Real Estate News

Donald T. Bollinger and the Four Seasons New Orleans (Getty, Four Seasons)

Donald T. Bollinger and the Four Seasons New Orleans (Getty, Four Seasons)

The $13 million penthouse sale at the soon-to-open Four Seasons New Orleans Hotel and Private Residences is the priciest condo deal ever in the Big Easy.

Shipbuilder Donald T. Bollinger bought the 4,000-square-foot penthouse on the 30th floor of the revamped tower in Downtown, according to the Wall Street Journal.

Built in 1967, the 33-story building was designed by renowned architect Edward Durrell Stone, and opened as the city’s World Trade Center. Located on the Mississippi River, it sustained heavy damage during Hurricane Katrina in 2005 and sat largely vacant for several years.

The building was nearly demolished in 2010, but the city eventually chose the Four Seasons consortium to redevelop it in 2015. Work began two years later, and is set to be completed soon at a cost of $530 million, a spokesperson told the Journal. There will be 92 condos and 341 hotel rooms.

Bollinger’s new penthouse itself once served as the Plimsoll Club, a restaurant, lounge and event space that mostly hosted foreign dignitaries and business executives. The original fireplace was kept.

Interiors have been updated to a contemporary style with dark floorboards, white walls, and black accents on the floor-to-ceiling windows overlooking the city and the river.

Bollinger was formerly CEO of Bollinger Shipyards, a company his father founded in 1946. There is a Bollinger Shipyards facility just across the water from the Four Seasons tower. Donald T. Bollinger sold his stake in the company in 2014, but his name is still emblazoned on two drydocks nearby. [WSJ] — Dennis Lynch

The post Big sale in Big Easy: Four Seasons penthouse sale breaks record appeared first on The Real Deal South Florida.

Evan Spiegel and Miranda Kerr (Getty, iStock)

Evan Spiegel and Miranda Kerr (Getty, iStock)

A U.S. tech billionaire and his supermodel wife dropped $30 million on a French domicile.

Snapchat CEO Evan Spiegel and Miranda Kerr’s new home sits in the heart of Paris, just near the Seine river, according to the New York Post.

At over 10,000 square feet, the mansion has six bedrooms, five bathrooms, two dressing rooms, a library, music room, wine cellar and separate staff quarters. The property also comes with its own 10,000-square-foot private park and pool.

The couple purchased the property in May, but the news was not reported until this month.

Spiegel, 30, co-founded Snapchat with Bobby Murphy and Reggie Brown in 2011. By 25, Spiegel had become a billionaire, and his net worth was estimated to be $10.2 billion as of December 2020. French President Emmanuel Macron granted him citizenship in 2018.

Spiegel and Kerr married in 2017 and have two children. Kerr also has a child from her previous marriage to Orlando Bloom.

[NYP] — Danielle Balbi

The post Snapchat co-founder and supermodel wife snag $30M Paris manse appeared first on The Real Deal South Florida.

(iStock)

(iStock)

It could be a transformative year for Austin’s residential market.

A recent survey from Zillow and data from Redfin suggest that home prices could increase beyond the national average and outpace prices in top-tier metros, according to Inman.

Zillow’s quarterly survey on home price expectations found 84 percent of industry experts, economists, and investors believed that price increases in Austin would exceed the national average.

That consensus was the strongest about any city, either positive or negative.

Los Angeles, San Francisco and New York were on the other end of the spectrum. A majority of respondents believed home prices would rise slower in those three expensive cities than the national average.

Besides pandemic-induced slowdowns, that could be because prices in those markets are already among the highest in the nation, so there’s less room to grow. Prices have still hit record highs in L.A. this year, for example.

Austin topped the same Zillow survey last year and that consensus proved correct: The median list price in the metro area in December was up 23.6 percent year-over-year, more than in any of the 50 largest U.S. markets.

Demand from out-of-town shoppers is a factor. Around 43 percent of Redfin home searches in Austin in the fourth quarter were from out-of-towners.

A third of those queries came from San Francisco alone. Some of the Bay Area’s biggest businesspeople are moving to Austin and employees seem ready to follow.

High-tech industries have grown by 25 percent over the past five years in Austin, where about 16% of all jobs are in that sector. Oracle recently announced it was moving its headquarters there. PayPal, eBay, Microsoft, Facebook, Cirrus Logic, National Instruments, Hewlett Packard, Emerson, Dell, Samsung, ChemWest, InnoTech, Data Foundry and Orion Novotus already have offices in and around the city.

Home shoppers have expanded their searches overall — a record 30 percent of Redfin.com users were searching for homes in other metro areas, a 16 percent year-over-year increase. [Inman] — Dennis Lynch 

The post Austin home market seen as hottest of 2021 appeared first on The Real Deal South Florida.

Atria Senior Living promises vaccines to residents. (Getty, Atria)

Atria Senior Living promises vaccines to residents. (Getty, Atria)

 

As the pandemic drives down occupancy at senior living properties, a Long Island assisted living community is promising vaccines to residents who sign a lease by Jan. 26.

Atria Senior Living included the promise in marketing materials for its Atria Bay Shore property and also listed 60 vaccine clinics scheduled at its U.S. properties through February, according to Bloomberg.

Atria has also discounted move-in fees and offered free months of rent at many of its 150 U.S. properties to entice potential residents, some of whom may be hesitant to move in, given the risks of Covid-19 to the elderly.

Occupancy at senior living properties dropped to a record low of 80.7 percent in the fourth quarter, partly because of new inventory coming to the market, according to Senior Housing News.

A growing share of operators are dealing with low occupancy. Around 40 percent of operators have occupancy rates below the market average of 80 percent, up from 29 percent in the second quarter of 2020.

Still, the U.S. population is growing older and long-term demand for senior living properties is expected to remain strong. While the near-term picture is less than rosy, investors have remained active in the sector.

Investment sales and developments continue despite the pandemic, including many in Florida.

[Bloomberg] [Senior Housing News] — Dennis Lynch 

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The average price of a London home rose above 500,000 pounds, or roughly $685,000, for the first time. (Getty)

The average price of a London home rose above 500,000 pounds, or roughly $685,000, for the first time. (Getty)

London home prices just keep getting higher.

The average price of a home in the city rose nearly 10 percent between November 2019 and November 2020 to about 514,000 pounds, or just over $700,000, according to Bloomberg News. That figure is based on data from the British government.

There are a number of elements affecting values, including a surge in demand following lockdowns in the spring and a tax cut on home sales that can be worth as much as 15,000 pounds.

The luxury market in particular slowed immensely in the first half of 2020, with 68 percent fewer deals in the first six months of the year compared to the same period a year earlier. Pricing, however, stayed high.

While the gains recorded in November are good news for homeowners, it also means fewer people can likely afford to buy at all. The average home price in the city is twice that of the national average, according to the publication.

Even though some Londoners have purchased homes outside the metro area — a post-lockdown trend seen in many big cities — prices in inner London rose more sharply than outer boroughs.

The Office of National Statistics said that could be because buyers want to take advantage of tax cuts on pricey homes, as well as demand from investors.

Demand in inner London could remain high through the spring ahead of a property tax increase set to take effect in April. A sales tax deduction for overseas buyers recently expired and some retailers are concerned that could discourage foreign shoppers from coming to the U.K. [Bloomberg] — Dennis Lynch

The post London home prices hit new high appeared first on The Real Deal South Florida.

Atlantic City Mayor Marty Small supports Carl Icahn, who owns Trump Plaza Casino. (Getty, Marty Small via Instagram)

Atlantic City Mayor Marty Small supports Carl Icahn, who owns Trump Plaza Casino. (Getty, Marty Small via Instagram)

 

Carl Icahn is known to blow things up, but not literally. https://www.vanityfair.com/news/2020/05/carl-icahn-is-exiting-herbalife-and-making-a-killing

The activist investor is not interested in auctioning off the opportunity to demolish Atlantic City’s former Trump Plaza casino, which he owns.

The billionaire’s company has instructed Bodnar’s Auction to cancel the auction, calling it a “spectacle” and a safety risk, according to Bloomberg.

Icahn has agreed to raze the defunct and dilapidated casino, but a spokesperson said, “From the beginning, we thought the auction and any other related spectacle presented a safety risk, and we were always clear that we would not participate in any way.”

Atlantic City, backed by Mayor Marty Small, hatched the idea to put up for bidding the opportunity to detonate explosives that would take down the casino. Small hoped the auction would raise $1 million for the Boys and Girls Club of Atlantic City.

Icahn said he will donate $175,000 to the nonprofit club to replace the money that might have been raised by the auction.

Small praised Icahn’s pledge and said it “is very important that we maintain a positive relationship with Mr. Icahn because the next conversation we need to have is what should be developed there.”

The demolition was set to occur Jan. 29 but has been pushed back.

Donald Trump opened the Trump Plaza casino in 1984 and at one point owned two other casinos in the city. He had largely divested from them by 2009 and the Trump Plaza itself closed for good in 2014.

[Bloomberg]­ — Dennis Lynch 

The post Carl Icahn pulls plug on auction to demolish Trump casino appeared first on The Real Deal South Florida.

(iStock)

(iStock)

Residential sales continued to soar throughout South Florida in December, with median prices of both single-family homes and condos on the rise.

A boost in high-end sales, which has occurred throughout the pandemic, led to double-digit year-over-year increases in sales volume in the tri-county region, according to reports from the Miami Association of Realtors.

In Miami-Dade, Broward and Palm Beach counties, a record $5 billion worth of residential real estate sold in December.

The results continue the trends found in November, October and September.

Miami-Dade County

Residential sales rose by 23.3 percent, year-over-year, to 2,990 closings in Miami-Dade County. Single-family home sales increased by about 17 percent to 1,372, and condo sales jumped 29.4 percent to 1,618.

Sales volume totaled $704 million for single-family homes, up nearly 86 percent, and condo dollar volume increased 68 percent to $854 million, for a total of $1.6 billion.

Median single-family prices rose 20 percent to $455,000. Condo prices grew 12 percent to $274,500.

Broward

Residential sales jumped 26.5 percent, year-over-year, to 3,413 in Broward County. Single-family home sales rose by 24.5 percent to 1,645, while condo closings increased 28.5 percent to 1,768.

As a result, sales dollar volume surged, rising nearly 50 percent to $977 million for homes and up 48 percent for condos to $469 million.

Median single-family prices increased 13.2 percent to $430,000. Condo prices grew 11.1 percent to $200,000.

Palm Beach County

Residential sales totaled 3,079 closings in December, a 16.5 percent year-over-year increase for Palm Beach County. Single-family home sales continued to shine, rising nearly 26 percent annually to 1,784. Condo sales rose only 6 percent to 1,295.

Closed dollar volume increased 117 percent to a whopping $1.5 billion, and condo dollar volume jumped 14 percent to $499 million.

Single-family home prices increased 16.8 percent year-over-year to $425,000. Condo prices rose 21.1 percent to $230,000.

[contact-form-7]

The post South Florida hits record $5B in residential sales volume in December appeared first on The Real Deal South Florida.

Phil Gutman with Bess Freedman and Mark Zilbert (Linkedin, Freedman by Studio Scrivo)

Phil Gutman (right) with Mark Zilbert and Bess Freedman (Linkedin, Freedman by Studio Scrivo)

Phil Gutman stepped down as president of Brown Harris Stevens Miami and Mark Zilbert was named interim managing broker of the firm’s Miami Beach locations, The Real Deal has learned.

Gutman had been in that role at Brown Harris Stevens for nearly three years. He joined the company in 2017. He plans to return to new development sales and said he is considering multiple offers from other firms.

Gutman, who joined Brown Harris Stevens from Douglas Elliman, is also working with developers Ian Bruce Eichner and TSG Group on plans for a luxury condo tower in Brickell.

Zilbert will lead Brown Harris Stevens’ two Miami Beach offices with about 80 agents. He joined when he sold his company, Zilbert International Realty, to Brown Harris Stevens in 2015, marking Brown Harris Stevens’ expansion to the Miami area. It also operates in Palm Beach County. Bess Freedman, CEO of New York-based Brown Harris Stevens, will continue to oversee the South Florida region while they find a permanent replacement for Gutman.

Zilbert said it “just made sense on an interim basis for me to jump back in the saddle again,” as someone who led his own brokerage before it was acquired about six years ago.

Gutman said he parted ways with Brown Harris Stevens on good terms, and Brown Harris Stevens wished him well in a statement. While at the brokerage, he launched a sports and entertainment division led by Seth Cohen, a professional sports agent. Brown Harris Stevens now has four offices and more than 200 agents in Miami-Dade County, according to a press release.

Jeff Miller, a top producer at Brown Harris Stevens, left earlier this year for One Sotheby’s International Realty. Miller had his license with Zilbert since the start of his real estate career in 2006, and joined Brown Harris Stevens as a result of the Zilbert acquisition.

[contact-form-7]

The post Phil Gutman leaves Brown Harris Stevens Miami appeared first on The Real Deal South Florida.

David Schwartz

Homes aren’t just homes anymore.

During Covid, they’ve become offices, schools, gyms, places of worship and date spots, combining shelter, work and social fulfillment in a way that hasn’t been seen in decades. So if owning hundreds of apartments was an emotional and political minefield prior to the pandemic, you can imagine what David Schwartz is dealing with now.

Schwartz is the chair of  the National Multifamily Housing Council, the most influential national trade group for large multifamily landlords. The NMHC has been in the thick of the battle against the national rent control movement and is a key industry voice in Washington. Schwartz is also the CEO and co-founder of Waterton, a Chicago-based multifamily investor launched in 1995 that has $6 billion in assets under management and is finalizing a $1.25 billion investment fund, its largest ever.

The Real Deal caught up with Schwartz to discuss his organization’s latest efforts to counter the rent control movement, its strategy around securing federal assistance for landlords at a time when renters may be as much as $70 billion behind on payments, and his plans for Waterton.

This interview has been condensed and edited for clarity.

The mandate going into the NMHC role was probably dramatically different from what you’re looking at now. What did you expect when you took this on?

It’s funny. I talked about disruption on a lot of different levels: regulatory disruption [and how] our industry happens to get picked on by government; technological disruption; climate change disruption. I didn’t talk about biological disruption, so that was a surprise.

We had been hit head on with all of the above. The inability for our residents to pay rent came very fast because unemployment hit so quickly and so dramatically when the shutdowns began in March. Our first line of attack is: What is the right thing to do with the households that live in our communities? We represent the largest owners and operators in the United States. What is our messaging for them? We were expecting a lot of our residents to be unable to pay rent. What do we tell them?

What we came up with was: We’re not going to put anyone in the street. We want to keep people in their homes. It’s critical, with the home turned into an office and school.

That strategy works when there is an end line in sight. One of the challenges your industry has faced is that things have gone on for longer than we expected. Some say the true pain in multifamily hasn’t even been quite felt yet.

Government has to get involved and support people so they can stay in their homes. We can’t put that on the backs of the landlords, the owners of America, and that’s what’s happened. There are eviction moratoriums and local moratoriums, statewide moratoriums, national moratoriums. Ultimately, that falls on the backs of the owners of these properties who still have to pay bills. They still have property taxes — no one’s waiving the property tax. They still have employees and maintenance that is critical.

We’ve spent the last eight or nine months saying to Congress that we need emergency renters’ assistance. We got $25 billion of it.

We’ve heard estimates [for rent shortfalls] as high as $70 billion. That’s quite a significant gap.

We don’t know the true number — $25 billion is for sure a start. We’ll need more stimulus checks, we’ll need more continued enhanced unemployment. These are all tools that provide households essential shelter, which is our business.

How willing are lenders to work with you at the moment?

As a food group within real estate, we’re not as impacted [as the lodging industry or regional malls] as far as forbearance and working with our lenders goes. The banks have bigger fish to fry right now with their hotel loans and other delinquent real estate classes.

I would expect there could be problems with construction loans as they mature, particularly in some of the hard-hit urban areas.

Stepping away from the pandemic, you’ve talked about rent control as something that could derail the industry’s plan to provide more housing. How have you countered that movement?

It certainly hasn’t gone away. We saw it on the ballot in California [Proposition 21]. And there are other states that have various risk levels of rent control being put on the legislative agenda. You’d think the heat on rent control would be going away because these less affordable markets are seeing massive rent decline. So the natural market forces are working quite well. A lot of that is due to supply that had been built before the pandemic and is entering the market in a very low-demand environment.

Is it just about supply and demand, or is it also about political momentum and rhetoric?

There is kind of a progressive social justice side to it all. But I think we can’t ignore the housing affordability problem. People should not be spending 50 percent of their income on housing, and that’s what’s happening in these expensive markets.

So we do need to attack the housing affordability problem. Rent control is a methodology to do that. It’s great for politicians because it doesn’t cost the taxpayer anything. It’s a good story, but there is no economist that we know of who thinks it’s a good idea. The cities where we have rent control, whether it’s New York or San Francisco, have the most expensive housing in the country.

Are you taking these advocates head on?

There’s a defense approach: That’s helping our members raise money and paid media campaigns to deal with the statewide ballot initiative, which is extremely expensive. We’ve had to do that in Illinois and deal with legislative initiatives. We’ve had to do it in Colorado, Oregon. So that’s the defense, it’s reactionary.

The offense is more important. That’s figuring out how to create more affordable housing options in markets across the country, and working with the legislature and state and local folks on solutions. We can’t just magically build real cheap housing that people can afford. And so we try to offer solutions. We continue to push for more Section 8 vouchers, real basic things to make housing more affordable.

We were successful in helping the Section 42 tax credit [for affordable housing development] in the stimulus bill. We got that 4 percent credit fixed in there, which is pretty critical. Our industry is extremely responsive to financial incentives. So if you remove property tax from the equation, we’ll do a lot of things for affordability.

What are you most optimistic about with the shift from the Trump administration to the Biden administration? What are you less thrilled about?

The Trump administration [had] really been trying to get Fannie and Freddie out of conservatorship and make them stand on their own. We think the Biden administration will likely reverse that course. They will behave more like the agencies did under the Obama administration. The affordability will be a bigger part of that mission. And so that’s probably good for our industry, and it’ll keep the financing affordable.

The Biden housing plan is kind of mixed, but rental housing is a big priority for them and so that’s good. There are proposals such as renter tax credits that we’re not asking for. It’s all baked into their tax reform proposal, which is obviously negative to the real estate industry in general. 

One of the most dramatic pandemic-driven changes to me is the ability for talent to disperse. What opportunities have opened up, particularly in Tier 2 and Tier 3 cities?

We’re not jumping into the theory that all the employees who worked at JPMorgan in Midtown Manhattan now are going to move to Lake Placid or the Adirondacks and change their lifestyle and work remotely. This pandemic has for sure benefited suburban Sunbelt areas. We think that some of that is permanent; some is temporary. Our in-house view at Waterton is that the urban areas will come back, that people will come back to work. The majority of the time, we’ll still be coming to the office.

And then the nightlife and other elements of urban living, we think, will come roaring back. There will probably be quite a bit of pent-up demand for it.

Source: NMHC (Click to enlarge)

I know you’re in the process of finalizing Fund 14 — my Latin numerals aren’t very good — a $1.25 billion fund, [Waterton’s] largest. What are you looking to target?

Even in a healthy market like Atlanta, your growth is still lackluster because we’re in a recession, we’re not creating a ton of jobs. We’re recovering. Across the U.S., we’re going to be at these trough levels of net operating income. We’ve already acquired some assets, a small portfolio in Hawaii and Honolulu. It’s a little bit of a contrarian play, but it’s the ultimate barrier-to-entry market — very high unemployment. We think this pandemic will slow down the supply pipelines across the country to varying degrees.

Were you always ready to take on the political challenges of the business? I know you worked with Sam Zell, so there’s probably scrap in you somewhere.

The great thing about the apartment business is people always need a place to live and you can always fill an apartment. That’s really the foundation of investing in this. I don’t think that goes away. Yes, you have political risk, and that’s probably more significant than I’ve seen in my career. These are people’s homes, and we just can’t forget that. If that’s not in your culture as a business, you’re probably not in the right business. And you certainly see owners who really ignore that.

That’s not the case with us. Our mission is one, to provide a great place to live. Two, to provide a great place to work. And then the third part of our mission is to provide great results to our investors, which happens automatically if you do the first two things.

Right now you can do one and two perfectly, but you may not get three for a while. And that’s why I think it’s a fascinating time to talk with you.

Yeah. But this is a year in time, and maybe it’s 18 months in time. It’s a blip. The great financial crisis, we had an 18-month blip. That was pretty rough. I think this one is still a relatively short blip. We’ll come out of it with all sorts of lingering progressive issues we’ll have to deal with. I think our industry needs to do a better job communicating to the media. On evictions, if you look at the real statistics, an infinitesimal percentage of residents at professionally managed apartment communities get evicted. But if you read [Matthew] Desmond’s book “Evicted,” you’d think everyone’s getting evicted. It’s just not true.

The NMHC rent tracker  [which looks at 12 million units nationally to analyze rent collections] has gotten a lot of attention.

The tracker is pretty historic in our industry because we got the big property software companies — Yardi, RealPage, etc. — to contribute their data and work together. In March, we feared the worst, we feared Armageddon. The conclusion over eight months is we’re 2 percentage points on average off of what it would have been in 2019 in those same months. So, Armageddon did not happen.

Is that taking into account partial rent as well?

There is some nuance with that. But what I would tell you is it’s not meaningful in the overall numbers. If I’m collecting 2 percent less rent, that’s meaningful to our P&L. But it’s not Armageddon, it’s reasonable in this type of environment. And it proved that most households stepped up and were able to pay — they use their government assistance, they use the enhanced unemployment, maybe they use stimulus checks.

We as owners and operators had to step up. We had more trash to collect. We had hygiene protocols at a higher level than ever. Our employees are frontline workers. One of the other things we did is make sure they were treated like frontline workers and could go to work every day because it was pretty necessary, and the government and CDC agreed with that.

The rent-tracking numbers have sometimes been used against you.

There were some people in Congress who said, “You’re not hurt by this.” Or, “Hey, this eviction moratorium isn’t hurting you. Because the rent tracker says you’re collecting 97 percent.” But the 12 million units it tracks are generally professionally managed. If you dissect the data, you can see certain geographies are hurt much worse than others. An example would be Southern California, because L.A. County has probably the worst moratorium in the country. Basically gives residents a year to pay their rent with no penalty or no late fees. You can’t report to the credit bureaus, and so people take advantage of that. So you have very poor collection data in certain parts of the country. You take the smaller landlords, they’re more impacted for various reasons.

You made an interesting point about needing to be better at telling your story. There’s been some arrogance on the part of the real estate industry that’s now come back to bite them.

Look, we’re an essential business. When you look at the grocery stores, no one was ever suggesting, “Hey, look, if you don’t have the money, when you’re at checkout, just take the groceries, you don’t have to pay it.” That’s kind of what they’re saying to our industry. We have to do a better job articulating that the vast majority of the rent goes to pay critical expenses like property tax and extermination and cleaning. It doesn’t all go to the owner’s pocket. There’s this misconception, and we’ve had great difficulty in conveying that.

Rent control is a tough one. Because, in a sound bite, it’s hard to explain to people who don’t understand why that’s a bad policy, why it’s actually destructive to housing. And so, we’ve tried to do different things. There are great ads that were produced in the Prop 21 fight about the impact to all sorts of people when you implement rent regulation, including minorities, low-income families and households and unions. All the people who you’d think would support it, it actually impacts them. It impacts jobs, it impacts wages, it impacts the quality of the housing, maintenance and so on. So we have to continue to tell that story

Georgia Kromrei contributed reporting.

The post NMHC chair David Schwartz on rent control fights and multifamily’s mission appeared first on The Real Deal South Florida.

Bank OZK CEO George Gleason (Photos via Bank OZK; iStock)

Bank OZK CEO George Gleason (Photos via Bank OZK; iStock)

One of the nation’s most active construction lenders ended 2020 on a high note following an overall miserable year for the real estate industry.

Bank OZK reported net income of $120.5 million in the fourth quarter, a 19.5 percent increase from the $100.8 million a year ago, marking its second highest quarterly profit in company history. The Arkansas-based bank also reported another quarter of almost no write-downs on its real estate loans.

