pearl Yoga, JB & C Juice Bar and Café and the Bean to Brew coffee shop. Sturgis, who handled leasing of the property, previously had his office at the Hive.

Over the past three-and-a-half years, effective rents at both properties have ranged from $25 a square foot, triple net, to $47 a square foot. More recently, rents have increased up to $35 a square foot to $45 a square foot.

“A few years ago, I couldn’t get anyone to take this neighborhood seriously. Nobody thought the rents could be achieved,” Sturgis said. The sales “speak to the fact that it’s not such an emerging market anymore.”

Previous records in Flagler Village hovered around $100 to $150 per square foot for land and $200 to $250 per foot for buildable square footage, he added.

Apartment development is also booming in Flagler Village, where nearly 2,000 units are scheduled to be completed this year and next.

Property records show 750 Flagler LLC, managed by attorney Alan Grunspan, sold Flagler Uptown. Grunspan is also tied to the seller of the Hive, 900 Flagler LLC, which lists an Aventura address.

The properties are the second deal in Fort Lauderdale for Tricera Capital, which launched in 2017 to focus on acquiring retail, office and mixed-use properties in emerging areas of the Southeast.

An earlier version of this story excluded RRE Investments and incorrectly stated that the properties were the first in Fort Lauderdale for Tricera. 

Blackstone’s Kathleen McCarthy and Kenneth Kaplan

The Blackstone Group is getting ready to close its largest private-equity real estate fund yet: a $20 billion investment vehicle with three times as much purchasing power.

Real estate funds typically use $2 of debt for every dollar of equity, meaning that the new fund has about $60 billion figure in buying power, the Wall Street Journal reported. That’s more than all the commercial real estate that traded in New York, Chicago, and San Francisco through most of 2018.

In order to put that money to work, Blackstone will most likely have to ink some large deals.

“If you have to deploy billions of dollars over a three-year investment period, it’s very inefficient to do it in $10 million chunks,” Michael Stark, co-head of the global advisory firm and placement agent Park Hill Real Estate Group, told the Journal.

Blackstone’s latest fund is expected to close in the first quarter of 2019. And the eye-popping sum that the company has culled together from U.S. and overseas pension funds, foreign governments and high net-worth individuals is more than double the size of what Blackstone’s competitors have ever raised.

Blackstone’s high-risk opportunistic real estate funds have delivered annual average net returns of 16 percent, but the firm may have trouble repeating such successes.

There’s increasing concern that property prices may fall after a decade-long bull market, especially if interest rates rise. And previous Blackstone bets, such as its 2015 purchase of office buildings and other properties in Brazil, has yet to pan out as the country’s property market hasn’t bounced back.

Blackstone, like other big private equity players, often gives breaks on things like management fees to investors who pledge large sums to its vehicles. [WSJ] – Rich Bockmann

Rendering of Caoba at 698 Northeast First Avenue in Miami

The first building at Miami Worldcenter, a 27-acre, mixed-use project in downtown Miami is now completed.

CIM Group and Falcone Group completed Caoba, a 444-unit rental tower, at 698 Northeast First Avenue, according to a press release. Rents start at $1,774 for a 349-square-foot studio apartment, which would be considered a micro unit in Miami, information on Caoba’s website shows.

Caoba is about a block away from MiamiCentral, which also has an apartment component to it.

Next to be delivered is Paramount Miami Worldcenter, a 60-story condo tower with more than 500 residential units, which is 85 percent sold with about $400 million in sales. 

Art Falcone and Nitin Motwani are leading the development of the mixed-use project with a number of partners, like CIM Group, Paramount developer Dan Kodsi, citizenM and others.

CitizenM, a Netherlands-based hotel chain, recently paid $10.75 million for the site of their 12-story hotel at Worldcenter.

Miami Worldcenter will also have 450,000 square feet of high street retail, a 1,100-space parking garage, a 1,700-room convention center hotel from MDM Development Group and an office tower being built by Hines.

The project provided one of the sites submitted as part of South Florida’s bid for Amazon’s second headquarters. Amazon ultimately decided against Miami, choosing to split the mega project between Long Island City and Arlington, Virginia. – Katherine Kallergis

(Credit: iStock)

UPDATED Jan. 15, 5:45 p.m.: South Florida Airbnb hosts made $315 million in 2018 and took in a total of 1.47 million guests, according to Airbnb.

The short-term rental company announced on Tuesday that there are now more than 45,000 Floridian hosts who share their homes through Airbnb, each earning an average of $6,500 annually in supplemental income.

Miami-Dade County hosts on Airbnb made $204 million with 954,000 guests; Broward County made $80.3 million with 406,000 guests; and Palm Beach County made $30.6 million with 126,000 guests, according to Airbnb. 

Overall, the tri-county area of South Florida made up 38 percent of the $810 million in income that Florida hosts made in 2018.

The company’s announcement comes shortly after it filed suit against Miami Beach over the city’s ordinance regulating short-term rental properties. The ordinance requires Airbnb and other short-term rental platforms to post listings for Miami Beach properties only if the listings include proof that the properties are registered with the city.

Airbnb said it is seeing a rise in demand at the same time hotels are seeing an increase in occupancy and growth.

The company has said it plans an initial public offering by late 2020. It has previously been valued at $31 billion. — Keith Larsen

Rendering of One CocoWalk (Rendering by ArX Solutions)

Spaces is heading to Coconut Grove.

Regus’ co-working operator signed a lease for nearly 43,000 square feet at One CocoWalk, a five-story, 85,762-square-foot office building under construction at CocoWalk.

Spaces will anchor the office building, taking about 2,000 square feet on the ground floor and the remaining 41,000 square feet on the second and third floors, according to a release. The building will be delivered in the first quarter of next year.

Spaces signed a 12-year lease, according to a spokesperson.

Federal Realty Investment Trust, Grass River Property and the Comras Company are redeveloping the mall at 3015 Grand Avenue to include a total of 100,000 square feet of office space and 150,000 square feet of retail, dining and entertainment space. The partnership paid about $87.5 million for the property in May 2015. CocoWalk opened in 1990.

Randy Carballo and Gavin Macphail of JLL represented Spaces in the lease and Tere Blanca, Danet Linares and Juan Ruiz of Blanca Commercial Real Estate represented One CocoWalk.

Asking rents range from the high-$50s per square foot to the low $60s per square foot, according to Blanca.

The building will have private parking for office tenants and access to a gym at CocoWalk.

Büro, a South Florida-based shared office space company led by founder and CEO Michael Feinstein, opened in a 10,000-square-foot space across the street from CocoWalk at 2980 MacFarlane Road in 2016.

The flexible office space market is growing in South Florida, but experts have warned that the region doesn’t attract the blue-chip clients that are increasingly bolstering co-working firms across the country. Since 2015, WeWork has taken up more than a quarter million square feet of office space in Miami-Dade, close to five times the square footage Büro occupies at its five locations, which range from 10,000 to 20,000 square feet, according to a recent analysis by The Real Deal.

Michael Marks and Masayoshi Son (Credit: Getty Images, Katerra, and iStock)

Masayoshi Son’s $100 billion Vision Fund is preparing another major investment in real estate tech, with plans to lead a $700 million round of financing for Katerra, the construction startup founded by former Flextronics International CEO Michael Marks.

This financing round would value the four-year-old company at more than $4 billion, according to The Information. The SoftBank fund invested $865 million in Katerra last January, after which the company was valued at $3 billion.

Katerra and SoftBank declined to comment, and the identities of the other investors in this financing round are unknown.

California-based Katerra, founded in 2015, has faced some growing pains since its last cash injection. In August, The Information reported that the company’s flagship factory in Arizona had to be shut down soon after it opened because it lacked proper building permits.

At the time, one former Katerra manager said that “every day is a fire drill.”

The company’s revenue was reportedly in the high hundreds of millions of dollars in 2018, and sources expect that number to exceed $2 billion this year.

SoftBank’s last investment in Katerra was one of the largest real estate tech deals of 2018, coming just behind two other SoftBank deals – $3 billion and $1 billion fundraising rounds for the company formerly known as WeWork.

