Real Estate News

Brookfield Property Partners’ Brian Kingston

Brookfield Property Partners’ Brian Kingston

Brookfield Property Partners collected just 34 percent of rent across its retail portfolio in the second quarter, helping drive another sharp decline in earnings this year. Its office holdings also took a hit.

The real estate arm of Brookfield Asset Management reported a net loss of $1.5 billion from April through June, compared with $23 million of net income over the same period in 2019.

At Thursday’s earnings call, company executives blamed its poor April through June results on coronavirus-caused mall closures. Most of its malls didn’t reopen until June, and the company has seen improved rent collections since July.

Brookfield Property Partners CEO Brian Kingston said the company was “cautiously optimistic that the worst of the economic shutdown is behind us.” He added that “our business is well positioned to handle any lingering impacts.” Brookfield is one of the largest mall operators in the U.S.

At its first quarter earnings call in May, company executives said they were negotiating with 2,400 of its retail tenants who had been unable to come up with the rent, and whose spaces were still closed at the time. That first quarter was also harsh for the Canadian giant, which reported a net loss of $373 million in Q1 compared with $713 million in net income year-over-year.

At its Q2 earnings, the company said cash flow from operations for its retail portfolio dropped to $140 million, compared to $170 million over the same period in 2019.

But the company’s core office portfolio also took a hit. It reported cash flow from operations of $126 million in the second quarter compared to $187 million in the same period in 2019. Occupancy fell slightly to 92.3 percent across the portfolio, with a remaining weighted average lease term of 8.6 years.

As other large office landlords have done, Kingston said he doesn’t believe the pandemic will have a lasting effect on the market.

“In the long run, we don’t think that remote working represents a threat to office,” he said.

The company also saw a decline in its cash on hand, which dropped to $5.9 billion, from $6.2 billion year-over-year.

“Operating with $6 billion in liquidity is more than adequate,” said CFO Bryan Davis. “We tend not to operate with lots of cash because it is not a good returning investment.”

Brookfield’s retail portfolio has come under close scrutiny by investors and analysts, who see it as a bellwether. Brookfield in May said it planned to inject $5 billion into major retail companies hit hard by the pandemic.

The company recently canceled plans to redevelop a mall in Burlington, Vermont, where it planned to build 10 apartment buildings and a 10-story office. It became involved in the project in 2017, but last month sold its interest to local partner Devonwood Investors.

The post Brookfield Property’s retail tenants paid 34% of rent in Q2 appeared first on The Real Deal Miami.

3100 NE 46th St., Lighthouse Point (Realtor)

3100 NE 46th St., Lighthouse Point (Realtor)

The CFO of one of the largest health and life insurance agencies in the country bought a Lighthouse Point mansion from a hospitality executive tied to controversial resorts owner Daniel Lambert.

Lighthouse Point Newport Property, managed by Insurance Care Direct CFO Edward Carriero, paid $6.4 million for the mansion at 3100 Northeast 46th Street, records show.

The 16,693-square-foot mansion sits on 1.63 acres across the Intracoastal Waterway from Hillsboro Mile. Built in 1989, the home has eight bedrooms, a Jacuzzi and pool, according to the listing. It also sports 465 feet of deep water frontage, a volleyball court, a basketball and tennis court, a pavilion with a summer kitchen, a pool house studio and indoor and outdoor exercise rooms. The property includes a detached one-bedroom guest apartment and a six-car garage.

Cori O’Brien of Global Luxury Realty represented the seller. Senada Adzem of Douglas Elliman represented the buyer, according to the listing.

The sellers, James H. and Teresa M. Verrillo, paid $3.6 million for the home in 1999. It was the most expensive home sale in Lighthouse Point at the time, according to the Sun Sentinel.

Insurance Care Direct, founded in 2001 and based in Deerfield Beach, has 70-plus enrollment centers, 500-plus agents and is active in 37 states, according to its website. The insurance is politically connected, with an advisory board that includes former governors of Oklahoma and Nebraska, the former CFO for the state of Florida, the former chairman of Florida’s Republican Party, and Barry Goldwater Jr., a former U.S. congressman and son of the 1964 presidential candidate of the same name.

Verrillo is associated with David Lambert, who owns resorts in South Florida and Orlando and co-founded American Top Team, a mixed-martial arts team.

Verrillo and Lambert have become familiar to state and federal regulators over the years. In 1999, Verrillo, Lambert and Verrillo’s father settled an U.S. Securities and Exchange Commission insider trading case for almost $300,000. The case involved the securities of Vacation Break U.S.A., a former Ft. Lauderdale company in the time-share business. In the 2000s, Verrillo and Lambert were part of a $1.5 million settlement. They were sued by 17 states and the District of Columbia, which accused the men of running scams where travelers were allegedly promised free trips but instead were charged exorbitant hidden fees, according to reports from the time. Last year, the men were named in a class action lawsuit alleging millions of robocalls placed from a call center in India to offer consumers free cruises.

Lambert’s ex-wife put her waterfront Fort Lauderdale estate for sale in 2016, asking $13.8 million.

A Hillsboro Mile home across the water from Verrillo’s former mansion sold in July for $18 million.

The post A house to die for: Life insurance CFO buys Lighthouse Point mansion appeared first on The Real Deal Miami.

With many tech companies open to long-term remote work for their employees, questions are being asked about how that will impact the office and residential markets in hubs of tech talent. (iStock)

With many tech companies open to long-term remote work for their employees, questions are being asked about how that will impact the office and residential markets in hubs of tech talent. (iStock)

The technology industry accounted for over a fifth of major leasing activity nationwide in 2019, making it the biggest driver of the office market in the U.S. In hubs of tech talent, that activity drove office and apartment rents up and vacancies down and caused landlords to reimagine their entire portfolios to cater to the industry. But then came the big remote work experiment.

With many large and small tech companies open to long-term remote work (partial and full-time) for their employees, questions are being asked about how that will impact the office and residential markets in hubs of tech talent. A good starting point would be to understand the current state of play – what kind of numbers does tech drive?

(Related: TRD Insights: Google isn’t coming back to the office until at least next summer. Here’s all the space at stake)

A new report provides some answers. Office leases are the second-biggest cost for typical tech firms, according to an analysis of the 50 top tech markets in U.S. and Canada from CBRE. In New York, office rents amounted to 11 percent of total annual costs for tech companies, the highest in the nation.

The tech industry, which CBRE took to be about 6.3 million employees across 50 U.S. and Canadian markets, signed 22 percent of major leases – defined as 10,000 square feet or more – nationwide in 2019, up from 11 percent in 2011, according to the report. That was the biggest growth in office leasing of any industry over the past decade, and that growth has led to consistent annual gains in office rental costs.

Most growth was concentrated in cities with highly educated and young residents, such as Seattle, San Francisco and New York City. In Seattle, more than two-thirds of residents aged 25 and above have college degrees, according to the report. Companies headquartered there include e-commerce behemoth Amazon and online real estate brokerage Redfin. Tech degree completions in 2018 were highest in New York City, where Google, Facebook and Twitter have all committed to major chunks of office space. (Google is keeping its employees home until at least next summer, while both Facebook and Twitter have declared that they will embrace remote work at scale).

With top-tier talent in these cities comes top-tier costs. The CBRE analysis found that a combination of tech worker wages and pricey office rents made the San Francisco Bay Area the most expensive market for tech firms in 2020, with total real estate and labor costs for the typical 500-person tech company using 75,000 square feet of office space hitting $62 million annually. New York City came in at $53 million annually, while Los Angeles was at $46 million.

This tech influx has warped the residential markets in these cities. In San Francisco, monthly apartment rents have increased 15 percent in the last five years, according to CBRE. In Los Angeles, where a bevy of major tech players have more recently set up camp, that figure is 21 percent.

Even with the industry’s relatively high salaries, the average tech worker remains rent-burdened. The average New York tech worker, for example, spends 44 percent of her annual income on housing, blowing past the 30 percent federal benchmark for housing affordability. In Los Angeles, the average tech worker spends 27 percent of her annual income on housing, while in San Francisco it’s 25 percent.

The CBRE report notes that the rise of remote work could lead to a further distribution of tech talent across North America, allowing some cheaper locales such as Waterloo in Ontario, Canada and Dayton, Ohio to compete for talent. Tech companies are increasingly eyeing emerging talent hubs in Latin America as well, such Sao Paulo, Brazil and Bogota, Colombia as well.

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Simon Property Group’s David Simon and Gap CEO Sonia Syngal (Getty, Wikipedia, iStock)

Simon Property Group’s David Simon and Gap CEO Sonia Syngal (Getty, Wikipedia, iStock)

Call it a retail rumble, with Simon Property Group in one corner and its largest national tenant in the other.

The largest shopping mall landlord has filed another lawsuit against the Gap. This one accuses the retailer of “taking opportunistic advantage” of the pandemic to avoid paying $107 million in overdue rent, even though some of its stores have reopened, Bloomberg reported.

In June, Simon sued the Gap, saying it owed $66 million in rent. The Gap followed that up with its own suit seeking rent relief.

Since the pandemic forced retailers across the country to close, there have been a slew of lawsuits between tenants and landlords over unpaid rent. In addition to the dispute with Simon, Gap is also involved in litigation with Brookfield Properties and other landlords.

With restrictions now loosening across the country, several Gap stores have reopened, but the company said it is still struggling in many areas.

“We remain committed to working with our landlords on mutually agreeable solutions and fair rent terms,” a representative for the Gap told Bloomberg, “just as our industry and government partners have sat with us in good faith to shape the post-Covid business landscape.”

In its counterclaim, Simon said Gap “has ample financial resources to meet its contractual obligations” but its “executive leadership made a calculated and strategic decision not to do so.”

“The Gap’s re-openings were highly selective and strategic,” the suit said. “They had more to do with The Gap’s business objectives and implementation of its new business plans than they did with any legitimate Covid-19 concerns or temporary disruptions.” [Bloomberg] — Sylvia Varnham O’Regan

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JLL CEO Christian Ulbrich (Ulbrich by Jemal Countess/Getty Images for Women's Forum of New York)

JLL CEO Christian Ulbrich (Ulbrich by Jemal Countess/Getty Images for Women’s Forum of New York)

JLL’s profitability fell by more than half during the second quarter as fees from brokering office leases around the world slowed to a trickle.

JLL, the second-biggest real estate services firm in the world, saw a 54 percent reduction in earnings before interest, taxes, depreciation and amortization to $103 million during the second quarter compared to the same time last year, according to the firm’s latest financial results.

Company CEO Christian Ulbrich said during the firm’s second-quarter earnings call Thursday morning that companies were signing fewer leases – and deals that were getting done had shorter terms.

He said the terms of leases signed during the first half of the year were down roughly 16 percent, leading to less revenue for the company.

Ulbrich added, however, that the wait-and-see mentality many firms were in during the early stages of the pandemic is starting to shift as companies realize that the recovery will be prolonged.

“Business is coming to terms that this is the environment we will be in for the foreseeable future” he said.

Leasing fees during the second quarter were down 43 percent on the year to roughly $359 million.

Much uncertainty remains over how office markets around the world will respond to the coronavirus. Many large firms like Facebook, Twitter and Zillow have announced indefinite work-from-home policies – fueling speculation that large companies will have less demand for office space in the future.

Conversely, Facebook earlier this week finalized a much-anticipated lease in Manhattan for 730,000 square feet, a move seen as a vote of confidence in the value of a large urban office.

Contact Rich Bockmann at rb@therealdeal.com or 908-415-5229.

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J. Eddy Martinez, Roland Ortiz, and Daniel de la Vega

J. Eddy Martinez, Roland Ortiz, and Daniel de la Vega

One Sotheby’s International Realty acquired Worldwide Properties, a South Beach brokerage led by partners J. Eddy Martinez and Roland Ortiz.

Worldwide Properties’ 30 agents will now operate under the team name Worldwide Group. The South-of-Fifth group is bringing $80 million of listings to One Sotheby’s, and $26 million in pending residential sales, according to a press release.

Miami-based One Sotheby’s said it marks the firm’s fourth merger in the last six months. Daniel de la Vega, president of One Sotheby’s, said in the release that he had been in talks with Worldwide Properties “for a long time.”

“We had been approached by several firms over the past four years, but it never felt like the right fit,” Martinez said in a statement.

During the pandemic, One Sotheby’s has made some staff changes. The company promoted Vanessa Stabile to chief administrative officer, focused on strengthening agents’ services and sales operations. Seth Kaufman, managing broker in Fort Lauderdale, was promoted to chief sales officer, and Steve Snider joined the company as co-brokerage manager in Aventura and Sunny Isles Beach.

In May, One Sotheby’s acquired Sea Turtle Real Estate in Vero Beach, as it continued its expansion throughout Florida. Earlier this year, it closed on the acquisition of Duek Realty, a 17-agent firm focused on Brazilian buyers. And late last year, the Sotheby’s franchise also acquired the 100-agent Treasure Coast Sotheby’s, active in the Vero Beach and Melbourne markets.

Write to Katherine Kallergis at kk@therealdeal.com

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Deutsche Bank CEO Christian Sewing and President Donald Trump (Sewing by Thomas Lohnes/Getty Images; Trump by Drew Angerer/Getty Images)

Deutsche Bank CEO Christian Sewing and President Donald Trump (Sewing by Thomas Lohnes/Getty Images; Trump by Drew Angerer/Getty Images)

New York prosecutors’ investigation into the Trump Organization may run even deeper than was previously known.

The Manhattan district attorney’s office subpoenaed Deutsche Bank last year as part of a criminal investigation into President Donald Trump’s business practices, according to the New York Times.

Two sources familiar with the matter told the Times that the German bank — Trump’s main lender since the 1990s — complied with the subpoena, providing prosecutoes with financial statements and other records related to Trump’s loan applications.

The grand jury inquiry was originally focused on hush-money payments made by the Trump campaign in 2016 to women who claimed they had affairs with Trump.

However it has since broadened out: A new filing this week from the DA’s office cited “public reports of possibly extensive and protracted criminal conduct at the Trump Organization.” It also indicated prosecutors were looking into possible bank and insurance fraud.

Prospectors have also been trying to obtain Trump’s eight years of the president’s personal and corporate tax returns — a lengthy battle that recently went to the Supreme Court.

Trump has described the investigation as a “continuation of the worst witch hunt in American history,” and “a terrible thing that they [Democrats] do.” [NYT] — Sylvia Varnham O’Regan

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 South Florida Resi Contracts Up in July (Credit: iStock)

South Florida Resi Contracts Up in July (Credit: iStock)

New signed residential contracts and new condo inventory in South Florida rose in July, according to a monthly report from Douglas Elliman. But while the volume of new signed contracts exceeded recent pre-pandemic levels, new listings of single-family homes continued to lag behind levels seen the previous year.

Though new signed contracts have increased in both June and May, overall residential sales in South Florida have dropped during the pandemic, as not all contracts will close.

The largest annual increase in July was for new contracts signed for condos in Palm Beach County, rising nearly 235 percent to 566 new contracts, according to the report. The report is authored by Miller Samuel’s Jonathan Miller, citing data from the Multiple Listing Service.

Here’s a breakdown of new contracts signed last month:

Miami-Dade

New signed single-family home contracts grew in Miami-Dade County by 94.5 percent to 1,727.

Houses priced between $400,000 and $599,000 represented the largest year-over-year growth in signed contracts, more than doubling to 483 contracts in July. Buyers signed 459 contracts for homes priced between $300,000 and $399,000, up 96 percent.

Inventory of new single-family homes fell in Miami-Dade by 9.3 percent, due to a drop-off in new listings of more affordable houses. Homes listed for under $200,000 declined by more than half to 12 listings in July. At the same time, inventory of homes priced at $1 million-plus grew by 37.5 percent to 198 listings.

Single family homes priced between $300,000 and $399,000 as well as homes priced at $1 million-plus made up the highest concentration of the 859 new single family home listings in Miami-Dade, each accounting for almost a quarter of the new listings.

In the condo market, new signed contracts totaled 6,087, a year-over-year increase of 82 percent. The highest growth was among condos priced between $300,000 and $399,000, where contracts rose more than 100 percent to 669.

New condo listings grew 5.8 percent year-over-year, up to 3,872. Units priced between $500,000 and $599,000 made up the highest concentration of July new condo listings in the county — 33 percent of the newly added inventory. Inventory of those units rose 25 percent in July to 1,287 listings.

New listings of units priced below $200,000 dropped by 20 percent to 380.

Broward

Single-family contracts doubled in Broward County, totaling 1,052 in July. Houses priced between $600,000 and $799,000 jumped by more than 164 percent, up to 177 contracts last month. Though all price points experienced year-over-year increases, contracts for homes priced below $200,000 grew by only 15 percent to 38 new contracts, likely due to a lack of inventory. New listings for those homes declined by 50 percent, down to 17 new listings.

Overall, new inventory of single-family homes decreased year over year by 4.5 percent to 1,072. Still, homes priced between $600,000 and $799,000 and homes over $1 million each saw 35 percent annual increases in new listings to about 160 listings each in July.

Broward saw a 97 percent increase in new signed condo contracts, up to 895 contracts in July. The largest year-over-year growth was for condos priced between $300,000 to $399,000, which more than doubled to 117 contracts. More than half of Broward’s new signed condo contracts were for units priced under $200,000, which also represented the highest concentration of new listings at 44 percent.

New condo listings only rose 7.6 percent to 1,692 listings in July, as new inventory declined at the top and bottom of the condo market. In the $600,000 and $799,000 condo range, new listings increased by about 72 percent to 67 new listings last month.

Palm Beach County

Single-family home contracts in Palm Beach County increased by 94.6 percent year over year to 1,052 contracts, with the growth concentrated among the middle- to higher-end homes. Signed contracts for homes priced at $400,000-plus more than doubled year over year, totaling 301 contracts in July.

New inventory of single-family homes experienced the slowest growth in Palm Beach County, rising only 2.7 percent to 1,009 new listings. The higher-end of the market added more new listings: 220 homes listed at $1 million-plus made up 22 percent of new single-family home listings in Palm Beach County last month.

Condo contracts surged in Palm Beach County, growing a whopping 235 percent to 566 new contracts signed in July. Units priced under $200,000 made up almost half of those contracts countywide in July. Every price range saw triple-digit growth.

New condo listings grew overall by 16 percent, up to 1,402. Lower-priced units made up the majority of Palm Beach County’s new condo listings in July. Those priced under $200,000 made up about 43 percent of new condo listings.

Condos priced between $800,000 and $999,000 more than doubled year over year to 48 listings in July.

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34 Star Island Drive with Albert Justo, Stacy Robins and Mirce Curkoski (Redfin)

34 Star Island Drive with Albert Justo, Stacy Robins and Mirce Curkoski (Redfin)

Former Star Island residents Roni and Sam Jacobson are returning to the exclusive Miami Beach enclave.

The Jacobsons, real estate investors and philanthropists, paid $12 million for the home at 34 Star Island Drive. Property records show the seller is the Ida Kirsner trust, managed by Kirsner family members. Kirsner died last year, according to an obituary published in the Miami Herald.

Albert Justo and Mirce Curkoski of One Sotheby’s International Realty were the listing agents, while Stacy Robins of the Stacy Robins Companies represented the buyers. The property hit the market in September for $15.3 million, the listing shows. It includes a two-story, nearly 6,500-square-foot house built in 1961.

Todd Michael Glaser will renovate and expand the home for the Jacobsons, he said. He plans to complete the project by December.

The Jacobsons sold their home at 31 Star Island Drive in Miami Beach to Wayne and Wendy Holman in 2014 for $18.8 million. Roni Jacobson owns a house in Palm Beach, records show. But they’ll share the same neighbor as they did before, just on the opposite side. Records show Gerald and Joan Robins live at 33 Star Island.

Last month, Stuart Miller, executive chairman of Lennar Corp., sold a waterfront spec mansion on Star Island for $49.5 million, marking the second most expensive home sale in Miami-Dade County history.

Miller owns a number of other properties on Star Island, including 4, 5, 6, 11, and 12 Star Island Drive. Last year, he sold 10 Star Island Drive for $17.5 million. Other Star Island property owners include Philip and Patricia Frost, Gloria and Emilio Estefan, and Paul Cejas.

The guard-gated island is in between Palm and Hibiscus islands and mainland Miami Beach, accessible by boat and the MacArthur Causeway.

Write to Katherine Kallergis at kk@therealdeal.com

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For the first time since the start of the coronavirus crisis, the percentage of CMBS loans that are more than a month behind on payments has gone down. (iStock)

For the first time since the start of the coronavirus crisis, the percentage of CMBS loans that are more than a month behind on payments has gone down. (iStock)

The delinquency rate of CMBS loans has declined — slightly — for the time since the start of the coronavirus crisis.

The percentage of those CMBS loans that are more than a month behind on payments was 9.6 percent at the end of July, down from June’s rate of 10.32 percent, according to the latest delinquency report from Trepp. The June figure was just a few basis points shy of the all-time record in June 2012, when 10.34 percent of CMBS loans were delinquent.

The decline in delinquency was largely due to various types of loan relief, including loan modifications to extend maturity dates, or permission to use loan reserves to make payments. More than $8 billion worth of loans saw their status go from delinquent in June to current in July.

As has been the case since the beginning of the crisis, lodging and retail properties have experienced the most delinquencies of all property types. While the delinquency rate for most asset classes declined somewhat in July, the delinquency rate for multifamily property rose slightly to 3.33 percent.

The latest report still highlights the extent to which borrowers are suffering. Trepp found that the percentage of seriously delinquent loans or those in foreclosure actually ticked up.

The numbers compare to the situation before the pandemic hit, when the delinquency rate reached a low of 2.04 percent.

Trepp analysts had previously predicted the July stabilization, referring to it as “terminal delinquency velocity.”

“Put another way, if a borrower didn’t need relief between April and June, there is a good chance the borrower won’t be needing it,” the report says. “However, with relief windows closing after a three-month respite in most cases, an uptick in delinquencies in the future is likely.”

So while the delinquency rate may rise again — especially given new waves of infections across the country — Trepp analysts expect those increases to be more modest.

While the overall percentage of delinquent CMBS loans has decreased, other metrics have continued to deteriorate, according to the report. The percentage of loans in special servicing rose from 8.28 percent in June to 9.49 percent in July. And the percentage of seriously delinquent loans — those that are more than two months delinquent, or in foreclosure, or worse — rose by 1.61 percentage points to 7.86 percent.

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Chief Justice Tani Cantil-Sakauye (UCDavis, iStock)

Chief Justice Tani Cantil-Sakauye (UCDavis, iStock)

Ready or not, California is poised to end its historic ban on evictions and foreclosures, a possibility that has lawmakers rushing to extend the measure.

Remarks released this week by California Chief Justice Tani Cantil-Sakauye indicate that the temporary ban could be lifted as soon as Aug. 14, when the state Judicial Council will vote again.

In April, the Judicial Council ruled that California courts would not process orders related to commercial and residential evictions and foreclosures. Now, Cantil-Sakuye said the matter should turn to the legislature “for permanent measures and permanent solutions.”

The judge said the court has “always known that the remedies we sought for all the affected parties are best left to the legislative and executive branches of government.” She added that the legislature must address the issue “to protect people from devastating effects of this pandemic and its recent resurgence.”

Residential property owners and renters alike have voiced concern about the timing of the upcoming Judicial Council vote, noting that the recently expired $600-a-week federal unemployment benefit boosted rent collections. Still, about one in three residents across the state could not pay all or part of their rent in July, the California Apartment Association estimated, according to ABC7 News.

California landlords largely oppose the eviction ban, and have filed lawsuits against the state to overturn the court ruling. Landlords represented by the libertarian-leaning Pacific Legal Foundation, calls the eviction freeze a “classic policy decision” that rests with the state legislature.

But lawmakers have not not acted on the ban, and instead have deferred to other government branches. Gov. Gavin Newsom issued dozens of executive orders related to the pandemic, including a pact for landlords to renegotiate mortgages with participating banks.

The Judicial Council order has not completely ended evictions. The Los Angeles Tenants Unions is documenting instances of landlords who try to carry out evictions absent court approval, which has led to dramatic confrontations between landlords and tenant organizers.

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WeWork Lincoln Road with Sandeep Mathrani (Google Maps, WeWork)

WeWork Lincoln Road with Sandeep Mathrani (Google Maps, WeWork)

WeWork’s landlord on Lincoln Road is suing the co-working giant, alleging it failed to pay rent in April, May and June while still occupying the space.

SML 350 Lincoln Inc. sued WeWork in Miami-Dade Circuit Court in late July, alleging the company breached its commercial lease by failing to pay rent. The landlord, led by Shaul Levy and Meir Levy, is seeking more than $19.5 million in unpaid rent, attorney’s fees and more.

A WeWork spokesperson said in a statement that “the lawsuit lacks merit for a variety of reasons,” and that it continues to work with its landlords to meet its obligations and “reach mutually beneficial solutions.”

WeWork announced to its members last week that it would be closing the 40,000-square-foot space at 350 Lincoln Road, and would make the nearby location at 429 Lenox Avenue its flagship Miami Beach space. Last month, WeWork’s landlord on Lenox Avenue posted a three-day notice saying it was intending to sue WeWork for unpaid rent in April, May and June to the tune of more than $650,000.

WeWork and its Lenox Avenue landlord, Goddard Investment Group, appear to have worked it out. A source confirmed to The Real Deal that they finalized their agreement on Monday.

The Lincoln Road location is set to close Aug. 14, but WeWork is still on the hook for the lease, which extends to October 2030, according to the lawsuit. The 16-year lease was signed Nov. 1, 2014, and WeWork opened the following year.

WeWork has been working on shrinking its portfolio around the world, following its failed IPO attempt last year, and further propelled by the effects of the coronavirus pandemic.

The SoftBank-backed company, now led by CEO Sandeep Mathrani, has a number of locations in the Miami area. It was previously announced as the anchor tenant of a new Class A office tower under construction in Brickell, where construction workers were seriously injured on Wednesday.

In addition to the two locations in Miami Beach, WeWork has locations in downtown Miami, Brickell and Coral Gables.

Write to Katherine Kallergis at kk@therealdeal.com

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Left to right: Metaprop partners Zach Aarons, Aaron Block, Zak Schwarzman and Maureen Waters (Images via Metaprop)

Left to right: MetaProp partners Zach Aarons, Aaron Block, Zak Schwarzman and Maureen Waters (Images via Metaprop)

MetaProp, a New York-based venture capital firm, is looking to raise $200 million — its biggest fund yet — to back later-stage proptech startups.

The five-year-old company disclosed the fund, dubbed MetaProp Growth Select I, in a regulatory filing with the U.S. Securities and Exchange Commission on Wednesday. Co-founder Aaron Block is listed as the fund manager.

MetaProp declined to comment. But in raising a growth fund, it appears to be shifting its focus from seed- and early-stage companies to more mature startups seeking bigger checks to fuel growth.

The firm was one of the first proptech-focused VC funds when it launched in 2015 with $5 million from friends and family. It raised $40 million in 2018, and set out to raise a $100 million fund in May 2019. It’s drawn investments from major real estate players including RXR Realty, Cushman & Wakefield, CBRE and PGIM Real Estate.

As of July 15, MetaProp had $72.95 million in dry powder, according to Pitchbook, and it had invested in 95 companies to date with an average check size of $3 million. Portfolio companies include appraisal startup Bowery Valuation and Spruce, a title insurance startup that raised $29 million in May.

This week, MetaProp announced that it led a $4.8 million seed round in Proper, an AI-powered accounting and bookkeeping startup for the multifamily industry. But during the early days of coronavirus, it focused on triaging existing portfolio companies. “We wound up doing a lot of our defensive work pretty early,” Zak Schwarzman, a general partner at MetaProp, told The Real Deal in June.

Last month, MetaProp was listed among the recipients of PPP loans available to small businesses via the CARES Act. The firm declined to comment, but Small Business Administration data show it received between $150,000 and $350,000.