It deferred a total of $1.1 billion in loans as of December, but about $980 million of those deferrals expired.

At its earnings call on Friday, bank executives said they are seeing fewer opportunities in New York City, the pandemic has led some residents to seek more space and less dense areas, including places in the south.

“It is hard to find things that make sense there [New York],” said CEO George Gleason. Though Bank OZK had been one of the largest construction lenders in New York, Miami and Los Angeles, following a down Q2, one executive said the company was “more on the cautious side in the more dense urban settings.

But the Q4 rise in net income is the second straight quarter of positive news following two quarters are massive losses. The bank said first half losses were caused by the sudden and severe economic downturn fueled by the coronavirus, and the implementation of a bank accounting method used to calculate Bank OZK’s allowance for credit losses.

For the full year, Bank OZK reported net income of $291.9 million, a 31.5 percent drop from the $425.9 million it reported in 2019, the company reported.

In the final quarter, Bank OZK — which has $27 billion in assets — increased its real estate loan originations. Its real estate lending arm, Real Estate Specialties Group, originated $1.77 billion in loans in Q4, a 23 percent rise from $1.44 billion in 2019. In comments accompanying the bank’s earnings release Thursday, Gleason called the fourth quarter a “strong finish to a challenging year.”

The bank said payments on its real estate loans remained high from October through December.

On Friday’s call, the company highlighted one New York project that it said ran into trouble.

Bank OZK sold off a $50 million loan it provided to Reading International in early 2017 for a project to expand the 70,000-square-foot Union Square Theatre in Manhattan. According to a recent filing Reading made with the Securities and Exchange Commission, the borrower drew down $40.8 million of the loan. Bank OZK had extended the maturity of the loan and increased the interest rate to 17.5 percent.

“It was a transaction that we were just not pleased with the progress on,” Gleason said during the call with analysts. He said the bank didn’t lose any money on the loan. “We didn’t leave a penny on the table.”

Brannon Hamblen, chief operating officer and head of its real estate lending arm, said the bank has recently provided loans to life sciences projects, and is seeing more opportunities in multifamily across the country; he mentioned that strategy earlier in the year as well.

Hamblen said multifamily “has probably the highest number of developments and, in addition, competition pursuing those developments.” He added, “We are probably going to continue to see strong origination there, but we are being careful to make sure it’s at the right time to the right place to the right people.”

Bank OZK, formerly known as Bank of the Ozarks, is known for underwriting large construction loans to condo projects. It has come under scrutiny from short sellers and some banking experts who say it is taking on too much risk. Bank OZK also shed its holding company, which allowed it to stop filing quarterly and annual reports with the SEC, and removed its oversight by the Federal Reserve.

The bank has long claimed it only works with the best sponsors at low leverage points. It also says it is the sole-secured lender on its projects, meaning if something goes wrong Bank OZK is the first to get paid back.

Bank OZK’s stock rose nearly 5 percent to $35.96 at the closing bell on Friday.

[contact-form-7]

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Make-A-Wish South Florida CEO Norman Wedderburn and 350 Northwest Sixth Street (Getty, Google Maps)

Make-A-Wish South Florida CEO Norman Wedderburn and 350 Northwest Sixth Street (Getty, Google Maps)

The South Florida branch of nonprofit Make-A-Wish paid about $8 million for 1.6 acres of land in Miami’s Overtown neighborhood.

Make-A-Wish bought the land at 350 Northwest Sixth Street, according to a press release. The nonprofit plans to build the 30,000-square-foot Finker-Frenkel House for administrative offices, donor events and volunteer work associated with the sick children the organization serves.

Construction on the building, which will be inside an Opportunity Zone, should be completed by September 2022, according to the release.

Danielle Gonzalez of Greenberg Traurig led the team of nearly a dozen attorneys who worked on the project. NAI Miami represented the buyer. Miami-based Arquitectonica is the designer. Lawrence Stockton and Jeff Resnick represented the sellers, Yul Laviv and Tom Post.

This will be the first permanent headquarters location for Make-A-Wish Southern Florida, which has rented office space in Hollywood and Davie. The local branch is led by Norman Wedderburn.

Other proposed projects in Overtown include a multifamily or mixed-use development at 690 Northwest 13th Street, and a 578-unit mixed-use project anchored by a Target at 249 Northwest Sixth Street.

[contact-form-7]

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Sales of Existing US Homes Hit 14-Year High in 2020

(Illustration by The Real Deal)

Despite the global pandemic, or perhaps because of it, home sales clocked their best year since 2006.

The annual pace of existing home sales in December increased to 6.76 million, seasonally adjusted, up 0.7 percent from November and 22 percent year-over-year, according to the National Association of Realtors’ monthly report.

It was a strong finish to a year that saw 5.64 million existing homes change hands, up 5.6 percent from 2019 to the highest level since 2006. Residential construction also posted the busiest year since 2006, though homebuilder confidence has begun to wane over the past two months despite record low levels of housing inventory.

The supply of existing homes for sale hit another historic low with 1.07 million units on the market. At the current sales pace, those homes will be sold within 1.9 months. Seventy percent of homes sold in December were listed for less than a month.

The median home price closed the year at $309,800, up nearly 13 percent from a year earlier, and marking the 106th month of consecutive price increases.

“The tight resale market has been good for the new home market, which like the resale market is also benefiting from demographic shifts and low mortgage interest rates,” said RCLCO Real Estate Advisors’ Gregg Logan. “For many home buyers the pandemic has created economic and lifestyle changes that have influenced people to make moves.”

Lawrence Yun, NAR’s chief economist said he expects December’s momentum will carry into 2021, despite mortgage rates creeping up.

“Although mortgage rates are projected to increase, they will continue to hover near record lows at around 3%,” Yun predicted. “Expect economic conditions to improve with additional stimulus forthcoming and vaccine distribution already underway.”

Other experts are expressing concern that demand will ebb if prices continue to rise.

Joel Kan, head of industry forecasting at the Mortgage Bankers Association, noted in a statement Friday that “disproportionate” growth in higher tiers of the housing market could slow demand.

“More acute affordability challenges will emerge if inventory stays this tight and home-price growth continues to accelerate.” Kan said. “This in turn would be especially challenging for first-time homebuyers, who make up a third of all home sales.”

Similar concerns were expressed more broadly last year as lenders tightened borrowing criteria, locking non-affluent buyers out of the market.

There have been some indications of homebuyers pulling back. Pending home sales, an indicator of future sales, dropped month-over-month in September, October and November. Existing sales fell in November, the first time since June that sales didn’t grow month-over-month. But sales were still up nearly 26 percent compared to November 2019.

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Matthew Whitman Lazenby and Bal Harbour Shops

Matthew Whitman Lazenby and Bal Harbour Shops

A looming special election tied to easing height restrictions for the Bal Harbour Shops would give the luxury shopping center’s owners the flexibility to possibly add a mid-to-high rise building in the future. But some prominent residents fear Whitman Family Development wants to bypass the village’s voters in seeking approval for a skyscraper more than 290 feet tall.

As of Thursday morning, 391 mail-in ballots had been turned into the Miami-Dade elections department for the special election that will be held Tuesday. Voters, who will also be allowed to cast ballots in-person on election day, will decide whether to amend the Bal Harbour village charter and allow height increases above five stories in the special business improvement area, which encompasses the Bal Harbour Shops at 9700 Collins Avenue. Currently, the village charter prohibits structures above five stories from being built anywhere in Bal Harbour.

Whitman Family Development, which owns Bal Harbour Shops, is pushing in favor of a yes vote on the referendum, through a political action committee called The Future of Bal Harbour. Matthew Whitman Lazenby, owner and manager general of Whitman Family Development, said the charter amendment would create a process requiring public hearings and approval from the village council for any potential new development that affects height limits in the business district.

As the nearly $500 million renovation of the Bal Harbour Shops moves forward, the severe impact of the Covid-19 pandemic on brick-and-mortar retail caused Whitman Family Development to consider ways the company can adapt and remain a viable, local business, Lazenby said in a written response to emailed questions.

Last summer, Future of Bal Harbour got 253 residents to sign a citizens’ petition to hold a referendum on the height increase proposal. The petition was certified on July 24 by the village clerk after the Miami-Dade elections supervisor verified 195 signatures on the petition were from qualified Bal Harbour voters. The threshold for certification is 185 verified signatures representing 10 percent of the village’s 1,855 voters.

“The Shops wants to continue to deliver a superior shopping environment to its patrons and a world-class downtown for the village’s residents, and it strongly believes that the current height limit prohibits its ability to respond to the rapidly changing needs of consumers and residents,” Lazenby said.

Yet, the Bal Harbour Civic Association opposes the referendum. The influential homeowners group claims a yes vote would take the power away from residents to decide height increases for Bal Harbour Shops. Instead, the village’s elected officials would have control.

In a Jan. 13 mass email to village homeowners, the association warned voters not to “be fooled by the calls, texts and glossy mailers you’ve received from the Future of Bal Harbour committee.”

“A yes vote means that three elected officials — here today and gone tomorrow — will decide the future of Bal Harbour,” the email states. “The Shops attempted to build a high-rise hotel on their property in 2006. At that time, voters overwhelmingly passed a charter amendment that froze the zoning limits on building heights in Bal Harbour and stopped the planned hotel.”

The association’s email claimed that a yes vote would allow Whitman Family Development permission to possibly develop a 27-story hotel or office building. “A no vote will stop the development project in its tracks,” the email states. “The Shops has not even presented its proposed project for the public to examine and review before this special election.”

Bal Harbour Civic Association board member Mark B. Fisher told The Real Deal that the association feels Whitman Family Development’s best route is to present a project to the residents and let them vote yea or nay on the project.

“Bring a plan so that the entire community can see exactly what the Shops proposes just like most developers would do,” Fisher said. “According to the city, this can be brought as a referendum as opposed to the community ceding control to the council without even knowing what the plan entails.”

Fisher said the association “absolutely wants” Bal Harbour Shops to succeed. “It is in everyone’s best interest because a prosperous Shops [means] a prosperous community,” Fisher said. “On the other hand, in 2006, residents voted to have the final say on height. Why would the community approve a variance to give it back to the council without even knowing what the plan is?”

Lazenby denied his company is contemplating a 27-story high-rise project. “This claim is false,” he said. “Bal Harbour Shops has no intention of building a 27-floor tower and the charter amendment says nothing about allowing 27 stories.”

The luxury retail center owner also insisted the referendum, if approved, would give residents the opportunity to object to any height increase requests. “The current charter prohibition on height is absolute,” Lazenby said. “It forbids any and all plans for buildings that might exceed three stories and expressly does not provide for a vote of the residents to consider plans.”

The post Special election could pave way for height increase at Bal Harbour Shops appeared first on The Real Deal South Florida.

The Standard hotel in West Hollywood (Getty, iStock)

The Standard hotel in West Hollywood (Getty, iStock)

The trendy Standard hotel in West Hollywood will close on Friday after 22 years in business, seemingly done in by higher rent prices and the battering effects of the coronavirus on the industry.

A spokesperson for the chain said the leaseholder, Ferrado Group, raised the rent in 2019, rendering it “unsustainable to operate the hotel,” according to the Los Angeles Times. The 139-key property is located at 8300 Sunset Boulevard. On its website, the company also announced the closure, calling the West Hollywood location “the birthplace of the Standard’s culture.”

It was the first hotel that Andre Balazs opened under the brand. Stars including Leonardo DiCaprio, Cameron Diaz, and Benicio del Toro were among its first financial backers. There are now six Standard hotels under the brand, including one in Downtown L.A., two in New York and one in Miami Beach.

The pandemic has dealt a crushing blow to the hospitality industry across the U.S. and around the world, with Los Angeles hotels and resorts continuing to feel the sting.

The Standard is the second high-profile luxury hotel in L.A. to shutter in recent months. In the fall, the Luxe Rodeo Drive closed. As of late September, about 60 hotels in L.A. and Orange counties were more than 30 days behind on their mortgages.

Hotel transactions in L.A. also dried up last year. The number of hotel investment sales plummeted from 50 in 2019 to just 23 in 2020. The pace of sales could pick up this year, depending on the discounts available to investors, experts say.

As for Balazs, he stepped down as chairman of the Standard International brand in 2017. But he hasn’t quit L.A. For his latest venture, Balazs plans to convert hotels into private clubs, starting with the historic Chateau Marmont only a few blocks away from the Standard. [LAT] — Dennis Lynch 

The post Rent and Covid force Standard hotel in WeHo to close appeared first on The Real Deal South Florida.

Peter Thiel with 445 to 441 East Rivo Alto Drive (Getty)

Peter Thiel with 445 to 441 East Rivo Alto Drive (Getty)

PayPal co-founder Peter Thiel was revealed as the buyer of two waterfront adjacent Miami Beach mansions that sold in September for $18 million.

Thiel, the German-American billionaire entrepreneur and venture capitalist, acquired Jacques Nasser’s double-home at 445 to 441 East Rivo Alto Drive on the Venetian Islands. Business Insider first reported the buyer’s identity, which a source confirmed to The Real Deal.

Thiel is a co-founder of San Francisco-based venture capital firm Founders Fund, which has a presence in the Miami area. Thiel incorporated Founders Fund Miami in December, according to state records. He also invested in Facebook and co-founded Palantir Technologies. Forbes pegs his net worth at about $5.9 billion.

Nasser, a Lebanese-American business executive and philanthropist who led Ford Motor Company as president and CEO, put the Miami Beach property up for sale asking nearly $20 million in July.

The property includes two houses, each with a pool, with a total of nine bedrooms, seven bathrooms and one half-bath. Nasser paid $5 million for the 0.6-acre property in 2005. The homes were originally built in 1947 and 1956, records show.

Dora Puig of Luxe Living Realty was the listing agent in the latest deal, and Douglas Kinsley of Fortune International Realty represented the buyer.

Thiel is one of the biggest tech names to plunk down cash for a waterfront Miami Beach home in recent months, as more venture capital and tech executives move to South Florida. In December, Keith Rabois, a member of the “PayPal Mafia” and a general partner at Founders Fund, paid nearly $29 million for a mansion, also on the Venetian Islands.

In October, Jon Oringer, the billionaire businessman who founded the stock media company Shutterstock, paid $42 million for a waterfront mansion on North Bay Road.

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Book on Suburbs Offers Ideas to Retrofit Them

(Illustration by The Real Deal)

 

Donald Trump vowed to protect the suburbs from low-income housing, but more Americans in poverty live in the suburbs than in urban areas, note authors June Williamson and Ellen Dunham-Jones.

Their new book challenges popular notions about who lives in the suburbs and offers ideas for reshaping them, Vice reported.

In “Case Studies in Retrofitting Suburbia: Urban Design Strategies for Urgent Challenges,” the authors document 32 examples of redesigning the suburbs to respond to their new demographics and the preferences of those who live there.

One is repurposing parking spaces. The U.S. has nearly two spots per person, but in some places there are many more — 19 in Des Moines and 27 in Jackson, Wyoming, for example. Dunham-Jones observed dryly that the country has “a right to park as opposed to a right to housing.”

“Cars have much more protection than people do,” she told Vice in an interview.

Other suburban spaces — or suburb-like spaces in urban areas — could be retrofitted, too. In Fort Worth’s Grand Plaza, sprawling multi-story department stores have given way to a Latino mall, a hive of small businesses reminiscent of the mercados of Mexico. The mall’s central atrium hosts events including Mexican wrestling.

Repurposing suburbs is a response to shifts in the way people work and prefer to live. Jobs are no longer concentrated in urban downtowns. The desire for privacy and space to park has given way to an interest in public space, community activities and walkability.

Repurposing the suburbs is an opportunity to promote social equity and affordability, Dunham-Jones and Williamson argue. Empty strip malls could be converted to supportive housing, or housing for the elderly, in a way that would not keep car-less seniors stranded.

[Vice] — Georgia Kromrei

The post How builders are changing America’s suburbs to fit the times appeared first on The Real Deal South Florida.

Sylvester Stallone and his Beverly Hills estate (Getty, Google Maps)

Sylvester Stallone and his Beverly Park estate (Getty, Google Maps)

Sylvester Stallone is looking for a blockbuster in Beverly Park.

The “Rocky” and “Rambo” actor has listed his 21,000-square-foot mansion for $130 million, according to the website Dirt. Revel Real Estate founder Ben Bacal announced the news on Instagram.

Stallone bought the 3.5-acre property in the late 1990s and built the sprawling home in a Mediterranean-style. The annual property taxes on the eight-bedroom, 12-bathroom estate reportedly total $125,000.

The listing wasn’t on Redfin or Zillow as of Friday. The only home that is publicly listed for more in L.A. is Villa Firenze, also in Beverly Park. That estate was set to hit the auction block in November but it remains on the market for $160 million.

Stallone’s library is reportedly packed with memorabilia from the “Rocky” franchise, which walloped the actor to fame. There is also a life-size Rocky statue in the house. It’s not clear whether those items would be included in a sale.

There is a large swimming pool and stone terrace connecting it to the house.

Stallone and his wife, Jennifer Flavin, may be headed off to the East Coast, or perhaps they are there already. About a month ago, they bought a home in Palm Beach, Florida. It’s about half the size of the Beverly Park mansion and cost them $35 million. [Dirt] — Dennis Lynch 

The post Weighing in at $130M: Sly Stallone lists massive mansion appeared first on The Real Deal South Florida.

Phillips Point office towers with Related’s Stephen Ross (JLL, Getty)

Phillips Point office towers with Related’s Stephen Ross (JLL, Getty)

The Related Companies closed on its $282 million purchase of the Phillips Point office towers in West Palm Beach, marking the largest office sale in South Florida in more than a year.

Property records show an AEW Capital Management affiliate sold the 448,914-square-foot office complex at 777 South Flagler Drive and 201 Lakeview Avenue to Realted’s 777 South Flagler Associates for $281.9 million. The purchase, which equates to $628 per square foot, was announced earlier this month.

The Related affiliate financed the acquisition with a $198.5 million loan from Goldman Sachs.

Records show AEW paid $246 million for the two towers in 2015. They sit on more than 4 acres overlooking Palm Beach island.

JLL brokers Hermen Rodriguez, Ike Ojala and Matt McCormack represented AEW Capital in the latest deal.

Phillips Point is about 90 percent occupied, with Morgan Stanley, Gunster, and Akerman among the tenants.

The sale comes as more financial and tech firms announce they are opening offices in South Florida. Goldman Sachs, which has a small office at Phillips Point, is considering moving its asset management division to South Florida, and reportedly has looked at spaces in Palm Beach County.

New York-based Related Companies, led by Miami Dolphins owner Stephen Ross, has been active in West Palm Beach.

Last year, the company secured a $140 million loan from MSD Capital to finish building its 20-story 360 Rosemary office tower in downtown West Palm, where tenants will include Elliott Management, the hedge fund founded by Paul Singer. Related redeveloped CityPlace into Rosemary Square, and plans to build another office tower across from Phillips Point called One Flagler.

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Beny Steinmetz (Getty)

Beny Steinmetz (Getty)

 

A Geneva court has found Israeli billionaire Beny Steinmetz guilty of corruption.

Steinmetz, who is reported to be a silent backer of New York real estate, was sentenced to five years in jail for paying bribes to a Guinean public official in order to secure rights to an iron-ore mine.

The official, Mamadie Toure, is the wife of Guinea’s late former president, Lansana Conté. Steinmetz’s lawyer denied the tycoon had been involved in any payment, according to Bloomberg News.

“The fact that Steinmetz wasn’t aware of all details doesn’t change a thing,” the judge said. “Steinmetz had his hand on the payments and was able to oversee the bribery process.”

Steinmetz reportedly described the ruling as a “big injustice.” His lawyer said they would appeal.

Last month, Steinmetz was sentenced to five years in a separate case in Romania. In that case, the court found Steinmetz and his partner Tal Silberstein, a media consultant, had collaborated with a Romanian businessman and the grandson of the country’s former king in an attempt to defraud the state.

Steinmetz, who made his fortune in the diamond trade, is also reportedly a silent real estate investor, according to sources. In the past he has been tied to the Chrysler Building and HFZ Capital Group, though the latter “vigorously” denied his involvement in its Chelsea project, the XI.

[Bloomberg News] — Sylvia Varnham O’Regan

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Saeed Amidi and Moishe Mana (Getty, iStock)

Saeed Amidi and Moishe Mana (Getty, iStock)

Silicon Valley investor Plug and Play is plugging into South Florida.

The early stage investor and accelerator, which invested in Google, PayPal, Dropbox and other major tech firms, plans to open an office in downtown Miami’s Flagler district, according to a press release from Moishe Mana’s Mana Common.

Sunnyvale, California-based Plug and Play, which has offices in Paris, Tokyo, Chicago, São Paulo, Shanghai and other cities, will host two events a year in downtown Miami, with the first on Feb. 16 that will also be available virtually. A spokesperson for Mana Common said the square footage and specific space has not yet been determined.

Saeed Amidi, founder and CEO of Plug and Play, said in the press release that it plans to work with Mana Tech to find founding partners to help develop the tech community in Miami.

Mana has big plans for his downtown Miami portfolio, and is the largest private landowner in the Flagler district with nearly $375 million worth of properties totaling over 1.3 million square feet of buildings. His goal is to make Miami a thriving startup and tech hub like his hometown of Tel Aviv.

A number of Silicon Valley investors have flocked to Miami in recent months, advancing a decade-long effort to build up South Florida’s tech scene. Miami Mayor Suarez has recently made a big push to attract venture capital investors, tech giants and startups.

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The median existing-home price exceeded $300,000 for the first time last year (iStock)

The median existing-home price exceeded $300,000 for the first time last year (iStock)

Homeowners aren’t budging, and it’s driving the supply of houses down — and existing-home prices up.

One in four homeowners has not moved in 20 years, the Wall Street Journal reported. The analysis, conducted by real estate brokerage Redfin, found that homeowner tenure has been climbing steadily since 2005, when only 8.6 percent of homeowners had been in their homes for 20 years.

Home sales in 2020 swelled to their highest level in 14 years as newly remote workers searched for more space for their families and home offices. In turn, the availability of homes has dwindled to a record low, with just a 2.3-month supply at the end of November.

Those looking to buy homes will find few affordable options, as the demand for existing homes pushes prices up. The median existing-home price exceeded $300,000 for the first time last year, and in November reached $310,800 — a 15 percent increase from 2019, according to the National Association of Realtors.

“We are in a really huge supply crunch,” Daryl Fairweather, Redfin’s chief economist, told the Journal. “It becomes a cycle where people don’t want to move because it’s so difficult to buy a home, and then that in turn makes it even more difficult to buy a home because people aren’t moving and freeing up inventory.”

[WSJ] — Georgia Kromrei

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Matthew Sodl and 800 Seagate Drive, Delray Beach (Google Maps)

Matthew Sodl and 800 Seagate Drive, Delray Beach (Google Maps)

An investment banker bought a Delray Beach spec home for $5.1 million.

Matthew J. Sodl and his wife, Cathryn, bought the house at 800 Seagate Drive from Ron Adzima, records show.

Sodl is the founding partner, president and managing director of El Segundo, California-based Innovation Capital. Founded in 2004, Innovation Capital serves mid-market gaming, leisure, restaurant and retail industries, according to its website.

Adzima bought the property in 2017, through Nines Development Co LLC, for $1.5 million, according to records. That same year, Adzima demolished the existing home and began to build a new house.

The home was finished in 2018 and put on the market in March of 2019 for $5 million, according to Realtor.com. The asking price rose as high as $5.7 million in August, and was most recently $5.3 million in October.

Candace Friis with the Corcoran Group represented both sides of the deal.

Built by Delray homebuilder Ocean Blue Custom Homes, the house has five bedrooms, five full bathrooms and three half-bathrooms, according to the listing. The 5,413-square-foot house has 12-foot ceilings on the ground floor and a saltwater pool.

This year, the estate of the late president and CEO of Walmart sold his waterfront home in Delray Beach for $8.4 million.

Also in Delray Beach, Max Weinberg sold a home for $5.15 million, and the estate of a late developer sold his mansion for $5.8 million.

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Spec home developer Nile Niami is soliciting buyers for his megamansion through Google Forms. (Getty)

Spec home developer Nile Niami is soliciting buyers for his megamansion through Google Forms. (Getty)

 

While initially insisting that his Bel Air megamansion would be for “normal dudes,” Nile Niami is now going the elitist route.

