The tax break allows foreign visitors to reclaim a sales tax of 20 percent on items bought in the country for more than £30 (Getty; Unsplash)
A popular tax break is expiring in the United Kingdom in January, threatening the country’s status as a shopping destination and potentially dealing another blow to struggling retailers.
The scheme allows foreign visitors to reclaim a sales tax of 20 percent on items bought in the country for more than £30, or roughly $40, according to the Wall Street Journal. That can add up, especially for foreign visitors dropping serious coin in pricey shops on London’s high streets — which are already seeing an exodus of retailers — and premier shopping districts.
The tax break expires after the U.K. formally withdraws from the European Union Customs Union and European Single Market on Dec. 31.
British business owners worry that shoppers will stop coming to the U.K. in favor of other European destinations, such as Paris or Milan, that have similar tax schemes. Visitors from outside the European Union can claim 20 percent of their spending in France and 22 percent in Italy.
A recent survey of tourists found that at least 70 percent of visitors from Asia and the Middle East, along with 70 percent of Americans, are less likely to visit the U.K. after the tax break expires.
The coronavirus pandemic is also putting pressure on British retailers. More than 7,800 retail stores closed in the first half of the year.
The owners of Heathrow Airport are leading a legal challenge against repealing the tax refund, claiming in the British High Court that the government failed to consult parties most affected by the change and for miscalculating the financial details of the repeal. [WSJ] — Dennis Lynch
Istanye Park in Istanbul (Photo via Wikipedia Commons)
Turkish investment giant Dogus Holdings AS has agreed to sell a 30 percent stake in a high-end Istanbul shopping mall to a wing of Qatar’s sovereign wealth fund.
The deal is said to value the Istanye Park property at $1 billion, Bloomberg News reported. The buyer is Qatar Fund, which is owned by the Qatar Investment Authority.
Dogus is expected to use the $300 million or so in proceeds to pay its bank lenders, per a $2.7 billion debt restructuring deal that closed last year. Dogus committed to sell assets to meet those debts.
Dogus is negotiating agreements with banks to delay payments on the debt restructured last year. The conglomerate has businesses in numerous sectors, including auto dealerships and construction. Among its holdings is the Nusr-Et chain of steakhouses run by Nusret Gökçe, better known as Salt Bae.
Dogus was one of a number of Turkish companies that hit troubles with its debt obligations following the rapid devaluation of the Turkish lira in 2018. The coronavirus pandemic has complicated any recovery.
In the past few years, the Qatari government has pledged as much as $15 billion in investment and credit to the Turkish government. [Bloomberg News] — Dennis Lynch
John Wayne and the Riverside County ranch (Getty; Land and Farm)
A sprawling Riverside County ranch once owned by actor John Wayne is back on the market for $8 million.
The 2,000-acre property dubbed Rancho Pavoreal in the town of Sage was last on the market in 2018, according to the Los Angeles Times. It was marketed for cannabis cultivation, among other things. It also asked $8 million at the time.
Now Rancho Pavoreal is being touted as an equestrian compound, cattle ranch, shooting range, camp or private retreat.
The property is home to a three-bedroom, three-bathroom stucco ranch house totaling 3,000 square feet. There’s also a barn and three wells. The property is fenced and crisscrossed by horse trails.
The ranch borders a ranch property once owned by Walt Disney. Tatiana Novick with Coldwell Banker Realty has the listing.
Wayne was born in Iowa as Marion Robert Morrison but spent most of his youth and young adulthood in Palmdale and Glendale. Wayne lived in Encino for some time and spent the last 20 years or so of his life in Newport Beach, where he also docked his yacht, “Wild Goose.” [LAT] — Dennis Lynch
Michael Stern and a rendering of the project (Getty, JDS Development/SHoP Archictects)
UPDATED, Nov. 25, 9:45 p.m.: Developer Michael Stern closed on an assemblage of properties in Miami’s Brickell neighborhood where he plans to build a 62-story tower, The Real Deal has learned.
Stern, who leads New York-based JDS Development Group, paid $9 million for property at 191 Southwest 12th Street. The seller is a company tied to John Polit. Stern also bought adjacent land from Choice Hotels for $14.5 million.
Stern will demolish the existing building on the property and build a new fire station, plus a 1,400-unit mixed-use project that will encompass 1,000 rental apartments, 200 micro-units, a 200-key hotel, 250,000 square feet of office space and a new $8 million fire station.
Adrian Sanchez, of Waterfront Investment Real Estate, represented both the seller and the buyer in the $9 million deal. The property last sold for $4.2 million in 2014. Records show that a four-story, 12-unit multifamily building built in 1971 is currently on the property.
Earlier this year, a company tied to Alain Lantigua sued Stern, alleging he reneged on a $10 million assignment fee for legwork to obtain the zoning approvals for the development. Lantigua’s plan originally was to buy 191 Southwest 12th Street in order to flip the land to Stern for the fee. Lantigua is principal of Crystal Clear Holdings and Harlequin Property Management, according to his LinkedIn. The lawsuit is still open, according to court records.
The lawsuit identifies the property seller as a company tied to Polit, son of former Ecuadorian official Carlos Polit, who was given a six-year prison sentence in 2018 for allegedly collecting a $10.1 millionbribe from a Brazilian construction firm. John Polit was given three years for being an accomplice. Earlier this year, the U.S. Securities and Exchange Commission opened an investigation into Polit, a former Merrill Lynch employee, related to activities in Ecuador.
In July, Stern filed court documents denying the lawsuit’s accusations, alleging that no such contract was formed between the two parties, and that Lantigua failed to close on adjoining property and “to perform under the Public Benefit Agreement.”
“In truth, Plaintiff conferred no benefit and was unable to bring the project to fruition by its own power and now seeks to profit off these failures by suing those that could bring the project to completion,” according to the documents.
In late February, the Miami City Commission approved a public benefits agreement with an affiliate of Stern’s JDS Development Group that allows Stern to build the $500 million tower on the fire station site and an adjoining property that he purchased last year.
As part of the deal, the city will get roughly $2.2 million in cash for fire station equipment, about $5.4 million in public benefits and $200,000 in streetscape improvements, and will pay for the renovations to the park and the transfer of development density rights, according to the public benefits agreement.
The Economic Innovation Group identified 145 real estate investments in Opportunity Zones (iStock)
Investment in Opportunity Zones is growing at a rapid pace, and so is skepticism about the program — and whether its incentives for pouring cash into low-income communities amount to a tax dodge.
The Economic Innovation Group, a policy group that’s a proponent of the program, identified 186 real estate and business investments in Opportunity Zones in the United States. Of those, the majority — 145 — are in real estate, the New York Times reported.
Critics have said that operational projects would create more jobs for locals and that the program doesn’t meaningfully help residents of the “distressed” communities. But investors often need incentives, and proponents are pushing back.
“When we make investments, we look at impact. And in this case, we’re taking an old, 500,000-square-foot abandoned building, giving it a second life, and bringing people into the area,” Michael Tillman, chief executive of PTM Partners, whose firm is raising $250 million for its second Opportunity Zone fund, told the publication.
PTM, along with Douglas Development, developed a mixed-use complex with luxury apartments in an Opportunity Zone in Washington, D.C.
“We’re also bringing in a school that lost its lease elsewhere,” he added. “All of that has a positive impact on the community.”
While some states and cities are attempting to track investment in opportunity zones, there is no such data at the federal level. This summer, however, the White House estimated that $75 billion had flowed into Opportunity Zones because of tax incentives.
In Baltimore, for example, some 80 projects are in the works in 42 zones.
“We have enough examples at this point to show that Opportunity Zones are helping projects that either would not have happened or would have taken a very long time to move forward,” said Benjamin Seigel, the Opportunity Zone coordinator for Baltimore’s economic development agency. “We’ve also learned that we’re not going to achieve the outcomes we care about by doing nothing.”
President-elect Joe Biden has suggested reforms to the program, including incentivizing developers to partner with community organizations, and a more robust system for reporting on the impacts of developers’ investments.
As workers trade in suits for sweatpants, 1 in 6 dry cleaners has closed or gone bankrupt (Getty)
At J’s Cleaners, business had clawed up to 40 percent of pre-pandemic levels last month. But now, with Covid-19 soaring again, that number is expected to plummet.
“If this thing keeps dragging, many small businesses will close. Maybe I could be one of them,” owner Albert Lee, who plans to permanently shutter four of his 15 locations, told Bloomberg. He is losing $1,000 to $2,000 monthly per store.
As workers abandon suits for sweatpants, dry cleaners are having an existential crisis, the publication reported.
One in six dry cleaners has closed or gone bankrupt in the U.S. already, and many won’t survive without more federal stimulus, according to the National Cleaners Association. The industry’s revenue is half of the $7 billion it enjoyed pre-Covid.
“It’s an ugly, ugly time,” said Nora Nealis, executive director at the trade group, which has more than 2,000 members. “Most of them are holding on with their fingernails in hope of help.”
Joel Meyerson and 24 Palm Avenue, Miami Beach (The Pure Source, Sotheby’s)
The CEO and president of a cosmetics and lotions manufacturer paid $10.65 for a waterfront Palm Island mansion.
Records show Joel J. Meyerson, as trustee of The Martial Trust Under Article VIII of the Amended and Restated Tamra Meterson Revocable Trust, bought the home at 24 Palm Avenue in Miami Beach from Sharem Properties LLC, a Florida company managed by Efren Yaber Jimenez.
Meyerson is the CEO and president of Miami-based Pure Source, a contract manufacturer of creams, lotions, liquids, gels, tablets, capsules and patches. It was founded in 1995.
Jimenez is an administrator for Televisa, a Mexican television production company, according to his LinkedIn. He acquired the property in 2006 from City National Bank of Florida, according to property records.
The home, built in 2000, went on the market in November of 2018 with an asking price of $15.3 million. After a series of price chops, it most recently listed in September for $11.7 million.
Saddy Delgado of One Sotheby’s International Realty represented Jimenez, while Oren Alexander of Douglas Elliman represented Meyerson.
The two-story, 6,996-square-foot house sits on over half an acre of land and comes with a guest house. It also features seven bedrooms, seven-and-a-half bathrooms and a four-car garage. The outdoor area has a pool, a dock and 100 feet of water frontage, according to the listing.
Meyerson also owns a 19,350-square-foot estate in Miami Beach that he listed for $29.5 million in 2017.
Palm Island has seen many high-priced sales in recent months. A London investor sold his waterfront Palm Island mansion for $20.5 million, a former Miss Ukraine paid $19.75 million for a waterfront mansion, and an investor bought rapper Birdman’s former home for $10.85 million.
Compass has tapped underwriters for a potential public offering that would be among the most buzzed-about IPOs in the residential world.
The SoftBank-backed firm, which jolted traditional brokerages when it launched eight years ago, has hired Morgan Stanley and Goldman Sachs as underwriters, Bloomberg reported. It is looking at a potential IPO sometime in 2021.
Founded in New York in 2012, Compass has raised more than $1.5 billion from investors including SoftBank, Fidelity, Wellington Management, Dragoneer and others. After raising $370 million in July 2019, Compass was valued at $6.4 billion — a figure that prompted rivals to question whether it was overvalued.
Compass bills itself as a real estate firm that uses technology to make agents more efficient. It currently has more than 18,000 agents who sold $91.2 billion worth of real estate last year, according to research firm Real Trends.
For years, Compass co-founders Robert Reffkin and Ori Allon said an IPO was likely, but claimed they were not in a rush to go public.
Like other residential firms, Compass has benefitted from a quicker-than-expected housing turnaround in recent months. Forced to lay off 15 percent of its staff in March, the firm claimed it saw record revenue in June, July and August.
Meanwhile, the IPO market has gotten hot with other real estate players lining up to go public, including Airbnb, Opendoor and Porch.com.
Zillow’s Rich Barton and CoStar’s Andy Florance (JD Lasica via Flickr; Getty)
Having cornered commercial real estate, CoStar has a new target.
The data giant’s $250 million purchase of Homesnap, announced Sunday, gives it a foothold in residential sales, where it will go head-to-head with Zillow, Realtor.com and others. Until now, CoStar’s focus was limited to rentals.
The deal brings CoStar’s bet on the residential sector to more than $2 billion, and represents a huge expansion opportunity for the data giant.
As CoStar CEO Andy Florance put it: “The estimated value of commercial real estate assets in the U.S. is $16 trillion.” By comparison, the residential sector has $27 trillion in assets. “With the new addition of clients and information … we are almost tripling the size of our addressable markets,” he said in a statement.
Homesnap is a national search portal that serves 240 multiple-listing services nationwide. It gets listing data from those platforms and 500 other data sources. It currently has 1.3 million active listings on its platform, which is free. And it claims 300,000 agents use it regularly, including 50,000 who pay extra for a “pro” version.
Guy Wolcott, John Mazur and Steve Barnes launched Homesnap in Bethesda, Maryland, in 2008. The company, which raised a total of $32 million from investors, started off as an app that let consumers access MLS and public data just by snapping a picture of a home. In 2017, it partnered with listings services around the country to create a consumer-facing listings portal.
“In some ways, Homesnap’s public residential real estate portal … has essentially become the front-end solution for many MLS providers,” Stephen Sheldon, an analyst at William Blair, wrote in a Nov. 22 research note.
The purchase price works out to more than six times Homesnap’s projected revenue of $40 million this year. But Wall Street analysts noted the startup has been growing hand over fist. In 2019, Homesnap generated $28 million in revenue, a 55 percent year-over-year jump. The company’s $18 million in 2018 revenue was double the prior year.
Sterling Auty, an analyst at J.P. Morgan, said Homesnap doubles the number of listings available across CoStar’s brands, from 1.35 million to over 2.6 million. He also said the deal appeared to be one where CoStar identified good technology in a business that is “suboptimal in its monetization,” he wrote in a recent research note.
CoStar has been circling the residential space over the last six years. In 2014, it shelled out $585 million for Apartments.com, followed by ApartmentFinder ($170 million in 2015), ForRent ($385 million in 2017) and Cozy Services ($68 million in 2018). In February, it shelled out $588 million to buy RentPath, the parent company of ApartmentGuide.com, Rentals.com and Rent.com.
It also recently emerged as one of the bidders interested in taking over CoreLogic, one of the country’s biggest residential real estate data companies. Talks were said to stall in late October.
With Homesnap, however, CoStar is going after the for-sale market or the so-called “meat of the residential market,” said Brett Huff, an analyst at Stephens. In a Nov. 22 research note, Huff emphasized Florance’s point: The residential housing market — with $27 trillion in assets — is significantly larger than the commercial sector, with $16 trillion.
To industry observers, the deal left little doubt that CoStar was going after Zillow.
“You’ve got three or four big residential data companies that all want to find a way to monetize residential real estate information and customer information,” said Steve Murray, founder of research firm Real Trends, referring to Zillow, Realtor.com and Redfin.
With a market cap of $34.5 billion (compared to Zillow’s $25 billion), CoStar is a formidable competitor. But Zillow has the consumer eyeballs. During the third quarter, it reported 2.8 billion visits to its website and mobile app, compared to CoStar’s 69 million visits.
There’s another key difference. Despite its push into iBuying, Zillow generates nearly $1 billion in annual revenue from agent advertising. Homesnap’s revenue comes from MLSs that display listings on its site.
In Sunday’s statement, Florance took a thinly veiled dig at its chief rival. “We will continue to differentiate our residential real estate portal and solutions by working solely to help agents market their listings and their brands, which is in sharp contrast to other portals that increasingly advertise on top of agent listings and offer brokerage services directly,” he said.
During an Oct. 28 earnings call, Florance said the U.S. is an “oddly underdeveloped country” when it comes to residential marketplaces. A company like Australia’s REA Group, which is majority owned by News Corp., could be a $200 billion company in the U.S., he said. “You’d create $1 billion-plus of EBITDA in that area and yet no one’s really doing a good job.” (News Corp. also owns Realtor.com, which in recent years has moved to compete with StreetEasy, Zillow’s New York City-focused subsidiary.)
Murray said the Homesnap deal alone isn’t enough to shake Zillow. In fact, Murray, who has close ties in the brokerage world, speculated that CoStar would be hard-pressed to retain Homesnap’s clients. CoStar charges steep membership fees, whereas Homesnap is free for many brokers.
“There are any number of entities in the industry that do not see this as a positive development,” he said.
But if CoStar also buys CoreLogic, Murray said the combination of CoreLogic’s data and Homesnap’s search tool would be serious competition.
“If they get that done and I’m Zillow, now I start to get worried,” Murray said. “Now they’d have a formidable competitor with access to as much data as Zillow has.”
Steve Witkoff and 4766 North Bay Road (Getty, Douglas Elliman)
A company tied to the Witkoff Group bought a vacant waterfront lot on Miami Beach’s North Bay Road for $8 million.
The New York-based real estate investment and development group, led by Steve Witkoff, bought the nearly half-acre lot at 4766 North Bay Road, according to records. A spokesperson for the company did not return a request for comment.
The seller was JPMorgan Chase Bank, which bought the property at public auction for $5.4 million in July 2019 after foreclosing on the previous owner, according to court records.
Online listings show the property listed for $8.4 million in October 2019, dropping to $8.15 million in September. Oren Alexander of Douglas Elliman represented the buyer. Lindsay McMinn of BHHS EWM Realty represented the seller.
Last year, Steve Witkoff bought a waterfront Sunset Islands home in Miami Beach for $10 million. He is known in politics for his close relationship with President Donald Trump, serving on Trump’s economic recovery council and joining the president at public events.
North Bay Road has seen a flurry of purchases recently. The waterfront lot once home to Colombian drug lord Pablo Escobar sold to developer Jarrett Posner, founder and chairman of New York City-based BMC Investments, for $10.95 million. The CEO of AmeriSave Mortgage Corp. paid $8.2 million for a waterfront Miami Beach teardown next to his mansion on North Bay Road. Marcelo Claure bought a waterfront teardown at 5212 North Bay Road for $11.1 million. And hospitality mogul David Grutman closed on the site of his next home for $10.3 million.
The total supply of single-family homes declined 40 percent to 3.3 months in October (iStock)
Sales of new, single-family homes ebbed last month, but are still far ahead of where they were a year ago.
October sales fell to a seasonally adjusted annual rate of 999,000, a 0.3 percent drop from September’s revised estimate of 1.002 million. But home sales are still up 41 percent from a year ago, according to government data.
Americans are continuing to take advantage of record-low mortgage rates to buy new homes, squeezing existing supply. The total supply of single-family homes declined 40 percent to 3.3 months in October, meaning that’s how long it would take buyers to exhaust the new homes on the market.
More than half of all home sales in October — 580,000 — occurred in the southern half of the United States.
As demand rose last month, so did home prices. The median sale price of new houses sold in October was $330,600, up from $322,400 a year earlier.
Since the onset of the pandemic, demand for new homes has skyrocketed. In addition to low mortgage rates, buyers are also motivated by a desire for larger homes with work-from-home space.
Homebuilding confidence also reached new highs in October. Housing starts jumped 4.9 percent to 1.5 million in October, seasonally adjusted, compared to 1.4 million in September, according to the Census Bureau’s monthly report on residential construction.
Joel Kan, the Mortgage Bankers Association’s head of industry forecasting, noted that the increase in housing starts was driven by single-family home construction, which he said is at its highest level since 2007.
The Allen Apartments with Mark Samuelian, Michael Gongora and Ricky Arriola (Miami Beach Community Development Corp., Wikipedia Commons)
Miami Beach’s success in attracting luxury developments means there’s little to no room for affordable housing developers to build projects. But the city commission’s land use committee is hoping to solve that problem.
Committee members Mark Samuelian, Michael Gongora and Ricky Arriola, who are also commissioners, on Tuesday directed Miami Beach planning director Thomas Mooney to draft ordinances that would entice affordable housing developers to build in the city.
“As we know, the city is not building any significant affordable housing and hasn’t in quite some time,” Gongora said at the committee meeting. “The price of our land is very expensive and it is hard to get people interested in building new affordable housing.”
The most recent affordable housing project completed in Miami Beach was in 2018, when the 21-unit Leonard Turkel Residences at 234 Jefferson Avenue opened. The apartment building is among five affordable housing projects owned and operated by the Housing Authority of Miami Beach. The Miami Beach Community Development Corp. manages another 323 units scattered among 12 historic buildings in the city.
Still, that’s not enough affordable housing stock in a city where the typical home value is $364,074, according to Zillow. The average rent in Miami Beach is $2,018, and the average apartment size is 917 square feet, according to RentCafe. Roughly 55 percent of Miami beach households are renter occupied. Every year, the city opens its waiting list for affordable housing that often attracts thousands of applicants, whose household incomes must be no less than $8,868 and no more than $47,450. New renters are chosen through a lottery system.
Gongora proposed the city pass legislation that would fast track affordable housing projects through the building permit process and waive land use and other fees associated with new developments, which drew praise from his colleague, Samuelian.
“We have talked a lot about affordable housing and how to make sure it happens,” Samuelian said. “This is a movement in the right direction.”
But Arriola cautioned his colleagues that affordable housing usually requires developers to build high density projects, which are often met with stiff opposition from local residents. “If we want affordable housing, we will have to allow more,” Arriola said. “Otherwise we are kidding ourselves and the public. We have to be comfortable building more.”
The committee voted to direct Mooney to draft proposed ordinances and present them at the land use meeting in January.
October construction starts in South Florida rose from September, but lagged behind amounts seen a year prior, according to a recently released report.
Total construction starts for Miami-Dade, Broward and Palm Beach counties fell 10 percent from October of last year to $964.3 million, according to Dodge Data & Analytics, a Hamilton, New Jersey-based construction data analytics firm.
While nonresidential construction starts jumped, they were offset by a decline in residential starts. Nonresidential construction rose 63 percent, year-over-year, to $583.41 million. Residential construction fell 46 percent to $380.9 million. Residential construction represented about 60 percent of the total building in the region.
Nonresidential construction includes office, retail, hotels, warehouses, manufacturing, educational, healthcare, religious, government, recreational, and other buildings. Residential construction includes single-family homes and multifamily housing, according to Dodge.
October total construction starts climbed about 72 percent from September. That puts October’s total above those reported for March, April, May and August.
October residential construction was up 16 percent from September. Nonresidential construction more than doubled from September.
Year to date, total October construction starts fell 27 percent, year-over-year, to $7.9 billion. Nonresidential construction starts fell 35 percent to $3.4 billion. Residential construction starts fell 20 percent to $4.5 billion.
Nationwide, total construction starts rose 12 percent, year-over-year in October. Nonresidential building increased 19 percent and residential activity gained 2 percent, according to Dodge.
Year to date through October, total nationwide construction starts fell 11 percent, compared to the same period of 2019. Nonresidential starts dropped 24 percent and residential starts decreased by 2 percent.
South Florida projects that scored construction loans in October include Coral Rock Development Group’s $53.5 million loan for the 260-unit residential portion of its mixed-use project in Hialeah.
Ivanka Trump and Jared Kushner with the Trump National Golf Club in Bedminster (Getty; Trump Org)
New Jersey could be getting some part-time neighbors back on a full-time basis.
Ivanka Trump and Jared Kushner are expanding their “cottage” by the Trump National Golf Club in Bedminster. In the plans are four new pickleball courts, a relocated heliport, and a spa and yoga complex, the New York Times reported.
The renovations are taking place as Manhattan awaits the couple’s decision about returning there with their three children when they exit Washington. Speculation has been rampant that the power couple would not be welcomed back by New York high society after their defending of Ivanka’s father, President Donald Trump, the past four years.
Sam Nunberg, a former Trump campaign adviser, told the Times that though he isn’t offering the couple advice, “I’m moving to Florida next year for taxes and lifestyle.” But Kushner Companies, Jared’s former and perhaps future real estate firm, is based in New York City and has extensive holdings in New Jersey.
Trump and Kushner previously updated the cottage in 2016, adding a basement and a fireplace sitting room. Now they are expanding the master bedroom, bath and dressing room, as well as adding two new bedrooms, a study and a ground floor veranda.
Plans also call for adding five more 5,000 square foot cottages to the property, a recreation complex with spa treatments and a “general store.”
Real estate investor and author Justin Daniels spent $6.5 million on a waterfront home in Jupiter’s Admirals Cove neighborhood.
Daniels and his wife, Robin, bought the house at 197 Spyglass Court in Jupiter from Edward D. Pluzynski and Susan Love Pluzynski, according to records.
The Daniels both own and operate Daniels Holdings, a Jupiter-based real estate and investment holding company that specializes in the identification, acquisition, improvement, leasing and sale of properties. Justin Daniels also authored a book in 2013, “No more vodka in my orange juice,” that was named in Amazon’s best selling list.
Edward Pluzynski bought the property in 2000 for $2.9 million, records show. The home went on the market in September with an asking price of $6.5 million, according to Realtor.com. Rob Thomson with Waterfront Properties & Club Communities brokered the deal.
Built in 1991, the 6,047-square-foot house is on a nearly 30,000-square-foot lot. It features four bedrooms, seven-and-a-half bathrooms, a pool and a private dock.
Among other sales this year in Admirals Cove, the founder and CEO of MyEyeDr bought a waterfront mansion for $11.2 million, and the organizer of the “Trumptilla” boat parade sold his home for $5.7 million.
Also this month in Jupiter, the former CEO of an oil and energy logistics company bought a home for $5.8 million.
Tudor House Art Deco and Essex House hotels (Wikipedia Commons)
Miami Beach officials are evaluating zoning changes in the Art Deco Historic District as part of a long-range plan to transform Ocean Drive once again. The proposal includes possibly granting Collins Avenue hotel developers significant height increases and restricting the number of standalone drinking establishments on Ocean Drive.
The city’s three-member land use committee discussed the proposed new zoning rules on Tuesday. “It is really important to emphasize this is not a short-term proposal and it is not being proposed on behalf of any one property owner,” Miami Beach planning director Thomas Mooney told committee members. “These are a series of recommendations developed by the administration as a long-term vision…to strategically attract a better class of hotel operators.”
Ocean Drive and the surrounding historic district went through a redevelopment wave in the late 1980s and early 1990s, when real estate investors like Mark Soyka and the late Tony Goldman bought and renovated Art Deco hotels and apartment buildings that had become de facto retirement homes for elderly snowbirds. The strip became known for attracting A-list celebrities and created a vibrant LGBTQ scene. It launched a slew of restaurants and bars such as the Clevelander, Mango’s and News Cafe.
But in recent years, city officials have struggled to keep criminal mayhem on Ocean Drive under control, while dealing with accusations from organizations such as the NAACP that Miami Beach discriminates against people of color who stay in hotels and frequent establishments in the historic district.
According to a city memo, the proposed zoning changes are part of a multipronged approach to incentivize “a renaissance of the original plan for Ocean Drive.” To attract higher caliber hotel developers and operators, the city proposes granting them a maximum of 75 feet in height for additions to existing hotel properties located on the east side of Collins Avenue in the Art Deco district. Two hotels that would fall under the new zoning are Tudor House at 1111 Collins Avenue and Essex House at 1001 Collins Avenue, which is a sister property to the Clevelander South Beach Hotel and Bar at 1020 Ocean Drive.
Currently, the maximum height is 50 feet, which has required demolition of buildings in order to accommodate four-story and five-story additions, the memo states. The city would also waive fees developers have to pay the city for not having onsite parking. As far as Ocean Drive itself, the city is proposing a ban on opening new standalone drinking establishments and limiting rooftop uses to restaurants only.
Local preservationists and commissioner Michael Gongora, a land use committee member, expressed skepticism about the height increases for hotel additions. Gongora said the main goal of revamping Ocean Drive is to address “crime and the bad element in the entertainment district.”
“I am not getting how upzoning a bunch of properties plays into either of those,” Gongora said. “It seems it would bring more tourists into the area, and we are having trouble controlling that now.”
Gongora added that he would be more receptive to allowing residential developers height bonuses for properties on the east side of Collins Avenue. “If you put people living there, it may have more of a positive impact,” he said.
Mitch Novick, owner of the Sherbrooke Hotel at 901 Collins Avenue and an Ocean Drive activist, said granting hotel developers permission to build up to 75 feet is a bad idea.
“It sounds like a wholesale demolition on Collins,” said Novick, whose property would be eligible for the height bonus under the proposal. “Anything more than a one-story addition is a complete abomination.”
The land use committee will reevaluate the proposal at its January meeting before sending it to the full city commission.