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Home sale price declines are expected for July, after a recent bump, according to a CoreLogic report. (iStock)

Home sale price declines are expected for July, after a recent bump, according to a CoreLogic report. (iStock)

Home sale prices nationwide rose in June, though experts predict price growth will falter in July when the numbers come in.

Prices rose nearly 5 percent year-over-year compared to June 2019, and prices in June increased 1 percent from May prices, according to Mansion Global, citing an analysis from CoreLogic. July home prices have not been released.

CoreLogic’s chief economist attributed the June uptick to a decline in inventory and record-low mortgage rates, which enabled first-time homebuyers and millennials to buy.

The forecast for July is not as rosy. CoreLogic predicts prices will drop 1 percent in July, and expects to report negative annual price growth by next year.

A recent report from the National Association of Realtors showed a larger gain in June. The NAR report revealed sales of existing homes across four major regions shot up 20.7 percent in June compared to May. It also found that the median home price also increased to $295,300 — marking the 100th month in a row that year-over-year median home prices have increased. [MG] — Erin Hudson

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350 Indian Road and (inset) Frank H. Kenan (Realtor, Kenan Institute)

350 Indian Road and (inset) Frank H. Kenan (Realtor, Kenan Institute)

A scion of the Kenan family, which has prominent ties to Florida real estate and North Carolina academics and culture, sold her mansion in Palm Beach.

Holt Kenan Hemingway and her husband, Gregg Hemingway, sold the mansion at 350 Indian Road for $7.525 million, records show.

The buyer, John D. Olson, paid a 33 percent discount off the original listing price in October of $9.975 million.

Stephen Hall of Compass Florida represented the seller. Suzanne Frisbie of Premier Estate Properties represented the buyer, according to the listing.

The 7,220-square-foot, two-story house is designed around a courtyard with a pool, spa and fireplace. The house features a three-car garage, elevator and separate guest house.

Built in 2006, the home has six bedrooms, six baths and two half-baths. The Hemingways had paid $7.905 million for the house in 2016, records show.

Gregg Hemingway is a real estate agent. Holt Kenan Hemingway’s step-grandfather, Frank Hawkins Kenan, ran oil and oil services companies and served for many years as chairman and CEO of The Flagler System Companies of Florida.

The Kenan name is associated with various universities in North Carolina, adorning UNC’s Kenan-Flagler Business School, its 265-seat Elizabeth Price Kenan Theatre and Duke University’s Frank Hawkins Kenan Plastic Surgery Research Laboratories.

The Kenan family also owns The Breakers in Palm Beach.

Luxury homes in Palm Beach continue to sell at record levels during the global pandemic. This week, an investor in energy services and his wife, a former Enron executive, paid $6.5 million for a house in Palm Beach.

And Esure insurance founder and chairman Peter J. Wood sold a Palm Beach home for $9.65 million to Edwin Lin, who heads Citadel’s global fixed income practice.

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Nitin Motwani, Sankesh Abbhi and 1016 Northeast Second Avenue (Google Maps)

Nitin Motwani, Sankesh Abbhi and 1016 Northeast Second Avenue (Google Maps)

UPDATED, Aug. 5, 4:40 p.m.: Miami Worldcenter’s development group sold off another part of the mega-project.

Abbhi Capital bought a 1.15-acre parcel of land at the Miami Worldcenter development site at 1016 Northeast Second Avenue for $24 million, according to a spokesperson for Miami Worldcenter. MWC Block A, LLC, led by Nitin Motwani, sold the property.

The site is zoned T6-60a-O, which allows the developer to build up to 60 stories with a wide variety of uses, according to property records.

Abbhi Capital’s plans for the site remain unclear. Attorneys for both Abbhi Capital and Miami Worldcenter and a spokesperson for Miami Worldcenter declined comment.

The property is next to Akara Partners’ planned mixed-use apartment project that will feature 450 apartments, 10,000 square feet of retail and 20,000 square feet of co-working space. Akara closed on the property in July for $18.85 million.

Abbhi Capital’s lawyer, Elena Otero of Holland and Knight, said Abbhi Capital, through its affiliates, partnered with Akara on that recent acquisition.

Abbhi Capital is a privately-held investment firm based in Miami. The company, led by Sankesh Abbhi, focuses on investing in healthcare, technology, real estate and hospitality, according to its website. Abbhi is also the CEO of ArisGlobal, a cloud solutions provider for life sciences companies.

Miami Worldcenter, which spans 27 acres near downtown Miami, is being developed by Art Falcone, Nitin Motwani and Dan Kodsi. It is one of the largest commercial real estate projects on the East Coast.

The phased Miami Worldcenter project will include 300,000 square feet of retail, restaurant and entertainment space; the completed Paramount Miami Worldcenter condominium tower; Caoba, a 444-unit apartment tower that is completed; and a 348-room CitizenM hotel that is now under construction. It will also include a 434-unit rental tower by ZOM Living and 500,000 square feet of Class A office space.

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Walker Tower at 212 West 18th Street with in-contract buyer Ron Vinder (left), and prior owner Khadem al-Qubaisi (right) (Images from JDS Development, Morgan Stanley, Pixabay)

Walker Tower at 212 West 18th Street with in-contract buyer Ron Vinder (left), and prior owner Khadem al-Qubaisi (right) (Images from JDS Development, Morgan Stanley, Pixabay)

In order to prevent the U.S. government from selling a 1MDB scandal-linked penthouse at a steep discount, the condo board of Chelsea’s Walker Tower recently sought to exercise its right of first refusal on a proposed sale.

Unfortunately for them, a federal judge has decided that such a right no longer exists.

Judge Dale Fischer wrote in a decision last Monday that a May consent judgment wiped out the board’s right of first refusal — a ruling the board has already appealed. The judge made “a fundamental error” in finding that the board had waived its right of first refusal, the board said in a statement. “No such waiver was ever granted, nor should one be implied.”

The board also claims that the DOJ let the apartment “deteriorate,” left “its common charges unpaid for several years” and “ignored multiple efforts to sell the penthouse at a fair premium.”

“More importantly, the board is frustrated by the continued missteps the Justice Department has made in its handling of this incredible penthouse asset, worth tens of millions of dollars in recovery to victims of the 1MDB scandal,” the statement continues.

Although the May consent judgment does not explicitly mention the right of first refusal, it states broadly that “all right, title, and interest” of the board in the condo unit “shall be forfeited to the United States.” While the parties spent a lot of time debating whether the right of first refusal was attached to the unit, the judge found that this distinction “does not make any difference.”

“The ROFR is a right (or interest) in the Property, and the Judgment forfeits all of those rights,” she wrote.

The purported “low-ball” offer of $18.25 million comes from Ron Vinder, a financial advisor with Morgan Stanley Private Wealth Management. The proposed purchaser’s identity has not been previously reported. Vinder did not respond to a request for comment.

The unit at 212 West 18th Street previously sold for $50.9 million in 2014, setting a record for the Downtown market. The buyer was an LLC linked to Abu Dhabi businessman Khadem Al Qubaisi, and the Justice Department seized the property in 2016, alleging that the unit was bought with money stolen from Malaysia’s sovereign wealth fund, 1MDB.

Al-Qubaisi, who once headed Abu Dhabi’s International Petroleum Investment Company, received a 15-year prison sentence in the emirate last year.

The asking price on the full-floor, five-bedroom penthouse was most recently cut to $35 million last January. According to court filings, the highest offer on the unit as of March was $23 million, which was then reduced to $18 million “due to all of the uncertainty in the market and frankly in the world” caused by coronavirus, according to an email from the buyer’s agent.

The condo board’s plan, if it is able to exercise its right of first refusal, is to sell the unit to itself for the same price as the current offer and then to relist it for more, the Wall Street Journal previously reported.

In a declaration included in court filings, Vinder says that the condo board president at one point offered to “cease efforts to find another purchaser” if he were willing to pay an extra $1 million for the unit.

In its statement, the board says that its preferred buyer entity offered an additional $2.5 million for the unit, which “would expressly have been added to the compensation for 1MBD victims.” The Justice Department’s rejection of this offer, they say, further reflects that “the government is not acting in the best interests of the building or of victims of the fraud.”

Representatives for the Justice Department declined to comment. In court filings, the DOJ argues that the board’s move would force the U.S. government to breach the Vinder contract and potentially subject itself to liability. It also alleges that the board is seeking to extract a $2.5 million “side-payment” by exercising its right of first refusal.

The past month has been full of major developments in the 1MDB case, as former Malaysian prime minister Najib Razak was sentenced to up to 12 years in prison in connection with the scandal, while Goldman Sachs agreed to a $3.9 billion settlement with the Malaysian government.

Meanwhile, the scheme’s mastermind, Jho Low, may now be hiding in the Chinese territory of Macau, according to Malaysian police. Previous speculation indicated that he might be hiding in the United Arab Emirates or mainland China.

Contact Kevin Sun at ks@therealdeal.com.

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Civic Construction CEO Williams Real, Vlad Doronin and an aerial view of the Brickell project's foundation (Getty, Linkedin, Golden Dusk Photography)

Civic Construction CEO Williams Real, Vlad Doronin and an aerial view of the Brickell project’s foundation (Getty, Linkedin, Golden Dusk Photography)

UPDATED, Aug. 5, 8:20 p.m.: A bundle of rebar collapsed at a construction site Wednesday near Brickell City Centre, trapping six workers who were eventually freed and sent to the hospital in serious or critical condition.

The accident occurred before 11:30 a.m. at the site of 830 Brickell, where developers OKO Group and Cain International are building a 57-story, 724-foot-tall tower at 888 Southeast Brickell Plaza in Miami. Civic Construction is the contractor.

The rebar fell onto the construction floor and landed on top of the workers, said Lieutenant Pete Sanchez of Miami Fire Rescue. All six were taken to Ryder Trauma Center, and one worker was possibly impaled by a piece of rebar, he said. Because on-the-ground access to the site was limited, Miami Fire Rescue freed the workers using aerial ladders and stokes baskets.

“The safety of our workers and contractors is always our highest priority, and we are cooperating with the building department and OSHA in an internal investigation to determine the cause of today’s incident, and to prevent it from occurring again,” according to a statement from Civic Construction, which included that the workers are “reported to be stable and receiving care for their injuries.”

The Occupational Safety and Health Administration is expected to investigate the accident.

Workers completed the building’s foundation in late June after a 16-hour pour that involved 4,000 cubic yards of concrete, a spokesperson said at the time.

The building is designed by Adrian Smith + Gordon Gill Architecture, the same architecture firm that designed the Jeddah Tower and the Burj Khalifa.

Billionaire Vladislav Doronin’s OKO is partnering with Cain International to develop the office tower, where WeWork is expected to be an anchor tenant. MSD Partners, the private investment firm of Dell Technologies billionaire Michael Dell, provided a $300 million construction loan for the project last year.

This is a breaking news story and will be updated as more information becomes available.

Write to Katherine Kallergis at kk@therealdeal.com

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Barry Sternlicht (Getty, iStock)

Barry Sternlicht (Getty, iStock)

Barry Sternlicht compares the coronavirus pandemic to a race at the Indianapolis Speedway gone wrong. As a pace car laps around the track, lenders have to pull into the pit to change the tires and replace auto bodies.

“We have never experienced that,” said Sternlicht, chairman and CEO of Miami Beach-based Starwood Property Trust, during a second quarter earnings call with analysts on Wednesday. Sternlicht previously compared the pandemic to World War III, as well as a Category 5 hurricane pummeling the economy since March.

Two real estate sectors in which demand will not return to pre-Covid levels are hotels and retail, Sternlicht said.

“You have to predict the future and it’s not going to look like 2019. Not for a while. There’s no question business travel will be injured,” he added. “Underwriting is going to be different. If Covid goes on for years, it’s going to be tough.”

Still, Starwood is sitting on more than $800 million in cash and undrawn debt capacity, executives said. Sternlicht said the real estate investment trust is “quite blessed” with its scale.

“The ability to continue earning these types of returns … is truly something surprising,” he added.

Starwood reported $139.7 million in second quarter earnings, or 49 cents per share, up 10 percent percent from $127 million, or 45 cents per share, in the same period in 2019. The REIT reported $265.6 million in revenue for the second quarter, down 14.6 percent from $311 million in the second quarter of last year. The company’s stock rose 2 percent to $15.24 per share at 12:35 p.m. on Wednesday, following the earnings call.

The REIT said it has deleveraged its balance sheet by more than $350 million, lowering its future funding obligations by more than $700 million.

During the second quarter, Starwood said it negotiated modifications to 11 loans and is working on one more, offering partial interest deferrals to its borrowers. A majority of these loans are for hotel properties.

Jeff DiModica, the company’s CFO, said its hotel sponsors contributed $150 million in “fresh equity” and are projected to invest another $150 million of their own equity in the second half of this year. He said the REIT is “cautiously on offense.” Sternlicht later added that globally, transaction volume is still low as sellers are waiting “until the dam breaks” to sell, and many see a light at the end of the tunnel.

Starwood’s extended stay hotels, which have averaged 80 percent occupancy, represent about 20 percent of its hotel portfolio.

During the most recent quarter, Amazon signed a lease for a Starwood-owned distribution center in Orlando that was formerly leased to Winn-Dixie, DiModica said.

“Industrial has been fine. The housing markets are on fire. Multifamily is holding its own with some deterioration,” Sternlicht said, adding that there has been a flight to suburbia due to the perception of a lack of safety in some major cities, including New York. As a result, other cities, such as Nashville, Austin, Tampa, Orlando and Miami could benefit, he said.

As to the impact of a Joe Biden presidency on real estate and Biden’s proposal to eliminate 1031 exchanges, Sternlicht instead cautioned about the potential effect on interest rates and property taxes. Sternlicht said he has never used 1031 exchanges, which he referred to as lifetime exchanges, and that the tax code “should go away.”

“It isn’t required and it isn’t helpful to real estate,” he said. “There’s pressure on real estate taxes and we have to watch out for that.”

Write to Katherine Kallergis at kk@therealdeal.com

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The weekly survey tracking purchase loans saw a seasonally adjusted decline of 2 percent in the final week of July. (iStock)

The weekly survey tracking purchase loans saw a seasonally adjusted decline of 2 percent in the final week of July. (iStock)

The volume of applications for home loans fell again last week, due to a weak job market and tightening credit rules.

The weekly survey tracking purchase loans saw a seasonally adjusted decline of 2 percent in the final week of July.

The Mortgage Bankers Association metric, known as the purchase index, is still up 20 percent year over year, according to Joel Kan, head of MBA’s industry forecasting. It marks the eleventh week of consecutive annual increases, though weekly volume fell during the last two weeks of July.

Kan noted that purchase loan size is increasing. The average loan size was $366,500 last week, up from $364,600 last week. He said it could be “a sign that the still-weak job market and tighter credit for government loans are constraining some first-time homebuyers.”

Refinance activity also dropped last week. MBA’s seasonally adjusted refinance index declined 7 percent compared to the previous week, though it was up 84 percent from the same week in 2019.

The decline came even as rates continued to sink to yet another record low in the history of MBA’s weekly survey, which has been conducted since 1990 and covers 75 percent of the U.S. residential market.

The average rate for a 30-year, fixed-rate mortgage was 3.14 percent last week, down from 3.20 a week earlier. Jumbo rates dropped 1 basis point to 3.51 percent.

Kan said he expects rates to remain low and that, in turn, will ultimately drive applications to refinance.

MBA’s overall index of all home loan applications fell 5.1 percent, seasonally adjusted, from the prior week.

Write to Erin Hudson at ekh@therealdeal.com

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eXp Realty founder and CEO Glenn Sanford (Image via eXp)

eXp Realty founder and CEO Glenn Sanford (Image via eXp)

Virtual brokerage eXp Realty’s profits surged to a record $8.3 million during the second quarter as homebuying was forced to go remote, the firm’s parent company said Wednesday.

For the quarter ending June 30, eXp World Holdings said revenue grew 33 percent year over year to $354 million. For the third consecutive quarter, eXp was in the black. The company reported a net loss of $2.2 million during the second quarter of 2019.

The strong results were largely expected, following a quarter in which physical offices were closed and agents mostly conducted virtual showings.

“Due to the performance of our agents and the power of our cloud-based brokerage model, eXp Realty achieved exceptional results with strong growth in all areas, despite initial impacts on the housing market from business restrictions related to Covid-19,” founder and CEO Glenn Sanford said in a statement.

Sanford added that eXp has always had “the minimum footprint required” to operate, and therefore it was able to quickly reduce expenses during the pandemic. In April, eXp cut 15 percent of its staff in what it said was a proactive measure. It also eliminated all business travel, paused hiring and slashed executive pay.

The firm ended the second quarter with 31,000 agents globally, up 54 percent year over year.

Despite health and economic concerns, eXp said sales volume rose 26 percent to $13 billion during the quarter, up from $10.3 billion during the same period in 2019. The number of sales increased 22 percent to 43,653.

Use of eXp’s immersive software VirBELA, which powers its own virtual office, also “expanded quickly” during the quarter, the company said.

Earlier this week, eXp said it would launch a consumer-facing listing portal after acquiring Showcase IDX, a search plugin used by brokerages to display listings on their websites.

During the second half of 2020, eXp expects to formally launch in five additional international markets.

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Prentis Wilson and 1880 Sabal Palm Circle (Realtor)

Prentis Wilson and 1880 Sabal Palm Circle (Realtor)

A former Amazon executive who created its business-to-business sales program bought a mansion at the Royal Palm Yacht & Country Club in Boca Raton.

Prentis Wilson Jr. and his wife, Miriam Park, paid $5.15 million for the 8,190-square-foot, six-bedroom home at 1880 Sabal Palm Circle, records show. That’s a 19 percent discount off the original listing price of $6.39 million in February 2019, according to online listings. The price was cut three times, most recently in January to $5.65 million. It sat on the market for more than 500 days.

Jussara Alves de Oliveira Moritz and Roberto Eduardo Moritz sold the home. They had paid $4.6 million for the house in 2010, records show.

Built in 2008, the home has seven baths, two half-baths, a three-car garage and a golf cart. It also features a wood-paneled club room with a full bar, home theater and pool.

Michele A. Floyd with Re/Max Advantage Plus represented the seller, according to the listing. Better Homes and Gardens Real Estate Florida 1st, based in Fort Lauderdale, represented the buyer.

Wilson left Amazon and became president of online wholesaler Boxed in July 2019, marking the company’s first president, according to a press release at the time. Founded in 2013, Boxed offers warehouse club products — including household staples, health and beauty supplies, office pantry items and groceries — shipped to customers with no membership fees, according to its website.

Before joining Boxed, Wilson was vice president and general manager of Amazon Business, which he grew to more than $10 billion in annual sales in less than four years. He also led Cisco’s global sourcing and procurement operations and held various roles for 12 years at Honeywell International, according to the release.

The Royal Palm Yacht & Country Club in Boca Raton was founded in 1959 with boundaries of the Boca Hotel and Club, the Intracoastal Waterway, the Hillsboro River and Federal Highway, according to the club’s website.

The community has seen high-priced real estate deals amid the global pandemic. In April, a former general counsel at Office Depot sold a home on Sabal Palm Drive for $5.7 million.

In May, the former CEO of the craft store Michaels and his wife sold their waterfront estate in the Royal Palm Yacht & Country Club for $10 million, marking one of the priciest residential sales in Boca Raton in the past year.

Also, in April 2019, the head of a medical investment firm and his wife sold a 8,570-square-foot house at 271 West Coconut Palm Road in the Royal Palm Yacht & Country Club for $11 million.

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ADT CEO Jim DeVries and Google CEO Sundar Pichai (ADT; Pichai by Stephanie Keith/Getty Images; Nest via wallpaperflare)

ADT CEO Jim DeVries and Google CEO Sundar Pichai (ADT; Pichai by Stephanie Keith/Getty Images; Nest via wallpaperflare)

Google and ADT are teaming up to go after the burgeoning smart-home market.

In a partnership announced Monday, Google said it will invest $450 million for a 6.6 percent stake in the security giant. In exchange, Google will receive access to about 6.5 million of ADT’s customers to drive sales of Nest products. ADT, meanwhile, will get the backing of a Silicon Valley heavyweight as it competes against tech-driven security solutions.

Although the companies said they’re focusing on residential and small-business customers first, CEO Jim DeVries said the partnership comes with a “long list” of opportunities. “Their investment demonstrates skin in the game,” he said during an investor presentation Monday.

Wall Street looked at the deal favorably – ADT’s stock closed at $13.48 per share, up 56.6 percent from its closing price of $8.61 on July 31. Trading volume on Monday topped 187.1 million, compared to an average of 4.8 million.

Here’s what else you should know about the deal:

1. The most basic part of the deal combines Nest hardware with ADT’s installation and monitoring. ADT will offer Google devices to customers starting this year.

2. ADT and Google are also each planning to invest another $150 million to market and develop new products. The first $50 million is “coming soon,” said DeVries. The next two tranches are based on “milestones that we’re confident we’ll be achieving.”

3. Why now? The global smart home market is massive, with some estimates projecting it will grow from $78.3 billion in 2020 to $135.3 billion by 2025. In March, SmartRent, which develops smart home software and hardware for multifamily landlords, raised $60 million.

4. Smart homes is an area that 145-year-old ADT has been chasing. Last year, for example, it acquired I-View Now, a video verification company, for an undisclosed sum.

5. ADT also has a joint product with Amazon — dubbed Alexa Guard — which links the cloud-based voice assistant to ADT’s security system. Basically, Alexa is able to listen for things like breaking glass and smoke alarms. DeVries said that the relationship “will continue,” and that ADT would still integrate the two systems “when customers request it.”

6. Some background on Google Nest: Google bought Nest for $3.2 billion in cash in 2014. In addition to its flagship thermostat device, Nest also makes smart speakers, smoke detectors and security systems (including doorbells, cameras and locks).

7. For ADT, the Google deal has another key upside. ADT will use the $450 million to fuel growth and pay debt. After being bought (and later taken public) by Apollo Global Management, ADT has more than $10 billion in debt, according to its most recent annual report.

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(iStock)

(iStock)

Responding to an eviction in progress in South Central Los Angeles, tenant organizers didn’t call a defense attorney. They called a contractor, who came equipped with a power drill.

When a local landlord removed a resident’s belongings and changed the locks on his apartment a week after he missed rent, Paul Lanctot, an organizer with the Los Angeles Tenant Union, said he put out a call to a network of supporters. Soon after, more than 30 tenant organizers arrived at 9316 South Figueroa Street, and physically blocked a moving van loaded with the tenant’s belongings.

While some linked arms to keep the van from pulling out of the driveway, others formed a blockade around the back entry to the apartment building, where the contractor got to work. In just 5 minutes, he removed the lock and opened the door, and organizers rapidly moved the belongings back in, according to the organizers.

The building’s landlord, David Wohlman, told The Real Deal he was “overwhelmed” by the group’s response. When the tenant stopped paying rent, Wohlman said he tried to move him to a cheaper property. But those efforts led to the sudden backlash — which the landlord characterized as a “riot” — and in the end, the tenant stayed put.

“If I’d known this would have happened, I would have just left him in his house,” said Wohlman, founder of the transitional housing nonprofit Uncle Dave’s Housing. “We’ve never had anything like this happen before.”

“If I’d known this would have happened, I would have just left [the tenant] in his house.” — David Wohlman, Uncle Dave’s Housing 

Physically getting evicted tenants back in their homes is a key strategic play, argued Trinidad Ruiz, another member of the LATU. “If you don’t have possession of the home going into court, you lose, because you’re already evicted,” he said.

In Los Angeles County, where an estimated 60 percent of residents are renters, evictions are under the jurisdiction of the sheriff rather than each city’s police department. In recent months, however, local police have carried out extra-judicial evictions at the behest of landlords seeking to boot non-paying tenants. In the first 10 weeks after L.A. issued a pause on evictions in late March, police were called to carry out more than 290 lockouts, according to data compiled by the Los Angeles Times.

Elsewhere around the U.S., eviction efforts are gaining momentum — despite moratoriums that were put into place in 27 states this spring — and a growing number of landlords are suing to dismantle eviction bans.

“We’re hearing there are illegal evictions across the country,” said Lisa Marlow, a spokesperson for the National Low Income Housing Coalition. “Landlords are ignoring [state] moratoriums because they do not know or because they just need their money.”

More than 50 million U.S. workers have filed for unemployment since the start of the pandemic, while confirmed coronavirus cases around the country have surpassed 4.5 million, according to data from the Labor Department and John Hopkins University. President Donald Trump announced on Aug. 3 that he may take executive action to impose a federal moratorium on evictions, as negotiations over a new U.S. Covid relief plan stall in Congress. “A lot of people are going to be evicted,” Trump said. “But I’m going to stop it, because I’ll do it myself if I have to.”

But the president did not offer any more details on an executive action to that effect.

At the same time, a moratorium on evictions for federally backed mortgages saw little enforcement and lapsed July 24, and many of the state moratoriums are expiring too. In an effort to counter that, tenant groups like the LATU are using more aggressive tactics to prevent evictions — especially in regions where few protections exist.

“The reason we’re seeing more militant direct action from tenants is because of weakened protections,” said Patrick Tyrell, a staff attorney at Mobilization for Justice, a nonprofit organization that provides free civil legal services. “What else can they do?”

Locked in arms

A throng of tenant organizers recently surrounded a New Orleans city courthouse in a concerted effort to halt evictions.

Dozens of court workers, attorneys and others were physically blocked from entering the building as the crowd cried out “shut it down” and “housing is healthcare.” Unable to open, the courthouse had to reschedule not only evictions, but other proceedings as well, according to a representative from the New Orleans City Court.

Benjamin Teresa, co-director of the RVA Eviction Lab in Richmond, Virginia, said there is no enforcement mechanism or penalty for landlords who disregard a federal eviction moratorium.

“So, effectively, enforcement has fallen to tenants — the group least prepared to carry that burden,” Teresa said.

In Louisville, Kentucky, the eviction rate in 2016 was nearly double the national average of 9 eviction filings for every 100 renters, according to a landmark study by Princeton University.
The Homeless and Housing Coalition of Kentucky estimated that another 340,000 people are at risk of eviction going forward.

And a weekly Census Bureau survey found that one in four people in the U.S. are now “housing insecure,” meaning they missed last month’s rent or mortgage payment, or have little confidence that their household can pay August’s rent or mortgage on time.

“Without rental assistance, the outlook is bleak,” a letter sent to Sen. Mitch McConnell from the Homeless and Housing Coalition read. “We will see longer lines of hundreds and thousands of Kentuckians — only this time, it will be around homeless shelters and not employment centers or the unemployment office.”

Many evictions in Kentucky are never documented, according to tenant advocates and legal experts. Consisting of little more than changing a lock and putting a person’s belongings in front of their house, such evictions, or “set-outs,” multiplied in the early days of the pandemic.

Tenant organizers fought back, filing lawsuits against local city governments to halt the practice, said Joshua Poe, who co-founded the Root Cause Research Center. “We got a team of lawyers and filed several lawsuits around set outs and won,” Poe said. “When there was pushback, it stopped a little bit.”

But he and others are pushing for a deeper impact. A tenuous statewide pause on evictions for non-payment will last until Gov. Andy Beshear ends Kentucky’s formal state of emergency, which went into effect in March. In the meantime, evictions for other reasons continue.

Many renters are unaware of the federal limits on evictions for federally-backed mortgages, according to Poe, who is working to identify evictions that have occurred in properties covered by the moratorium. “I haven’t seen an instance where the judge has asked for that information,” he said.

Poe estimated that 15,000 evictions could be filed starting July 25, after the federal eviction moratorium lapses. His group has taken to Zoom-bombing virtual eviction proceedings in Louisville — which in some cases do not include the tenant — to keep evictions from going forward.