“This is not an opportunity for just anyone,” Niami’s Google Forms document for the palatial pad, dubbed “The One,” states. The form, first reported by the New York Post, asks prospective buyers to submit both proof of funds and the name of the influencer who told them about the property.

In December, The Real Deal reported that the spec mansion was wrapping up construction, and would soon be on the market, with Rayni and Branden Williams of Beverly Hills Estates and Compass’ Aaron Kirman serving as listing brokers. It doesn’t appear to be officially on the market yet, but the Post reported a $350 million price tag. For the last couple of years, Niami had been floating the idea of putting a $500 million price tag on the sprawling development.

The home which spans over 100,000 square feet, boasts 21 bedrooms, a nightclub, a 40-seat movie theater, a bowling alley, four infinity pools, and a room with walls and ceilings made out of jellyfish tanks.

Niami has faced several construction and financing issues at the property, which was first slated for completion in 2017. The developer has also faced challenges across other parts of his luxury-home portfolio. In February, a lender took over control of Niami’s a spec home in Beverly Hills called Opus.

[NYP]  — TRD Staff

The post How to sell a mansion for $350M? Use Google Forms appeared first on The Real Deal South Florida.

(iStock)

(iStock)

Office vacancies rose across South Florida in the fourth quarter, and Broward and Palm Beach counties experienced negative net absorption of space, according to a newly released report from Colliers International.

Still, the region saw some significant deals close at the end of the year. And average asking rents in Broward and Miami-Dade counties rose, despite market uncertainty and new deliveries. With more corporate relocations to the area, plenty of newly constructed inventory could become occupied in the long run, according to the report.

Here’s a breakdown:

Miami-Dade County

Miami-Dade had an 11.3 percent vacancy rate in the fourth quarter, the lowest in the tri-county region. That’s up from 11 percent in the third quarter of 2020, and up from the 9.6 percent in the fourth quarter of 2019.

The county’s overall average asking rent was the highest in the region, at $42.16, up from $41.23 in the third quarter of 2020, and up from $38.93 for the fourth quarter of 2019.

The market saw 240,000 square feet absorbed during the quarter, the first quarter of positive net absorption since the pandemic began in March. The county saw delivery of 655,000 square feet of new construction — 291,000 square feet of that from the North Tower of The Plaza Coral Gables.

Miami-Dade has another 3.6 million square feet of office space under construction.

Big deals during the quarter included Banesco USA paying $11.95 million for a new headquarters in Doral, and Coral Gables property owner and broker Bill Kerdyk Jr. selling a downtown office building on Alhambra Circle in Coral Gables for $5.3 million.

Major leases signed during the quarter included Blackstone Group’s 41,000 square feet in downtown Miami, and Gastro Health’s 27,000 square feet in Kendall.

Broward County

Broward had the highest vacancy rate in the region at 12.1 percent, up from 11.2 percent in the third quarter of 2020, and up from 9.7 percent in the fourth quarter of 2019.

The county’s overall asking rent was $34.05 a square foot, up from $32.72 in the third quarter of 2020, and up from $31.40 in the fourth quarter of 2019.

The market saw negative absorption of 208,000 square feet, with 417,000 square feet of new construction delivered. That is the most new office supply since 2017 — a difficult amount to absorb, given that 2020 had only 59 percent of 2019’s leasing activity.

About 385,000 of that new office space supply came from the newly completed Main Las Olas in Fort Lauderdale. Broward has 1.4 million square feet of office space under construction.

All of the largest Broward leases of the quarter were renewals. Some of the larger office sales included Starwood Capital selling several buildings within a Plantation office park for $78 million, and a Miami real estate investment and asset management firm buying the Miramar headquarters of an information technology company for $22.6 million.

Palm Beach County

Palm Beach County had an 11.9 percent vacancy rate during the quarter, up from 11.6 percent in the third quarter of 2020, and up from 10.9 percent in the fourth quarter of 2019.

The county saw negative net absorption of 153,000 square feet. It had 11,400 square feet of new office space built, the least amount of new inventory in the tri-county area. Palm Beach still has 1.2 million square feet of office space under construction.

The county saw the lowest average asking rent of $33.01 a square foot, down from $34.50 in the third quarter of 2020, and up from $32.86 in the fourth quarter of 2019.

Major leases signed included the relocation of Elliott Management, the hedge fund founded by Paul Singer, to West Palm Beach.

Other large leases inked in the quarter included Baptist Health South Florida taking 38,000 square feet in Boca Raton; Incapital taking 18,000 square feet in Delray Beach; and Meisner Electric taking 15,000 square feet in Boca Raton.

Major deals during the quarter included local real estate investor Allen Chelminsky buying a pair of office buildings near Lake Worth Beach for $10.9 million.

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(Photo illustration by The Real Deal)

At the Regency Square Mall in Jacksonville, Florida, roaches roam freely, the air conditioning is broken and the roof leaks, according to a series of lawsuits filed over the past four years.

But the mall’s owner, Namdar Realty Group, did not disclose any of that to its tenants, a handful of retailers alleged.

When the issue was raised, Namdar painted over the water stains and the problem got worse as mold grew and another leak developed, International Decor Outlet asserted in a 2017 suit. 

Namdar “is an absentee landlord with a reputation as a ‘slumlord,’” the home furnishings store’s complaint reads. The lawsuit was later voluntarily dismissed.

In another part of the mall, the leaky roof allegedly made it impossible for a tenant to move in. A certificate of occupancy was never issued, and the leaks caused two electrical fires, according to another lawsuit filed against the property by the Jacksonville Automotive and Motorcycle Museum.

And when the electricity went out in one part of the mall in June 2017, it took Namdar four months to restore power, a local church claimed in a third lawsuit. As a result, a build-up of moisture caused the chiller pipes to rip through the ceiling, destroying the tiles, dry wall and floor, according to the church.

That comes on top of complaints against Namdar and its sister company, Mason Asset Management, from local officials and residents in several regions.

Namdar and Mason, which co-owns and co-manages the Regency Mall and others, declined to comment on specific lawsuits but denied the accusations.

“We feel that we’re doing very good for the communities and the properties that we own within those communities,” said Mason’s president, Elliot Nassim. “Once in a while you come across someone who doesn’t necessarily agree with what you’re doing.”

Despite being hit with allegations of neglect at several of their malls, Namdar and Mason are rapidly growing. With 86 million square feet across more than 400 properties combined, they now stack up against some of the industry’s biggest players. By comparison, Macerich owns 51 million square feet across 47 malls, and Simon Property Group owns 186 million square feet across 250 properties.

“We still believe in [brick and mortar] retail, and we think there’s a place for it,” said Igal Namdar, Namdar’s president.

Through extensive interviews with Namdar and Mason executives and examination of public filings and lawsuits, The Real Deal took a closer look at the two firms and their strategy at a time when many malls are in turmoil.

“Prime locations”

Based in the upscale enclave of Great Neck, Long Island, Namdar and Mason are both family run.

The companies operate jointly: Namdar handles most of the finances, while Mason focuses on leasing. Some of the properties are owned by one and managed by the other, and some are owned by both.

Curiously, Namdar and Mason continue to fly under the radar. They have been gobbling up properties even as the market for malls shrinks and other owners and operators pull back. In 2019, Namdar bought 30 properties and Mason acquired 23. Last year, Namdar bought 12 more and Mason added eight.

Malls were at one point seen as the future — places where people of all ages could gather and shop under a single roof. But as online shopping grew and consumer habits changed, many malls found themselves plagued by dwindling foot traffic and rising bankruptcies.

When the pandemic hit, those issues were only exacerbated. Dozens of retailers have filed for Chapter 11 in the past year, including mall staples such as J.C. Penney and Ascena Retail Group. Others, like Macy’s and Gap, have decided to pull out of malls altogether.

At the same time, many tenants have simply stopped paying rent, as countless malls struggle to regain their footing.

In New York City, malls lost half a year to the pandemic before being permitted to reopen in September. In Los Angeles, malls got the green light that October after reopening and closing again in mid-July.

For big names, revenue plummeted. Even Simon Property, which has one of the best balance sheets in the business, saw its net income fall to $145.9 million in 2020’s third quarter from $544.3 million in the same period a year earlier.

None of this seems to faze Namdar and Mason executives, who say they’ve survived downturns before. “It doesn’t matter to us if people are selling,” Igal said. “If we see that our business idea works, and we can run these models, and we can fix them up, and we can manage them, and we can bring value, we’ll keep on buying.”

Namdar was founded in 1999, the same year Time named Amazon’s Jeff Bezos Person of the Year. Mason was founded more than 10 years later, as the country was coming out of the Great Recession.

Nassim is the cousin of Igal’s wife. Their joint operation began when Igal started buying small retail locations in Great Neck using money from his family’s jewelry business; Nassim took up the leasing. Nassim brought in the national tenants and managed to fill spaces that brokers couldn’t, Igal said.

“You go in and you don’t know much,” he noted. “You make a lot of mistakes, and you learn from every mistake on the way.”

The two talk every day, brainstorming their next moves, and see each other on weekends. That time is vital now as they navigate the heavy turbulence of the pandemic.

Igal and Nassim’s strategy lately has been similar to that employed by Simon and Brookfield, which have been buying up bankrupt retailers including J.C. Penney and Brooks Brothers. Namdar and Mason have been acquiring smaller, distressed, local retailers, including a Midwest movie theater chain that filed for bankruptcy last year. Namdar also recently hired a director of redevelopment with plans to repurpose some of the partnership’s properties.

“Most of the [malls] are built in prime locations,” Igal said. “So there’s great value there.”

A fading industry

More than 20 percent of U.S. malls will close by 2022, according to a 2017 report by Credit Suisse. Some may die a slow death as stores are shuttered one by one. Others will be demolished by their owners.

Of course, not all may be worth saving. And it may be natural to have issues at some mall locations, especially if there’s not enough capital to make changes, industry sources say. If the ultimate goal is to redevelop the property, criticism can occur.

“Communities often want the world. And then there’s reality,” said Alexander Goldfarb, managing director senior and REIT analyst for Piper Sandler, who declined to comment on Namdar in particular. “So the community may want one thing, but economically, it’s not feasible.”

But in the meantime, according to retail strategist Marshall Kay, malls serve a purpose for the communities that they’re in, regardless of the backlash they may face over their condition. He raised the possibility that another owner might not keep some of Namdar’s malls open at all.

“If Namdar wasn’t the owner of these properties, would it mean that certain areas would be underserved? That’s a question worth considering,” said Kay, who argued that there “isn’t an obligation to revitalize every retail property.”

“What is the alternative for consumers?” he added. “What is the alternative for the retailers who rent from them?”

“Depreciation purposes”

In Mansfield, Ohio, Namdar’s Westpark Shopping Center looks ill.

The canopy is peeling off the building, and its signage has fallen. The overflowing dumpster has become a public nuisance, according to a letter from the city to Namdar last September. A spokesperson for Namdar said it is actively working to fix the property.

It’s not the first time the shopping center has been in trouble. In October 2019, Dollar General received an order to evacuate: The fire alarm system was out of service and needed to be replaced.

At a Namdar property in Sterling, Illinois, photographs show a sinkhole that formed after a storm drainage tube collapsed. The damage may be causing water to infiltrate the city’s sewer system, according to emails between town officials sent throughout 2020 provided to TRD.

Mall employees and customers voiced concerns to the city, but outreach to Namdar went unanswered until the city threatened litigation, according to the emails. Namdar’s spokesperson said the company has worked “diligently” to repair the storm drain and any remaining issues surrounding the collapse.

As Namdar rushes to acquire more properties, some worry that the ones it owns are being left behind.

A sinkhole at the Northland Mall in Sterling, Illinois.

“Over time, you do become what you’re perceived,” Cushman and Wakefield Vice Chair Mark Gilbert said of Namdar in a 2018 interview with Reuters. “I think that in many respects if they don’t define what they’re going to do with these malls in general, then they may get defined by the bad ones.”

At a shuttered mall in Hazelwood, Missouri, near St. Louis, the local newspaper published images of burned-out light bulbs and waist-high grass. The mall looks abandoned, but isn’t.

“We’ve redirected our efforts at the St. Louis Outlet Mall and have since entered into a multiparty agreement to resolve outstanding taxes and assessments,” Namdar’s spokesperson said in a statement.

At the now-shuttered Phillipsburg Mall in New Jersey, following a heavy rain in 2018, the roof of a vacant Sears collapsed, bringing a water pipe down with it, according to police reports.

Namdar’s spokesperson blamed “hastily completed contracting work that Sears had commissioned a number of years back,” before the retailer shut its doors.

“Given that the property was slated for a redevelopment and ultimately would be demolished, this accelerated the plans for the building,” the spokesperson noted.

Upset communities allege that Namdar and Mason are looking to turn a profit by not investing in their malls.

Brad Schrader, Sterling’s superintendent of public works, said he suspects the city is the victim of Namdar using the local mall “for depreciation purposes.”

“We get stuck holding the bag in the end,” he said. “It’s an economic drain on us because they’re not reinvesting and it’s a moral drain on the community, watching something that was once a vibrant center for the community falling into disrepair.”

Smoke and mirrors?

After soaking Florida’s DeSoto Square Mall for management fees, Namdar attempted to sell the property for $30 million, according to a lawsuit filed by the financial services firm ML Holdings in 2018.

Namdar ultimately traded the property to ML Holdings for $25.5 million. But when the new owner took a closer look after the sale, it found things were not as they appeared.

Despite carrying significant expenses for security, waste disposal, landscaping and parking lot repairs on its books, the mall was in poor condition, and its gross income was slashed from $6 million to $4 million, ML Holdings claimed.

Soon after the sale closed, tenants allegedly began to flee.

Namdar had verbally agreed to lower rents for store owners, in some cases to as little as 25 percent of what was reported in leases, while others had been allowed to stay rent-free to prop up occupancy rates, according to the complaint.

“While we cannot say much on the matters related to the Midtown DeSoto Square Mall, it has been made public that we sold the property in early 2017,” Namdar’s spokesperson said.

Over time, ML Holdings fell into default on its loan. The lawsuit contends that the mall should have sold for about $5 million — one-fifth of what the company paid.

That was no accident, said Meyer Silber, ML Holdings’ lawyer in the case against Namdar, which is ongoing.

“Their strategy generally was to suck out as much money from a mall as possible,” said Silber, “and they try to just dump it.”

The post Inside mall owner Namdar’s rapid growth story appeared first on The Real Deal South Florida.

CoStar's Andy Florance and CoreLogic’s Frank D. Martell (Photos via VCU; Getty; iStock)

CoStar’s Andy Florance and CoreLogic’s Frank D. Martell (Photos via VCU; Getty; iStock)

CoStar Group may be nearing its next acquisition.

The data giant and a private group, led by Warburg Pincus, have emerged as the final two bidders for CoreLogic, a data provider for the real estate and mortgage industries, reported Bloomberg News.

The bids are not known, but CoreLogic is said to be evaluating offers and will make a decision in the coming weeks. Ultimately, CoreLogic may opt to remain independent.

For CoStar — which has spent billions of dollars acquiring companies over the past few years — the deal would be its biggest takeover yet, Bloomberg said. The company had $3.8 billion in cash as of Sept. 30, 2020, regulatory filings show.

In November, it paid $250 million to buy Homesnap, a listing portal. A month later, CoStar’s deal to buy RentPath for $585 million was called off after federal antitrust regulators sued to block the deal.

CoreLogic, which is based in Irvine, Calif., has been in the crosshairs of potential acquirers for months. In June, activist investors Cannae Holdings Inc. and Senator Investment Group offered to buy the company for $66 per share. But they backed out of the deal when CoreLogic said it got an offer as high as $80 per share. In November, CoreLogic launched a strategic review of its options after Cannae and Senator won three seats on its board.

Its stock closed at $76.79 per share on Thursday, giving it a $5.9 billion market cap.

CoStar’s interest in CoreLogic has been known for several months. In October, it reportedly offered $77 to $83 per share, according to Bloomberg. But talks stalled after CoStar refused terms of CoreLogic’s non-disclosure agreement.

[Bloomberg] — E.B. Solomont 

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Renderings of the project with Michael Simkins and Ryan Shear (PMG)

Renderings of the project with Michael Simkins and Ryan Shear (ArX Solutions, PMG)

The popular nightclub E11even Miami is getting into branded condo and hotel development.

Property Markets Group and E11even Partners, led by Michael Simkins, are partnering on E11even Hotel & Residences, a planned 65-story, 400-unit tower in Park West, a neighborhood northwest of downtown Miami, The Real Deal has learned.

PMG and E11even Partners tapped Sieger Suarez to design the skyscraper, and Avro Ko to handle interiors, according to marketing materials obtained by TRD. Units will range from studios to two-bedrooms, plus a penthouse collection. The condos will be fully furnished. Sales are being handled in-house.

The tower, which is expected to rise near the nightclub at 29 Northeast 11th Street, will include the multi-level E11even Day Club and pool, that will span 20,000 square feet and will feature cabanas, temperature controlled plunge pools, and a 2,200-square-foot pool. It is planned to also have a gourmet food hall, wellness center, sports lounge, beach club and art installations.

PMG declined to comment through a spokesperson.

The condo-hotel joins a number of other similar projects in Greater Downtown Miami that offer hotel rental programs and short-term rental options.

Turkish development firm Okan Development Group plans to develop Okan Tower, a 70-story hotel and condo tower in Miami’s Arts & Entertainment District. In 2019, the developers of YotelPad Miami announced that their project, a 31-story tower with 231 condos and 222 Yotel rooms, was sold out. YotelPad, at 227 Northeast Second Street in downtown Miami, was built by David Arditi’s Aria Development Group and Kuwaiti real estate company AQARAT.

PMG, led by managing partners Kevin Maloney and Ryan Shear, has a number of developments in South Florida. The firm completed the 639-unit Society Las Olas in Fort Lauderdale, and is working on the Waldorf Astoria Hotel & Residences Miami, a 98-story luxury hotel and condo tower planned for 300 Biscayne Boulevard in downtown Miami.

In December, PMG paid $11.5 million for more land for its planned Society Wynwood project at 2407 Northwest Second Avenue, where it plans to build an apartment complex with partner Greybrook Realty Partners.

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Robert Reffkin 

Robert Reffkin

A few months before Compass filed confidentially to go public, CEO Robert Reffkin made another hush-hush move.

The brokerage chief went into contract on a penthouse in Tribeca in June and closed a month later, according to property records, which identified the buyer as Red Heart Friends LLC. Sources confirmed that Reffkin is the real owner.

The pad is located in a limestone-and-brick building on Greenwich Street. The property — built in 1911 and originally home to tea, soap and candy manufacturers — was converted to 62 condos in 2005.

Reffkin’s duplex penthouse spans 4,500 square feet and has 2,200 square feet of outdoor space. The unit has four bedrooms and 4.5 baths, with white oak floors, atrium windows and skylights accented with blackened steel, according to the listing. The terrace has two levels and an outdoor kitchen.

The purchase price — an 18.25 percent discount from the original $20 million price tag — works out to $3,633 per foot.
During a September appearance on CNBC’s Squawk Box, Reffkin opined on the strength of the U.S. housing market and said he was bullish on cities — particularly New York City.

“I put my money where my mouth is. I actually bought a home in New York City since Covid hit,” he said. “Everything we love about New York City is still here, we just need to wait until a vaccine comes.”

He did not respond to requests for comment for this story.

According to the Olshan Report, which tracks luxury sales in Manhattan, the buyer’s agent was Josh Wesoky, a former investment banker who was one of Compass’ earliest recruits in 2015.

The Corcoran Group’s Danny Davis had the listing. Neither Davis or Wesoky could be reached for comment.

Records show the penthouse’s prior owner — Big Moose LLC — paid $11.5 million in 2015. After a three-year gut renovation, it was listed for $20 million in September 2019, according to StreetEasy. The seller later dropped the price to $18.995 million.
In June, Davis told Olshan that Wesoky previewed the apartment before it hit the market.

The buyers, who were living in a Tribeca rental, only toured the apartment on their own after there was an accepted offer, Davis was quoted as saying. Some of the furniture was included.

The origin of Reffkin’s LLC, Red Heart Friends, is unclear. But in 2016, he told Built In NYC about a card game he liked to play with his young daughter. “I deal the cards and she asks for a red two with hearts,” he said. “Until she gets that she isn’t quite happy.”

Reffkin’s new home is within walking distance of Compass’ headquarters at 90 Fifth Avenue.

His stake in the eight-year-old firm is unknown, but his stock agreement came to light in 2019. Reffkin’s original stock — without dilution or any selling of shares — amounts to roughly 8.5 percent of the company, or $517.5 million, according to evidence provided in Compass’ ongoing suit with Avi Dorfman, who claims to be a co-founder. That’s based on Compass’ $6.4 billion valuation after its last funding round in July 2019.

Although the residential market froze up in March and April, it’s been booming in recent months.

Home sales in November dipped 2.5 percent from October, the first decline in six months, according to data from the National Association of Realtors. In addition to low mortgage rates, demand has far exceeded supply.

The same hasn’t been true in New York City, which was an epicenter of early Covid cases in the U.S. During the fourth quarter of 2020, Manhattan sales slipped 20.6 percent, according to appraisal firm Miller Samuel. Sales above $5 million slid 28 percent year over year.

But Compass is seizing on the strong national market — and hot IPO environment — to go public.

The brokerage, which has raised $1.5 billion from investors including SoftBank, Fidelity and Dragoneer, filed confidential plans for a public offering earlier this month, as The Real Deal first reported. With 18,000 agents, it was the No. 3 brokerage in the country in 2019 with $91.3 billion in sales, according to data firm Real Trends.

In September, Reffkin said Compass’ consumer web traffic was up 180 percent year over year, which he interpreted to be an indicator of future demand. “We believe the increased activity is going to persist in 2021,” he said.

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From far left: Jose Huizar, Nury Martinez, Eric Garcetti and Marqueece Harris-Dawson

The FBI brought down the hammer last year on Jose Huizar’s alleged criminal enterprise, stating that the former Los Angeles City Council member milked developers for more than $1 million in payments and gifts, ranging from prostitutes to money to settle sexual harassment lawsuits.

In exchange, according to investigators, Huizar greased the wheels for their controversial projects — Shenzhen New World Group’s 77-story tower and Carmel Partners’ 35-story residential building in the Arts District.

As Huizar’s alleged misdeeds incited anger and embarrassment at City Hall — Mayor Eric Garcetti said he was “sickened” by the indictments — City Council member David Ryu made a modest suggestion: create an office of the inspector general to snuff out future real estate crimes.

Ryu’s proposal seemed like the least the city could do. An “IG” is a garden-variety post in most city governments. Ryu noted that even cities with less than pristine records, such as Philadelphia and Chicago, employ an independent investigator to root out corruption, fraud and misconduct.

“Pay-to-play politics is made possible when politics is exploited for personal or financial gain,” Ryu wrote in a proposed ordinance. “In Los Angeles, that power rests predominantly in land use.”

But the ordinance’s fine print did not actually call for an inspector general.

Instead, it merely requested “studying the feasibility” of having one, with no deadline for such an analysis. And now such a report might be asking too much: Ryu was voted out of office in November.

The stalled proposal is indicative of a choice made by those in charge at City Hall. Despite the allegations against Huizar (who pleaded not guilty and faces a criminal trial in June), the city will likely punt on reforming real estate project approvals.

“There’s no momentum for change,” said Ryan Leaderman, a land use attorney at Holland & Knight.

That may be because officials, namely the 15 City Council members, benefit from a convoluted status quo.

“There’s a lot of institutional inertia,” Leaderman said. “People generally don’t want to give up power.”

How soon they forget

Ideas to revise the development approval process, whether sweeping or specific (City Attorney Mike Feuer called for revoking project approvals tainted by the Huizar probe), languish in Council committees.

“The recent scandal has prompted the City Council to introduce a flurry of new initiatives,” Nithya Raman, who was later elected to take over Ryu’s Council seat, noted in August following Huizar’s arrest.

But, Raman added, “It’s hard to know how far any of these motions will get, given that most such efforts are quickly forgotten.”