When Deutsche Finance Group looked to crack the U.S. real estate market, it set its sights on a prime Manhattan corridor.
In August 2018, the German investment firm’s new U.S. subsidiary picked up the top floors of the Gucci building with New York-based developer Michael Shvo and Turkish real estate mogul Serdar Bilgili for $135 million. The partners are planning to redevelop 25 floors at 685 Fifth Avenue into Mandarin Oriental-branded luxury residences with views of Central Park and the Midtown skyline.
Over the last 24 months, Deutsche Finance — no relation to Deutsche Bank — has partnered in 13 U.S. real estate deals from Boston to San Francisco, totaling about $2 billion in equity. That marks one of the largest foreign buying sprees in recent years, after Chinese investors pulled back.
The group’s recent spate of direct investments in the United States has led to a dramatic expansion in the company’s scale. Deutsche Finance has quadrupled its assets under management to €6.9 billion from €1.5 billion at the end 2017. While the firm has invested in 47 countries since 2005, its recent growth has been concentrated in the more developed markets of the U.S. and Europe.
“They had been thinking about North America, and I think the Shvo-Bilgili thing was a catalyst for it — it allowed them to have a deal and create a platform around it,” said a source familiar with the firm’s history who asked not to be named. Deutsche Finance declined to be interviewed for this article.
Even as the pandemic has slowed transaction volume and made property owners and lenders alike question valuations, Deutsche Finance appears to be sticking to its strategy. In October, the firm and a group led by Shvo closed on the $650 million acquisition of the Transamerica Pyramid in San Francisco. And some of the German firm’s recent investments, such as a Boston life-sciences project, may even stand to benefit from the current environment.
Once the ball started rolling in the U.S., the massive amount of German capital waiting to be deployed — driven abroad by low to negative interest rates at home — would soon lead to one blockbuster deal after another.
“They have lower yield requirements and a lot of capital, so if they trust you — like they do with Deutsche Finance — then it’s a pretty interesting capital source,” the source said.
Birth of the club deal
The nature of Deutsche Finance’s business isn’t that easy to pin down.
The group has been active in the real estate, private equity and infrastructure space since its founding in 2005. “We are a business platform and not a business in the classical sense,” the firm’s founder and chairman Thomas Oliver Müller told a German trade publication in a January 2019 interview.
Deutsche Finance is backed by at least 15 financial institutions, including some of Germany’s largest pension funds, as well as more than 35,000 mom-and-pop retail investors in Germany.
Since 2008, Deutsche Finance has closed more than a dozen funds for private investors. But as part of its U.S. expansion, the group is experimenting with what it calls “club deal” funds, which allows small investors to invest alongside financial institutions.
The first such fund was launched in 2019, to raise $40 million in equity for a life sciences development near Boston. The fund raised its target within three weeks.
“This is a truly entrepreneurial real estate investment, in which the investors take an active part,” Theodor Randelshofer, head of Deutsche Finance’s sales division, said in an interview with German trade publication Finanzwelt early this year. “Retail investors had no access to this — until our first club deal in November 2019.”
Deutsche Finance is not alone in raising significant amounts of capital from retail investors in Germany. For example, Jamestown L.P. — an affiliate of Germany-based Jamestown US-Immobilien GmbH — has closed 38 U.S. real estate funds with capital from more than 80,000 small investors over the past three decades.
(Click to enlarge)
Pursuing investment opportunities around the globe, Deutsche Finance built up a sprawling network of properties spanning from Brazil and Chile to Indonesia and Vietnam, including not only office and residential properties but also hospitals, gas stations, casinos and ports.
“Fundamentally, all countries are on our investment shortlist,” Müller said in a 2018 interview. “There’s certainly always temporary attention on a specific country, but that has less to do with the country itself than with an asset manager on the ground that is offering us an interesting investment opportunity.”
But after taking significant book losses in Turkey amid that country’s currency crisis, Deutsche Finance began laying the groundwork for its big push into the U.S.
“We will make more Euro investments and overall focus more on Europe and the U.S.,”Deutsche Finance chief investment officer Sven Neubauer said in a 2018 interview. “That also means there will be fewer emerging markets in the portfolio.”
The first signature deal of Deutsche’s new Euro-American strategy closed in early 2017, when its newly founded London-based subsidiary, Deutsche Finance International, acquired the British capital’s landmark Olympia Exhibition Centre for €330 million in partnership with U.K. private-equity firm Yoo Capital, Bayerische Versorgungskammer and Versicherungskammer Bayern.
The acquisition and planned redevelopment of the Olympia marked “the successful start to a number of interesting ‘club deals’ and joint ventures for investors,” Neubauer said at the time.
That pipeline would include Deutsche Finance’s first direct investments in the U.S.
By August 2018, the firm launched Deutsche Finance America, headed by former Amstar Group president Jason Lucas.
Boots on the ground
It was a Turkish connection that brought Deutsche Finance to its first deal in the U.S.
Shvo and Bilgili sat at dinner with the broker who would ultimately help the partners line up financing they needed to get the Gucci building deal over the finish line.
Mitch Sikora, CEO of Manhattan-based JTP Capital, suggested Bilgili reach out to Deutsche Finance, with whom the developer has an existing relationship. (One of Deutsche Finance International’s co-founders, Frank Roccogrande, had co-founded and spent seven years as senior managing partner of BLG Capital, according to the firm’s website.)
The Munich-based private equity firm then brought Germany’s biggest pension company into the deal.
The Shvo-led group then expanded its reach, buying up three hotels in Miami’s South Beach for a total of $243 million and a 54-unit residential and retail development site in Beverly Hills for $130 million in 2019.
The group then pivoted to prime office properties, starting with the Coca-Cola Building at 711 Fifth Avenue in Manhattan, which they acquired for $937 million just months after Coca-Cola had sold it to another buyer.
Deutsche Finance’s last pair of office buys were different from the earlier deals in one respect: Bilgili’s BLG Capital was no longer involved.
Over the summer, the Turkish developer filed two lawsuits against Shvo and Deutsche Finance, accusing them of scheming to cut him out of a $376 million deal to buy Chicago’s “Big Red” office building at 333 South Wabash Avenue and the $650 million acquisition of the Transamerica building.
In Bilgili’s second suit against Shvo, which has already been discontinued, his lawyers claimed that Bilgili was “instrumental in securing” the group’s German institutional investors, which were “initially reluctant to do business with Michael Shvo because he had been indicted for and pleaded guilty to tax fraud.”
Shvo’s lawyers have rejected those claims, arguing that the suit was “a transparent attempt to cloak his defamatory allegations against Mr. Shvo with judicial immunity.”
Meanwhile, the pandemic has also led to another legal headache for Shvo and Deutsche Finance, in the form of a lease dispute with a major retail tenant at 530 Broadway, which they bought for $382 million in March.
Ralph Lauren subsidiary Club Monaco, which accounts for one-fifth of the mixed-use property’s annual base rent, sued the landlord entity in September to prevent its lease from being terminated, claiming the purpose of the lease had been frustrated by the pandemic. In mid-October, the court granted an injunction blocking Shvo from evicting the tenant.
This rent dispute has also caused some complications for the $210 million mortgage which LoanCore Capital provided to finance the acquisition.
In response to the suit, Shvo said in an October affidavit, “It is wholly inequitable and contrary to law that [the] landlord must continue to pay the mortgage for the building, with its significant monthly debt service, while [the] tenant deliberately deprives [the] landlord of its rent stream, which is essential to paying the debt service.”
An $80 million piece of that debt was set to be included in a commercial mortgage-backed security deal. But in June, the loan was removed from the package, according to Fitch Ratings.
Mom-and-pop investors still seem to be backing Deutsche Finance’s U.S. investments, even amid the pandemic.
The firm is partnering with developers DLJ Real Estate Capital Partners and Leggat McCall on part of the Boynton Yards complex in Somerville, Massachusetts, including a 289,000-square-foot laboratory building at 101 South Street, and a nearby parcel with 600,000 buildable square feet.
The Boston development is a proof of concept for a new offering Deutsche Finance is pitching. The company raised $40 million in equity for the project through a “club deal” fund, accepting contributions from investors of as little as $25,000 each — and managed to close the fund in just three weeks.
While Deutsche Finance’s first club deal fund gave retail investors a chance to bet on a new development in an up-and-coming asset class, the group’s second such offering — once again backed by property in the U.S. — is more traditional.
The company is now in the process of raising $50 million in equity for the Big Red building, an iconic 45-story, 1.2 million-square-foot office tower in the Central Loop of Chicago.
German rating agency Scope Analysis has given the fund high marks for tenant creditworthiness, a recent renovation by the previous owners, and Deutsche Finance’s highly developed competence in structuring club deals. But it also warned that the impact of coronavirus on the U.S. office market remains unclear.
Beyond Deutsche Finance, German institutional investors in general have long been big players in U.S. real estate. In the first three quarters of 2020, Germany was the second largest source of foreign investment in U.S. property after Canada with $2.2 billion in deals closed, according to Real Capital Analytics.
In addition to deals involving Deutsche Finance’s institutional partners, that figure was boosted by the sale of an office tower at 330 Madison Avenue in Midtown Manhattan, which German insurer Munich RE bought from the Abu Dhabi Investment Authority for $900 million in March.
German investment has slowed down significantly since the outbreak of the pandemic, dropping the country into third place behind South Korea. And all of Deutsche Finance’s recent acquisitions were already in contract prior to the pandemic.
Still, in early October, Deutsche Finance announced that it had already raised $41 million for the Big Red fund, a sign that the fund is on track to close ahead of its planned year-end deadline.
“Will German investors continue to invest in the U.S. in the foreseeable future? It would seem to me that their investment activity will still be limited in the near term … because of the ongoing Covid-19 mayhem,” Real Capital Analytics’ Jim Costello said. “That said, to the extent that cross-border capital is coming to the U.S., German capital will continue to be a leading source of capital.”
Editor’s note: All quotes in the story from German trade publications were translated.
As the holiday season kicked off, buyers and homeowners got hungry for home financing.
An index tracking the number of mortgage applications to purchase homes increased 4 percent last week, seasonally adjusted, compared to the prior week, according to the Mortgage Bankers Association’s weekly survey.
It was the second consecutive weekly increase for the metric, known as the purchase index. The index had not grown for seven straight weeks until the second week of November.
Refinancing activity was also up: MBA’s index tracking applications to refinance increased 5 percent from the week before.
Joel Kan, MBA’s head of industry forecasting, attributed the jump in home loans to the drop in the average 30-year, fixed-rate mortgage rate to 2.92 percent from 2.99 percent. That rate was the lowest in the 30-year history of MBA’s weekly survey.
“The decline in rates ignited borrower interest, with applications for both home purchases and refinancing increasing on a weekly and annual basis,” Kan said in a statement.
The unadjusted purchase index was up 19 percent year-over-year, while the refinance index was up 79 percent year-over-year. Jumbo purchase rates increased, however, to 3.18 percent from 3.11 the week before. Many lenders are tightening lending criteria for jumbo loans, particularly in densely populated urban markets.
Overall, applications for all home loans increased by nearly 4 percent last week. Refinancing requests made up more than 71 percent of home loan applications, according to MBA’s report.
Carlos Mattos and Dylan Fonseca with the Waterway Shoppes of Weston at 2210-2282 Weston Rd (Linkedin, Marcus & Millichap)
The Mattos family expanded its South Florida holdings by buying a shopping center in Weston for $20.45 million.
A company managed by Nicolas and Isabella Mattos — the children of Carlos Mattos, founder of car importer Hyundai Colombia Automotriz — bought the Waterway Shoppes of Weston at 2210-2282 Weston Road, according to records. The buying entity is also managed by attorney Richard G. Toledo.
The sale of the 36,000-square-foot shopping center equates to $569 per square foot.
Built in 1999 on 5 acres, the shopping center listed for $20.65 million, according to an online listing. Tenants include AT&T, Baires Grill and Pearl Vision Center. Spaces range from 980 square feet to 6,000 square feet.
The seller is a company tied to Fondo Atlas, a Miami-based owner and operator of real estate in Florida and South America. Fondo Atlas is led by Dylan Fonseca and Jose Torbay. The firm bought the shopping center for $15.3 million in May 2015, records show.
Kirk Olson and Drew Kristol of Marcus & Millichap represented the seller in the latest deal, according to a press release. Gordon Messinger of Cushman & Wakefield brought the buyer.
Earlier this year, the Mattos family bought an assemblage in Hialeah for $8 million.
Carlos Mattos is also partnering with Swire on a 100,000-square-foot-plus expansion at Brickell City Centre, which would include a 54-story, 588-unit residential tower, another 62-story, 384-unit residential tower, commercial space and parking.
In 2017, Fondo Atlas dropped $25 million for a shopping center in Palm Beach Gardens.
Other recent sales in Weston include industrial properties that were part of Blackstone’s $93.5 million portfolio purchase from Elion Partners.
Lennar’s Stuart Miller and 28600 Southwest 132nd Avenue (Google Maps)
Lennar Homes purchased a former mobile home park in Homestead for $29 million, with plans to build a new housing community.
Property records show Lennar Homes LLC bought two parcels totaling more than 40 acres at 28600 Southwest 132nd Avenue. The seller is Mac Thirteen LLC, a Florida company linked to the Treo Group.
Treo bought the land in November 2018 for $13 million, records show. The property was formerly the Pine Isle Mobile Home Community, a 55-and-older mobile home park. In March 2019, Treo informed residents that they needed to relocate.
Miami-based Lennar Homes has already put in its plans for redevelopment. On its website, a community named Pine Vista has already begun selling units.
According to the website, Pine Vista will have single-family homes and townhomes, starting in the mid-$200,000s. The community will also feature a clubhouse, a pool and a park.
Lennar has continued to be active this year, buying land all over South Florida. Last month, Lennar purchased land in western Palm Beach County for $13.7 million to develop a community. The homebuilder spent another $27.6 million for a development site on a former golf course in Delray Beach.
The Treo Group also has its hands in projects in South Florida. The Miami-based development firm is developing a mixed-use project in Coconut Grove called Regatta Harbour. Treo also secured a $33.25 million construction loan earlier this year for a mixed-use student housing project in South Miami.
Hippo founders Assaf Wand and Eyal Navon (LinkedIn)
Home insurance startup Hippo has raised $350 million from Japanese insurance giant Mitsui Sumitomo.
The deal comes just four months after the online insurance firm raised $150 million, valuing the company at $1.5 billion. The companies did not disclose a new valuation, but said the fresh capital would fuel Hippo’s growth in the U.S., where demand for all-digital real estate services has surged since the onset of the pandemic.
Mitsui Sumitomo, a subsidiary of MS&AD Insurance Group Holdings, was also an investor in the July funding round. The company has now raised a total of $709 million from investors including Dragoner, Fifth Wall Ventures and Lennar.
In addition to the new funding, Hippo said Mitsui Sumitomo will sign a reinsurance agreement, meaning it will take on some of the startup’s insurance risk.
Mitsui Sumitomo bought a convertible note (a form of equity and debt) that will turn into equity the next time Hippo raises money, CEO Assaf Wand told Reuters, which first reported the funding.
Wand declined to provide an update on Hippo’s previously stated goal of going public by 2021.
But in July, Wand told Bloomberg News the goal was to have Hippo on a “clear path to profitability” by 2021. He said Hippo was on track to generate $100 million of revenue in the next year.
As an online insurance agent, Hippo lets homeowners purchase a policy in five minutes or less. It relies on various companies to underwrite loans; in June, it bought Spinnaker Insurance Co., making it a carrier as well.
The company also gives customers free smart home devices, which it says can detect incidents in advance and potentially help avoid claims.
Hippo, which was founded in 2015, is currently available in 32 states, and aims to reach 95 percent of U.S. homeowners next year, according to a news release.
Over the past 12 months, insurance startups have rushed to go public, bolstered by low interest rates and a hot IPO market. In July, SoftBank-backed Lemonade saw its share price triple in its stock market debut. Rocket Companies, the parent of Quicken Loans and Rocket Mortgage, saw its stock jump 26 percent when it went public in August.
Goldman Properties’ Jessica Goldman Srebnick with 2501 Northwest 5th Avenue and the lot at 413 Northwest 25th Street, Miami (Getty, iStock)
Goldman Properties bought a retail building and adjacent vacant lot in Miami’s Wynwood for $5.2 million.
Goldman bought the 12,000-square-foot building, built in 1955, at 2501 Northwest 5th Avenue and the lot at 413 Northwest 25th Street from RedSky Capital, according to records.
Goldman Properties is led by CEO Jessica Goldman Srebnick, the daughter of the company’s late founder Tony Goldman. The site is three blocks from Wynwood Walls, an art space Tony Goldman launched in 2009. He is renowned for pioneering Wynwood’s revitalization from a warehouse district to a trendy art, dining and shopping destination that is popular with tourists.
Goldman Srebnick did not respond to a request for comment on her plans for the site.
RedSky Capital, based in Brooklyn, is led by Ben Stokes and Ben Bernstein. RedSky bought the property in a 2015 deal for $6 million, according to records. An online listing shows rent at the building is $50 a square foot, with three units available from 2,398 square feet to 2,875 square feet.
In 2016, Goldman Properties sold RedSky and its partner, private equity firm JZ Capital Partners, an assemblage in Wynwood at 257 Northwest 27th Street; 252, 268 and 276 Northwest 27th Terrace; and 2700 Northwest 2nd Avenue for $31 million. RedSky and JZ’s lender closed on the site in late September for $26 million.
Earlier this year, RedSky’s Miami Design District portfolio, encompassing 14 buildings with 125,000 square feet of space, hit the market unpriced.
And in August, JZ wrote down to zero its stakes on portfolios in Brooklyn and Miami’s Design District.
Other recent Wynwood sales include developer Alex Karakhanian selling a building leased to Revlon and Scripps Network for $17 million, and the Related Group closing on a development site for $18.5 million.
Amazon’s Jeff Bezos, Google’s Sundar Pichai and Facebook’s Mark Zuckerberg (Getty, iStock)
The sluggish commercial real estate market is getting a boost from tech giants Amazon and Facebook, which have emerged as some of the largest acquirers of real estate in recent years.
Five of the largest tech companies — Amazon, Facebook, Apple, Microsoft and Google’s parent company, Alphabet — now collectively occupy about 589 million square feet of U.S. real estate, according to the Wall Street Journal, citing data from CoStar Group. That is more than five times the space the sector occupied a decade ago.
Although some of these companies, including Facebook and Microsoft, are implementing flexible work-from-home policies in the wake of the pandemic, the sector is still making big bets on office space, warehouses and data centers. In 2020, the five tech firms have expanded their real-estate footprint by more than a quarter, marking the fastest rate in a decade.
These firms are now outpacing large REITs like Simon Property Group and Equity Residential when it comes to property holdings, according to the publication. Alphabet owned $39.9 billion in land and buildings as of September, according to filings with the Securities and Exchange Commission, up from $4 billion a decade ago. As of the end of 2019, Amazon owned $39.2 billion in real estate, up from slightly more than $1 billion in 2010.
Google’s first large real estate purchase came in 2010, when the company bought an office building in Manhattan’s Chelsea neighborhood for $1.8 billion. The company has since leased more office space in the area and bought another nearby building for $2.4 billion.
Tech companies generally buy properties rather than lease, since it allows the firms to have full control of the buildings.
But the companies’ emergence as landlords has drawn sharp criticism from anti-gentrification activists who say their presence has driven up the cost of living. Data bears that out: Home prices close to Google’s Chelsea campus and Amazon’s new HQ2 in Virginia have risen faster than in other areas, the Journal reported.
Prices increased 6.6 percent year-over-year in September (iStock)
Housing prices continue to soar into the fall.
Prices increased 6.6 percent year-over-year in September, according to the S&P CoreLogic Case-Shiller home price index, which tracks the housing market in 20 cities including New York City, Los Angeles, Miami and Chicago. In August, the price index jumped 5.2 percent.
Phoenix, Seattle and San Diego saw the biggest gains in home prices, repeating their performance from August. Phoenix reported a 11.4 percent increase, Seattle a 10 percent gain and San Diego had a 9.5 percent bump.
The S&P CoreLogic Case-Shiller national home price index, which tracks prices across the entire country, increased by 7 percent, up from 5.8 percent in August. Its monthly indices have been tracking the U.S. housing market for 27 years.
The rise in prices nationwide comes as demand for homes is high — in October, 6.85 million existing homes sold — and supply is at historic lows, with just 1.42 million properties for sale.
Housing starts rose 5 percent the same month, though Lawrence Yun, the National Association of Realtors’ chief economist, noted that new home construction was yet to alleviate the housing market’s low supply.
As prices soar and tighter lending criteria blocks some would-be homebuyers from being able to finance their purchases, the housing market recovery has been classified as K-shaped, with high earners recovering more quickly than those with lower incomes. Economists warn that the housing market’s uneven recovery could have dire consequences for the broader economy and growing inequality in society.
Laurent Ouazana and 6505 Allison Road, Miami Beach (Twitter, Google Maps)
An entity tied to a French insurance CEO paid $6.4 million for an Allison Island waterfront home next to the new mansion he purchased last month.
Records show US PLO 224 LLC bought the home at 6505 Allison Road in Miami Beach from Gerardo M. and Silvia M. Perez.
US PLO 224 LLC is a Delaware company managed by Laurent and Pascale Ouazan. Laurent is the CEO of the French insurance firm Entoria. According to its website, Entoria is France’s second-largest wholesale broker for life insurance and property & casualty insurance, and the 15th-largest overall broker in France.
A month ago, the same LLC bought a spec home next door for $12.5 million from developer Gregg Covin. Also in October, US PLO 224 LLC sold a Bal Harbour mansion for $23.9 million after buying it for $24 million last year.
Ida Schwartz with Compass represented the sellers in the most recent deal, while Dina Goldentayer of Douglas Elliman represented the buyer.
Records show the Perez family bought the home in 1999 for $925,000. It first went on the market in 2018 for $7.6 million. The most recent asking price was $6.7 million in July.
The 4,302-acre home, on half an acre of land, was originally built in 1947. It has four bedrooms, four bathrooms and 100 feet of water frontage.
Cineworld Group CEO Mooky Greidinger and Regal Cinema (Photo via Getty; Wikipedia)
The owner of Regal Cinemas scored a lifeline to help the financially challenged movie theater chain stay afloat.
Cineworld Group has secured a $450 million loan from lenders as coronavirus cases spike and theaters across the country remain closed. Other lenders provided increased flexibility on the company’s revolving loan and senior debt, adding over $750 million of liquidity to the company, the Wall Street Journal reported.
The deal comes just a week after reports that the entertainment company was seeking investors or a rescue deal to stay in operation. The company’s shares rose 20 percent in London on Monday to £55.30, or about $74.
The company reported that revenue in the first half of 2020 declined 67 percent to $712 million. It has $4 billion in lease obligations and $4 billion in debt overall. Last month, it temporarily shuttered its more than 500 U.S. theaters, which had reopened in August.
In the short-term, many movies are being released directly to streaming services, skipping traditional theaters altogether. But with more Americans couch-bound, demand for production space has surged. In June, Blackstone was in talks with Hudson Pacific Properties to develop production space in Los Angeles, a deal valued at $1.4 billion.
Sam Nazarian and Accor CEO Sébastien Bazin (Getty)
UPDATED, Nov. 24, 4:56 p.m.: As a rising star of the Los Angeles club scene in the early aughts, Sam Nazarian helped create the hotel-as-party-spot with properties like his SLS in Beverly Hills and Miami. He teamed up with A-list designers like Philippe Starck and took the mantle of boutique-hotel impresario from Ian Schrager when he bought the Studio 54 co-founder’s Morgan Hotels group in 2016.
Now, Nazarian is cashing out of his hotels business to focus on the latest trend: ghost kitchens and digital restaurant brands.
Nazarian on Tuesday closed a deal to sell his remaining 50-percent stake in SBE Entertainment’s hotel brands to the French hospitality company Accor, he told The Real Deal. At the same time, Nazarian said he was increasing his ownership of SBE’s restaurant and virtual kitchens business. The cash-and-asset-swap deal values all the different lines of business at $850 million.
The hospitality mogul is moving out of hotels at a time when the pandemic has slammed the lodging industry, and as digital kitchens are proving to be a lucrative area of growth.
Accor, which bought half of SBE in 2018, had planned to purchase Nazarian’s remaining 50-percent stake in the hotel operating business in 2022. But SBE, which includes brands such as the Mondrian, SLS, Hyde and Delano hotels, expanded quicker over the past two years than the sides had originally expected so they decided to speed up the acquisition.
“The business has grown at a pace much faster than anticipated. We basically doubled the pipeline,” Nazarian said.
Through the transaction, Accor bought the operating companies for luxury hotel brands as well as the majority of SBE’s restaurants and nightlife brands, which include clubs like the Mediterranean eatery Cleo and Italian steakhouse Carna by Dario Cecchini. Accor is retiring SBE’s corporate debt, and the deal values the company at $650 million. Accor also plans to launch its own lifestyle platform.
Accor CEO Sébastien Bazin said in a statement that the transaction will accelerate growth with a “leaner management structure.” The company is Europe’s largest hotel operator.
In a separate deal, SBE sold the real estate for the Hudson Hotel in Manhattan and the Delano Hotel in South Beach Greenwich, Connecticut-based Eldridge, for an undisclosed amount. The deal was announced Tuesday.
For his part, Nazarian is taking full ownership of SBE’s food and beverage business and increasing his stake in C3 — the platform that owns eateries like Umami Burger and Sam’s Crispy Chicken. The company, which includes mall owner Simon Property Group as an investor, is on track to open 200 digital kitchens by the end of the year. The transaction with Accor values those businesses at $200 million.
Nazarian will stay on as an adviser to Bazin for the next three years, at which point he’ll say goodbye to the line of business that evolved out of his time in the early 2000s when he quickly gained a reputation as Los Angeles’ nightclub king.
He expanded into hotels with the SLS Beverly Hills in 2009. Around 2015, he flirted with the idea of taking the company public through talks to acquire the publicly traded Morgans Hotel Group, the influential company founded in the 1980s by nightclub impresarios Schrager and Steve Rubell. The negotiations culminated in 2016 with SBE taking Morgans private in a deal valuing the company at $850 million. It gave SBE 22 hotels with 7,000 rooms.
Nazarian is now focusing on his digital kitchen business. He recently opened a culinary incubator at Manhattan West.
The short-term dive in office demand is not likely to continue far into the 2020s, according to a recent report form MetLife Investment Management.
In fact, the cities where demand for office space is falling most — including San Francisco, Washington and San Jose — may attract the most demand over the next decade, presenting a “unique buying opportunity” for investors, the report says.
The report identifies pandemic-related trends that have led to the drop in demand for office space. Public transit is one factor: Until sometime next year, when a coronavirus vaccine could be widely distributed, MetLife says cities with workers who rely on public transportation might downsize their office leases. In New York City, for example, mass transit ridership is down 70 percent from a year ago (even though studies have found it poses a low risk for Covid-19) and only 13 percent of workers have returned to the office.
Offices in sprawling, car-centric cities such as Los Angeles, Miami and Dallas may fare better in the short term, and there may be greater demand for offices in suburban markets until a vaccine is widely distributed. But MetLife says the trend will likely reverse over the next decade, with firms returning to central business districts because they can tap bigger and typically more elite pools of talent.
Markets with a large share of high-income workers between the ages of 35 and 54 — what MetLife calls the “middle management” cohort — may also see office demand dip in the short term. “[T]he most junior and senior employees are less likely to work remotely and are also less likely to adopt desk-sharing arrangements that could allow firms to downsize office space,” the report reads. Employees who earn north of $100,000 work remotely more than lower-paid workers, per the report.
MetLife also expects office demand to fall less in cities where financial professionals make up a significant chunk of the workforce. Several major banks have announced extended work-from-home plans, and those working in finance are more readily able to work remotely than those in other white-collar professions. Yet they choose to work from home less often, according to MetLife’s research, which could help fuel healthier demand for office space.
Chart Source: MetLife Investment Management
Last month, Fitch Ratings issued a report stating that the rise of remote work and uncertainty about the future of the U.S. economy could hurt cash flow for office real estate investment trusts. In the report, Fitch projected office landlords’ operating incomes would fall over the next year before rebounding in 2022 and 2023.
But news that Pfizer’s coronavirus vaccine was more than 90 percent effective injected life into some office REITs earlier this month. Empire State Realty Trust, which owns the Empire State Building, saw its stock rise more than 37 percent the day Pfizer made its vaccine announcement. Moderna and AstraZeneca have since also reported promising results from trials for their own vaccines.