Poe said he hopes to push lawmakers in Kentucky to pass “just cause” eviction, which would place the burden of justifying an eviction on the landlord. For now, Poe said his first priority is to repeal Kentucky’s noise ordinance, a law that allows landlords to automatically evict a tenant after the police have been called to the property three times.

Evictions due to such complaints have increased in recent months, said Beaux Revlett, who organizes tenants in Lexington, Kentucky, where evictions resumed on July 1. “There have been significantly more evictions for nuisance complaints, which a lot of people interpret as a pretext for non-payment,” Revlett noted.

Landlords in Kentucky do not have to present evidence in court to justify an eviction. That poses a challenge for defending against frivolous evictions, especially when tenants are not represented, Revlett said.

Calling on Congress

Pro-tenant lawmakers hope to use what clout they have in Washington D.C. to demand policy that will curb rising evictions.

While such policies will surely face headwinds in the Republican-controlled senate, Trump surprised many when he announced his own plans to “stop evictions” while Congress tussles over the next round of pandemic relief. For now, though, any executive actions from the White House are subject to the president’s whims.

In the meantime, some members of Congress have been pushing for greater tenant protections on the federal level.

  “We’ve seen that unfortunately there are a lot of corrupt landlords that exploit any vulnerability, and right now, in the middle of a pandemic, that vulnerability has exploded.” — Rep. Alexandria Ocasio-Cortez 

Rep. Alexandria Ocasio-Cortez and Rep. Jamaal Bowman hosted a virtual eviction defense workshop with the New York tenant group Housing Justice for All last month.

“We’ve seen that unfortunately there are a lot of corrupt landlords that exploit any vulnerability, and right now, in the middle of a pandemic, that vulnerability has exploded,” Ocasio-Cortez said during the remote meeting.

Tenants elsewhere are also planning eviction blockades and other direct actions after months of demanding eviction moratoriums have gone unheeded in states like Missouri. There was never a full ban on evictions in Missouri, where Tara Raghuveer, of Kansas City Tenants, said 1,000 evictions have been filed in a single county since the courts started back up in June.

But like Kentucky, many evictions in Missouri are carried out before there is any documentation.

Raghuveer’s organization, which maintains a tenant hotline, has received an increase in reports of tenants being paid to leave their apartment. She said that, although many tenants are unable to pay rent, there will always be strong demand for the lowest-income segments of housing.

“People are extremely desperate and they just need a place right now,” Raghuveer maintained. “They’ll do anything to get back in.”

The post “We’re seeing more militant direct action:” Tenant groups fight evictions with power drills and other tools appeared first on The Real Deal Miami.

(iStock)

(iStock)

The coronavirus pandemic and its economic aftermath have put a damper on office leasing across the U.S. By one measure, the decline in demand for office space in the second quarter was the largest the country has seen since the dot-com crash.

Net absorption in the U.S. office market — the amount of space leased minus vacated space and new space — turned negative for the first time a decade in the second quarter, totalling 21.5 million of negative absorption, according to a new report from CBRE. That’s slightly worse than the 21.2 million single-quarter decline seen at the peak of the financial crisis, but still well behind the massive 41.2 million square foot decline from the third quarter of 2001.

As the below chart from the report shows, the 2008 financial crisis led to four consecutive quarters of negative net absorption in office markets nationwide. It remains to be seen how long the impact of the current disruption will last.

Other office leasing metrics also point to a major slowdown in the market. Leasing volume fell by 35 percent from the prior quarter and 44 percent from the same period last year. Vacancy ticked up 0.7 percentage points to 13 percent.

The slowdown hit some markets more heavily than others, with the NYC metropolitan area, California and Texas accounting for 72 percent of negative demand. Meanwhile, about a dozen markets in Southeast, Midwest, and Washington, D.C., still saw positive absorption.

The San Francisco market saw the most negative absorption of all, at 2.3 million square feet. At the other end of the spectrum, Tampa saw positive absorption of 360,000 square feet, the largest of any market.

Even after the massive decline in demand, San Francisco’s office market was still the second tightest in the country at 7 percent vacancy, surpassed only by nearby San Jose’s 6.7 percent.

The amount of available sublease space has begun to grow significantly in some parts of the country, with Phoenix and Salt Lake City seeing large increases in the second quarter. CBRE notes that this is “perhaps due to a greater ability to tour space than other markets that were more acutely affected by Covid-19 restrictions early in the crisis.”

Manhattan, for example, has yet to see a widely expected increase in sublet availability, while Los Angeles has seen sublease availability hit record levels.

Rents have also yet to drop noticeably despite the decline in demand, although CBRE notes that downward pressure is growing as landlords offer more concessions. But for now, “a significant difference in pricing expectations has emerged between landlords and tenants,” the report says.

Contact Kevin Sun at ks@therealdeal.com

The post TRD Insights: Nationwide office leasing demand hits two-decade low appeared first on The Real Deal Miami.

113 Clarke Avenue, Peter J. Wood, Edwin Lin (Realtor.com)

113 Clarke Avenue, Peter J. Wood, Edwin Lin (Realtor)

Esure insurance founder and chairman Peter J. Wood sold a Palm Beach home to Edwin Lin, who heads Citadel’s global fixed income practice.

Wood, an English multimillionaire businessman, sold the 6,278-square-foot house at 113 Clarke Avenue for $9.65 million, or $1,537 per square foot. Lin and his wife, Vivian Chiu of New York, purchased the property, records show.

Meanwhile, Lin and Chiu are listing their home at 215 Seabreeze Avenue in Palm Beach for $4.65 million.

Wood paid $10.13 million for the Clarke Avenue house in 2007, and sold it for about half a million dollars less than that. The five-bedroom, six-and-a-half bathroom house was relisted last year for nearly $12 million. It sits on less than half an acre of non-waterfront land.

Christian Angle of Christian Angle Real Estate represented Wood, while Dana Koch of the Corcoran Group brought the buyer. Koch is also listing the house on Seabreeze.

Lin has worked at Chicago-based Citadel, billionaire Kenneth Griffin’s hedge fund, since May 2011, according to his LinkedIn. Griffin has assembled at least 19 acres of land for a massive estate along Blossom Way and South Ocean Boulevard in Palm Beach, spending roughly $350 million on a number of properties. Griffin, a Daytona Beach native, also owns pricey homes in New York City and Chicago.

Early on in the pandemic, Griffin set up a trading room for his Citadel Securities at the Four Seasons Resort Palm Beach, flying in traders and staff from his New York and Chicago offices to work out of the temporary trading floor.

The high-end Palm Beach market has been on fire over the past few months, with a number of big-ticket sales closing during the coronavirus pandemic. In June, two Palm Beach estates sold for more than $70 million.

The following month, rock star Jon Bon Jovi closed on an oceanfront mansion at 1075 North Ocean Boulevard for $43 million, after selling his home at 230 North Ocean Boulevard for $19.8 million.

Write to Katherine Kallergis at kk@therealdeal.com

The post Citadel hedge fund exec buys Palm Beach home for $10M appeared first on The Real Deal Miami.

Matthew Kramer, Victor Petrescu, Sebastian Jaramillo and Gov. Ron DeSantis (Getty, iStock) 

Matthew Kramer, Victor Petrescu, Sebastian Jaramillo and Gov. Ron DeSantis (Getty, iStock)

Florida Gov. Ron DeSantis’ latest extension of the ban on residential foreclosures and evictions is expected to flood the courts with new filings once it is lifted, as layoffs continue to mount and federal funding runs out, real estate attorneys told The Real Deal.

“Mortgage lenders are getting nervous that the people they’re lending money to are no longer getting paid,” said Victor Petrescu, a partner at Miami-based Levine Kellogg Lehman Schneider + Grossman. The CARES Act expired on Friday, ending the additional $600 in weekly jobless benefits.

DeSantis extended the moratorium on evictions and foreclosures to Sept. 1 last week, just two days before the order was set to expire.  The state’s ban on both evictions and foreclosures is meant to keep people in their homes during the pandemic, as the number of positive Covid-19 cases continues to rise in Florida. It does not provide financial relief. In fact, all payments are due when the borrower or tenant is “no longer adversely affected” by coronavirus.

Lawyers, landlords and lenders expect the governor to sign another month-long extension at the end of August. (The Federal National Mortgage Association/Federal Home Loan Mortgage Corp. moratorium has already been extended until the end of August.) Florida first put a halt to new evictions and foreclosures in early April, with monthly extensions since then.

Petrescu, who represents a number of mortgage lenders, said the series of 11th-hour extensions in Florida has provided people “with a lot of uncertainty.” More than 3.4 million people in Florida have filed for unemployment since March 15, and nearly 500,000 people have tested positive for coronavirus, according to the state.

“I can’t imagine what these people are going through. It must be like a rollercoaster ride,” Petrescu said. “It’s better than nothing, but it’s only deferring the inevitable.”

The inevitable will likely be a deluge of residential evictions and foreclosures once the stay is lifted, similar to the cluttered court dockets seen in the last recession. Judges will likely be overwhelmed with cases, experts say.

Miami attorney Sebastian Jaramillo was prepared in late June to serve hundreds of eviction notices, until the governor made a last-minute extension to Aug. 1, hours before the moratorium was set to expire.

Jaramillo, a partner with Miami-based Wolfe Pincavage law firm, said that a number of tenants are taking advantage of the ban on evictions, and choosing to not pay their rent. The freeze on both evictions and foreclosures has also delayed closings, he said.

At the same time, some landlords are working with their tenants, and lenders with their borrowers. Matthew Kramer, an attorney at Miami-based Weinberg Wheeler Hudgins Gunn & Dial, predicts that will continue “until such time as there’s more clarity regarding how long this pandemic will last.”

“I think the reality still is that even if you’re ready to foreclose upon or evict a tenant in this economic climate, does it make sense to foreclose or evict if you may not have a tenant or a purchaser of the property after you foreclose or evict?” Kramer said.

Plus, most lenders are looking for an income stream, and foreclosure is an expensive process, he added.

Still, said Kramer, “each month the order gets extended, it becomes that much more difficult determining how to proceed.”

Write to Katherine Kallergis at kk@therealdeal.com

The post Eviction, foreclosure freeze in Florida delaying inevitable flood of cases appeared first on The Real Deal Miami.

Mayor Bill de Blasio (Getty)

Photo illustration of Hudson Pacific Properties CEO Victor Coleman and Blackstone Group President Jonathan Gray (Coleman by Rich Polk/Getty; Gray by Drew Angerer/Getty; Top Gun by Paramount Pictures/Sunset Boulevard/Corbis/Getty)

As many developers just try to hang on during the pandemic, Victor Coleman is celebrating.

During an earnings call at the end of July, Coleman could hardly contain his excitement about what he called “the milestone.” Blackstone Group, the New York-based investment giant, had agreed to buy a 49 percent stake in his company and its $1.65 billion Hollywood real estate portfolio.

“Our sale of 49 percent to Blackstone, arguably, the preeminent institutional real estate investor, provides validation to the stock market,” Coleman, the CEO of Hudson Pacific Properties, declared. The seeds he sowed nearly 15 years ago had borne lucrative fruit.

But for Blackstone, the deal for 2 million square feet of Hollywood office buildings and soundstages represents something else entirely. It’s a dramatic entree into what some see as a recession-proof real estate play: capitalizing on the streaming frenzy.

Blackstone Global Co-Head of Real Estate Ken Caplan

Blackstone Global Co-Head of Real Estate Ken Caplan

“Our business is driven by investing thematically in sectors with powerful secular tailwinds,” said Ken Caplan, global co-head of Blackstone Real Estate. “And there is no better example of that than content creation in Los Angeles.”

Industry insiders agree the planned Blackstone-Hudson Pacific venture is an exclamation point on the value of soundstage space, which they say is an asset class still little understood by real estate investors.

Meanwhile, Blackstone’s money could be used to satiate Coleman’s acquisition ambitions. Or Blackstone could even swallow Hudson Pacific whole.

“I think there is a chance that Hudson would ultimately be acquired,” said Alexander Goldfarb, a real estate investment trust analyst with Piper Sandler. “I think it would make a great pairing.”

Blackstone Goes Hollywood

The deal, which closed this week,* centers on Sunset Bronson, Sunset Gower, and Sunset Las Palmas film production facilities, plus adjoining office buildings.

The soundstage space involved totals 1.2 million square feet. There is an additional 1.1 million square feet of adjacent, under-utilized land owned by Hudson Pacific, SEC filings show, that the REIT may convert into production facilities.

Fifty percent of the Sunset soundstage leases are long-term, said Hudson Pacific chief operating officer Alex Vouvalides, with Netflix the biggest long-term tenant.

Hudson Pacific COO Alex Vouvalides

Hudson Pacific COO Alex Vouvalides

Netflix also leases 100 percent of the Icon, Epic and Cue office buildings, Vouvalides said. An old guard showbiz player – Technicolor – leases the remaining office space. In all, Blackstone is taking a stake in about 966,000 square feet of office space.

Blackstone’s Core+ fund will run the deal, sources close to the transaction said. Blackstone is considering asset-level financing, per the SEC filings, which would give Hudson Pacific “anticipated cash proceeds of up to $1.268 billion.”

The deal was discussed “for quite some time pre-Covid,” Vouvalides said.

“Hudson Pacific gets a deep-pocketed investor on board as they move forward with the renovation and expansion of their Hollywood facilities,” said Michael Soto, Southern California research director at Savills. “Blackstone gets to invest in studio facilities which has become a niche product with insatiable demand due to streaming.”

Blackstone perhaps signaled its interest during an April earnings call.

“We’ve also been emphasizing deployment in faster growing sectors over the past several years, which are showing great resiliency in this environment,” Jonathan Gray, Blackstone’s president and chief operating officer, said at the time. “Key themes include logistics, life sciences, cloud migration, and online content creation – all which are holding up quite well.”

In public statements, Gray and CEO Stephen Schwarzman seem to play to Blackstone’s master of the universe reputation by emphasizing that the company brims with capital. Blackstone officials used the phrase “dry powder” a total of 13 times during the company’s two earnings calls this year.

But even the country’s largest commercial landlord by total property value has scaled back some of its ambitions amid the pandemic. Blackstone wound down a mortgage-backed security fund that had net assets of $553 million as of May 31, and skipped a $274 million hotel loan payment earlier this month.

“There are only so many things they can do,” said Sam Alavi, a real estate attorney at Paul Hastings.

Blackstone and Hudson Pacific have previously done at least two major deals. Hudson Pacific bought a majority stake in a San Francisco and Silicon Valley office portfolio valued at $3.5 billion from Blackstone in 2014, and the firms have an office and retail space joint venture in Vancouver.

And Blackstone is not a neophyte when it comes to the L.A. entertainment space. It bought $1.7 billion worth of properties in Burbank, buildings with tenants such as Walt Disney, Warner Bros. Entertainment, and NBCUniversal. But that deal was almost all office space, not soundstages.

“Running studios is a niche operation,” said Craig Coan, a real estate lawyer at Greenberg Glusker.

Life’s a Soundstage

A Vancouver native, Coleman is mostly written about as a hockey fan and minority investor of the Las Vegas Golden Knights hockey team. But the developer has had a notable if low-profile impact on Southern California real estate for three decades.

After graduating from Golden Gate University in 1990, Coleman broke into real estate by partnering with property mogul Richard Ziman to start Arden Realty. In less than 15 years, the company became Southern California’s largest office landlord, with 192 buildings and 18.5 million square feet across four counties. In 2005, General Electric’s real estate arm bought Arden for $3.2 billion.

Sunset Gower Studios (Google Maps)

Sunset Gower Studios (Google Maps)

A year later, Coleman founded Hudson Capital (later renamed Hudson Pacific Properties) and began scooping up film studios. In the next two years, his company acquired Sunset Gower Studios, the iconic former Hollywood headquarters of Columbia Pictures, and then Sunset Bronson Studios, the first production center for Warner Brothers.

Hudson Pacific is a different kind of real estate investment trust. Not in a boilerplate “We think differently to create value, blah blah blah” corporate culture sense, but in a tangible way: The company leases buildings to high-profile entertainment and technology companies with very specific operational needs.

Coleman spotted an opportunity not just with Netflix, but leasing San Francisco office space to Uber and Santa Monica buildings to esports’ Riot Games when those companies were getting started.

“The focus of Hudson Pacific really was around the media and tech real estate business, and our first acquisitions were two large studios that we bought in Los Angeles,” Coleman told REIT Magazine last year.

Hudson Pacific’s work with Netflix dovetailed with the streaming services move to “Netflix originals” that directly compete with legacy studios, as well as the emergence of other streaming platforms — from Amazon Prime to NBCUniversal’s fledgling Peacock — that need space to produce their own original content.

Hudson Pacific’s Hollywood portfolio alone accounts for a fifth of the 5.2 million square feet of L.A. County’s leasable soundstages, according to Film LA, a local government entity. In fact, Hudson Pacific owns the most soundstage space in the country, with the exception of legacy studios Disney, Warner, Sony, Paramount and Universal.

Sunset Bronson Studios (Google Maps)

Sunset Bronson Studios (Google Maps)

That, of course, is a major exception. The Paramount lot alone in Hollywood is set to span 4.1 million square feet after construction is completed.

The life of a soundstage space landlord is a lucrative but chaotic endeavor. There is no shortage of film producers roaming L.A. willing to pay to shoot for a few weeks (Film LA studies show county soundstage occupancy at around 95 percent before the pandemic). But besides the problem of short-term tenants, the landlord must also coordinate the production.

“What makes it complicated for everyone is that the components of the cost go far beyond rent,” said a real estate broker who does business at the Hudson Pacific studios. “There’s a slew of add-ons – trailers, stages, production offices, green rooms, and more.”

Hudson Pacific along with Hackman Capital Partners, which leases studio space to Amazon, has tried to operate soundstage leasing to more closely resemble other types of commercial leases.

“Rents were very inconsistent, until Netflix and Amazon began looking at long-term leases,” the consultant said, who added long-term leases can shift operational headaches to the renter.

Still, Hudson Pacific must handle the 50 percent of soundstages not leased to Netflix. According to Vouvalides, the company was leasing 92 percent of its total soundstage space at the end of March, a number that presumably dropped amid the lockdown.

But in L.A., the roughly 600,000-square feet of studio space not leased to Netflix is still seen as exceedingly valuable.

“This space will be in huge demand once all restrictions are lifted,” Coan said. “I understand that there are a lot of content creators waiting to get into the studios.”

“While everyone is crying [about] the death of the office,” noted Alavi of Paul Hastings. “There will be studio demand.”

On Wall Street, the view is more complicated. As Netflix’s stock has shot up 30 percent since March, the stock of its L.A. landlord has been up and down since March, more in line with other real estate investment trusts.

Hudson Pacific’s stock was trading around $24 after its second quarter earnings call, or about a dollar below its share value in March.

The share price was boosted after the announced deal with Blackstone. An analyst note from Bank of America, which is also a financial advisor on the deal, said Blackstone overvalued Hudson Pacific’s Hollywood portfolio by about 10 percent.

L.A. brokers counter that the soundstage space was undervalued. “This is pretty much irreplaceable space on urban infill sites that sold at or below replacement level cost,” one said. “Building a new soundstage would cost $500 per square foot, while this sold at $530 a square foot as a growing business.”

The broker added that some investors still don’t make the connection between the proliferation of amply bankrolled streaming services with soundstages long-term value. “Soundstages are a space few on Wall Street understand.”

The Next Scene

Hudson Pacific is in acquisition mode following the Blackstone deal. “Especially now that we have reduced our funding requirements for future development, we are nimble and poised to take advantage of market dislocations in the current environment to expand in office as well as studios,” Coleman said on the July earnings call.

One move could be Hudson Pacific acquiring the remaining 25 percent of One Westside Pavilion, office space leased to Google. To own the project, which is being built for $475 million, Hudson Pacific would have to buy off Macerich, a Santa Monica-based real estate investment trust that’s reeling from mall tenants not paying rent.

“Buying up One Westside is certainly a possibility, but it still leaves them with a lot of firepower,” said Goldfarb of Piper Sandler. “They have identified that they want to grow in L.A.”

One Westside Pavilion (Google Maps)

One Westside Pavilion (Google Maps)

One path is repurposing sites for more soundstage space. Despite the proliferation in streaming. less than a handful of new L.A. County soundstages have come into operation in the past two decades, according to Film LA data.

There’s also whispers of a very different direction: Blackstone and Hudson Pacific extending their partnership by Blackstone buying Hudson Pacific.

While a big player in Hollywood, Hudson Pacific has just four percent of the market capitalization of Blackstone.

“The downturn may produce more mergers,” said one L.A. commercial broker. “It’s harder for everyone to operate independently.”

Coan sees Blackstone maybe “testing the waters,” and then perhaps snagging a majority stake in the Hollywood studios.

The attorney noted that Hudson Pacific has built a strong brand, but “everybody is always for sale.”

* Clarification: Shortly before this story was published, the Hudson Pacific-Blackstone agreement officially closed. The SEC filing indicates deal terms are unchanged since the June announcement.

The post Inside Hudson Pacific and Blackstone’s field of streams appeared first on The Real Deal Miami.

Schuyler Tilney and 222 Ridgeview Drive (Linkedin, Sotheby's)

Schuyler Tilney and 222 Ridgeview Drive (Linkedin, Sotheby’s)

An investor in energy services and his wife, a former Enron executive, bought a house in Palm Beach.

Schuyler and Elizabeth Tilney paid $6.5 million for the nearly 4,000-square-foot home at 222 Ridgeview Drive, according to records. It was an off-market sale.

The four-bedroom, five-and-a-half bath house was built in 2007. The home has a master suite on the first floor, gourmet kitchen, full home generator and water filtration system, with beach and bike trail access, according to a previous listing.

The sellers, Edwin and Danielle Conway, paid $3.78 million for the house in 2017, records show.

In July, the Tilneys sold a 19,600-square-foot lot in Palm Beach for $6.25 million to spec home builder Todd MIchael Glaser and his partners.

Schuyler Tilney is chairman of oilfield services banking for Houston-based Tudor, Pickering, Holt & Co., which provides strategic and financial advice to investors, management teams, boards of directors, governments and other professionals in the global energy industry, according to the company’s website.

Tilney made headlines in the early 2000s as a managing director at Merrill Lynch. He was the lead investment banker in dealings with Enron Corp., a Houston-based energy, commodities and services company that ceased operations after scandals involving corporate corruption and accounting fraud.

Tilney memorably invoked his Fifth Amendment right to refuse to testify during a 2002 Senate committee meeting on Merrill Lynch and Enron.

Elizabeth Tilney was a senior Enron executive. She worked at Enron until January 2002 on the company’s crisis management strategy and is credited with introducing the company’s crooked “E” logo. She worked in account management for ad agency Ogilvy during the 1980s.

High-end Palm Beach houses continue to sell despite the global pandemic. In July alone, the ritzy town saw rock star Jon Bon Jovi close on an oceanfront mansion for $43 million.

In addition, cable TV mogul Jeffrey Marcus paid $16 million for a waterfront home, and an ocean-to-lake mansion traded for $51.4 million.

The post Got the power: Energy investor and former Enron exec pay $7M for Palm Beach house appeared first on The Real Deal Miami.

B. Riley Real Estate president Michael Jerbich and  J.C. Penney CEO Jill Soltau (Getty, Linkedin, J.C. Penney)

B. Riley Real Estate president Michael Jerbich and  J.C. Penney CEO Jill Soltau (Getty, Linkedin, J.C. Penney)

As part of its plan to reduce its portfolio and cut costs amid Chapter 11 bankruptcy, J.C. Penney is looking to sell off its interest in 163 locations across the country.

The department store chain has tapped Cushman & Wakefield and B. Riley Real Estate to sell the leases for 142 locations, as well as 21 stores it owns, Business Insider reported.

“There’s all kinds of interest and there are some good properties here,” B. Riley principal Jim Terrell told the publication.

“There are residential investors who might redevelop these properties and there’s storage players who could use them for logistics. And then you have retailers themselves who could occupy it.”

J.C. Penney declined to comment. Bankruptcy filings from May indicated that the company planned to close 192 stores this year and sell 50 stores that it owns next year.

Bids for the leases are due by mid-September, while the owned stores may take longer to sell, according to B. Riley president Michael Jerbich.

“Although there aren’t additional stores being offered for sale at this time, that could change as the process evolves,” Jerbich said.

Several buyers are reportedly considering bidding for the J.C. Penney brand, including mall owners Simon Property Group and Brookfield, private equity firm Sycamore, and Amazon. [BI] — Kevin Sun

The post J.C. Penney taps Cushman, B. Riley to sell 163 locations appeared first on The Real Deal Miami.

Hotelier Monty Bennett and Marriott Beverly Hills (Bennett via Ashford Inc.; Marriott via Booking)

Hotelier Monty Bennett and Marriott Beverly Hills (Bennett via Ashford Inc.; Marriott via Booking)

Texas-based Hotelier Monty Bennett and his affiliated companies came under public scrutiny in the spring when they received $68 million in coronavirus-related federal funding, despite having paid out millions in preferred dividends.

Now, the U.S. Securities and Exchange Commission has opened an investigation into at least three companies tied to Bennett, the Wall Street Journal reported. They are: Ashford Inc., along with subsidiaries Ashford Hospitality Trust and Braemar Hotels & Resorts Inc.

The investigation targets related-party deals, including an agreement real estate investment trust Ashford Hospitality signed with a subsidiary of parent company Ashford Inc. The deals involved renegotiating mortgage debt while Ashford Inc. said it could no longer afford interest payments on debts, the Journal reported.

The agreement could have paid Ashford Inc. up to $20 million to renegotiate mortgages and ask for forbearance from lenders. Bennett is a major shareholder in Ashford Inc.

The SEC also asked for “accounting policies, procedures, and internal controls related to such related party transactions,” according to the Journal.

Shortly after having received the PPP funding, and following public backlash, the companies tied to Bennett said they would return the money, which was meant to help businesses pay necessary expenses including payroll, rent, mortgage interest, and utilities. The total forgivable loan amount was among the most received by any public company.

Ashford Inc. and its subsidiaries laid off around 7,000 workers during the pandemic. Regarding the PPP funding, the firms blamed the government on what it called “inconsistent federal guidance that put the companies at compliance risk.” [WSJ] — Dennis Lynch

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4700 North Congress Avenue and Velocis Managing Partner Fred Hamm (Google Maps)

4700 North Congress Avenue and Velocis Managing Partner Fred Hamm (Google Maps)

A private equity group sold a medical office building in West Palm Beach for $5.2 million, a slight discount from its last sale price in 2013.

Dallas-based Velocis sold the 43,797-square-foot West Palm Medical Plaza at 4700 North Congress Avenue for $118 per square foot, records show. WPB Medical Office, LLC, led by Andrew Greenbaum of Boca Raton, bought the property.

Colliers International Florida’s Harry Blyden and Bastian Laggerbauer brokered the sale.

The building sits on 5.13 acres. It was built in 1987 and underwent renovations in 2011. At the time of the sale, the building was 63 percent occupied, leased to seven medical-related tenants, according to a press release.

The property last sold for $5.7 million in Dec. 2013, records show.

West Palm Medical Plaza is near I-95 and 45th Street, with close access to Palm Beach International Airport and downtown West Palm Beach.

Medical office buildings were initially hit hard by the coronavirus pandemic, according to industry experts and lenders, since non-essential medical offices were ordered to close. But demand for the sector in recent years has been high due to the growing population of senior citizens and growing demand for senior living centers in South Florida.

The post Private equity firm sells West Palm medical offices at discount appeared first on The Real Deal Miami.

185 East 85th Street (Google Maps)

185 East 85th Street (Google Maps)

The Upper East Side tower that famously housed a TV family’s “de-luxe apartment in the sky” now faces sky-high damages from a class-action lawsuit.