Katerra has also found itself entangled in some of the Vision Fund’s political troubles lately. In October, just weeks after the Saudi government was implicated in the murder of journalist Jamal Khashoggi, Marks travelled to Riyadh to sign an agreement to build several factories in Saudi Arabia. Other U.S. tech executives, such Uber CEO Dara Khosrowshahi, had declined to attend the same event.

Through the Vision Fund, Son had planned to invest $16 billion to take a majority stake in WeWork (now called The We Company), but his backers from government funds in Abu Dhabi and Saudi Arabia balked. [The Information] — Kevin Sun

 

Clarion partners CEO David Gilbert (Credit: Clarion Partners)

Clarion Partners just paid $32.6 million for Tropical Shipping’s Medley facility as South Florida’s industrial prices continue to rise.

Tropical Shipping sold the nearly 21-acre site at 9505 Northwest 108th Avenue for about $180 per square foot. Clarion Partners’ Lit Industrial Limited Partnership bought the 182,000-square-foot warehouse, which was built in 2000.

Property records show Tropical Shipping paid $3.58 million for the property in 1999. Tropical Shipping, based in Riviera Beach, Florida, is a Caribbean cargo and freight shipper with more than 1,000 employees.

South Florida’s industrial market is one of the area’s best performing assets classes due to land scarcity and growing demand for e-commerce. Institutional investors have been the main buyers of industrial properties, acquiring nearly $340 million of industrial assets in South Florida as of October 2018, representing 23 percent of total buyers, according to Colliers International South Florida.

Clarion Partners is a New York-based real estate firm that manages more than $47 billion worth of assets, according to its website. In 2015, the company partnered to purchase the Palm Beach Outlets shopping center for $278 million. A year later, Clarion paid $109 million for the ground leases of a major mixed-use building on Lincoln Road.

Condo sales volume dropped again in the second week of the new year.

The county recorded 77 closings for a total of $23.5 million, down in terms of sales volume from the previous week’s 69 closings for $34 million. Condos last week sold for an average price of about $306,000 or about $289 per square foot.

The most expensive sale was at Jade Beach in Sunny Isles Beach. Unit 3004 traded hands for $1.5 million, or more than $760 per foot, after 154 days on the market. Rita Japhet represented the seller, and Sergio Waissmann brought the buyer.

The second priciest deal was the $1.4 million sale of Ocean Three unit 2905, also in Sunny Isles. It sold after 199 days on market for just under $500 per foot. Lana Bell was the listing agent, and MariaAmancia Vial-Ducaud brought the buyer.

Here’s a breakdown of the top 10 sales from Jan. 6 to Jan. 12. Click on the map for more information:

Most expensive
Jade Beach #3004 | 154 days on market | $1.5M | $764 psf | Listing agent: Rita Japhet | Buyer’s agent: Sergio Waissmann

Least expensive
Mutiny Park Condo #1811 | 93 days on market | $470K | $365 psf | Listing agent: Carlos Sotolongo | Buyer’s agent: Carlos Sotolongo

Most days on market
SLS Brickell #3306 | 393 days on market | $600K | $520 psf | Listing agent: Fernando Alpern | Buyer’s agent: Fernando Alpern

Fewest days on market
Courts Brickell Key #1001 | 13 days on market | $560K | $438 psf | Listing agent: Jacquelyn Cue | Buyer’s agent: Juan Ramirez

Linda Marx (Credit: Facebook)

A popular South Florida Realtor was shot and killed in northeast Miami-Dade on Monday, in a murder-suicide.

Linda Marx, broker and owner of Linda Marx Realty, was killed by her son-in-law Steve Kasimow in front of his home on Northeast 211th Street near North Miami Beach. Kasimow then committed suicide in Hollywood, local police told NBC Miami.

Kasimow was reportedly upset about his divorce and got into an argument with Marx, who was 70.

Marx got her real estate license in Florida in 1980, according to the Florida Department of Business and Professional Regulation. Her North Miami Beach-based brokerage has 21 agents.

Over the course of her career, Marx closed deals totaling more than $100 million, according to her company’s website.

Kasimow was also a licensed real estate broker in Florida, state records show. He owned Buy and Sell Now Realty Inc., a brokerage based in Hollywood.

Dwight Schar

The Schar family, which founded one of the largest homebuilders in the country just sold a lot in Palm Beach, property records show.

Dwight Schar founded NVR Inc., the parent company of Ryan Homes, NV Homes, NVHomes, Rymarc Homes, Fox Ridge Homes and Heartland Homes, and is part owner of the Washington Redskins. The Schar Family Trust sold the roughly 10,500-square-foot plot at 125 Gulfstream Road to the Bishop Family Trust, which is based in Connecticut, for $6.7 million.

The property is just a few houses down from the ocean and South Ocean Boulevard. It last sold in 2015 for $5.6 million. The Schar family also owns the home next door at 133 Gulfstream Road.

Brokers expect there will be a surge of wealthy buyers moving to Palm Beach from the Northeast to take advantage of Florida’s tax laws.

In 2016, law firm owners George and Beverly Rawlings bought a property nearby at 102 Gulfstream Road for $13.9 million.

PG&E’s incoming CEO John Simon and a Paradise, California home burned in the Camp Fire (Credit: iStock)

PG&E Corp. said it is preparing to file for bankruptcy in the next two weeks, as it faces potential liabilities of up to $30 billion related to a string of wildfires over the last few years.

On Sunday, CEO Geisha Williams stepped down as CEO of the company, which wholly owns the Pacific Gas and Electric utilities company. General Counsel John Simon will act as CEO until a replacement can be found, according to Bloomberg.

In lawsuits, survivors have blamed PG&E for igniting some of the deadly wildfires that have scourged California in recent years, including the Camp Fire in November that killed 86 people and destroyed 21,000 homes across six counties in Northern California.

State Attorney General Xavier Becerra also has the company in his sights. He promised in December to charge PG&E if an investigation revealed that “reckless” behavior contributed to the Camp Fire.

Around two-thirds of the company’s market value has been wiped out since the company said following the fire that there were equipment failures near its origin point.

PG&E said it “does not expect” bankruptcy to impact service to customers, or pay and benefits to employees. The company has spent millions of dollars lobbying the state to let it pass on the cost of damages to its customers. The utility has $1.5 billion in cash and equivalents on hand, according to Bloomberg, far less than its potential liabilities.

A group of more than 170 residents have also filed suit against Southern California Edison, claiming the utility company was partially responsible for causing the Woolsey Fire, which destroyed more than 1,600 structures in L.A. and Ventura counties in November. [Bloomberg] — Dennis Lynch

Renderings of the Bradley and Jon Paul Pérez

Miami’s biggest condo builder is preparing to complete two rental projects in Wynwood this year, with rents starting at $1,400.

The Related Group will open its leasing center for Wynwood 25, a 285-unit project it’s developing with East End Capital, in about a month with a late spring/early summer opening date, Related Vice President Jon Paul Pérez said.

The project is one of possibly three rental developments that Related is working on in the artsy neighborhood. On Friday, Related topped off The Bradley, a 175-unit building at 51 Northwest 26th Street. Units will start at 480 square feet with rents in the low $1,400s and the majority of rents under $2,000, Pérez said. Two-bedroom units will be as large as 1,000 square feet.

Related also has a third property it’s planning to co-develop with Tony Cho. Pérez said the developers will decide whether to build micro condos, a hotel with branded condos or a rental building on that property, which is on Northwest First Avenue and Northwest 28th Street.

Related is building The Bradley, previously called Wynwood 26, with Block Capital Group, and expects to complete it by the end of the year. Arquitectonica designed the building and Lenny Kravitz’s Kravitz Design is handling the interiors. The Bradley will also include more than 32,000 square feet of commercial space, a 233-space parking garage, a fitness center and health club, and a rooftop terrace with a pool, covered amenity deck and outdoor kitchen.

The developers are targeting “young millennials,” Pérez said. Related’s in-house management company, TRG Management, is handling apartment leasing. BM2 Realty is leasing the commercial space.

Related and Block Capital Group financed construction of the project with a $33 million loan last year. Related partnered with Block Capital Group in 2015 when it paid $5.25 million for its 50 percent share of the 1.2-acre development site.

Wynwood 25, at 252 Northwest 25th Street, will mark the first new large apartment development in Wynwood when it opens in a few months.