At a nighttime campaign rally in Macon, Georgia, last month, Donald Trump stood at the podium and tried to inspire his base. “Could you imagine if I lose? I’m not going to feel so good,” the president said. “Maybe I’ll have to leave the country — I don’t know.”
It’s unclear what Trump’s life will look like after Jan. 20, 2021. Writers and political observers have speculated that he could start his own TV network, host a radio show or — yes — move abroad.
Or he might just return to the real estate firm founded by his father and grandmother as E. Trump & Son in the early 1920s.
Upon trading his Trump Organization digs for the Oval Office, Trump transferred control of the private business to his sons, and the company agreed not to solicit deals in foreign countries during Trump’s presidency.
When Trump’s presidency ends, his firm will no longer need to abide by that plan, which critics said did not prevent conflicts of interest anyway. Its entities include hotels, casinos, office buildings and golf courses in multiple countries as well countless licensing deals.
In the near term, the most pressing issue appears to be the company’s debt, followed by the president’s personal tax mess and investigations into his business dealings.
The Trump Organization, currently led by Eric Trump, has more than $300 million in loans coming due in the next four years, according to the New York Times. Forbes pegged the company’s debt at $1 billion-plus.
Covid-19, meanwhile, upended not only the president’s re-election bid but also the hospitality sector, a core area of his business. The Trump Organization’s resorts and golf courses laid off over 1,300 employees in March and April.
But the condition of the business might not be as bad as some presume. It should be able to refinance and service its debt, according to some experts. And although the hospitality industry is in tatters, the company’s office properties and limited partnerships still generate cash.
Trump should also be able to capitalize on his branding and licensing strength, especially in countries where he remains popular such as Israel, Brazil, the United Arab Emirates and India.
“The Trump brand name has tremendous value,” said Bernie Kent, chairman of Michigan-based Schechter Investment Advisors.
The Trump Organization’s golf resorts, hotels, office buildings, mansions and other assets are valued at about $3.66 billion, giving the president a net worth of over $2 billion, according to a recent Forbes report.
But days before the election, officials from Deutsche Bank, one of Trump’s go-to lenders, told Reuters that it seeks to cut ties with him, citing reputational damage. Deutsche Bank declined to comment.
Although Trump may not be as overleveraged as some observers have suggested, he will likely have to find a new lender to refinance debt coming due. Deutsche Bank holds three loans with about $340 million outstanding, Reuters reported, citing senior bank officials. The loans are tied to Trump’s golf course in Doral, Florida, and to hotels in Washington and Chicago.
Trump has burned a number of lenders in his career, which Deutsche Bank knew when it provided the financing. But Richard Painter, a law professor at the University of Minnesota and former chief ethics lawyer for President George W. Bush, said the German bank could be a conduit for another party.
“We don’t know who took the risk on his loans,” Painter told The Real Deal. “I would be surprised if [Deutsche Bank] took that much risk with Donald Trump.”
Deutsche Bank could seek to collect on the loans before they are due, or it could sell them.
One source familiar with the matter said Trump won’t have much difficulty refinancing, as most of his loans are AAA-rated. Trump could turn to Ladder Capital, which has lent the firm more than $200 million on its 40 Wall Street skyscraper and Trump Tower. Those loans were packaged and sold to bond investors as commercial mortgage-backed securities.
Trump could probably still tap the CMBS market to refinance some loans, including the one on Trump Tower’s commercial base expiring in 2022. Net cash flow for the flagship asset, which generated $6 million in the first half of 2020, has dipped only slightly this year. And its largest tenant, Gucci, has a lease in place until 2038.
“We pride ourselves on remaining highly underleveraged,” Eric Trump said in a statement to TRD. “The very little debt we do carry as a company, relative to the value of our assets, is something that most developers would dream of.”
Since his first successful swing in West Palm Beach in the late 1990s, Donald Trump has invested more than $1 billion in 11 golf properties, including his Doral resort, the Trump National Golf Club in Bedminster and the storied Turnberry Golf Club in Scotland, according to Reuters.
Trump has stressed that the value of those properties is in their development potential.
“My golf holdings are really investments in thousands, many thousands of housing units and hotels,” he told the financial news outlet in 2016.
But the Trump Organization — which has yet to build those homes— has lost about $315 million on its golf courses over the past two decades, the Times reported, citing Trump’s tax returns.
While Trump could look to developers such as golf legend Jack Nicklaus, who built a high-end residential community around a private golf course in Jupiter, Florida, he might want no part of the extensive approval process.
“I scratch my head at what his ultimate goal is,” said Mike Kahn, a golf course consultant in St. Petersburg, Florida, when asked about Trump’s plans for his golf resorts.
Since Trump took office, the organization has mostly unloaded rather than acquired assets.
His sons have sold $118 million worth of assets since 2017, Forbes calculated. In March, they reportedly sought to sell the Trump International Hotel in Washington, D.C., for $500 million but received little interest at that price. The Trumps are also seeking a buyer for a sprawling 213-acre tract in Westchester, New York, called Seven Springs, the Wall Street Journal reported.
But sales could be hampered by the investigations into Trump’s U.S. business dealings.
Manhattan District Attorney Cyrus Vance is investigating Trump and his company for potential crimes, including payments made to two women who allege they had affairs with Trump. As part of this investigation, Vance is seeking eight years of his personal and corporate tax returns.
New York Attorney General Letitia James is conducting a civil investigation into Trump’s business, exploring whether it overvalued its assets to secure financing and tax breaks.
Whether or not Trump returns to real estate, he is unlikely to have much interest in personally negotiating leases or working with lenders. His sons will control much of the business.
The jury is still out on how they will do. In 2017, Don Jr. and Eric announced the company would develop two new lines of hotels catering to budget and midpriced travelers but scrapped those plans two years later, citing scrutiny from Democrats and the “fake news” media. Starting next month, they will have more leeway to build the company.
“There will certainly be no shortage of opportunities for us to pursue,” Eric Trump said.
Photo of the new Aston Martin DBX and the Aston Martin Residences (Aston Martin)
The developer of Aston Martin Residences in downtown Miami unveiled the high-end carmaker’s first SUV in the Americas, which buyers can select as part of their purchases.
Included in the purchase of the 391-unit tower’s 38 “signature” units and seven penthouses, buyers will receive an Aston Martin DBX, the SUV, or a DB11. The $50 million triplex penthouse will come with an Aston Martin Vulcan, which is valued at about $2.3 million.
Cervera Real Estate is handling sales and marketing of the project, whose units start at $970,000. The signature units range from $5.3 million to $7.7 million.
The 66-story tower, under construction at 300 Biscayne Boulevard Way, is more than 60 percent presold, said Alejandro Aljanati, G&G’s chief marketing officer. About half of the signature units have been presold, and buyers will be able to select between the “Miami Riverwalk Edition” of either the DBX or DB11 in the first quarter of 2021.
G&G and Aston Martin are partnering to customize both options with a combination of leathers and colors.
The sail-shaped tower is expected to be delivered in 2022. It was designed by Revuelta Architecture and Bodas Miani Anger Architects. The property is next to the Epic hotel and condo tower.
A four-story, 42,275-square-foot amenity section will include a chef’s kitchen, infinity pool, gym, virtual golf, two theaters, a full-service spa and more.
Condo sales and closed dollar volume jumped last week in Miami-Dade County.
A total of 147 condos sold for $70.2 million last week. The previous week, 115 condos sold for $52.8 million.
Condos last week sold for an average price of about $477,000 or $348 per square foot.
The most expensive sale was for unit 2905 at the Santa Maria in Miami’s Brickell neighborhood. The unit sold for $4.2 million, or $1,048 per square foot, after 347 days on the market. Daniela Bonetti represented both sides of the deal.
The second most expensive sale of the week was for unit 803N at St. Regis Bal Harbour. The condo sold for $3.9 million, or $1,373 per square foot, after 43 days on the market. Sildy Cervera represented the seller, and Alejandro Gershanik represented the buyer.
Here’s a breakdown of the top 10 sales from Nov. 15 to Nov. 21.
Santa Maria 2905 | 347 days on market | $4.2M | $1,048 psf | Listing agent: Daniela Bonetti | Buyer’s agent: Daniela Bonetti
Jade Beach Condo 4105 | 169 days on market | $1.4M | $726 psf | Listing agent: Roberto Costa | Buyer’s agent: Alberto Galante
Most days on market
Santa Maria 2905 | 347 days on market | $4.2M | $1,048 psf | Listing agent: Daniela Bonetti | Buyer’s agent: Daniela Bonetti
Fewest days on market
South Pointe Tower PH2506 | 3 days on market | $2.1M | $1,464 psf | Listing agent: Michael Feuling | Buyer’s agent: Michael Feuling
Shahla and Hushang Ansary with Sun and Surf One Hundred building in Palm Beach (Getty, Google Maps)
Shahla Ansary, the wife of billionaire businessman Hushang Ansary, bought a penthouse and cabana in Palm Beach for $14 million.
Property records show Ansary bought unit PH-2 as well as Cabana CA-46 at the Sun and Surf One Hundred building at 100 Sunrise Avenue. The seller is Magis LLC, a Delaware company managed by West Palm Beach attorney Alan J. Ciklin.
Hushang Ansary was formerly Minister of Economic Affairs and Finance in the Iranian government and was Iran’s ambassador to the United States from 1967 to 1969. Ansary founded Parman Capital Group, a Houston-based oil and gas company, in 2005.
The penthouse and cabana had an asking price of $18.75 million when they hit the market in May. Magis LLC bought the property in 2014 for $7.8 million.
Lawrence Moens of Lawrence A. Moens Associates represented the seller, while Harold Matheson with Monique Matheson Properties represented Ansary.
According to Palm Beach property appraisal records, the penthouse spans 5,095 square feet and has three bedrooms and four-and-a-half bathrooms. The cabana is 597 square feet. The Sun and Surf One Hundred building was built in 1977.
Other recent sales in Palm Beach include the widow of the late San Francisco Giants owner buying a home for $6.1 million, Sack & Sack attorney Jonathan Sack spending $13.3 million for a non-waterfront mansion and a textile designer buying a waterfront home for $7 million.
Note: These items are independently selected by our team. However, TRD may receive a commission when you purchase products through affiliate links.
You can’t give anyone more hours in the day, but you can give the busiest of business people a fashionable way to stay on time.
Whether it’s a gift to yourself for clinching a tough close, or for a colleague who needs that subtle reminder to show up on time, a luxury watch is a classic gift that’s both professional and statusy.
To help with your search, TRD has rounded up our favorite timeless watch options.
A Rolex is the classic starting place for newbie watch collectors. This particular style is historic: Rolex premiered the Daytona signature back in the 1960s. If you’re introducing someone to the world of status watches, this provides more than a foot in the door.
A Patek Philippe watch is so renowned — and statusy — that it got a mention on HBO’s Succession. Its hefty price tag is a reflection of the craftsmanship from the nearly 200-year-old Swiss watch-maker. As gift giving goes, you couldn’t do better.
Shlomo Khoudari and Justin Bennett with 3141 Southwest 10th Street in Pompano (Google Maps)
Real estate investment firm Elion Partners bought a Pompano Beach distribution center for $11.65 million.
The 94,000-square-foot center at 3141 Southwest 10th Street is part of a larger series of logistics purchases that Miami-based Elion plans to make in markets including Broward and Miami-Dade counties, according to a press release.
Aftermarket parts and tools retailer O’Reilly Auto Parts leases the property and plans to vacate by the end of the year, sources told The Real Deal. Elion plans to find a new tenant.
The seller of the building is tied to Harold and Barry Bennett, the second generation of owners of Bennett Auto Supply, a 60-plus year-old regional aftermarket auto parts retail chain. Harold Bennett, son of Bennett Auto co-founders Allen and Lettie Bennett, signed the deed. Bennett Law, which counts former Bennett Auto general counsel Justin Bennett — son of Barry Bennett — among its lawyers, represented the seller in the Elion deal.
In 2018, O’Reilly agreed to buy most of Bennett Auto Supply’s real estate, which included 33 Florida stores at the time, according to a release.
The Pompano Beach building was constructed in 2001. The Bennetts bought the property for $5.9 million in 2000, records show.
In the latest deal, Katz & Associates’ Jon Cashion and Eric Spritz represented the seller, and Cushman & Wakefield’s Rick Etner Jr. represented Elion. Holland & Knight acted as Elion’s counsel.
Elion Partners separately bought four last-mile industrial distribution assets located in California and Washington state for a total of $83 million, according to the release.
In August, Blackstone bought eight industrial properties in Miami-Dade County from Elion Partners as part of a $93.5 million portfolio deal in South Florida.
TikTok’s biggest stars include (from left) Bryce Hall, Griffin Johnson, Addison Rae, Charli D’Amelio and Dixie D’Amelio (Getty)
West of Hudson Group, which operates a network of houses where TikTok influencers live and perform, went public last week, the New York Times reported.
Tongji Healthcare Group, a Las Vegas-based entity incorporated by a Chinese hospital in 2006, acquired the company and has moved to rename the new entity Clubhouse Media Group, according to the Times.
On Friday, Tongji’s stock closed at $2.30, 38 percent below its August high.
What’s happening behind the scenes is a bit more complex: Tongji was previously acquired by Amir Ben-Yohanan, the founder of West of Hudson Properties — a property management firm based in Hackensack, New Jersey — and his business partners. In a way, Ben-Yohanan and his partners used Tongji as a vehicle to bring West of Hudson into the public market.
West of Hudson’s Clubhouse, the primary influencer house in Beverly Hills, was founded in March by Ben-Yohanan, Christian J. Young and social media influencer Daisy Keech. The network has expanded to four additional properties, according to the Times.
Party houses in Los Angeles and their residents have come under fire for hosting raucous parties and encouraging unsafe behavior during the pandemic. In August, L.A. mayor Eric Garcetti said he would authorize the city to cut power and water to those houses, and legislators in the city proposed steep fines and other penalties for homeowners who allow the parties to happen.
The properties used as TikTok mansions are often spec houses, according to Bloomberg News, and can rent for as much as $50,000 per month.
From left: President Donald Trump, Blackstone’s Jonathan Gray and Tishman Speyer’s Rob Speyer (Getty)
More than 100 business leaders have signed a letter demanding that President Donald Trump’s administration cease its challenges to the presidential election and let President-elect Joe Biden’s transition begin.
Tishman Speyer CEO Rob Speyer, Blackstone president Jon Gray and KKR co-CEO Henry R. Kravis are among the real estate and business leaders who plan to sign the letter, according to the New York Times.
In light of the Trump administration’s continued challenges to the election results, Emily Murphy, head of the General Services Administration, has declined to issue a letter affirming that Biden and Vice President-elect Kamala Harris have won the election. Without the letter, Biden and his team can’t access resources and money set aside for an incoming administration to prepare for the transition.
“Every day that an orderly presidential transition process is delayed, our democracy grows weaker in the eyes of our own citizens and the nation’s stature on the global stage is diminished,” a draft of the letter reviewed by the Times stated. “Withholding resources and vital information from an incoming administration puts the public and economic health and security of America at risk.”
Blackstone chairman and CEO Stephen Schwarzman, who has been a staunch Trump defender, didn’t sign the letter, but he said in a statement to the Times that “the outcome is very certain today and the country should move on.”
The business executives’ move came following a meeting of Democratic state attorneys general on Thursday evening. After the meeting, New York AG Letitia James approached business leaders in the city about possible efforts to move the transition forward.
During the conversation, Speyer reportedly said that some wealthy donors had been considering withholding support from Republican Senators Kelly Loeffler and David Perdue of Georgia, both of whom are facing run-off elections against Democratic challengers, until the presidential transition is underway.
In a statement, James said, “This isn’t about partisan politics, but about protecting our democracy.”
“Without the rule of law and an orderly transfer of power, everything from commerce to health care delivery to national security is in peril, and our business leaders can see that as clearly as the rest of us,” she added.
William Zabel and Alexandre Leviant with 2750 Northwest South River Drive (Getty, Linkedin, Google Maps)
ROVR Development and its partner paid $15 million for a mobile home park along the Miami River.
A company affiliated with Raul and Michael Nunez sold the property at 2750 Northwest South River Drive. Raul Nunez is a manager of A+ Mini Storage, according to his LinkedIn account. A+ has 10 locations throughout South Florida.
Michael Nunez, president of A+, died earlier this month, according to Inside Self-Storage. The Nunezes bought the property in 2000 for $1.6 million.
A company tied to Coral Gables-based ROVR Development received a 66.6 percent interest in the property, while a trust for the Leviant family of New York received a 33.3 percent ownership. ROVR is run by Oscar Rodriguez and Ricardo Vadia.
Leviant patriarch Jacques Leviant died at age 96 in 2018, according to an obituary. He founded the ICD Group of companies, what is now a global manufacturer and distributor of specialty materials. The trustees of the Leviant trust are William D. Zabel, founding partner of the firm Schulte Roth & Zabel, and Alexandre J. Leviant, CEO of ICD Group.
ROVR and Zabel did not respond to requests for comment regarding plans for redevelopment.
The mobile home park, called Paradise, battled with local officials last year, according to published reports. As of September 2019, the park housed 35 mobile homes, and faced code violations including illegal alterations and unsafe conditions.
Earlier this year, a partnership involving ROVR closed on a $53 million loan for a high-rise rental tower in downtown Miami that counts retired baseball superstar Alex Rodriguez among its investors.
ROVR is also a partner with the Related Group on The District at 225 North Miami Avenue in downtown Miami. The proposed 37-story mixed-use project would have 343 residential units and nearly 2,300 square feet of ground-floor retail space. ROVR also developed the Fairchild, a boutique bayfront condo project in Coconut Grove.
From left: LX Collection’s Justin Kitrosser, Terry Villani and Jared Seeger (Photos via LX Collection)
StreetEasy has another new competitor.
LX Collection is a platform that aims to sell luxury condominiums in a handful of cities to wealthy homebuyers across the globe.
Its current inventory includes 40 high-end developments in New York City, Miami, Los Angeles and San Francisco, with projects in London and Toronto due to launch soon. Developers that have signed on include Extell Development, Related Companies, Silverstein Properties and Lightstone. In New York, those include Extell’s Central Park Tower and HFZ Capital’s the XI; in Miami, Alex Sapir’s Arte Surfside is on the platform.
LX’s goal is to be “a Neiman Marcus of luxury development,” i.e., known for a well-curated selection of luxe brands, according to Scott Laine, a former Condé Nast and Wired executive who was hired as the company’s chief operating officer.
Developers will be able to register their listings for free on the site and can opt to pay for different services offered by the LX team for a fixed fee. Services will largely include a variety of content marketing initiatives from video to sponsored articles. LX will also publish articles written by well-known architecture and design writers.
The platform was founded by Knightsbridge Park, a digital media marketing firm specializing in new development, and the Villani Group, a media buying and advertising agency for luxury properties. They began working on the idea two years ago and began development in earnest last year.
Justin Kitrosser, LX’s CEO and co-founder, said the company’s criteria for properties it features are based on a combination of the architect and design team behind the project, amenities and location within the city — along with a certain je ne sais quoi that the company’s founders struggled to articulate.
That said, he said the firm wasn’t going to err on the side of ultra-exclusivity because “we want to give a consumer a full breadth of the market.”
The average price of listings — not including those asking $20 million or more — in New York City is currently $4.5 million; in San Francisco, $4.1 million; and in Miami, nearly $3.5 million.
In New York City, LX enters a competitive landscape with several new platforms, such as Localize.city and BuyersList, that are vying to unseat the dominant player, Zillow Group’s StreetEasy, most recently by leveraging the long-standing animus many brokerages and agents harbor against the platform.
But Laine dismissed those competitors. He said the goal of LX is to be not just a platform for listings, but also a site where wealthy buyers can educate themselves on high-quality design features and notable trends in luxury living.
“The dominant players are everything to everybody,” said Laine.
To cultivate its consumer audience, LX will largely rely on agents to introduce clients to the platform. The firm plans to launch a suite of products for agents early next year, and is exploring a seed funding round in the first quarter of 2021.
Though LX did not disclose its monetization strategy, Laine emphasized that the goal is to become a destination and concierge service for both developers and consumers.
“We’re not here to monetize every single one of the engagements that a consumer would have,” said Laine. “This is a long game for us.”
Deborah Magowan, the widow of former San Francisco Giants owner Peter Magowan, bought a home in Palm Beach for $6.1 million.
Records show Magowan bought the house at 444 Brazilian Avenue from Guy Rabideau, a trustee of The 444 Brazilian Avenue Trust. Rabideau is an attorney in Palm Beach who has signed documents on behalf of buyers.
Magowan, who is still listed as a principal partner of the Bay area baseball team, was married to the former owner, Peter, who bought the team in 1993. He stepped down as managing partner of the Giants in 2008. He died in 2019.
The 444 Brazilian Avenue Trust bought the home for $5.35 million in 2019. A year later, the home was listed for nearly $6 million. The asking price dropped to $5.75 million in July, according to Realtor.com
Alison Newton of Douglas Elliman represented The 444 Brazilian Avenue Trust, and Ann Summers with Brown Harris Stevens represented the buyer.
Built in 1999, the 4,111-square-foot home features three bedrooms and three-and-a-half bathrooms. It also includes a pool, elevator and a garden designed by Mario Never.
Palm Beach has seen a flurry of sales over the past few months. Attorney Jonathan Sack paid $13.3 million for a non-waterfront mansion in Palm Beach, a textile designer bought a waterfront home for $7 million and the co-founder of a New York-based investment firm paid $5.5 million for a newly built spec home.
CoStar’s Andrew Florance and Homesnap’s John Mazur (CoStart; LinkedIn)
CoStar Group is set to buy Homesnap, an app and technology provider for residential real estate agents, for $250 million, the Wall Street Journal reported.
The all-cash acquisition is expected to close later this year.
The acquisition would mark CoStar’s first major step into the single-family-home market, which dwarfs the size of the commercial real estate market. CoStar bills itself as the world’s largest provider of commercial real estate information and analysis.
Homesnap has about 150 employees, with this year’s revenue expected to be about $40 million, up about 45 percent form 2019. About 300,000 residential agents use the company’s app to manage and analyze their listings and others.
By merging, CoStar and Homesnap would expand each others’ reach, said Andrew Florance, CoStar’s founder and CEO.
“I would say that 50 percent of our broker clients do some residential and, of the top 100 residential firms, 80 percent do some commercial,” he said. “So we would think these tools as they come together would be pretty powerful.”
CoStar has also expressed interest in acquiring CoreLogic, one of the largest residential real estate companies valued at $6 billion, according to the Journal.
Jonathan Fish and a rendering of the project (Linkedin)
A proposed mixed-use development near Fort Lauderdale’s Flagler Village aims to break ground in mid-March.
Thrive Progresso will bring 80,000 square feet of office, mini-warehouse and food and beverage space to about 5 acres at 746 Northwest 5th Avenue, Jonathan Fish told The Real Deal. Fish and his brother, Abraham, are developing the project.
Fish wants to create a Wynwood-type district for Fort Lauderdale with a stage area for concerts and plenty of walking space, he said.
He spent about four years and more than $5 million assembling the development site, according to records.
Leases will range from $17 per square foot triple-net to $25 per square foot, triple net, and the project is expected to have its own parking. The project received about $3 million from the city’s Community Redevelopment Agency.
Fish expects to submit construction documents in the next couple of weeks before going through permitting. He wants to complete the project by the end of September 2021, he said.
Fish is also president of National Water Restoration, a South Florida household and business cleaning company, according to his LinkedIn.
Flagler Village has attracted much investor interest lately. Recent big-ticket deals in the area include the $14 million purchase of a development site by Dev Motwani, and affiliates of Jenco Properties paying $67.5 million for a Flagler Village rental complex.
From top: Park Place Mall in Tucson, AZ with Brookfield Property Partners CEO Brian Kingston; Westfield Countryside in Clearwater, FL with Unibail-Rodamco-Westfield CEO Christophe Cuvillier; and The Mall at Tuttle Crossing in Dublin, OH with Simon Property Group CEO David Simon (Google Maps, Westfield, Simon, Getty)
As shopping centers across the country continue to struggle with a new surge in infections and lockdowns, the expiry of forbearance agreements, and secular headwinds that predated the pandemic, a growing number of mall owners are ready to hand back the keys to their lenders.
This trend has been particularly notable in the commercial mortgage-backed securities sector, where non-recourse loans are the norm and the costs of letting lenders clean up a mess are less severe.
A list of properties recently published by Trepp, based on the firm’s analysis of special servicer commentary, helps pinpoint some of the biggest CMBS loans that borrowers are ready to give up on.
Negotiations between borrowers and special servicers are a fluid process, and Trepp notes that “the data is changing everyday” and may reflect “judgment calls” and “negotiation tactics.” But a look at the largest loans on the list does still provide a sense of where mall owners are feeling the most pain.
In particular, landlords so far appear more willing to give up on malls in secondary markets. Among the top 10 properties, the largest metropolitan area represented is Philadelphia, the eighth-largest in the United States.
The country’s largest mall owners are all well-represented in the data. Brookfield Property Partners owns four of the top five; Simon Property Group has three of the top ten; and Unibail-Rodamco-Westfield accounts for two more. CBL Properties, which filed for bankruptcy this month, rounds out the top 10.
These are the 10 largest CMBS-financed properties that have a high likelihood of going back to their lenders, ranked by the total initial balance of all loan pieces. (Square footage and tenant data from Trepp does not always reflect anchors that own their own space.)
1) Park Place Mall | Tucson, AZ | $199 million | Brookfield
Size: 478,000 square feet
Top tenants: Century Theatres (73,000 square feet), Total Wine & More (27,000 square feet), H&M (19,000 square feet)
What the servicer says: “Borrower has now indicated that they will no longer support the property with additional infusions of equity. … Have retained counsel to dual-track foreclosure and loan restructure strategies.”
2) Mall St. Matthews | Louisville, KY | $187 million | Brookfield
Size: 670,000 square feet
Top tenants: JCPenney (166,000 square feet), Dave & Buster’s (65,000 square feet), Cinemark Theater (42,000 square feet)
What the servicer says: “Borrower was unable to pay off the Loan on the Maturity Date [in June]. The Special Servicer is currently in discussion with the Borrower on a potential workout and/or deed-in-lieu.”
3) Meadows Mall | Las Vegas, NV | $164 million | Brookfield
Size: 309,000 square feet
Top tenants: Dillard’s (182,000 square feet), Macy’s (163,000 square feet), JCPenney (147,000 square feet)
What the servicer says: “COVID-19 Relief Cancelled. Borrower is working with Lender towards possible solution.”
4) Westfield Countryside | Clearwater, FL (Tampa metro) | $155 million | Westfield
Size: 465,000 square feet
Top tenants: CMX Cinemas (54,000 square feet), GameTime (26,000 square feet), Forever 21 (20,000 square feet)
What the servicer says: “Westfield has indicated it will no longer support the asset going forward and is cooperating in a friendly foreclosure process. … Westfield continuing to manage mall and will assist in turnover transition.”
5) RiverTown Crossings | Grandville, MI (Grand Rapids metro) | $155 million | Brookfield
Size: 634,000 square feet
Top tenants: Dick’s Sporting Goods (91,000 square feet), Celebration Cinema (86,000 square feet), Barnes & Noble (26,000 square feet)
What the servicer says: “The Borrower requested to release operating expenses prior to debt service and to engage in work out discussions, including potentially deeding the property back to the Lender.”
6) Westfield Citrus Park | Tampa, FL | $147 million | Westfield
Size: 494,000 square feet
Top tenants: Regal Cinemas (88,000 square feet), Dick’s Sporting Goods (50,000 square feet), Finish Line (22,000 square feet)
What the servicer says: “Westfield has indicated it will no longer support the asset going forward and is cooperating in a friendly foreclosure process. … Westfield continuing to manage mall and will assist in turnover transition.”
7) The Mall at Tuttle Crossing | Dublin, OH (Columbus metro) | $125 million | Simon
Size: 385,000 square feet
Top tenants: Finish Line (20,000 square feet), Shoe Dept. Encore (14,000 square feet), Victoria’s Secret (12,000 square feet)
What the servicer says: “Legal counsel has been engaged and a receivership is being sought. Borrower has indicated they will agree to a stipulated receivership and friendly foreclosure.”