Rhetorically, at least, city leaders have called for reforms.

Garcetti said during a December press conference that he agreed with outgoing U.S. Attorney for Los Angeles, Nicola Hanna, that the arrest of Huizar “should prompt a serious discussion as to whether reforms are warranted in Los Angeles city government.”

Garcetti said he wants Council members to not vote on real estate projects if they took money from the developer, stating a recusal policy would “take away the temptation” of pay-to-play politics. The mayor also said he would like “charter reform,” a reference to a municipal governance charter last updated in 1999, when Cher’s “Believe” led the Billboard 100.

But such bills require approval by the same Council members they would police, and neither idea has gained traction.

The Council in December 2019 did approve a ban on members taking direct contributions from developers. But the measure said nothing about indirect payments by developers to political action committees benefiting lawmakers (or, in the case of Huizar, through his former high school, where Greenland USA and Related Companies provided contributions).

Council members panned the developer donation ban, with Mike Bonin savaging it as “piecemeal crap.” Yet no stronger legislation, or any bill for that matter, has advanced to further restrict what developers can give.

Ryu and Council member Paul Koretz authored an ordinance to remove a clause in the 1999 charter that gives the City Council the same power as the mayor-appointed Planning Commission over new developments.

The measure could curb Council members’ decision-making powers that are ripe for abuse, said Sean McMorris, a consultant at Southern California Common Cause. But the legislation “has sat idle in the City Council Rules Committee,” McMorris noted.

Like Garcetti, City Council President Nury Martinez has said the approval process needs to change.

Martinez introduced an ordinance to steer “high-value projects” (which she defined as multimillion-dollar proposals) around the Council’s Planning and Land Use and Management Committee and straight to the full Council.

The measure is a rebuke to Huizar, who chaired that committee. Martinez, though, may be suggesting a game of Whac-A-Mole.

“In reality, all the money developers used to spend on wooing committee members will go to wooing all Council members,” said Casey Maddren, president of United Neighborhoods for Los Angeles, an advocacy group for affordable housing.

Kings of their districts

In not more aggressively pursuing reform, Garcetti and Martinez offer a partial excuse: The problem was less the approval process than Huizar himself.

The scandal was marked by “illegal bribes,” Garcetti said at the press conference, adding, “It’s tough to outlaw something that is already outlawed.”

In an email to TRD, Martinez said that “the one thing that we cannot legislate is personal accountability and moral fortitude. That is the duty of each individual official — to be a good and faithful servant.”

Indeed, as someone who allegedly made subordinates call him “boss” and shook down developer Shenzhen Hazens for three Katy Perry concert tickets, Huizar may be a “singular” figure in the annals of city politics, said Andrew Brady, a land use attorney at DLA Piper.

A rendering of the 35-story project that a Los Angeles City Council member allegedly approved in exchange for bribes. The approval has not been revoked.

But, Brady added, Huizar’s actions were made possible by an approval process dependent on the case-by-case decisions of Council members.

“The corruption comes from discretion,” Brady said. “When there’s discretion to deny a project, some unscrupulous character may take advantage of the process.”

The discretion starts with a zoning code that even the City Planning Department admits is a reaction to specific project proposals.

“The current zoning code is the result of decades of amendments and supplemental layers of land use regulations that were added on top of the existing regulations to achieve specific goals,” reads a post on the department’s website, which also notes that 66 percent of all L.A. lots are spot-zoned.

The city’s convoluted project approval process requires four sign-offs: from a city planning official, the mayor-appointed Planning Commission, the City Council’s planning committee and finally the full City Council — with the member who has project jurisdiction instructing colleagues how to vote.

City Hall observers could not recall a single time when a Council member’s prerogative over land use matters was challenged by a colleague.

“The Council members like being little kings of their district,” Leaderman said.

The process can be sidetracked by neighbors, labor unions and others who invoke laws such as the California Environmental Quality Act to trigger appeals. Attorneys for developers complain that appeals tend to make people lose sight of a project’s merits.

“At review hearings, the cranky old man who doesn’t like traffic is at the same level as the engineer who has actually studied the neighborhood’s traffic,” said Ellia Thompson, a land use attorney at Ervin Cohen & Jessup.

But ultimately these appeals, Thompson said, are simply further invitations for Council members to  wield their clout and make a deal with opponents. Appeals also lead developers to conclude that because even sane projects get derailed, why not propose something wild?

For instance, an executive from Carmel Partners (now CP Employers) allegedly felt internal pressure to get a residential high-rise in the Arts District approved.

The executive purportedly found that if he bribed Huizar (mostly through contributions to a PAC created to elect Huizar’s wife to the City Council), Carmel could get its 35-story tower built on a street where the next-tallest building was four stories.

Huizar shuttled the project through the planning committee and full City Council, which unanimously approved it despite furious neighbor and labor union opposition. The Carmel executive allegedly bragged to colleagues that the approval was “truly amazing.”

Pandemic gets dibs

Garcetti answered the question about Huizar during a press conference where he broadcast the city’s skyrocketing Covid death toll.

The mayor, in other words, has a lot to deal with. And even if Garcetti were examining the city’s real estate approval process, his action might not be readily apparent.

“Since Covid in March, everyone has been so isolated and contained [that] I’m not aware of any deep thoughts or conversations around reform,” Thompson said.

Garcetti’s critics, for their part, accuse him of having one foot out the door. In 2018, the mayor traveled across the country to test-drive a presidential bid.  And Garcetti surprised some observers in December when he announced that he wouldn’t join Joe Biden’s administration.

Martinez, meanwhile, has been Council president for one year and represents a working-class district of the San Fernando Valley “where you are lucky to have big development projects,” Leaderman said.

Observers do not see her confronting developers or her colleagues, nor do they see leadership from Marqueece Harris-Dawson, who replaced Huizar as planning committee chair.

“I don’t know if he has the wherewithal to really push through structural reforms,” Leaderman said of Harris-Dawson. “I’m not seeing games being played. I just don’t think there’s a push to get things done.”

Emails, calls and tweets over three weeks to Harris-Dawson’s office went unanswered. The Council member’s failure to respond was not unique. Some members, who represent about 600,000 constituents each, do not even have websites (incoming member Mark Ridley-Thomas, for one) or post nonworking phone numbers on their sites (Koretz).

Maddren, the affordable housing advocate, hopes that Ryu’s replacement, Raman, will be a voice for reform. Raman declined an interview request, with a spokesperson saying, “All of Council member Raman’s attention is focused on setting up her office and attending to the pandemic and its associated economic fallout.”

During the pandemic, the work of Council members and their interactions with developers have moved even further from public view. McMorris of Common Cause noted that post-Huizar, there could have been a push for city government transparency.

But the response from the mayor and City Council, he said, “is severely lacking.

The post LA’s scandal response: status quo appeared first on The Real Deal South Florida.

Thor Chairman Joe Sitt, Stefano Ricci CEO Niccolo Ricci and the Miami store. (Getty, Thor, Miami Design District)

Thor Chairman Joe Sitt, Stefano Ricci CEO Niccolo Ricci and the Miami store. (Getty, Thor, Miami Design District)

 

A mortgage trustee is suing affiliates of Thor Equities and fashion house Stefano Ricci, as well as Thor Chairman Joe Sitt, over an alleged unpaid loan on a Miami Design District property, with the plaintiff seeking foreclosure or receivership.

At issue is $17 million in an unpaid loan by the Thor affiliate, according to documents filed in Miami-Dade Circuit Court last month. Wellington Trust is the mortgage trustee and plaintiff in the case, and Midland Loan Services is the special servicer for the loan on the property at 118 to 120 Northeast 39th Street, home to a Stefano Ricci store.

Attorneys with Carlton Fields, representing Wellington Trust, did not respond to requests for comment.

According to documents filed with the lawsuit, the owners of defendant Thor 118 NE 39th LLC include a trust for Sitt’s children, Premier Equities partner Bert H. Dweck, and Ezra Hamway. The other defendants sued are Stefano Ricci affiliate Luxury & Co. of Miami and Sitt, himself.

Stefano Ricci is based in Italy and led by Niccolo Ricci.

In the summer, Thor sued to evict Stefano Ricci from the store, saying it owed Thor more than $133,000 in rent. The case is still open. Thor purchased the 3,702-square-foot property in April 2014 for $9.5 million, records show.

Attorneys with Akerman, representing Thor in the eviction case, did not respond to requests for comment. Nor did Brett Silverman, representing Stefano Ricci in the eviction case.

The pandemic has led to many retail landlords seeking relief from the courts, in an attempt to recuperate money lost. In New York City, landlord Vornado Realty Trust sued to recover $14.8 million in future rent payments allegedly owed by fashion brand Elie Tahari.

Thor’s recent financial issues include a $105 million commercial mortgage-backed securities loan tied to the Charles Scribner’s Sons Building at 597 Fifth Avenue that went into special servicing.

In December, Thor sold a Flatiron retail building to A member of the Qatari royal family for $40 million.

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From left: Robert Zangrillo, Geoff Palmer, Tom Barrack and President Donald Trump (Getty, iStock)

From left: Robert Zangrillo, Geoff Palmer, Tom Barrack and President Donald Trump (Getty, iStock)

Donald Trump’s White House claimed developer Geoff Palmer lobbied the former president to pardon Miami developer Robert Zangrillo, whom federal prosecutors had charged in the college admissions scandal.

The Trump administration said the pardon was also supported by Colony Capital chairman Tom Barrack, but Barrack denied that, according to the Los Angeles Times. Trump granted the pardon in his final hours as president.

Palmer is an active political donor and a longtime supporter of Trump. As of October, his company had donated $6.4 million to candidates, committees, and superPACs affiliated with Trump and the Republican Party.

Prosecutors allege that Zangrillo paid associates of Rick Singer, the alleged mastermind of the admissions scheme, to finish his daughter’s high school and community college classes.

They alleged he then paid Singer $250,000 to get her into the University of Southern California as a recruit of the crew coach.

A spokesperson for Barrack said he “had nothing whatsoever to do” with the pardon. Barrack is an alumnus and university trustee of USC.

Another source told the Times that Zangrillo tried to meet with Barrack for help with the case, but was rebuffed.

A spokesperson for the school declined the comment on the pardon. Some at the school were outraged that Barrack’s name came up in relation to the scandal.

“I hope it’s true that a USC trustee, with a fiduciary duty to the university, played no role in securing a pardon for a wrongdoer whose actions have done so much harm to USC’s reputation,” said Ariela Gross, a law professor who chairs Concerned Faculty of USC. [LAT] — Dennis Lynch

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Norman Braman, Jorge Perez and Magic City Jai Alai (Google Maps, Getty, jai alai player via Wikimedia Commons)

Norman Braman, Jorge Perez and Magic City Jai Alai (Google Maps, Getty, jai alai player via Wikimedia Commons)

A campaign led by auto dealership mogul Norman Braman and developer Jorge Perez to stop a Jai Alai fronton and card room from being developed in Miami’s Edgewater neighborhood was dealt a winning hand earlier this week.

On Tuesday, Miami-Dade Circuit Court Judge Michael Hanzman ruled the City of Miami unlawfully approved a settlement with West Flagler Associates, owners of Magic City Casino and other gambling sites in the city, to let the company build the fronton and card room on a property at 3030 Biscayne Boulevard owned by Crescent Heights, the development firm headed by Russell Galbut.

Hanzman determined that Miami City Attorney Vicky Mendez erroneously opined that Miami Mayor Francis Suarez’s Feb. 21, 2020 veto of the West Flagler settlement was not applicable because the city commission’s approval of the agreement did not constitute a land use decision per the city’s charter.

“The court concludes that the commission’s decision to enter into this settlement agreement was a ‘land use decision’ as that phrase would be understood by the average citizen,” Hanzman wrote. “The decision to give the mayor this broad veto power was carefully considered and enacted into law because ‘land use decisions’ can dramatically impact the health and well-being of a community.”

In an email statement, Mendez said the city is still evaluating what it’s next step will be, including a possible appeal. “We appreciate Judge Hanzman’s efforts in trying to clarify the complex issues in this case,” Mendez said. “We are reviewing the court’s order to determine how best to proceed in light of the ruling.”

In a written statement, Braman said he and the other plaintiffs are pleased with Hanzman’s decision. In March of last year, entities controlled by Braman and Perez joined forces with two homeowner associations to sue the city and West Flagler. “With help from the mayor and commission, Miami has become a world class city and is on the precipice of further transformational leaps,” Braman said. “The last thing our city needs is the plight and desolation that come with casino gambling.”

Joseph DeMaria, a partner with Fox Rothschild representing West Flagler, said his client doesn’t want to appeal Hanzman’s ruling and would prefer to redo the process for approving the settlement agreement, which would involve another vote by the city commission and a possible second veto from Suarez. The difference is that this time, his clients want the city commission to vote on overriding the mayor’s veto by a supermajority, DeMaria said during a phone interview.

“If we get to that point and the city commission does override a veto, great,” DeMaria said. “If it doesn’t get overridden, then we will go to trial and we believe we will win.”

The settlement agreement had put the brakes on a pending federal lawsuit West Flagler filed against the city over an ordinance that would require the company to seek final approval for the fronton from city boards and the city commission. West Flagler contends that a 2012 opinion by then-zoning administrator Barnaby Min allows the fronton to be built and that the casino operator only has to obtain state permits to open the jai alai and card room facility.

In an earlier ruling for the Braman-Perez lawsuit, Hanzman ruled Min’s opinion had no legal basis, said Grace Mead, a shareholder with Stearns Weaver Miller, which represents the plaintiffs. “The letter West Flagler obtained would have opened up two-thirds of the city to gambling,” Mead said. “It has no legal effect and because of that they don’t have a legal basis to move forward with the Jai Alai facility in Edgewater.”

DeMaria said his client is offering the city the same terms, including waiving all attorney fees and a stipulation that West Flagler will not place slot machines in the proposed fronton and card room. “The same day Hanzman ruled, I resubmitted the settlement agreement to the city,” he said. “If it doesn’t get approved, all bets are off. Mr. Braman and his anti-gambling crusade need to seriously think about what he’s doing to the city. This is going to be a pari mutuel activity, which has been around since 1932.”

The post Norman Braman and Jorge Perez score court victory against Edgewater Jai Alai fronton appeared first on The Real Deal South Florida.

Overall, the number of housing units that started construction last year was up 7 percent from 2019. (iStock)

Overall, the number of housing units that started construction last year was up 7 percent from 2019. (iStock)

Residential construction continued to surge as 2020 came to an end, finishing off homebuilding’s busiest year since the housing bubble burst.

Housing starts in December increased for the fourth month in a row to an annual rate of 1.67 million units, seasonally adjusted, according to the Census Bureau’s monthly report on residential construction. That’s a 5.8 percent increase from November’s revised rate and up 5.2 percent year-over-year.

Overall, the number of housing units that started construction last year was up 7 percent from 2019.

Joel Kan, head of industry forecasting for the Mortgage Bankers Association, called it “the strongest for residential construction since 2006.”

Residential projects have dominated construction spending as demand and housing prices have continued to rise with inventory shrinking and interest rates remaining low. But there are some headwinds: Homebuilder sentiment has dipped over the past two months and mortgage rates have crept up.

The annual rate of building permits in December was 1.7 million, seasonally adjusted — about 4.5 percent higher than November’s rate and up more than 17 percent year-over-year. Kan pointed to the continued uptick in permits for single-family homes as an indication of new supply to come.

The rate of housing completions also increased to 1.4 million units, seasonally adjusted. That was up about 16 percent from November’s revised rate and up 8 percent year-over-year.

[contact-form-7]

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Glenn C. Rice and 2700 Aqua Vista Boulevard, Fort Lauderdale (Linkedin, Google Maps)

Glenn C. Rice and 2700 Aqua Vista Boulevard, Fort Lauderdale (Linkedin, Google Maps)

The president of a pharmaceutical development and manufacturing company sold his waterfront Seven Isles mansion in Fort Lauderdale for $12.8 million.

Records show Glenn C. Rice and his wife, Cynthia Anne Hoy, sold their home at 2700 Aqua Vista Boulevard to 2518 LLC, a Delaware corporation tied to Chicago-based investment firm Skydeck Capital.

Rice is the president of MetronomX, a drug development company he co-founded in 2010, headquartered in Houston. Rice was formerly president and COO of pharmaceuticals company Pharmacyclics and was the vice president of research at ILEX Oncology, which was sold for $1 billion in 2004, according to MetronomX’s website.

Rice and Hoy bought the 12,338-square-foot mansion for $3.6 million in 2012. According to property records, the married couple made multiple renovations to the home, including constructing an addition to the house, a two-story addition to the guest house and a new pool and dock, finishing in 2014.

The home was listed in September for $15 million. Julie Jones-Bernard of Florida Luxurious Properties represented the sellers, while Daniel Teixeira of Douglas Elliman represented the buyer.

The waterfront property, built by Gulf Builders, includes a main house with six bedrooms and a guest house with three bedrooms, with a bridge that connects the two, according to the listing. It has a total of 10-and-a-half bathrooms.

The home also features a 205-foot, private dock with room for a yacht.

Skydeck Capital was founded by Michael Polsky who sold a Bal Harbour mansion for a record $24 million in 2019. He is also the CEO of Chicago-based power and energy company Invenergy.

Teixeira could not be reached for comment on the identity of the buyer.

Last year in Fort Lauderdale’s Seven Isles neighborhood, retired baseball player Mike Napoli sold a mansion for $7.3 million, and the CEO of a software company bought a waterfront home for $6.1 million.

[contact-form-7]

The post Pharma exec sells Fort Lauderdale waterfront mansion for nearly $13M appeared first on The Real Deal South Florida.

Donald and Eric Trump with the Trump National Doral Golf Club in Florida and Trump International Hotel at Washington D.C. (Getty; Trump Organization)

Donald and Eric Trump with the Trump National Doral Golf Club in Florida and Trump International Hotel in Washington, D.C. (Getty; Trump Organization)

A financial disclosure report filed shortly after former President Donald Trump left office Wednesday has revealed the scope of losses faced by the Trump Organization in 2020.

At the company’s Trump National Doral Golf Club outside of Miami, revenue fell 40 percent, according to the New York Times. At its Washington, D.C., hotel, revenue fell 63 percent. Overall, the company’s revenue was down 38 percent last year.

“There were places that due to government mandates we were not able to operate,” Eric Trump told the publication in an interview, insisting the company was in a stable position. “Those are places you are going to lose the season because of it.”

There was, however, one outlier: Mar-a-Lago, the Trump Organization’s club in Palm Beach, Florida, saw a revenue increase of 13 percent, from $21.4 million to $24.2 million.

With Donald Trump no longer in office, the company has a bumpy road ahead, particularly after the former president encouraged insurrectionists to storm the U.S. Capitol, a move that alienated several allies and sank his approval rating.

Trump’s company has more than $300 million in loans that will come due in the next few years, and several businesses have recently cut ties with the business in the wake of the Jan. 6 riot.

Last month, New York Mayor Bill de Blasio announced the city would terminate its contracts with the Trump Organization. However, some of the air was taken out of the declaration when Politico revealed that three of the four contracts were already set to expire in April. The Trump Organization said it is owed $30 million and will fight the cancelations in court.

[NYT] — Sylvia Varnham O’Regan

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Fifth Wall's Brendan Wallace (right) and Andriy Mykhaylovskyy (Fifth Wall; iStock)

Fifth Wall’s Brendan Wallace (right) and Andriy Mykhaylovskyy (Fifth Wall; iStock)

Fifth Wall is officially in the SPAC market and looking to raise $250 million for a new blank-check company.

The Los Angeles-based firm said in a regulatory filing that it will issue 25 million shares of its new special purpose acquisition company at $10 per share. Goldman Sachs and Deutsche Bank are underwriting the deal.

Headed by Blackstone Group alumni Brendan Wallace and Brad Greiwe, Fifth Wall is already one of the best-funded proptech VCs, with $1.3 billion in committed capital.

Its new blank-check company will join a growing list of proptech-focused SPACs, including Tishman Speyer’s TS Innovation Acquisitions and PropTech Investment Corp. II, formed by Abu Dhabi Investment Authority veterans Tom Hennessy and Joe Beck.

Blank-check companies, which have no underlying assets, seek reverse-mergers with private companies that are looking to go public. They made a comeback last year as an alternative to the traditional IPO process.

So far in January, investors have poured $16.8 billion into 59 new SPACs, according to SPACInsider. The 248 SPACs created last year raised $83 billion.

Fifth Wall is betting its track record will give its new SPAC a “substantial competitive advantage,” the IPO filing said. “A SPAC is an important extension of Fifth Wall’s approach to partnering with leading real estate technology companies to create long-term value,” it said.

Fifth Wall has invested in 40 startups, including six that are now unicorns, including VTS and Opendoor, which went public in a SPAC deal last year. Fifth Wall’s investment grew by a multiple of seven, generating more than $600 million on paper, according to regulatory filings.

The new SPAC filing did not specify whether Fifth Wall will look to merge with an existing portfolio company. The SPAC will be headed by Wallace and Fifth Wall CFO Andriy Mykhaylovskyy and aims to guide a “category-defining market leader” from the private market to the public one.

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Ophir Sternberg with the Ritz-Carlton Residences, Miami Beach and the land for the villas (Lionheart Capital)

Ophir Sternberg with the Ritz-Carlton Residences, Miami Beach and the land for the villas (Lionheart Capital)

UPDATED, Jan. 21, 6:10 p.m.: Lionheart Capital sold land for the second phase of the Ritz-Carlton Residences, Miami Beach, to a New York development firm in an off-market deal, The Real Deal has learned.

Lionheart planned to build and sell 15 single-family homes on the land, and sell them for a combined $90 million, or roughly $6 million each. GFI, led by Chairman and CEO Allen Gross, will now develop the homes, which Lionheart refers to as “villas,” and launch sales with Douglas Elliman, according to a press release.

Lionheart CEO Ophir Sternberg declined to provide a sales price for the 3.4 acres. Sternberg said “this was a good opportunity, so we decided to sell,” and that the property was never on the market.

GFI broke ground and launched sales on the two-story villas, according to a release from the firm. Prices start at about $3.4 million, and the villas will range from 3,263 square feet to 4,643 square feet, with three to five bedrooms.

Lionheart and its partner Elliott Management completed the Ritz-Carlton Residences, at 4701 North Meridian Avenue in mid-Miami Beach, in 2019 after construction delays. It now has less than 20 percent of the 111 condos remaining for sale.

The villas will be managed as part of the Ritz-Carlton Residences, Miami Beach and designed by Italian architect Piero Lissoni along with Choeff Levy Fischman. One villa has been completed.

Over the last month, Lionheart has secured 11 contracts totaling more than $50 million, three of which have closed, a spokesperson previously said. That includes the $15 million all-cash sale of one of its penthouses to an unnamed hedge funder from Chicago, who plans to relocate with his family.

The development, built on a 7.5-acre lakefront property, features gardens, pools and 36 private boat slips. Shared amenities include an art studio, a rooftop pool deck with private cabanas and a restaurant, a waterfront bar and social room, pet grooming facilities, indoor and outdoor yoga studios, a meditation garden and car wash facilities.

Eight of the villas will be waterfront villas and have private boat dockage.

Waterfront single-family home sales have boomed throughout the pandemic, which brokers and developers attribute to an increase in out-of-state buyers, especially from high-tax states in the Northeast, West Coast and Midwest. That has started to spill over into the high-end condo market, with larger units in more private buildings selling faster.

In the fourth quarter of last year, residential sales grew by 52 percent, year-over-year, to 1,176 closings in Miami Beach and the barrier islands, according to Douglas Elliman.

[contact-form-7]

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President and CEO at Caron Treatment Centers Doug Tieman with the units. (Google Maps, LinkedIn via Doug Tieman)

President and CEO at Caron Treatment Centers Doug Tieman with the units. (Google Maps, LinkedIn via Doug Tieman)

 

The nonprofit operator of addiction treatment centers paid $12 million for a 46-unit apartment complex near the Delray Beach Golf Club.

Caron Treatment Centers, based in Wernersville, Pennsylvania, bought the “Fairway on the Greens” apartments at 2045 Lowson Boulevard, according to records. The price equates to about $261,000 a unit.