Tenants allege that the owners of the Park Lane, the rental building featured in the 1970s sitcom “The Jeffersons,” charged as many as 100 current and former tenants market-rate rents while receiving a tax benefit.

The lawsuit names the owner entity of the 430-unit tower, which property records show is linked to an executive at investment firm Centerbridge. The executive, Lance West, also served as CEO of the property’s management company, Charles H. Greenthal & Co.

A representative for Centerbridge, which manages $25 billion in assets, declined to comment. Charles H. Greenthal & Co. did not immediately return a request for comment.

The plaintiffs seek $250,000 in legal fees plus damages equal to the alleged rent overcharges, meaning the difference between the actual rent and what was allowed under rent stabilization while the building received a property-tax break under the J-51 program.

Rents at the 35-story Yorkville tower have been movin’ on up since 1975, when the fictional George and Louise Jefferson moved in from Archie Bunker’s neighborhood in Astoria. Units are now about $4,000 a month, according to StreetEasy.

The attorney representing the plaintiffs, Lucas Ferrara, an adjunct professor at New York Law School and a partner at Newman Ferrara, said the tenants are “finally going to be getting a piece of the pie,” referencing the once-popular sitcom’s theme song.

“While it is premature to offer precise rent-rollback calculations, damages are likely to be quite significant given the rents that were wrongfully charged,” said Ferrara.

Tenant attorneys filed a slew of rent-overcharge lawsuits after last year’s new rent law increased the look-back period for determining overcharges and enlarged the monetary damages tenants could win in such cases.

In April the state’s highest court ruled that the law had overreached on the look-back provision, but a previous ruling still requires landlords to offer rent-stabilized leases while receiving J-51 benefits.

Ferrara said the case against 185 East 85th Street is the first class-action rent overcharge lawsuit brought since the April ruling. That Court of Appeals decision limited the new overcharge formula to cases brought after the bill passed in June 2019 — a rare bit of recent good news for multifamily landlords.

The post Rent overcharge case targets “The Jeffersons” tower in NYC appeared first on The Real Deal Miami.

6312 Riviera Drive and Jeff Conry (Realtor)

6312 Riviera Drive and Jeff Conry (Realtor)

The president of a charter airline company bought an estate in the Riviera neighborhood of Coral Gables, near the University of Miami.

Jeff Conry, president of Miami-based iAero Airways, paid $14.9 million for the mansion at 6312 Riviera Drive, on the Coral Gables Waterway, records show.

The 10,762-square-foot, six-bedroom, six-bathroom, house is on a 1.6-acre lot. It features a separate small house, tennis court, pool, dock and boat storage yard, according to records.

The seller is Rene A. Garcia, founder of Jacavi Worldwide. Jacavi has made fragrances for celebrities including musician Pitbull.

Garcia had paid $5.9 million for the house in 2012, records show. The home and small house were built in 1937.

iAero Airways, which operates 33 aircraft, calls itself the largest charter airline in the U.S. Its privately owned parent, Aero Group, founded in 2018, includes airframe and engine maintenance, repair, and overhaul companies, as well as iAero Airways. The charter carrier was formerly called Swift Air before iAero Group purchased it and rebranded it last year.

Coral Gables has seen several big-ticket home sales during the pandemic. In July, a private equity executive and his fashion designer wife paid $22 million for a waterfront mansion in Gables Estates.

In June, companies tied to the Cisneros family of Venezuela sold an assemblage of land in Gables Estates for about $37.6 million — about $20.4 million less than the combined asking price.

In April, the managing director at private equity firm Warburg Pincus in New York paid $7.75 million for a waterfront home in Coral Gables. Also in April, Leon Medical Centers founder Benjamin Leon Jr. sold a waterfront mansion in Gables Estates for $49 million.

The post Lift off: Charter airline prez buys waterfront Coral Gables mansion for $15M appeared first on The Real Deal Miami.

From left: Trinity Investments CEO Sean Hehir and Benchmark Real Estate Group principals Aaron Feldman and Jordan Vogel (iStock, LinkedIn, Trinity Investments)

From left: Trinity Investments CEO Sean Hehir and Benchmark Real Estate Group principals Aaron Feldman and Jordan Vogel (iStock, LinkedIn, Trinity Investments)

The 1980s called. They asked for their investment strategies back.

In July, an affiliate of prominent New York-based real estate investment firm Benchmark Real Estate Group raised money through a vehicle known as a blank check company. The Benchmark entity, Property Solutions Acquisition, raised $200 million by selling shares of a shell corporation to private and public investors.

Such an entity — also called a special-purpose acquisition company, or SPAC — has no underlying assets. Rather, it’s a promise to investors that it will acquire a target company in the future. If no acquisition is made, investors are supposed to get their money back.

Despite having a reputation as risky – the entities were associated with “pump and dump” penny stock schemes in the 1980s – SPACs are making a comeback. Bill Ackman, the billionaire hedge funder known for his crusades against Herbalife and Target, raised $4 billion through a SPAC in July. Richard Branson’s Virgin Galactic, trucking company Nikola, and sports betting site DraftKings also raised funds through SPACs. Real estate is taking notice.

“We simply viewed SPACs as an interesting business line for Trinity to be in,” said Sean Hehir, CEO of Trinity Investments, a Honolulu-based firm that has stakes in a number of hospitality properties in Hawaii, Florida and Mexico, according to its website. Hehir, in partnership with investor Lee Neibart, raised $300 million through Trinity’s SPAC in May 2018.

Last year there were 59 SPACs, up from 8 in 2013, according to Jay Ritter, a finance professor at the University of Florida.

“The main reason is that a lot of companies are saying that the cost of doing a traditional IPO is too high,” Ritter said. Hefty underwriting fees, which can run into the hundreds of thousands of dollars, are one burden. Another is the time spent on roadshows to gin up private investment, a period in which the company opens itself up to a lot of scrutiny and media attention, as was the case with WeWork.

Hehir added that “today’s volatile market” made it tricky to go the IPO route “because underwriters can’t always price companies effectively.” In the case of renters and homeowners insurance company Lemonade, for example, underwriters targeted a share price of $29, which trading pushed to $69.38 on its first day, resulting in the company leaving hundreds of millions of dollars on the table.

Proponents of SPACs see them as a better way to capture value for early investors.

Aaron Feldman and Jordan Vogel, principals at Soho-based Benchmark Real Estate Group, roared through the New York multifamily market in the 2010s, acquiring buildings which they sold at a hefty profit for more than $400 million between 2015 and 2017. After sitting on the sidelines for a few years, Feldman and Vogel seem ready to get back in the game.

Benchmark declined to comment or offer further details about its SPAC. Once the funds are raised, SPACs have about two years to find and acquire a target company. Former Vornado Realty Trust CEO Michael Fascitelli, for example, formed a SPAC in partnership with financier Noam Gottesman in late 2017, and closed on an $860 million acquisition of cell tower lease investor AP WIP this March.

For managers of a SPAC, the payday can be significant. Managers often own about 20 percent of the outstanding shares, which they purchase at a fraction of the offering price.

According to the Benchmark SPAC’s SEC filings, private investors can purchase shares for a price of half a cent each, compared to the public offering of $10 per share. That means an initial investment of $25,000 could yield $50 million if values hold.

SPACs still have some drawbacks for real estate. Chief among them is that the entities cannot be used to acquire individual properties.

“Once you raise the money, you start kissing a lot of babies,” said Trinity’s Hehir, likening the process of finding a target company to a political campaign. He said his firm looked at between 30 and 50 companies before ultimately merging with the Seattle-based capital firm Broadmark in November.

“You actually aren’t allowed to have a target company in mind when you form the SPAC,” added Hehir, whose shares in Broadmark will remain locked up until a full year after the merger. Lionheart Acquisition Corp II, associated with Ophir Sternberg’s Lionheart Capital, the Miami-based real estate development and investment firm, was set up at the end of last year and is on the lookout for a company to acquire.

Companies with real estate assets, such as a data company or a home listing company, could be promising targets, according to Paul Monsen, a capital markets advisor for George Smith Partners. Proptech companies have proven another popular target, such as Porch.com which just merged with PropTech Acquisition, a Los Angeles-based SPAC formed last year by Abu Dhabi Investment Authority veterans Thomas Hennessey and Joseph Beck. The deal values Porch.com at $523 million.

According to SEC filing documents, Benchmark’s SPAC may also seek a proptech firm to merge with.

Given the way SPACs are structured, they can be thought of as primarily a show of faith in the principals behind them. They may sound like a good deal to retail investors, since they can get in on deals that may have previously been restricted to institutional investors and big private players. However, SPACs do not have to disclose to investors which companies they are initially going to invest in, leaving investors to take a leap of faith. And they do have a reputation: blank check companies were commonly tied to penny stock frauds in the 1980s and their share prices were often manipulated to benefit stock promoters. Not until 2005 were SPACs required to submit a traditional registration to the SEC before going public, according to law firm Kirland and Ellis.

“They (investors) are being asked to make an investment based on their faith in the (SPAC) managers,” said Tom Hazen, a securities law professor at UNC-Chapel Hill. “Unless a manager has a track record like Warren Buffett does, it’s a very risky proposition.”

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Brookfield Property Partners CEO Brian Kingston and Burlington Mayor Miro Weinberger (Brookfield; Weinberger by Vermont National Guard)

Brookfield Property Partners CEO Brian Kingston and Burlington Mayor Miro Weinberger (Brookfield; Weinberger by Vermont National Guard)

A tough economic environment has led Brookfield Property Partners to cancel plans to redevelop a mall in Burlington, Vermont, and local officials aren’t happy.

Brookfield became involved in the project in 2017, with plans to build apartments and a 10-story office tower on the now-empty site. But last month, it sold its interest in the project to local partner Devonwood Investors.

“We made a lot of progress over the past three years, completing the assembly of the site and progressing approvals,” a Brookfield spokeswoman told the Wall Street Journal, “but the long-term nature of the next phase of this development doesn’t fit with our funds mandate.”

Burlington Mayor Miro Weinberger criticized the investment giant’s decision to pull out without bringing a new partner to replace it, calling it “a breach of faith and a betrayal of trust.” The city issued a letter of default to Brookfield on July 22 and plans to pursue damages.

“They understand that their reputation is at stake here,” Weinberger said. Brookfield says that its development agreement allowed it to sell its interest, but the city disagrees.

In a 2018 investor presentation, Brookfield named the Burlington project as an example of its strategy of transforming struggling malls by shrinking the retail footprint and adding office and residential uses.

But analysts say Brookfield’s redevelopment strategy may not be feasible in the current economic environment.

“Tenants are likely slower to take up space now,” said Alexander Goldfarb, a senior research analyst at Piper Sandler Cos. “There is no rush to complete a new hotel or add new restaurants.”

Brookfield is continuing its mixed-use redevelopment of the Stonestown Galleria in San Francisco, and counts Manhattan’s Brookfield Place among its prior mixed-use successes. [WSJ] — Kevin Sun

 

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Antonio Sersale and Nadim Ashi, with Le Sirenuse at the Surf Club (Credit: Google Maps and Jacopo Raule/Getty Images)

Antonio Sersale and Nadim Ashi, with Le Sirenuse at the Surf Club (Credit: Google Maps and Jacopo Raule/Getty Images)

Le Sirenuse Restaurant & Champagne Bar at The Surf Club has closed its doors for good, joining a growing list of restaurants that will not reopen due to the coronavirus pandemic.

The Italian restaurant and bar made the announcement on Facebook, stating that Le Sirenuse and Fort Partners “made the mutual decision” that the restaurant would not resume operations, citing the impact of the pandemic. Fort Partners, led by Nadim Ashi, developed the oceanfront Four Seasons Hotel and Residences at The Surf Club.

Le Sirenuse marked the first foreign outpost for the Positano, Italy-based restaurant at Hotel Le Sirenuse, owned by Antonio Sersale. The Miami restaurant, at 9011 Collins Avenue in Surfside, offered a similar menu, seating, plates and glassware as the original Le Sirenuse when it opened in March 2017.

Le Sirenuse said it will be working “to resume its presence in North America and continue the great culinary traditions of Naples and the Amalfi Coast.”

The luxury hotel and condo development also has the Surf Club Restaurant by Chef Thomas Keller, which is still open and offering outdoor dining, according to its website.

A number of restaurants have decided not to reopen as a result of coronavirus, including chef Cindy Hutson’s Ortanique on the Mile in Coral Gables. Restaurant owners have found it increasingly difficult to survive after indoor dining was shut down again last month by Miami-Dade County.

Some restaurateurs decided to temporarily close after the latest round of restrictions was put in place in early July.

Write to Katherine Kallergis at kk@therealdeal.com

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Miami’s condo market came back to life last week, led by a $22 million sale at 321 Ocean.

A total of 153 condos sold for $80 million last week. That’s compared to 112 units that sold for $52.6 million the previous week.Condos last week sold for an average price of about $524,000 or $304 per square foot.

Billionaire hedge fund manager Clifford Asness sold his 321 Ocean penthouse for $22 million, or $3,235 per square foot. The 6,800-square-foot unit was on the market for 248 days before it sold. Eloy Carmenate and Mick Duchon of Douglas Elliman were the listing agents. Seth Feuer of Compass brought the buyer.

Unit 1401 in the south tower of the St. Regis sold for $6.5 million, or $1,674 per square foot. Oren Alexander represented the seller, and Ekaterina Lavrova brought the buyer. It was on the market for 123 days.

Here’s a breakdown of the top 10 sales from July 26 to Aug. 1. Click on the map for more information:

Most expensive
321 Ocean #PH | 248 days on market | $22M | $3,232 psf | Listing agents: Eloy Carmenate and Mick Duchon | Buyer’s agent: Seth Feuer

Least expensive
Oceania IV #841 | 330 days on market | $835K | $357 psf | Listing agent: Daniel Mas | Buyer’s agent: Marina Luengo

Most days on market
Balmoral #15Y | 647 days on market | $1M | $530 psf | Listing agent: Boris Vertsberger | Buyer’s agent: Samantha Scalzo

Fewest days on market
Coconut Grove Bayshore #5B | 23 days on market | $1.1M | $625 psf | Listing agent: Daniel Hertzberg | Buyer’s agent: Carole Smith

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President Donald Trump and Manhattan District Attorney Cyrus Vance (Trump by BRENDAN SMIALOWSKI/AFP via Getty Image; Vance by Kevin Hagen/Getty Images)

President Donald Trump and Manhattan District Attorney Cyrus Vance (Trump by BRENDAN SMIALOWSKI/AFP via Getty Image; Vance by Kevin Hagen/Getty Images)

In its efforts to compel President Trump’s accountants to hand over his tax returns, Manhattan District Attorney Cyrus Vance’s office has indicated that the scope of its investigation is wider than previously thought.

While the grand jury inquiry previously appeared to focus on hush-money payments made by the Trump campaign prior to the 2016 election, a new filing from Vance’s office cites news reports regarding a much broader range of the Trump Organization’s business practices.

The subpoena order for the tax returns from accounting firm Mazars USA is neither unusual nor improper “in light of these public reports of possibly extensive and protracted criminal conduct at the Trump Organization,” the filing said. Prosecutors are seeking eight years of the president’s personal and corporate tax returns.

While objection from Trump’s lawyers to the subpoena “rests on the false premise that the grand jury’s investigation is limited to so-called ‘hush-money’ payments,” the court “is already aware that this assertion is fatally undermined by undisputed information in the public record,” prosecutors said.

Because the grand jury inquiry is conducted in secret by law, the prosecutors did not explicitly explain the focus of their investigation. These secrecy rules mean that even if the subpoena is successful, the documents are unlikely to be made public unless criminal charges are brought.

News reports cited in the filing include reports on the congressional testimony of former Trump “fixer” Michael Cohen, and reports that Trump inflated the values of his properties when seeking loans.

“The prosecutor is just doing what he has to do in order to suggest this is a broad white-collar investigation, which generally justifies fairly broad subpoenas to financial institutions,” New York Law School professor Rebecca Roiphe told the New York Times. “They could be going on a totally different tangent.”

When asked about the investigation at a White House briefing, the president called it a “continuation of the worst witch hunt in American history” and “a terrible thing that they [Democrats] do.” [NYT] — Kevin Sun

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Nine Island Avenue (Google Maps)

Nine Island Avenue (Google Maps)

A construction company alleges the condo association at Nine Island Avenue on Miami Beach’s Venetian Islands skipped out on $723,000 for a major renovation.

Miami-based Critical Path Construction is suing the condo association at Nine Island Avenue, alleging the association breached its contract after it failed to pay the construction company for completing 99 percent of its renovation project. The lawsuit was filed July 23 in Miami-Dade Circuit Court.

In a response to the suit, the association claims that it withheld the payments due to construction defects.

Nine Island Avenue, at 9 Island Avenue in Miami Beach, is directly across the street from the Standard Spa, Miami Beach on the Venetian Islands.

According to the lawsuit, after completing the first phase of renovations to the condo tower, Critical Path started working on phase two of the renovations in September 2017. But the project soon ran into numerous delays, which Critical Path alleges were caused by incomplete or inadequate plans by the association and failure to address change orders. The complaint alleges the condo association made more than 100 change orders and 100 requests for information, which caused the delays. By July 2018, progress had come to a complete stop due to the alleged issues.

A year and a half later, Critical Path claimed it obtained a Temporary Certificate of Occupancy, or a TCO, for the majority of the project to be completed in December 2019. It alleges Nine Island Avenue was responsible for completing the rest of the project, but failed to do so, which prevented the building from getting a final inspection. The construction company alleges it has not been paid since September 2019.

Nine Island Avenue’s condo association did not immediately respond to a request for comment.

In February, the construction firm recorded a lien against the condo association for $491,197, according to the suit. In May, the association threatened to terminate the construction company’s contract due to various reasons, including not accurately providing schedules, failing to perform diligent work, and failure to install wall tile. It directed the construction company to fix the defects in 15 days.

Critical Path said it was not responsible for the defects and it could not fix them in 15 days. In June, the association terminated Critical Path’s contract, according to the suit.

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Cash-strapped mortgage borrowers are paying off credit cards and other consumer debt instead because those bills are lower (iStock)

Cash-strapped mortgage borrowers are paying off credit cards and other consumer debt instead because those bills are lower (iStock)

More homeowners are choosing to skip their monthly mortgage payments in favor of paying off other debt obligations.

A newly-published Fitch Ratings report attributes the reason in part to coronavirus-related government relief programs that provide grace periods for home loans payments. Fitch also said that cash-strapped mortgage borrowers are paying off credit cards and other consumer debt instead because those bills are lower, and have greater short-term consequences.

The federal government’s $2 trillion CARES Act allows homeowners with federally-backed mortgages to defer payments for up to 180 days days. Million of Americans have taken advantage of the forbearance option, though the share of loans in forbearance hit a two-month low in July.

Continued uncertainty in the economy and the job market is also pushing people to prioritize credit card payments in order to allow for future purchases. Consumers are also more likely to keep up with auto loan payments because of the “importance of personal mobility due to the social distancing challenges with public transportation,” the report noted.

Fitch said the trend matches the one set during the last global financial crisis, when U.S. consumers largely opted to pay down their credit cards and auto loans but not their mortgages. This time around, rock-bottom mortgage rates mean deferring payments for many is cheaper than ever, Fitch added.

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Sandeep Mathrani (WeWork, iStock)

Sandeep Mathrani (WeWork, iStock)

With the office market in limbo, WeWork has launched a pay-as-you-go offering that allows users to drop in for as little as an hour (and $10).

A source familiar with WeWork’s new “On Demand” program said it’s being piloted for the next 60 days in New York City. As companies reopen for business, it reflects a growing demand for a “third place” to work — in other words, a flexible space that is neither home nor office.

In an email obtained by The Real Deal, WeWork said On Demand is available at 12 locations in Manhattan and Brooklyn. Users can book a workspace for $29 per day or a meeting room for $10 per hour. Membership is not required.

It’s not the first time WeWork has tried its hand at hourly workspaces — a model associated with Breather, a VC-backed on-demand workplace startup that ran into financial trouble last year.

WeWork previously offered a flexible option at WeWork Now, a retail location at 902 Broadway in the Flatiron district. The location closed in May as WeWork divested non-core businesses.

WeWork announced its new On Demand program to former members of WeWork Now on Monday. A source familiar with the offering said On Demand is focused outside of WeWork’s existing members.

In general, flex-office providers say they are poised to help companies bring employees back to the office by offering ancillary locations for some of their employees. Serendipity Labs, for example, which operates in suburban markets, offered an interchangeable subscription during the month of May.

Even as WeWork grapples with the loss of some tenants, including VC-backed startups that are struggling with fallout from coronavirus, the company is courting big corporations, CEO Sandeep Mathrani told the Wall Street Journal in an interview. In June, large companies accounted for 65 percent of new customers. “If you want to continue to grow faster, the additional demand comes from enterprise businesses,” Mathrani said.

The embattled co-working company slashed 8,000 jobs and is looking to terminate a chunk of its leases. After a series of painful cuts, the company is on track to be profitable by the end of 2021, executive chairman Marcelo Claure told the Financial Times in July. Covid sent demand for private spaces “through the roof,” he said.

Write to E.B. Solomont at eb@therealdeal.com

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Marwan Kheireddine (inset), Jennifer Lawrence and 400 East 67th Street (Getty, Compass, BDL Accelerate)

Marwan Kheireddine (inset), Jennifer Lawrence and 400 East 67th Street (Getty, Compass, BDL Accelerate)

Oscar winner Jennifer Lawrence sold her 4,070-square-foot Upper East Side penthouse at a hefty loss.

The actress sold the full-floor unit at Alexico Group’s Laurel Condominium for $9.9 million late last month, property records show. The price was nearly 37 percent below the $15.6 million she paid in 2016.

The buyer is a limited liability company called John’s Mountain. It is managed by Marwan Kheireddine, the chairman of Lebanon’s AM Bank and a former Minister of State of the country.

When reached for comment, Kheireddine said the trade was not a personal purchase.

“I manage John’s Mountain. The owner doesn’t wish to comment on the transaction which is purely commercial in nature,” he wrote in a message.

The LLC Kheireddine manages has taken out a nearly $6 million mortgage on the condo from San Diego-based Axos Bank, according to records. He is the signatory on all documents related to the unit and its mortgage.

Despite the loss, Lawrence made out better than the market with a deal that pencils out to $2,439 per square foot. The average sales price per square foot for an UES condo was $1,713 in the first quarter. That slid to $1,473 last quarter, as the market froze when the coronavirus pandemic took hold.

The three-bedroom unit at 400 East 67th Street has a two-story landscape terrace that stretches nearly 3,000 square feet and includes an outdoor kitchen and fireplace. The condo is accessed through a key-lock elevator.

The unit went into contract in late January with the asking price of $12 million. Lawrence first listed the unit last July for $15.45 million. The New York Post first reported on the closing last week.

Listing agent Pamela D’Arc of Compass declined to comment.

Write to Erin Hudson at ekh@therealdeal.com

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1510 West 25th Street, Valerio Morabito (inset) and Gianluca Vacchi (Getty, Douglas Elliman)

1510 West 25th Street, Valerio Morabito (inset) and Gianluca Vacchi (Getty, Douglas Elliman)

Italian developer Valerio Morabito sold his waterfront Miami Beach mansion to Italian entrepreneur, DJ and Instagram personality Gianluca Vacchi for $24.5 million.

Morabito sold the 12,700-square-foot home at 1510 West 25th Street on Sunset Island II to Vacchi, listing agent Eloy Carmenate of Douglas Elliman confirmed. The Sunset Islands mansion was last asking $27 million. Carmenate and Mick Duchon co-listed the property, and represented the buyer as well.

The seven-bedroom, seven-bathroom and three half-bath mansion has 7,400 square feet of terraces, a 1,140-square-foot rooftop, and about 150 feet of waterfront. The house was built 13 feet above sea level, and features two guest homes, a gym, elevator, wine cellar, screening room, 90-foot pool and an outdoor kitchen.

It sold for $1,929 per square foot.

Morabito hired Michele Bonan and Max Strang to design the estate, which was completed late last year. The property includes more than $1 million of Bonan’s custom furniture, according to information from Elliman.

Records show Morabito’s 1510 West 25 LLC paid $5.6 million for the lot in 2012.

The Wall Street Journal first reported the sale.

Morabito has partnered with developer Ugo Colombo in Miami Beach, where they built the boutique oceanfront condo building called Beach House 8. He is also working on plans for a 41-unit condo in Bay Harbor Islands with Colombo. Morabito has a development planned in Wynwood, as well.

Vacchi previously led his family’s business, IMA Group, which designs and manufactures machines that process and package pharmaceuticals, cosmetics, food, tea and coffee. He has about 16.8 million followers on Instagram, and is known for clips showing him dancing with his girlfriend. Earlier this year, he listed his penthouse at 1800 Sunset Harbour Drive in Miami Beach for $10.9 million.

Hospitality entrepreneur David Grutman recently listed his Sunset Islands home at 2201 Sunset Drive on Sunset Island IV for $8.9 million.

Write to Katherine Kallergis at kk@therealdeal.com

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President Donald Trump (Photo by Doug Mills-Pool/Getty Images; iStock)

President Donald Trump (Photo by Doug Mills-Pool/Getty Images; iStock)

President Donald Trump said Monday that he was “going to stop” evictions by issuing a moratorium as negotiations in Congress bog down over a larger federal coronavirus relief plan.

The White House is also looking into whether Trump can unilaterally extend the enhanced unemployment benefits that were part of the federal government’s pandemic relief legislation passed in March, according to Bloomberg.

Democratic and Republican leaders are currently at an impasse over a proposed relief package. The matter of evictions and $600-a-week unemployment benefits are major points of disagreement. Both measures have now expired.

Trump, referring to the impasse, said Democrats are “not interested in unemployment [and evictions.”

“A lot of people are going to be evicted. But I’m going to stop it, because I’ll do it myself if I have to,” Trump said. “I have a lot of powers with respect to executive orders and we’re looking at that very seriously right now.”

Trump did not offer details on an executive action to that effect.

The Democrat-controlled House of Representatives passed a $3.5 trillion aid package in May, while the Republican-controlled Senate introduced a $1 trillion package last week.

The House’s stimulus plan would extend the enhanced unemployment benefits created in March, allowing unemployed workers to claim an extra $600 weekly. Republican leaders have argued for a reduced supplement as low as $200 per week, claiming the extra benefits discourage workers from returning to their jobs.

On Monday, Trump’s Treasury Secretary Steven Mnuchin and Chief of Staff Mark Meadows met with House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer for negotiations over the relief package. [Bloomberg] — Dennis Lynch 

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5350 Park with Armando Codina and Ana-Marie Codina

5350 Park with Armando Codina and Ana-Marie Codina

UPDATED, Aug. 5, 2:40 p.m.: A Codina Partners affiliate allegedly won’t pay a Fort Lauderdale construction firm for $3.6 million after completing 5350 Park, the developer’s latest condo project in Downtown Doral, according to a recently filed lawsuit.

Grycon LLC is suing 5350 Park LLC and the project’s surety bond provider Arch Insurance Company in Miami-Dade Circuit Court for breach of contract. According to the complaint, Grycon hasn’t been paid for $3.1 million in construction services and $500,000 in bonuses for achieving completion milestones.

In February, the 20-story, 238-unit tower and attached garage were substantially completed, and buyers began closing on 5350 Park condos, the lawsuit states.

“When it came time to pay us and settle up, [the developer] has come up with excuse after excuse,” said Stuart Sobel, a Siegfried Rivera shareholder representing Grycon. “They have played it very heavy-handed.”

A spokesperson for Codina Partners, headed by Executive Chairman Armando Codina and CEO Ana-Marie Codina Barlick, said the company doesn’t comment on pending litigation. But 5350 Park has filed a motion to dismiss Grycon’s lawsuit, claiming the construction firm owes the developer liquidated damages for construction delays.