8) Southridge Mall | Greendale, WI (Milwaukee metro) | $125 million | Simon
Size: 560,000 square feet
Top tenants: Macy’s (150,000 square feet), H&M (17,000 square feet), Old Navy (13,000 square feet)
What the servicer says: “Legal counsel has been engaged and a receivership is being sought. Borrower has indicated they will agree to a stipulated receivership and friendly foreclosure.”
9) Montgomery Mall | North Wales, PA (Philadelphia metro) | $100 million | Simon
Size: 1.1 million square feet
Top tenants: Macy’s (218,000 square feet), Sears (170,000 square feet), JCPenney (166,000 square feet)
What the servicer says: “Borrower is unwilling to inject additional funds into loan, but is willing to manage property.”
10) Park Plaza | Little Rock, AR | $99 million | CBL
Size: 283,000 square feet
Top tenants: H&M Shoes (29,000 square feet), Forever 21 (25,000 square feet), Shoe Dept. Encore (11,000 square feet)
What the servicer says: “Borrower intends to turn over the collateral back to lender.”
Between April and June, when the pandemic went from a shocking jolt to a daily reality, a record number of people fell behind on their home loans.
“The Covid-19 pandemic’s effect on homeowners’ ability to make their mortgage payments could not be more apparent,” said Marina Walsh of the Mortgage Bankers Association, noting that the second quarter had the highest overall delinquency rates in nine years.
It was a worrying trend, particularly given that the country had about $16 trillion in outstanding residential and commercial mortgage debt with more than 60 percent of that bundled into securitized home loans. But it was hardly surprising: Millions of people were out of work, virus cases were surging, and political infighting was hampering efforts to lock in another stimulus bill.
For most people, hearing the words “mortgage” and “crisis” in the same sentence evokes memories of the last economic collapse, brought on when the housing bubble burst after years of risky lending, causing a credit crunch that hobbled the global economy for years.
Now, with interest rates low and employees working remotely, many Americans are rushing to buy homes. But a repeat of 2007 is unlikely.
This time around, the government has injected more stimulus money into the U.S. economy, struggling homeowners have been given mortgage forbearance and a tight supply of housing has driven up home prices across the country.
Mortgage-backed securities — central to the last crisis — are also under much tighter controls, and the once-booming private RMBS market has been eclipsed by government-backed offerings.
Though there was a small bump in private issuance between 2015 and 2018, that momentum was slowed by the pandemic, and moves to reduce government dominance in the wider market have grown more uncertain with the election of Joe Biden as president.
“Unless the government steps away in a big way from the mortgage market, I don’t see that there will be any room for the private RMBS market,” said Mark Zandi, chief economist of Moody’s Analytics.
Then to now
The securities, in simple terms, are pools of residential mortgages bundled into bondlike instruments, which are backed by interest payments from homeowners and sold off to investors — making RMBS deals susceptible to foreclosures and personal bankruptcies.
For many years, the country’s housing market has been backed by both agency RMBS, issued by government-sponsored entities such as Fannie Mae and Freddie Mac, and the “private-label” offerings securitized by banks and other private lenders.
In the years leading up to the last crisis, the markets for both private and agency RMBS had started to fill up with loans issued to people with poor credit scores, no documentation and other red flags. That included homeowners and speculators who were looking to buy up mansions which, despite relatively high incomes, some just couldn’t afford.
Banks that had been busy making money from these securities were later accused of not doing enough due diligence about the quality of the mortgages inside them and failing to see that the market was a house of cards. (Or, as famously immortalized by Ryan Gosling in “The Big Short,” a Jenga tower.)
Whatever image you prefer, the whole thing collapsed spectacularly.
The market today looks a lot different. Property values are strong in most parts of the country, and the latest crisis has been fueled by a virus rather than reckless mortgage lending.
Perhaps most importantly, the amount of private RMBS issued in recent years is a fraction of what it was in 2006 and 2007, when it topped more than $1 trillion.
Private issuance now makes up only 1 percent of the market compared to the other 99 percent of agency RMBS, according to recent figures from the Securities Industry and Financial Markets Association (SIFMA). Before 2008, the two were almost tied.
To Zandi, comparing the private market then to now is “night and day,” in part because of all the regulations that were put in place after the economy collapsed.
“The mortgages that are being securitized these days are much better underwritten,” he said. “There’s no such thing as ‘no-doc loans’; the underlying credit characteristics of the borrowers are very different; and the rating agencies now have to do their own due diligence on the loans that go into the securities.”
Zandi said the size and structure of the private RMBS market means the risks in that area are low — even if we see deeper distress set in.
“If things went off the rails for housing and house prices started to decline, I’m sure you’d see some credit issues,” he said. But, he added, they would be “modest.”
Homebound in 2020
With private RMBS reduced to a bit player, agency RMBS is surging ahead as its more popular sibling: Last year, $1.99 trillion was issued, according to SIFMA. So far this year, that number is up to $3.19 trillion.
Thanks in part to low interest rates and robust federal support for the economy, demand for single-family homes also increased in 2020 as inventory fell, pushing prices higher. According to JPMorgan, home ownership is up 4 percent from last year.
Still, glaring inequalities have also been exacerbated by the pandemic.
“For all the excitement around the housing market, you’ve got a significant share of the ownership population — and it’s skewed toward disadvantaged or underserved communities — where they are simply not able to make their mortgage payments,” said Sam Chandan, dean of New York University’s Schack Institute of Real Estate.
After the pandemic hit, the government extended forbearance to homeowners with federally backed mortgages who were struggling to meet their repayments.
The move mostly stopped foreclosures, though some markets saw an uptick this fall and many anticipate a larger wave in the upcoming year.
In the second quarter, almost 16 percent of home loans backed by the Federal Housing Administration were delinquent, the highest rate in four decades. (The Federal Housing Administration, part of the Department of Housing and Urban Development, is not to be confused with the Federal Housing Finance Agency, which regulates Fannie and Freddie.)
By November, some 2.74 million home loans were in active forbearance — a drop from the week prior, according to data firm Black Knight. The total represented 9.1 percent of Federal Housing Administration/Veterans Affairs loans; 3.5 percent of Fannie and Freddie loans; and 5 percent of “other” loans, including those held in private-label securities.
“I don’t think [the delinquencies] are going to present a major financial challenge to the GSEs,” said Edward Pinto, director of the Washington, D.C.-based think tank AEI Housing Center, noting that the most serious delinquencies are concentrated in FHA loans.
“That said,” Pinto added, “it is going to cost them some numbers of billions of dollars,” which is one of the reasons the Federal Housing Finance Agency raised its fee for homeowners looking to refinance, a measure due to come into effect in December.
In 2008, widespread foreclosures and a severe pullback on mortgage lending sent housing values tumbling, putting a dent in the national homeownership rate.
“This recession is different,” said Mike Fratantoni of the Mortgage Bankers Association. “As a result of the pandemic and the lockdowns that were meant to control it, we saw an extraordinarily sharp drop in the level of economic activity in spring, and then a very rapid rebound, particularly in the housing sector, as states began to reopen beginning in May.”
Forecasts for 2021
When Biden assumes the presidency in January — a likely outcome to the election despite a slew of legal challenges from Donald Trump — he will be tasked with sorting out an issue that has befuddled several administrations past: what to do about Fannie and Freddie.
When the Federal Housing Finance Agency took control of the mortgage giants after the last crash, few imagined the conservatorship arrangement would last 12 years.
But the path out is complicated, and the announcement in November that Freddie Mac CEO David Brickman would be stepping down has only clouded matters more.
“The Biden administration will not be in a rush,” said Mark Willis, senior policy fellow at the New York University’s Furman Center. “And the best reason is, [the mortgage market] is not broken.”
Though a lot has changed since 2008, one thing that hasn’t, even with more government involvement in the RMBS market, is the hefty profits made by lenders.
In the first half of 2018, global banks made just under $200 million in revenues from agency RMBS, according to research house Coalition. By 2019, that number reached $1 billion.
In the event that the government steps back and private RMBS does make a comeback, the market will have a different cast of players than it did in 2008.
Back then, nonbank lenders like Countrywide — once referred to by former CEO Angelo Mozilo as his “baby” — were called out as major culprits. After everything fell apart, Countrywide and others were swallowed up by big banks, while others fizzled out altogether.
Tom Schopflocher, a senior director at S&P Global Ratings, said the most active issuers today include Wells Fargo, J.P. Morgan, Goldman Sachs and Credit Suisse.
“The big banks on the list were around prior to the global financial crisis,” he said.
“But many of the originators and issuers from that time are long gone.”
Airbnb’s prospectus dropped this week, giving investors their first glimpse at the company’s books. What did they find? Nearly 350 pages detailing a rollercoaster of revenue and losses.
Airbnb’s gross bookings totaled $38 billion in 2019, up 29 percent year over year, with $4.8 billion in revenue, compared to $3.7 billion in 2018. It lost $674.3 million last year. Below are 5 more highlights:
1. Covid made a big dent. Even with a rebound in local travel, bookings totaled $18 billion as of Sept. 30, a 39 percent year-over-year decline. Revenue for the same period was $2.5 billion, a 32 percent year-over-year drop.
2. Airbnb’s still chasing profits. The company lost $674.3 million in 2019. And for the first nine months of this year, it lost a whopping $696.6 million. There was a glimmer of light in Q3: $219 million in profits.
3. March was madness. Pre-pandemic, Airbnb had gross bookings of $3 billion in February 2020. But refunds to customers pushed that number down to negative $900 million in March, the S-1 shows. Monthly bookings were back up to $2.5 billion in September.
4. Chesky has a charitable streak. CEO Brain Chesky’s base pay will be $1, but he’ll get stock valued at $120 million over 10 years. He plans to donate that money to “charitable causes.” The S-1 shows Chesky owns 15.4 percent of Airbnb. Top executives together control 43 percent of the company.
5. Fun financial facts: Airbnb lured CFO Dave Stephenson with a $600,000 salary and $2.4 sign-on million bonus. Ex-COO Belinda Johnson, who stopped down earlier this year, sold 933,648 of her shares for $27.4 million, which covered the exercise price of her stock options.
“Without us, the hosts, Airbnb is nothing.”
Nipping at Opendoor’s heels?
iBuying startup Offerpad is shaking up its C-suite as it chases industry leaders Opendoor and Zillow.
The five-year-old company, which has raised $155 million from investors, named Steve Johnson as COO. In a statement, CEO Brian Bair said Offerpad is targeting “aggressive growth.” In addition to Johnson, Offerpad last week hired David Connelly as chief growth officer and Ben Aronovitch as chief legal officer.
Although Offerpad came onto the iBuying scene at the same time as Opendoor, the company has lagged behind its top rival, which is going public via a $4.8 billion merger with a blank-check company. In 2019, Offerpad sold an estimated 4,600 homes, generating $1.2 billion in gross revenue, according to data from industry analyst Mike DelPrete. But its market share dropped to 16 percent in 2019, from 26 percent in 2018. Offerpad recently inked a deal with a relocation service to boost business. And it launched a home-selling service.
Overall, iBuying numbers for 2020 aren’t looking great. DelPrete projected a 50 percent drop in sales volume for 2020, thanks to a pause in transactions this spring. Opendoor’s sales are projected to drop nearly 60 percent, compared to Zillow’s 21 percent drop and Offerpad’s 24 percent drop.
Is Domio over, or isn’t it?
Embattled hospitality startup Domio is open for business, according to the company’s interim CEO Jim Mhra. His rebuttal came on the heels of a report that Domio laid off its staff after failing to raise $10 million.
But in an email, Mhra said Domio’s demise was exaggerated. Instead, it’s undergoing a “planned financial re-engineering.”
Founded in 2016, Domio has raised more than $100 million from investors to lease portions of buildings and rent out furnished units to travelers. But in August, the Information reported that Domio had a longstanding practice of renting out short-term units under pseudonyms via Airbnb, in violation of Airbnb’s policies. The disclosure prompted CEO Jay Roberts and Chief Strategy Officer Adrian Lam to resign. Domio currently has 1,000 spaces in Chicago, Miami, Nashville and New Orleans, according to its website.
Susquehanna pours $22M into video startup
Here’s a story about a profitable startup that just raised $22 million.
Indiana-based Realync sells video software to property owners. Founded in 2013, it had 300 properties on its platform before Covid. Today, it’s pushing 1,500. To keep up with demand, Realync raised $22 million from Susquehanna Growth Equity. CEO Matt Heirich Realync has only raised $1.4 million in outside funds to date, and the company is profitable with $4.5 million in recurring annual revenue. Customers use their smartphones to record video tours and send personalized clips to prospects.
STAT OF THE WEEK
Estimated surge in demand for flex-office space by 2025, per Colliers
Better.com’s CEO goes off the rails
Mortgage originator Better.com is one of the most buzzed-about startups, recently securing a $4 billion valuation and pursuing IPO dreams.
But CEO Vishal Garg is ensnared in a rash of lawsuits, alleging financial mismanagement at prior startups and misappropriation of “tens of millions” of dollars, reported Forbes. His volatility spilled over into emails with employees, according to an email obtained by Forbes. “You are a bunch of DUMB DOLPHINS,” Garg wrote. “DUMB DOLPHINS get caught in nets and eaten by sharks. SO STOP IT.”
According to Forbes, Better.com investor Goldman Sachs accused entities controlled by Garg of “flagrant self-dealing” before quietly dropping the suit in October. And Garg’s former business partner, Raza Khan, said Garg took $3 million from a joint business account to start Better.com. Khan also said Garg threatened to burn him alive.
Garg later apologized for letting his emotions get “out of control.” A spokesperson for Better.com called the accusations “baseless,” and said “lawsuits are an unfortunate fact of life for successful startups and their CEOs.”
Beefing up the board
Compass is adding financial firepower to its board.
The SoftBank-backed residential brokerage said it added LinkedIn CFO Steve Sordello to its board. He’ll bring “invaluable perspective” to Compass, CEO Robert Reffkin said. The firm, last valued at $6.4 billion after raising $370 million in July 2019, appears to be laying the groundwork for an IPO. Sordello is the fourth director to join this year, in addition to former Oracle Corp. President Charles Phillips; Bridgewater Associates co-CEO Eileen Murray and media exec Pamela Thomas-Graham.
This startup will pay your rent on time
What if rent wasn’t due on the first of the month?
Chicago-based NestEgg, started by former Expedia CTO Eachan Fletcher, “decouples” when tenants pay and when landlords get their check by essentially fronting the money itself. Now, the company has raised $7 million to hit the gas on new offerings.
NestEgg bills itself as a tool for individual landlords who can use its app to coordinate administrative tasks, maintenance jobs and rent collection. For $5 per unit per month, NestEgg will draw on a line of credit to pay landlords on the first of the month. Tenants then pay back NestEgg over the course of the month.
In conjunction with the funding round, NestEgg launchd NestEgg Pay, which landlords use to finance maintenance jobs, interest-free for six months. Fletcher said the new capital will allow NestEgg to double its 18-person team in the next three months.
A NYC real estate lawyer launched InstaClosing, a digital closing startup.
Digital notary startup Notarize is partnering with Zillow-owned Dotloop, a transaction manager. Agents using Dotloop can get documents notarized with the click of a button.
Urban Ladder, an Indian furniture marketplace that raised $100M from Sequoia Capital and others, was bought for $24.5M by retail giant Reliance Retail.
HelloOffice, a tech-focused commercial brokerage that raised $20 million in June, rebranded as Raise.
Dominic Penaloza, WeWork’s ex-head of innovation in China, launched REinvent, a “startup studio” where teams of engineers work on several new ventures.
Ex-Apple exec Greg Leung is the new CEO of Connect Homes, a startup that builds prefab starter homes (460 sf to 3,200 sf), for $174,000 to $825,000. The company recently raised $5M.
Microsoft is investing $65M into affordable housing units in Seattle, including $40M into a fund operated by Urban Housing Ventures.
A recent study that found 1 in 10 Black homeowners returned to renting between 1984 and 2017 (iStock)
Over the last three decades, Black homeowners were twice as likely as white homeowners to lose their properties and return to renting.
That’s according to a recent study that found 1 in 10 Black homeowners returned to renting between 1984 and 2017, compared to 1 in 20 white homeowners, the USA Today reported.
Dartmouth College researcher Gregory Sharp, who co-authored the report, said the difference could come down to the availability of extended-family wealth in helping pay a mortgage.
“They might not have access to wealth in the family,” Sharp said. “So, therefore, because African American homeowners are already at a more vulnerable state on average, it stands to reason that they’re worse affected by these types of disasters like Covid.”
The report found that the average net worth of a Black homeowner’s extended family was around $133,000. For a white homeowner’s extended family, it was about $400,000.
The report could provide more insight when it comes to the nearly 3 million American homeowners who had mortgages in forbearance as of late October. That number has been dropping recently, but there are concerns that a wave of foreclosures could come once those assistance programs expire.
Owning property itself is a huge part of building family wealth and is part of the reason why white families had a median net worth of $171,000 in 2016, about 10 times more than Black families had, according to the Brookings Institution.
Racist policies adopted generations ago, like redlining, still impact Black homeowners today. Since 1980, homeowners in redlined neighborhoods https://therealdeal.com/2020/06/12/homeowners-gained-far-less-equity-in-formerly-redlined-areas-study/ — areas with mostly Black residents where lenders refused to provide mortgages — have built just half the equity of homeowners outside those areas where loans were made available. [USA Today] — Dennis Lynch
Ski resort operators are gearing up for what could be a tough season.
Operators are adopting measures that will be familiar to most patrons by now, according to the New York Times. Most resorts will require face coverings inside and are limiting capacity in trams. Many are also following the standard produced by the National Ski Areas Association called “Ski Well. Be Well,” which includes daily wellness checks for employees and enhanced cleaning protocols.
They hope those measures will help avoid super spreader events like those seen at Idaho’s Sun Valley, which recorded hundreds of cases in the spring. Around 93 percent of American ski resorts closed last March in response to the pandemic, leading to a collective loss of $2 billion.
For those who plan to hit the slopes, the season looks like a toss-up. Many ski areas plan to limit daily lift tickets and require reservations even for people with season passes, which means it will be harder to get on the slopes. Most resorts have canceled parties and group events that are a staple of the experience for skiers and snowboarders. Venues in top destinations like Vail are closed.
Some diehards are renting or buying mobile homes for self-contained trips. The R.V. Industry Association reported that sales are up 4.5 percent this year, and the group estimates they could be up by 19 percent in 2021. [NYT] — Dennis Lynch
Inventor and infomercial king Ron Popeil’s latest pitch is for his 150-acre Santa Barbara ranch with seven miles of trails.
But wait, there’s more.
Popeil, whose Ronco company manufactured and sold various cooking devices and kitchen accessories, is asking $4.9 million for the sprawling property that includes a two-bedroom home and 800 olive trees, according to the Los Angeles Times. He paid $2.1 million for the property in 2007.
The ranch centers on the 1800s-era house, which has decks and covered patios to take in the views below. The trails lead up and around nearby mountains. There’s also a two-bedroom guest house.
There is also a swimming pool and a full suite of equestrian facilities. Adam McKaig with Douglas Elliman has the listing.
Popeil, now 85 years old, was a fixture on television for decades and best known for the phrases, “But wait, there’s more!”
He’s marketed numerous products over the years, mostly kitchen devices like a food dehydrator, beef jerky machine and the Showtime rotisserie oven. For that, all viewers had to do was, “Set it, and forget it!” Popeil said. He sold Ronco in 2005 for $55 million, but continued to serve as spokesperson and an inventor. [LAT] — Dennis Lynch
As winter nears and coronavirus infections spike in the U.S. and parts of Europe, some workers are heading for warmer, more remote climes.
Those fortunate Europeans and Americans — but not ultra wealthy — are leaving cities like Paris, London and New York for locales around the Mediterranean, according to the Wall Street Journal.
Besides the weather, some destinations have the added benefit of a lower cost of living. Jennifer Babin, whose employer is based in Paris, is working in Sicily. She pays about $710 per month for a two-bedroom apartment in downtown Palermo, a third of the rent she paid in Paris.
Manchester, England, native Duncan Wallis also moved to Sicily, and said he sees “no good reason to leave,” given that restrictions in Italy will be similar to those in his home country.
“I wanted to go to a place where I could get a bit of sunshine, spend more time outside, and where rents would be a little cheaper,” he told the Journal. “It’s working pretty well.”
Americans are restricted in their travel, but can get to some European countries if they are seeking residency. Jincey Lumpkin and her wife flew to Portugal from New York in September. They went house hunting with plans to stay permanently when their residency visa is approved.
Lumpkin works in the beauty industry as a writer and is still working on an East Coast schedule, which she says works with her night-owl schedule. She called it a “blessing in disguise” when she was laid off from an advertising firm this summer.
Some hotels are also offering long-stay packages catered specifically to people working abroad. [WSJ] — Dennis Lynch
The effort is meant to address concerns among residents about rising rents and supply shortages (Unsplash)
The South Korean government wants to convert empty hotels and office buildings into over 100,000 residential units over the next two years.
The effort is meant to address concerns among residents about rising rents and supply shortages, according to CNBC. The government wants to create 114,000 units of one-person public housing through the program.
“You all will be able to see hotels turning into affordable, high-quality, single-family homes,” said Kim Hyun-mee, minister of Land, Infrastructure and Transport.
It’s not the first program to address housing shortages — in the past, the government has eased height limits on buildings and converted military properties into residential neighborhoods.
Real estate market analyst Yeo Kyoung-hui described “a sense of desperation” over the housing shortage facing the country, and said the move “could be the fastest way to increase home supplies.”
But Yeo added the focus on home supply for one-person households “could disappoint families with children, who are at the center of the home shortage crisis and are struggling just as hard to find affordable homes.”
Many U.S. cities and states are dealing with affordability issues related to a lack of supply, most notably California, which has for years struggled to address the growing problem.
In Seoul, one 28-year-old office worker living with her parents said the stigma of public housing would keep her and maybe others from renting units created through the program.
“The government knows there is a social stigma on people living in public housing. I refuse to move into one whether it’s a fancy hotel or not,” she said.
Like many places around the globe, South Korea’s real estate market has been upended by the pandemic, although the country’s response to Covid has been one of the most effective in the world at keeping the number of cases in check. [CNBC] — Dennis Lynch
The Studio City house that stood in for Kris Jenner’s home on “Keeping Up With The Kardashians” is back on the market (Photos via Zillow; Getty)
The Los Angeles house that stood in for Kris Jenner’s home on “Keeping Up With The Kardashians” is back on the market with a new, higher asking price.
The 7,843-square-foot home first listed in June, asking $7.8 million; now, that ask is up to $8 million, according to the New York Post.
The property has been on and off the market for the last decade. It last sold in late 2018 for $5.3 million, and reappeared just six months later. The current asking price is the highest it’s been at since mid-2017, when it was listed for $8.6 million.
The home was built in 1983 in the quasi-Mediterranean style that was popular in the 1980s and ’90s. The exteriors were used to represent Jenner’s house on the long-running reality show, but its interiors were never shown. Jenner never owned the property.
There are seven bedrooms and nine bathrooms, including a main suite with a private patio. Amenities include a wine cellar and screening room. The property totals under an acre and the backyard has a saltwater swimming pool, hot tub and outdoor kitchen.
Jenner recently bought a new home in Hidden Hills, next door to where Khloe Kardashian also recently snagged a house.
From left: 555 California Street in San Francisco, Vornado CEO Steven Roth and 1290 Sixth Avenue in Manhattan (Photos via Wikipedia Commons; Getty; Trump Org)
Vornado Realty Trust has suspended its efforts to sell two trophy office towers that it co-owns with the Trump Organization.
The real estate investment trust has been looking for a buyer for its 70 percent stake in the buildings, located at 1290 Sixth Avenue in Manhattan and 555 California Street in San Francisco’s Financial District. Vornado was hoping to sell the properties for around $5 billion, the Wall Street Journal reported.
If the buildings had gone for that price, the Trump family’s 30 percent stake in the partnership would have been valued at around $1.5 billion.
But sources said Vornado could not attract buyers at that price, leading the firm to stop the sale. Potential conflicts of interest involved in making a deal with the sitting U.S. president might have given foreign buyers — who often snap up high-priced trophy properties — a second thought as well.
Vornado is now shifting its strategy for the properties.
“We are now focusing more on refinancing both assets,” said Doug Harmon, an investment advisor at Cushman & Wakefield, which was leading the sales effort for the Manhattan building. Eastdil Secured LLC was working on the San Francisco tower.
The Trump Organization is reportedly a passive owner and has no control over making sales decisions on the two buildings. In recent weeks, the company has halted its own sale of the Trump International Hotel in Washington, D.C., and while potentially letting go of its Seven Springs estate in Westchester County, New York.
“The Trump Organization is an incredible company with tremendous cash flow. We have never been stronger,” the company told the Journal.
Jarrett Posner and Pablo Escobar with 5860 North Bay Road (Getty, The Waterfront Team)
The waterfront Miami Beach lot once home to Colombian drug lord Pablo Escobar in the 1980s now has a new owner.
Chicken Kitchen founder Christian de Berdouare and his wife, former local news anchor Jennifer Valoppi, sold the 30,000-square-foot property at 5860 North Bay Road to developer Jarrett Posner, founder and chairman of New York City-based BMC Investments, for $10.95 million.
Mirce Curkoski and Albert Justo of One Sotheby’s International Realty represented the sellers, while Brett Harris of Douglas Elliman brought the buyer.
The buyer plans to build a new mansion on the property to live in, Harris said. Todd Michael Glaser is the owner’s representative and Domo Architecture + Design is designing the house.
Harris called it a “special property for a special family,” and one of the best remaining lots on North Bay Road with views of downtown Miami.
Posner is a grandson of the late real estate mogul and former corporate raider Victor Posner. Jarrett’s brother is Miami Beach investor and Grafton Street Capital co-founder Sean Posner.
De Berdouare and Valoppi demolished the house in 2016 with plans to build a spec home on the property. The couple paid $9.65 million for the home in May 2014. At one point, they listed the property for sale for $21 million, later dropping the price.
Escobar, who was shot and killed in 1993 in Medellín, paid $760,000 for the North Bay Road home in 1980. It was seized by the government in the 1980s.
The high-end waterfront residential market in Miami Beach has been on fire over the past few months. Nearby on North Bay Road, the billionaire founder of Shutterstock paid a record $42 million for a waterfront mansion just north of Mount Sinai Medical Center.
Earlier this week, the CEO of AmeriSave Mortgage Corp. paid $8.2 million for a waterfront Miami Beach teardown at 6050 North Bay Road, next door to his mansion. And hospitality mogul David Grutman closed on Grammy-winning Spanish artist Alejandro Sanz’s house at 2050 North Bay Road, where he plans to build a new home.
Pharrell Williams and David Lerner with a photo of 2545 Northwest Third Avenue and a rendering of the Billionaire Boys Club exterior (Getty, Google Maps, Lerner Family Properties)
Billionaire Boys Club plans to open a store in Miami’s trendy Wynwood neighborhood.
The Pharrell Williams-owned clothing brand inked a lease for 5,700 square feet at 2545 Northwest Third Avenue in a building that formerly housed a wholesale shoe company, according to a release. The site is across from Zak the Baker, Walt Grace Vintage and the Wynwood Garage. Lease terms were not disclosed.
The store is expected to open in late 2021, according to a spokesperson. It will be Billionaire Boys Club’s second full-scale store in the U.S., following its flagship in New York City.
David Lerner of Dwntwn Realty Advisors represented both sides of the Wynwood deal.
Williams started Billionaire Boys Club in 2003 alongside fashion designer and A Bathing Ape creator Nigo and Japanese graphic designer Sk8thing. The new Wynwood location will sell clothes from the Billionaire Boys Club line as well as brands including Icecream, Adidas, CDG Play, Human Made, Medicom, Neighborhood and Wtaps
“To date, BBC is the largest fashion tenant to commit to Wynwood, and it did so during a pandemic,” Dwntwn co-founder Tony Arellano said in a statement.
Billionaire Boys Club will open in a 14,903-square-foot building owned by brother and sister Irving and Esther Lerner of Lerner Family Properties. The building will be divided into three individual units with Billionaire Boys Club as the anchor.
Billionaire Boys Club has operated a pop-up location in Wynwood since the end of 2018, at 255 Northwest 25th Street, according to the spokesperson. It will vacate that site, where a new Moxy by Marriott hotel will be built, when it opens its Wynwood store.