The 285-unit project includes about 31,000 square feet of retail space. Tenants include Bartaco and Barcelona Wine Bar, which will share a patio at the project. Koniver Stern Group is handling leasing. Apartment rents will also start at about $1,400 a month, but the units will be larger, Pérez added. Adam Meshberg of Meshberg Group is handling the interior design.

From left: downtown Denver, Jason Kern, and Glenn Sonnenberg (Credit: Getty Images and Wikipedia)

LaSalle Investment Management completed its acquisition of a majority state in Latitude Management Real Estate Investors and its $1.2 billion debt fund business.

The asset management arm of Chicago-based JLL, LaSalle announced last year it was acquiring commercial real estate lender Latitude, making a play in that lending space in the United States.

Latitude, now part of LaSalle’s North America private equity platform, has been re-named LaSalle Mortgage Real Estate Investors. Former Latitude President and CEO Glenn Sonnenberg, Executive Vice President Chip Sellers and managing directors Craig Oram and Brett Mayer remain in the same roles with the new company.

Latitude generally provided bridge loans of between $5 million and $35 million on multifamily, office, hotel, retail and industrial properties.

LaSalle Investment Management had more than $64 billion under management as of the fourth quarter of 2018.

Its Chicago holdings include 101 North Wacker Drive, where railcar owner and manager TTX Company signed a 12-year lease extension for its 103,000-square-foot space, making it one of the 600,000-square-foot building’s biggest tenants.

A joint venture between LaSalle and Quantum Global Real Estate last put its stake in the office tower at 521 Fifth Avenue in New York on the market, as part of a push to sell $1.8 billion in global real estate.

Hovnanian Enterprises’ CEO Ara Hovnanian (Credit: Fox)

Hovnanian Enterprises, one of the country’s largest homebuilders, took on loads of debt to acquire companies and land more than a decade ago only to see the housing market collapse in 2008 and property values tumble.

Today, the New Jersey-based firm, which includes K. Hovnanian, faces the risk of being delisted from the New York Stock Exchange as it continues to struggle with that debt.

The company said it will seek shareholder approval at its annual meeting on March 19 to conduct a reverse stock split in order keep it on the exchange.

Hovnanian’s stock needs to stay above $1 in order to meet the NYSE’s listing requirements. The stock closed at 75 cents on Monday.

The homebuilder’s troubles pertain to longstanding issues from the financial crisis. From the late 1990s until around 2006 it was in a buying mode and its debt piled up, according to the Wall Street Journal. The companies troubles are also piling up, now that some experts predict housing sales to continue to slow in 2019.

Because of that debt, Hovnanian was unable to make large acquisitions at a time when homebuilders were buying up land at distressed prices. When sales rebounded and demand for starter homes rose significantly, it couldn’t capitalize.

The company had a total of more than $1.1 billion in senior outstanding debt as of Oct. 31, 2018, according to its filing with the Securities and Exchange Commission. Its total revenue was $1.9 billion at the end of October.

One bright spot today: Hovnanian saw an uptick in home deliveries, which ticked up 2.4 percent to 1,829 in the fourth quarter, from 1,787 a year ago, according to its earnings release.

Hovnanian’s financial issues got more complicated in 2017, when the company borrowed money from hedge fund Solus Alternative Asset Management to pay off some of its other debts, as it neared payment deadlines. Solus then sold a number of credit default swap contracts on that debt, including to Blackstone Group subsidiary GSO Capital Partners.

With Hovnanian in need of a refinancing, GSO stepped in as a potential new lender, but with one major condition: GSO needed Hovnanian to default on some of its debt so it could reap millions in profits from its credit default swap contracts with Solus.

This triggered Solus’ lawsuit in which it accused GSO of engaging in illegal market manipulation. The lawsuit was settled in May without Hovnanian needing to default.

Ugo Colombo, Masoud Shojaee and 250 Bird Road

A joint venture between developers Ugo Colombo and Shoma Homes is facing a $16.2 million foreclosure lawsuit.

SHEDDF2-FL1 LLC, an affiliate of Safe Harbor Equity, is seeking to foreclosure on Coral Gables Luxury Holdings LLC, the company that planned to develop the Collection Residences at 250 Bird Road, 4101 Salzedo Street and 4112 Aurora Street in Coral Gables, a lawsuit filed on Friday shows.

Florida Community Bank provided the original loan on the property in late 2013, and sold it to the Safe Harbor affiliate in August 2017, records show. Safe Harbor is a boutique private equity firm that focuses on performing and non-performing loans, defaulted debt and distressed real estate, according to its website.

The $16.2 million loan was due in December 2016, and the foreclosure suit alleges the plaintiff is owed the full amount of the mortgage, plus fees and interest. Ralph Serrano, managing director of Safe Harbor Equity, said in a statement that “while we are sometimes forced to file to recoup our mortgage as a course of business, that is not an indicator that settlement discussions are not ongoing, or that progress is not being made to the benefit of all parties.”

Masoud Shojaee, founder of Shoma Homes, and a spokesperson for Colombo could not immediately be reached for comment.

Colombo and Shojaee’s partnership blew up in November 2015. The developers planned to build the Collection Residences, a mixed-use project with 128 condos and retail space at the 2.8-acre site.

In early 2016, Shojaee’s Shoma Coral Gables filed suit against Colombo’s Gables Investment Holdings LLC; Colombo, individually; and The Collection LLC, Colombo’s Coral Gables luxury car dealership, alleging breach of contract, among other counts.

In June 2017, months after Avison Young was hired to market the development site, a judge issued summary judgment against Shojaee and Shoma — and in favor of the defendants — on Shojaee’s alleged $56 million in lost profits claim. He later dismissed Colombo as a defendant in the case regarding interference in the operating agreement, and also dismissed Gables Investment Holdings as a defendant.

As of July, Baptist Health was under contract to pay $41.5 million for the Coral Gables development site.

Shoma filed a motion to dismiss the remaining charges of the case in August, but the lawsuit is still open in county records.

In an unrelated lawsuit, Colombo, founder of CMC Group and owner of the Collection Residences, is being sued by Craig Robins’ Dacra Development five years after Colombo won a legal battle over a shared private jet. Dacra is now alleging Colombo and CMC tampered with and bribed one of the jurors in the trial.

The Real Deal’s Future City 2019 is less than two weeks away, and we have just a few remaining spots for qualified candidates.

Attendees will join a group of 200 C-level executives in the fields of development, tech, construction, design and finance to network with and learn from the top minds and biggest dealmakers in the country at the Baha Mar resort in the Bahamas from Jan. 27-29.

Some of our participants include: Don Peebles, John Catsimatidis, Anthony Scaramucci, Michael Stern, Ken Fisher, Bess Freedman, Morris Moinian, Sharif El-Gamal, Young Woo, Edgardo DeFortuna, Bob Knakal and more.

The industry is changing at a faster pace than ever before as a result of new technology, new sources of funding, new policies and new attitudes, and top thought leaders will be hosting workshops at the event enabling an understanding of these seismic shifts at a high-level, as well as their practical day-to-day applications.

In addition to 20-plus learning sessions, there will be programming to facilitate networking including golf, fitness activities, group meals and keynote speeches, cocktail events and plenty of other entertainment.

If you are VP level or higher, please email Bahamas@TheRealDeal.com immediately for further details.

(Illustration by Matt Rota)

Just north of Yankee Stadium, tucked between the Grand Concourse and the Major Deegan Expressway, the Bronx’s Highbridge neighborhood is poised for a big wave of gentrification. The neighborhood has seen rents rise faster than anywhere else in the city in recent years, per real estate website Zumper, and Highbridge is spattered with new apartment buildings.

Among them is a 44-unit rental property on Edward L. Grant Highway that Kim Tasher’s SKF Development is expected to wrap construction on this year.

But instead of renting out apartments to young couples and others earning above the area’s median income, SKF — one of the most active market-rate builders in the Bronx — has found another play. The company plans to lease the entire seven-story building to homeless-shelter provider Westhab, which is negotiating an $18 million contract deal with the city’s Department of Homeless Services, a draft version of the contract shows.