The nonprofit is led by Doug Tieman. It has treatment centers and facilities in Pennsylvania, Florida, Georgia and Washington, D.C.

Caron has operated a residential addiction treatment program at the apartments since at least 2007, according to the Sun-Sentinel. Last year, Palm Beach County approved bonds of no more than $52.8 million for Caron to buy and renovate Fairway on the Greens, as well as construct a medical detox facility at 4675 West Linton Boulevard, according to records.

The seller of the apartments is a company tied to Allan V. Rose of Yonkers, New York-based AVR Realty Company.

The low-rise apartments on more than 3 acres were built in 1962, according to records. Rose bought the apartments in 2004 for $3 million.

Addiction treatment centers and nursing homes have expanded in South Florida amid the pandemic. In the summer, an entity tied to a drug and alcohol addiction treatment provider bought an empty office building in Pompano Beach for $5.9 million.

In October, a healthcare magnate continued his South Florida nursing home buying spree, paying $24 million for a 245-bed facility in North Miami. It marked his sixth nursing home purchase in two years, totaling more than $100 million in deals.

In July, Cortland Partners paid $73.9 million for the Depot Station apartment complex in Delray Beach.

[contact-form-7]

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(iStock)

(iStock)

South Florida’s single-family home market boomed in the fourth quarter of 2020, in many cases spilling over into condo sales, according to Douglas Elliman’s reports.

Brokers have reported an uptick especially in the luxury end of the market, citing a surge of buyers from the Northeast, California and Midwest who want to take advantage of Florida’s favorable climate and lack of state income tax. Single-family homes continued to outperform condos, according to the reports, which are authored by Jonathan Miller of Miller Samuel Inc.

At the same time, median prices continued to climb, while inventory declined across the region, with some exceptions for condos.

Miami mainland

On the coastal Miami mainland, which includes Aventura, Brickell, Coconut Grove, Palmetto Bay, Pinecrest and South Miami, residential sales rose 24 percent, year-over-year, to 4,650 closings in the fourth quarter, with both condo and home sales increasing at a similar pace.

The median price for a residential property was $380,000, up 13 percent compared to the previous year. Inventory fell more than 20 percent to 8,654 residential units on the market.

Condo sales rose about 26 percent, year-over-year, to 2,366, and single-family home sales totaled 2,284, a 22 percent annual increase. Inventory of single-family homes dropped by 40 percent, to 2,064 homes. Condo inventory also decreased, by 12 percent to 6,590 units listed for sale.

Miami Beach and the barrier islands

In Miami Beach and the barrier islands, including Bal Harbour, Bay Harbor Islands, Fisher Island, Golden Beach, Indian Creek, Key Biscayne, North Bay Village, Sunny Isles Beach and Surfside, residential sales grew by 52 percent, year-over-year, to 1,176 closings in the fourth quarter.

The median price jumped, by 33 percent to $530,000 for all residential properties. And inventory declined by 7 percent, to 6,020 listings.

Condo sales increased 36 percent to 952 closings, while single-family home sales surged, rising a whopping 195 percent to 224 closings in the fourth quarter. Inventory again declined, down 3.5 percent to 5,490 condo listings, and down 30 percent to 530 single-family home listings.

Fort Lauderdale

Condo sales increased 15 percent, year-over-year, to 566 closings, while single-family home sales rose 32 percent to 62 closings in Fort Lauderdale.

Again, homes fared better than condos. Inventory of condos increased slightly, up 3 percent to 1,472 listings, and the median condo price rose 5.5 percent to $316,500. The median price of homes grew by 28 percent to $2.7 million, and inventory fell by 32 percent to 223.

West Palm Beach

Though single-family home sales jumped 33 percent to 616 closings in West Palm Beach, condos weren’t as popular. Condo sales dropped 20 percent to 515 in the fourth quarter. Prices rose slightly, up nearly 4 percent to $134,000 for condos, and up 18 percent to $360,000 for houses.

Inventory of both fell, by 10 percent to 1,037 condo listings and by 35 percent to 458 single-family home listings.

Palm Beach

Single-family home sales exploded on Palm Beach island, increasing 329 percent, year-over-year, to 60 closings in the fourth quarter. The median price rose 29 percent to $4.9 million for houses, and inventory dropped by 60 percent to 59 listings.

Condo sales also rose, up 73 percent to 104 closings. The median condo price jumped to $745,000, a 17.5 percent annual increase. There were 200 listings, marking a 15 percent decline in inventory.

Jupiter and Palm Beach Gardens

In Jupiter and Palm Beach Gardens, condo sales dropped by 12 percent to 174 closings, but single-family home sales increased to 339 closings, a 46 percent jump.

The median price for both condos and houses rose 21 percent, to $375,000 for condos and to $640,000 for houses. Condo inventory dropped by 30 percent to 190 listings, and single-family home inventory fell by 44 percent to 204 closings.

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From left: Knotel’s Amol Sarva; Breather’s Bryan Murphy; WeWork’s Sandeep Mathrani and IWG’s Mark Dixon

Montreal-based Breather, a company that rents workspaces by the day, made a bold announcement last month that reverberated throughout the world of flex-office operators.

“Breather, in its current form as an operator, doesn’t make sense. And, to be frank, I’m not sure it ever made sense,” CEO Bryan Murphy told the Globe and Mail as he announced the startup would close all of its locations in the U.S., Great Britain and Canada.

Flex-office companies emerged from 2020 bruised and battered. But they say that whatever doesn’t kill you — and, to be sure, some companies were dealt a fatal blow — only makes you stronger.

The year of Covid was a telling one for the fast-growing commercial real estate sector that critics and supporters alike have long asserted had to prove it could survive through an economic downturn.

And 2020 proved to be the ultimate test for some of the biggest players.

Regus — the largest and longest-running company in the space — filed for bankruptcy in the United Kingdom in September 2020 and threw more than 100 locations in the United States into Chapter 11.

The five-year-old startup Knotel drew the ire of many of its New York landlords who claim the company has stopped paying rent, even though its members are still paying their dues. More than a dozen owners have sued to collect and a few have even filed to evict Knotel. A handful of smaller co-working companies have folded up or tried to reorganize themselves through bankruptcy.

“The flex sector is going through a vast change as it’s been heavily impacted by the shutdowns — even potentially more so than conventional businesses,” said CBRE research manager Mike Slattery.

One of the big questions looming for short-term rental companies, co-working firms and other flexible-space providers is how their business models will be affected by shifting work patterns brought on by the pandemic.

Critics argue that with companies allowing employees to continue to work from home, there will be less demand for their spaces. But those who are more bullish say the new realities of office culture mean companies will shift employees from traditional offices into flex spaces with less restrictive terms than more traditional office leases.

The co-working correction

The onset of the pandemic certainly represented a big shift for flex-office companies, which had gobbled up space in Manhattan and other markets over the past few years, driven in large part by WeWork’s ambitious expansion.

Flex-office firms leased just 300,000 square feet in Manhattan in 2020, according to CBRE, down from 4.7 million square feet in 2018.

And while office leasing across all industries was down due to the pandemic, flex office took a much bigger hit. Those 300,000 square feet accounted for just 3.5 percent of Manhattan’s leasing total, compared to 2018 when the sector accounted for about 18 percent, CBRE’s figures show.

As for public sentiment toward the flex space, one can look to Regus’ parent company IWG, run by founder Mark Dixon, which is publicly traded on the London Stock Exchange.

The value of the company’s shares has made a significant recovery after taking a sharp dive in March 2020 along with broader stock market turbulence when the pandemic first hit. IWG stock was trading at about £360 (about $485) in early January, recovering about 70 percent of the value lost in March, when it bottomed out at £160 (roughly $215).

In response to the pandemic, the company accelerated its plans to shutter about 4 percent of its portfolio of nearly 3,400 locations worldwide. In the U.S., part of that strategy involved putting many of its locations into bankruptcy.

“We predict dramatic changes in the fabric of how and where people work will continue to accelerate as employees look for solutions that offer a mix of working from home, satellite office and HQ,” a spokesperson for IWG told The Real Deal in a statement.

Regus, which first launched in Brussels in 1989, is no stranger to bankruptcy. The company filed for Chapter 11 in 2003 after the dot-com bubble burst. At the time, the flex-office market was much younger than it is today, but the industry really started growing and maturing in the years following the Great Recession.

WeWork opened its first location in Soho in 2010 and famously ballooned to a valuation of $47 billion with heavy backing from SoftBank before the co-working giant’s failed IPO effort in 2019. Following that debacle, the company changed leadership — replacing its co-founder Adam Neumann with mall industry veteran Sandeep Mathrani as CEO — and drastically cut back its growth plans.

In August 2020, WeWork got a $1.1 billion cash infusion from SoftBank, and that month its executive chairman Marcelo Claure told the Financial Times that the company was on track to be profitable by the end of 2021. SoftBank removed Claure from WeWork’s board just a few months later.

Even with the cash infusion, Fitch downgraded WeWork’s rating to CCC in October 2020, saying there was concern over the viability of its business model if the pandemic led to less demand for office space.

WeWork’s success inspired a new generation of co-working firms, many of which were aimed at niche audiences.

But that trend appears to be going in reverse now, as companies in weaker financial positions struggle and those with stronger models become more entrenched.

Industrious — one of the few firms that has shown little sign of pulling back or changing course — is teaming up with landlords to operate their office properties as private offices. Developer Sioni Group recently signed an agreement with the startup to debut its recently developed 53,000-square-foot office building at 44 West 37th Street in Manhattan as Industrious Herald Square this winter.

Industrious CEO Jamie Hodari recently told TRD that smart landlords are trying to take advantage of the “work from anywhere” trend.

Survival of the fittest

Many see the pandemic as weeding out the weaker players. When workers do finally return to the office and the market bounces back, they say, the playing field will be much more consolidated with fewer players.

In June 2020, the wellness-focused co-working firm The Assemblage reportedly shut down all three of its Manhattan locations. Primary — a small co-working firm founded by former WeWork employee Lisa Skye Hain with two locations in Manhattan near Penn station and in the Financial District — filed for bankruptcy in July. And Serendipity Labs, a co-working firm founded in 2011 by former Regus president John Arenas, filed for bankruptcy in December 2020.

Only the strong will survive,” said Ryan Simonetti, CEO of the shared meeting-space startup Convene.

“There’s no question for me that when the pandemic ends, businesses that survive will desire these amazing experiences,” he added about the perks of flex office, which doesn’t require companies to commit to long-term leases. “And if anything, there will be [fewer] competitors around.”

Simonetti, who said his company cut about 85 percent of its expenses in 2020 as a survival measure, noted that “strong” could be defined in a number of ways: a deep pocket of cash to dip into or an asset-light business model that spreads around the risk, for example.

He said Convene was able to get through the pandemic due to the fact that it mostly partners with landlords instead of doing conventional leases. The company also recently pivoted by transforming some of its shared-meeting locations into mini broadcast studios as part of its new virtual meetings business.

Simonetti said he believes his segment of the flex-office market will bounce back quicker than others. “I think the meetings, events and conference business recovers faster than the co-working business,” he said.

For others, the pandemic has exposed fatal flaws in their business models.

Breather, which is shutting down all of its 400-plus on-demand locations in an effort to repay creditors, has also laid off most of its staff. The company is now pivoting to an online membership model that lets users rent flex-space operated by other companies.

“I want to be like Airbnb,” Murphy said in December 2020.

Revolving doors

To be sure, the challenges of 2020 have put many operators in adversarial relationships with their landlords.

WeWork filed a lawsuit this month against its landlord at 404 Fifth Avenue, the Chetrit Group, claiming the owner threatened to illegally draw down on a multimillion-dollar letter of credit at the location.

And Knotel is facing a mounting pile of lawsuits from property owners and vendors claiming the company owes them roughly $10 million in rent and fees. Knotel CEO Amol Sarva said he was working to resolve the “shared economic situation with our landlord partners” and argued it was in everyone’s best interest to come to mutually beneficial agreements.

“We’re trying to do it in a civil and cooperative way, because we will be doing business in the future,” he said in a recent interview. “They all know that customers want to do flex.”

Knotel reportedly secured a recent funding round, which he announced to employees in an all-hands meeting this month. Sarva declined to comment on the funding or whether any new cash would be used to pay rent, but a source told Business Insider that it’s a restructuring type of deal, including debt and equity financing.

Sarva told TRD his big takeaway from last year is that the flex-office model can survive a once-in-a-lifetime crisis. “The big news is, this is the way it works now,” he said. “Flex platforms are real.”

To that end, 2020 wasn’t all a retreat. In November, for instance, IWG opened its first Williamsburg location under the company’s Spaces co-working brand.

The new flex office opened in 79,000 square feet at Meadow Partners’ 109 South 5th Street, which had previously been a WeWork location.

—Akiko Matsuda contributed reporting.

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Sagi Shaked and 201 North Pine Island Road (Shaked Law, Google Maps)

Sagi Shaked and 201 North Pine Island Road (Shaked Law, Google Maps)

A company affiliated with South Florida personal injury attorney Sagi Shaked paid $7.5 million for a medical office building in Plantation.

Shaked bought the 15,000-square-foot building at 201 North Pine Island Road, according to records.

The building was previously home to Plantation Fertility & Genetics, the medical practice of Dr. Mick Abae, who is also the seller. Abae closed his practice of 30 years on April 30, blaming the “economic impacts, uncertainties and risks” of Covid-19, according to his website.

Abae bought the land in 2003 for $1.2 million, and the two-story office building was built two years later.

Shaked bought the building through Duke & Duke Holding, a company he manages with Aaron Michael Friedeberg, according to records. Shaked and Friedeberg are also in charge of Alliance Spine & Joint, a Hallandale-based medical provider for interventional pain management, orthopedic surgery and neurosurgery.

Late last year, Shaked paid $8.9 million for a Weston office building anchored by JPMorgan Chase but mostly leased by medical tenants.

Other recent big-ticket office sales in South Florida include an Atlanta-based real estate investment firm paying $36.7 million for an eight-story South Miami medical office building and Bridge Investment Group selling the Bayview Corporate Tower in Fort Lauderdale for $82.5 million.

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President Joe Biden (Getty; iStock)

President Joe Biden (Getty; iStock)

President Joe Biden is extending federal limits on evictions through at least the end of March.

Biden is expected to move quickly to extend protections for renters, Bloomberg reported, and may sign an executive order within hours of his inauguration. Biden will also ask federal agencies to consider extending foreclosure protections and forbearance options.

The existing federal eviction order, in place since September, allows lower-income renters to claim financial hardship as a defense for an eviction for non-payment. It does not, however, preclude states from passing more comprehensive eviction bans, as New York state did in December.

The reduction in economic activity to stem the spread of the coronavirus has left landlords with mounting unpaid bills. Moody’s estimates that landlords are owed $57 billion in back rent, utilities and fees.

Meanwhile, the nation’s poverty rate has risen steeply in the U.S. since some federal aid benefits expired, according to economists from University of Chicago, University of Notre Dame and Zhejiang University. From June to November, the portion of Americans in poverty rose by 2.4 percentage points, or 7.8 million people, to 11.7 percent in November.

[Bloomberg] — Georgia Kromrei

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21046 Commercial Trail, Boca Raton (Google Maps, iStock)

21046 Commercial Trail, Boca Raton (Google Maps, iStock)

Even with a newly inked 62,000-square-foot bowling alley lease, South Florida’s retail market saw mostly gutter balls in the fourth quarter.

Across the tri-county area, vacancy rates rose and square footage returned to the market, according to a newly released report from Colliers International. And yet in some parts of the region, average asking rents rose, and landlords landed some large leases and buyers.

With relatively limited construction in the works, retailers may take advantage of market weakness and growing population centers, giving retail some long-term health, according to the report.

Here’s a breakdown:

Miami-Dade County

Miami-Dade had the lowest vacancy rate of the tri-county area, at 4.6 percent in the fourth quarter, up slightly from 4.5 percent in the third quarter of 2020 and the fourth quarter of 2019.

Retail tenants returned 42,000 square feet of space to the market. The county saw little new construction delivered, at 28,000 square feet — the smallest amount in a year. It has 1.8 million square feet of retail space under construction.

The average asking rent of $35.83 a square foot was down 0.4 percent, quarter-over-quarter, and down 6.5 percent, year-over-year.

Two of the largest leases signed during the quarter were for gyms. Crunch Fitness signed 34,000 square feet at Cutler Bay Towne Center, and Planet Fitness signed for 18,000 square feet at River Landing in Miami, which opened in the fall. Ross Dress for Less signed 24,000 square feet at Doral Square.

Some of the biggest real estate sales during the quarter aim for redevelopment. Midtown Development bought Shops at Sunset Place in South Miami for $65.5 million, with plans to reduce retail and add office, apartments, hotel and parking space. AvalonBay paid $19 million for a 21,000-square-foot Winn-Dixie property in South Miami, with plans to add grocery, apartments and parking spaces.

Broward County

Broward saw the highest vacancy rate in the region at 5.6 percent, up from 5.1 percent in the third quarter of 2020 and up from 4.5 percent in the fourth quarter of 2019.

Retail tenants returned 181,000 square feet of retail space to the market. This marked the third consecutive quarter of negative net absorption and increased vacancy.

The county had 235,000 square feet of new construction delivered during the quarter, and has 628,000 square feet under construction.

The $21.92 average rent per square foot was the lowest in the region, down 1 percent, quarter-over-quarter, and down 4 percent, year-over-year.

Some retailers may be taking advantage of the weakened market. Publix leased 23,000 square feet at 16000 Pines Market in Pembroke Pines, which is under construction and expected to open this year. Other tenants to pre-lease space at the shopping center are Verizon Wireless and Everglades Family Dental.

Other big leases signed in the county during the quarter include Party Tyme World taking 24,000 square feet at 11210 to 11300 Pines Boulevard, Pembroke Pines; Learning City Academy taking 10,000 square feet at 9897 West Oakland Park Boulevard, Sunrise; Breed of Human taking 10,000 square feet at 191 South Bryan Road, Dania Beach; and My Salon Suite taking 7,000 square feet at 6261 to 6301 West Sample Road, Coral Springs.

Investors bought shopping centers and drug stores. Some of the top sales include the Mattos family expanding its South Florida holdings by buying a shopping center in Weston for $20.45 million and an Oakland Park Walgreens store selling for $7.3 million.

Palm Beach County

The county had a vacancy rate of 5.2 percent, down from 5.3 percent in the third quarter of 2020, and up from 4.5 percent in the fourth quarter of 2019.

Palm Beach saw a limited amount of construction, with 18,000 square feet of new retail delivered during the quarter. Another 504,000 square feet of space is under construction.

Rent averaged at $23.45 a square foot, up 3 percent, quarter-over-quarter, and up 4 percent, year-over-year.

Big leases inked during the quarter include Bowlero leasing 62,000 square feet for a bowling alley at 21046 Commercial Trail in Boca Raton, which marked one of the largest lease deals of the year.

Big sales included Fortress Investment Group, Hyde Retail Partners and Kean Development selling the Tiffany & Co. building on Worth Avenue in Palm Beach for $26.4 million.

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The post New bowling alley lease couldn’t keep South Florida’s retail market out of the gutter in Q4 appeared first on The Real Deal South Florida.

Gene Martinez (Compass)

Gene Martinez (Compass)

Gene Martinez, a longtime New York City sales manager who was one of Compass’ earliest recruits, died Tuesday night. He was 60.

Compass CEO Robert Reffkin informed managers of Martinez’s sudden death in an email Wednesday. Reffkin said Martinez played a “critical” role in helping Compass launch offices in New York, Washington, D.C., and San Francisco, where he was the firm’s first regional president. “We would not be the community we are today without him,” he wrote on Instagram.

The cause of death was a stroke, sources said.

When Martinez joined Compass in 2015, he was one of the startup brokerage’s first 50 employees. He came from the Corcoran Group, where he spent 16 years and rose to become manager of its Soho office.

In fact, Martinez’s move to Compass became a flash point in the startup firm’s rivalry with established players.

After he and several other ex-Corcoran managers and agents joined Compass, Corcoran sued the firm, alleging it had “brazenly” raided its offices and poached talent.

The lawsuit was settled, but a copy of Martinez’s contract, which was submitted as evidence in the case, shed light on Compass’ recruiting tactics, including lucrative signing bonuses and other perks.

In 2019, Corcoran’s parent company, Realogy, filed a wide-ranging lawsuit accusing Compass of “predatory” recruiting. (Martinez was not mentioned in that lawsuit, which is ongoing.) Compass now has 18,000 agents and did over $91 billion in sales volume in 2019. Earlier this month, it filed confidentially to go public, as The Real Deal first reported.

To satisfy his noncompete with Corcoran, Martinez was director of sales and business development in Miami and D.C., according to his LinkedIn. He later held the same role in New York City. In 2016, he moved to San Francisco to launch that market, and he moved back to his hometown of Miami in 2018 and began working as an agent.

In December, he represented Karlie Kloss and Joshua Kushner in a $23.5 million purchase of a waterfront mansion in Miami Beach.

On social media, fellow agents recalled Martinez as a caring and effective manager who was generous with his advice. “I am absolutely devastated,” Leonard Steinberg, Compass’ chief evangelist and a fellow early recruit, wrote in an Instagram post.

“He was a coach, confidant, and close friend to many,” Reffkin wrote in an email to Compass managers on Wednesday. “His entrepreneurial spirit was always on display.”

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The post Gene Martinez, early Compass recruit, dies appeared first on The Real Deal South Florida.

(Photo illustration by The Real Deal)

It was hard to miss the dozens of hardhats on lunch break as they poured out of a 20-story office building on Manhattan’s Far West Side. Some ducked into nearby shops, while others lined up at street vendors for chicken and rice.

The construction crew has been working to overhaul the 636,000-square-foot property just across from Hudson Yards, a job that will transform the nearly century-old building into a Class A office tower.

When 601W Companies closed on the Amazon-anchored building at 410 10th Avenue for $952.5 million in December, it was the second biggest investment sale in the city’s pandemic-ravaged market in 2020. And it was a perfect illustration of 601W’s playbook.

Besides having a penchant for trophy office properties, the Manhattan-based investment firm, led by founder Mark Karasick and fellow managing members Michael Silberberg and Victor Gerstein, is entrenched in the redevelopment business. It acquires massive but often aging or neglected office buildings, and spends millions to redevelop them before boosting occupancy — or rebranding for a new tenant roster — and eventually selling at a high return.

But 601W’s ambitious strategy is being tested, as both New York and Chicago — another city where it is heavily invested — continue to get decimated by the pandemic, with offices emptied out and tenants trimming space.

Despite owning prime properties across the country, some high-wattage tenants — Uber included — and expansive redevelopment projects, 601W and especially its founder have for years maintained a low profile. But the 410 10th buy, for which it secured a $705 million acquisition loan from JPMorgan Chase, thrust it into the spotlight. 

The company “had to rise above the kings of the industry to win this,” said Darcy Stacom, who heads CBRE’s New York capital markets group and respresented seller SL Green Realty in the deal for the tower.

Over the last 25 years, 601W has amassed 45 million square feet of office properties in its portfolio, worth over $12 billion. Its current holdings outside of Chicago and New York include massive properties like the 2.3 million-square-foot U.S. Steel Tower in Pittsburgh, along with a 650,000-square-foot former office complex at 4000 Connecticut Avenue in Washington, D.C., that was converted into a private school.

Besides the 410 10th redevelopment, the company is overhauling a 592,000-square-foot building at 801 South Canal Street in Chicago after buying it for $68 million last February. The property is just south of the 2.5 million-square-foot Old Post Office, which 601W acquired for $130 million in 2016. It plowed more than $800 million into redeveloping and modernizing that hulking complex, including installing a new 3.5-acre rooftop park.

Out of office

601W’s moves come at a perilous time for the industry, though one some investors see as ripe for opportunity. Manhattan’s office availability hit 14.3 percent in the fourth quarter of 2020, the highest quarterly mark on record, according to Colliers International.

Chicago’s downtown office market has also seen vacancy soar. Its rate stood at 14.2 percent in the fourth quarter, which doesn’t include the 5.4 million square feet of sublet inventory — the highest on record — according to the local commercial brokerage MB Real Estate.