Wynwood has been undergoing a transition in the past several years, with new retail stores, restaurants and multifamily projects.
In September, Magellan Housing and its celebrity partner, Miami Heat star Udonis Haslem, won approval from Miami’s Omni Community Redevelopment Agency for a proposed 12-story, mixed-use apartment project at 2035 North Miami Avenue in the southern end of Wynwood.
This summer, East End Capital scored approval from the Miami Urban Development Review Board for Foyer Wynwood, a 12-story, 236-unit co-living development on North Miami Avenue, between 24th and 25th streets.
Last month, the Related Group and Block Capital Group listed their 175-unit apartment-hotel at 51 Northwest 26th Street with a whisper price of $90 million.
From left: Google’s Sundar Pichai, Facebook’s Mark Holliday, and Factory_OS’s Rick Holliday and Larry Pace (Getty; Factory_OS; iStock)
Tech giants Facebook and Google are pulling out their checkbooks to back a modular housing startup.
Factory_OS, which aims to build apartments more efficiently and for less money, announced the Series B Friday. The $55 million round was led by Lafayette Square Holdings, with participation from Autodesk, Citi and Morgan Stanley, along with Facebook and Google.
Based in Vallejo, California, Factory_OS was founded in 2017 by general contractor Larry Pace and Rick Holliday, a San Francisco affordable housing developer. The startup previously raised $22.7 million, according to Crunchbase.
Factory_OS aims to build houses “more like cars,” according to a press release, meaning different components of each are pre-assembled simultaneously. The company claims it can lower construction costs by 20 to 40 percent by assembling everything off-site.
With the fresh capital, the startup aims to “accelerate growth” of its technology, it said in a press release, as well as ramp up manufacturing at a 100,000-square-foot facility that’s currently under construction in Mare Island, in the Bay Area. It’s also looking to expand into Los Angeles, according to the San Francisco Chronicle, which first reported the news.
Factory_OS is projecting $80 million in revenue this year, with $150 million expected in 2021. “Demand for what we’re doing is increasing,” Holliday told the North Bay Business Journal in November.
The company has produced over 1,000 units with several projects under construction, including a 250-unit apartment for Google employees near the tech giant’s Mountain View office.
Google, Facebook and Apple have all pledged billions of dollars to address California’s affordable housing problem. Google has said it plans to invest $1 billion, and has partnered with Lendlease on a proposal to build master-planned communities in Silicon Valley.
Apple announced a $2.5 billion housing plan last year, including $1 billion to help first-time homebuyers get mortgages.
A Fort Lauderdale-based real estate development and investment firm wants to raise $125 million to invest in mixed-income workforce housing in South and Central Florida.
Affiliated Development launched the impact housing fund to help communities while delivering risk-adjusted returns for its investors, according to a press release. The fund will provide capital to finance Affiliated Development’s pipeline of workforce housing projects and investments. Affiliated will also apply for government financing incentives to help fund the projects.
The fund has the required capital commitments for an initial closing scheduled for December. Current committed investors include the Fort Lauderdale Police and Firefighters’ Pension Fund, West Palm Beach Police Pension Fund, Hollywood Police Pension Fund, Hollywood Firefighters’ Pension Fund, Miramar Police Pension Fund and an unnamed locally based family office, according to the release.
Jeff Burns and Nick Rojo of Affiliated will be the sole general partners and managers of the fund.
In June, Affiliated scored the first round of approvals from the Lake Worth Beach city commission for its apartment project known as the Bohemian, at 1017 Lake Avenue.
In December, Affiliated Development snagged a $35 million construction loan for its 230-unit apartment project, The Mid, on 16th Avenue and North Dixie Highway near downtown Lake Worth Beach. That month, it also received approval from West Palm Beach officials for a $9 million grant to go forward with the 289-unit, eight-story mixed-use project known as The Grand in West Palm Beach.
Meanwhile, earlier this year Florida-based firm Kayne Anderson raised $1.3 billion for a distressed debt fund. And Blackstone gathered $8 billion for a property debt fund that closed in September, making it the largest real estate credit fund ever raised.
The pandemic has led to many changes in the residential real estate market: suburban migration, a dearth of inventory, the return of bidding wars, waning luxury markets and more. But have those trends in homebuying sparked big changes to sale prices around the country — particularly in the most expensive areas?
The short answer: Maybe.
According to PropertyShark’s analysis of the country’s most expensive ZIP codes, “2020 presented a reversal of 2019’s picture, with significantly more areas experiencing gains in their median sale price than losses.”
Seventy-eight locations saw gains year-over-year, and 28 of those experienced double-digit increases. On New York City’s Upper West Side, for example, the median sale price in the ZIP code 10069 rose 42 percent to reach $2.725 million.
PropertyShark ranks the country’s priciest zip codes this year by looking at every closed residential transaction through the end of October and calculating median sale prices from that. Among the 121 ZIP codes that made it onto the list, New York and California stand strong, with 107 of the most expensive areas.
California dominates the top 10, while New York City doesn’t enter the list until No. 11, with Tribeca, located in ZIP code 10007. Miami Beach’s Fisher Island, in the 33109 ZIP code, made it onto the list at No. 23.
Other states also that appear on the list include Massachusetts, with four zip codes; Connecticut and Nevada, with two; and Arizona, Florida, Maryland, New Hampshire, New Jersey and Washington, which each contributed one.
Here are the top 10:
94027: In the town of Atherton in San Mateo County, CA, the median sales price was a whopping $7 million, making it the most expensive zip code for the fourth year in a row. Notable residents include Chamath Palihapitiya, the venture capitalist whose Social Capital Hedosophia Holdings II recently helped taked Opendoor public.
11962:Sagaponack, New York once sat at the top of the list back in 2015. But, its $3.875 million median is the result of a 10 percent year-over-year drop — the fourth year in the past five that the Hamptons community’s median sale price has decreased.
90402 and 90210: Unsurprisingly Santa Monica, California is close to the top of the list with a median sales price of $3.75 million. This is the second year the neighborhood has ranked No. 3 on PropertyShark’s list, despite coming in 10 percent below 2019 pricing levels.Beverly Hills tied with Santa Monica, but that’s a drop from the city’s five-year high of $4.08 million in 2019.
94957: With an 8 percent gain over 2019 figures to reach $3.605 million, Ross, a small town in Marin County, California, claimed fourth place.
94028: Portola Valley in San Mateo County, California, similarly rose 7 percent to hit $3.53 million.
94022: Los Altos in Santa Clara County, California, claimed sixth place with $3.453 million.
11932: After a California-filled spree, seventh place brings us back to the Hamptons.Bridgehampton in Suffolk County, NY saw a 30 percent price increase, pushing its median sale price to $3.325 million. That’s also the third-highest median price growth among the top 100 most expensive zip codes.
94301: Going back to Cali: Palo Alto in Santa Clara County claims eighth place with $3.298 million.
98039: In King County, Washington, Medina claims the title of most expensive ZIP code in the Pacific Northwest with a median sales price of $3.225 million. Bill and Melinda Gates are among the notable people who call Medina home.
94024: Last but not least, a separate zip code in Los Altos closes out the list with a median sale price of $3.2 million.
Residential sales surged for a second straight month throughout South Florida.
Total home sales across the region reached nearly $4.6 billion in October, according to the Miami Association of Realtors.
Miami-Dade, Broward and Palm Beach counties all experienced double-digit jumps in sales, year-over-year, just as they did in September.
Sales dollar volume also soared last month, spiking by nearly 80 percent, year-over-year, in Palm Beach County.
While the months of supply for single-family homes decreased in Miami-Dade, Broward and Palm Beach counties, the months of inventory of condos increased in Miami-Dade and Broward counties. Pricing continued to rise across the tri-county area.
Residential sales rose 16.2 percent in Miami-Dade County last month, year-over-year, to 2,737 closings. Single-family home sales increased 15.7 percent to 1,326. Condo sales rose 16.7 percent to 1,411.
Closed dollar volume of single-family homes climbed 75.5 percent, to $988.3 million. Condo sales volume totaled $549.9 million, up 19.4 percent.
Median prices of single-family homes rose 19.2 percent, year-over-year, to $435,000, while condo prices increased 8.5 percent to $268,000.
Total home sales jumped 23.1 percent, year-over-year, to 3,241. Single-family home sales rose 23.2 percent to 1,656, while condo sales increased 23.1 percent to 1,585 closings in October.
Single-family dollar volume surged by 49.4 percent to $913.4 million. Condo dollar volume rose 41.2 percent, year-over-year, to $385.3 million.
Prices also continued to increase in Broward, with the median single-family home price rising 14.6 percent to $415,000, and the median condo price rising 12.5 percent to $189,000.
Residential sales jumped 34 percent, year-over-year in Palm Beach County in October, to 3,233 closings. Single-family home sales rose 32.8 percent to 1,818, and condo sales climbed 35.7 percent to 1,415.
Single-family home dollar volume surged by 79.8 percent, year-over-year, to $1.3 billion. Condo dollar volume rose 55.2 percent to $440.7 million.
Single-family home prices increased 17 percent to $420,000, and condo prices rose 22.7 percent to $211,000.
Mortgage originator Better.com is one of the most buzzed-about startups, and was recently valued at $4 billion.
But CEO Vishal Garg is a volatile leader ensnared in a rash of lawsuits alleging financial mismanagement and worse, according to a new report.
Garg, 42, is accused of improper management of funds at several prior startups, including as much as “tens of millions of dollars,” Forbes reported. Some of the allegedly mismanaged money went to starting Better.com.
Founded in 2014, New York-based Better.com is trying to digitize home loans. Covid-19 has accelerated demand for its product, and since March, the company has hired 2,000 employees. It’s now on track to generate $800 million in revenue this year and is rumored to be eying an IPO.
But Garg’s legal woes could present a challenge to a public offering. Goldman Sachs, which invested in Better.com, accused entities controlled by Garg of “flagrant self-dealing,” Forbes said. And while the bank dropped its legal claims in October, Garg is still facing accusations by PIMCO that startups he controlled siphoned off money owed to investors.
Meanwhile, Garg has been battling a former business partner and friend, Raza Khan, who claims Garg transferred $3 million from a joint business to his personal bank account, and used that money to launch Better.com. Garg denied the claim in a countersuit. But in a deposition, things grew so heated Garg threatened to burn Khan alive. Garg later apologized for letting his emotions get “out of control.”
A spokesperson for Better.com called the accusations “baseless,” and said “lawsuits are an unfortunate fact of life for successful startups and their CEOs.”
Former employees described a harsh work environment where Garg chastised managers who only worked eight-hour days. “You are TOO DAMN SLOW,” he wrote in an email that was obtained by Forbes. “You are a bunch of DUMB DOLPHINS and … DUMB DOLPHINS get caught in nets and eaten by sharks. SO STOP IT.”
An analysis of data from CoStar found that retailers nationwide had missed two to four months’ rent (iStock)
Brick-and-mortar stores were struggling before the pandemic. But now, the retail sector owes $52 billion in back rent.
An analysis of data from CoStar found that retailers nationwide had missed two to four months’ rent, according to Bloomberg. Questions remain about how the pandemic and changing consumer preferences will affect the sector in the long run.
Even when a Covid-19 vaccine becomes widely available, the amount of debt may be insurmountable, industry pros say. An increasing number of brick-and-mortar stores, faced with expanded online shopping choices and lingering skittishness about the virus, may pack it in for good.
“You’re going to have big bubbles that are going to be hitting next year or even in the fourth quarter,” Andy Graiser, co-president of A&G Real Estate Partners, told Bloomberg. “I’m not sure if they are going to be able to make those payments in addition to their existing rent.”
Retailers’ requests for relief continue to pour in. TIAA Real Estate Account received more than a thousand requests for deferrals from tenants, most of them from retailers.
Rent collected from retailers improved to 89 percent in October, far better than the dire numbers in April, when retail landlords collected just 54 percent of rent. Malls have lagged behind, however, collecting only 79 percent of November rent.
“It’s going to take a period of years, not months, to get through this,” Michael Hirschfeld, vice chairman at JLL, told Bloomberg. [Bloomberg] — Georgia Kromrei
Hotels in trouble: the Hilton Houston Post Oak (left) saw its value cut in half and is in foreclosure, and the Residence Inn Arlington Pentagon City is set to be torn down and turned into part of Amazon’s HQ2. (Photos via Hilton; Marriott; iStock)
Nearly $31 billion in outstanding CMBS hotel loans — more than a third of the total — is due to mature in 2021.
That’s according to a new report from Trepp, which found that 3,100 hotel loans totaled $87 billion, about 16 percent of the total outstanding balance of all CMBS loans.
Lodging properties have been one of the hardest hit property types alongside retail, and though recent news about vaccine development appears promising, the nationwide surge in coronavirus cases and approaching winter months still present headwinds in the short term.
“Major players in the hotel segment have been forced to reassess the value of their properties and have shown an increasing willingness to give up ownership,” according to the Trepp report, pointing to Monty Bennett’s Ashford Hospitality Trust as a prime example. The hotel REIT has been selling off assets in recent months and has expressed readiness to hand delinquent properties back to its lenders.
The impact of Covid-19 on hotels has been geographically uneven, as the chart below shows. While major metros like New York, Los Angeles and Chicago all have more than a billion dollars each in delinquent loans, Miami — with more than $4.3 billion in outstanding CMBS hotel debt — only has $363 million in loans behind on payments.
In proportion to the size of its hotel market, Houston stands out as one of the most hard-hit cities with 76 percent of hotel CMBS loans facing delinquency, due to the pandemic’s impact on the oil industry. Trepp’s report notes that the cancellation of “large revenue-driving energy conferences” has had a big impact on the city’s hotels.
Hotels in Portland, Oregon, are also facing an unusually high rate of CMBS hotel loan delinquencies, accounting for 78 percent of the city’s total balance. On top of the pandemic, the city struggled with hazardous levels of wildfire smoke in the late summer, and gained nationwide notoriety for violent clashes in the wake of the summer’s Black Lives Matter protests.
Different types of hotels have also been affected differently by the pandemic, with limited-service hotels facing higher rates of delinquency than extended stay and full-service hotels. A CBRE research report cited by Trepp shows that rural and mid- to lower-tier hotels have fared better on average than their urban or upper-tier counterparts.
While the delinquency rate for hotels — and the CMBS sector overall — has come down from its summer peak as forbearance agreements have come into effect, the proportion of loans in special servicing has remained above 25 percent. Meanwhile, hotels that have been reappraised since March have on average seen their values sliced by nearly 30 percent.
“Liquidity pressures are at record highs and recovery can’t come soon enough. Values have declined and the effects of the pandemic will likely be felt for years to come,” CBRE analysts write in their report, while professing optimism that the sector will eventually rebound as it has many times in the past.
Dr. David R. Campbell (inset) and Mark Egan with13943 Chester Bay Lane (Florida Spine Center, Mark Egan, Google Maps)
An orthopedic spine surgeon sold his North Palm Beach home for $6 million.
Dr. David R. Campbell and his wife, Rachel, sold their 4,357-square-foot home at 13943 Chester Bay Lane to Mark Egan as trustee of a trust in his name, and Constance J. Petersen, as trustee of a trust in her name.
Campbell is the head orthopedic physician and spine surgeon at the David Campbell MDPA Spine Center, which has locations in Fort Lauderdale, Jupiter and Lake Worth.
Egan, who attended the University of Miami, is a jazz bassist originally from Brockton, Massachusetts.
Christina Zecca with Illustrated Properties represented the Campbells, and Lynda Smith of One Sotheby’s International Realty represented the buyers.
The home had an asking price of $5.7 million in October, according to Realtor.com. The Campbells bought the property in 2017 for $3.75 million, records show.
The four-bedroom, four-and-a-half-bathroom house was built in 2015 by Toll Brothers. The home features a three-car garage, a yard with a zen garden, a pool and a dock.
The second-largest movie theater operator in the U.S. is hunting for a financial lifeline (iStock)
The parent company of Regal Cinemas, the second-largest movie theater operator in the U.S., is hunting for a financial lifeline.
U.K.-based Cineworld is in talks with investors for rescue financing or debt to fund a bankruptcy proceeding, the Wall Street Journal reported.
The company reported that revenue in the first half of 2020 declined 67 percent to $712 million. It has $4 billion in lease obligations and $4 billion in debt overall. Last month, it re-shuttered its more than 500 U.S. theaters after reopening in August.
In September, Cineworld said it had taken steps to improve its cash flow. Staying closed, however, could be less expensive than remaining open with few moviegoers. Lackluster performance of a Labor Day weekend premier of Christopher Nolan’s “Tenet” led observers to question whether movie theaters would return even after the pandemic eases.
In the short-term, many movies are being released directly to streaming services, skipping traditional theaters altogether. With more Americans couch-bound, demand for production space has surged. In June, Blackstone was in talks with Hudson Pacific Properties to develop production space in Los Angeles — a deal valued at $1.4 billion.
Meanwhile, movie release dates — including “James Bond,” “Dune” and a sequel to “Top Gun” — have been delayed until 2021 and beyond.
AMC Entertainment Holdings, the largest movie-theater operator in the U.S., has said it would run out of cash by the end of the year if conditions did not improve.
Northland’s Lawrence Gottesdiener with the Del Oro and Plantation Meadows apartments (Google Maps)
A pair of Plantation apartment complexes with a combined 345 units sold for a total of $57 million, or $28.5 million each.
A company with ties to real estate investment firm NorthEnd Equities and real estate investors Mordechai Schapira and Labe Twerski bought the apartments. One of the complexes is the Del Oro at 7001 to 7081 Northwest 16th Street. The other is Plantation Meadows at 7201 to 7321 Northwest 16th Street. Both complexes were built in the 1970s, according to records.
NorthEnd Equities is based in Brooklyn and led by Charles Herzka.
The seller of both complexes is a company connected to Northland Investment Corp. of Newton, Massachusetts, according to records. Northland is led by CEO Lawrence Gottesdiener.
The 175-unit, four-story Del Oro sold for about $163,000 a unit. Rents range from $1,125 for a one-bedroom unit to $1,780 for a two-bedroom, according to an online listing. The apartment complex also offers three-bedroom units.
The 170-unit, two-story Plantation Meadows sold for about $168,000 a unit.
Northland had paid a total of $21.6 million for the properties — $6.7 million in 1994 for Del Oro and $14.9 million in 2014 for Plantation Meadows.
In 2017, Northland bought two sister rental communities in Jupiter for $56 million.
Earlier this year, NorthEnd sold a 40,802-square-foot mixed use building in Borough Park in New York for $24.3 million. In 2019, NorthEnd sold a vacant parcel of land in New York at 37-29 31st Street for $13.3 million.
National Association of Realtors president Charlie Oppler (Photo via NAR; iStock)
The National Association of Realtors has issued an historic apology for its role in housing discrimination, but some say it falls short.
Charlie Oppler, the president-elect of NAR, which represents 1.4 million real estate professionals, said realtors have contributed to inequality, which he described as an “outrage to our morals and our ideals,” Bloomberg News reported.
The Black homeownership rate is just 46 percent as of Sept. 30, compared to 67 percent for all U.S. households and 76 percent for white households, according to the Census Bureau.
“We can’t go back to fix the mistakes of the past, but we can look at this problem squarely in the eye,” said Oppler, who is the CEO of Prominent Properties Sotheby’s International Realty in Franklin Lakes, New Jersey. “And, on behalf of our industry, we can say that what realtors did was shameful, and we are sorry.”
The organization’s past mistakes include opposing the Fair Housing Act in 1968 and barring black members from joining the group. Their exclusion led to the formation in 1947 of the National Association of Real Estate Brokers, which promotes Black homeownership.
More recently, NAR found itself in the crosshairs after a bombshell investigation from Newsday found that brokers on Long Island routinely steered Black homebuyers away from white neighborhoods. The report spurred swift action from elected officials, who demanded an apology from the real estate industry.
Donnell Williiams, president of the National Association of Real Estate Brokers, said the industry apology was insufficient, and did not offer reparations to Black homeowners.
“The difference of Black-American wealth and white wealth is tied directly to homeownership,” Williams told Bloomberg. “They manipulated the entire system.”
Eric and Donald Trump Jr. with 1100 Pennsylvania Avenue (Photos via Getty; Trump Hotels)
Plans to sell the Trump International Hotel in Washington D.C. have been shelved after bids came in at less than half the asking price.
JLL, which the Trump Organization hired last spring to market the property, told CNBC that plans to sell the property were on “indefinite hold.” The Trump Organization sought $500 million for the asset, which like other of the company’s hotels and resorts benefited from those seeking favors from President Donald Trump’s administration over the last four years.
The property made $40.5 million in revenue in 2019, according to the Office of Government Ethics. Now, like the rest of the hotel industry, the asset is struggling — and is saddled with a $100 million loan that Deutsche Bank provided for renovations.
“At this point, they could either just turn over the keys, or keep it and make it part of whatever media company the President decides to create,” said Brian Friedman of Friedman Capital, which bid on the hotel and owns several properties in the area. “I just don’t think they’re going to get the price they expected.”
A spokesperson for the Trump Organization said the company had no plans to default on the loan, and that it had received bids over $350 million, “which would have been the most expensive price ever paid for a hotel” in D.C.
Other factors that may have turned some would-be buyers away include the requirement to maintain the Trump name on the hotel, and the 60-year leasehold on the former post office site with the General Services Administration.
The Trump Organization far outbid competitors for the leasehold in 2011, paying $3 million a year — a figure which rises with inflation. Experts told CNBC that as a result, any bid for the property would have to be around $150 million or $175 million.
Overall, the developer invested $200 million in the property. In 2012, Trump told the Washington Post he had paid “too much for the Old Post Office.”
The coronavirus has taken a devastating toll on older Americans, but it’s people in their prime earning years who are struggling most to pay the rent.
That’s according to a recent survey from rental management platform Avail and Urban Institute — a Washington-based nonpartisan think tank. Only 51 percent of renters 30 to 49 years old paid full rent in September, according to the findings. The survey polled 2,452 tenants and landlords.
Those above and below that age range fared far better. Of the renters 29 years old and under, 68 percent paid their full rent in September. Meanwhile, of those 50 and above, 73 percent paid their full rent, the survey found.
More older Americans can afford to pay rent because they have accumulated wealth over the years and have fewer dependents, the report found. The data showed that even older Americans with lower incomes paid rent at higher rates than younger Americans who earned more. “Renters hit the hardest are in the prime age range for supporting dependent children,” the survey noted.
Predictably, lower-income households had a harder time paying rent. Nearly half of households with annual incomes below $25,000 said they weren’t able to pay full rent in September, compared to just 9 percent of households with annual incomes of $125,000 and above.
The survey also found that renters in smaller multifamily buildings owned by individual landlords struggled to pay rent more than renters in larger, corporate-owned multifamily complexes. About 13 percent of renters in small multifamily buildings owned by individual landlords said they couldn’t pay September rent. That compared to just 5 percent of renters in big multifamily complexes owned by institutional investors. Those renters tend to make more money, the survey found.
Missed rent payments are also translating into distress for small landlords, many of whom are struggling to pay mortgages and property taxes. The survey found that many small landlords are increasingly feeling pressure to sell their properties.
The survey highlighted the role federal assistance programs play in helping Americans pay rent. Nearly a third of survey respondents said they were able to pay their September thanks to federal unemployment assistance, and 29 percent said government assistance had helped them through the pandemic.
Seventy percent of survey respondents who couldn’t pay rent blamed loss of unemployment and income. Those numbers could rise in the near future as Covid lockdowns and restrictions increase to counter the latest wave of infections spreading across the U.S.
Craig A. Bondy & 327 East Alexander Palm Road (Royal Palm)
The managing director of a private equity firm bought a spec mansion at the Royal Palm Yacht & Country Club in Boca Raton for $12.8 million.
Records show Craig A. Bondy bought the home at 327 East Alexander Palm Road from Jeffrey A. Levine, trustee of the 434 S Maya Palm Drive Real Estate Trust.
Bondy is a managing director at Chicago-based private equity firm GTCR. He has been with the firm since 2000, according to its website.
Jeffrey A. Levine is of counsel at the Sachs Sax Caplan firm in Boca Raton. Levine represents developers and builders in Palm Beach County, according to the Sachs Sax Caplan website.
The 434 S Maya Palm Drive Real Estate Trust bought the property in 2018 for $8.2 million and tore down the existing home, according to records. Construction for the current home started in the spring of 2019 and finished this year.
The new 9,562-square-foot mansion had an asking price of $14 million in February. David W. Roberts with Royal Palm Properties represented the seller, while Mitch Greenberg of BEX Realty represented Bondy.
The two-story waterfront mansion has six bedrooms, seven full bathrooms and two half-bathrooms, two two-car garages, a pool and a “yacht-ready” dock, according to the listing.
In Albuquerque, New Mexico, multifamily occupancy is up. Memphis, Tennessee, is seeing rising rents, and cap rates for apartment assets in Detroit have spiked.
Months into a pandemic that eradicated many of the perks of big-city apartment living and made remote work a universal reality, renters have been moving to some unexpected places. And multifamily investors have been following them.
While initial lockdowns sent more affluent homeowners fleeing dense cities for weekend properties in the Hamptons and second homes, renters have recalibrated, too. That has been a boon for smaller cities, where space is more plentiful and rent is cheaper. Multifamily Investors, some of whom have fled what they see as too pro-tenant policies in states like California and New York, are beginning to shift their bets accordingly.
They’re now seeking out multifamily assets in far smaller markets. Among the most popular cities are Memphis and Albuquerque, where rents are lower but landlords can still expect to raise them each year.
Take Kushner Companies, which is extending its reach into the Sun Belt. The firm is making its first apartment acquisition in Memphis and has been eyeing other cities in the southeast. It is focusing on areas of job growth, such as those near logistics centers, a sector that has performed strongly in recent months.
Investor dollars have also been flowing to Detroit and Las Vegas.
Ben Teresa, who teaches real estate finance at Virginia Commonwealth University, said the strategy of capital favoring less-developed markets is one that’s generally seen during recessions.
“It certainly happened in the last economic cycle,” he said. “Investors would move into second- or third-tier markets after New York and San Francisco were saturated, and cap rates had become too low.”
Some of those smaller multifamily markets have even outperformed major metros in the third quarter, according to CBRE. It found that occupancy rates and rent prices rose in several of those markets — compared to New York, San Francisco and Chicago, where property owners are dangling concessions amid rising vacancies.
In-demand logistics centers are also boosting these emerging multifamily markets.
“We look to invest where corporations are relocating, and where housing is affordable,” said Russell Appel, principal at New York-based Praedium Group, which paid $90 million for a 385-unit apartment complex in Phoenix in September. “Rental housing is like an essential service — people need a place to live.”
Jay Lybik, a Phoenix-based researcher at Marcus & Millichap, said he has noticed a lot more interest in the Southwest with its proximity to California allowing it to attract renters who leave that state. Detroit, too, has seen more interest compared with last year, he said, and cities like Memphis are seeing more interest as companies expand logistics and warehouse centers.
“There are a number of cities in the Southwest and Southeast that have become strong distribution hubs — investors were seeing that trend pre-Covid, and they’re seeing that continued trend strengthen,” Lybik said, adding that employees in those distribution hubs have a “high propensity to rent.”
Here are four multifamily markets getting increasing attention from investors:
Detroit revs up
Detroit’s high cap rates for multifamily assets promise greater returns, said Nick Kirby, a director at local commercial brokerage Greystone Bel. He contrasted that to core urban markets, where he said that cap rates are so low a property owner “can break a window and lose money.”
Still, investors may be worried about reputational risk. Six years ago, Detroit emerged from the country’s biggest municipal bankruptcy with strict financial controls imposed in exchange for slashing a portion of its debt. The city also has a long history of racial inequality deepened by discriminatory lending practices and disinvestment. As manufacturing jobs vanished, white people fled for the suburbs beginning in the 1950s.
But the Motor City has performed surprisingly well during the pandemic. From March through September, net effective rents were up 3 percent, and vacancy decreased 100 basis points, according to CBRE. That has contributed to investor interest and kept Kirby busy, he said.
In mid-November, a 64-unit multifamily building he listed went into contract just days after the buyer — a local investment group — completed an on-site inspection.
Investors who are able to move quickly may also have another advantage in Detroit: The lack of access to financing has restricted new supply.
Also, lots of longtime, less sophisticated property owners may leave hundreds of thousands of dollars on the table when they decide to sell — which can be a boon for more savvy or opportunistic investors.