The proposed shelter is one of the newest under Mayor Bill de Blasio’s plan to overhaul a shelter system that’s found itself in a perpetual state of crisis, relying on short-term fixes as New York’s homeless population swells. And Tasher, who did not respond to multiple interview requests, represents a new breed of developer stepping up to meet the demand for more sustainable homeless housing — particularly with newly built properties.

Those private real estate sponsors generally charge the city a premium over unregulated apartment rents, a big factor in the decision to go with a shelter over rentals or condos, several insiders told The Real Deal.

The city “has so much money that they’re putting towards homelessness, and they’re paying above-market rates for deals where they can get some scale and make a dent,” said investment sales broker Steven Westreich of Westbridge Realty Group, who has worked with Tasher on several property deals.

But as DHS spends hundreds of millions to overhaul New York’s shelter system, it’s also reworking its budgeting process and methods for determining how much rent the city will pay for homeless housing. In that environment, sources familiar with the process say, it’s not always clear how the city calculates rents — or if it’s getting the best deal.

“It’s opaque,” said Brooklyn City Council member Stephen Levin, chair of the Committee on General Welfare, which oversees DHS. He added that the city was spending “enormous amounts of money” on shelters under normal circumstances and now even more so under de Blasio’s nearly two-year-old Turning the Tide on Homelessness initiative.

“The cost of the DHS budget on just shelter operations has [nearly] doubled to $2 billion” over the past two years, Levin said. “There should be oversight over how these lease terms are drawn up, and it shouldn’t be haphazard or ad hoc.”

The long haul

The city has its back against the wall as it tries to overhaul its shelter system — a situation Department of Social Services Commissioner Steven Banks has described as “flying the plane while we’re rebuilding it.”

One of the problems is that New York’s homeless population has risen faster than the city can open shelters. So DHS has had to rely on ineffective solutions, such as private apartments in run-down buildings, often referred to as cluster sites, and vacant hotel rooms. Some say that makes it difficult to provide the kinds of services that help break the cycle of homelessness and move people into permanent housing.

“Everything’s an emergency with DHS,” the head of real estate at one of the city’s largest shelter providers said on the condition of anonymity. “It’s always been about how desperate they were, how tight the census was and how tough the landlord was at the moment. That’s why the numbers have no type of pattern.”

New York’s shelter population began rising sharply nearly eight years ago, when city and state officials eliminated the Advantage program rent subsidy that helped many former homeless afford market-rate apartments. The shelter population has since shot up 65 percent from an average of 38,400 in 2011 to nearly 63,500 men, women and children in 2017 — an all-time record, per DHS.

To get a handle on the city’s fast-growing homeless population, de Blasio announced his Turning the Tide initiative in February 2017. The plan seeks to phase out roughly 3,000 cluster-site apartments by 2021, as well as rooms rented in some 80 hotels by 2023, and replace them with 90 new facilities built specifically as shelters.

And to meet that goal in time, the city will need to rely heavily on private developers, sources say.

“If you really know the right people and are working with the credible nonprofits, it’s a pretty lucrative business as an alternative to building condos and rentals,” said Michelle Abramov of the Queens-based commercial brokerage Asset Commercial Realty Group.

Abramov said that while the city offers financial incentives for private companies to build new shelters, those deals come with their share of risks. Working with DHS, for example, can be a lengthy process, and a developer has to consider the carrying costs. Shelter operators can also lose their funding — forcing some landlords to scramble to lease the space to another tenant.

“Do I see it as being a big risk right now? No,” she said. “Unfortunately, New York is at the top of the list of cities that have the largest homeless populations.”

At the same time, the city is allocating more cash to give DHS a leg up: The agency’s budget has grown more than 40 percent in fiscal year 2018 from $1.4 billion two years ago, and it tends to spend more throughout the year, city records show.

And for the first time in its 26-year history, DHS is using comparable rents in neighborhoods to help determine the appropriate rate to pay for shelter space. An October 2017 audit by State Comptroller Tom DiNapoli found that rental rates for homeless housing are typically negotiated between the landlord and shelter provider, and that DHS “has no choice but to accept the cost.”

A DHS spokesperson said the agency was already initiating reforms when the comptroller’s office conducted its review, adding that it will use a revamped budgeting model for all new shelters going forward.

But the agency ignored multiple requests to discuss the comps it uses for shelter space and other factors that go into calculating rents. That’s become a point of tension, particularly as the “fair share” part of de Blasio’s five-year plan looks to spread shelters out across the five boroughs — including more affluent neighborhoods where the city will be paying more for rent.

“There’s a bit of a debate going on right now,” said the head of real estate at the large shelter provider, “but they have to do that if they don’t want all the shelters to be in the South Bronx.”

Ruffled feathers

One of the more contentious shelter proposals is at the former Park Savoy Hotel on West 58th Street, in the area known as Billionaires’ Row. That has been a key move by the city to share the burden that less affluent neighborhoods face when housing the homeless.

A group of more than 500 residents in the Midtown neighborhood filed a lawsuit against the city in July to try to prevent the shelter from opening. The West 58th Street Coalition claimed the building is not up to modern safety standards and would pose a threat to its homeless residents and others who live nearby.

An appellate court judge granted the group a temporary win in late December, preventing the city from moving people into the shelter pending a full appeals panel review.

Randy Mastro, co-chair of Gibson & Dunn’s litigation practice, who represents the resident group, said that on top of the potential safety violations, the city is paying through the nose to make a point.

“Our coalition actually identified an alternative location just four blocks away that was move-in ready, safe and much cheaper,” said Mastro, a former deputy mayor in the Rudy Giuliani administration. “But the city blew us off and, for whatever reason, predetermined they wanted to open a facility in that particular building in that particular location — come hell or high water.”

But opponents of homeless shelters can’t simply suggest an alternative location; a shelter operator would have to submit a proposal to DHS. And the 107-year-old Park Savoy is up to code, according to both the city’s Fire Department and Department of Buildings. The building has “never been safer, in terms of fire protection,” an FDNY spokesperson said.

DHS inked a $61 million contract for the former hotel with Westhab (the same nonprofit that will operate Tasher’s shelter in the Bronx) that will pay the organization more than $48,000 per year per person, or nearly 33 percent more than the average single-adult shelter, according to the lawsuit.

Mastro argued that the city’s Human Resources Administration has stymied his efforts to review the contract and denied records requests for the comps used to determine rent at the shelter. The city, he said, is failing to offer evidence that opening a shelter at such a high cost is rational.

Both sides have made their arguments to the court and are awaiting a ruling, according to the DHS spokesperson. “We remain focused on opening this site as soon as possible so that we can provide high-quality shelter and employment services to hardworking New Yorkers experiencing homelessness as they get back on their feet,” the spokesperson said.

Private incentives

While homeless shelters remain a tough sell to affluent communities, a growing number of for-profit developers are seeing the mutual benefits. Women in Need CEO and former City Council Speaker Christine Quinn said the city’s real estate industry has shown “greater interest” in homeless housing since de Blasio’s five-year plan launched.

“The industry and service providers are at the ready to ‘turn the tide’ from plan to reality,” she told TRD. “Now what we need is some cohesion from the city.”

Westreich of Westbridge Realty said he’s also seeing more landlords and developers show interest in the city’s shelter system due to the potential for profits. “Shelters are an interesting play right now,” he said, noting that it can be hard to turn away when shelter operators show up with a check and are willing to pay above-market rents.

Dozens of real estate investors own buildings in five boroughs that they either operate directly or lease out to shelter providers.

David Levitan is one of the largest private homeless shelter landlords in the city, with a portfolio spanning 54 properties and 3,719 units, according to a TRD review of DHS records. The co-founder of Brooklyn-based Liberty One Group has been operating shelters for at least two decades and was around in the early 2000s, when the city began filling single apartments as a stopgap.

Now Levitan is opening at least two new shelters under Turning the Tide: one at a former warehouse on East 134th Street in the South Bronx and another at a hotel on 127th Street in College Point, Queens. The Queens shelter is facing pushback from community members who plan to sue the city in an effort to block it.

Shimmie Horn, meanwhile, has 1,393 units in nine properties. He recently opened a shelter at the former Hotel Chandler on East 31st Street in Manhattan. Levitan and Horn did not respond to requests for comment.