While Covid vaccine distribution brings renewed optimism, the work-from-home environment is now entrenched, meaning finding new tenants will be a struggle in the coming months.

Sam Chandan, who heads New York University’s Schack Institute of Real Estate, said absent federal aid to New York, “the fiscal challenges we face with declines in tax revenue — related to property sales, related to tourism spending — will put severe strains on the city and its competitiveness.”

But Stacom, who has been one of the city’s top commercial dealmakers for years, said 601W’s willingness to pay nearly $1 billion for the SL Green building almost a year into the pandemic proves it is already looking past the crisis.

From its inception, 601W has played the long game.

In 1998, Karasick and his investment partners, under the name 601 West Associates, bought the sprawling Starrett-Lehigh Building at 601 West 26th Street in New York from Helmsley Enterprises for $152 million. The 2.3 million-square-foot manufacturing building — which became the company’s namesake — was already a designated landmark but had been poorly run, and was 50 percent vacant at the time of acquisition.

To attract new tenants, Karasick invested about $22 million in upgrades, the New York Times reported. 601W eventually brought in high-paying tenants like Martha Stewart Living, Omnimedia and Hugo Boss, but 12 former tenants, feeling the landlord was harassing them to force them out, sued the firm.

Karasick denied trying to kick the tenants out, and in an interview with the Times downplayed the lawsuit in a building with nearly 200 tenants total.

Karasick and other representatives at 601W did not respond to requests for comment for this article. The company lists Karasick as a graduate of Yeshiva University and several of its graduate schools — including the Bernard Revel Graduate School of Jewish Studies.

After successfully stabilizing the Starrett-Lehigh Building and rebranding it as a “new media and technology center,” 601W sold the trophy asset to Scott Rechler’s RXR Realty for $950 million in 2011. Pocketing more than six times the purchase price, 601W still touts that deal on its website.

The firm’s track record with Starrett-Lehigh was appealing to Chicago city officials when the company reached out in 2016 about purchasing the Old Post Office building. The similarities between the two projects stood out as the administration of then-Mayor Rahm Emanuel probed 601W as a prospective buyer, said David Reifman, at the time Chicago’s planning chief.

The city was in the process of condemning the dilapidated former post office, which had sat vacant along the Chicago River for nearly two decades. But the city halted that process after 601W guaranteed a quick closing on the $130 million deal with the seller, British property mogul Bill Davies. The firm kept its word and moved forward with the redevelopment after the purchase, Reifman said.

That part of downtown wasn’t considered an office district, but the city saw potential because of its proximity to transit, and 601W shared the same vision, Reifman said.

“It’s really a very interesting market that needed something like the Old Post Office to breathe new life,” he added.

Timing is everything

But vision alone wouldn’t have revived the 12-story Art Deco building, said Lisa Davidson, a Savills broker who was part of the team representing the Old Post Office seller.

“They really did have a lot of foresight. And so I definitely give them credit for that,” she said, referring to the 601W team. “But I think, sometimes in life, timing is everything.”

801 South Canal Street in Chicago

Davies — who paid $24 million for the building at a 2009 auction — had rejected multiple offers over the years from other developers. Because Davies wanted to be involved in the project as a co-owner, those proposals ultimately fell apart, Davidson recalled.

By the time 601W started to negotiate with Davies, however, he was ill and in the hospital.

“He was finally willing to let go of the idea of being involved in the property,” making it possible for 601W to move forward with the deal, Davidson said.

Davies died the day after the 601W deal closed in May 2016.

The firm spent more than $800 million to transform the Old Post Office into a modern office building, securing a $500 million construction loan in late 2017 from JPMorgan and Blackstone Group. JPMorgan also provided a $611 million refinance in October 2019, just before the building opened, Crain’s reported. 601W has secured long-term leases with Uber, Walgreens, PepsiCo, the Chicago Board Options Exchange and Cisco. As of its June 2019 rent roll, the property had 1.9 million square feet leased.

All of that had an unintended effect for the press-averse firm. 601W increased its “profile here in Chicago by doing a building like the Old Post Office,” Reifman said.

But the Old Post Office wasn’t even 601W’s biggest purchase in Chicago. The year before, it paid $712 million for the 83-story Aon Center. In late 2018, it was approved for its $185 million overhaul of the skyscraper, including plans for an observation deck “thrill ride” that would dangle passengers over the roof.

Pandemic parley

601W has used a bit of creativity to lure new tenants, said CBRE’s Bradley Serot, who leads the firm’s tech group in downtown Chicago.

For a potential new tenant that had a lease expiring in 24 months at its current location, 601W has worked to bring it in, Serot said. The company will “structure a deal to get them out of their existing lease across the street and into a 601 West Companies building,” providing necessary tenant improvements along with a portion of free rent, he added.

601W, which is now one of Chicago’s largest office landlords — it owns seven office buildings and a total of 9.4 million square feet — is “being a little bit more proactive and creative than maybe some owners I’ve seen in town,” he said.

At the Old Post Office, leasing was brisk, and the behemoth was about 80 percent leased when first tenants started to move in by fall of 2019. In February 2020, Walgreens relocated about 1,800 employees to its new 203,000-square-foot digs.

But then the pandemic hit and offices emptied out. With companies trimming leases and even exiting them entirely across the city, 601W began offering different options. One, called the Pony Express, allows tenants to rent a smaller, plug-and-play space for a short term while having access to the common amenities, similar to a co-working model.

“This is a strategic answer to some of the challenges posed by Covid and accelerates an already-existing trend of making it easier and faster for tenants to occupy spaces,” said Cailin Rogers, spokesperson for the Telos Group. The Chicago-based leasing and consulting firm handles 601W properties.

Meanwhile, a total makeover at 801 South Canal — dubbed Canal Station — has recently begun, said Telos broker Matt Whipple. 601W’s six-story property, built in 1990 for Northern Trust, will reopen as a multi-tenant boutique office building that meets tenants’ needs in a post-Covid era, he said. Work is set to be completed late this year or early in 2022.

“We think the timing of this redevelopment is actually really positive,” Whipple said

The post This office redeveloper is going all in appeared first on The Real Deal South Florida.

(iStock)

(iStock)

Homebuilder sentiment fell again as 2021 got underway.

The National Association of Home Builders/Wells Fargo Housing Market Index this month decreased to 83, seasonally adjusted, compared to December’s reading of 86.

January’s reading is the second consecutive month the index has reported a month-over-month decline. The prior month’s reading was the first time since April that the index saw a decline.

Homebuilder sentiment was also lower when it came to current single-family sales, with a reading of 90. The outlook for home sales in six months time dropped to 83, while the outlook for buyer traffic fell to 68.

The index tracks homebuilder confidence in current and future single-family home sales and traffic of potential homebuyers on a monthly basis. A reading of more than 50 indicates a positive outlook; a reading under 50 indicates a negative outlook.

Regional sentiment once again followed in the national indices’ footsteps, with index readings all below than those recorded in December, except in the Midwest region.

But despite January’s lower figures, all components and regions tracked by the indices were higher compared to readings in January 2020.

The housing market’s strength from last year has carried into the new year so far. Homebuyers continue to apply for bigger loans to purchase new homes, while the supply of available homes reached an all-time low.

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Gil Dezer and renderings of the project (Renderings via Zyscovich Architects)

Gil Dezer and renderings of the project (Renderings via Zyscovich Architects)

A homeowners association filed a lawsuit challenging the city of North Miami Beach’s recent rezoning of the Intracoastal Mall for father-and-son developers Michael and Gil Dezer.

The Eastern Shores Property Owners Association and three Eastern Shores residents – Bruce Lamberto, Stacy Roskin and Bruce Kusens – are appealing the comprehensive zoning amendments and a development agreement that will enable Dezer Development to replace the waterfront Intracoastal Mall shopping center with Uptown Harbour, a $1.5 billion project that includes 2,000 residential units, 250 hotel rooms, 200,000 square feet of office space, a new 280,000-square-foot shopping center, a 50,000-square-foot supermarket, a 45,000-square-foot gym, and a brand new canal.

The zoning changes were approved by a vote of four to three last year.

Eric Isicoff, a partner of the Brickell-based law firm of Isicoff Ragatz and an Eastern Shores resident, is representing the Eastern Shores plaintiffs. The lawsuit was filed in Miami-Dade Circuit Court on Tuesday.

“We think the mayor and his fellow commissioners were wrong and they made a serious legal error on a matter with significant implications for the residents of Eastern Shores,” Isicoff stated in an email to The Real Deal. “We are hopeful that the court will recognize the error and quash the decision of the City Commission.”

North Miami Beach City Attorney Daniel Espino did not return a request for comment.

The lawsuit drafted by Isicoff alleges that the city ignored its own zoning code requiring developers to provide multiple vehicle access points in and out of the property prior to redeveloping Intracoastal Mall. Isicoff argues that adding more traffic lanes and widening existing entrances doesn’t sufficiently meet that requirement.

The complaint also alleges that Uptown Harbour’s towers won’t match the surrounding area of Eastern Shores, a neighborhood of single-family homes and low-rise apartments. Under the new zoning heights would rise on two sides from 12 stories or 160 feet to 20 stories or 286 feet; and from 20 stories or 255 feet to 32 stories or 425 feet, according to the lawsuit, marking a 66 percent increase to the heights originally proposed and approved, the lawsuit stated.

The lawsuit points to North Miami Beach Mayor Anthony DeFillipo indicating to Eastern Shores residents that he was skeptical of the developers’ traffic mitigation plans and that he’d ultimately vote against final approval of the project. It alleges that DeFillipo claimed that commissioners who voted in favor of the zoning change had “sold themselves to the devil.” However, after being re-elected in November, DeFillipo ended up supporting the project. (Kusens, one of the plaintiffs in the suit, ran against DeFillipo for mayor.)

“I didn’t say I was going to vote no. I said I was going to reconsider,” DeFillipo said following the Nov. 10 commission vote.

The Dezers purchased the 26-acre Intracoastal Mall in late 2013 for $64 million.

Two years later, the city rezoned the property to allow mixed-use high-rise development. In March 2020, Dezer Development increased its land holdings by purchasing a neighboring office building for $15 million.

By the summer of 2020, the Dezers were seeking additional zoning changes that would include the addition of a canal as well as height increases. Many Eastern Shores residents opposed the plans, fearing their neighborhood would be engulfed with traffic and skyscrapers.

Most zoning changes are finalized after two votes from a local elected body. However, the North Miami Beach City Commission had to vote on Uptown Harbour three times. The mayor called for the third vote after one commissioner was disconnected and another fell asleep during the second reading vote in August, which stretched past 2 a.m. and was held virtually on Zoom.

The post Neighbors sue to overturn approval of Dezer’s mega project in North Miami Beach appeared first on The Real Deal South Florida.

Donald Trump and Alex Adjmi (Photos via Getty; GOSO NYC)

Donald Trump and Alex Adjmi (Photos via Getty; GOSO NYC)

Alex Adjmi, a mainstay of the Syrian Jewish community that dominates the Manhattan retail market, received a presidential pardon, the White House announced early Wednesday. Adjmi was convicted of money laundering for a Colombian drug cartel in 1996 and served 44 months in prison.

Adjmi is the head of A&H Acquisitions, a major but under-the-radar real estate player across Manhattan, Brooklyn, Chicago and Los Angeles. A&H has or previously had stakes in properties including 529 and 568 Broadway in Soho, 213 West 34th Street in Midtown, 21 Ninth Avenue in the Meatpacking District, and 9570 Wilshire Boulevard in Beverly Hills. It often partners with other big investors from the community on these deals, including Jeff Sutton, Aurora Capital Associates, and Crown Acquisitions, whose founder, Stanley Chera, was a prominent backer of President Trump.

Adjmi’s petition was supported by influential members of the community, including Haim Chera, son of Stanley Chera and head of retail at Vornado Realty Trust; Bobby Cayre, head of Aurora Capital, and members of the Sitt family, according to the announcement from the White House.

Adjmi was a target of a federal sting operation in which he allegedly helped wash $22.5 million for the Cali cocaine cartel through a Connecticut brokerage that was in fact an undercover operation run by the FBI and the Drug Enforcement Agency, according to the Asbury Park Press. He was arrested in 1993 and pleaded guilty to five felonies. He went to prison in 1996 and was released in October 2000 after serving 44 months.

“Following his release, he [Adjmi] has dedicated himself to his community and has supported numerous charitable causes, including support for children with special needs and substance recovery centers,” the White House said. In 2017, Alex and his brother and partner, Harry, were honored by Getting Out Staying Out, an organization that helps formerly incarcerated people find a path to the job market. A&H offered former inmates paid internships in its construction division.

Reached Wednesday, Adjmi only said that he was “humbled and grateful to have received this pardon.”

The Adjmi family has several homes in the wealthy New Jersey seaside enclave of Deal, though Alex’s personal property is in nearby Allenhurst.

Trump has bestowed a number of pardons and commutations on real estate and business executives and associates in his final days in office. In December, the president pardoned Kushner Companies’ founder Charles Kushner, who served 14 months in federal prison on crimes including illegal campaign donations and witness tampering.

And on Wednesday, Trump also pardoned Ken Kurson, former editor-in-chief of the New York Observer. Kurson was arrested in October on charges of cyberstalking. The Observer, which includes the popular real-estate supplement Commercial Observer, was bought by Jared Kushner in 2006 and is now controlled by his brother-in-law, Joseph Meyer.

Trump can still issue more pardons until President-elect Joe Biden is sworn in today, at noon Eastern.

This story was updated to include a comment from Alex Adjmi.

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Richard Bressler and Lisa Gersh with 1425 West 25th Street, Miami Beach (Getty, Google Maps)

Richard Bressler and Lisa Gersh with 1425 West 25th Street, Miami Beach (Getty, Google Maps)

UPDATED, Jan. 21, 6:25 p.m.: Media giants Richard Bressler and Lisa Gersh spent $5.1 million on a Sunset Islands II home.

Records show Bressler and Gersh bought the home at 1425 West 25th Street in Miami Beach from Robb Michael LaKritz.

Bressler is president, COO and CFO of iHeartMedia, a San Antonio, Texas-based broadcast, podcast and streaming radio platform. He was named president in 2013. Gersh is the co-founder and former president and COO of New York-based Oxygen Media. She previously held CEO positions at goop and Alexander Wang. Gersh is currently a board member of Establishment Labs, Pershing Square Tontine Holdings and Hasbro, according to her LinkedIn profile.

LaKritz is a real estate investor and the founder and CEO of Washington, D.C.-based LaKritz Holdings. He formerly served as an advisor to the United States Deputy Treasury Secretary for three years under George W. Bush.

LaKritz bought the home in 2015 for $3.6 million, according to records.

The house was first listed for $4.5 million in 2018. Danny Hertzberg of the Jills Zeder Group at Coldwell Banker Realty represented the sellers, while his mother, Jill Hertzberg, of the same brokerage represented the buyers.

According to Danny Hertzberg, the 4,902-square-foot house was rented by Bressler and Gersh for $25,000 a month. The two originally agreed to lease the home for two years in April, but decided to buy the home less than halfway through their term.

Built in 1985, the non-waterfront, four-bedroom, four-and-a-half bathroom house has a pool.

Recently on Sunset Islands, a Venezuelan oil tycoon sold his waterfront mansion for $17.4 million, and the waterfront mansion once owned by Elizabeth Taylor sold for nearly $20 million.

On Sunset Island IV, Douglas Elliman brokers Oren and Tal Alexander paid $10 million for a waterfront teardown with plans to build a new home.

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The post Media titans buy Sunset Islands home for $5M appeared first on The Real Deal South Florida.

NAR's Vince Malta (Photos via NAR; Pixabay; iStock)

NAR’s Vince Malta (Photos via NAR; Pixabay; iStock)

Weeks after a pro-Trump mob attacked the U.S. Capitol building, the National Association of Realtors has suspended all federal political donations, Inman reported.

“Following last Tuesday’s meeting of the RPAC Board of Trustees, our association is temporarily pausing federal political disbursements,” NAR spokesperson Wes Shaw said in an emailed statement. “NAR will continue to closely monitor events in Washington in the days and weeks ahead in order to ensure our political participation most closely represents the will of our Realtor members and the best interests of American real estate.”

Through its political action committee, Realtor PAC, the trade association makes financial contributions to local, state and national campaigns. The PAC’s Board of Trustees is responsible for deciding disbursements to federal candidates.

The group has asserted that it does not favor Democrats or Republicans, but backs candidates who support the “Realtor Party” — i.e. those who support real estate issues, according to Inman.

The NAR was among the largest donors to the members of Congress who contested President-elect Joe Biden’s Electoral College win, donating over $1.27 million to what critics called the “sedition caucus.”

Many other industry trade groups are in the process of reviewing their policies regarding political donations, while some, like NAR, have halted donations altogether following the unrest at the Capitol.

[Inman] — Sasha Jones

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Donald Trump Jr. and Kimberly Guilfoyle with 492 & 494 Mariner Drive (Getty, Google Maps)

Donald Trump Jr. and Kimberly Guilfoyle with 492 & 494 Mariner Drive (Getty, Google Maps)

Residents of the high-end Admirals Cove community in Jupiter are voicing concerns about Donald Trump Jr. and his girlfriend Kimberly Guilfoyle moving into the neighborhood.

Trump Jr. and Guilfoyle are under contract to buy the seven-bedroom, 12-bathroom mansion at 492 Mariner Drive, which is on the market for $11 million. And Guilfoyle, alone, plans to buy the estate next door at 494 Mariner Drive, which is asking $9.5 million, according to the Palm Beach Post.

Peter Moore, general manager of Admirals Cove’s homeowners association, told the newspaper that about 30 residents have reached out with their concerns. “I believe their membership would bring undesirable notoriety to the club, harm our reputation and have the potential for creating disharmony,” one resident said.

Trump Jr. and Guilfoyle are expected to move into their home in March. Trump Jr.’s ex-wife lives nearby in the Jupiter Country Club, and Admirals Cove is about 20 miles away from Mar-a-Lago in Palm Beach, where former President Donald Trump arrived after departing the White House on Wednesday morning. Palm Beach residents have also opposed the former president’s plans to live at his private club.

Both Admirals Cove homes are listed with Rob Thomson of Waterfront Properties.

The Trump family is scattering throughout South Florida.

Ivanka Trump and Jared Kushner closed on their purchase of a waterfront lot in the exclusive Indian Creek Village for about $32 million. They’re also going to be renting a unit at a luxury condo building nearby in Surfside.

Jared’s brother, Joshua Kushner, and his wife, model Karlie Kloss, paid $23.5 million for a waterfront home not far away in Miami Beach.

[Palm Beach Post] – Katherine Kallergis

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(iStock)

(iStock)

Homebuyers are still going strong.

An index that tracks mortgage applications to buy homes increased 3 percent, seasonally adjusted, last week, surpassing the prior week’s surge, according to the Mortgage Bankers Association’s survey.

The MBA metric, known as the purchase index, increased despite mortgage interest rates rising for the second week in a row.

The average 30-year, fixed-rate mortgage was 2.92 percent, up from the previous week’s 2.88 percent. It’s the highest rate since November, according to Joel Kan, MBA’s head of industry forecasting. Jumbo rates also ticked up, to 3.19 percent from 3.17 percent the prior week.

The average loan size for purchase applications jumped to $384,000, the second highest level in the 30-year history of MBA’s weekly survey. The prior week’s average loan size was $374,700.

“Homebuyers in early 2021 continue to seek newer, larger homes,” said Kan.

Rising rates might have pushed down refinance applications, however. The MBA index tracking requests to refinance dropped 5 percent last week from the previous week. Kan attributed the drop to rising rates caused by increasing yields on Treasury bonds, which mortgage rates historically follow.

“Market expectations of a larger than anticipated fiscal relief package, which is expected to further boost economic growth and lower unemployment, have driven Treasury yields higher the last two weeks,” he explained.

Last week, yields on 10- and 30-year Treasury bonds reached the highest levels since March.

The Treasury Department has begun flooding the market with long-term bonds, for which there has been little investor demand to date. That drives down bond prices, boosting yields. On Tuesday, however, Janet Yellen, President-elect Joe Biden’s Treasury secretary nominee, mentioned the idea of issuing 50-year Treasury bonds for the first time, prompting a sell-off in the bond market.

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Ruthie and Ethan Assouline lead Compass’ Assouline Team. (The Assouline Team, iStock)

Ruthie and Ethan Assouline lead Compass’ Assouline Team. (The Assouline Team, iStock)

 

Another out-of-state broker team is entering the South Florida market.

Compass’ The Assouline Team, led by Ruthie and Ethan Assouline, expanded from New York City to Miami. The husband and wife team will split their time between the Big Apple and Miami Beach, they said. They came down to South Florida in March and decided to stay as their clients kept calling them for sales and rentals in the Miami area. http://therealdeal.com/miami/tag/miami-beach

Ruthie Assouline has roots in the area. She grew up between Miami Beach and Bal Harbour. Ruthie and Ethan will work out of the Compass Miami Beach office. Between both offices, the team has five agents. They closed $130 million in sales volume in 2020, according to a spokesperson.

Recent deals include the sale of one of Sarah Jessica Parker and Matthew Broderick’s West Village townhouses.

A growing number of agents are getting licensed in Florida or expanding to the Sunshine State part-time. Los Angeles broker Carl Gambino, who is licensed with Compass in California, and Adam Modlin’s The Modlin Group in New York, joined Compass in Florida.

The Assoulines said they had been planning their Miami expansion for the last three years or so, but pulled the trigger due to the pandemic. Still, they believe both New York and Miami will do well.

“I don’t think there’s a mass exodus from New York,” Ruthie Assouline said. “We’re busier in New York now than we were in 2019.”

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Robert Zangrillo and Rick Renzi with Donald Trump (Getty)

Robert Zangrillo and Rick Renzi with Donald Trump (Getty)

In his final hours in office, President Donald Trump granted pardons to dozens of friends, partners and executives, including several from the real estate world.

One went to Eliyahu Weinstein, who was sentenced to prison in 2014. He and his company, Pine Projects, were convicted for a Ponzi scheme that resulted in $200 million in losses. His jail sentence of 264 months was commuted, according to the New York Times.

Another was received by Miami developer Robert Zangrillo, who was convicted as part of Operation Varsity Blues, a federal investigation that found affluent Americans cheating to get their children into colleges. Zangrillo had conspired with a consultant to bribe athletic officials at the University of Southern California to designate his daughter as a recruit to the crew team. He received a pardon.

Head of A&H Acquisitions Alex Adjmi, who was arrested in 1993 and pleaded guilty to five felonies, also was pardoned. [See separate story here.] And Washington, D.C., developer Douglas Jemal, an older brother of Nobody Beats the Wiz founder Marvin Jemal, got a pardon for his 2006 fraud conviction. The elder Jemal, who hails from Brooklyn, is close to the Kushners, as he and Charles Kushner own neighboring homes on the Jersey Shore.

The 73 convicts and defendants receiving clemency in Trump’s final 24 hours as president ranged from Steve Bannon, the former Trump administration chief strategist, to rapper Dwayne Michael Carter Jr., better known as Lil Wayne. The president spared venture capitalist and top Trump fundraiser Elliott Broidy, who was part of the 1MDB scandal, from punishment as well.

Three former Republican members of the House, including Rick Renzi, who was sentenced in 2013 to three years for a bribery scheme involving an Arizona land swap deal, were in Trump’s pardon parade.

Trump also pardoned former Observer editor-in-chief Ken Kurson, who was charged in October with cyberstalking. The publication includes the real-estate supplement Commercial Observer, which Jared Kushner bought in 2006.

Recently, Trump pardoned Jared’s father Charles Kushner, the Kushner Companies patriarch who spent over a year in prison on charges including falsifying tax returns, making illegal campaign donations and retaliating against a witness.

[NYT] — Sasha Jones

[contact-form-7]

The post Trump pardons Zangrillo, Jemal, other real estate figures appeared first on The Real Deal South Florida.

Multifamily lenders and policymakers have taken much the same approach with evictions and mounting debt during the pandemic: Put things off and hope the rental market’s problems resolve themselves before it’s too late.

That strategy persists as vaccinations ramp up. But with a surge in Covid cases, restrictions on economic activity and evictions could continue for months. As landlords hold on, they are on the hook for more than $1 trillion in multifamily debt held by agency and bank lenders.