“You can get much higher cap rates” for existing multifamily assets, Lybik said. But it’s not for every investor, he added.
“It most likely has to be a very unconventional deal,” he said. “That turns off a number of investors — but for those who want to take a little more risk, it’s attractive in the long run.”
Some larger investors, too, are noticing an increase in demand for affordable multifamily housing.
Stuart Boesky, CEO of Pembrook Capital Management, said that after Amazon broke ground on a 823,000-square-foot distribution center where the Pontiac Silverdome once stood, the city’s public pension fund reached out. It had identified a shortage of housing for the employees and was making Pembrook aware of the opportunity.
“It’s certainly an issue,” Boesky said. “Rental housing is needed where these huge tech-oriented distribution centers are.”
Betting on Sin City
The Las Vegas market has benefited from its relative proximity to pricey and supply-constrained Silicon Valley. Vegas’ more affordable housing has seen it flourish in recent months, experts say.
The city had a positive absorption rate of 1.6 percent in the third quarter, according to CBRE. Net effective rents also rose, and the overall vacancy rate was down in September, compared to March. In Henderson, a suburb 16 miles from the Strip, the absorption rate increased to 4.3 percent. There, the average rent for an apartment is $1,300, compared with $1,400 nationwide.
Although multifamily rent collections declined 9 percent compared with pre-Covid levels, rent prices and occupancy levels both increased, according to a third-quarter report from Cushman & Wakefield.
Some recent deals include Benedict Canyon Realty’s acquisition of a 98-unit luxury apartment complex at 10620 West Alexander Road in July for $21 million. JB Partners, a private investment firm, acquired Tower at Tropicana at 6575 W. Tropicana Avenue and Gloria Park Villas at 3625 South Decatur Boulevard — not far from the Strip — for $82.5 million in August. The price was up from $62.5 million in 2017, when the assets last traded, public records show.
John Tippins, CEO of multifamily brokerage Northcap, said he’s seen a surge in renters coming from Silicon Valley and the San Francisco and Oakland areas.
“We’ve done some case studies of people who work at big tech companies who are paying $4,500 or $6,000 for a one-bedroom,” Tippins said. “Here, you can stay in the nicest three-bedroom or 3.5-bedroom home or apartment for $2,500 a month.”
In May, when Gov. Michelle Lujan Grisham limited occupancy for university dorms across the state, apartment owners saw demand for their product spike. Desperate for digs, students poured into nearby properties, driving double-digit occupancy increases.
At the same time, multifamily broker Todd Clarke of NM Apartment Advisors said investors from coastal markets — frustrated with lockdowns in dense urban areas — have been calling, looking to move their families and their capital.
The payoff can be significant in Albuquerque, where the average cap rate is 6.62 percent, according to Colliers International’s third-quarter multifamily report. That follows a second quarter report — from CBRE — that found the vacancy rate in Albuquerque decreased while effective rents rose slightly.
A survey by moving company Hire a Helper from August showed that New Mexico saw a net population increase of 44 percent. That was the second highest percentage nationwide during the pandemic, the survey found, and in line with Albuquerque’s recent multifamily market churn, Clarke said.
“Property managers are telling us that occupancy is very tight,” he said. “We’re also seeing double-digit rent increases in some neighborhoods.”
Even with rent increases, those who come from more pricier cities may be startled when they find the average monthly rent in Albuquerque is only $900. That’s a strong motivator for tech workers freed from their Silicon Valley offices.
Tech giants have started taking notice. Facebook opened the first building in its data center in Los Lunas, a suburb to the south of Albuquerque, in 2019. Amazon is building a 465,000-square-foot fulfillment center, and Netflix bought a production studio in downtown for $31 million in 2018; it included a generous incentive package from the city and state.
“I feel bad telling people our business is booming and we’re doing so well,” Clarke said. “But when you live in Silicon Valley and you’ve got to rent your neighbor’s dog to have a legitimate reason to go outside — the wide open spaces, the Wild West, and people golfing, hiking and biking, which are not really limited at all by wearing a mask or staying socially distanced — it looks super attractive.”
A little more action in Memphis
Second-quarter effective rents actually rose in Memphis, according to CBRE.
In October, Kushner Companies — whose 20,000-unit apartment portfolio is East Coast-dominated — about $31 million for a 256-unit apartment complex in the Cordova neighborhood.
Kushner’s Riley Wilson, who led the acquisition, said the strong fundamentals of the Memphis market — diversified demographics, an educated workforce and a continued supply of jobs — drew the firm’s interest.
“We plan to continue our growth in these dynamic cities and build on a large scale over the next several months throughout the Southeast,” he said.
The Memphis area is also getting a boost from the industrial surge. Amazon said it would open its sixth fulfillment center in western Tennessee this year, with an 855,000-square-foot warehouse. FedEx, which is headquartered in Memphis, reported a 20 percent surge in revenue in the third quarter, the Memphis Business Journal reported, mostly due to the increase in online shopping brought on by the pandemic.
Logistics space expansion also led to job creation — mostly low-paying but stable.
“It’s very good for the rental market — a lot of the people working there will be renters,” said Steve Woodyard, CEO of multifamily brokerage Woodyard Realty. “The affordable housing side of that is really benefiting.”
Out of the 20 multifamily assets he has listed in Memphis, 15 are under contract — and he expected three more to follow in a matter of days.
And while New York and California both recently tightened existing limits on how much landlords can increase rent, Memphis has no such policy — at least for now.
“We’re getting a flood of New York and New Jersey investors because of rent control and recent law changes they’ve had,” Woodyard said. “They’re fearful they can’t maintain their buildings, and the rent can’t keep up.”
For many movie theaters, Covid-19, which has kept viewers at home and new releases from the screen, feels like the final curtain. (iStock)
Even before the pandemic, Ari Benmosche realized that running his movie theater in a traditional sense wasn’t sustainable.
The owner of the Lafayette Theater, a small venue in Suffern, New York, has shown the new “Star Wars” releases and movie marathons of holiday classics, always ending with “It’s a Wonderful Life.” But he could not get the theater back to profitability.
“The exhibition industry is like a totem pole. We, as a single-screen movie theater, are at the absolute bottom of that totem pole,” Benmosche said. “I am one guy with one screen and 1,000 seats.”
This isn’t the first time the theater’s first brush with failure. Twenty years ago it was set to be sold and gutted, but Benmosche’s family bought the property and saved it. Now, he must reimagine what a theater can be.
Benmosche isn’t alone. For many movie theaters, Covid-19, which has kept viewers at home and new releases from the screen, feels like the final curtain following years of dwindling audiences. That’s the case even for national chains of multiplexes.
In October, Cineworld, the owner of Regal Cinemas, announced the temporary closure of its 500 U.S. locations. AMC, staring down bankruptcy, said it would think twice about renewing some of its leases.
Movie theaters across the country had paid just 38 percent of their October rent as of Nov. 5, dead last among retailers, according to a report by Datex Property Solutions.
There is collateral damage, too. Movie theaters provide shopping centers with late-night traffic and serve as community gathering spaces. Their turmoil poses a threat to the developments that they help anchor.
“There are lots of businesses that are really reliant on them being successful and operating
well into capacity,” said Kennedy Smith, principal of Community Land Use + Economics Group, a consulting firm that focuses on the revitalization of locally owned businesses.
In 1995 there were 7,744 movie theaters across the United States. But by 2018, there were just 5,869, according to Statista. The drop can be attributed to the rise of at-home movie watching, which gained steam as VHS tapes gave way to DVDs and then streaming services. Rising costs for theaters were also a factor.
While some movie-goers remained eager to sink into the cushy seats of their local cinema with a tub of buttery popcorn and oversized drink — theaters’ profits come largely from concessions — the pandemic dealt a crushing blow.
For months, movie theaters were shuttered. And though most have reopened under capacity restrictions, studios have held their releases as Covid proliferates and fear of gathering indoors persists.
More theater owners have had to think about other ways to use the properties.
“Everything has a kind of a lifespan, whether that be a physical lifespan, or experiential lifespan. Oftentimes during the 25-, 50-, 75-year lifespan of a building, it needs to be repositioned in order to best serve the public,” said Grant Gagnier, New York City business unit leader of Gilbane Building Company, a construction management firm.
Benmosche is planning to upgrade his theater with portable seats and a mechanical screen that can be retracted, which will allow the venue to also host live entertainment.
His theater remains closed, despite New York state allowing for theaters to reopen at 25 percent capacity or up to 50 people per screen. The pandemic seemed like the perfect time for renovations.
Other theaters have also been increasing their offerings in recent years, such as by adding three- (or more) dimensional screens, or dining options.
The pandemic could trigger more repurposing of movie houses, but that, too, can be difficult.
“In New York, we always default to residential — in most cases, the highest and best use,” said Ariel Aufgang, principal at Aufgang Architects. “Multifamily requires windows, a lot of natural light and air. And these theaters are essentially big-box commercial structures.”
It is not impossible, though.
The Victoria Theater in Harlem once housed 2,000 seats as a performing arts theater, before it was used as a multi screen movie theater in the 1970’s. Then, in 1989, it went dark.
Redesigned by Aufgang, it’s now home to 199 residential units and 211 hotel rooms. To recall its original use, the facade, signage, marquis, and lobby were incorporated into the design.
“You really have to think about what the innate demands and needs are for that local community where the asset is and try to figure out how to synthesize a set of uses that produce commercial viability,” said Craig Livingston, principal of Exact Capital Partners, which redeveloped the property.
And while closures may happen, theaters are hardly dead. In Vacaville, California, the Deville Theater has been on the market for just two months and already has four parties interested in it as an entertainment venue.
“The path of least resistance is finding a building that is already built this way. It’s cost-prohibitive to build from scratch, or to retrofit,” said Mark McGuire, the broker for the property and owner of McGuire Capital Group Realty. “I think overall we’re just surprised by the optimism of what’s going on right now.”
IQHQ Stephen Rosetta and the San Diego Research and Development District (IQHQ)
The life sciences sector has officially become the in-thing for real estate investors.
Highlighting this interest, real estate investment trust IQHQ has raised $1.7 billion, which it plans to use for an existing development pipeline of 4.4 million square feet of life science projects in Boston, San Francisco and San Diego.
The $1.7 billion raise comes just nine months after the Solana Beach, California-based company completed its initial capital raise of $770 million.
IQHQ, formerly known as Creative Science Properties, recently purchased the 26.5-acre Alewife Park in Cambridge, Massachusetts, which has office and research space. It also broke ground on the Research and Development District, a 1.6 million-square-foot campus in San Diego that will have labs, offices and retail.
While the pandemic has pummeled other commercial sectors, demand for laboratory and research space is flourishing — and office landlords are hoping that the sector will fill the gap left by other tenants.
In New York, more than $1 billion of venture capital funding poured into life sciences last year https://therealdeal.com/2020/07/14/life-sciences-sector-proves-safe-haven-for-landlords/, up from $990 million in 2018 and $366 million in 2017, according to JLL.
In Long Island City, Alexandria Real Estate recently announced plans to turn a building once used for bookbinding into more than 175,000 square feet of laboratory and office space. And at 125 West End Avenue on the Upper West Side, Taconic Partners and Nuveen Real Estate are converting a former Disney-owned ABC campus into a 400,000-square-foot research center.
IQHQ CEO Stephen Rosetta said his company focuses on buying and developing new facilities, rather than converting other spaces for use by life sciences companies.
“The demand is for the new facilities,” said Rosetta, who adds that these companies typically want purpose-built spaces rather than conversions.
Rosetta said that IQHQ investors are largely institutional, sovereign wealth funds and large family offices. CenterSquare Investment Management, for example, invested $158 million in its most recent capital raise, according to a release.
IQHQ is led by Rosetta, who opened Cushman & Wakefield’s San Diego County office and held the position of vice chair. IQHQ executive chair Alan Gold was previously the CEO of BioMed Realty Trust, which sold to Blackstone in 2016 in a deal worth about $8 billion
The National Association of Realtors has once again had its competitive practices called into question — this time by the federal government.
The Department of Justice announced Thursday that it filed a lawsuit against the trade association, alongside a proposed settlement, that takes aim at NAR’s “anticompetitive rules, policies, and practices,” according to a DOJ release.
The proposed settlement from the Antitrust Division mandates that NAR change rules that currently allow brokers to withhold information from prospective homebuyers regarding fees and commissions. The proposed changes must also carry over to multiple listing services associated with NAR.
“If approved, the settlement will enhance competition in the real estate market, resulting in more choice and better service for consumers,” the DOJ release said.
In a statement to Inman, NAR said it disagreed with the DOJ’s characterization and admitted no wrongdoing, but had reached an agreement and “fully resolved” the issues raised. A spokesperson added that the organization remained “focused on supporting our members as they preserve, protect and advance the American dream of homeownership.”
The goal of the settlement is to allow for more transparency — and thus competition — in the real estate market, which could result in more choices and better service for homebuyers. The agreement still awaits approval from the court.
“Home buyers and sellers should be aware of all the broker fees they are paying. Today’s settlement prevents traditional brokers from impeding competition — including by internet-based methods of home buying and selling — by providing greater transparency to consumers about broker fees,” Makan Delrahim, assistant attorney general of the DOJ’s Antitrust Division, said in a statement. “This will increase price competition among brokers and lead to better quality of services for American home buyers and sellers.”
With 1.4 million members, NAR has a wide scope of influence. It establishes and enforces policies for agents who belong to the organization, along with affiliated multiple listing services.
NAR has previously come under fire for its alleged anti-competitive practices, with several antitrust lawsuits filed against the organization in recent years. [Inman] — Raji Pandya
UPDATED, Nov. 19, 7 p.m.: Lionheart Capital principals Ricardo Dunin and Ophir Sternberg have parted ways.
Dunin left the Miami-based real estate development and investment firm to launch Oak Capital, The Real Deal has learned. The separation agreement was finalized Wednesday, Dunin said.
Dunin plans to continue to focus on development and investment, taking a minority ownership in Fortune International Group’s planned $350 million Pompano Beach development. He takes with him a number of properties, including land in Miami’s Little Haiti neighborhood, sites in Fort Lauderdale, and a hotel and residential development in Breckenridge, Colorado. Dunin also owns a 50 percent stake in Lionheart’s office in the Miami Design District, which has been on and off the market over the years, he said.
Lionheart Capital, developer of the Ritz-Carlton Residences, Miami Beach, will keep the remaining units in that project, which was completed last year. Records show 60 condos of the development’s 111 units have sold to date.
Lately, Sternberg has focused on special-purpose acquisition companies, or SPACs. His Lionheart Acquisition Corp. II, a blank check company, raised $230 million to acquire proptech. OPES Acquisition Corp., a separate blank check company also led by Sternberg, announced in June that it would acquire the burger chain BurgerFi.
“It was time to part ways,” Dunin said about him leaving Lionheart Capital.
“Anything that has the Lionheart Capital name on it is no longer mine – for the good and the bad,” he added.
In a statement to TRD, Sternberg wished Dunin “the best of luck” with his new venture.
“After a decade of a successful partnership, our interests have naturally diverged,” Sternberg said. “The opportunity to buy Ricardo’s shares presented itself so I could take sole ownership of Lionheart Capital.”
Dunin has worked on projects totaling $2 billion in the U.S., Caribbean and Latin America, according to a release.
Oak Capital is based in Brickell. Dunin said he will work on residential and commercial investments and acquisitions, and plans to take advantage of distressed opportunities.
He’s also planning to launch Volume Holding Company, a family entertainment centers conglomerate along with Curt Skallerup, former founder and CEO of Altitude Trampoline Parks. The company will lease space in malls across the country and internationally with multiple entertainment concepts under one umbrella, Dunin said.
An earlier version of this story misidentified the SPAC that will be acquiring BurgerFi.
Centrum’s Arthur Slaven and an aerial view of the project (Deerfield Beach City Commission)
Deerfield Beach commissioners approved a zoning change, in a move toward turning an empty lot into a five-story multifamily building with as many as 277 units.
The commission last week voted 3-1 to change 5.7 acres at 201, 221, 231 and 299 North Federal Highway from “commercial” and “residential moderate” to “residential irregular.” The change allows for 48.6 dwelling units per acre at the planned Centrum Deerfield.
The landowner and developer is Centrum Realty, based in Chicago and managed by the Slaven family. Centrum bought the vacant land in 2017 for $3.9 million, according to records.
The development site includes a 29,000-square-foot building built in 1962 and owned by OER Properties Co. The company is run by Greg Rogers and Lisa Ann Bourquin of Palm City, according to records.
Deerfield Beach Mayor Bill Ganz voted against the measure. Vice Mayor Bernie Parness was absent due to illness. Ganz said he has concerns about plan specifics, including the building’s height and its proximity to neighbors.
The commissioners voiced concern over negative effects of additional traffic to the area. However, Dennis Mele, an attorney representing the developer, told the commission that current zoning for the land could allow a shopping center, which could cause greater congestion than a residential building.
Mele said the plan is for studios and one- and two-bedroom apartments. The lack of three-bedroom apartments would limit the number of families who live in the building. The developer will also pay $500 a unit — or $138,500 — into the city’s affordable housing fund.
Officials will have many more opportunities to voice concerns on the project. The developers still face months of approvals from Broward County and state agencies, plus rezoning and site plan approvals, Mele told the commission.
Commissioner Michael Hudack said that development of the lot is inevitable and called a residential building “the lesser of two evils.”
Neighbors of the development site wrote and called into the meeting to voice concerns, including the potential for someone to look down into neighboring yards from the highest stories of the building. Tinka Ellington, a local real estate agent, called into the meeting to voice approval of the project. She said that once finished, the building would provide a pleasant visual for drivers coming from Boca Raton.
The property is not Centrum’s first in South Florida. In July, a company affiliated with Arthur Slaven of Centrum sold a Hialeah CVS building for $10.5 million.
In 2018, the year-old Centrum Bucktown complex in Chicago sold for $50.5 million.
Other proposals for multifamily projects in the area include a 355-unit mixed-use multifamily development in Pompano Beach, and a 79-unit apartment building with ground-floor retail space in west Dania Beach.
Domio’s interim CEO Jim Mrha (Photos via Domio; iStock)
Reports of Domio’s demise have been greatly exaggerated, according to the company’s interim CEO.
In response to a recent report that said the short-term rental company would cease operations and sell its assets, Jim Mrha, Domio’s interim CEO, said that its properties are, in fact, open for business.
But Mhra, who joined Domio in March after spending more than 30 years in the hotel industry, also acknowledged that the startup is in the midst of a “planned financial re-engineering” through a process called an “assignment of the benefit of creditors,” a measure generally considered as an alternative to formal bankruptcy proceedings.
The process includes a “realignment” of the brand’s portfolio of properties, but the “majority of properties will continue to serve our customers, some properties may leave the system, and new properties will be added,” Mrha said.
Founded in 2016, Domio operates apartment-hotels. It leases portions of apartment buildings — or entire properties — furnishes the units and rents them out to travelers.
But the company has struggled in recent months. In August, the Information reported that the startup would rent out its short-term apartments under pseudonyms via Airbnb. After the report, Airbnb suspended all of Domio’s accounts for violating its terms of service.
Domio and Airbnb have since settled the issue, and with listings from the former — now clearly marked as “hosted by Domio” — appearing on Airbnb once again. Airbnb did not immediately respond to a request for comment.
The latest report, also from the Information, said that Domio laid off the majority of its staff earlier this month after failing to raise $10 million in additional capital.
“Unfortunately, conditions precedent to close this round were not achieved,” the company reportedly wrote in a note to its investors. It noted cryptically that “there is a scenario where Domio is able to operate,” but offered no specifics.
Domio currently rents out around 1,000 spaces in Chicago, Miami, Nashville and New Orleans, according to its website. The portfolio maintained a 74 percent occupancy rate in October, Mrha said.
In his email, Mrha said Domio plans to open three new apartment-hotels in Miami, Puerto Rico, and Tulum, Mexico. He did not respond to follow-up questions on specifics related to the ongoing effort to revamp the company’s finances.
The company’s co-founders, CEO Jay Roberts and Chief Strategy Officer Adrian Lam, resigned from their posts and stepped down from the board of directors in September.
Camilo Miguel Jr. and rendering of 4000 Alton Road
Developer Mast Capital can now move forward with its plans for a luxury condo project in mid-Miami Beach.
The Miami Beach City Commission unanimously approved three ordinances tied to the redevelopment of 4000 Alton Road at Wednesday’s commission meeting. The developer agreed to limit the number of units to 175 condos and the height to 85 feet.
Mast Capital, led by Camilo Miguel Jr., had previously sought a height increase to 290 feet for the project near the Julia Tuttle Causeway, but decided against it due to backlash from residents in the community. Though the Miami Beach Planning Board had unanimously voted against the rezoning for a 12 story-tower in August, the board recently recommended approval of the three ordinances that the commission then approved this week on second reading.
The commission approved changing the zoning to residential multifamily from government use for the adjacent 17,860-square-foot plot of land next to the site, which the Florida Department of Transportation sold to Mast Capital.
The developer purchased Talmudic University’s 1.9-acre parking lot and basketball court for $17.1 million in October 2014, eight months after the city agreed to increase the site’s height limit from 60 to 85 feet. In February 2016, Mast Capital launched sales for what was then planned as an eight-story, 78-unit condo called 3900 Alton. Those plans were eventually scrapped.
At Wednesday’s meeting, Douglas Elliman Florida CEO Jay Parker and Miami Real Estate Group broker Andres Asion were among those who spoke in favor of Mast Capital’s latest plans for the site.
Vornado didn’t plan a 23,000-square-foot quadplex at its trophy property, but Citadel’s Ken Griffin changed those plans. In January 2019, he set a U.S. sales record with his $240 million purchase in the building. All the more stunning? The apartment is being delivered as a white box. Griffin has amassed a $1 billion real estate portfolio over the past two years, scooping up pricey properties in Palm Beach, the Hamptons and London. He also set sales records in Miami for a $60 million penthouse, and in Chicago for a $58.75 million condo.
Sting and Trudie Styler’s interest in 220 Central Park South was tabloid fodder for years, and the couple made it official in 2019, closing on a $65.75 million penthouse in the villa portion of the building. At 5,845 square feet, the purchase price worked out to $11,249 per square foot. Before moving into 220 Central Park South, they sold their condo at 15 Central Park West, also designed by Robert A.M. Stern, for $50 million — a nice profit on the $26.5 million they paid in 2008.
Auto dealer Michael Cantanucci was one of the building’s earliest buyers, going into contract on a duplex in March 2015. Cantanucci ultimately paid $38.2 million for the 4,814-square-foot pad in September 2019. Within two months, however, he was ready to trade it in for a unit at JDS Development’s 111 West 57th Street.
Billionaire Daniel Och’s move to Miami last year may have been a hedge against New York taxes, but his $92.7 million penthouse buy at 220 Central Park South was anything but. In January 2019, Och closed on the 9,800 square-foot unit, paying $9,463 per square foot. (He also bought a smaller staff unit.) Och, who founded Och-Ziff Capital Management in 1994, previously lived at 15 Central Park West. His condo there is listed with Corcoran’s Deborah Kern — coincidentally, the broker who led sales at 220 Central Park South — for $57.5 million.
As CEO of Paramount Group, Albert Behler has made a career out of buying and selling real estate. In 2018, he struck a deal to pay $33.5 million for a 4,148-square-foot spread at 220 Central Park South. Arriving relatively “late” to the party, Behler got a $1 million discount (or 2.9 percent) from the offering plan price. Property records show Behler previously lived at 1080 Fifth Avenue, a white-glove co-op where he spent at least $9.3 million to combine several units.
Hong Kong power couple Peter Mok Fung and Sun Min made a fortune in the trading business. And that’s just what they did in 2019, swapping a $15 million condo at 15 Central Park West for a $64.15 million pad at 220 Central Park South. Records show they went into contract on the 6,591-square-foot condo in March 2015. But two years prior, Min was convicted of insider trading and fined $3 million. Regulators said that shortly after closing on the 15 Central Park West pad, the couple bought shares in a Chinese juice company. When a rumored deal with Coca-Cola caused the stock to jump, they sold their stake and collected a windfall.
The early backer
Decades before 220 Central Park South was a blip on the radar, real estate investor David Mandelbaum wrote a $250,000 check to an unproven developer named Steve Roth. Fast-forward to 2019, when Mandelbaum’s gamble paid off; he snagged a condo at Roth’s luxury tower for $23.4 million. Mandelbaum, a longtime member of Vornado’s board, also brought his family into the fold: According to the REIT’s regulatory filings, Mandelbaum’s brother scooped up a 220 Central Park South unit for $16.1 million.
Hardware exec Eric Smidt knows good finishes. In November 2019, the Harbor Freight Tools co-founder paid $61 million for a 47th-floor, 6,591-square-foot unit with five bedrooms. The purchase price worked out to $9,255 per foot. (He also bought a staff unit for $1.8 million.) Smidt’s estimated net worth is $4.7 billion, and he also owns a $40 million Beverly Hills estate dubbed the Knoll.
Did construction mogul Renata de Camargo Nascimento know Vornado spent $5,000 per square foot to build 220 Central Park South? If so, that could justify the $30.2 million — or $8,153 per foot — she paid for a 33rd-floor unit in January 2019. Nascimento, worth an estimated $3 billion, purchased her condo through an LLC. She went into contract in 2015, agreeing to pay above the original price of $29.65 million.
Rendering of the Parks at Delray with Key International founder Jose Ardid and 13th Floor managing principal Arnaud Karsent (S+A via Key International)
Delray Beach board members gave partial initial approval to a proposed mixed-use development with about 600 residential units on the site of Office Depot’s former headquarters.
The Delray Beach Site Plan Review and Appearance Board unanimously approved changes to a site plan, landscape plan and architectural elevation for the residential half of the planned Parks at Delray development at Old Germantown Road and Congress Avenue.
Board member John Brewer recused himself from the vote, saying that his brokerage, Atlantic Commercial Group, might work with the developers.
The plan calls for 76 townhouses and 524 apartments with two swimming pools, two dog parks, a playground and a clubhouse. The project could also feature up to 70,000 square feet of offices; 250,000 square feet of retail and 80,000 square feet of restaurant space.
The joint venture developing the project includes 13th Floor Investments, Key International, CDS International Holdings and Wexford Capital.
13th Floor, led by managing principal Arnaud Karsenti, is based in Miami. Key is also based in Miami and led by the Ardid family. CDS International is led by Bill Milmoe. And Wexford, which has offices in West Palm Beach and Stamford, Connecticut, was co-founded by Chairman and Chief Investment Officer Charles Davidson and President Joseph Jacobs.
The joint venture bought the former Office Depot headquarters for $33 million at the end of 2018, with plans to redevelop the property into one of the biggest projects in the city’s history.
Other proposed multifamily developments in Delray Beach include Echelon, a three-story, 14-unit condominium on Ocean Boulevard, and a 292-unit apartment complex with 73 workforce housing units just west of I-95 in Delray Beach.
The housing market continued to roar with 6.85 million homes sold last month, but the shrinking pool of available homes has driven up prices.
That number represented a 4.3 percent increase compared to September’s 6.5 million homes sold, and an annual jump of nearly 27 percent, according to the National Association of Realtors’ monthly report.
The fifth consecutive month of gains in existing home sales comes as supply hit an all-time low with just 1.42 million properties for sale. At the current sales pace, all existing inventory would be sold in 2.5 months. That’s a drop of nearly 20 percent compared to the 1.77 million homes on the market a year ago.
Lawrence Yun, NAR’s chief economist, noted that despite unprecedented levels of optimism from homebuilders and a jump in housing starts, a new wave of inventory has yet to hit the market in a meaningful way. He called for new ideas to increase U.S. housing stock.
“All measures, such as reduction to lumber tariffs and expansion of vocational training, need to be considered to significantly boost supply and construct new housing,” he said in a statement.
As a result of diminished inventory, prices continued to climb: The median sales price nationwide is now $313,000, a more than 15 percent jump from last October’s $271,100.
Despite higher price tags, homes sold at a fast and furious pace. NAR’s report found the typical home remained on the market for 21 days, with 72 percent of October sales having been on the market for under a month.
Yun said the surge in existing homes sales has now offset the losses the housing market took in the initial months of the pandemic, which he expects to continue.
“With news that a Covid-19 vaccine will soon be available, and with mortgage rates projected to hover around 3 percent in 2021, I expect the market’s growth to continue into 2021,” he said in a statement.