Privately owned homeless shelters can be a double-edged sword. Most seasoned landlords will be flexible when it comes to the idiosyncrasies and quirks of the shelter system, according to several insiders. DHS, for instance, is notorious for making late payments to shelter providers — a problem when monthly rent checks are due.

At the same time, having a small concentration of private landlords means those building owners can often negotiate higher rents with shelter providers, which then pass the costs back to the city.

One shelter operator, who asked not to be identified, said the city may face some harsh realities as it takes a more analytical look at the market for shelter space. “The comps are not a bad idea, but it may take them down a road they didn’t anticipate where they’re going to have to pony up,” the operator said. “The long and short of it is that the developers are making a lot of money.”

But as a growing number of private sponsors join the mix and more nonprofits look to build their own properties from the ground up, some say that could create more equilibrium.

Brooklyn-based developer Heights Advisors opened a shelter in the affordable rental property it recently built on Rogers Avenue in Crown Heights — one of the first under de Blasio’s initiative. It’s also the first homeless shelter for Heights Advisors, which built the Richard Meier-designed condo tower On Prospect Park, overlooking Grand Army Plaza.

And the New York-based nonprofit Bowery Residents Committee, which has been providing services to the city’s homeless since the early 1970s, recently developed its own building at 233 Landing Road in the Bronx’s University Heights neighborhood with a 200-bed homeless shelter and 135 affordable apartments.

The property — built with financing from charitable foundations and philanthropists — is part of the city’s new HomeStretch housing model, which uses surplus income from the shelter component to help subsidize the permanently affordable rentals.

Bowery Residents CEO Muzzy Rosenblatt said his organization was forced to come up with an alternative solution when the federal government cut spending for Section 8 housing in 2010. Rosenblatt acknowledged that ground-up development is tough for nonprofits to finance and said he “would love if the private guys followed our lead.”

Until the city gets a handle on the homeless population, though, demand for shelter space will continue to rise, he said.

“DHS knows that they have to have the capacity — that lengths of stay in the shelter system are going up and that demand for shelters is going up,” Rosenblatt said. “And the real estate community knows that as well.”

Jacob Khotoveli, managing director of JBL Management

UPDATED, Jan. 15, 10:48 a.m.: JBL Asset Management bought the Plaza at Wellington Green for $18 million, a month after the Hollywood-based company acquired another shopping center nearby.

JBL Asset Management purchased the 10-acre property at 2205 South State Road 7 in Wellington for $311 per square foot from Plaza at Wellington Green Owners, records show. Plaza at Wellington Green Owners is tied to Colorado real estate investor Alan Cogen. Starwood Capital Group has a right of first refusal to purchase the property if it is offered for sale, according to property records.

The HFF investment advisory team of Daniel Finkle, Luis Castillo and Eric Williams represented the seller.

Men’s Wearhouse anchors the 10-acre property. It is part of Wellington Green Mall, a 1.28-million-square-foot super regional shopping center anchored by Macy’s, Nordstrom, Dillard’s and JCPenney.

JBL Asset Management is led by Jacob Khotoveli. The firm bought a Burlington-anchored shopping center in Royal Palm Beach in December for $20.7 million.

Khotoveli said the shopping center in Wellington is Class A and is 100 percent leased. He also said it has a lot of visibility since it is off South State Road. He said Wellington is a growing market due to its rising population.

The property was last purchased in 2003 for $6 million and then developed in 2004.

JBL Asset Management owns and manages more than 2 million square feet of shopping centers across the country, according to its website.

While many retailers are struggling to make money and large chains such as Toys “R” Us have filed for bankruptcy, some real estate investors are seeing buying opportunities. Palm Beach-based Sterling Organization and other have set up funds to buy some of these distressed retail shopping centers and Class B properties throughout the country.

Correction: A previous version of the story misrepresented the seller

Vanguard CEO Tim Buckley and Redfin CEO Glenn Kelman

The investment firm Vanguard Group has purchased a more than 10 percent stake in Redfin.

Recent filings with the U.S. Securities and Exchange Commission show that Vanguard now owns 9,444,137 Redfin shares, which equates to a 10.54 percent stake in the company, according to Inman. The investment should be worth more than $160 million based on Redfin’s $16.96 closing stock price on Friday.

Last quarter, Redfin saw revenues increase 28 percent year over year, but its net income tumbled 67 percent. The discount brokerage was grappling with what its CEO referred to as a “temporary retreat” in the residential market. The firm, following a big advertising and hiring push, is expected to take a slower recruiting approach this year.

MIT Center for Real Estate lecturer Jen Cookke told Inman that Vanguard’s investment suggests it is betting on the “market share opportunity and growth potential of Redfin” and thinks it “will be the dominant player” in the business of purchasing homes.

“The market share potential is enormous,” Cookke said, “and even if Redfin is in the top three providers, this investment will pay off.” [Inman] – Eddie Small

Richard LeFrak and a rendering of the Four Seasons Residences at The Surf Club (Credit: Getty Images)

A company tied to developer Richard LeFrak closed on a penthouse at the Four Seasons Residences at The Surf Club.

Property records show Surf Club Apartment LLC, a Delaware company managed by LeFrak, paid $9.7 million for penthouse 4B in the south tower of the luxury Surfside development.

LeFrak, who co-developed 1 Hotel & Homes with Barry Sternlicht, sold a unit at the Setai in Miami Beach to DJ and music producer David Guetta for $9.5 million last year.

LeFrak is chairman and CEO of LeFrak. In South Florida, his projects include SoleMia, a $4 billion mixed-use development in North Miami he’s building with the Soffers of Turnberry Associates.

Fort Partners, led by Nadim Ashi, sold the Surf Club unit to LeFrak. The developer completed the project, which includes 150 condo units, a 72-room hotel, a Le Sirenuse restaurant and a Thomas Keller restaurant, in 2017.

At the Four Seasons, LeFrak’s neighbors include Theory co-founder and CEO Andrew Rosen and South Florida auto dealer Alan Potamkin. Recently filed property records revealed billionaire real estate and casino tycoon Neil Bluhm was the buyer of another penthouse at the property. The hotel and condo project was designed by Pritzker Prize-winning architect Richard Meier, who last year was accused of sexual harassment, and Kobi Karp.

Kroger CEO Rodney McMullen (Credit: University of Kentucky, iStock)

As it seeks to fend off Amazon’s expansion into the retail food business, national grocery chain Kroger teamed with Microsoft to roll out new tech-enabled stores with “digital shelves.”

Cincinnati-based Kroger teamed with Microsoft to develop a cloud-based system that can help customize the grocery store experience for customers, company executives told Bloomberg. Kroger has unveiled the system in 92 of its stores.

In the new system, customers add their grocery list to their Kroger app, and digital displays installed in the store’s aisles flash with a customer-chosen icon to direct them to the products they’re shopping for.

The digital displays can show ads and sales papers, and Microsoft’s artificial intelligence can predict a shopper’s age and gender, which helps customize the ads to specific customers.

Kroger’s smart shelves also can speed up the time for employees to fulfill online orders and curbside pickups, a move that could help gain an advantage over competitors like Amazon’s Whole Foods and Walmart.

After acquiring Whole Foods for $13 billion in 2017, Amazon is planning an expansion of the now tech-infused grocer. The new stores will be bigger, with extra space for Amazon’s delivery service and online order pickup. Amazon is also working to roll out 3,000 cashier-free convenience stores throughout the country.

Grocers have not been immune to the challenges facing the retail industry. Competition is up, while same-store sales have been flat. [Bloomberg] — Joe Ward

Richard Livingstone and the Pullman Miami Airport hotel (Credit: Getty Images)

London + Regional Properties paid $48.65 million for the Pullman Miami Airport hotel.

Los Angeles-based Laurus Corp. sold the 281-room hotel at 5800 Blue Lagoon Drive, property records show. The buyer, a London-based real estate and investment firm, purchased the property without ties to a management agreement but plans to keep the Pullman brand for a year, according to HFF. The hotel is one of two Pullmans in the U.S. The other is in San Francisco.

Laurus completed a multimillion-dollar renovation of the hotel in 2016 that converted it from a Sofitel to a Pullman. It was built in 1986 on a 10-acre site in the Blue Lagoon office park. The hotel features 18,500 square feet of meeting and event space, a pool, tennis courts, a fitness center, business center and two food and beverage concepts.