Tenants’ debt, too, is building — they owe $57 billion in back rent and utilities, Moody’s Analytics estimates. Yet landlords are not walking away from their assets.

That’s largely because, miraculously, rental payments haven’t fallen much throughout the pandemic. Although an industry group in December reported the largest drop in rental payments in market-rate units since April, apartments — unlike some other asset types — are still performing.

Lenders are more inclined to work with multifamily borrowers whose cash flow problems are seen as temporary, rather than hotel or luxury condo developers, whose assets may have fundamental, long-term problems.

Lenders, however, don’t have infinite patience, even if they prefer not to foreclose, said David Wright, CEO of Beverly Hills-based multifamily developer Markwood.

“The understanding between lenders and borrowers is that we want to be able to access the capital markets, and they don’t want to own real estate,” he said. “But there’s going to be a limit, at which point people are going to have to take a harder stance.”

Waiting for Godot

New York’s eviction moratoriums have been a drag on its multifamily market for nearly 10 months. With a near-blanket ban on evictions — fewer than a dozen have been executed in the five boroughs since March — one might expect mass nonpayment of rent.

But in fact, tenants are largely paying.

Even in New York, a state where the “cancel rent” movement gets a lot of press and socialists using anti-landlord rhetoric have won several legislative seats, only 12 percent of residents say they are behind on housing payments or unsure they can pay next month’s rent, according to a Census Bureau survey. That’s worse than the national average of 9.5 percent, but far better than many expected.

“I was really surprised early on in the pandemic that most of my residents were paying their rent,” said Robert Nelson, who owns more than 4,000 rental apartments in New York City through his firm Nelson Management. “My experience is that the Covid relief money people have received has gone toward paying their expenses, and that has amounted to pretty decent rent collections.”

About the same percentage of Californians as New Yorkers are behind on rent or worried about their next payment. But 35 percent of Californians perceive a risk of eviction, a much higher figure than in New York, according to the Census survey.

That may reflect California’s more landlord-friendly approach to evictions. In September, Gov. Gavin Newsom limited evictions for nonpayment, a measure that expires at the end of January. Tenants can be evicted, however, if they do not return a declaration of hardship within a 15-day notice period and pay 25 percent of their rent debt by the end of January.

New York, on the other hand, has put all residential evictions on ice until May, except for those deemed necessary to protect other residents’ safety. Renters need not prove any financial hardship or go to court.

Proponents of eviction moratoriums argue they are necessary to prevent a wave of homelessness during a pandemic. Mark Zandi, chief economist at Moody’s Analytics, said that without any policy intervention, about 3.9 million tenants would be evicted, representing 7 percent of renter-occupied housing units.

“This is a significant number,” Zandi said in a statement. “Eviction rates have hovered between 2.3 and 3.2 percent from 2000 to 2016.”

But the eviction protections do not address the real estate industry’s need for steady rent to pay its mortgages, maintenance and property management bills. Many landlords say removing the threat of eviction deters tenants from paying.

Trade groups, including the National Multifamily Housing Council, have instead favored expanding rental vouchers, which are paid directly to landlords. Some of the organizations have also pushed for a break on property taxes to landlords who provide rent relief, although that is a tough sell with cash-strapped state and local governments.

Longer-term, the real estate industry argues for property tax reductions, rather than rent control, as a way to make housing more affordable.

“Our industry is extremely responsive to financial incentives,” said David Schwartz, CEO of Chicago-based Waterton and the chair of the multifamily council. “So [if] you remove property tax from the equation, we’ll do a lot of things for affordability.”

Borrow another day

The multifamily sector has not taken the beating that hospitality and retail have or that office landlords fear, but neither has it emerged unscathed.

Nearly half of the multifamily market’s $1.65 trillion in outstanding mortgage debt is secured by Fannie Mae and Freddie Mac, the two quasi-governmental agencies overseen by the Federal Housing Administration.

Responding to the first wave of the pandemic, the agencies moved quickly — even before Congress passed a relief bill — to offer borrowers forbearance. Community banks, which hold a smaller but not insubstantial chunk of multifamily mortgages, also allowed borrowers to defer loan payments.

But as that debt continues to pile up, lenders may struggle to distinguish between borrowers with time-limited cash flow issues stemming from Covid and those whose assets have other problems.

One of the most high-profile flameouts in New York so far, involving Isaac Kassirer’s Emerald Equity Group, was mostly a case of bad timing.

In 2016, with a pile of institutional cash, Emerald scooped up thousands of low-income, rent-regulated Harlem rentals, and  it refinanced them with Freddie Mac in 2018 on the expectation of raising rents.

The next year, New York changed its rent law, eliminating much of landlords’ capacity to raise rents on regulated units. Then tenants in some of the Harlem buildings went on rent strike.

The debt for 40 buildings in Kassirer’s portfolio was placed on hold last spring as lenders offered forbearance to their borrowers in response to the pandemic. Covid had little to do with the buildings’ problems, though.

By December, the rent strike had gone on for more than a year and vacancies were increasing. Twelve of the buildings filed for Chapter 11 bankruptcy protection in December, citing the rent strike as the main cause.

A few days after the bankruptcy filing, attorneys representing tenants at 203 West 107th Street sued to compel Kassirer to resolve housing code violations — including bedbugs and a rat infestation — as a requirement of the debt restructuring.

Yet insiders do not expect the lending community to sour on Kassirer, saying that as long as he avoids taking an adversarial stance with his lender, others would remain open to giving him loans.

One explanation is that the changes to New York’s rent law caught the entire sector by surprise, and lenders would rather not take control of so many buildings. So Kassirer will live to borrow another day.

“The fact that he bought the buildings and gave them back doesn’t make him a bad guy,” said Joshua Stein, a commercial real estate attorney. “The only thing that would make him a bad guy [with lenders] is if he were to engage in liability action, using bankruptcy as a sword rather than a shield.”

Stein said that he expects many multifamily borrowers will experience distress, as Kassirer has, but it may take some time.

“It’s a downward spiral, and it’s scary,” said one large New York City landlord, speaking on condition of anonymity. “And they’re not going down because of Covid — it’s because of the [new rent] laws.”

Value-deferred

If multifamily distress becomes widespread, it may show up first in the assets backing commercial mortgage-backed securities, which typically are too risky to be secured by Fannie Mae and Freddie Mac.

The Mortgage Bankers Association, which tracks delinquency rates across several loan types, reported that multifamily CMBS delinquencies reached 7.9 percent in the third quarter of 2020. The rate for mortgages secured by Freddie Mac was just 0.13 percent.

CMBS represents less than 3 percent of outstanding multifamily mortgage debt — although the properties they’re lending on are “more problematic,” said Will Matthews, a multifamily broker at Colliers International, meaning they may have deferred maintenance or other risk factors that worry lenders.

More distress could also occur in assets where an owner’s investment strategy is specifically threatened by a long-term pause on evictions. Landlords seeking to increase revenue by improving apartments and raising rents are unable to do so as long as eviction moratoriums keep tenants in place. That model depends on being able to push tenants out and get renovation crews in.

Eviction moratoriums — and rent control, which unlike Covid won’t go away with a vaccine — wreck that strategy. For now, most landlords are hoping the eviction moratoriums will be lifted in mid-2021 and are putting off rent increases until then.

There’s also an understanding that value-add multifamily — one of the most recession-resistant strategies — is as close to a sure thing as exists in real estate, even if owners must put it off for a time.

“When people are buying into value-add multifamily, they’re not just buying for a year,” said one executive at a New York City-based investment firm. “Even if they’re kicking it into year two or three, the numbers still work.”

That could explain why investors are still hopeful. In the third quarter, government-sponsored agencies increased their multifamily debt holdings by 3 percent, as did state and local governments.

Pension funds, which provide the financial firepower for the largest asset allocators, are also increasing their multifamily holdings, according to Doug Weill, a partner at real estate capital advisory firm Hodes Weill. The stable returns on multifamily properties put them “high on the buy list” for such institutions, he said.

Robust returns, however, depend on being able to eventually raise rents. For now, the sector has few options but to wait and see what becomes of the gathering storm clouds.

“Do we have a choice?” asked Nelson, the big multifamily landlord. “I don’t think we do.”

The post Multifamily’s trillion-dollar tango appeared first on The Real Deal South Florida.

President Joe Biden (Getty; iStock)

President Joe Biden (Getty; iStock)

With one exception, real estate is not in Joe Biden’s immediate agenda. But within the next few months, the industry will have a fight on its hands — and a few things to cheer.

As Biden is sworn in today as the nation’s 46th president, his focus is on ending the pandemic. That’s good news for real estate, with the aforementioned exception: his proposal to continue the nationwide residential eviction moratorium until September.

Biden wants to end other measures, notably tax breaks that real estate executives have come to view as a birthright even though some have not been around that long — certainly not as long as the new president.

One favorite, the 1031 exchange, was born in 1954, a dozen years after Biden. The original provision let sellers avoid capital gains taxes by immediately spending the proceeds on another property purchase. But 1031 exchanges didn’t come into widespread use until court decisions in 1979 gave sellers time to reinvest and still get the tax break.

Since then they have become second nature in real estate. Pay taxes on reinvested gains? Unthinkable. As the late Leona Helmsley famously said, “We don’t pay taxes. Only the little people pay taxes.”

But Biden sees himself as a champion of the little people — although for him, “little” seems to mean anyone making less than $400,000. Hence, only earners above that threshold would lose their 1031 privileges, should Biden get his way.

Although industry players say that would cause them to hoard cash rather than bolster the sagging economy by investing, Biden appears to believe they will keep doing, well, what real estate people do.

In any case, they could still postpone or eliminate paying capital gains taxes by investing in Opportunity Zones, created by the Republicans’ 2017 tax reform. All Biden seems inclined to do there is require disclosures to gauge whether the zones really help residents of underprivileged neighborhoods, which is the ostensible rationale for the program.

Such a determination could take years. And the gerrymandering of the zones to include non-poor areas such as Long Island City appears to be safe.

For people earning $1 million or more, Biden wants to tax capital gains and dividends at the same rate as regular income. That would cost wealthy REIT shareholders and sellers of property and a lot of money, but would not be unprecedented. Income and capital gains tax rates were equal from 1988 through 1990, and dividends got equal tax treatment until the Bush tax cuts of 2003.

Biden wants to raise some taxes to address wealth inequality and offset some of his spending. The 2017 tax reform lets an individual pass $11.7 million to heirs tax-free, up from $5.5 million pre-Trump and $675,000 when George W. Bush took office in 2001. A married couple can bequeath $23.4 million with nary a dime going to Uncle Sam.

It would be hard to find a faster expansion of a tax exemption or clearer protector of wealth inequality, and Biden aims to roll it back — meaning more wealthy families would have to sell property when an owner dies. If he fails, the tax would revert to 2017 levels in 2026.

Another archaic, wealth-protecting tax policy targeted by Biden is the stepped-up basis, which wipes out (on paper) capital gains of property when it is inherited. That allows families to pass real estate from generation to generation, with the ultimate seller paying as little as zero tax — or even taking a deduction, if it sells for less than it was worth when last inherited.

The policy provides a tax benefit when people hold property until they die, which exacerbates the housing shortage by keeping large dwellings from being used by families. By encouraging sales, ending the step-up basis would benefit brokers, as would a $15,000 tax credit proposed by Biden for anyone buying a home after not owning one for three years.

Developers could benefit from another Biden priority: reinstatement of a rule requiring localities to explain how they are furthering affordable housing. That could lead to opportunities to build multifamily housing in suburbs where for years it has been difficult to build much of anything.

Some suburbs have resisted apartment construction for ages, despite laws and court rulings demanding they accommodate a bare minimum of affordable housing. In one classic example, a Connecticut town rejected a proposal to build 12 dwellings on 2.2 acres as “ghettoizing Westport,” as one planning commissioner called it. But Biden’s vote advantage over Donald Trump in the ’burbs suggests a more welcoming attitude might prevail.

At least one staple of real estate, depreciation, is not on Biden’s radar, although Congress could begin to wonder why property owners can file tax returns claiming their buildings decline in value when in the real world they go up.

[contact-form-7]

The post President Joe Biden’s real estate checklist appeared first on The Real Deal South Florida.

Jared Kushner and Ivanka Trump with Arte Surfside (Getty, Arte)

Jared Kushner and Ivanka Trump with Arte Surfside (Getty, Arte)

Ivanka Trump and Jared Kushner are making moves in South Florida.

President Donald Trump’s daughter and son-in-law will be renting a luxury condo at developer Alex Sapir’s Arte by Antonio Citterio in Surfside, the Wall Street Journal first reported. The couple has been busy picking up real estate in Florida as they plan for their lives after they depart the White House.

Before the end of the year, they paid $32 million for a waterfront lot on the exclusive Indian Creek Island, about two miles away from Arte.

Alex Sapir (center) with Ivanka Trump, President Donald Trump, Donald Trump Jr. and Eric Trump (Getty)

Alex Sapir (center) with Ivanka Trump, President Donald Trump, Donald Trump Jr. and Eric Trump (Getty)

The 12-story, 16-unit oceanfront building at 8955 Collins Avenue, was completed late last year. The project features an outdoor pool, indoor lap pool, a spa and fitness center, a tennis court, residents’ lounge and air conditioned parking.

Jared’s brother, Joshua Kushner, and his wife, model Karlie Kloss, paid $23.5 million for a waterfront home nearby in Miami Beach.

Sapir has ties to the Trump family: His father, the late Tamir Sapir, and Bayrock partnered with the Trump Organization on Trump Soho.

Buyers at Trump Soho filed a federal lawsuit in 2011 against Bayrock and the Sapir Organization, alleging they misrepresented sales figures. The developers settled the suit, refunding the buyers 90 percent of their deposits.

Manhattan District Attorney Cyrus Vance’s office also investigated whether Ivanka Trump and Donald Trump, Jr. had made false claims to potential buyers about the sale of condos at the site, according to a 2017 joint investigation by WNYC, the New Yorker and ProPublica.

[contact-form-7]

The post Ivanka Trump, Jared Kushner to rent luxury condo in Miami’s Surfside appeared first on The Real Deal South Florida.

 Matt Damon and Luciana Barroso (Getty, iStock)

Matt Damon and Luciana Barroso (Getty, iStock)

Matt Damon and his wife have listed their Pacific Palisades mansion for $21 million, as the couple intends to move their family to New York City, where they bought a penthouse two years ago.

The Academy Award-winning actor and wife Luciana Barroso are set to list their 13,500-square-foot home, according to the Wall Street Journal.

They paid $15 million for the seven-bedroom modernist property in 2012, and haven’t renovated it beyond some cosmetic work, listing agent Eric Haskell of The Agency told the Journal.

The home has a central atrium with a 35-foot-tall vaulted ceiling, an open living and dining room, and amenities including a gym, home theater, and wine storage.

The pool area is resort-like with a large outdoor pavilion, waterfall, and spa. There is also a koi pond and a children’s play area in the backyard.

Damon — who shared an Oscar for best original screenplay for “Good Will Hunting” — and Barroso paid $16.8 million for a 6,200-square-foot Brooklyn Heights penthouse in late 2018. It was the priciest residential deal ever recorded in the borough.

“They really love it there, even with everything going on with Covid,” Haskell told the Journal, referring to New York.

In September, an 11,900-square-foot Pacific Palisades home owned by the family of the late singer Johnny Hallday — “the French Elvis Presley” — listed for $18 million. [WSJ] — Dennis Lynch

The post Matt Damon lists Pacific Palisades mansion and heads to NY appeared first on The Real Deal South Florida.

Note: These items are independently selected by our team. However, TRD may receive a commission when you purchase products through affiliate links.

Real estate can be a high-risk, high-reward industry. That said, it can also be high-stress. Implementing a little bit of self-care into your day — whether as simple as lighting a candle or as involved as a 10-step beauty routine — will help you put your best foot forward.

A feel-good smoothie or a silky face serum may not be the cure to falling retail rents or a very slow return to office, but at least in some sense, they’ll help ease the tensions those have wrought.

Our staff at The Real Deal has found items that are both indulgent and useful, that will help you look and feel a bit more bright-eyed, even if you’re only fueled by caffeine. See our top picks for everything you need to keep a fresh face in 2021.

For stressed pores: Lancer’s Clarifying Detox Mask

Anyone prone to stress breakouts can benefit from this detoxifying mask. It gets its color from a green tea and green clay base, and the Azelaic Acid and fruit extract will help clear up blemishes, decongest skin and reduce redness.

 
 

For a sharper shave: Gentlemen’s Tonic Mayfair Set

Complete with a badger hair shaving brush for the perfect wet shave and a razor with a super sharp Mach III Blade, this set will help you be presentation-ready in no time.

 
 

For limp hair: The Ordinary Multi-Peptide Serum

Hair feeling limp? This multi-peptide serum helps hair that might be losing its strength and thickness. Created with a mix of healthy complexes, including stimulating caffeine, use it before bed and you’ll feel like a shampoo model again in no time.

 
 

For a stale workspace: ESPA Energising Candle

Fight the midday slump with this energizing candle. Blended with the invigorating scents of peppermint, eucalyptus, lime and rosemary, it’s a perfect deskside companion.

 
 

For a quick refresh: Caudalie Beauty Elixir

This elixir has a cult following, and for good reason. Its mist tones the skin, adds moisture and reduces dullness. Perfect to spritz on throughout the day to counteract the dry heat indoors, it also moonlights as a makeup primer or an aftershave treatment.

 
 

For a shower upgrade: Paul Mitchell Tea Tree Special Shampoo and Conditioner

It can be hard to pick out a new shampoo, especially if you’ve been stuck in the 2-in-1 trap. This Paul Mitchell tea tree shampoo and conditioner comes as a set, making your transition to two bottles that much easier. It’s also organic, clarifying, moisturizing, and leaves a cooling sensation on the scalp.

For a chic way to kill germs: Cowshed Refresh Hand Wash

Sanitize in style. This Cowshed soap is good enough to be the go-to at every Soho House location. With essential oils from grapefruits, bitter oranges and lavender, it’ll make staying clean and safe unexpectedly luxurious.

 
 

For bedhead: Layrite Original Pomade

This pomade was made for barbers by barbers. Layrite has the hold of wax but the washability of hair gel, so it’s an easy choice to get your strands in place in time for the morning meeting.

 
 

For dulling skin: Farmacy Honeymoon Glow

Look no further for your new skin cure-all. This overnight serum does everything from adding moisture to reducing pore size to improving dullness and hyperpigmentation. Its honey and Hyaluronic Acid come together to give a new meaning to the term “fresh faced.”

 
 

For weary eyes: Wander Beauty Baggage Claim Gold Eye Masks

If lack of sleep or too much screen time has left you with puffy eyes or dark circles, ditch the eye-rubbing and opt for these gold eye masks instead. Just 10 to 15 minutes will make you look like you really do relax.

The post All the self-care items you need to stay fresh in 2021 appeared first on The Real Deal South Florida.

Images of Arte, Ritz-Carlton Residences Miami Beach, Ritz-Carlton Residences Miami Beach and One Thousand Museum (One Thousand Museum via One Sotheby's)

Images of Arte, Ritz-Carlton Residences Miami Beach, Ritz-Carlton Residences Miami Beach and One Thousand Museum (One Thousand Museum via One Sotheby’s)

After months of skyrocketing luxury single-family sales, condo developers are starting to reap the benefits of the surge in ultra-wealthy out-of-towners moving to South Florida.

Until recently, much of the luxury sales and rental activity has been concentrated in waterfront single-family homes, as residents of the Northeast have flocked to South Florida during the pandemic. But as inventory dwindles, some buyers are now turning to new luxury condos projects, scooping up multimillion-dollar units, with a desire to close quickly, brokers and developers say.

Last year, the region’s condo market was saddled with high inventory, and developers offered a slew of incentives to boost deals. By the fourth quarter, condo/townhomes sales in Miami-Dade jumped more than 30 percent compared to the same period in 2019, to 282 sales, according to the Keyes Luxury South Florida market report.

And demand for condos shows no sign of slowing in the new year, brokers say.

At the Zaha Hadid-designed One Thousand Museum in downtown Miami, two units sold in January. A tech investor from San Francisco bought penthouse 5001 for $16 million, and a hedge funder from New York bought a half-floor unit on the 47th floor for $6.3 million, according to Reid Heidenry of One Sotheby’s International Realty, who represented both buyers. Harvey Daniels and Anna Sherrill, also with One Sotheby’s, represented the development group.

Heidenry, who declined to identify the buyers, said both are relocating for tax purposes and quality of life. He said the deal marks the second most expensive condo sale to ever close in the city of Miami, following David and Victoria Beckham’s nearly $20 million purchase at One Thousand Museum last year.

Other deals are in negotiations, according to Louis Birdman, a co-developer of the 62-story, 84-unit luxury condo tower along with Gregg Covin, Gilberto Bomeny, Kevin Venger and Todd Michael Glaser. Buyers are hailing from California, the Midwest and the Northeast.

Farther north, at the Sapir Corp.’s Arte by Antonio Citterio in Surfside, the developer sold the penthouse for $33 million in December, and recently sold two other units for $16 million and $10.2 million each, said Giovanni Fasciano, a co-developer of the building.

A buyer from the West Coast purchased the larger unit, a furnished, six-bedroom duplex condo, for its $16 million asking price. Unit 202, with nearly 7,000 square feet of interior space, includes two kitchens, a master suite overlooking the ocean, and a nearly 1,500-square-foot wraparound terrace. Dean Bloch of Douglas Elliman represented the developer in the sale. Chad Carroll from Compass represented the buyer.

The smaller unit, 501, sold for $250,000 above the asking price to a buyer from New York, according to Fasciano, who declined to name the buyers. In many cases, the buyers work in tech or finance and are increasingly requiring confidentiality on their deals, often buying in trusts or hidden LLCs.

Fasciano said that buyers are “realizing the convenience of living in a luxe building” versus a single-family home. The building is 50 percent sold, with eight units remaining.

Danny Hertzberg, an agent with the Jills Zeder Group at Coldwell Banker, said the ultra high-end of the condo market is seeing more activity than the rest of the market, especially in Miami Beach, Surfside and other beachfront towns. When the pandemic hit, “it was crickets in condos.” Now, buyers are now more confident about living in condo buildings, he said.

Hertzberg is noticing an uptick in showings of larger and more expensive units now that inventory of waterfront homes has decreased dramatically. At the Continuum in South Beach, only six showings are allowed per day due to Covid restrictions. Hertzberg said showings have had to be rescheduled due to increased demand.

At the Ritz-Carlton Residences in Miami Beach, Lionheart Capital secured a buyer for one of its penthouses for $15 million, CEO Ophir Sternberg said. An unnamed hedge funder from Chicago and his family, who are relocating, paid cash for the unit, which spans 6,300 square feet with an additional 8,500 square feet of terrace space.

Philip Freedman

Philip Freedman

Many buyers are seeking to close quickly. The $15 million deal went into contract in December and closed Jan. 2, said Philip Freedman, director of sales. Jennifer Markovich and Freedman, who are both with Douglas Elliman, represented the developer, and Lucas Lechuga of Luxe Living Realty brought the buyer. The unit was asking more than $17 million.

Freedman said about 20 percent of the Ritz-Carlton, Miami Beach’s 111 units remain to be sold. The building was completed in late 2019.

“Buyers are coming in and very quickly making a decision,” Sternberg said. “Suddenly there’s a real sense of urgency.”

Over the last month, the developer has secured 11 contracts for sales totaling more than $50 million, three of which have closed, a spokesperson said.

Another Ritz-Carlton-branded development, the Ritz-Carlton Residences Sunny Isles Beach, recently announced $30 million in closed sales over the last 30 days.

The tower, developed by Fortune International Group and Château Group, was completed in March, just before the pandemic shut down businesses throughout South Florida. Since closings began, the developers said they’ve recorded sales totaling more than $630 million. It’s 85 percent sold.

Edgardo DeFortuna

Edgardo Defortuna, CEO of Fortune, said about 70 percent of the buyers are domestic, a reversal compared to years past when international buyers flooded new condo buildings. And he and co-developer Manuel Grosskopf said the buyers are relocating to South Florida, not using the units as second or third homes.