But it’s increasingly apparent that the housing market is being driven by wealthier buyers unaffected by job or income loss due to the pandemic, while others have been locked out of homebuying.
The housing market’s K-shaped recovery — where high earners recover faster than lower-income ones — could have dire implications for the broader economy and exacerbate inequality, economists warn.
The CEO of AmeriSave Mortgage Corp. paid $8.2 million for a waterfront Miami Beach teardown next door to his mansion.
Records show Patrick Markert bought the home at 6050 North Bay Road from 6050 North Bay Road LLLP, a Florida partnership that links to luxury homebuilder Bart Reines.
AmeriSave Mortgage Corp., founded in 2002, is an online mortgage lender based in Atlanta.
Markert already lives next door at 6020 North Bay Road, which he bought in 2014 from actor Matt Damon for $15.4 million. It’s a 9,500-square-foot estate with multiple buildings, totaling nine bedrooms and 10 bathrooms, records show.
Bart Reines flipped the home at 6050 North Bay Road, after purchasing it for $6 million in July from Christopher Findlater.
Nelson Gonzalez with EWM Realty International represented both sides in the latest deal.
The 3,678-square-foot house is on almost half an acre of land along Biscayne Bay. The home, originally built in 1951, has four bedrooms, four bathrooms, a two-car garage, a pool with a cabana and a dock with a boatlift.
In September, Reines bought a LaGorce Island home for $6.8 million. Last year, he built a Miami Beach home that sold for $16 million.
North Bay Road waterfront properties have sold for sky-high prices this year, including Shutterstock founder Jonathan Oringer’s record-breaking $42 million purchase of a waterfront mansion. Other sales on North Bay Road reached the double digits, including hospitality mogul David Grutman’s purchase of a home for $10.3 million and Keith Menin’s sale a waterfront home for $23.5 million.
As Macy’s grapples with a net loss of $91 million in the third quarter, the brand is reimagining what the future of its business may look like.
One possible answer: fulfillment centers.
As two of its stores went “dark,” or closed to in-person shopping, they were converted into processing centers for online orders. The stores, in Colorado and Delaware, will be used to fulfill online and curbside orders.
“We’re experimenting with that,” Macy’s CEO Jeff Gennette said on an earnings call Thursday.
Other brands, including Whole Foods, are testing out dark stores as shoppers have avoided in-person retail due to the pandemic.
Overall, Macy’s recorded $3.9 billion in net sales, below the $5 billion it racked up during the same time last year. Still, its earnings were above what it recorded in the second quarter, when the retailer suffered a net loss of $431 million.
The company’s sales were largely driven by an increase in e-commerce, which grew by 27 percent over the same time last year. Online sales made up 38 percent of the company’s total sales in the third quarter.
The retailer operates 764 stores across its Macy’s, Bloomingdale’s and Bluemercury brands, but seven locations have closed between the second quarter and now.
Gennette also noted that while Macy’s neighborhood locations are seeing customers return, their flagships are struggling, largely due to the lack of tourism and office workers.
“When you look at Herald Square, you look at 59th Street at Bloomingdale’s, State Street, Union Square — they are our most challenged,” Gennette said.
Other stores are similarly reckoning with the prominence of e-commerce and how to fulfill online orders. On Wednesday, Target announced that it would take a different approach: opening more stores to fulfill digital sales.
Major Food Group’s Jeff Zalaznick and the Design District location (iStock)
New York restaurateur Major Food Group is expanding to Miami, with three locations planned in the Design District, South Beach and Brickell, The Real Deal has learned.
The company, with concepts that include Carbone, Santina, The Grill and Parm, signed a lease for the space on the northeast corner of 41st Street and First Avenue in the Miami Design District, owner Jeff Zalaznick confirmed to TRD.
Craig Robins’ Dacra owns the building, which is catty-corner to the Museum Garage.
Major Food Group also signed a lease in the South-of-Fifth neighborhood of Miami Beach, and one in Miami’s Brickell area. Zalaznick said the company hasn’t decided which concepts will be in which site.
“We’re very focused on the Miami market and we’re hopefully going to be starting to open restaurants in the next four to 12 months,” he said. Zalaznick declined to provide further details about the locations.
Major Food Group has 21 restaurants in New York, Las Vegas, Hong Kong and Tel Aviv, according to the company’s website. Its partners include Mario Carbone and Rich Torrisi. Most recently, Major Food Group opened The Grill, The Lobster Club and other food and beverage outlets at The Seagram Building in New York.
In the Miami Design District, the restaurant group will be opening in a space across the street from a store Tesla is building, and on the same street as Chanel, Alexander McQueen, Stone Island, Maison Margiela and Bottega Veneta.
Robins, who has led the transformation of the district into a high-end mixed-use retail and dining destination, said that it is significant that “so many companies are moving forward” with their opening plans in the neighborhood during the pandemic.
Federal Reserve chairman Jerome Powell (Getty; iStock)
Mortgage balances rose in the third quarter as foreclosure filings fell, according to the Federal Reserve Bank of New York.
Borrowers took out $1.05 trillion in home loans, according to a new report. The level of mortgage originations, which includes both purchases and refinancing, was the second highest seen since 2000, the Wall Street Journal reported.
Donghoon Lee, a research officer at New York Fed, said originations “continued on their upward trend as homeowners continue to take advantage of the low interest-rate environment.”
Total mortgage balances hit $9.86 trillion — up $85 billion from the second quarter, the report said.
Bain Capital’s Kavindi Wickremage and Magnolia Capital’s Maxwell Peek (Photos via Bain; Magnolia)
Bain Capital Real Estate and Magnolia Capital are teaming up to acquire and renovate multifamily assets.
The joint venture will deploy $900 million on behalf of investors to purchase garden-style properties built between 1975 and 2000 with a middle-income renter profile, in what the companies deem well-located areas — i.e. suburban areas outside of Gateway cities. It will then pour money into fixing up those properties.
Middle-income tenants were largely buffered from the employment losses that low-income renters suffered due to the pandemic, but still fit into a renter-by-necessity profile, making the sector a safer bet in an economic downturn.
“Our partnership with Magnolia Capital is rooted in our thesis that there is a long-term need for middle-income housing, particularly in growing U.S. markets where housing affordability continues to worsen,” said Kavindi Wickremage, managing director at Bain.
The companies expect the joint venture to bring in returns in the low to mid teens for its investors. That’s typical of value-add strategies, where a property manager buys an asset and makes improvements or repairs in order to increase cash flow. For Bain and Magnolia, improvements could include interior renovations, along with exterior and amenity space upgrades.
Magnolia, which is based in Chicago, owns and manages 6,600 properties, most of which are concentrated in the Sunbelt region, including holdings in Dallas, Atlanta, and Raleigh and Charlotte in North Carolina. The firm has $2 billion in assets under management.
Bain Capital Real Estate is the real estate arm of Bain Capital, which was co-founded by U.S. Senator (and former Republican presidential candidate) Mitt Romney. Since 2018, it has invested over $4 billion across multiple sectors. In 2019 it formed a joint venture with SKW Funding to target $500 million of distressed real estate debt as part of its $3 billion debt fund.
At the time, SKW Funding principal Ayush Kapahi said that regulatory changes to the multifamily sector could lead to distress.
But any distress is still rippling under the surface. Overall, the sector has become a safe-haven investment during the pandemic, despite initial concern over rent collections. Investors including Kushner Companies are looking to double down on garden-style apartments in the Sunbelt region.
Boca Raton Municipal Golf Course with GL Homes’ Misha Ezratti, head of GL Homes and Boca Raton Mayor Scott Singer (Google Maps, Lila Photo via GL Homes, Twitter)
GL Homes’ yearslong attempt to buy a golf course owned by the city of Boca Raton, and build more than 500 homes, will take another year.
Last week, Boca Raton city council members unanimously approved delays to the deal for the 190-acre golf course on Glades Road, west of Florida’s Turnpike.
The commission agreed to the 12th modification to its agreement. The inspection period is now delayed to Feb. 28, 2021, allowing GL Homes to address a lawsuit over a 400-foot communications tower proposed for the site. It also moves the closing date to Oct. 31, 2021.
As part of a prior agreement with GL Homes, the delays increased the homebuilder’s purchase price by an extra $250,000, bringing the total price to $65.75 million. The commission will still need to vote on the sale, easements and other details related to the deal at a future meeting, according to documents provided to the commission.
GL Homes, based in Sunrise and led by Misha Ezratti, received approval in 2018 from Palm Beach County to build more than 550 homes on the site.
The city of Boca Raton had approved the sale of the Boca Raton Municipal Golf Course to GL Homes in 2017.
In August 2019, Glades Road Self Storage LLC sued the Palm Beach County Commission, Palm Beach County and GL Homes over the 400-foot tower, according to Palm Beach County court records.
Glades Road Self Storage, an affiliate of Sunshine Self Storage, alleged that the county inappropriately approved the communications tower near the golf course, that GL allegedly failed to meet all the criteria for waivers related to building the tower, and that the county allegedly failed to consider the effects of the tower on nearby property owners like Glades Road Self Storage.
Glades Road Self Storage owns property at 20555 Boca Rio Road, which houses a self-storage facility and 511-foot communication tower. The lawsuit is still open.
Meanwhile, earlier this year GL Homes was the sole bidder for development rights along the Lake Worth Drainage District, which could give the homebuilder the ability to build an additional 313 homes in the Agricultural Reserve.
Private equity giant Blackstone announced in June that it would acquire a 49 percent stake in a portfolio of television and film production spaces in Los Angeles County.
Blackstone’s bet on Hudson Pacific Properties’ $1.65 billion portfolio signaled that soundstage space, as the industry calls it, had entered the big leagues. During HPP’s last quarterly earnings call, CEO Victor Coleman said Blackstone’s acquisition “provides validation to the stock market” for his firm’s decision to “assemble the largest collection of independent soundstages in the United States.”
It’s not just Blackstone. Institutional investors are increasingly entering the soundstage market, encouraged by healthy demand for production space from such investment-grade streaming companies as Hulu and Netflix as well as from lumbering entertainment behemoths such as Disney.
Hackman Capital and Square Mile Capital, for example, also made a recent soundstage play with a $500 million acquisition of Silvercup Studios in New York.
The pandemic has only driven up demand for soundstage space, in part because streaming services need to keep up with pandemic-induced appetites for content, according to a recent CBRE report. That surely figured into Blackstone’s calculus on the HPP portfolio, where Netflix accounts for more than a third of all studio space rent.
Video streaming has surged 74 percent over its level in 2019, when the top five streaming companies dropped $25 billion on new productions, according to the report. The growth in streaming has also fueled gains in entertainment-related employment over the last decade.
North America has 11 million square feet of soundstage space, mostly concentrated in Los Angeles, Atlanta and New York City. Los Angeles has about half of it, with 5.5 million square feet. Atlanta and New York follow, with 1.8 million square feet and 1.5 million square feet, respectively, according to the report.
Occupancy at spaces across North America has been north of 90 percent for several years, and the biggest markets are much more expensive because demand outstrips availability. Studios have alternatives, such as British Columbia in Canada (1.2 million square feet of soundstage space) and Louisiana (700,000 square feet).
Production studios also have sought space in emerging North America markets because of cheaper labor and favorable tax policies. Tax credits are easier to nab in emerging markets. Georgia, British Columbia and Ontario each offer transferable or refundable tax credits to film productions with no cap on the total tax write-off, according to the report. New York has a generous tax credit, at $420 million a year, but it is not unlimited.
Heightened demand for soundstage space is also driving many studios to rent “transitional” industrial spaces, according to the report. Over the last decade, conversion of industrial spaces into production facilities has grown more common.
Soundstage space is similarly versatile, which is one of the chief reasons for investing in it, according to Square Mile Capital’s Craig Solomon.
“We do not buy an asset that we don’t look to the alternative uses of that asset,” Solomon said in an October interview with The Real Deal. “It’s not expensive to reposition.”
Steven Roth and 220 Central Park South, which has effectively created its own tier of the luxury market.
If not for 220 Central Park South, Vornado Realty Trust’s recent financials would have been a horror show.
Vornado, one of New York City’s biggest landlords, recorded a $107 million loss in the third quarter on its prime retail portfolio, once-prized Fifth Avenue and Times Square properties that have been paralyzed by the pandemic. It also took significant hits on the shuttered Hotel Pennsylvania and other investments.
But thanks to a flurry of closings at 220 Central Park South, its ultra-luxury condo at the foot of Central Park, the REIT closed out the quarter comfortably in the black.
Even as the high-end condo market has been sunk by oversupply, a waning foreign buyer pool and a slowing economy, 220 Central Park South has floated above it all, closing high eight-figure deals, snagging boldface buyers and effectively creating its own single-project luxury market. It is the clear heir to 15 Central Park West as the city’s new alpha residence. It holds the record for the country’s priciest residential transaction. And with $1 billion of realized profits, it’s arguably the world’s most successful condo.
Roth said in his annual letter to shareholders in March that the project’s performance relative to its rivals was “sort of like winning the Kentucky Derby by 10 lengths.” But 220 Central Park South has been less horse race and more odyssey, a 15-year journey that encapsulates the best and worst of the blood sport that is New York real estate.
Buyout battles with tenants, siege warfare with rival developers, a lavish construction purse courtesy of a foreign lender, guerrilla marketing and record-breaking deals that highlighted the city’s extreme inequality and its status as a magnet for the global superrich: The tower has seen it all.
Veronica “Ronne” Hackett’s first job was ideal, albeit unusual, training for a career in New York dealmaking: She tracked troop movements and rice shipments for the CIA during the Vietnam War.
“She had a background of not trusting anybody,” said David Perry, who for 11 years was director of sales at Hackett’s firm, the Clarett Group. “And she was usually right.”
After the CIA stint, the native Floridian moved to New York and worked as an assistant at a small investment brokerage while taking night classes toward an MBA at NYU. She then became one of the first female employees in Citibank’s real estate division.
“I didn’t know what a mortgage was,” she recalled in a 2006 appearance on the real estate talk show “The Stoler Report.”
She learned, moving to Chemical Bank in the thick of the 1970s mortgage REIT crisis. She then jumped into development, running marketing and finance at George Klein’s Park Tower Realty. In 1999, Hackett formed the Clarett Group with Neil Klarfeld, a Park Tower colleague who died in 2004. Backed by financial giant Prudential, the firm went shopping.
“Prudential gave us a blank check to do development deals,” said Perry.
In 2005, a potential deal came along: a 20-story rental building at 220 Central Park South.
The white-brick building was drab, the location anything but. Nestled right on the park between Seventh Avenue and Columbus Circle, a new tower there would offer the best views in the city — even better than those from Zeckendorf Development’s much-anticipated 15 Central Park West.
“The view out the front was over Central Park,” said Joel Diamond, a music producer who rented the penthouse for $1,200 per month in 1971 and lived there for two decades. “It was absolutely magnificent.”
The property was owned by the estate of Sarah Korein, a Hebrew teacher-turned-notoriously tough investor with “bare-knuckle tactics cloaked by grandmotherly charm,” as the New York Times put it in her obituary.
The 124-unit building was home to 47 rent-stabilized tenants and 40 percent vacant. Clarett wanted to tear it down and replace it with a 41-story luxury condo, but it had a chicken-and-egg problem.
To get the state’s blessing to demolish a building with rent-stabilized tenants, Clarett had to show it had the funds to immediately kick off the redevelopment. But without a legal green light, the funds would be impossible to get.
“We couldn’t do it with a loan,” Perry recalled. “We needed to have a financial partner that could write a check off of their line.”
The rental property at 220 CPS. Vornado and Clarett bought it for $136.6 million in 2005
Clarett’s chief investment officer, Warren Fink, was a connected industry veteran who knew Michael Fascitelli and Steven Roth, the Vornado bosses dubbed “the Gangstas of Brick” by the New York Post. By then, Vornado had a market capitalization north of $10 billion and had developed the luxury condo One Beacon Court atop its Bloomberg Tower in Midtown East.
Fink brought Vornado to 220 Central Park South as a 90-percent equity partner, and the joint venture was christened Madave Properties. In August 2005, it closed on the acquisition for $136.6 million. Then came the hard part.
Clarett began buying up air rights from neighboring properties, including from Ian Reisner at 230 Central Park South, and pursuing buyouts of the building’s tenants. Many had lived there for decades and were aghast at the idea of leaving.
“Why should they tear up a beautiful building like this?” Marjorie Cantor, a retired Fordham University professor who lived at 220 Central Park South for 27 years, told the Times.
“It’s a scorched-earth policy,” added tenant lawyer William Gibben. “If this gets done, it is open season on every building in the city.”
Hackett, however, saw it differently. “The bigger issue,” she countered, “is how to deal with obsolete buildings in the city.”
Vornado deployed its huge war chest in the battle against the building’s residents. “There was so much money involved,” recalled Jack Lester, who represented a group of tenants who sued in 2007 to block demolition. “The tenants were put under a great deal of pressure.”
In 2008, Justice Paul Feinman said the state might need to conduct an environmental review to assess how wealthy buyers would impact the “existing community character,” but the ruling was overturned on appeal.
The legal battle dragged through the financial crisis. Finally, in December 2010, the developers agreed to pay each of the remaining tenants between $1.3 million and $1.6 million. Among them was Corcoran Group agent Leighton Candler, who in 2012 would broker Michael Dell’s record-breaking $100.5 million purchase at One57.
Lester recalled tense negotiating sessions with Hackett. “In person, she was pleasant enough,” he said. “Behind the pleasant façade was a sword ready to strike at the heart of the tenants.”
With the residents finally out, Vornado and Clarett were eager to raze the building. But they had to deal with one final nuisance: a savvy and preternaturally patient developer named Gary Barnett.
The Trojan Horse
Champion Parking, a third-generation family business founded by Sam Rosenblatt in 1949, operates 39 locations across New York. In 2005, one of them was a 44-space basement garage at 220 Central Park South.
That summer, Champion’s principals, Kenneth and Gary Rosenblatt, were approached by representatives from Barnett’s firm, Extell Development.
Barnett, a diamond dealer-turned-developer, had a lot at stake. He had recently bought the first parcel in an assemblage for a potential supertall condo between West 57th and 58th streets, hoping the park views would command bumper prices. When his rivals made their play for 220 Central Park South, he feared their upcoming tower would block the views from his.
He made his move, buying a 49 percent stake in the Rosenblatts’ garage lease, which ran until 2018. He paid the Rosenblatts many multiples of what the lease was worth, but to him, it was an invaluable bargaining chip.
Barnett gave a different rationale in an affidavit from a lawsuit Extell brought against Vornado. “I wanted to have parking available for my nearby projects,” he said. He also bought a small development parcel on 58th Street (“nothing but a little sliver of land,” as one source put it) that was in the middle of Vornado’s development site.
According to a person familiar with the events, Barnett hired an executive from Clarett, Pamela Samuels, giving him valuable insight into 220 Central Park South.
Then he waited.
By 2011, the recession had left Clarett unable to secure financing for its projects. Vornado indicated to the firm that given the additional delays and costs, Clarett’s promote, or the premium paid to the sponsor in a development project, was essentially wiped out. Vornado wrote the firm a check for its troubles and took full control of 220 Central Park South.
“The golden rule is: He who has the gold makes the rules,” said a source familiar with the partnership. “[Vornado] had the money, so they could keep going.”
But a final obstacle remained: the garage. If it stayed put, the redevelopment would be more complicated and expensive, and Barnett knew it. Vornado began negotiating with Extell to close the garage, and began preparing to tear down the building above it.
“We think it would show very poor judgment to attempt to demolish an occupied building, especially when there is no possibility of construction for a number of years,” an Extell spokesperson told the Wall Street Journal in April 2012, implying that a tower could not be built until the garage’s lease expired in 2018. “God forbid something bad happens for no purpose.”
Vornado informed the Rosenblatts that they were in default on the garage lease, setting the stage for an eviction. It cited a Department of Buildings violation it received that stated the garage was not being primarily used as parking for the building’s residents.
In fact, the violation was engineered by Vornado, court papers show. The company first informed DOB of the transgression in the summer of 2011 and even followed up later.
“The history of this DOB violation is curious in that its recipient, Madave, asked for it,” Judge Donna Mills wrote in an opinion on the eviction case.
Extell sued Vornado in 2012, alleging the developer was using sham tactics to force it out.
“They take away our clients, they empty out the building, and then say, ‘You’re in violation because you have an empty building,’” Barnett said to the Journal after the suit was filed. He asked the court for a Yellowstone injunction, a proceeding by which a tenant being threatened with termination is allowed to stay, provided it addresses the alleged breach of lease. It was a stalling tactic, and it worked: In July 2013, the court granted the injunction.
That October, Vornado blinked. It agreed to pay Extell $194 million for its tiny West 58th Street parcel and additional air rights. The deal came to a staggering $1,400 per square foot, more than twice the going rate for air rights in the area.
The developers also agreed to unusual design adjustments for their competing towers: Vornado would shift its project slightly to the west, while Extell would move its planned luxury condo on West 57th Street — what would eventually become Central Park Tower, the city’s tallest residential building — to the east. Extell would also cantilever its skyscraper 28 feet to the east over the landmarked Art Students League building, a move the Times’ architecture critic Michael Kimmelman likened to “a giant with one foot raised, poised to squash a poodle.”
“I could just see [Vornado] trying to browbeat Gary, and Gary just being immovable,” said Charles Bagli, a veteran real estate reporter who covered the saga for the Times.
Barnett downplayed the ransom he received.
“You think [the price] is high,” he told The Real Dealin 2014. “But it’s not high at all.”
“I’m in the suck-up business to the Bank of China.”
That’s how Roth characterized his relationship to his favorite lender on a panel hosted by the China General Chamber of Commerce in 2015. The previous year, after flirting with a Qatari sovereign-wealth fund, Vornado had scored a $600 million loan from the Bank of China, giving it the funds to finally begin erecting its tower. The overall cost of capital on the $1.5 billion project, Roth said, was just 1.4 percent, far lower than his rivals paid.
“We had the ability to over-improve it, make it great, make it so that it really was at the tippy-top of the luxury market, and we did that,” Roth said. When Barnett, who was also on the panel, suggested that his upcoming Central Park Tower might be the better building, Roth said, “Don’t be jerky — it’s not even close.”
A few months after the event, Bank of China topped up the loan with a further $350 million.
Although 220 Central Park South was initially conceived as a glassy tower designed by Pelli Clarke Pelli, by late 2013 the developer had decided to go with Robert A.M. Stern, designer of the record-breaking 15 Central Park West, which the real estate blog Curbed immortalized as“the Limestone Jesus.”
Stern’s firm hewed closely to a proven formula that combined silvery Alabama limestone, set-back terraces and a fluted crown with ornamental cornices. With just 118 units, the development would comprise two structures: a 70-story tower and an 18-story “villa” annex facing Central Park.
Even by Billionaires’ Row standards, 220 Central Park South was a study in opulence. In late 2015, with the shell of the building rising nine stories, Roth disclosed that Vornado was spending an unheard-of $5,000 per square foot on construction: $1,500 for the land and $3,500 for hard, soft and financial costs.
“The building has the largest loss factor of any building of its type, intentionally,” Roth said, touting interiors by Thierry Despont and an amenity package that included multiple lobbies and a porte-cochère. When completed, the building would also have a wine cellar, juice bar, 82-foot saltwater pool, basketball court and golf simulator, as well as a private 54-seat restaurant operated by Jean-Georges Vongerichten.
“Leaving taste aside, you really can’t spend more,” said one rival luxury condo developer.
Even the building’s construction signage — with elegant silver lettering set on lush boxwood — replaced the industrial signs favored by rivals.
Architecture nerds and skyscraper enthusiasts breathlessly chronicled every stage of development. In 2014, Curbed and New York YIMBY published unauthorized renderings of the building. “They were the most tight-lipped of any development site I’ve covered,” said Nikolai Fedak, founder of New York YIMBY.
The first official depiction of the building was revealed in the developer’s own full-page advertisement for the property in the 2016 Real Estate Board of New York gala handbook. That same year, a New Jersey teen broke into the construction site and captured footage of himself hanging from the scaffolding. It went viral.
But the allure was mostly lost on the workers toiling away at 220 Central Park South and its counterparts.
“I don’t give a rat’s ass,” one told TRDin 2015. “I’m glad they’re building stuff and I have a job,” said another.
In May 2015, Roth dropped a bombshell on an earnings call: Vornado had sold $1.1 billion worth of condos at 220 Central Park South — or one-third of the building — just six weeks after launching sales.
“Acceptance by brokers and buyers has been extraordinary and unprecedented,” he said.
One could be forgiven for asking: What launch? What brokers? What buyers?
Sales kickoffs for luxury condos are usually part debutante ball, part bar mitzvah, accompanied by PR blitzes that include a teaser website and videos, rendering reveals and parties with top-shelf Scotch, champagne and canapés. Developers often spend millions on the sales offices alone.
Vornado’s sales office was a simple room inside the REIT’s headquarters at 888 Seventh Avenue, complete with trappings such as a couch, table and computer screen.
“There’s never been something sold without being sold before,” said Anna Zarro, a new development consultant who was Extell’s sales director from 2016 to 2018.
The years of delays Vornado endured with tenants and Barnett proved serendipitous, as other projects with Central Park views worked the ultra-luxury market into a frenzy. Extell had launched One57 in 2011, with Macklowe Properties and CIM Group’s 432 Park Avenue debuting the following year. Billionaire Michael Dell inked a $100.5 million deal at One57, and when he closed on it at the end of 2014, the market took notice.
Vornado’s building was the next big thing, launching at the top of the market. It was quickly becoming the new nexus of wealth and power. For a time, though, that wasn’t clear.
By early 2016, Vornado stopped updating Wall Street on sales at the project for “competitive reasons,” leaving brokers and their buyers in the dark about what was available.
Savvy brokers and lawyers obtained floor plans and prices from the building’s offering plan, a kind of prospectus filed with the state’s attorney general. Real estate reporters, hunting for crumbs of information about the building, obtained the plan via the Freedom of Information Act. They trekked to the attorney general’s office at 120 Broadway and photocopied sections from the tome.
Initially, the plan listed 112 units ranging in price from $12 million to $60 million. Later, Vornado released the six priciest units for $100 million to $250 million.
“Given how hard it is to assemble that kind of real estate, these buildings are worth the money that’s being charged,” said JDS Development Group’s Michael Stern, who is finalizing a supertall condo nearby at 111 West 57th Street. “I get what goes into it.”
(Click to enlarge)
To sell the building, Roth turned to Corcoran Sunshine Marketing Group, Corcoran’s new development arm and successor to the eponymous marketing firm started by Louise Sunshine. The actual business of selling fell to Deborah Kern, a Brit who previously led sales at Harry Macklowe’s 737 Park Avenue. Her brand of outreach was akin to a discreet tap on the shoulder, mostly high-level phone calls placed to the kind of buyers Roth wanted.
Most brokers never saw the building’s sales office, where Roth would drop in to meet prospective buyers. Douglas Elliman’s Jacky Teplitzky said the Vornado chair grilled two of her clients, a couple, not just about their finances, but also their background and personalities.
“He [was] basically hand-picking the buyers in his building,” she said in 2016.
“The marketing strategy was Steve’s Rolodex,” noted a competing developer. “The bet was that he could curate a country club of like-minded people.”
The vetting process, part of the lore of New York’s toniest co-ops, was a first for a condo, but it made the building more desirable.
“Even if you had the money, it wasn’t guaranteed you could get a visit,” said Elliman’s Richard Steinberg.
Soon, the names of possible buyers trickled out, including Sting and his wife, Trudie Styler, and hedge funder Ken Griffin, who was rumored to be buying the top penthouse.
The vibe of Central Park South, with its horse carriages and hot dog vendors, wasn’t for everyone. R New York’s Jeffrey Fields had one client back out of his contract in favor of Zeckendorf’s 520 Park Avenue, a 35-unit building where prices started at $18 million.
“When you’re spending $60 to $70 million and you walk out on Central Park and it smells like horse shit, you wonder if it’s where you want to be,” Fields said.
Roth could afford a few naysayers. Demand was so intense that Vornado raised prices six times in the first year of sales, and a dozen times between 2015 and 2018.
A luxury broker put it this way: “You didn’t go there because of the deal you were getting. You went because you wanted to be part of the club.”