HFF’s Alexandra Lalos, Tony Malk and Daniel Peek represented the seller, according to a release.

The hotel last sold for $22.3 million in 2012, property records show.

The buyer, L+R, owns more than 17,000 hotel rooms worldwide, including the London Hilton on Park Lane, Trafalgar Hilton, Nobu Ibiza and Marriott Grand Cayman, the release said. The company, founded by billionaires Richard and Ian Livingstone in 1987, has a portfolio exceeding £9 billion.

AccorHotels, a French hospitality company, owns the Pullman brand.

(Credit: iStock)

It’s developers, not farmers, who may see the biggest regulatory and financial relief from the Trump administration’s rollback of wetlands rules.

Farmers and farmland are already exempt from many wetlands regulations that the Trump administration wants to overturn. Instead, its real estate developers who take out more permits than farmers for projects related to wetlands, streams and creeks, according to the Associated Press.

A financial analysis the administration released last month shows that out of 248,688 federal permits issued from 2011 to 2015 for wetlands-related work, the government required developers to do some type of mitigation 990 times a year on average.

Other industries landed an average of 3,163 wetlands permits with extra mitigation required, and farmers made up just eight of those in a year on average.

The Trump administration’s proposal narrows the definition of what wetlands and streams can receive federal protection, changes enforcement of the 1972 Clean Water Act and scales back an Obama administration rule from 2015 about what waterways are protected. President Donald Trump signed an order directing the rollback in February 2017.

The rollback “could be a benefit to builders who will see some relief in terms of cost and time,” National Association of Home Builders spokeswoman Liz Thompson wrote in an email to the AP. “That said, builders will still be regulated and will still be the industry that pulls the largest number of 404 permits which are very costly.” [AP] – Eddie Small

Jay Parker and Patricia Rotsztain (Credit: iStock)

Broker Patricia Rotsztain joined Douglas Elliman to lead the company’s Miami Beach offices, including a new one on Ocean Drive, The Real Deal has learned.

Rotsztain previously led a commercial division at Decorus Realty, and before that was a principal broker and owner at Rotsztain & Sulichin, a boutique firm focused on commercial deals, investment properties, new development and luxury residential. She’s worked on deals in Little Havana, Wynwood and other areas in Miami, including the sale of AutoNation’s Honda dealership.

Rotsztain is replacing Maggie Buck, who moved to open Elliman’s Coral Gables office at 1515 Sunset Drive.

The brokerage recently opened its third location in Miami Beach at Glass, at 120 Ocean Drive. Eloy Carmenate, Mick Duchon and Dina Goldentayer will be based out of the 671-square-foot space on the ground floor of Glass, a 10-unit condo building designed by Rene Gonzalez.

Goldentayer previously worked with Sladja Stantic, who returned to One Sotheby’s International Realty last year.  Carmenate joined Elliman in 2015 to work on preconstruction sales of Terra’s Eighty Seven Park project in North Beach.

From left: Mortgage Bankers Association chief Robert Broeksmit, Treasury Secretary Steven Mnuchin (Credit: Mortgage Bankers Association, Getty Images)

Despite the ongoing government shutdown, hundreds of clerks at the Internal Revenue Service are back at work with pay after the Mortgage Bankers Association successfully lobbied the Treasury Department.

The association’s president and CEO Robert Broeksmit spoke with officials including Craig Phillips, a senior adviser to Treasury Secretary Steven Mnuchin, about restarting the IRS’ processing of tax transcripts — a service which verifies would-be homebuyers’ incomes — and a day later Broeksmit heard that clerks were being called back to work, the Washington Post reported. Sources confirmed to the publication that the IRS income verification service resumed last week.

Broeksmit described his exchange with Phillips to the publication: “I said, ‘Look, this is starting to be a problem for the lending industry,’ ” he recounted. “Could you make these guys essential?”

Phillips wrote in an email to the Post that the decision to call 400 clerks back to work “was not taken to benefit the industry. It benefits the consumers that have made loan applications.”

The funds to pay the reinstated workers will come from the fees charged to homebuyers to have their mortgage applications processed.  The IRS claims it will be similarly reinstating other services that levy user fees.

“I’d like to take some credit,” said Broeksmit, whose trade association represents 2,300 entities working in the country’s $1.3 trillion mortgage industry, to the Post. “Our direct request got quite rapid results.”

Sunday marked day 23 of the longest government shutdown in U.S. history. An estimated 800,000 workers are furloughed, or working without pay, and this month these federal employees owe a combined $438 million in mortgage and rent payments. [WashPost] — Erin Hudson

Siena at Bella Collina rendering

A private equity group based in South Florida launched sales of units in the newest phase of a condominium development in Central Florida.

West Palm Beach-based DCS Investment Holdings, owned by Washington Redskins co-owner Dwight C. Schar, is marketing 75 furnished units in a phase of the Bella Collina condo development, called Siena at Bella Collina, expected to open early this year.

Prices start in the high $300,000s for units at mid-rise Siena condo buildings. The units have two to three bedrooms, and two and a half to three bathrooms.

The 75 furnished units feature porcelain tile floors, wood cabinets and quartz counter tops in the kitchen, and raised double vanities with Moen faucets in the bathrooms.

Shared amenities include two parking spots per owner, a conference room, a fitness center and a heated swimming pool.

A 30-minute drive from downtown Orlando, gated and guarded Bella Collina covers 1,900 acres along Lake Apopka, the third-largest lake in Florida, and private spring-fed Lake Siena.

Owners of Siena units will have membership privileges at the private Club at Bella Collina, including complimentary use of the club’s restaurants, full-service spa and salon.

Siena unit owners can upgrade their club memberships on a “pay-to-play” basis to gain access to the club’s Nick Faldo-designed golf course, resort-style pool complex, a cluster of Har-Tru tennis courts, and the club’s Sportivo Centro fitness center. – Mike Seemuth

Players Club bar in Wellington

The owner of a property in Wellington that houses a bar and restaurant proposed a project to develop a two residential buildings on the site.

Sperin LLC, led by manager Neil Hirsch, proposed demolishing the property and replacing it with a four-story, 54-unit residential development with a rooftop swimming pool.

In 2001, Sperin paid $1.9 million to acquire the building where the Players Club bar and the Suri West restaurant are located.

Sperin also proposed construction of a three-story, eight-unit residential building on the site of the bar and restaurant, located at the intersection of Greenview Shores Boulevard and South Shore Boulevard in Wellington.

Both the three-story and four-story residential buildings would have underground parking garages.

The average size of the residential units would be about 2,800 square feet, according to Bob Basehart, Wellington’s planning, zoning and building director.

Sperin filed several applications with the village government, including one that proposes a taller limit on building height in some areas of Wellington.

The height limit is now 35 feet for buildings outside the State Road corridor in Wellington. Sperin wants the village to allow taller buildings along other arterial roads in Wellington.

The limited liability company also proposed changing the approved land use for its property from commercial recreation to multifamily low.

According to Basehart, Wellington’s Planning, Zoning and Adjustment Board could consider the company’s applications as early as March. [Palm Beach Post]Mike Seemuth

(Credit: iStock)

Owners of multifamily buildings charged an average monthly rent of $1,419 in December, 3.2 percent more than in December 2017, Yardi Matrix reported.

The average monthly rent is expected to increase nearly 3 percent this year, according to the Yardi Matrix report.

The division of real estate software publisher Yardi Systems based its rental housing report on an analysis of 127 large real estate markets across the United States.

Yardi Matrix reported that the average rent in a multifamily building has risen 31 percent since 2011 amid increasing home prices, a robust economy and an expanding market for rental housing.

“Multifamily could be taking a trajectory much like hotels, which have had nine consecutive years of above-trend revenue growth,” Yardi reported.

Last year, multifamily rent increased the fastest in Las Vegas (up 7.3 percent), Phoenix (up 6.5 percent) and California’s Inland Empire (up 5.5 percent).

Though impressive, fast-rising rent “breeds worry that the cycle has extended almost as far as it can,” Yardi reported. “Real estate rarely has performed so well for so long.”