After publication, Felix X. Rodriguez, legal counsel for Codina Partners said that Grycon fell woefully short of its obligations and was duly terminated from the project. “Thereafter, Grycon filed its lawsuit in an attempt to distract from its failure to complete the project in accordance with its construction contract and avoid liability for numerous construction deficiencies,” Rodriguez said in a statement. “Accordingly, Codina Partners intends to enforce its rights under the construction agreement and vigorously pursue all remedies afforded by law.”

Nicholas Siegfried, Sobel’s law firm partner who is also representing Grycon, denied his client delayed the Downtown Doral condo project. According to the lawsuit, Grycon completed 5350 Park on time, securing a final certificate of occupancy by March 1 as required by its contract.

“They terminated us when [5350 Park] got its final certificate of occupancy,” Siegfried said. “We found that odd since we had completed the project…They have been selling units and closing. It’s mind-boggling to withhold this money.”

In a July 6 press release, Codina Partners said it had paid off a $32 million construction loan for 5350 Park, the third condo project at Downtown Doral, a mixed-use development spanning 250 acres. The press release also states the luxury tower is more than 92 percent sold.

Designed by Cohen, Freedman, Encinosa & Associates and featuring interiors by Giorgio Ferrara, 5350 Park features studios to three-bedroom condos priced between $200,000 and $500,000-plus. Amenities include a resort-style pool with private cabanas, a state-of-the-art gym overlooking Downtown Doral Park and a dedicated massage parlor and sauna.

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Robert Durst (Photo by Alex Gallardo-Pool/Getty Images)

Robert Durst (Photo by Alex Gallardo-Pool/Getty Images)

The pandemic has again postponed the Los Angeles murder trial of Robert Durst, this time, until April 2021.
L.A. County Superior Court Judge Mark Windham extended the trial adjournment of the Durst Organization heir at the request of the prosecution and defense, according to Bloomberg.

The trial was suspended in March, less than two weeks after it started, and as the coronavirus began intensifying. It had been set to resume this month.

The 77-year-old scion is charged with murdering his college friend, Susan Berman, at her Beverly Hills home 20 years ago.

In June, Durst’s defense team requested the judge declare a mistrial, but Windham declined, saying that it would take months to select a new jury amid the pandemic. But the two sides have apparently agreed that resuming the trial now, while Covid-19 cases are surging in the L.A. area, would have been too difficult.

Durst’s brother, Douglas, who is chairman of Durst Organization, is expected to testify.

Berman’s death was chronicled in the 2015 documentary, “The Jinx,” along with the deaths of Durst’s wife Kathie McCormack Durst and his Texas neighbor, Morris Black. L.A. prosecutors reopened the Berman murder case following the release of the documentary.

Durst claims that he walked into her house, found her dead, then panicked and sent a note to Beverly Hills police that there was a dead body at the house. He claims he fled because he worried he would be seen as a suspect. [Bloomberg] — Dennis Lynch

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Rendering of an interior living room and kitchen in a home at the Neovita gated community in Doral

Rendering of an interior living room and kitchen in a home at the Neovita gated community in Doral

UPDATED: Aug. 4, 2020, 11:40 a.m.: Alta Developers launched sales for the second phase of its Neovita Doral gated community.

The second phase, known as Vesta at Neovita Doral, at 6833 Northwest 103rd Place in Doral, will feature 33 single-family homes, which are expected to be delivered in the first quarter of 2021, according to a press release.

The Keyes Co. is handling sales. Carlos Villanueva and Elizabeth Santurio of Keyes are leading sales, and Carmen Colmenares is sales manager.

PPK & Associates is the architect.

Vesta at Neovita Doral and the first phase, called Neovita Doral, will have 80 single-family homes and townhouses surrounding four cul-de-sacs. Townhomes in the community start at about $410,500 for a three-bedroom, three-bath unit, to $460,500 for a four-bedroom, three-and-a-half bath unit, according to the release. Single-family residences start at $599,900, up to $800,000-plus.

Alta, led by principal and CEO Raimundo Onetto, said it has a few homes left for the completed phase I, Neovita Doral.

The company said buyer inquiries have come from the Northeast, California, Texas and Latin America. Local interest has come from Miami residents seeking more space and backyard with pools, according to a statement.

Alta’s other current projects include EON Flagler Village, Pacifica Boynton Beach and Quadro at the Miami Design District, which launched sales earlier this year.

Past projects include One Paraiso, Le Parc at Brickell, Quantum on the Bay and Metropolis at Dadeland.

Correction: A previous version of this story incorrectly said the second phase included townhomes rather than single-family homes.

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The closures will primarily affect low-volume sales locations (Photo by Alexi Rosenfeld/Getty Images)

The closures will primarily affect low-volume sales locations (Photo by Alexi Rosenfeld/Getty Images)

America will soon have to run on 800 fewer Dunkin’ Donuts.

The retailer, one of the largest coffee and doughnut chains in the world, is permanently closing 8 percent of its U.S. locations, according to CNN.

The company described the closures as “real estate portfolio rationalization” in its second quarter earnings, released Thursday. The closures will primarily affect low-volume sales locations, and Speedway convenience stores will consist of 450 of the closures.

Dunkin’ additionally expects to close 350 international locations in the second half of 2020.

Restaurants have largely been struggling during the shutdowns. However, unlike many other chains, Dunkin’ has been able to pay a large portion of its rent throughout the pandemic. In mid-July, the company paid over 80 percent of rent collections, according to a Datex Property Solutions report.

The chain, which already had hundreds of locations across New York City, announced in 2018 that it would roll out 60 new stores in Manhattan over a three-year period.  [CNN] — Sasha Jones

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WeWork Lenox Avenue, WeWork Lincoln Road and CEO Sandeep Mathrani (Lenox location by Katherine Kallergis, WeWork, iStock)

WeWork Lenox Avenue, WeWork Lincoln Road and CEO Sandeep Mathrani (Lenox location by Katherine Kallergis, WeWork, iStock)

UPDATED, Aug. 3, 4:55 p.m.: WeWork is leaving Lincoln Road after allegedly owing more than $650,000 in unpaid rent at Lenox Avenue, and is consolidating its two Miami Beach locations into one, The Real Deal has learned.

The embattled coworking giant notified its members at 350 Lincoln Road in Miami Beach that it was closing the space effective Aug. 14, according to a letter obtained by TRD. Members were offered a move to 429 Lenox Avenue in Miami Beach, which WeWork is now calling its flagship Miami Beach location, or downtown Miami at the Southeast Financial Center at 200 South Biscayne Boulevard.

WeWork opened its Lincoln Road location – on four floors totaling 40,000 square feet – in 2015. A company controlled by Shaul Levy and Meir Levy owns the building.

The announcement comes as WeWork looks to shrink its portfolio around the world amid the coronavirus pandemic. The move follows WeWork’s failed IPO attempt last year.

A month ago, WeWork’s landlord at 429 Lenox Avenue posted a three-day notice to the front door of the building, allegedly seeking more than $650,000 in unpaid rent.

On July 13, WeWork and Robert Goddard’s Goddard Investment Group, the landlord at 429 Lenox Avenue, sent a letter to members. It said the landlord and tenant were working together “in good faith” and were confident a resolution would be finalized in the coming days. WeWork is the sole tenant of the 43,500-square-foot building.

WeWork and Goddard Investment Group finalized their agreement on Monday, according to a source.

Meanwhile, members of WeWork on Lincoln Road were stunned by the closure notice.

Jay Rodgers, of Stryder Eyewear, a member at 350 Lincoln Road, wrote that several members are “scrambling for a new place” and that WeWork is not paying to relocate its members or reprint marketing materials. Rodgers called it an “awful experience.”

WeWork declined to comment. In the letter sent to members of 350 Lincoln Road, WeWork said it would work with them to move to “another WeWork location for no additional membership or relocation cost.”

The company has locations in downtown Miami, Brickell and Coral Gables.

In New York, the co-working firm decided to shut down its first-ever location on Grand Street. It recently hired JLL and CBRE to help fill millions of square feet now vacant, in New York City and Los Angeles, and has been shopping for brokerages to help lease spaces in major markets, including Miami.

Write to Katherine Kallergis at kk@therealdeal.com

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From left: Jared Kushner, 715 Park Avenue, Deutsche Bank CEO Christian Sewing, and Rosemary Vrablic (Credits: Kushner by BRENDAN SMIALOWSKI/AFP via Getty Images; 715 Park via Google Maps; Sewing by by Thomas Lohnes/Getty Images; Vrablic by PAUL LAURIE/Patrick McMullan via Getty Images)

From left: Jared Kushner, 715 Park Avenue, Deutsche Bank CEO Christian Sewing, and Rosemary Vrablic (Credits: Kushner by BRENDAN SMIALOWSKI/AFP via Getty Images; 715 Park via Google Maps; Sewing by by Thomas Lohnes/Getty Images; Vrablic by PAUL LAURIE/Patrick McMullan via Getty Images)

Deutsche Bank is investigating a Park Avenue apartment sale by a company part-owned by Jared Kushner to his banker.

Rosemary Vrablic, a private banker at Deutsche Bank for President Donald Trump and his son-in-law Kushner, bought a one-bedroom apartment at 715 Park Avenue in 2013 for about $1.5 million from Bergel 715 Associates. Kushner held an ownership stake in the seller at the time, the New York Times reported, citing an anonymous source familiar with Kushner’s finances.

Kushner, a senior adviser to the president, disclosed in an annual personal financial report late Friday that he and his wife, Ivanka Trump, had received between $1 million and $5 million last year from Bergel 715.

Dominic Scalzi and Matthew Pontoriero, who worked for Vrablic in Deutsche Bank’s private-banking division, were also co-purchasers of the 908-square-foot apartment.

To avoid conflicts of interest, banks typically restrict employees from doing personal business with clients.

Property records show the apartment, which was deeded to a limited liability company registered to Vrablic’s home address, was sold for $1.85 million in 2015, according to the Times.

Vrablic was a private banker for the Kushner family even before she joined Deutsche Bank in 2006. In 2011, Kushner introduced her to his father-in-law, who was in need of banking connections as most banks were refusing to do business with Trump, given his history of defaults and bankruptcies. [NYT] — Akiko Matsuda

The post Apartment sale to banker for Trump and Kushner probed appeared first on The Real Deal Miami.

(iStock)

(iStock)

In the second quarter, condo sales took the biggest hit in Brickell and Coconut Grove, while prices surged in Flagami, Overtown and Park West, a new analysis of residential closings in the city of Miami shows.

The Real Deal’s second quarter analysis of MLS data also shows where single-family home prices experienced the steepest declines. As the pandemic continued to take a toll on sales, the number of single-family and condo closings fell across the board.

Condo prices

The Venetian Islands, which span both the city of Miami and Miami Beach, experienced the biggest bump in median prices for condos, rising 81.7 percent year-over-year to $841,375. Though the median price rose, only 10 condos sold in the second quarter, marking a 37.5 percent decrease compared to last year.

In Flagami, the median condo price jumped 70.4 percent, to $241,900. Seven condos sold in the Miami neighborhood, which is south of Miami International Airport. That’s a 53 percent decrease in annual condo sales, down from 15 the second quarter of the previous year.

Condo prices also rose in Overtown, up 54.2 percent to $266,000, and in neighboring Park West, rising nearly 37 percent to $635,000. It’s important to note that in Overtown, only one condo sold in the second quarter compared to two sales in the second quarter of 2019, which skews the median price. In Park West, 14 condos sold, a 26 percent year-over-year increase.

Prices experienced the largest drops in west Flagler, falling by nearly 25 percent to $128,000; and in Coconut Grove, where prices decreased by about 24 percent to $425,000. Three condos sold in west Flagler, marking a 200 percent increase. In Coconut Grove, there were 31 condo sales in the second quarter, down 43 percent.

Single-family home prices

The median price of single-family homes fell the most in Brickell, an area known for its high-rise condo towers, down nearly 43 percent to $380,000. That’s based on only three sales, compared to one sale in the second quarter of 2019.

Generally, single-family home prices increased in the city of Miami and the Venetians. In Overtown, the median price in the second quarter was $525,000, up 56.7 percent, based on just one sale.

In Little Haiti, prices rose by 26 percent to $252,000. There, only three houses sold in the second quarter, down 40 percent year-over-year. Along Coral Way, west of Brickell, the median price jumped 18 percent to $517,000, based on 35 sales in the second quarter. Still, sales fell in the Coral Way neighborhood as well, down nearly 42 percent.

Write to Katherine Kallergis at kk@therealdeal.com

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Lord & Taylor and Men’s Wearhouse are just the latest big retail chains to file for bankruptcy (Lord and Taylor by Bruce Bennett/Getty Images; Men's Warehouse by Scott Olson/Getty Images)

Lord & Taylor and Men’s Wearhouse are just the latest big retail chains to file for bankruptcy (Lord and Taylor by Bruce Bennett/Getty Images; Men’s Warehouse by Scott Olson/Getty Images)

Lord & Taylor and the owner of Men’s Wearhouse have fallen victim to the coronavirus, with the retailers filing for bankruptcy this weekend.

Lord & Taylor, a department store chain whose roots go back to nearly two centuries, was acquired last year by the clothing rental start-up Le Tote for $100 million. But both companies filed for Chapter 11 bankruptcy protection Sunday, the New York Times reported. The department chain operated 38 stores, which have been temporarily closed since March, according to the court filing.

Tailored Brands, which owns Men’s Wearhouse and JoS. A. Bank, also filed for bankruptcy on Sunday, with plans to eliminate its debt by at least $630 million. The filing comes shortly after the retailer announced plans to eliminate 20 percent of its corporate jobs and close up to 500 of its about 1,400 stores.

The apparel industry had been one of the most affected by the pandemic. Millions of Americans are unemployed or working from home, resulting in a massive drop in clothing sales. Tailored Brands reported that net sales had fallen by 60.4 percent in the three months that ended May 2, compared to a year ago.

Neiman Marcus, J. Crew, New York & Company, Brooks Brothers and J.C. Penney all filed for bankruptcy in recent weeks. Ascena Retail, which owns Ann Taylor and Lane Bryant, also sought Chapter 11 protection in late July. [NYT 1, 2] — Akiko Matsuda

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Calpers CEO Marcie Frost, CommonWealth CEO Brett Munger and City National Plaza (Google Maps)

Calpers CEO Marcie Frost, CommonWealth CEO Brett Munger and City National Plaza (Google Maps)

City National Plaza office complex in Downtown Los Angeles received a $550 million refinancing from Morgan Stanley and Goldman Sachs in late March, just as the CMBS market seized up in response to the coronavirus pandemic.

Two months later, as the market began to recover, a $330 million piece of that loan was included in a single-borrower transaction known as MSC 2020-CNP, while smaller pieces have been included in several other conduit deals.

Financial disclosures associated with the securitization reveal details about the finances of the massive two-tower property at a time of uncertainty for the office market in both Los Angeles and nationwide.

The complex has about 1.2 million square feet of office space and 123,000 square feet of retail, and was 81.4-percent leased as of March.

The largest tenant at the building is the complex’s namesake, City National Bank, which occupies a dozen floors in the south tower, accounting for 14 percent of the rentable space and 17 percent of the base rent. The top 10 tenants include four Am Law 200 law firms, with most tenants paying rent in the high $20s per square foot.

The priciest rent per square foot among large office tenants is paid by Boston Consulting Group, which pays $33.87 per square foot for the top two floors of the north tower. Meanwhile, law firm Jones Day pays just $23.79 a foot across six floors near the top of the south tower.

The property is owned by a joint venture of CommonWealth Partners and California Public Employees’ Retirement System. CalPERS, the country’s largest public pension fund, holds a 99.7-percent financial stake while a CommonWealth subsidiary manages the property. The venture acquired the property for $858 million in 2013.

Due to the coronavirus, all retail tenants at the complex were closed as of early May and most office tenants were working remotely. Law firm Paul Hastings, the second largest tenant, requested rent relief and a renegotiation of certain terms of its lease, as did nine other non-retail tenants representing 10.6 percent of rentable area and 13.6 percent of base rent.

The landlord collected 91.6 percent of base rent due for the month of April by the end of that month, and loan payments have remained current.

Other notable tenants at the property include brokerages JLL and Marcus Millichap, construction firms Lendlease and Turner Construction, and flexible office space provider Regus.

Office leasing activity in Los Angeles has slowed down dramatically as a result of the coronavirus pandemic, and market uncertainty has also put pressure on property valuations. The nearby US Bank Tower is now in contract to be acquired by New York’s Silverstein Properties for $430 million, a 34-percent price cut from the property’s pre-coronavirus book value.

Contact Kevin Sun at ks@therealdeal.com

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27359 South Dixie Highway and Longpoint Realty Managing and Founding Partner Dwight Angelini (Google Maps)

27359 South Dixie Highway and Longpoint Realty Managing and Founding Partner Dwight Angelini (Google Maps)

Longpoint Realty Partners added to its South Florida portfolio, paying $11.65 million for a shopping center anchored by Fresco Y Mas in Naranja.

Longpoint bought the 98,471-square-foot retail center at 27359 South Dixie Highway for $118 per square foot, records show. Naranja Lakes Joint Venture, led by Antonio Fraga, sold the property.

The entire shopping center totals 6.7 acres. Other tenants include Family Dollar and T-Mobile.

The property last sold for $6.1 million in 1991, records show. The retail center was built in 1984. It is just off of U.S. 1 and north of Homestead.

Boston-based Longpoint Realty Partners has been expanding its holdings in South Florida. In July 2019, the firm bought an industrial park in Miami Gardens from ProLogis for $25 million. In April 2019, the company paid $37.53 million for a Sedano’s-anchored shopping center in Pembroke Pines.

The firm also paid $21.2 million for a strip mall within the Crossroads Square Shopping Center in Pembroke Pines in November 2018.

Longpoint Realty Partners focuses on industrial and retail properties in major markets including Texas, Tennessee and Georgia, according to its website.

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A new report shows that construction costs have kept rising during the pandemic but that unemployment in the industry, which spiked early, has recovered somewhat. (Getty; iStock)

A new report shows that construction costs have kept rising during the pandemic but that unemployment in the industry, which spiked early, has recovered somewhat. (Getty; iStock)

The construction industry was hit hard by the pandemic, with many construction sites across the country shutting down as the coronavirus began intensifying.

The latest quarterly report from construction consultancy firm Rider Levett Bucknall shows that unemployment in the industry spiked in the early days of the crisis but then recovered somewhat, and did not reach levels seen after the 2008 financial crisis.

Meanwhile, construction costs continued to grow inexorable, albeit at a slower pace.

RLB’s research shows that construction costs have continued to grow, as its national construction cost index rose by 0.84 over the past quarter — well below the 2.2-per-quarter growth rate of the past five years.

California markets saw costs increase the most, as San Francisco — which surpassed New York last year as the most expensive city to build in — increased its lead, and Los Angeles overtook Washington D.C. to land in sixth place among the 12 cities tracked by RLB.

Unemployment in the construction sector has always been seasonal, peaking in winter and falling in the summer. But “at the onset of the coronavirus, we saw construction unemployment rise to 6.9% during March; a higher rate than expected despite the anticipated cyclical peak,” the report says. “This dramatic influx of unemployment came as a result of construction job sites shutting down and trades being furloughed or laid off until it became safe to work again.”

Construction unemployment rose further to 16.6 percent in April before falling to 12.7 in May. “We anticipate that construction unemployment will continue to decrease as job sites open back up, though we do not expect that the rate will get as low as it was, pre-pandemic.”

Data from the U.S. Bureau of Labor Statistics shows that construction sector unemployment was significantly worse in the years following the financial crisis, reaching a peak of 27.1 percent in February 2010.

(Credit: U.S. Bureau of Labor Statistics)

(Credit: U.S. Bureau of Labor Statistics)

According to data released by the Small Business Administration in July, the construction sector was among the largest recipients of forgivable Paycheck Protection Program loans, receiving more than 470,000 loans totalling $64 billion, about 12.5 percent of all funds disbursed.

The post TRD Insights: Construction costs have kept rising during pandemic appeared first on The Real Deal Miami.

ONE100 at Palm Jumeirah in Dubai (Image courtesy of Sotheby's)

ONE100 at Palm Jumeirah in Dubai (Image courtesy of Sotheby’s)

A modern-style mansion on Dubai’s manmade archipelago, Palm Jumeirah, is on the market for just under $33 million.

The 14,000-square-foot home was built by clothing industry businessman Michael Alibhai, who told the Wall Street Journal he “wanted to blow people minds when they visit me.”

He bought the property for an undisclosed sum in 2011 and spent six years designing and building the home, taking aesthetic notes from the modern-inspired mega-mansions mansions of Beverly Hills and Bel Air, particularly a Bruce Makowsky-developed property that sold last year for an underwhelming $94 million.

The influence shows in both design and amenities. The spaces are almost all right angles and centered around a massive double-height living room with large windows and glass doors leading out to the backyard swimming pool.

There are three home theaters — one inside, one on the roof, and another hydraulic-driven pop-up theater outside. The house comes with a Rolls Royce, a Ferrari, and a custom Harley Davidson motorcycle turned into an “art piece,” Abilhai told the Journal.

That’s another cue taken from Makowsky and his fellow Los Angeles-area spec builders, including Nile Niami. Both of them included high-priced cars and artwork with their spec properties, although both removed extras with price chops later. [WSJ] — Dennis Lynch

The post LA-inspired Dubai megamansion hits the market for $33M appeared first on The Real Deal Miami.

John Hendrickson and Marylou Whitney (Whitney and Hendrickson by Kimnelson46 via Wikipedia; Pxfuel)

John Hendrickson and Marylou Whitney (Whitney and Hendrickson by Kimnelson46 via Wikipedia; Pxfuel)

Some 36,000 picturesque acres are going up for sale in New York’s Adirondack Mountains for the first time in over a century.

The huge swath of pristine land is called Whitney Park after the prominent Northeast family that’s owned it since the 1890s. The asking price is $180 million, or roughly $5,000 per acre.

The property is hitting the market after its longtime owner, Marylou Whitney, died last year at the age of 93.

Whitney inherited the property in 1992 from her husband, Cornelius Vanderbilt Whitney. She sold 14,700 acres to the state of New York five years later for $17.1 million, which was turned into the William C. Whitney Wilderness Area. Her husband, John Hendrickson, is selling the property.

The massive property is centered on Deerlands, an estate with 17 bedrooms across its buildings that sits at the end of an eight-mile-long drive behind a gatehouse.

The house overlooks Little Forked Lake, but if that gets old, there’s another 21 lakes on the property. There’s also an active timber operation on the estate.

Hendrickson said that he and his wife over the years upgraded the roughly 80 miles of roads that cross the property. He said it’s “bittersweet” that he’s selling it, but that he believes the property needs a family to enjoy it.

“It’s too overwhelming for one man and I don’t really want to be the owner of a country,” he said. “You can fit 70 Monacos in there.”

Or around 43 Central Parks. [WSJ] — Dennis Lynch

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4725 Hana Highway (Sotheby's)

4725 Hana Highway (Sotheby’s)

Looking to get real far off the grid? How about a 39-acre solar-powered estate on Maui mountainside?

The couple that built out the estate over the last decade put it on the market for $7 million, according to Bloomberg.

Linda and John Stobart, the latter a former executive at BHP Billiton Petroleum, set out to build a compound that is “completely off the grid” when they bought the property in 2010. Linda said she’s aware of the irony of an oil executive’s family living on an estate that doesn’t draw its electricity from the power grid.

“I know it’s not always possible, but this house manages to achieve it,” she said.

They build a 4,000-square-foot barn with 96 solar panels, a 60,000-gallon water catchment system and have an electricity generator for cloudy days.

The main house is 4,500 square feet with five bedrooms and six bathrooms. It has some Balinese-inspired design features, including outdoor showers, influenced by a time living in Southeast Asia.

It took five years to complete and the couple moved there full time in 2017 after John Stobart retired from the oil business.

The grounds also include a large garden with groves of bamboo, royal palms, and native flowers. [Bloomberg] — Dennis Lynch 

The post Former oil exec lists off-the-grid Maui estate for $7M appeared first on The Real Deal Miami.

Jennifer Lopez, Alex Rodriguez and their Malibu flip (Getty, Realtor)

Jennifer Lopez, Alex Rodriguez and their Malibu flip (Getty, Realtor)

Baseball star Alex Rodriguez and entertainer Jennifer Lopez are looking to shed a Malibu beach house they bought less than two years ago.

The couple is asking $8 million for the three-story property on Malibu Road, according to the Los Angeles Times. They paid former owner and actor Jeremy Piven $6.6 million for what Lopez last year called “a little fixer-upper next to the water.”

The couple renovated the property last year with the help of HGTV “Fixer Upper” host Joanna Gaines.

The home spans 4,400 square feet and features five bedrooms and 4.5 bathrooms. There are balconies facing the water on each floor, as well as wraparound porches on the two lower levels and a smaller porch on the third level. There’s 50 feet of beach frontage.

Piven paid $3.5 million for the home in 2004 and listed it for $10.5 million in 2017 shortly after buying a home in Laurel Canyon.

A-Rod and J-Lo are part of a group openly making a play to buy the New York Mets baseball franchise from the Wilpon family. They’re competing with at least six other groups bidding on the franchise, including a group led by L.A.-based broker and developer Kurt Rappaport. [LAT] — Dennis Lynch

The post J-Lo and A-Rod list Malibu beach house for $8M appeared first on The Real Deal Miami.

Ivan Ko

Ivan Ko

A Hong Kong developer redrew a pitch to build a city from scratch in Ireland after what appeared to be a lukewarm reception.

Victoria Harbour Group founder Ivan Ko is now looking for a roughly 20-square-mile site outside Dublin to build a city from the ground up dubbed Nextpolis that would host 50,000 Hong Kong emigrants.

He first pitched a 193-square-mile project around December as an autonomous city in the vein of Hong Kong itself, but has now revised the proposal after getting feedback from Ireland and other potential host countries.

“We found out that replicating the Hong Kong model was not suitable, as if we were imposing something, and that Hong Kong people would be seen as segregated from the rest of the population,” he said, adding that the new proposed city would not have its own border or independent political system.

He called Nextpolis “just a new city to let Hong Kong people live together and at the same time integrate with local businesses so we can maximize the benefits to both sides.”

Ko cited Ireland’s favorable corporate tax structure as a reason to build there and said the proposal meets the Irish government’s desire to develop outside Dublin, according to the Guardian.

A spokesperson for Ireland’s Department of Foreign Affairs said that the department was in contact with Ko and his team and provided feedback when they first approached the Irish government in December, but “since providing this guidance there has been no further action taken by the department in this matter.” [The Guardian] — Dennis Lynch

The post Hong Kong developer pitches ground-up city in Ireland for HK expats appeared first on The Real Deal Miami.

Lisbon

Lisbon

Portugal’s capital Lisbon is a few months into a program meant to bring units in the city off the short-term rental market and into its affordable housing stock.

Landlords so far have been slow to embrace it, but that could change if the coronavirus pandemic continues to hammer tourism in the city, according to Bloomberg.

The city’s Safe Rent program requires landlords to commit to long-term affordable renting for at least five years. Lisbon’s government pays a guaranteed 1,000 euros per month in rent for units in the program.

The average monthly revenues for some Airbnb listings, including four-bedroom units, has fallen well below that figure since mid-March or so, when the coronavirus pandemic began to impact cities around the world. Last year during this time, average monthly revenues for a four-bedroom listing hovered around 3,500 euros per month.

The number of reservations in the second quarter were just 10 percent of reservations in Q2 2019.

Most short-term landlords are holding out for now, hoping that that reservations would pick back up in the typically busy summer months, according to Eduardo Miranda, head of the Association of Local Accommodations in Portugal.

“This hasn’t happened yet and many of these owners may be considering other alternatives at the moment, including the safe rent program in Lisbon,” he said.