In October 2018, five years after breaking ground and 13 years after acquiring the site, Vornadosent out the first closing notices to buyers. Great Lawn Holdings, an anonymous LLC that paid $14.6 million for a three-bedroom, three-bathroom unit on the 24th floor, was the tower’s first closing.
Rival developers kept close tabs on the building’s sales, hoping it would give a boost to their projects.
“Any success 220 had was a rising tide,” said Zarro, who led sales for Extell’s Central Park Tower, which has 20 condos priced at or above $60 million. “When you get into such a small market sector, you want to see wins even if they’re not directly yours, because they bode well.”
Once closings began, Roth’s hand-picked purchasers came to light. Many were wealthy domestic buyers, such as car dealer Michael Cantanucci, who shelled out $38.2 million for a duplex, and Harbor Freight Tools CEO Eric Smidt, who paid $61 million for a five-bedroom.
(Click to enlarge)
Some came from New York’s finance and real estate worlds, including Ofer Yardeni, CEO of Stonehenge NYC; Albert Behler, the CEO of Paramount Group, who paid $33.5 million for a 35th-floor unit; and Richard Leibovitch, founder of Arel Capital, who paid $26.2 million four floors down.
But the vast majority of buyers used LLCs that shielded their identity from the public, among them the acquirer of a $99.9 million duplex that sold for a stunning $12,164 per square foot.
Other big-ticket deals included Sting and Styler’s Villa penthouse, for which they paid $65.7 million, or $11,313 per square foot. Daniel Och, founder of Och-Ziff Capital Management, snapped up a 9,800-square-foot penthouse for $92.7 million, or $9,446 per square foot. Sting and Och previously bought condos at 15 Central Park West, which was “the first building that captured the imagination of the helicopter people,” said Michael Gross, whose “House of Outrageous Fortune” chronicled the record-breaking building. Vornado’s project continued the tradition, he said.
“These people don’t want to be on the board of the Met,” Gross said. “They want their own museums.”
The pièce de résistance came in January 2019, when Griffin closed on a 23,000-square-foot quadplex for nearly $240 million, shattering the record for America’s priciest residence. Though the price was untethered from the rest of the market, brokers were elated to see the long-rumored deal culminate.
The sale also stirred up class warfare in a city already marked by extreme wealth disparity.
State Sen. Brad Hoylman, a Manhattan Democrat, used the event to reintroduce a bill for a pied-à-terre tax on second homes.
“A $238 million purchase puts things in perspective,” Hoylman told the Times in February 2019. Mayor Bill de Blasio, who ascended to City Hall on a “tale of two cities” message, sided with Hoylman, as did City Council Speaker Corey Johnson. City Comptroller Scott Stringer estimated the second-home tax could generate $650 million annually to repair the city’s crumbling subways.
“It’s a rounding error for the people who own these expensive part-time apartments,” Stringer said at the time.
Developers and brokers saw the tax as an existential threat. In March 2019, William Zeckendorf headed to Albany with Patrick Jenkins, a lobbyist who was a college roommate of Assembly Speaker Carl Heastie. Zeckendorf cited his own analysis, which found that while a pied-à-terre tax might generate up to $370 million, that windfall could be dwarfed by the losses from wealthy out-of-towners leaving New York.
Roth, who had described New York’s loss of Amazon’s proposed HQ2 campus last year as “one of the stupidest damn things I’ve ever seen,” said the proposed pied-à-terre tax was almost as bad.
“Those who fan the fire of class warfare and those who tear down should be put on double secret probation,” he wrote in his 2019 letter to shareholders.
Meanwhile, his company kept cashing in. By July 2019, the developer said it had closed 38 units valued at $1.03 billion. That allowed it to repay Bank of China, so proceeds from remaining sales would flow directly “into our treasury,” Michael Franco, Vornado’s president, said during an earnings call.
By September of this year, Vornado had sold 95 units for $2.8 billion, and its net gain ticked past $1 billion.
That kind of success would normally breed several copycats. But there’s reason to believe that won’t happen.
For starters, Manhattan’s ultra-luxury market has withered since 2015 thanks to a supply glut and dearth of top-drawer buyers. There were just 139 luxury sales during the third quarter of 2020 compared to 366 in the same period in 2015, according to data from real estate appraisers Miller Samuel. The average discount, just 2.7 percent in 2015, rose to 12.1 percent this year.
And then there’s the matter of changing tastes at the top of the market, particularly given the pandemic.
“In the post-Covid world, the next supertall, uber-luxe condo is going to look like a suit with big shoulder pads,” said Gross.
JDS’ Stern noted another impediment: Land for towers adjacent to Central Park is all spoken for. Billionaires’ Row is all built up.
“We just lived through an era,” he said. “Make no mistake — these aren’t happening anytime soon. It was a small window.”
Write to Hiten Samtani at firstname.lastname@example.org and E.B. Solomont at email@example.com
Villa Firenze is 28,000 square feet and for two years, the Beverly Crest mansion has lingered on the market for $160 million.
Without a buyer, the massive mansion is now headed for auction next month, with no reserve, according to CNBC. The property at 67 Beverly Park Court is owned by billionaire Steven Udvar-Hazy.
The massive property first hit the market in 2018 for $165 million and since then has sat among the priciest listings in Los Angeles County. In June, the price was trimmed by $5 million, according to Zillow. The site also lists Jeff Hyland of Hilton & Hyland as the broker. The listing has been viewed over 100,000 times.
The main house has 20 bedrooms and 23 bathrooms, and the property includes three guest residences. It was designed by William Hablinski and completed after five years of construction in 1998.
Concierge Auctions is handling the auction. While the listed price would break an auction record if the gavel hammered down at that amount, there is no minimum price threshold in a no reserve auction.
The most expensive home to sell at auction was also sold through Concierge Auctions — the 30,000-square-foot Playa Vista Isle in Florida. That had been on the market for $159 million, but sold in 2018 for just $42.5 million, according to the report.
Concierge Auctions regularly handles luxury property auctions in the L.A. area, but also has a checkered recent history. Between 2014 and 2019, the company was named as a defendant in 10 lawsuits, half of those accused Concierge Auctions of some form of bidding manipulation, including using fake bidders to bid up the price of properties. [CNBC] — Dennis Lynch
Jadian Capital’s Jarret Cohen with Jadian’s life sciences property in Fremont, CA (Photo via Jadian Capital)
Jadian Capital has closed a $650 million fund that will target emerging real estate sectors, such as life sciences, data centers and cell towers.
The Greenwich, Connecticut-based investment firm, led by former Fir Tree Partners executive Jarret Cohen, surpassed its initial target raise of $400 million. Capital for its new fund came from institutional investors, including state and corporate pension funds, endowments, foundations, investment managers and family offices.
The company is looking for highly structured deals that have traditionally been overlooked by commercial real estate investors.
“We tend to do the less competitive sectors,” said Cohen, who noted that non-core real estate tends to outperform traditional sectors over time.
Investment in real estate tied to life sciences is expected to soar in the future. In New York, more than $1 billion of venture capital funding poured into life sciences last year, up from $990 million in 2018 and $366 million in 2017, according to JLL. Demand for data center real estate has also boomed in recent months due to the popularity of streaming services like TikTok.
Jadian Capital’s strategy differs from funds set up by firms like Starwood Capital and Oaktree, which are seeking to raise billions of dollars to deploy into distressed assets such as hotels and office properties.
Cohen said that dry powder will limit the number of distress opportunities in traditional real estate sectors.
“I don’t foresee deep bargain-hunting,” said Cohen.
Jadian plans make its investments by buying new assets or adding value to existing ones, or it may invest directly in companies that it’s targeting. The firm will look at deals throughout the country.
Cohen founded Jadian Capital in 2017. He was previously head of private real estate and a partner at the New York-based hedge fund Fir Tree Partners, which made billions from investing in distressed properties.
Jadian’s past deals have included a preferred equity position in the largest independent developer of plasma collection centers. The company is also looking to invest further in renewable energy (e.g. wind and solar) projects.
Sack & Sack attorney Jonathan Sack paid $13.3 million for a non-waterfront mansion in Palm Beach.
Property records show Roni Jacobson and former Palm Beach council member Charles Gerald Goldsmith sold the five-bedroom, seven-bathroom home at 8 Windsor Court in an off-market deal to Sack and his wife, Caroline. Jacobson and Goldsmith filed for divorce in June, court records show.
Jacobson, who was previously married to real estate investor Sam Jacobson, purchased a waterfront Star Island home with him in August for $12 million.
Roni Jacobson paid $7 million for the Palm Beach property in 2013. The 9,146-square-foot estate includes a pool, cabana and outdoor kitchen. It was developed in 2002.
Sack & Sack is a New York-based law firm that focuses on employment law, according to its website. Caroline Sack’s grandfather was the late Max E. Oppenheimer, who founded and was a senior partner at Oppenheimer & Company, a brokerage house.
South Florida’s high-end residential market has been increasingly active in recent months.
This month, textile designer Bart Halpern, and his husband, Lawrence Kaplan, paid $7 million for a waterfront Palm Beach home, and Diameter Capital Partners co-founder Scott Goodwin and his wife, Kimberly, paid $5.5 million for an Ecclestone-developed spec home in Palm Beach.
Caryn Zucker, the ex-wife of CNN chief Jeff Zucker, also paid $8.4 million for a villa on Seabreeze Avenue in Palm Beach.
For many of us, following politics has taken up so much bandwidth in our lives over the past four years. We’ve gotten used to our daily fix of outrage, about how our side is going to save the world and the other side is going to destroy it.
Maybe the election of a new president means it’s a chance to move on. Maybe we can give some of that bandwidth back to other things.
Well, maybe that’s wishful thinking.
But in this issue, for our cover story at least, we go cold turkey on the partisan politics and their impact on real estate. The words “Trump” and “Biden” are not mentioned once in our 4,000 word cover piece.
We take you inside the story of 220 Central Park South, the world’s most profitable condo project ever. The 15-year journey, which netted developer Vornado more than $1 billion, encapsulates the best and worst of the blood sport that is real estate.
If not for the posh building, Vornado, one of New York City’s biggest landlords, and its cocksure CEO Steve Roth would have been nailed by the pandemic. Instead, during a third quarter earnings call recently, Roth said his real estate investment trust was “loaded” and finished comfortably in the black.
As Hiten Samtani and E.B. Solomont write, “the tower has seen it all: buyout battles with tenants, siege warfare with rival developers, a lavish construction purse courtesy of a foreign lender, guerrilla marketing and record-breaking deals.” That includes a $238 million condo sale that highlighted the city’s extreme inequality and its status as a magnet for the global superrich.
While some real estate players are known for what they build, others are known for what they own. And that’s the case with Joseph Tabak, the chairman of Princeton Real Estate Partners, who has had a hand in more than $13 billion worth of deals and has come to be known among his contemporaries as the “real estate doctor.” He’s also one of those real estate players that flies extremely under the radar, nearly invisible, which makes our rare sit-down interview a must-read.
Tabak’s unconventional approach to dealmaking emphasizes the terms of the deal, not the price. “Like my mother used to say, there’s a Polish lottery ticket: You win $1 million, and they pay it out to you a dollar a year for the rest of your life. All you end up with is $60,” he told us by way of illustration.
Meanwhile, in our Closing interview this month, we sit down with Spencer Rascoff, co-founder and former CEO of Zillow, arguably the most consequential residential tech startup of a generation (say what you will of the accuracy of its Zestimates). Last month, Rascoff, who is based in L.A., launched Pacaso, a startup that lets buyers purchase shares in second homes.
His business acumen came in part from his father, who was the tour manager for the Rolling Stones and was more into the bottom line than the bass line. “With 120,000 people cheering for the Rolling Stones, he would be whispering in my ear, saying, ‘Those fireworks cost $100,000, and they probably weren’t necessary, but Mick wanted them.’” Rascoff remembered. “He’d walk me through the P&L of every show.” See page 108.
All this dealmaking prowess is bound to come in handy in a market like this. (Make sure to check out our ranking of the top lawyers doing deals)
Even leaving aside the pandemic, there is the prospect of unstoppable wildfires, epic floods and other environmental risks that are starting to be priced into deals, with major asset managers pulling back from markets that are most vulnerable to climate change. Meanwhile, on the financial front, problems with CMBS loans — one of the culprits in the Great Recession — could have ripple effects. When giants like Starwood hand their keys back to lenders, it’s a sign of fallout yet to come.
And finally, since I’ve gone for nine paragraphs now without mentioning “Trump” or “Biden,” we do, in fact, have some post-election coverage. We look back on what four years of the first developer-in-chief has meant for the industry, what to expect from a Biden presidency going forward and what the future holds for the Trump Organization.
Of course, that doesn’t answer the biggest questions of them all: Will Jared and Ivanka move back to New York? Maybe a big house in a fancy Republican-leaning suburb outside the city? And will Trump head to Mar-a-Lago while he plans a 2024 run?
We’ll try to move on to other things, too. Enjoy the issue.
NestEgg, a startup aimed at making sure landlords get paid on time, just raised $7 million to hit the gas on new offerings, including financing for maintenance expenses.
The Series A was led by Hyde Park Venture Partners, with participation from Bonfire Ventures, BAM Ventures, Financial Venture Studios, Dreamit Ventures and Hyde Park Angels, the company said.
Based in Chicago, NestEgg bills itself as a solution for mom-and-pop property owners who can use its app to coordinate administrative tasks, maintenance jobs and rent collection. But its signature product is a rent assurance program that guarantees landlords are paid on the first of every month — a pain point that has intensified since the onset of the pandemic.
The company was started in 2017 by Expedia alums Eachan Fletcher, Amie O’Donohue and Jeff Slipko. Fletcher said the idea from NestEgg came to him after he became a landlord himself and realized the headache involved.
“The way renting and leasing has worked is so old fashioned. It’s about saying, ‘We signed this contract and you pay once a month,’” he said. “With all the flexibility you have with technology, why is that how it works?”
For tenants living paycheck to paycheck, paying a lump sum is often impossible. Meanwhile, landlords have their own expenses due, leaving them with a cash-flow crisis at the start of the month unless the rent is in hand.
The national ban on evictions has added another wrinkle to the dynamic, leaving landlords whose tenants can’t pay with little recourse.
Fletcher said NestEgg “decouples” that financial standoff by paying landlords itself. In exchange, tenants pay NestEgg on flexible terms. “If you are a tenant who gets paid weekly, you can pay rent weekly to NestEgg,” he said.
NestEgg pays landlords by drawing on its own line of credit. Landlords also pay a monthly fee: The basic “Rent Advance” program, which allows landlords to collect the full rent on the first of the month, costs $5 per unit per month. A pricier “Rent Assure” program lets landlords purchase insurance against tenant default for $49 per unit per month. In exchange, NestEgg covers up to four months of lost rent.
In conjunction with the Series A, NestEgg will also launch a financing feature for landlords called NestEgg Pay. For landlords who use the app to process maintenance requests, the company will pay upfront with interest-free financing for up to six months. Landlords pay back NestEgg in installments.
Ira Weiss, a partner at Hyde Park Venture Partners, cited the “massive” market of mom-and-pop landlord, who own one to three units, among the reasons Hyde Park invested in NestEgg. According to Weiss, NestEgg currently has 3,000 landlords using its platform, but he anticipates that the funding could boost that number to tens of thousands.
Over the past few months, investors have poured funds into startups aimed at targeting small landlords. In July, MeetElise, an AI-powered leasing startup, raised $6.75 million. Realync, a video tour company targeting multi-family owners, announced a $22 million round on Wednesday.
Fletcher said the funding will allow NestEgg to double its 18-person team within the next three months. NestEgg declined to disclose financials, but said its business has been growing 30 percent each month since September 2019.
Lawrence Kaplan and Bart Halpern with 2299 Ibis Isle Road East, Palm Beach (Getty, Corcoran)
A textile designer bought a waterfront Palm Beach home for $7 million.
Bart Halpern, along with his husband, Lawrence Kaplan, bought the house at 2299 Ibis Isle Road East from Stephen A. and Joy M. Hall, according to records.
Bart Halpern founded Bart Halpern Inc., a New York-based textiles company, in 1999, according to Material Bank. Kaplan is president of Ellipse Media Advisory.
Records show the Hall family bought the house in March of last year for $6.85 million. It went on the market a year later with an asking price of $7.75 million.
Steven Presson with The Corcoran Group represented both sides of the deal.
The 5,076-square-foot home, built in 2017, sits on just over a half-acre of waterfront property. The house has four bedrooms, four bathrooms, an elevator and a three-car garage. It also has a guest house with two bedrooms and two bathrooms, according to the listing.
The home has a total of 315 feet of water frontage — on two sides — with a private dock and boat lift.
Among other recent sales in Palm Beach, the co-founder of an investment firm bought a spec home for $5.5 million, a Washington, D.C. taxi magnate sold his home for $6.3 million and the ex-wife CNN head Jeff Zucker paid $8.4 million for a Palm Beach villa.
TriArch Real Estate Group Chris DeAngelis and Pebb Capital James Jago (Photos via TriArch; Pebb Capital; iStock)
Developers are eyeing sparsely-populated student housing as an opportunity to create high-end apartments for professionals.
According to data from Moody’s, 30 percent of public and private universities in the country are running deficits, the New York Times reported. And with fewer students on campus due to the pandemic, some are looking to close the financial gap by partnering with private developers to transform dorms into apartments.
Pebb Capital, in partnership with Coastal Ridge Real Estate, bought a rent-by-the-bedroom building called the Cadence near the University of Arizona in Tucson for $33 million. The firms are planning a $12 million renovation to convert the property into a mix of studios and one- and two-bedroom apartments.
In Austin, Rastegar Property Company recently acquired and refurbished more than a dozen multifamily properties whose original tenants were about 50 percent students. One of the buildings, Plaza 38 near the University of Texas, Austin, has been transformed with new amenities and is now called Hyde Park Square. But with the renovation comes a bump in prices: Rents for the updated building are 25 percent higher, according to the Times.
Pebb Capital has been using this business model before the pandemic. In 2016, the firm bought the Alabama, a student housing building in Greenwich Village owned by Yeshiva University, for $58 million, in a partnership with TriArch Real Estate Group. The developer transformed the dated dormitory into sleek apartments to serve graduate students and young professionals, and in February, sold the building to an entity linked to the Simons Foundation for $104 million.
Pebb Capital and TriArch also co-developed a ground-up student housing project, called Monarch Heights, for Columbia University. But thanks to the pandemic, the partnership shifted the property to serve both students and regular renters.
Miami-Dade County issued a request for proposals to develop the property next to the Vizcaya Metrorail Station, near the entrance to Miami’s Brickell neighborhood.
Proposals are due to the county by Nov. 30 for the 2.6-acre property at 3205 Southwest First Avenue, documents show. The development agreement would allow a multi-phased project to be built on the site. The request for proposals calls for a long-term ground lease between the county and a developer for up to 99 years.
The county could begin negotiating with a developer by next spring.
The property is north of the historic Vizcaya Museum and Gardens in Coconut Grove. The Metrorail runs from Brickell to Downtown Dadeland, and the planned Underline linear park is underneath the tracks.
Farther southwest on U.S. 1, 13th Floor Investments and Adler Group are developing a massive mixed-use development at the Douglas Station property, also owned by the county. The developers, who have a ground lease with Miami-Dade, secured a $99 million construction loan for the second tower at The Link at Douglas in February. That project will include a workforce housing component, and the developers are funding $17 million in public infrastructure improvements, including renovating the Metrorail station, building a public plaza and funding a portion of the Underline.
Proposals for the Vizcaya station site will be ranked by a competitive selection committee, which will evaluate them based on market viability, past experience, development schedule, financial strength and more, according to the county’s documents.
In a separate request, Miami Beach is seeking letters of intent from developers, due by early January, for three lots north of Lincoln Road. The city is looking to develop the land into Class A office space, through a public-private partnership that would be subject to a voter referendum.
Homebuilding surged in October in tandem with confidence in the sector reaching a new high.
Housing starts jumped 4.9 percent to 1.5 million, seasonally adjusted, compared to 1.4 million logged in September by the Census Bureau’s monthly report on residential construction. October’s figures were up 14 percent year-over-year, underscoring the strength of the housing market this year.
But the swell of demand from homebuyers may be starting to trail off. In September, the number of new and pending home sales dipped, both of which could indicate a coming drop in sales. Mortgage applications had a seven-week slump that broke last week, according to the Mortgage Bankers Association.
Joel Kan, MBA’s head of industry forecasting, noted that the increase in housing starts was driven by single-family home construction, which he said is at its highest level since 2007.
He expected the wave of new homes to provide “sufficient inventory” to speed up the pace of sales. There have been a dearth of homes on the market and prices have risen accordingly.
But that may take some time to play out. The number of housing completions last month dropped 4.5 percent to an adjusted 1.3 million units, compared to September’s 1.4 million, according to the Census report. That still beat last year’s completions during the same period by 69,000 units.
The report also reflects the number of homes in the early phases of development. Building permits were issued for an adjusted 1.5 million housing units last month, which is on par with September’s numbers — but it was a nearly 3 percent increase compared to the same time last year.
Brent Baker and a rendering of 5024 South State Road 7 (DiVosta, iStock)
National homebuilder PulteGroup purchased 31 acres of land in Palm Beach County, with plans to build a housing community.
Pulte paid $9 million for land in the Palm Beach Farms area, from the William A. Mazzoni Trust, The Real Deal has learned. Records show Mazzoni has owned the land at 5024 South State Road 7 in Lake Worth since 1993, when he bought it for $450,000.
F. Thomas Godart, managing director of Godart Florida Real Estate Investments, represented Pulte in the deal.
Pulte plans to build Windsong Estates with 100 residential units, including 32 single-family homes, 61 zero-lot-line units and seven townhomes.
The homes will range in size from 1,800 square feet to 2,800 square feet and will be priced starting in the high $400s into the $600s, according to Pulte Group’s Southeast Florida President Brent Baker.
“The pandemic is driving more people to buy single-family homes in less urbanized areas, and we fully expect that trend to continue for the foreseeable future,” Baker said in a statement.
Pulte expects development to start as soon as this month, with model homes built by the spring, according to Baker. He also anticipates sales to begin in the summer of 2021.
PulteGroup is an active homebuilder in South Florida. At the beginning of this year, Pulte paid $1.72 million for 20 acres in Lauderdale Lakes for a new housing community. Last year, Pulte Homes closed on 139 acres in Oakland Park for $31 million.
Airbnb is inviting hosts to enjoy in its success following a bumpy year of breakups and makeups.
The startup is offering a portion of its shares to people who rent homes on its platform through a directed-share program, a rare move that means those eligible could reap rewards when Airbnb goes public.
But Airbnb has not said how many shares it will offer and the criteria is narrow. Only U.S. hosts are eligible — 86 percent of its 4 million hosts are based outside the US, according to the company’s S-1 — and the offer is only being extended to those who were active within the past two years.
Airbnb, which has changed the hospitality landscape since its founding in 2008, disclosed the program in its Monday filing ahead of the company’s long-awaited IPO. The home-share startup is looking to raise as much as $3 billion, with a valuation of up to $30 billion.
Keeping hosts happy is crucial to the company’s growth because Airbnb relies on their homes.
“Airbnb is a truly asset-light company but it is still in the real estate business,” Dror Peleg, an industry observer and author of “Rethinking Real Estate,” said in an email. “Having exclusive inventory in key locations is still critical.”
The company has been working to win over its hosts after the startup changed its cancellation policy in response to the pandemic in March. Many hosts were angry that they weren’t consulted about the change, which granted guests full refunds on their bookings.
In response, Airbnb CEO Brian Chesky issued a public apology and announced a relief package to support hosts who relied on Airbnb for income.
Travel has picked up a bit in the months since, but there’s still a long way to go. Last year, Airbnb reported $38 billion in total bookings, according to the prospectus. As of Sept. 30, bookings totaled just $18 billion — a 39 percent year-over-year drop.
The startup’s revenue in that period slid 32 percent to $2.5 billion, and losses totalled $697 million, more than double the amount from the prior-year period.
Airbnb had more than 4 million hosts with 5.6 million active listings through Sept. 30. About 21 percent of hosts were “superhosts” who book 10 stays or more during a 12-month period.
Santosh Rao, head of research at Manhattan Venture Partners, said the share plan was a way of rewarding loyalty. Ride-share startup offered a similar program to its drivers ahead of the company’s lackluster IPO last year.
“This is another method to keep people in the system,” Rao said.
Jesse DePinto, a co-founder of rental startup FrontDesk, said host loyalty translates to more exclusive inventory for Airbnb. “And more exclusive inventory on Airbnb increases their ability to attract more guests directly to their website, with lower marketing expenses than their peers,” he said. “This is one of Airbnb’s core differentiators.”
The immediate reaction among hosts, however, was mixed.
On Reddit, one host put it bluntly: “Without us, the hosts, Airbnb is nothing.” But another felt Airbnb owed him nothing. “I’ve banked a lot of dough I wouldn’t have banked without them … They already paid me. They don’t owe me any favors.”
Scott Smith, a superhost and father of four who lives in the Bay Area, told The Real Deal he “was impressed that the company was considerate or willing to allocate some amount of shares.”
“I’m curious to see how effective it is and if it actually works,” he added.
Airbnb said through Sept. 30, the average annual earnings for hosts with at least one check-in was $7,900. Since Airbnb’s founding, hosts have earned $110 billion. Airbnb collects service fees on both sides of the deal. For a $100 stay, Airbnb would collect $3 from the host and $12 from the guest, according to an illustration included in the S-1.
In addition to shares, Airbnb said in its prospectus that it would put 9.2 million shares of Class H stock into an endowment fund to benefit hosts with “programs, initiatives, and grants.” Chesky will personally invest $100 million into the fund.
“It’s a nice gesture,” said Seth Borko, a senior analyst at Skift who follows Airbnb. But he noted that it represents a half percent of Airbnb’s total shares outstanding. According to the filing, Airbnb will cap the fund at 2 percent of the company’s total shares. It plans to make annual distributions from the fund, as soon as the value of the shares hits $1 billion.
By comparison, Airbnb’s top executives hold a 43 percent stake in the company, according to the filing. Chesky, with 76.9 million shares, owns a 15.4 percent stake.
Global alternative investment manager Ares Management and Regis Group, a London-based global investor and operator, have formed Haven Capital to get in the field of ground-lease investments, Bisnow reported.
Until recently, the niche but growing field was led by iStar-managed real estate investment trust Safehold.
Regis is one of the largest holders of ground leases in the U.K. The effort with Ares aims to eventually bring Haven Capital to an initial public offering, Commercial Observer reported.
“We believe ground leases represent an attractive, long-term funding source,” said Nick Gould, chairman and founder of Regis, in a statement.
SL Green Realty’s Joe Shanley joined the firm to lead its expansion.
Armed with an initial $1 billion, Haven plans to buy land under “high quality assets” in the country’s 50 top markets from property owners and collect monthly rent. The investors figure that some property owners, who would retain ownership of the buildings above, need cash in this economic downturn.
David Roth, a partner and the head of U.S. real estate equity within Ares’ real estate group, said in a statement that the firm believes “ground leases provide a compelling solution for both long-term property owners and developers, and we look forward to building this platform alongside Regis.”
Domio’s CEO Jay Roberts and Chief Strategy Officer Adrian Lam (Photos via Domio)
Short-term rental operator Domio is reportedly going out of business.
The startup, which was founded in 2016, will shut down and sell its assets through an assignment for the benefit of creditors, with Sherwood Partners overseeing the sale, The Information reported.
The company laid off the majority of its staff earlier this month after failing to raise $10 million in additional capital, according to the outlet.
“Unfortunately, conditions precedent to close this round were not achieved,” the company wrote in a note to its investors. It noted cryptically that “there is a scenario where Domio is able to operate,” but offered no specifics.
Domio has been under scrutiny for several months. In August an investigation by the Information found that Domio would rent out its short-term apartments under pseudonyms via Airbnb. After the report, Airbnb suspended all of Domio’s accounts for violating its terms of service.
The company’s co-founders, CEO Jay Roberts and Chief Strategy Officer Adrian Lam, resigned from their posts and stepped down from the board of directors in late September.
The company’s decision to shed its assets comes shortly after the Related Group and its partner, Black Capital Group, put out feelers to sell the 175-unit Domio Wynwood in Miami, where the short-term rental operator has a 10-year master lease agreement. The owners are looking to sell the asset at a whisper price of $90 million. The Related Group did not immediately return a message seeking comment.
[The Information] — Akiko Matsuda