Yardi predicted that multifamily rent will increase in 2019 at the fastest rate in the South, the West and the Southwest, where the demand for housing has been exceeding the supply.

The annual number of U.S. household formations is 1.1 million, more than the number of new homes that developers are building, according to Yardi.

Student loan debt and higher interest rates also are deterring home sales, forcing many young people to remain renters and avoid home ownership. [Inman] – Mike Seemuth

(Credit: iStock)

A lack of affordable housing afflicts many cities, and in Gary, Indiana, the municipal government is tackling the problem by selling houses for $1 each.

Located 25 miles south of downtown Chicago, Gary has a declining population and plenty of vacant houses, a legacy of the steel industry’s decline in the town since the 1960s.

The town’s Dollar House Program allows qualified residents to pay $1 for a fixer-upper house that needs repair and renovation but doesn’t have type of damage that would require demolition.

Gary introduced the program about 30 years ago under a different name, The Homestead Program, and one of the residents who got a $1 house under the original program was Karen Freeman-Wilson, who is now the town’s mayor.

The town terminated The Homestead Program, but Freeman-Wilson reinstated it as the Dollar House Program in 2013.

The town uses a lottery system to select buyers of $1 houses. Buyers, who are required to have a minimum annual income of about $35,000, must renovate their homes within a year and occupy them for at least five years. The $1 house buyers also are required to eliminate any code violations.

A handful of houses in Gary are sold annually through the Dollar House Program. The most recent lottery produced buyers for seven $1 houses.

According to Lakia Manley, the housing coordinator in the town’s Community Development Division, the Dollar House Program creates new homeowners, reduces blight and raises housing values. [CNBC]Mike Seemuth

(Credit: iStock)

The availability of warehouse space in the U.S. last year hit the lowest level since 2000 and will remain tight this year as e-commerce continues to boost demand for storage and distribution facilities, especially near heavily populated areas.

Real estate brokerage CBRE reported that only 7 percent of industrial space was vacant and available in the fourth quarter, the lowest level since 2000.

Demand for industrial space exceeded supply by about 6 million square feet in the fourth quarter and by 29 million square feet throughout 2018, according to CBRE.

“Demand is not slowing,” Richard Barkham, global chief economist and head of research for the Americas at CBRE, told the Wall Street Journal.

Developers delivered 57 million square feet of newly built warehouse space nationwide in the fourth quarter, 6 percent more than in the third quarter, CBRE reported

Signs of a slowing U.S. economy have emerged. The growth of manufacturing decelerated in December, and some measures of business activity in the service sector of the economy declined.

Yet consumer confidence is still strong, and the recent holiday shopping season was one of the best in years for such retailers as Target, which has experienced rapid growth in online sales.

Real estate brokerage JLL reported that the market for industrial space probably will “hit the pause button in 2019” as the pace of economic growth slows and disruptions in international trade alter supply chains.

That could provide some relief to tenants after a long period of industrial-space scarcity, according to JLL. New construction also could add to the availability industrial space this year and reduce the growth in rents.  [Wall Street Journal] – Mike Seemuth

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Ever since the Brexit referendum, Germany’s financial capital has been positioning itself to receive an influx of London bankers. With just months to go until the split is official, those ambitions have pushed Frankfurt’s commercial real estate market to record heights.

Frankfurt-based state-owned bank Helaba predicts that as many as 25 banks, including Goldman Sachs, Citi, JPMorgan and Barclays, will move operations and staff from London to Frankfurt, reported the Financial Times. In the long term, the number of staff employed by foreign banks is predicted to grow from 2,000 to as much as 8,000.

According to data from BNP Paribas Real Estate, Frankfurt saw a total of €10.4 billion in commercial real estate transactions last year, an all-time high and a 36 percent increase from 2017.

Major deals by professional investors drove much of this growth, with several large office towers changing hands. Two-thirds of the deals involved transactions of at least €100 million. At the same time, however, rising real estate prices have put downward pressure on returns. The average yield for office space in Frankfurt fell below 3 percent for the first time ever in the last quarter of 2018.

The United Kingdom’s exit from the European Union is scheduled for March 29. [FT] — Kevin Sun

Chrysler Building at 405 Lexington Avenue (Credit: iStock)

In the face of higher costs and increased competition, Manhattan’s landmark Chrysler Building is for sale.

The owners, an Abu Dhabi government fund and developer Tishman Speyer, have hired CBRE to market the tower, the Wall Street Journal reported. The iconic building has been competing with newer office towers that are equipped with modern amenities like outdoor terraces and fitness centers.

While estimates vary, several investors said the building could be hard-pressed to sell for the $800 million the Abu Dhabi Investment Council paid for a 90 percent stake in the tower. The costs for maintenance and improvements could also affect the price. Tishman Speyer spent $100 million in improvements when it took over the tower in 1997. The partnership with Abu Dhabi has spent additional cash to maintain the building and attract new tenants, including Creative Arts Agency and co-working firm Spaces.

“When things break, it takes much longer to fix because there’s only one guy on the planet that has the tools to fix something from the 1920s and 1940s,” said Adelaide Polsinelli, vice chair of the commercial investment sales and leasing division at Compass.

The building is also subject to a ground lease with Cooper Union. The annual ground lease fee jumped to $32.5 million from $7.75 million last year, the Journal reported, citing the school’s financial documents. The rent will reset again in 2028, reaching $41 million.

Other prominent buildings, including the Willis Tower in Chicago and the Waldorf Astoria in New York, have attracted domestic and overseas investors in recent years. The Chrysler Building’s owners are similarly hoping to attract international investors.

The 77-story art deco tower was built between 1928 and 1930. Designed by William Van Alen, the tower was constructed in a contest to become the world’s tallest building. Chrysler Corp. founder Walter P. Chrysler took over the project from the developer. Its title as the world’s tallest tower was short-lived, with the Empire State Building surpassing it in 1931. [WSJ] — Meenal Vamburkar

MedMen CEO Adam Bierman and the company’s store in LA (Credit: MedMen)

MedMen, the private equity-backed medical marijuana dispensary, is spinning off its real estate interests to fund a national expansion.

The Los Angeles-based company will sell its properties to Treehouse Real Estate Investment Trust for $100 million, MedMen announced this week.

Treehouse REIT, formed in collaboration with Venice-based investment firm Stable Road Capital, just completed a common stock offering and raised $133 million for the Medmen properties acquisition, along with other cannabis industry-related properties. The news was first reported in Los Angeles Business Journal.

Treehouse plans to make leaseback deals with MedMen for all classes of properties, including retail stores, and cultivation and production facilities.

Medmen will use that capital to fund an expansion nationwide. The company is active in California, Florida, New York, Arizona and Nevada. Treehouse will expand the lease-back model with other companies.

Some of the country’s best-performing REITs are the ones whose tenants specialize in marijuana farms. A recent report in Bloomberg found that Innovative Industrial Properties, which owns warehouses where farmers grow cannabis, netted investors a profit of 117 percent over the past year. That made it the most successful REIT at a time when many are struggling.

But there could be trouble on the horizon for MedMen. The founders of Beverly Hills-based Inception Companies, a company that launched a similar leaseback REIT this year that invested in MedMen, said Tuesday it would sue the company.

Inception Companies’ Brent Cox and Omar Mangalji say they own a “significant stake” in the company that manages MedMen and is accusing MedMen of “withholding its shares from its shareholders,” and using a “conflicted corporate structuring” to breach its fiduciary duties to its shareholders.

Inception Companies launched a $50 million fund in August to pursue leaseback deals. There’s plenty of opportunities within the industry — cannabis companies often have to buy their own real estate with cash because they can’t get financing from institutional lenders, which ties up capital and stifles growth.

Pelorus Equity Group of Newport Beach also sees an opportunity in the funding gap left by institutional lenders. Pelorus launched a $100 million fund to to help cannabis companies acquire properties.

Pier Sixty-Six Hotel & Marina in Fort Lauderdale

Tavistock Development Co. will build a 5,000-square-foot building featuring daily entertainment and attractions just south of the Pier Sixty-Six Hotel & Marina.

Fort Lauderdale city commissioners voted Tuesday to allow Tavistock to use the waterfront building for a temporary special event over a five-year term.