There are also concerns among landlords that they’ll have to pay a load of taxes upon transfer of units from short-term rentals to traditional long-term leasing. [Bloomberg] — Dennis Lynch 

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Marcum

Vishaan Chakrabarti has a message for real estate developers: Think outside your own black car.

The founder of Practice for Architecture and Urbanism and the dean of the UC Berkeley College of Environmental Design joined TRD‘s Hiten Samtani to discuss his proposal for a Manhattan in which private cars would be banned. Instead, all the land devoted to the private car — four Central Parks worth, by his estimate — could be used for better mass transit, bicycle lanes and real estate development that caters to the needs of more New Yorkers.

“What I find in the New York development community — not everyone, but too many people — are just too focused in their own reality, as opposed to the fact that real estate in New York, as an industry, is serving a city of 8.6 million people,” Chakrabarti said. He said city, state and federal governments would have to seriously step up to help counter the “world of hurt’ that New York is going to experience from the pandemic.

To read an extended version of this conversation, subscribers can click here

For more of The REInterview, a series of in-depth conversations with real estate leaders and newsmakers hosted by Hiten Samtani, click here

The post Vishaan Chakrabarti on a Manhattan real estate market without private cars appeared first on The Real Deal Miami.

(iStock)

(iStock)

Florida Power & Light paid $17.9 million for 969 acres in western Palm Beach County, where it will likely build a solar farm.

The energy company acquired the property on the former site of the historic Moss Ranch, west of the L-8 Canal and north of Southern Boulevard. Kinston, North Carolina-based International Farming Corp. sold the property, according to a release.

Atlantic Western Realty Corp. and Brett Dubois Real Estate represented the seller in the deal, according to the release.

Atlantic Western President Brad Scherer said that his understanding is that FPL will use the land for solar power generation.

FPL has launched a huge initiative to expand its solar production. The company has a ’30-by-30’ plan, with a goal of installing 30 million solar panels by 2030, according to its website. FPL serves more than 10 million people across the state of Florida.

In June 2018, FPL paid $10 million for a 400-acre site in the western edge of Palm Beach County for a solar farm. FPL purchased the property from Minto Communities, which is developing Westlake, a 4,500-home master-planned community.

The post FPL acquires nearly 1K acres in Palm Beach County for a solar farm appeared first on The Real Deal Miami.

Clifford Asness and 321 Ocean (Getty, Douglas Elliman)

Clifford Asness and 321 Ocean (Getty, Douglas Elliman)

Billionaire hedge fund manager Clifford Asness sold his South Beach penthouse for $22 million, 15 percent less than he paid for it two years ago.

Asness, co-founder of AQR Capital Management, sold the 6,800-square-foot unit at 321 Ocean to a private equity executive from the Northeast, according to the Wall Street Journal.

It traded for $3,235 per square foot.

Though the luxury single-family home market in Miami Beach has seen a number of high-priced deals, the condo market is not performing as well, especially during the pandemic.

In 2018, Asness paid $26 million for the five-bedroom unit, which includes a private rooftop deck, a fire pit and pool. He listed the penthouse at 321 Ocean Drive for sale last year for $29.5 million, and sold it for a 25 percent discount off the asking price.

The AQR Capital executive is worth about $1.7 billion, according to Forbes.

Asness had purchased the Miami Beach condo from Russian venture capitalist Boris Johnson, who once had the unit listed for $53 million.

Eloy Carmenate and Mick Duchon of Douglas Elliman represented Asness in the most recent sale. Seth Feuer of Compass brought the buyer. [WSJ] – Katherine Kallergis

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From left: 799 Broadway, Columbia Property Trust CEO Nelson Mills and 149 Madison Avenue (Image by 799 Broadway; Mills and 149 Madison Avenue via Columbia Property Trust)

From left: 799 Broadway, Columbia Property Trust CEO Nelson Mills and 149 Madison Avenue (Image by 799 Broadway; Mills and 149 Madison Avenue via Columbia Property Trust)

Looking at the latest quarterly financials from Columbia Property Trust, you might forget that we’re in the middle of a pandemic. The office REIT leased more square footage than it did in the same period a year ago, and recorded its highest normalized funds from operation since 2018.

But the situation on the ground tells a different story. The company’s properties still stand mostly empty — which has helped reduce operational costs somewhat — and are likely to stay that way until the fall.

“I’d estimate we’re at 5 percent or less utilization probably today,” CEO and president Nelson Mills said Thursday on the firm’s latest earnings call, noting that this was what the company had anticipated. “Since the shut down we’ve been in regular active conversation with tenants… most of them have planned all along to do the re-openings late summer or after Labor Day, particularly in New York.”

The occupancy rate may be somewhat higher in the Washington D.C. market, Mills noted, while the company’s San Francisco buildings are currently closed following reversals in California’s reopening.

Even Twitter, one of the REIT’s largest tenants and one that has signaled a longer-term interest in remote work post-pandemic, will start to reenter around Labor Day, Mills said. “We do believe that once it starts, it may cascade a little faster than in the summer,” he said, as tenants seek to join teammates, partners and competitors in returning to the office.

Columbia recorded normalized FFO per share of $0.40 for the quarter, higher than the $0.38 from a year prior. The company also leased 87,000 square feet, the bulk of which came from a 68,000-square-foot extension and expansion with consulting firm Berkeley Research Group in Washington D.C.

In early July, the landlord terminated its lease with WeWork at 149 Madison Avenue. “We now have the benefit of the base building work that WeWork performed and we’ve been relieved of the obligation to pay $18.7 million for additional work, much of which would have been WeWork specific build-out,” CFO James Fleming said.

“We’re back to plan A essentially,” Mills added, noting that he was optimistic about getting the property leased within the next year or so.

Columbia also amended two other WeWork leases, in San Francisco and Washington D.C., abating rents of $6.7 million. Mills said the co-working firm remains committed to those properties. “If they are successful, which we believe and hope they will be, they’ll be successful at these properties first and foremost,” he said. And if not, “both those spaces would be terrific opportunities for releasing.”

Mills also noted that the firm’s office development at 799 Broadway in Manhattan has just topped out and is set to open next spring, and that some leasing activity is expected in the next few quarters. That project was being developed by a joint venture between Columbia and Normandy Real Estate Partners, and Columbia has since acquired the latter in a $100 million deal.

In terms of the long term impact of coronavirus on the office market, Mills said that he expected density to become a concern once tenants re-entered their offices. “We don’t have a lot of space available for our tenants to spread out in today, which is not the worst problem to have,” he said.

“Could there be significant long-lasting shifts in demand? That’s quite possible, perhaps even likely,” he said. “Economic downturns for one reason or another are inevitable. That’s why we continue to believe that portfolio quality, location and the capabilities of our team are so important.”

Contact Kevin Sun at ks@therealdeal.com.

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340 Leucadendra Drive and Mocca's Alex Pirez (inset)

340 Leucadendra Drive and Mocca’s Alex Pirez (inset)

Mocca Construction paid $12.25 million for a partially completed spec mansion in the ritzy Gables Estates neighborhood.

Randall P. Fiorenza, president of aviation parts company Tiger Aircraft Trading, and his wife Sandra Fiorenza sold the nine-bedroom, roughly 17,000-square-foot waterfront home at 340 Leucadendra Drive to an affiliate of Mocca, led by Alex Pirez.

Sandra Fiorenza, an agent with One Sotheby’s International Realty, listed the property. The Fiorenzas paid $6.5 million for the 1.25-acre property in 2014, and Randall Fiorenza was the builder, Sandra said. Ramon Pacheco designed the Gables Estates mansion.

A spokesperson for Mocca Construction said the property is about half completed. Pirez, president of Mocca Construction, plans to complete the house and list it for sale by early 2021.

The property includes 220 feet on the Gables Waterway and a 140-foot dock with an elevated seawall, and a four-car garage. Plans call for nine bedrooms, 11 bathrooms and two half-bathrooms, a master suite, staff quarters, a courtyard in the center of the property with a garden and water features, library/home office, media room, a glass wine cellar, elevator and a sauna and steam room, according to the listing.

Pirez’s Mocca Realty was involved in two recent high-profile deals in the gated Coral Gables community. Mocca brokered the $49 million sale of 620 Arvida Parkway to trial attorney John H. Ruiz and represented Pharrell Williams in the singer’s $30 million purchase of 700 Casuarina Concourse. Both closed in March.

Write to Katherine Kallergis at kk@therealdeal.com

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Steve Witkoff and the Washington Park Hotel (Getty, Google Maps)

Steve Witkoff and the Washington Park Hotel (Getty, Google Maps)

A lender is seeking to foreclose on the Witkoff Group’s South Beach hotel after it alleges the developer failed to make its July payment on a $45 million loan.

Ladder Capital Finance filed a foreclosure lawsuit against the owner of the 181-room Washington Park Hotel and is seeking to collect the entire loan, along with interest and late fees. Private equity giant Carlyle Group is also a partner in the hotel at 1050 Washington Avenue.

The lawsuit was filed on July 22 in Miami-Dade County Circuit Court and is one of the largest foreclosure lawsuits in South Florida since the coronavirus pandemic began.

The boutique Art Deco hotel reopened in 2016 after an extensive renovation.

Ladder Capital provided the $45 million loan to the hotel in May 2016. The New York-based lender sent the company a letter of default on July 7, after it alleges Witkoff failed to make a payment on the loan, according to the complaint. The lawsuit was first reported by the South Florida Business Journal.

Witkoff and Ladder Capital did not immediately respond to requests for comment.

Since the pandemic began in March, a number of lenders have sought to work with borrowers to offer deferrals.

During its second quarter earnings call this week, Ladder said its balance sheet loans had a 98 percent collection rate in July. The exceptions were for one multifamily and one hotel loan, which were either late in payment or going to default. The hotel loan could be for the Washington Park Hotel.

Experts say that lenders are generally reluctant to foreclose on a property now because they are not interested in taking over or finding a replacement tenant or operator. Still, some are filing foreclosure suits. The lender, BridgeInvest, is seeking to foreclose on the 70-key Variety Hotel in Miami Beach.

Ladder Capital, a real estate investment trust founded in 2008 by Pamela McCormack, Robert Perelman and Brian Harris, is perhaps most famous for being a frequent lender to Donald Trump, having provided more than $250 million in debt to entities tied to him over the years.

In New York, Witkoff Group owns the Woolworth Building, the Park Lane Hotel and the Daily News Building. Over the past few years, it has expanded its presence in South Florida and has an office in Miami’s Design District. Last year, Steve Witkoff, the founder of the development group, purchased a Miami Beach home for $10 million.

The post Ladder Capital seeks to foreclose on Witkoff’s South Beach hotel appeared first on The Real Deal Miami.

 Amazon CEO Jeff Bezos with (clockwise from top left: 1055 Bronx River Ave. in Bronx, NY; 3507 W. 51st St. in Chicago; 13200 Southwest 272nd St. in South Miami-Dade, Florida; 28820 Chase Place in Valencia, California (1055 Bronx River Ave via Google Maps; 3507 W. 51st St. via 42 Floors; 13200 Southwest 272nd St. via Google Maps; 28820 Chase Place via IAC Commerce Center)

Amazon CEO Jeff Bezos with (clockwise from top left: 1055 Bronx River Ave. in Bronx, NY; 3507 W. 51st St. in Chicago; 13200 Southwest 272nd St. in South Miami-Dade, Florida; 28820 Chase Place in Valencia, California (1055 Bronx River Ave via Google Maps; 3507 W. 51st St. via 42 Floors; 13200 Southwest 272nd St. via Google Maps; 28820 Chase Place via IAC Commerce Center)

Amazon has been on a torrid pace of leasing and acquiring millions of square feet of fulfillment centers and warehouses across the country this year. And demand is there.

The company, which reported $88.9 billion in second quarter sales Thursday, said it would increase its fulfillment center square footage by 50 percent in 2020. That’s on top of the 15 percent increase it reported in 2019.

The Jeff Bezos-led behemoth benefited from an April through June surge of coronavirus-related e-commerce shopping. Sales were 40 percent higher than the $63.4 billion from the same period last year. Profits also doubled to $5.2 billion for the quarter just ended. That came despite Amazon having invested $4 billion for the quarter into Covid-19 costs that included stabilizing the supply chain.

The company has been pouring money into building and leasing distribution center space for years, but appears to have pushed up its timeline in 2020. Since March, Amazon will have leased about 11 million square feet of distribution centers and warehouses in the Chicago area alone.

Overall in the second quarter, the company invested more than $9 billion in capital projects, including fulfillment centers, transportation, and Amazon Web Services.

And while April through June was a devastating one for most real estate sectors — retail and hotels in particular — the industrial market has been riding a wave. That has benefited players like Blackstone Group and Prologis, whose CEO recently said the only thing preventing the company from adding more square footage is available land.

Amazon’s online grocery — like others in that space — also had an impressive three months. Sales tripled year-over-year for the second quarter, as nationwide stay-at-home orders boosted business. The company increased grocery delivery capacity by over 160 percent and tripled grocery pickup locations, highlighting the need for more last-mile warehouses.

During its earnings call Thursday, Amazon executives said the company would continue opening new fulfillment centers in the third and fourth quarters.

“Once these buildings open they are a headwind to profitability,” Amazon CFO Brian Olsavsky said.

In the second quarter, Amazon’s $9.4 billion of capital expenditures and finance leases was a 65 percent increase year-over-year.

Its industrial properties, as with its reach, stretch across the country. In June, Amazon took over a 200,000-square-foot warehouse in the Bronx. That same month, the company inked a lease for 155,000 square feet of warehouse space in the Santa Clarita Valley, about 30 miles north of Los Angeles.

And in July, Amazon was approved to build what could be its largest distribution facility in South Florida.

Contact Sasha Jones at sasha.jones@therealdeal.com

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Porch CEO Matt Ehrlichman, with Abu Dhabi Investment Authority veterans Thomas Hennessey (inset left) and Joseph Beck (inset right) (Ehrlichman via Porch,  Hennessey and Beck via LinkedIn)

Porch CEO Matt Ehrlichman, with Abu Dhabi Investment Authority veterans Thomas Hennessey (inset left) and Joseph Beck (inset right) (Ehrlichman via Porch,  Hennessey and Beck via LinkedIn)

Porch.com, a VC-backed home services marketplace, is going public with a blank-check company, one of the first such deals in the proptech world.

The Seattle-based firm said Friday it entered a definitive agreement to merge with PropTech Acquisition Corp., a Los Angeles-based special acquisition company, or SPAC, formed last year by Abu Dhabi Investment Authority veterans Thomas Hennessey and Joseph Beck. The deal values Porch.com at $523 million.

Upon closing, PropTech will be renamed Porch and will trade under the ticker symbol “PRCH.” Wellington Management is also investing $150 million as part of the deal, which is expected to close in the fourth quarter.

Founded in 2013, Porch provides software to insurance and moving companies in exchange for access to home-buyer clients. It then sells additional home services, such as contractor services and TV and internet, to those clients.
Porch claims that 5,500 home-inspection companies currently use its software, and because inspectors interact with homeowners prior to move-in, Porch gains early access to them.

“Merging with PropTech and becoming a public company is the right next step in our growth phase and a key milestone for our company,” CEO Matt Ehrlichman said in a statement. “A public listing will enhance our ability to scale more quickly and continue to innovate.”

To date, Porch has raised nearly $120 million from investors including Valor Equity Partners, Lowe’s Cos., Founders Fund and Battery Ventures.
Porch shareholders will get $30 million when the deal closes. Its executive team — including Ehrlichman, who will remain CEO — is rolling 92 percent of their equity into the deal, the company said.

According to an investor presentation, Porch’s revenue has been growing at a 50 percent clip but, like other fast-growing startups, it is not yet profitable.
Porch generated $57 million in 2019 revenue, company financials show, up from $36 million in 2018. It is projecting revenue of $73 million in 2020 and $120 million in 2021.

But Porch lost $50 million in 2018 and $56 million in 2019, the company disclosed Friday. Those losses are expected to narrow to $34 million in 2020 and $11 million in 2021.

PropTech was formed last year as a SPAC, raising $172.5 million in November 2019, with the goal of merging with a proptech startup and taking it to the public market. During an investor call Friday, Henessey said the SPAC evaluated 300 companies over the past six months.
Mergers with SPAC have gained popularity in recent months as a hedge against a turbulent equity market.

Earlier this year, VTS was reportedly approached by a SPAC, according to the Wall Street Journal. Just last week, Airbnb was, too, after CEO Brian Chesky revived IPO plans that were upended by coronavirus.

So far this year, 48 SPACs have raised $17.1 billion, representing 40 percent of money raised in the IPO market, according to IPO tracker Renaissance Capital. Bill Ackman’s blank-check company, Pershing Square Tontine Holdings, raised $4 billion, the largest SPAC to date. It is reportedly looking to take a “mature unicorn” public.

The post Porch.com to go public in $523M blank-check deal appeared first on The Real Deal Miami.


Wrapping their arms around the Paycheck Protection Program has been a mind-boggling experience for Mark Bosswick and Elliot Levine, two veterans of New York City’s accounting industry.

With hundreds of billions of dollars up for grabs from Congress, rapid-fire rule changes from Washington and bewildering responses from the banking system, the accountants and their colleagues have been trying to make sense of it all for clients.

Appearing Wednesday on The Real Deal’s webinar series TRD Talks Live, the number crunchers from Berdon LLP and Levine & Seltzer zeroed in on some key facts:

  • It’s not too late to get a forgivable PPP loan for businesses yet to receive one. The deadline to apply has been extended to Aug. 8.
  • Skip the big banks. Small, even obscure lenders are often nimbler. Ever heard of Kabbage.com? Neither had Levine — until it scored money for one of his clients in mere days.
  • Businesses that could not reopen before exhausting their PPP are SOL. For folks who have been living under a rock (quite a few of us, actually), that stands for Shit Outta Luck.
  • Gaming of the program looks inevitable, a fact Bosswick and Levine attributed to Congress’ failure to consult accountants when designing it.

Accountants tend to be exacting people, which may be why Bosswick and Levine — a managing partner and managing member at their respective firms — were flabbergasted at how the federal program was slapped together. Officials just seemed to make it up as they went along.

But one thing became clear to them: The program was not intended as a stimulus or economic development.

“Ultimately, PPP was a form of unemployment compensation that put the burden on the employer,” said Bosswick.

“It was a way to keep unemployment numbers low,” Levine added. “It didn’t help businesses.”

Rule changes flummoxed business owners, who were first asked to spend 10 weeks of payroll in eight weeks, then later given 24 weeks, the accountants said. Different rules were applied to applications filed on different dates. The initial money came from banks, but many only helped customers who had borrowed from them before.

That’s how Levine ended up at Kabbage.com, which he said had been “phenomenal” for his clients, unlike giant institutions such as Bank of America and JPMorgan Chase. Terms that make PPP loans friendly to businesses — notably an interest rate of 1 percent, payable over several years — make them less attractive to giant lenders. Many don’t want such piddling accounts lingering on their books. But other banks are drawn to the fee Congress provided.

“For small banks, a 5 percent fee for making the loan plus 1 percent interest isn’t bad,” Levine said. “And maybe they’ll get a client out of it.”

They noted that the program was hastily created, and probably necessarily so. But the money would have been more useful for scaling up after a prolonged closure, rather than as a passthrough to idle employees of shuttered shops.

“If there’s another round of PPP, give more capital to businesses, and let them spend the money once business has returned,” said Levine.

“Employing people just to give them money doesn’t make sense for businesses,” Bosswick added.

Because the program made loan forgiveness conditional on spending no more than 25 percent of the funds on rent — an amount eventually increased to 40 percent — real estate owners saw little support despite losing substantial rental income, according to Bosswick.

For businesses that have taken loans unsure if they will be forgiven, Levine said it’s best to think of them “as 1 percent loans which you may have to pay a portion of back.”

“One thing not many people understand about PPP is that banks are lending their own money,” Levine said, noting that banks prefer the loans to be forgiven so they can book federally guaranteed revenue. For loans neither forgiven nor repaid, the federal government will make the lender whole.

Although banks must examine how businesses used loans before declaring them forgivable, questions about accountability naturally arise for such a novel and hasty solution.

“To me,” Levine said, “the government took away a moral compass” by announcing a 1 percent penalty for companies found to have broken rules.

“That’s a very weak penalty,” he said.

To stay on the fair side of regulators, Bosswick recommended putting PPP proceeds into a separate account and using it exclusively for payroll and rent.

For businesses that miss out on PPP, Levine noted that the government renewed its Main Street Lending Program, which he said could provide a loan of six times EBITDA at 3.7 percent interest payable over five years, and interest-only for the first two years.

“The whole thing is just a numbers game,” Levine said. “I wish they had gotten accountants involved in the PPP from the start.”

The post Calamity and Kabbage: Accountants riff on PPP madness appeared first on The Real Deal Miami.

Starwood Capital Group CEO Barry Sternlicht (Getty)

Starwood Capital Group CEO Barry Sternlicht (Getty)

Barry Sternlicht is putting his money where his mouth is.

The Starwood Capital Group CEO last month quipped, “when it’s really ugly, it’s a good time to invest.” Now, the company is looking to raise $11 billion for real estate and distressed bets.

The firm’s Starwood Global Opportunity Fund XII is looking to raise $8 billion for real estate acquisitions, and a sidecar fund will raise $3 billion for distressed opportunities, Bloomberg reported.

Starwood, partly owned by Dyal Capital Partners, raised $7.55 billion in 2018 for its 11th flagship fund, its biggest ever. That vehicle’s investors include some of the largest public pension funds in the country, such as the Teachers’ Retirement System of the State of Illinois, Teacher Retirement System of Texas and New York State Teachers Retirement System.

The fundraising comes as global markets are in chaos — the U.S. Gross Domestic Product fell 9.5 percent in the second quarter, the largest percent decrease on record.

And Sternlicht predicted things may get worse, particularly for New York City if the government decides to raise taxes on the wealthy. That would cause a “negative cycle” of deteriorating services, less policing and a dirtier city — all things which could erode commercial real estate values.

Sternlicht’s worst nightmare — raising taxes on the wealthy — nevertheless gained some steam this week, after both the leaders of the state legislature broke with Gov. Andrew Cuomo and issued statements in support of taxing billionaires.

Things haven’t been pretty for Starwood, either. Its stock prices took a tumble, down 40 percent from last year, and its retail portfolio has been hit hard by the coronavirus crisis.

Starwood is also shopping around a $2 billion energy infrastructure loan portfolio it purchased in 2018. [Bloomberg] — Georgia Kromrei

The post Starwood eyes $11B raise for real estate, distressed bets appeared first on The Real Deal Miami.

(iStock)

(iStock)

New home mortgage borrowers in majority-Black communities are charged higher interest rates than borrowers in majority-white communities.

That was the finding from an analysis of 2018 and 2019 home purchase mortgage data, according to a Realtor.com report. It showed that homebuyers in areas where Black people comprised over 70 percent of the population received loans with interest rates 13 basis points above those homebuyers received in the majority-white neighborhoods.

Realtor.com analyzed the data that was compiled by real estate information company Optimal Blue.

The difference adds up to nearly $10,000 more that homebuyers in the majority-Black communities paid than white communities over the life of a typical 30-year fixed rate loan, the report found.

The report found the higher rates “are in part a byproduct of systemic racism that has resulted in higher unemployment and poverty rates in Black communities.” That means less wealth is passed down from previous generations, wealth the report said “would often be used to help children and grandchildren buy their own homes or pay for college.”

Nearly three-quarters of white Americans own their homes, compared to just 44 percent of Black Americans, according to 2020 U.S. Census data. That often means Black Americans have to settle for mortgages with low down payments and higher interest rates, according to the report.

The study also highlighted less explicit examples of bias that contribute to consistently worse outcomes for Blacks in the mortgage market.

In the wake of the 2008 financial crisis, many mortgage lenders tightened their belts, only originating loans to those with excellent FICO scores and low debt-to-income ratios. Those standards disproportionately hurts borrowers in majority-Black communities where the average borrower typically has a lower FICO score and a higher-debt-to-income ratio, according to the report.

Still, the report notes that credit scores don’t fully explain the difference in mortgage rates. Borrowers with FICO scores north of 700 living in majority-white areas received mortgage rates that were 8 basis points below the median for their metro area. Such discounts weren’t offered to borrowers in majority-Black areas with similar credit. Eight basis points — less than 1/10 of a percent — adds up to $11,000 over the course of a typical 30-year fixed rate mortgage.

The scarcity of traditional bank lenders in majority-Black communities may also contribute to the Black-white mortgage rate gap, the report noted. Small mortgage brokers in low-income communities tend to issue fewer loans. In turn, they cannot spread out their risk as much and must charge higher rates to turn a profit.

The findings coincide with news that the Trump administration has essentially opted to disregard evidence of discrimination in lending. ProPublica recently reported that the U.S. Treasury Department shelved at least six investigations into discriminatory lending practices at major banks and mortgage lenders in the United States.

The Trump administration also recently announced that the U.S. Department of Housing and Urban Development would eliminate an Obama-era rule requiring localities to proactively evaluate segregation in housing. On Wednesday, President Trump tweeted that with the rollback, “I am happy to inform all of the people living their Suburban Lifestyle Dream that you will no longer be bothered or financially hurt by having low income housing built in your neighborhood.”

The post TRD Insights: Homebuyers in Black communities charged higher mortgage rates, report finds appeared first on The Real Deal Miami.

3604 Matheson Avenue with Mike Komaransky and Corwynne Carruthers (Compass)

3604 Matheson Avenue with Mike Komaransky and Corwynne Carruthers (Compass)

Cryptocurrency enthusiast Mike Komaransky sold his waterfront Coconut Grove mansion for $6.7 million, marking a loss from its previous sale nearly three years ago.

Komaransky and his wife, Sophie Komaransky, sold the property at 3604 Matheson Avenue in Miami to Corwynne Christopher Carruthers and Catherine Ruth Carruthers, records show.

Jane Barrellier of Compass was the listing agent, and Ben Moss, also with Compass, brought the buyer, according to Redfin. It hit the market for $7.29 million in May.

Corwynne Carruthers is a managing director of Kinderhook Industries, a private investment firm that manages more than $3 billion in capital.

Mike Komaransky is the director of Grapefruit Trading, a cryptocurrency trading company, and was previously a partner at DRW Trading.

He and his wife paid $7.55 million for the 9,800-square-foot, five-bedroom house in September 2017, just after Hurricane Irma hit South Florida. The Coconut Grove home was built with sea-level rise in mind, roughly 40 feet high with the living area beginning on the second floor.

On the deed transfer of ownership, Komaransky’s listed address is 3550 Matheson Avenue, a larger waterfront mansion down the street that sold to an LLC in 2018 for nearly $20 million.

Write to Katherine Kallergis at kk@therealdeal.com

The post Crypto investor sells waterfront Coconut Grove mansion at a loss appeared first on The Real Deal Miami.

Hudson Pacific Properties CEO Victor Coleman (Illustration of Victor Coleman by The Real Deal; iStock; Coleman via Hudson Pacific)

Hudson Pacific Properties CEO Victor Coleman (Illustration of Victor Coleman by The Real Deal; iStock; Coleman via Hudson Pacific)

Hudson Pacific Properties reported a dip in second quarter net income, attributing it to retail tenants that deferred their rent payments because of the coronavirus.

But taking into account the massive impact the pandemic has had on retail and office landlords, the real estate investment trust’s net income of $3.7 million and revenue of $199 million in Q2, was not a sharp fall off from the same period last year, when it reported $9.8 million in profits on $197 million in revenue.

The modest change in earnings belies a company going through a major transition. The Los Angeles-based office, retail and studio landlord is set to receive a major injection of capital from Blackstone Group, but it also faces questions about its office leases as Google and other tenants tell employees to work from home.