Over a longer term, Tavistock plans to renovate and redevelop the Pier Sixty-Six resort on the north side of Southeast 17th Street at 2301 Southeast 17th Street.

Within a year, Tavistock plans to construct the one-story building on the south side of the street at 2150 Southeast 17th Street with an indoor-outdoor bar.

The site of the planned building is the location of the former Sails Marina, which Tavistock acquired in 2017 for $24 million after acquiring Pier Sixty-Six in 2016 for $163 million.

According to a Tavistock memo, the planned building could serve as a venue for yoga instruction, happy hours, brunches, farmers markets, art exhibits or musical performances.

The building is expected to open by the end of summer, according to Jessi Blakley, a senior director of Tavistock.

Open hours for the building will be 10 a.m. to 10 p.m. on Fridays and Saturdays and 10 a.m. to 9 p.m. Sunday through Thursday. [Sun-Sentinel]Mike Seemuth

Reid Boren, managing parner of Two Roads Development

West Palm Beach-based Two Roads Development and a partner secured $24.5 million in financing for a waterfront condominium development in downtown Tampa.

Two Roads and Feldman Equities LLC will use the financing to prepare the foundation and to fund demolition work at the development site of Riverwalk Place, which will rise more than 50 stories on the banks of the Hillsborough River.

The developers recently obtained a construction permit from the municipal government of Tampa for the foundation of Riverwalk Place.

Buyers have deposited a total of more than $80 million on Riverwalk Place condo units.

Calabasas, California-based Mosaic Real Estate Credit LLC provided the financing for the next phase of the Riverwalk Place project.

Mosaic also is working with Two Roads on its Elysee development, a 57-story condominium now under construction in the Edgewater area of Miami. – Mike Seemuth

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Foreign investors seeking U.S. green cards put nearly $50 million into what was supposed to be a massive mixed-use development in a suburb of Houston.

But the Securities and Exchange Commission charged the developers of the Houston-area project with diverting $20.5 million to other investments in real estate.

In December, without admitting or denying any wrongdoing, the developers settled the SEC charges and agreed to pay a penalty plus reimbursements to investors totaling $51.4 million. None of the investors has received a green card, and none of the developments they funded has advanced to construction.

The SEC civil action is the most recent sign of problems with the EB-5 program, which has provided more than 100,000 visas to foreign investors who put at least $500,000 in job creating U.S. businesses, often real estate developments.

The EB-5 immigration process was created in 1990 and scheduled to end three years ago, but Congress has granted a series of short-term extensions to keep the program alive.

Critics increasingly complain that the EB-5 program has led developers to improperly use funds, defraud investors and fund projects that fail to meet the economic goals of the program.

Flaws in the EB-5 program were exposed by the mixed-use development planned in Pearland, Texas, a suburb just south Houston.

The Wall Street Journal reported that the developers of the EB-5 project in Pearland and the firm that recruited the foreign investors are owned by the same company in Hong Kong, Modern Land (China) Co. Ltd.

Sen. Chuck Grassley (R, Iowa) raised questions about that type of arrangement in a 2016 letter to the Department of Homeland Security.

Grassley noted that the arrangement allows foreign companies to offer U.S. green cards to investors and to sell homes built with EB-5 funds to the same investors, negating the economic impact that Congress wanted the program to produce.

Nevertheless, Congress will keep extending the EB-5 program on a short-term basis, experts predict.

The planned development of senior housing, luxury residential buildings and retail space in Pearland drew $49.5 million of capital from 90 foreign investors, according to the SEC.

The money went to three development companies with common ownership, but they moved $20.5 million of the money to two unrelated real estate projects, according to the SEC.

The federal agency said the corporate owner of the three development companies “eventually replaced” the improperly diverted $20.5 million. [Wall Street Journal]Mike Seemuth

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Many people who bought homes next to golf courses thought their property value would rise. But they are now discovering that golf-home prices can drop, too, as the popularity of the sport recedes.

Decades after developers began to blanket the Sunbelt with residential communities built around golf courses, many courses are closing – triggering legal fights over the consequences.

Hundreds of communities built around golf courses that are money losers, according to Peter Nanula, chief executive of Concert Golf Partners, an owner and operator of about 20 private golf clubs across the country.

Among other projects, Nanula’s company has acquired and started to rehabilitate a golf club in Lake Worth, Florida, that closed one of its three golf courses and filed lawsuits against residents who refused to pay fees for club membership.

According to the National Golf Foundation, more than 200 golf courses in the United States closed in 2017, and 15 new courses opened.

Blake Plumley, Florida-based development consultant, told the Wall Street Journal that the prices of nearby homes usually drop about 25 percent when a golf course is closed. Price drops as deep as 50 percent are possible if litigation erupts over a golf course, causing legal uncertainty that discourages potential golf-home buyers.

Nearly 24 million people played at least one round of golf in 2017, down from 30 million in 2001, when the popularity of the sport peaked, according to the National Golf Foundation.

In the early 2000s, developers who built residential communities around golf clubs started to require all of their home buyers to become club members.

Mandatory club membership was intended to guarantee the financial feasibility of golf courses surrounded by homes. But mandatory club membership can reduce home values by reducing the number of people willing to buy such homes.

Prices for homes that come with mandatory membership in a golf club are “way below what they should be selling for,” Ken Johnson, a real estate economist at Florida Atlantic University, told the Journal.

In the early 2000s, a golf community in Lake Worth called Fountains of Palm Beach began to require all its home owners to join the Fountains Country Club, which is located on the gated grounds of the community.

Mandatory club membership withered the housing market at Fountains of Palm Beach, where homes that previously sold for about $400,000 have traded at prices under $200,000, according to Sharon Harrington, a resident of the community and a real estate agent in the Lake Worth area, just south of West Palm Beach.

Fountains Country Club closed one of its three golf courses in 2016. By then, Harrington’s membership dues had climbed to about $24,000, almost five times what she paid when she first joined. She and other residents stopped paying dues, and the club sued to enforce the mandatory-membership rules.

The lawsuits against her and other residents were dropped after Concert Golf Partners acquired Fountains Country Club.

Nanula, the chief executive of Concert, told the Journal that membership in the club is no longer mandatory for residents of Fountains of Palm Beach, and home prices in the community are recovering. He also said Concert has upgraded the club’s facilities and is preparing to redevelop the golf course that closed in 2016 as housing.

Mandatory memberships persist at other golf communities. For example, buyers at Akoya Boca West, a 10-story condominium in Boca Raton, Florida, are required to join the Boca West Country Club, which charges a $70,000 initiation fee and monthly dues of about $1,000. Prices for the condo units start around $1 million.

After three years on the market, 40 percent of the units at Akoya Boca West are still unsold, according to Robert Siemens of Siemens Group, the developer of the condo, who says mandatory club membership hasn’t deterred buyers. [Wall Street Journal]Mike Seemuth

(Credit: Coldwell Banker, iStock)

The heir of a founder of the IHOP restaurant chain listed his mansion in a suburb of Fort Lauderdale for $7.25 million – or the tab for approximately 1.5 million short stacks of IHOP buttermilk pancakes.

Nathan and Jacqueline Finkel listed the 21,656-square-foot residence in Southwest Ranches with an asking price that equates to $334 per square foot.

Nathan’s father, Abe Finkel, was a founder of IHOP, known formally as International House of Pancakes, LLC, a Glendale, California-based company with more than 1,750 restaurants serving breakfast and other meals across the United State and in 15 foreign countries.

The custom-built mansion on a 7.5-acre lot at 5550 Hancock Road in Southwest Ranches has 9 bedrooms, 11 bathrooms, four half bathrooms and a five-car garage.

Interior features include a two-lane bowling alley, four fireplaces, a 12-seat theater room, an 800-square-foot bar room, and a living room with (of course) a breakfast area.

The residence also comes with three offices, a library, quarters for maids or nannies, his and her master bathrooms, and balconies with views to the east and west.

Two ponds flank the entry to the privately gated mansion, and the backyard has a lighted tennis court, a gazebo with barbecue equipment, and a resort-style swimming pool with a waterfall, slide, hot tub and deck.

The listing agents are Mark A. Kaminsky and Kevin O’steen of the Kaminisky/Reyes Team at Coldwell Banker.– Mike Seemuth