Blackstone is planning to buy a 49 percent stake in HPP’s Hollywood office and soundstage properties for film production, a portfolio valued at $1.65 billion and largely leased to Netflix. HPP owns three studio lots and 36 sound stages totaling 1.2 million square feet of space across 41 acres, as well as 900,000 square feet of adjoining office space.

HPP executives said during the earnings call Thursday that the Blackstone deal was “imminent” and that proceeds from the deal would more than double Hudson Pacific’s liquidity — from $1.1 billion to $2.4 billion.

Company CEO Victor Coleman said Blackstone’s blockbuster buy-in “provides validation to the stock market” for HPP’s decision to “assemble the largest collection of independent soundstages in the United States.”

The company now has “ample liquidity,” Coleman said, “to enhance business with Blackstone” and also entertain stock buybacks.

The company’s lease signings have fallen since the third quarter in 2019, when it inked 550,000 square feet of leases. The fourth quarter saw that number decline to 435,000 square feet, then nearly 235,000 square feet in Q1 2020 and just 110,000 square feet of lease in the most recent quarter, when office leasing nosedived in L.A.

On the call, Coleman discussed possible acquisitions, including buying out Macerich’s 25 percent share of One Westside Pavilion, the $475 million office project pre-leased to Google, a move also floated in an October earnings call.

“The intent is eventually to hold 100 percent of the asset,” Coleman said, adding that given Macerich’s “capital needs” — the Santa Monica-based retail REIT has been hammered by a drop in rent payments — HPP “will make this transaction.”

So far, HPP has maintained its rent collection rate. The REIT reported that it had collected 97.3 percent of rent payments during the second quarter, only slightly down from previous quarters.

But HPP faces its own vulnerabilities, including studio production sidelined amid the pandemic, which has led to uncertainty about soundstage leases.

HPP president Mark Lammas characterized the lack of content production as a dispute between producers and actor-and-writer unions over coronavirus testing.

Despite a rising number of Covid-19 cases in L.A. County, Lammas said he anticipated production would begin as soon as next month, and would ramp up in the fourth quarter.

“Content producers are under significant pressure” to provide streaming subscribers new material, Lammas said.

And as with many office landlords, HPP faces an existential question about demand.

Coleman said that despite Google’s policy that its employees can work remotely until at least July 2021, the tech giant has not wavered in its agreement to lease roughly 300,000 square feet of office space at One Westside Pavilion.

“Our construction continues unabated,” Coleman said about the redevelopment project.

He seized on a Wall Street Journal article from last week, whose headline said that companies were beginning to question benefits of working from home.

He said it highlights a “lack of mentorship” and “impaired efficiency” that accompanies a remote work environment.

The post Hudson Pacific is effusive about Blackstone deal, defensive about office space appeared first on The Real Deal Miami.

Redfin CEO Glenn Kelman (iStock, Redfin)

Redfin CEO Glenn Kelman (iStock, Redfin)

Redfin’s second quarter wasn’t quite as terrible as the national brokerage and listings site had projected. The Seattle-based residential firm logged a net loss of $6.6 million in the second quarter of 2020 instead of the $21 to $26 million in losses it anticipated.

Redfin also reported $214 million in revenue, an 8 percent year-over-year increase. Back in May, the company projected that it would pull in between $179 million and $189 million. Redfin’s losses for the quarter hovered at $6.6 million, compared to the $12.6 million seen in the second quarter of 2019.

Still, the company’s brokerage business saw a 12 percent decline in revenue compared to the same quarter last year. CEO Glenn Kelman noted, however, that those losses were confined to April.

“It’s been a wild year, ” Kelman said. “We responded quickly in the downturn. Now we’re scrambling to capture demand, blowing out our financial projections from just a few months ago. We’re running naked through the jungle with the bowie knife clenched between our teeth, which is the way Redfin was born to be.”

Redfin’s market share dropped 0.01 percentage points, which Kelman attributed to western regions of the U.S. shutting down during the pandemic. He said he expects market share to grow in the third and fourth quarters and said the company has “never seen such a sharp increase in home-buying intent.”

After Redfin furloughed roughly 40 percent of its agents and laid off 11 percent of its workforce, Kelman said 83 percent of the firm’s furloughed agents returned to work.

He expects the company will hire more agents to meet increasing demand. However, Kelman still struck a cautious tone for what lies ahead for the housing market.

“Against the backdrop of double-digit unemployment, a second surge of coronavirus infections and widespread protests, the strength of the housing market almost feels eerie,” he said.

“A big question for next year is whether Americans will get back to work before [federal mortgage] forbearance expires,” Kelman added. “This disparity between the white collar home buyers and others worried about keeping their homes, coupled with the speed of the downturn and then the recovery, made it hard to call the 2020 housing market.”

The company expects to finalize its diversity targets in December, and will add a new board member by the end of the year to bring a different perspective of the company “at the highest level,” Kelman said.

In May, Kelman wrote a blog post about strengthening Redfin’s commitment to supporting its minority employees, a pledge some former employees criticized based on their own experiences with the company.

Kelman also mentioned that the self-tour tool that Redfin launched in March, Direct Access, has shown that smart phone-enabled locks lead to more people making offers on a home.

He said that the tool doesn’t just attract “looky-loos,” or people who want to throw parties in empty spaces. He said it was an “awesome part of the future whether there’s a pandemic or not.”

Write to Kathryn Brenzel at kathryn@therealdeal.com

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Realogy CEO Ryan Schneider (iStock)

Realogy CEO Ryan Schneider (iStock)

Realogy’s profits plunged during the second quarter, after coronavirus slowed home sales across the country, the brokerage giant said Thursday.

Realogy reported a $14 million loss during the quarter — a huge drop from $69 million in profits during the same period last year. Citing a “massive drop-off” in transactions, Realogy said revenue also fell 25 percent to $1.2 billion, from $1.6 billion a year ago.

During an earnings call with analysts, CEO Ryan Schneider cited an “unprecedented” drop in home sales in March, April and May. But Schneider said open transaction volume — which represents new deals — is showing “very strong” growth. Preliminary data for July show open volume rose about 30 percent.

To stem its losses during the height of the pandemic, Realogy took drastic cost-cutting steps, including slashing executive pay and marketing expenditures.

CFO Charlotte Simonelli told analysts that Realogy reduced expenses by $95 million during the pandemic. Most of the temporary cuts, she said, would be pulled back by the end of the year. But going forward, she said Realogy expects to reduce its lease expenses by $10 million to $15 million.

As the housing market picks up, Realogy said it’s seeing demand in the suburbs. In New York City, where sales declined 50 percent at one point during the pandemic, sales are still down about 30 percent to 40 percent, Schneider said.

By contrast, New Jersey is “on fire,” Schneider said, with sales up 50 percent.

Realogy, the parent of the Corcoran Group and Coldwell Banker, said it finished the quarter with $686 million of cash, including $400 million of credit it drew down in March. Realogy still has north of $3.5 billion in corporate debt, however.

During the quarter, Realogy said its agent headcount was up 2 percent, the fifth consecutive quarter of year-over-year growth.

Schneider said that during the pandemic, agents have become even more valuable to their clients. “All of the iBuyers shut down, and the agents powered on,” he said. “Realogy agents and others.”

The post Realogy’s Q2 profits plunge after “unprecedented” drop in sales appeared first on The Real Deal Miami.

"Our role as owner is shifting from what was solely ‘the librarian’ — collecting rent, renting shops and cleaning spaces — to becoming an ‘editor’ of the space.” (iStock)

“Our role as owner is shifting from what was solely ‘the librarian’ — collecting rent, renting shops and cleaning spaces — to becoming an ‘editor’ of the space.” (iStock)

In sickness and in health, till short-term, revenue-adjusted leases do us part.

One of the U.K.’s biggest retail landlords is moving away from a traditional lease structure across its multibillion-dollar portfolio, opting to give tenants a basket of leasing options with adjustments based on in-store revenue. It’s one of the most significant reevaluations of the relationship between landlord and tenant and is likely to be watched closely by property owners across the pond.

Legal & General Investment Management Real Assets, which has a U.K. retail and leisure destination portfolio valued at about $5.9 billion, will offer tenants various lease structures with rents tied to revenue, according to the Times of London.

Fledgling brands can sign leases as short as three months with revenue-adjusted rents, while more established stores can sign leases of between three and five years, also with revenue-adjusted rents and performance-based clauses that would allow for lease terminations. Tenants will still have the option of a traditional lease of five-plus years, with fixed rents and built-in escalations.

“Retail is not only changing through market forces but also culturally,” Denz Ibrahim, Legal & General Investment Management Real Assets’ head of retail, told the newspaper. “Our role as owner is shifting from what was solely ‘the librarian’ — collecting rent, renting shops and cleaning spaces — to becoming an ‘editor’ of the space.”

Ibrahim acknowledged that the coronavirus was a “catalyst” for the shift. “We think this is what the market needs to better serve investors, occupiers and consumers,” he added.

After hospitality, retail has been the industry sector most battered by the pandemic in the U.S., with Covid-related shutdowns and subsequent precautionary measures gutting foot traffic and in-store sales and ushering in a wave of defaults.

Unibail-Rodamco-Westfield’s U.S. malls saw a 15.3 percent year-over-year decline in net rental income for the first half of the year. Rent payments are piling up, and many formerly blue-chip tenants such as H&M and the Gap are being dragged to court by their landlords. Neiman Marcus said last week that it would shutter its much-hyped location at Hudson Yards, which its landlord, Related Companies, had touted as “the future” of retail. (Neiman Marcus did have a revenue-sharing agreement in lieu of a fixed rent in place at the complex, but seems there was little revenue to be had.)

And there’s likely more pain on the horizon: CMBS delinquency rates for retail properties jumped to 7.86 percent in June, according to ratings agency Fitch, more than twice the rates seen in May.

Legal & General’s gambit is what many industry observers have been advocating for with increased urgency since the pandemic struck: a closer tie of fortunes between landlord and tenant. Jamestown’s Michael Phillips told the Wall Street Journal in May that he expects to see shorter leases and more revenue-sharing agreements as the retail sector reopens.

“The days of being the landlord as an overlord to collect rent are over,” he said.

The post Welcome to a world of the à la carte retail lease appeared first on The Real Deal Miami.

Congressman Al Lawson and Van Taylor (Lawson by Bill Clark/CQ-Roll Call, Inc via Getty Images; Taylor by Thomas McKinless/CQ Roll Call)

Congressman Al Lawson and Van Taylor (Lawson by Bill Clark/CQ-Roll Call, Inc via Getty Images; Taylor by Thomas McKinless/CQ Roll Call)

A bipartisan bill introduced in Congress on Wednesday is intended as a lifeline for hotel and shopping-center CMBS borrowers.

The measure would provide preferred equity to borrowers hurt by the coronavirus pandemic, taking from a $454 billion pool set aside for struggling businesses in the earlier stimulus bill, the Wall Street Journal reported.

Roughly 10 percent of CMBS loans were delinquent by 30 days or more in June, according to Trepp.

“The numbers are getting more dire, and the projections are getting more stern,” said Republican Congressman Van Taylor of Texas, who is sponsoring the bill alongside Florida Democratic Congressman Al Lawson.

The Real Deal first reported news of Van Taylor’s proposal earlier this month.

The funds would be available to help borrowers who were in good standing before the pandemic hit to make mortgage payments. Many CMBS borrowers said they’re having trouble negotiating relief with special servicers.

Loan documents often prohibit them from taking on additional debt. That’s why Van Taylor structured the financing as preferred equity. Some have pointed out, however, that the government inserting itself inside the capital stack is a risky position.

The borrower would be required to repay the debt before they can take money out of the business.

Some industry players have argued that efforts to help the CMBS market primarily benefit large real estate owners instead of small businesses. But Van Taylor said the legislation was aimed at saving jobs.

“This started with employees in my district calling and saying, ‘I lost my job,’” he said. [WSJ] — Rich Bockmann

Contact Rich Bockmann at rb@therealdeal.com or 908-415-5229.

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Brookfield's Ric Clark (Getty)Brookfield Asset Management has renegotiated a $6.4 billion credit facility for its retail-heavy real estate investment trust, Brookfield Property REIT.

The deal imposes restrictions on dividends and requires other Brookfield Asset Management–owned entities to lend at least $250 million to the REIT, the Financial Times reported.

In exchange, a group of creditors led by Wells Fargo waived a contractual clause that allowed them to demand immediate repayment of loans if Brookfield Property REIT failed to meet certain financial conditions.

The agreement includes an exception that allows the REIT to pay larger dividends if that is necessary to retain its privileged tax status or if money from other Brookfield entities fund those distributions, according to the Financial Times.

Brookfield sought to reassure investors in the troubled entity, saying in a press release that “nothing in the amendment will prevent [Brookfield Property REIT] from operating its business as planned including servicing its indebtedness and maintaining payment of dividends to shareholders looking forward.”

The coronavirus pandemic hit Brookfield hard during an already difficult period for the retail industry. Brookfield Property Partners, of which the REIT is a subsidiary, suffered a $373 million net loss in the first quarter.

As stores closed and consumers focused on necessities, Brookfield Property Partners struggled to collect rent from many tenants. In April it brought in just one-fifth of rents from retailers. CEO Brian Kingston told The Real Deal the firm is working with tenants on rent deferral plans and in some cases lease restructuring. It’s currently trading lawsuits with tenant Gap over unpaid rent.

Despite general skepticism that the retail sector will be the property sector slowest to recover from the pandemic, Brookfield Asset Management announced in May a plan to invest $5 billion into retailers struggling through the pandemic.

Brookfield Property REIT shares closed Wednesday at $11.80 and opened Thursday at $11.64 before recovering. By early afternoon they were down about 0.3 percent from the previous day’s close. [Financial Times] — Dennis Lynch 

The post Brookfield, creditors reach deal on REIT’s $6.4B credit facility appeared first on The Real Deal Miami.

(iStock)

(iStock)

South Florida construction starts took a nosedive in June, continuing the trend since the coronavirus pandemic began.

Nonresidential construction declined 43 percent in June, year-over-year, to $239.6 million, while residential construction dropped 61 percent to $265.4 million during the same period, according to a new report from Dodge Data & Analytics.

Total building construction fell 54 percent in June to $504 million, according to the report.

Nonresidential buildings include office, retail, hotels, warehouses, and healthcare, whereas residential buildings include single-family homes and multifamily housing.

For months, construction has slowed in both residential and commercial real estate due to the impacts of coronavirus.

In May, new construction starts in South Florida declined 25 percent to $558.8 million, down from $749.4 million in May 2019, according to Dodge Data & Analytics. And in April, total construction starts dropped 33 percent to $684.4 million, down from $1.03 billion in April 2019.

Construction was designated an essential business by the state of Florida and allowed to continue during the pandemic. Yet, contractors and subcontractors still reported challenges, such as rising material costs and difficulties with obtaining supplies produced in China. Some contractors said they had to find new suppliers since businesses such as marble slab companies were deemed non-essential and were required to shut their doors.

The drop in construction starts could also be due to a decline in new permits, experts say. Most cities in South Florida stopped processing new permit applications for one to two months, which could have an impact on contractors and developers this summer.

The post SoFla construction starts plummet 54% in June appeared first on The Real Deal Miami.

Faena Hotel Miami Beach and Eau Palm Beach (Faena, Eau Palm Beach)

Faena Hotel Miami Beach and Eau Palm Beach (Faena, Eau Palm Beach)

UPDATED, July 31, 4:50 p.m.: South Florida hotels continue to lay off hundreds of employees due to the coronavirus pandemic, including high-end properties such as Faena Hotel Miami Beach and Eau Palm Beach Resort & Spa.

Faena Hotel, at 3201 Collins Avenue in Miami Beach, will lay off 261 employees, according to a WARN notice filed with the state. That includes permanent layoffs of 163 employees on Aug. 30, and layoffs of another 50 employees Sept. 8. Faena Group and Len Blavatnik’s Access Industries own the 168-room beachfront hotel, which is part of the Faena District.

Eau Palm Beach Resort & Spa, at 100 South Ocean Boulevard in Manalapan, laid off 295 employees. In a letter to the state, the hotel said that the layoffs, furloughs and reduction of hours that began on March 25 may continue beyond six months and could become permanent. The 310-key oceanfront hotel reopened on July 1, according to its website.

At Kimpton Epic Hotel at 270 Biscayne Boulevard Way in Miami, 168 employees were let go, according to a WARN notice filed with the state. Ugo Colombo’s CMC Group developed the 411-key hotel.

Brookfield Properties’ Hilton Fort Lauderdale Marina, at 1881 Southeast 17th Street, extended the furlough of 167 employees, according to a notice filed July 16. And the Hilton Fort Lauderdale Beach Resort, at 505 North Fort Lauderdale Beach Boulevard, extended the furlough period of 79 employees, and eliminated the roles of 29 employees.

In the Hilton Fort Lauderdale Marina’s WARN notice, the hotel referred to the “constantly changing” orders and regulations. “The hotel is responding and adapting to these developments as much as reasonably and feasibly possible. Contrary to our expectations, government orders continue to impose substantial limitations on our operations at this location including social distancing guidelines, limits on large public gatherings, and capacity limitations,” the letter states.

It’s not just the hotel industry that’s slashed its workforce since March. Calder Casino, at 21001 Northwest 27th Avenue in Miami Gardens, laid off 254 employees. Ruth’s Chris Steak House in North Palm Beach laid off 43 workers, according to WARN notices filed with the state.

In early July, casinos were ordered to close again in Miami-Dade County after the number of Covid-19 cases rose following a phased reopening of non-essential businesses countywide.

Tens of thousands of workers in South Florida have been laid off or furloughed since March. Many of those layoffs became permanent following reopening, including at the Fontainebleau Miami Beach, the largest hotel in Miami-Dade.

Already grappling with losses since March, a growing number of hotel owners in the Miami area are plotting their exits, as the pandemic takes another big toll, sources say.

An earlier version of this story identified the incorrect owner of the Hilton Fort Lauderdale Beach Resort. 

Write to Katherine Kallergis at kk@therealdeal.com

The post Faena Hotel, Eau Palm Beach Resort among latest to lay off hundreds appeared first on The Real Deal Miami.

Zillow's Dan Spaulding and Rich Barton (Images via Zillow)

Zillow’s Dan Spaulding and Rich Barton (Images via Zillow)

In April, as the nation was in the thick of lockdown, Zillow CEO Rich Barton tweeted that his “personal opinions about WFH have been turned upside down over the past 2 months.” He’s now ready to reflect that thinking in long-term company policy.

Effective immediately, the Seattle-based listings giant is allowing 90 percent of its 5,400 employees to work from home indefinitely, at least part-time, the company disclosed in a blog post Wednesday. The move will be significant for the U.S. office market, as Zillow leases over 1 million square feet of space in New York, Atlanta, San Francisco, Irvine, Calif., Denver, Phoenix and Overland Park, Kan. According to the company’s annual report, its operating lease expenses were $29.1 million in 2019. In New York, Zillow subsidiary StreetEasy increased its office footprint in 2018, leasing 130,000 square feet at 1250 Broadway in NoMad.

In the blog post, executives acknowledged a “drastic” shift for Zillow, which historically discouraged remote work. “Our old preferences have been debunked during the pandemic,” wrote Dan Spaulding, Zillow’s chief people officer.

“When conditions permit us to re-open our offices, our employees’ health and safety will remain our top priority,” Spaulding added. “Our offices will be there for individuals and teams to enable productivity and collaboration — but they won’t be the only place where those things happen.”

Zillow closed its headquarters in early March after Seattle became an early hotspot for coronavirus. In the early weeks of the pandemic, the company slashed expenses by 25 percent, froze hiring and suspended its instant-homebuying program.

In April, employees were told they could work from home for the rest of 2020. During Zillow’s Q1 earnings call in May, Barton joked about the need for a home office. “I’m right now in my bedroom because I have three kids on Zoom school right now all over the house,” he said.

By extending the policy indefinitely, Zillow is following in the footsteps of other major tech companies and raising serious questions about the value of office space.

In May, Twitter, which has north of 215,000 square feet in Manhattan’s Midtown South, told employees they could permanently work remotely. Facebook, which has commitments for over 2.5 million square feet of space in Manhattan and is in talks for another 740,000 square feet, told employees that it expected half of the company’s employees to work remotely within the decade. Google said this week that employees can work from home until at least the summer of 2021. When Google made that announcement, Spencer Rascoff, who was CEO of Zillow until February 2019, tweeted that the company’s decision would have a “big ripple effect.”

“WFH, or hybrid, is the new normal,” Rascoff said.

Write to E.B. Solomont at eb@therealdeal.com

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Silverstein Properties chairman Larry Silverstein (Getty)

Silverstein Properties chairman Larry Silverstein (Getty)

Silverstein Properties has raised $30 million on the Tel Aviv Stock Exchange, after expanding its Series B bond offering first issued in September.

The latest raise generated $30.4 million in demand, with a 3.54 percent interest rate, according to Commercial Observer.

When the offering was first issued last year, the institutional bid was vastly oversubscribed, the publication said, citing TASE filings. With the latest raise, the total Series B is now $96 million.

The bonds took a hit in February with the onset of the coronavirus pandemic. While they have rallied since then, they are still trading below pre-pandemic figures.

Several other U.S. companies, including Starwood Retail Partners and Related Companies are grappling with headwinds on the TASE.

As of May, Starwood had seen its Israeli bonds downgraded three months in a row, to C-.

Before its latest offering, Silverstein received an AA rating from Israeli agency S&P Maalot.

American developers had flocked to Israeli bond market in hopes of finding cheap debt several years ago. Most had luck, until U.S. real estate bonds on TASE took a beating in 2018, after a series of unsettling financial disclosures from American developers. Silverstein was one of the first companies to jump back into the market, with its $50 million raise in February 2019.

[CO] — Sylvia Varnham O’Regan

The post Silverstein Properties raises $30M on Israeli bond market appeared first on The Real Deal Miami.

Cortland Partners CEO Steven DeFrancis and Depot Station apartment complex in Delray Beach (Google Maps)

Cortland Partners CEO Steven DeFrancis and Depot Station apartment complex in Delray Beach (Google Maps)

Cortland Partners paid $73.9 million for the Depot Station apartment complex in Delray Beach, marking one of the largest multifamily deals in South Florida since the start of the pandemic.

The Atlanta-based real estate investment firm bought the 284-unit complex at 203 Depot Avenue for $260,211 per unit, records show. Atlanta-based Wood Partners sold the property.

Cortland secured a $37 million loan from Walker & Dunlop to acquire the complex, records show.

Delray Station consists of seven, three-story buildings with one-, two- and three-bedroom units. Monthly rents range from $1,545 to $2,752, according to Apartments.com. The apartments were built in 2017, records show.

Cortland was founded in 2005 with a focus on multifamily development, but pivoted during the recession to focus on acquiring and renovating existing multifamily projects, according to its website.

Wood Partners has developed 79,000 units with a combined value of more than $14.1 billion, according to its website.

Delray Beach is one of the hottest areas for new development in South Florida, partly due to its walkable downtown.

Aventura-based BH3 scored approval last year to build a mixed-use project in an Opportunity Zone on West Atlantic Avenue in Delray Beach.

In January 2019, a joint venture led by 13th Floor Investments, Key International and CDS International bought the former Office Depot headquarters in Delray Beach for $33 million.

The post Cortland pays $74M for Depot Station apartments in Delray Beach appeared first on The Real Deal Miami.

Ron DeSantis (Getty)

Ron DeSantis (Getty)

Florida Gov. Ron DeSantis extended the state’s moratorium on evictions and foreclosures to Sept. 1, two days before the order was set to expire.

DeSantis made an amendment to the original order, which has created confusion among the courts, lawyers, landlords and tenants, and borrowers and homeowners, experts say. The executive order, signed in early April, only allows residential tenants and borrowers to stay in their homes if they were unable to pay rent or mortgages due to the Covid-19 emergency. It did not and does not provide financial relief.

All payments are due when the borrower or tenant is “no longer adversely affected” by coronavirus, according to the updated order.

The moratorium refers to “final action at the conclusion of a mortgage foreclosure proceeding” by a single-family borrower – in this case a term that likely applies to owners of individual condos, houses and townhouses.

After multiple extensions of the governor’s emergency order, and a surge in coronavirus cases in Florida, industry players had expected another extension, sources said. As of Wednesday, Florida had 451,423 positive Covid-19 cases and 6,333 confirmed deaths. Mass layoffs have also continued since March, when the pandemic began to take a toll on the economy.

Many expect there to be a deluge of evictions and foreclosures once the freeze is lifted.

The post DeSantis extends residential foreclosure and eviction ban another month appeared first on The Real Deal Miami.

(iStock)

(iStock)

“South Florida by the numbers” is a web feature that catalogs the most notable, quirky and surprising real estate statistics.

Attribute it to Covid-19, taxes, costs of living, weather, the rise of remote working, or some combination of the above factors — whatever the cause, New Yorkers are relocating to Miami at eye-popping levels. While this trend has been building in recent years, the past few months have seen a spiked flow of Gothamites trading stilettos for sandals, and in most cases, cramped apartments for roomy single-family homes. Is this a real exodus with “legs,” or a momentary craze that will settle down once things return to normal? We explore it in this edition of “South Florida by the numbers.”

40 percent: Decline in New York City office values predicted by Barry Sternlicht, Starwood Capital’s CEO, who moved his company from Greenwich, Connecticut to Miami Beach in 2018 due to a more favorable tax climate. Sternlicht anticipates that a loss of populace and capital would increase New York City expenses accordingly, driving office rents down by 25 percent. [TheRealDeal]

10,346: Square footage of a $22 million Gables Estates mansion recently purchased by Lee Scott Millstein, a private equity investor and Sylvie Millstein, a fashion designer, who are relocating from New York with this purchase. The nine-bedroom home features 255 feet of water frontage with a 160-foot dock, a master suite that overlooks the water, a home theater, game room with a wet bar and wine cellar, pool, rooftop deck and outdoor entertainment area. [TheRealDeal]

25 percent: Increase in out-of-towners looking to rent in Miami in 2020 compared to last year, according to Master Broker Christopher Zoller. “They are showing up in droves…fleeing high density, high-rise locations. They are learning to work from home or they can work from common spaces,” Zoller said. [MiamiHerald]

12: Number of months the general partner of a New York-based venture capital firm has agreed to lease a Miami Beach home, which is typical of other entrepreneurs who are taking “a taste” of South Florida before deciding whether or not to stay permanently. These investors are seeking more space, a lower cost of living, and warmer weather for their families during this time, but are not ready to completely divest themselves from New York for the long term. [SFBJ]

270: Estimated number of people leaving the New York metro area each day, with most of them choosing Florida. And it’s not just the wealthy residents fleeing increased taxes. Lower to middle class income earners are also leaving New York, and the costly Northeast in general. [Forbes]

This column is produced by the Master Brokers Forum, a network of South Florida’s elite real estate professionals where membership is by invitation only and based on outstanding production, as well as ethical and professional behavior.

The post South Florida by the numbers: From the Big Apple to the Magic City appeared first on The Real Deal Miami.

Hamid Moghadam (iStock)

Hamid Moghadam (iStock)

The onset of the coronavirus wreaked havoc on company supply-chains across the country, a fact that will likely benefit industrial real estate owners in the long-run.

“Supply chains are going from just-in-time strategies to just-in-case strategies,” said Prologis CEO Hamid Moghadam, at a Wednesday webinar hosted by NYU’s Schack Institute of Real Estate. “Bottom line, I wouldn’t be surprised if after this people will carry 5 or 10 percent more inventory than before this, regardless of e-commerce. And that will double the demand for the growth rate for logistics facilities.”

As one of the largest industrial developers and investors, Prologis has weathered the pandemic far better than most companies.

Riding a wave of demand for warehouse and distribution centers, Moghadam noted that the real estate investment trust reported higher-than-expected rent collections for the most recent quarter and has readjusted earnings guidance to pre-coronavirus projections.

During the webinar, Moghadam even found time to joke.

“The killer risk is the transporter from ‘Star Trek,’” he said, referring to the teleportation machine. “If someone invents that we are toast.”

Blackstone has begun encroaching on its space with big investments and deals, but Prologis is still an industrial real estate giant. The REIT owns 963 million square feet of industrial space — up from around 800 million square feet at the end of 2019 — and 4,655 buildings across the country. The San Francisco-based company has $136 billion in assets under management and has leases with giants like Amazon, FedEx and Home Depot.

Moghadam said the company “has always been flush with capital” and has not had to raise money in public equity markets “in almost forever.”

The scarcity, he said, is finding a place to build. Buildable land in large U.S. cities is increasingly rare and local governments are growing more wary of new industrial development, he said. That hinders expansion plans.

“It’s very hard to find a 50-acre site to service the needs of the customers,” Moghadam said.

Constrained supply will keep vacancy rates down, he said, noting they were under 4 percent companywide. Another benefit, he added, is little threat of oversupply in metro areas, which typically serve as last-mile locations.

Schack Institute dean Sam Chandan introduced Moghadam, who spoke with Schack REIT Center director Scott Robinson; and with attorneys Adam Emmerich and Robin Panovka of New York-based Wachtell, Lipton, Rosen & Katz.

Moghadam said he does not see much opportunity in repurposing struggling retail centers into industrial facilities because of the strict contracts that generally prevent it.

As a property owner, he said, “the last thing you want to do is to give that as an excuse to the two anchors who are not doing well to walk away from the lease because you converted the third anchor to an industrial or logistics box.” A study by CBRE did find about two dozen instances of companies, including Amazon, repurposing retail stores and malls into warehouses, CNBC reported last year.

Moghadam added he is not worried about the trade tensions between the U.S. and China.

“Don’t listen to the politicians, look at the numbers,” he said. “We cannot produce all these things that we are depending on other countries to produce.” Should manufacturing return in a major way to the U.S., he said, the company would benefit from that, too.

“I honestly don’t care where stuff is made,” he said. “I care where stuff is consumed, and stuff is consumed in these major areas where people live and where they have money in their pockets.”

The post Prologis CEO: Capital is not an issue, it’s finding properties appeared first on The Real Deal Miami.

8818 Southeast Riverfront Terrace and Karin Taylor, pictured in 1996 at a Playboy event (Realtor, Getty)

8818 Southeast Riverfront Terrace and Karin Taylor, pictured in 1996 at a Playboy event (Realtor, Getty)

A former Playboy Playmate of the Month snagged a waterfront home in Tequesta for $3.1 million, sources told The Real Deal.

Karin Taylor purchased the 6,524-square-foot house at 8818 Southeast Riverfront Terrace for $475 per square foot. David and Lisa Hyman sold the property, records show.

Rob Thomson of Waterfront Properties represented the buyer and seller. Thomson declined to comment on the sale.

The house was built in 1990 and has six bedrooms and five-and-a-half baths, according to Realtor.com. It last sold for $2.1 million in 2018, records show.

The custom home, on a 0.85-acre lot, has 330 feet of shoreline and is across from Jonathan Dickinson Preserve. Amenities include a pool, spa and dock equipped with a boat lift and jet ski, according to a listing on Realtor.com.

Taylor was formerly an international model and Playboy magazine’s June 1996 Playmate of the Month. She currently runs a philanthropy for at-risk youth through equestrian therapy programs, according to the Palm Beach Post.

Court documents show she is in the midst of a divorce from husband Bill Weisberg, chairman and CEO of Affiliated Distributors, a Wayne, Pennsylvania-based distribution and manufacturing company.

Tequesta is a small town just north of Jupiter, which has seen an influx of high-end buyers, including Washington National pitcher Max Scherzer’s purchase of a $9.8 million mansion in Jupiter’s Admiral’s Cove neighborhood.

The post Former Playmate of the Month buys Tequesta home appeared first on The Real Deal Miami.

Blackstone's Jonathan Gray and a rendering of 350 Park (Vornado, Blackstone)

Blackstone’s Jonathan Gray and a rendering of 350 Park (Blackstone, Vornado)

The Blackstone Group is mulling options for a new headquarters in New York City as large as 1 million square feet, sources told The Real Deal. The investment giant’s current leases in the Plaza District expire in several years.

Blackstone, headed by CEO Stephen Schwarzman and president Jon Gray, has asked a handful landlords to submit proposals for a new headquarters in Midtown and the Far West Side.

Among the sites under consideration is a supertall office tower on Park Avenue proposed by Vornado Realty Trust and Rudin Management. The two have floated the idea of developing properties they separately own into a 1,450-foot-tall, 1.68 million-square-foot tower at 350 Park Avenue.

The project is particularly attractive to Blackstone, sources said, because the site sits catty-corner to the firm’s current headquarters at Rudin Management’s 345 Park Avenue. Between that location and another office at Boston Properties’ 601 Lexington Avenue, Blackstone occupies about 800,000 square feet on leases that expire in 2027.

Blackstone is looking at options to combine its offices and expand its footprint. The search is in its very early stages, and sources familiar with the process said Blackstone could also choose to renew and grow at 345 Park Avenue if space becomes available.

A spokesperson for Blackstone declined to comment.

Other sites under consideration include three developments in the Hudson Yards area: Tishman Speyer’s Spiral at 66 Hudson Boulevard, Related Companies’ 50 Hudson Yards and 3 Hudson Boulevard, which is being co-developed by Boston Properties and the Moinian Group.

On its second-quarter earnings call Wednesday, Boston Properties said it had recently made a pitch to a large tenant.

“Earlier this month we made a proposal and did a virtual presentation to a million-square-foot user with a mid-2020s delivery timeframe for 3 Hudson Boulevard,” said company president Doug Linde, without naming the tenant.

The REIT executive noted that most tenants are holding off from making moves on office space unless a lease expiring in the near future forces their hand, though he said there are a few exceptions.

“Some long-range planning activities continue despite the current economic and health uncertainties.”

Blackstone’s interest in a new Manhattan headquarters could be considered a vote of confidence for the city’s office market, which is suffering through an identity crisis as the shift to work-from-home during the coronavirus pandemic has many wondering if companies will abandon the central business district.

Gray earlier this month said people will eventually return to their office buildings, but “there will be less density, there will certainly be a lot less new construction.”

Contact Rich Bockmann at rb@therealdeal.com or 908-415-5229

The post Blackstone eyes new 1M sf NYC headquarters appeared first on The Real Deal Miami.

Unibail-Rodamco-Westfield CEO Christophe Cuvillier, Westfield Century City in Los Angeles and Westfield World Trade Center in New York (Getty, iStock, Google Maps)

Unibail-Rodamco-Westfield CEO Christophe Cuvillier, Westfield Century City in Los Angeles and Westfield World Trade Center in New York (Getty, iStock, Google Maps)

While operations at Unibail-Rodamco-Westfield’s European holdings are returning to normal, the retail giant’s U.S. holdings are contending with different reopening — and in some cases re-closing — timelines.

Some of the landlord’s European malls have already been back open for 12 weeks, with foot traffic recovering to nearly 90 percent of pre-coronavirus levels. Meanwhile, concerns about a second wave of infections and protests after the killing of George Floyd have contributed to a “particularly hectic” situation in the U.S., CEO Christophe Cuvillier said Wednesday on the firm’s half-year earnings call. He also pointed to re-closures, such as California Gov. Gavin Newsom rolling back the reopening of enclosed malls.

“As we see our footfall and sales improving weekly, our focus is now on rent collections and on finalizing tenant negotiations,” Cuvillier said on the call, its first since the coronavirus crisis began.

For the first half of the year, URW’s American shopping centers saw a 15.3 percent year-over-year decline in net rental income. That’s worse than the portfolio-wide average of 11.3 percent but better than malls in Austria and the U.K., which saw declines of 27.5 and 34.1 percent respectively.

URW’s U.S. holdings account for 25 percent of the firm’s portfolio by gross market value, with France accounting for 34 percent and no other country making up more than 10 percent.

In the early days of the coronavirus crisis, the company focused on building up liquidity and cutting costs, amassing an unprecedented 12.7 billion euro cash balance with the help of credit lines and bond issuances. The firm also automatically deferred tenants’ rent payments for the months of April and May.

“We took the stance to not make any immediate decision on potential rent relief in the middle of the crisis, so as not to negotiate in the dark without even knowing when the centers would be allowed to reopen, nor having an idea of how the customers would respond in the early weeks post-reopening,” Cuvillier said.

The mall owner has so far collected just 38 percent of rent due for the second quarter, while providing relief for 3 percent of the rent bill and deferring 20 percent to later in the year.

Ad hoc rent negotiations with tenants began in May, and URW says it is currently about 25 percent through the process. “Such negotiations are conducted on a case by case basis on the principle of a fair sharing of the burden, and include a request for concessions from tenants,” the firm’s earnings report notes.

Concessions URW may seek from tenants in exchange for relief include lease extensions, waivers of co-tenancy provisions, increases in percentage rent, or even signing leases for new stores.

While the company hopes to wrap up the majority of tenant negotiations by September, “there will obviously be the odd negotiation that lingers on, and there will be examples where we don’t agree, and if we don’t agree, then we’ll see what we do,” Cuvillier said. “You’ve probably heard that some landlords have started lawsuits against tenants that do not pay, so this is also an option.”

“We do not grant any rent relief, i.e. we do not conclude the negotiations, until we get payment for June and July or any arrears that we have,” he emphasized.

In the longer term, one of the firm’s major goals is to deleverage its portfolio with the sale of another 4 billion euro in assets, about half of which is retail. A recent decline in property values pushed the landlord’s loan-to-value ratio up to 41.5 percent, above its target range of 30 to 40 percent.

In May, URW received approval from Los Angeles’ city planning commission for a 34-acre mixed-use project in the Warner Center neighborhood, which will include 1,400 residential units, 280,000 square feet of retail, 731,500 square feet of office space and 572 hotel rooms. This reflects the company’s increasing focus on mixed-use developments, with retail accounting for just 32 percent of its roughly 10 million-square-foot development pipeline.

Contact Kevin Sun at ks@therealdeal.com

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David Martin and a rendering of the project

David Martin and a rendering of the project

Voters will decide if developer David Martin can redevelop the Miami Beach Marina into a high-rise, mixed-use tower.

The Miami Beach City Commission on Wednesday agreed to send the proposal to a referendum in November.

Martin’s Terra is proposing a tower of up to 385 feet in height, or about 38 stories tall. It would include about 60 residential units encompassing 275,000 square feet, as well as 45,000 square feet of retail, restaurant, office and marina space, and a 1-acre park on the Miami Beach Marina site at 300 to 400 Alton Road.

To make it onto the November 3 ballot, commissioners had to approve the agenda item, which had passed on first reading June 24. The resolution from the city’s June commission meeting included the development agreement, sale of the property and air rights, a new marina lease, and the vacation of a right-of-way. The existing building, which houses the restaurant Monty’s Sunset, would be demolished.

The city entered into a lease in 1983 to operate and maintain the Miami Beach Marina and property until 2022. Now, Martin is proposing a 99-year lease.

A majority of voters would have to sign off on the project for it to move forward.

In a statement, Martin said the marina is “in need of significant improvements to keep it competitive and address the challenges of sea level rise and climate change.” The marina project would include more than 2 acres of publicly accessible open space and a 1-acre Marina Park and baywalk.

Martin brought in Bjarke Ingels Group to design the development. Ingles designed Terra’s Grove at Grand Bay project, a two-tower luxury condo in Coconut Grove.

The Coconut Grove-based developer is active in Miami Beach. He’s partnering with Crescent Heights on the Canopy Club, a residential tower, and Canopy Park, previously known as the 500 Alton development and later Park on Fifth. Terra, Crescent Heights and their partner New Valley recently broke ground on the 3-acre park component.

Martin is also a co-developer of the Miami Beach Convention Center hotel, a planned 800-key Grand Hyatt.

Write to Katherine Kallergis at kk@therealdeal.com

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WeWork CEO Sandeep Mathrani (Wikipedia Commons)

WeWork CEO Sandeep Mathrani (Wikipedia Commons)

WeWork has hired JLL and CBRE to help fill millions of square feet now vacant, in New York City and Los Angeles, as the co-working giant continues to get pummeled by the effects of the coronavirus.

The company is also shopping for brokerages to help lease spaces in Miami, Boston and Seattle, according to Business Insider.

JLL is marketing WeWork spaces at seven buildings in Manhattan and a WeWork spokesperson said the company plans to hire one or more brokerages to help lease four other spaces in the city. The company has an estimated 2 million square feet of available space in New York, or around 20 percent of its portfolio.

JLL is marketing 437 Madison Avenue in New York (Google Maps)

JLL is marketing 437 Madison Avenue in New York (Google Maps)

CBRE is marketing four WeWork locations in L.A., whose commercial leasing has taken a major hit in recent months. A record 5 million square feet of sublease space hit the market in the second quarter — a five-fold increase from the first quarter.

WeWork has been rethinking its long-term strategy since its disastrous attempt at an IPO last fall and subsequent leadership changes. The pandemic’s impact, which has led to a work-from-home revolution, has only worsened the situation. Last month the company pulled out of a planned 115,000-square-foot lease at 149 Madison Avenue in Manhattan.

It’s also doubled down on its shift from smaller independent tenants that were long its base clientele toward larger “enterprise” tenants.

The second quarter marked the first time that companies with more than 500 employees accounted for half of WeWork’s core revenue outside China and India. [BI] — Dennis Lynch

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New York Rep. Alexandria Ocasio-Cortez, President Donald Trump and HUD Secretary Ben Carson (Getty)

New York Rep. Alexandria Ocasio-Cortez, President Donald Trump and HUD Secretary Ben Carson (Getty)

New York Rep. Alexandria Ocasio-Cortez is working to defund the Trump administration’s proposed fair housing rules before they even get off the ground.

For years, the administration has talked of dismantling an Obama-era rule which President Donald Trump has described as an “effort to abolish the suburbs.” Last week, in what appears to be a bid to win over suburban voters, the president announced that it would finally happen.

Ocasio-Cortez is seeking to frustrate the efforts with amendments she’s proposed to an appropriations bill that would prohibit federal funds from being used to comply with rules proposed under Housing and Urban Development Secretary Ben Carson, according to Bloomberg. That would effectively invalidate any rules from the Housing Secretary.

One of the rules in contest — Affirmatively Furthering Fair Housing, a provision of the Fair Housing Act — requires that state and local governments show how federal funds have been used to reduce housing segregation. Critics have called the rule “onerous,” and the Trump administration’s plan would allow governments to certify compliance without providing any proof.

“We cannot return to the days of redlining and white flight,” Ocasio-Cortez said in a statement to the publication. The rules have a particular impact on wealthy suburbs, where residents often push back against big affordable housing projects that would bring in more people of color to their communities.

Secretary Carson has been working to roll back the rule by relaxing the reporting standards since he joined the Trump Administration. But after Trump intervened, Carson’s department proposed a rule that would eliminate enforcement of the provision.

The second rule the administration is looking to change has to do with how HUD takes on cases alleging “disparate impact.” The change may make it more challenging for tenants and homebuyers to pursue discrimination complaints under the Fair Housing Act. [Bloomberg] — Erin Hudson

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Equity Residential chairman Sam Zell and CEO Mark Parrell (right) (Getty, iStock)

Equity Residential chairman Sam Zell and CEO Mark Parrell (right) (Getty, iStock)

Sam Zell’s Equity Residential has tried to maintain occupancy rates since the pandemic swept the nation, but despite efforts, the company’s year-over-year net income declined by 15 percent in the second quarter.

On a Wednesday earnings call, the real estate investment trust’s CEO Mark Parrell acknowledged the unprecedented climate the rental apartment industry has faced since March, in which renters have lost jobs or fled the hardest-hit urban cores. But in his statement, he emphasized the company’s strength.

“During one of the most challenging periods in our country and industry’s history, we feel that our business showed considerable resiliency,” Parrell said.

Equity Residential’s net income for the second quarter was about $271 million, down 15.5 percent from $321 million the same time last year. Its total revenue for the second quarter was about $654 million, down by 2 percent year over year. The REIT’s net income for the first quarter was about $333 million, and its total revenue for the quarter was about $682 million.

Parrell said the company is doing better than expected because of its customer base, whose average annual household income is $164,000.

“Data suggests that only 4 percent of workers making more than $150,000 a year have recently lost their jobs compared to the low-teens for lower-income categories,” he said. “We have collected about 97 percent of our residential rents during the second quarter, and attribute this to a customer base that remains well employed and capable of meeting their obligations.”

The REIT’s challenge, however, appears to lie in its urban holdings, which accounts for about 25 percent of its 80,000-unit portfolio. Its urban dwellings are spread across Boston, Cambridge, New York City and downtown San Francisco.

“This portfolio has the highest use of concessions and the most rate pressure,” COO Michael Manelis said. He noted that despite concessions, the company’s urban apartments are “currently 91 percent occupied.” While he didn’t specify the urban portfolio’s usual occupancy rate, company documents show that across the REIT’s residential holdings, rates average around 95 percent.

On the other hand, the REIT’s suburban portfolio, which represents about 45 percent of its holdings, remains relatively unscathed. Still, concessions were needed to keep those units occupied. Its lowest occupancy rate since the pandemic was at 95.2 percent “before recovering fully to the levels at or above prior year and ending the quarter at 96.6 percent,” Manelis said.

Asked if the company would consider shifting its portfolio types because of the changing preference among renters, Parrell said he wanted to maintain a good variety.

“I would point out that Gen Z is a pretty large group as well, and we don’t know their preferences, but I have a few of them living with me,” he said. “And they talk a lot about moving out of my house and moving to the city.”

Contact Akiko Matsuda at akiko.matsuda@therealdeal.com

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310 East Alexander Palm Road (Realtor.com)

310 East Alexander Palm Road (Realtor.com)

A descendant of the founder of Cumberland Farms paid $11 million for a newly built waterfront spec home in Boca Raton.

Byron G. Haseotes Jr., grandson of Vasilios S. Haseotes, who co-founded the chain of convenience stores and gas stations, paid $11.12 million through a land trust for the six-bedroom, 8,342-square-foot house at 310 East Alexander Palm Road. The sellers are Leslie O’Hare and Janet O’Hare, according to property records.

The house sold for $1,333 per square foot. A Haseotes family trust provided the buyer with an $8 million mortgage, records show.

Cumberland Farms has locations throughout New England, New York and Florida. The company sold its stake in Gulf Oil L.P. in the early 2000s.

The O’Hares paid $3.4 million for the 0.34-acre lot in February 2019, and began building the new spec mansion on the Boca Raton property, which overlooks the Gulf Stream waterway.

It was listed in November for $13.5 million. David Roberts with Royal Palm Properties was the listing agent, and Jonathan Postma of Coldwell Banker represented the buyer, according to Realtor.com.

In February, spec home developer Todd Michael Glaser and his partners sold a newly built luxury spec home in Palm Beach to Alexandra Murphy, a granddaughter of Vasilios Haseotes.

Earlier this month, retired tennis superstar Chris Evert sold her Boca Raton compound at 8563 Horseshoe Lane for nearly $4 million.

Write to Katherine Kallergis at kk@therealdeal.com

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6380 North Bay Road with Richard and Barbara Lane (Urdapilletta Real Estate, A Scott/Patrick McMullan/Getty)

6380 North Bay Road with Richard and Barbara Lane (Urdapilletta Real Estate, A Scott/Patrick McMullan/Getty)

UPDATED, July 30, 4:15 p.m.: A New York real estate honcho bought a waterfront home on Miami Beach’s North Bay Road for $9 million.

Richard and Barbara Lane bought the 6,314-square-foot house at 6380 North Bay Road for $1,425 per square foot, records show. Giro Investments, led by Nora Kohen and Alfredo Ghirardo of Coral Gables, sold the property.

Dolores Urdapilleta with Urdapilleta Real Estate, LLC had the listing, according to Realtor.com. Simone Weissman of The Nancy Batchelor Team at Berkshire Hathaway HomeServices EWM Realty represented the buyer.

The house was listed in January 2019 for $11.3 million, according to Realtor.com.

It last sold for $5.6 million in 2008, records show. The one-story house has four bedrooms and four-and-a-half baths.

Built in 1951, the remodeled home sits on a 27,013-square-foot lot and has 113 feet of water frontage. Amenities include a pool and cabana with a bathroom and kitchenette.

Richard Lane is chairman emeritus of New York-based real estate firm Olnick Organization and is also on the board of trustees for American Federation of the Arts, according to the organization’s website.

Olnick Organization owns thousands of rental apartments in the tri-state area. Family patriarch Robert Olnick founded the company in 1946 as a developer of housing in the Riverdale section of the Bronx. In 1952, the company built the 1,700-unit Lenox Terrace complex in Harlem.

North Bay Road is a popular destination for high-end home buyers. Earlier this month, David Deshe, co-founder and president of Vero Water, purchased a lot at 4350 North Bay Road for $8.5 million.

In March, the house at 5242 North Bay Road sold for $7 million. And in February, fashion executive and investor J. Christopher Burch paid $14 million for the mansion at 5050 North Bay Road.

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Boston Properties president Doug Linde and an Ann Taylor store (Getty)

Boston Properties president Doug Linde and an Ann Taylor store (Getty)

A Nasdaq-listed squatter?

Ann Taylor parent company Ascena Retail Group is among a handful of retailers that refuse to vacate stores after breaking their leases.

That’s causing some major headaches for landlord Boston Properties.

“As long as these tenants refuse to relinquish possession, we have no ability to re-let their space. And we are showing it as occupied and expiring,” Boston Properties president Doug Linde said on the company’s second-quarter earnings call Wednesday morning.

Linde said the REIT has about 700,000 square feet of retail in its portfolio where the stores are open, but the tenants refuse to pay rent or move out.

“Almost all of it is ‘open’ and those tenants are just not paying,” he said, calling it a frustrating situation. “We don’t have much that we can do other than start the legal process.”

Ascena Group, which also owns brands like Lane Bryant, filed for bankruptcy last week. Authentic Brands Group and its frequent landlord partners Simon Property Group and Brookfield are reportedly interested in buying the company.

Ann Taylor’s corporate offices are located at Boston Properties’ 7 Times Square. Ascena reportedly owes Boston Properties $8.8 million in rent.

Contact Rich Bockmann at rb@therealdeal.com or 908-415-5229

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Google CEO Sundar Pichai. Google’s work from home plans could have a big impact on office markets in major U.S. cities (Getty, Pixabay)

Google CEO Sundar Pichai. Google’s work from home plans could have a big impact on office markets in major U.S. cities (Getty, Pixabay)

In December 2018, Google CFO Ruth Porat announced plans for the search giant’s new 1.7 million-square-foot campus in Manhattan’s Hudson Square, a move that would allow the company to “more than double the number of Googlers in New York over the next 10 years.” It was the latest in a series of billion-dollar moves that had made Google one of the most consequential office tenants in core U.S. office markets, with a large presence in New York, Los Angeles, and Chicago.

Now, the company has announced plans to extend remote work until at least July 2021. The decision applies to nearly all 200,000 employees of Google parent Alphabet, and covers workers in most of the company’s major offices, including its Mountain View, California, headquarters and offices in the U.S., United Kingdom, India, Brazil and elsewhere.

Google’s decision could signal the reversal of the company’s 20-year quest for more office space in coastal cities it saw as hubs of talent. It could also portend the upheaval of office markets in metros across the globe, with some speculating that its competitors could soon follow suit.

 

This is a big deal since Google is a lot smarter than our government: The move will affect the vast majority of the roughly 200,000 full-time and contract employees across Google parent Alphabet, and is sure to pressure other technology giants https://t.co/v69DZ4V4tT via @WSJ

— Kara Swisher (@karaswisher) July 27, 2020

 

There will be a big ripple effect from the Google announcement extending WFH to July 2021. Other companies will match. WFH, or hybrid, is the new normal.

— Spencer Rascoff (@spencerrascoff) July 27, 2020

Since the turn of the century, the search engine titan has steadily expanded its footprint on both coasts in the United States, starting in Silicon Valley and then supersizing space commitments on the East Coast.

In December 1999, the company inked its first Manhattan lease at 1440 Broadway in Times Square. Google grew its footprint at that location to 170,000 square feet over the next several years. Later, it signed a pair of mammoth leases at RXR Realty and Youngwoo & Associates’ Pier 57 project, and in late 2018 announced it would bring 7,000 employees and invest $1 billion into a trio of properties totaling 1.7 million square feet in Hudson Square. All told, as of November 2018, Google occupied 3.35 million square feet and owned 4.7 million square feet in New York City, according to Yardi Matrix data.

In Los Angeles, Google joined a tech pilgrimage to “Silicon Beach,” leasing up to 100,000 square feet at the Frank Gehry-designed Binoculars Building in Venice in 2011. Five years later, the company tripled its LA footprint by leasing the entirety of a 319,000 square-foot former airplane hangar in Playa Vista known as the “Spruce Goose.”

That appetite for office space wasn’t strictly coastal. Google’s lease commitments in downtown Chicago total 1.3 million square feet, and its decision to move its midwest headquarters to the Fulton Market triggered a tidal wave of amenity-laden office development in the neighborhood.

The company’s real estate strategy has evolved away from leasing to ownership. Google bought 111 Eighth Avenue in the Meatpacking District for a record $1.8 billion in 2010, only to eclipse that deal eight years later by purchasing the Chelsea Market building for $2.4 billion. It is not clear how much space Google has taken up at its Eighth Avenue property, but one source said it could be as high as 800,000 square feet.

Those New York deals weren’t isolated events, but rather part of a series of acquisitions that grew Alphabet’s global real-estate portfolio to a valuation of $14.5 billion as of March 2018, according to Real Capital Analytics.

After Facebook, Twitter and Shopify announced remote-work plans, researchers and industry analysts published a flurry of reports and think pieces focused on what a corporate exodus could mean for major cities. The conclusions have been mixed, with some predicting urban demise and others urban resilience.

One survey from Redfin found that 61 percent of New York City residents would leave the city if they no longer had to commute to the office, citing the high cost of living as the chief reason for their departure. Before the coronavirus pandemic, 14 percent of survey respondents were working remotely most of the time. During the shutdowns, the share of those working from home shot up to 76 percent. In the San Francisco Bay area, that figure is 85 percent, though the transition to remote work has not been an entirely smooth one.

By contrast, a report from the Brookings Institution found that migration to downtowns nationwide has grown for decades, a trend that predates many tech companies’ move into major cities, and one that’s not likely to stop once they leave.

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Dan Gilbert (Getty, iStock)

Dan Gilbert (Getty, iStock)

Rocket Companies, the parent company of Quicken Loans and Rocket Mortgage, has set the bar for its upcoming initial public offering.

The mortgage giant is targeting a haul of $3.3 billion from its public offering of 150 million shares, Bloomberg reported. The IPO is slated to price on August 5, according to filings cited by the report.

Rocket filed for an IPO earlier this month, disclosing an annual profit over the past three years.

The company was founded by billionaire Dan Gilbert. Quicken Loans was one of the non-bank lenders that saw business take off in the wake of the 2008 financial crisis to fill the void in home lending left by banks. It’s since grown to become the largest retail mortgage lender in the U.S., a highly fragmented space where the five largest firms accounted for just 17 percent of all retail mortgages issued in 2019.

Though forbearances as of June 30 ticked up to 5.1 percent of the company’s serviced loans, mortgage activity has remained steady for Rocket Companies. The company reported $1.36 billion in total revenue in the first quarter, mostly from origination fees and selling the loans on the secondary market. It originated nearly $52 billion in residential mortgages in the first quarter and planned to do $75 billion in the second quarter.

Rocket Companies generated $79 million in profit in the first quarter, the company said in its S1.

[Bloomberg] — Erin Hudson

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