“We are experiencing more people living instead of vacationing,” Grosskopf said.

Ana Bozovic

Ana Bozovic

Some question how long the trend will continue, especially as more and more businesses announce plans to expand or relocate to South Florida. Ana Bozovic, founder of Analytics Miami, is bullish on the long-term outlook for the region.

“The conditions driving people to South Florida have only been exacerbated by the pandemic,” she said. “Miami will continue to shine over the next six months, as the [difference] in quality of life, compared to places like New York City, gets bigger and bigger. Meanwhile, more people and business will have moved, thereby creating social proof and pushing momentum yet higher.”

[contact-form-7]

[contact-form-7]

Correction: An earlier version of this story misidentified Reid Heidenry, as well as misidentified the buyer of unit 501 at Arte based on incorrect information from the developer.

The post Buyers shift to condos as waterfront single-family luxury inventory dwindles in South Florida appeared first on The Real Deal South Florida.

Zillow CEO Rich Barton (Illustration by The Real Deal)

Zillow CEO Rich Barton (Illustration by The Real Deal)

Against the backdrop of a booming housing market, Zillow is upping its fees for agents and for the first time will charge them to post rental listings.

As of Jan. 12, the Seattle-based listing giant is no longer syndicating listings from multiple listing systems. Instead, agents will be charged $9.99 per week to post rental listings, according to an email sent to agents.

“This encourages our rental owners and managers to remove listings promptly when they become unavailable or outdated, which helps us provide a better experience for renters,” Zillow said in a FAQ section of its website.


The move borrows from Zillow’s playbook in New York City, where StreetEasy began charging agents $3 daily to post listings in 2017. But it also comes at a time of heightened competition over rental listings from companies including Zumper and CoStar.

“They have a gazillion consumers looking at rentals on their site and they want to monetize that,” said Victor Lund, a partner at WAV Group, a real estate consulting firm. “It’s good for Zillow shareholders for sure.”

In a statement, Zillow said paid listings benefit consumers, who get more accurate listing data. The listings “usually spend fewer days on market than free listings because of increased lead volume and higher quality leads,” Zillow said.

In addition to the “Zillow Rental Manager,” which costs $9.99 per week per listing, Zillow is offering “Zillow Feed Connect” for enterprise clients that will cost between $1 and $3 per listing daily.

The listings giant has also implemented other changes recently. In September, it said it would start employing salaried agents to streamline its instant home-buying operation. Starting this month, Zillow agents will work with sellers in Atlanta, Phoenix and Tucson who want instant offers for their homes.

In conjunction with that announcement, Zillow said it would switch its back-end listing system to an IDX feed, instead of getting listings from thousands of brokerages and MLSs. (At the time, Zillow said the shift was set to reduce its data feeds to about 600 from 10,000.)

But it’s the daily fee for rental listings that risks alienating agents. That’s what happened when StreetEasy introduced a fee for rentals in New York, and then again when it attempted to raise the price to $6 per day per listing.

That fee hike hasn’t happened yet. After the onset of the pandemic in March, StreetEasy discounted its fees to post rental listings and to participate in Premier Agent.

During the third quarter of 2020, Zillow’s rental business popped as the overall housing market surged.

“The tide is so high that there is just more shopping demand everywhere and that includes rentals,” CEO Rich Barton said during an earnings call on Nov. 6.

For the quarter, Zillow reported $40 million in profits with revenue of $656.6 million.

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President-elect Joe Biden (Getty Images)

For decades, New York City has offered communities an enticing deal: Approve new housing and locals will get half of the affordable units.

But in 2014, the Obama administration warned the city that so-called “community preference” might be reinforcing segregation.

The city balked, offering to tweak the policy but not to dump it. “Without any promise of local benefits,” wrote Vicki Been — then head of the New York City’s main housing agency — getting local buy-in for projects could be “extraordinarily difficult.”

Federal housing officials felt community preference conflicted with an Obama administration rule requiring municipalities to show how they are combating exclusionary housing. But last summer the Trump administration repealed the Obama measure, Affirmatively Furthering Fair Housing, and the city’s policy remains unchanged.

Now, with President-elect Joe Biden planning to restore the fair housing rule and a federal lawsuit against community preference underway, the policy could come under scrutiny again. Mayoral candidates, too, have criticized the city’s practice and vowed to reform how it awards affordable apartments.

The fight is part of a national debate pitting the interests of local residents and the real estate industry against the need to unwind policies that cause or exacerbate segregation. Biden staffers have already laid out plans to expand and reform key affordable housing programs to better align with the Fair Housing Act.

But reversing the course set over the Trump years — let alone decades’ worth of government-sanctioned segregation — will be an uphill battle. And though Biden will control the Department of Housing and Urban Development and have a Democratically controlled Congress, it isn’t as if he can simply flip a switch on the nation’s housing problem.

“At this point, it is probably in worse shape than it has been in 20 years,” said Robert Silverman, an urban planning professor at the University at Buffalo. “HUD’s going to have a lot on its plate.”

Rethinking Section 8

Some federal programs have only just started to incentivize the construction of affordable housing in more affluent areas.

The efforts give low- and moderate-income residents more agency to move to “high opportunity” areas, so-called for their low crime and access to good schools, mass transit, government services and other amenities.

For roughly a decade, Dallas, for example, has approached housing vouchers for low-income tenants differently from most of the country.

But not voluntarily.

The local nonprofit Inclusive Communities Project had sued HUD more than a decade ago, arguing that the way it determined how much rent the federal government paid through Section 8 vouchers further insulated minorities in communities “marked by conditions of slum and blight.”

Because rent subsidies were the same in poor Dallas neighborhoods as rich ones, tenants tended to stay in low-income areas where the vouchers covered a higher percentage of their rent.

A 2011 settlement required the city to base the value of rent vouchers for low-income tenants on the going rents in individual ZIP codes, rather than citywide. In the final months of the Obama administration, HUD rolled out a version of that for the rest of the country, dubbed Small Area Fair Market Rents.

As with Obama’s fair housing rule, the Trump administration attempted to suspend the program, but a federal court upheld it in December 2017.

Traditionally under Section 8, low-income tenants with vouchers pay 30 percent of their income on rent, and the federal government pays the rest — to a point. Local housing agencies determine how much is covered based on the average market rent, which often encourages tenants to remain in low-income areas.    

“It was creating a sort of disincentive to move to a higher-opportunity area,” said Silverman, who co-authored a report for the Poverty & Race Research Council on the Small Area program’s first year.

Under the program, as with Dallas’ settlement, housing agencies use ZIP codes, rather than larger areas, to calculate the percentage of average market rent covered by vouchers. Housing voucher recipients in Dallas have seen an improvement in neighborhood quality since 2011, according to Silverman’s report.

But in the first wave of the program, some cities set federal rent payments below the average market rate in both low- and high-income ZIP codes, limiting renters’ incentive to move up, Silverman noted.

His report calls on HUD to make wealthier neighborhoods more attractive to tenants by issuing new guidelines.

Some cities have since opted on their own to use small area rents.

Boston applied them in more than 230 ZIP codes in July 2019 to give families “the choice to rent in areas that have historically been unaffordable with a voucher,” the city’s housing authority said.

Segregation in Boston is stark and persistent. Two-thirds of its Black population live in three city neighborhoods, according to Boston Magazine. More than 40 percent of the 147 municipalities in the Greater Boston area are at least 90 percent white, the publication reported. 

In recent years, Massachusetts Gov. Charlie Baker has pushed for more housing by weakening local authority to block projects. One bill was backed by several developer and broker groups in the state, but was criticized by housing advocates and some legislators for prioritizing market-rate housing.

Protesters rallied against HUD in front of the New York Stock Exchange in June 2017 (Getty Images)

“Racist, exclusionary zoning is a real thing,” state Rep. Mike Connolly told Boston Public Radio last July. “Just because you make it easier to zone for new housing doesn’t ensure it’ll be affordable for the people who need it most.”

This month the legislature and governor reached an agreement as part of a $630 million stimulus bill. The compromise included some of the reforms promoted by advocates, including requirements for multifamily housing suitable for families with children in certain areas, but didn’t incorporate all of the affordability requirements sought by its critics.

Balancing acts

The real estate industry’s role in perpetuating exclusionary housing practices has been well documented. Newsday’s 2019 investigation laid bare how some Long Island brokers steered home shoppers to certain neighborhoods based on their race, for example.

When it comes to construction of affordable housing, developers have argued that local zoning, high land costs and other market conditions dictate what they can build. They have also pointed to fierce local opposition from well-organized NIMBYs.      

The country’s Low-Income Housing Tax Credit program — a major funding source for affordable housing — has drawn similar criticism as Section 8 for incentivizing new development in low-income areas rather than higher-opportunity neighborhoods.

Biden has pledged to expand the subsidy program and ensure that “urban, suburban and rural areas all benefit from the credit.” And Congress recently made a critical change to make the tax credit more valuable and potentially allow affordable housing developers to put more equity into projects.

Aaron Koffman of Hudson Companies, which builds affordable and market-rate housing, said he’s hopeful the Biden administration will make further changes to allow tax-exempt bonds to be transferred when states don’t exhaust their annual allotment. That would let other states use them.

“Affordable housing in high-income neighborhoods is critical, as you see cities around the country remain unaffordable,” he said. Koffman added that the tax credit change would be “an easy tweak that would allow more affordable housing.”

Spencer Orkus, managing director at New York’s L+M Development Partners, said it’s important to build affordable housing in high-income neighborhoods to encourage upward mobility.

But if that’s all that is done, poor areas would be left behind, he said.

“You are basically picking a few winners and moving them to middle-income neighborhoods while divesting from low-income neighborhoods that need investment,” Orkus said.

Rasheedah Phillips, a housing attorney at Community Legal Services of Philadelphia, echoed that sentiment. “We have to make sure we don’t divert attention, resources and responsibility to invest back in neighborhoods that were historically disinvested from,” she said.

Phillips noted that Philadelphia landlords routinely deny housing to tenants with rent vouchers, despite a city law that prohibits it. A 2018 study by the Urban Institute found that when contacted about apartment listings, two-thirds of landlords would not accept a voucher.

Thirteen states and 90 local governments have barred discrimination based on source of income to protect families with vouchers, according to the civil rights law and policy organization Poverty & Race Research Action Council. Texas does the opposite: It has a law forbidding municipalities to ban discrimination based on source of income.

In March 2020, the U.S. Supreme Court declined to hear another challenge brought by the Inclusive Communities Project, which sought to require all landlords to accept vouchers.

In April 2020, the group fired off another lawsuit against HUD, claiming that the nonprofit has shouldered the burden of finding housing for voucher holders because landlords keep turning them away.

Biden has already thrown his support behind a Senate bill from 2019 that would bar discrimination based on source of income, including Section 8 vouchers and Social Security. With the Democrats’ tenuous control over the Senate, however, the measure’s passage is far from guaranteed.

Community choice?

Though the Trump administration repealed Obama’s fair housing rule in July 2020, calling it burdensome and a threat to suburban living, some communities are moving forward with the goals they laid out when it was in place.

“Even though the current administration tried to take the teeth out of it, we’ve continued to abide by it just because it is the right thing to do,” said Marla Newman, director of community development for Winston-Salem, North Carolina — one of the few communities that had a fair housing plan approved by HUD.

“I think we’re morally bound to create ways to address and undo some of the harm that was intentionally undertaken in these communities,” she noted.

But Newman said she hopes the rule is amended to be less “one-size-fits-all” to take into account the unique challenges of different cities and municipalities.

New York City is facing a lawsuit by three Black women from Brooklyn and Queens who repeatedly applied to affordable housing lotteries outside their community districts and were never selected.

In their 2015 lawsuit, the three women allege that as a result of community preference, “entrenched segregation is actively perpetuated, and access to [high-opportunity] neighborhoods … is effectively prioritized for white residents who already live there.”

Andrew Beveridge, a sociology professor at Queens College, conducted a report on behalf of the plaintiffs that found the policy “imposes a sorting process that would not otherwise exist and does so in a pattern that causes material disparities by race and ethnicity.”

A representative for the de Blasio administration, which had tried to keep the report private, declined to comment.

Craig Gurian, executive director of the Anti-Discrimination Center, which is representing the plaintiffs, called it the “Achilles’ heel of liberal, progressive New York to be able to pronounce for everybody else in the country and everybody else in the world, yet be arrogant enough to say ‘our segregation in New York is different.’

“It is not actually complex at all,” Gurian said.

Yet community buy-in on major affordable housing projects — specifically those that entail multiple public reviews — often hinge on guarantees for housing and other benefits for local residents, said affordable housing developer Rick Gropper of Camber Property Group.

“That’s one of the primary questions we get at community boards: How do I get an apartment for the people who actually live in these communities?” he said.

“There needs to be a balance,” Gropper added, “between the need to spread affordable housing and not concentrate it but also provide affordable housing for the people living in the community.

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2754-2790 Northwest 191st Terrace (Google Maps)

2754-2790 Northwest 191st Terrace (Google Maps)

An Aventura-based real estate investment and management firm paid $8.6 million for a 30-unit Miami Gardens apartment community.

The One Real Estate Partners bought the complex at 2754 to 2790 Northwest 191st Terrace, known as “Gardens Club,” according to records. The price equates to $286,667 per unit.

The One specializes in acquiring and rehabbing multifamily properties, according to the company’s website. The company is led by Abraham Cherem and Alexis Elias.

The seller is Gardens Club LLC, which is affiliated with Carlos and Oscar Rodriguez of Miami. The company bought the land in 2015 for $600,000, records show. The apartments were completed last year.

Carlos M. Cain of Marcus & Millichap represented the buyer, according to a press release. Ryan Nee of the same company assisted in the deal.

Last year, Greenstone Property Group paid $78 million for a 491-unit multifamily complex in Miami Gardens.

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Fidelity’s Raymond Quirk (iStock)

Fidelity’s Raymond Quirk (iStock)

As Americans look to take advantage of the historically low interest rates and buy new homes, more companies are providing platforms and tools to expedite the closing process.

One of the nation’s largest title insurance companies, Fidelity National Financial, recently launched a guided digital closing tool for real estate transactions, Inman reported. It is one part of the company’s broader platform that provides transaction tracking, e-notarization and e-closing services for agents and buyers, according to the report.

Fidelity National said the tool will provide more assistance than other digital closing services by offering tips and explanations to consumers who know little about the process. The firm was set to merge with Stewart Information Services in a $1.2 billion deal. But that was called off when the Federal Trade Commission failed to grant approvals in September 2019. [Inman] — Keith Larsen 

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Blackstone's Ken Caplan (iStock; Blackstone)

Blackstone’s Ken Caplan (iStock; Blackstone)

In the past five years, Blackstone has pivoted its portfolio away from retail and hotels and instead turned toward one of real estate’s hottest asset classes — industrial — helping the investment firm avoid losses that others are now facing.

The company bolstered its presence in the industrial sector to account for 36 percent of its real estate equity value, up from only 9 percent in 2017, according to the Wall Street Journal. Demand for industrial space has boomed since the onset of the pandemic due to the rise of e-commerce.

In contrast, the company’s retail portfolio, valued at $341 billion, made up approximately 5 percent of its equity value, down from 19 percent in 2015. Hotels account for just 7 percent of the equity value, down from 23 percent in 2015.

“You had multiple years of expected growth [in online retail] compressed into the past year,” the firm’s co-head, Kenneth Caplan, told the Journal.

Blackstone also said that traditional office space only accounts for 5 percent of its equity value, down from 19 percent in 2015.

The firm has instead shifted its focus on specialized office space, such as biotechnology and life sciences labs and Hollywood studios.

[WSJ] — Keith Larsen

The post Industrial now 36% of Blackstone’s RE portfolio appeared first on The Real Deal South Florida.

Brix Holdings CEO Craig Erlich (Photo via Brix; Getty)

Brix Holdings CEO Craig Erlich (Photo via Brix; Getty)

It’s all smiles for Friendly’s.

The casual dining chain has been saved from bankruptcy by Amici Partners Group, which invests in and runs eateries. The investment firm, which is affiliated with Brix Holdings, plans to keep 130 corporate-owned and franchised Friendly’s locations open.

Friendly’s filed for bankruptcy and announced a tentative deal with Amici in November. At the time, it was reported that the chain would sell for $2 million, but the parties didn’t disclose a final sale price.

“The investors of Amici Partners Group, LLC have been involved with the Friendly’s Restaurant brand in many capacities over the years, not only as owners/operators and leaders in the system, but also as longtime loyal customers of this iconic brand,” Craig Erlich, Brix president and CEO, said in a statement.

This isn’t the first time that the chain has faced turmoil.

At one point there were more than 500 Friendly’s locations, but the company filed for Chapter 11 bankruptcy protection in 2011 and subsequently closed more than 60 restaurants. It exited bankruptcy in 2012 and was acquired by Dean Foods in 2016 for $155 million.

Other restaurant chains have similarly filed for bankruptcy during the pandemic, with a few being rescued by investors. Notably, Le Pain Quotidien was bought out of bankruptcy by Aurify Brands and continued to reopen eateries and open new locations as a result.

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Almanac Realty Investors managing director Matthew Kaplan (Almanac Realty; iStock)

Almanac Realty Investors managing director Matthew Kaplan (Almanac Realty; iStock)

A private equity firm that backs workforce housing is getting a financial boost.

Almanac Realty Investors, an affiliate of Neuberger Berman, is investing $320 million in Asia Capital Real Estate. The investment will target multifamily properties that provide housing to people who don’t qualify for subsidized housing, according to Bloomberg News.

The companies said investors are attracted to this subset of real estate because it provides more consistent, safer returns — a particular draw since the start of the pandemic.

In the past year, Asia Capital Real Estate made loans to the City Club Apartments for properties in Detroit and Cincinnati, as well as to Sovereign Properties for a project in North Richland Hills, Texas.

ACRE manages more than $1.8 billion and its portfolio has more than 20,000 apartments. Almanac will own a minority stake in ACRE and anchor its fourth equity fund, which will target multifamily properties in the Southeast, Midwest and Texas.

Last year, Neuberger acquired Almanac, which had been part of Rothschild until 2007.

[Bloomberg News] — Keith Larsen

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2195 Northwest 103rd Street (Google Maps, iStock)

2195 Northwest 103rd Street (Google Maps, iStock)

Miami-based Westar Oil Co. sold four branded gas stations for about $11 million — and the buyer immediately flipped them for $15 million.

The ultimate buyer of the gas stations is Ernest M. Cherry Jr. and his wife, Carole, of Hampton Falls, New Hampshire, according to records. The deal includes the gas station at 715 Opa-Locka Boulevard near Golden Glades, one at 2195 Northwest 103rd Street in Miami and two Hialeah gas stations, at 790 East 25th Street and 1901 West 4th Avenue.

Cherry owns Aqua Systems, a small manufacturer of heat exchangers for homes, pools, ships and other uses, according to the company’s website.

Westar initially sold the stations on Dec. 30 to Trinity Petro, a company associated with the Martorano family. The company lists offices in Boynton Beach and Middletown, Delaware, according to records. The sellers were companies associated with John Obando and Ruben Gonzales of Westar Oil Co.

That same day, Trinity Petro sold the properties to the Cherrys for an extra $4 million.

The Cherrys then leased the West 4th Avenue site back to Trinity Petro for 180 months, or 15 years, with four 60-month extension possibilities, according to records.

Trinity Petro, in turn, leased space at that location to Kambiz LLC — which already owns the convenience store and ancillary businesses at that location — until Dec. 31, 2025.

Last year, U-Haul announced a new location at the West 4th Avenue location run by Kambiz, according to a release from the time. Kambiz is run by Kitssy Munoz and Gilberto Garay.

The Westar affiliates acquired the stations between 2001 and 2017 for about $3 million, records show. The oldest of the buildings was constructed in the 1950s.

Gas stations’ convenience stores were allowed to stay open for pick-up and delivery during the earliest days of stay-at-home orders last year in Miami-Dade County.

Other retail real estate sales in the area include a boat and water sports products store paying $5.5 million for a former Fort Lauderdale car dealership, and Raanan Katz’s real estate company RK Centers paying $11.5 million for a Best Buy-leased building in Plantation.

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North Point Mall in Alpharetta, Georgia (left) with Brookfield's Brian Kingston (iStock; Brookfield; Google Maps)

North Point Mall in Alpharetta, Georgia, (left) with Brookfield’s Brian Kingston (iStock; Brookfield; Google Maps)

As demand for e-commerce grew and large tenants like Sears closed up shop, some mall owners sought to redevelop their struggling properties into warehouses, residential buildings or office properties.

But the task has proven more challenging than expected, according to the Wall Street Journal. Mall owners are required to spend hundreds of millions of dollars on construction and labor costs. The new developer might not have ownership of the individual department stores or parcels, further complicating matters.

Some failed redevelopment efforts have resulted in the owner selling the property at a discount or turning it back over to its lenders.

Last week, Brookfield handed over its North Point Mall in Alpharetta, Georgia, to a lender even though it had previously scored rezoning approvals to bring hundreds of residential units to the property in 2019, the publication reported. The property’s value fell below its loan balance of about $200 million.

In July, Brookfield nixed its plans to redevelop the former Burlington, Vermont mall. The developer said that, at that time, the long-term nature of the project’s next phase didn’t fit with its funds mandate.

In other cases, local governments may step in. Just outside of Atlanta, an investor sought to redevelop the former Gwinnett Place Mall into a 20,000-seat cricket stadium. But the deal fell apart when the two sides couldn’t reach a deal. Last month, the county decided to buy the mall for $23 million.

[WSJ] — Keith Larsen

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Chris Bosh and his North Bay Road home, 6396 North Bay Road (Getty, One Sotheby’s International Realty)

Chris Bosh and his North Bay Road home, 6396 North Bay Road (Getty, One Sotheby’s International Realty)

Retired Miami Heat basketball star Chris Bosh sold his waterfront Miami Beach estate for more than $15 million, The Real Deal has learned.

Bosh, who first listed the property at 6396 North Bay Road for $18 million about three years ago, sold the mansion to an undisclosed buyer in an off-market deal, according to an email blast obtained by TRD.

Diane Lieberman of One Sotheby’s International Realty represented Bosh and his wife, Adrienne Williams Bosh, while Mirce Curkoski and Albert Justo, also with One Sotheby’s, represented the buyer. The brokerage declined to comment on the sale.

The seven-bedroom, nearly 12,400-square-foot mansion sold for $15.2 million.

The NBA All-Star, who also played for the Toronto Raptors, was part of the Heat’s “Big Three,” which included Dwyane Wade and LeBron James. James sold his Coconut Grove home for $13.4 million in 2015, while Wade, who retired in 2019, has his home nearby on North Bay Road on the market for $26.5 million. Wade’s home sale is pending, according to Realtor.com.

Property records show Bosh paid about $12.3 million for his Miami Beach mansion in 2010, a year after it was completed. The property includes an infinity-edge pool, boat dock, outdoor kitchen, gym and guesthouse. It was developed in 2009 on a 24,000-square-foot lot.

Luxury home sales along North Bay Road have skyrocketed in recent months.

Spec home developer Peter Fine recently sold the mansion at 6440 North Bay Road to billionaire hedge fund manager Dan Loeb for $20 million, sources told TRD.

In November, the waterfront Miami Beach lot at 5860 North Bay Road, once home to Colombian drug lord Pablo Escobar, sold to developer Jarrett Posner, founder and chairman of New York City-based BMC Investments, for $11 million.

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Jeff Bezos (Getty, iStock)

Jeff Bezos (Getty, iStock)

South Florida’s industrial market performed well in the fourth quarter and in 2020, as Amazon leased about 3 million square feet throughout the year, according to a recently released report.

The region’s average asking rent rose slightly to $8.88 in the year’s final quarter, up 1.6 percent year-over-year, according to the report from Newmark. The fourth quarter vacancy rate hit a low 4.9 percent, thanks to pre-leasing activity. About 6 million square feet of industrial space is currently under construction in the tri-county area, with more than half of it already leased.

Here is a breakdown for each of the counties:

Miami-Dade County

Miami-Dade’s vacancy rate stayed consistent at 4.5 percent for the fourth quarter. Average asking rent was $8.33, up 1 percent quarter-over-quarter, and up about 4 percent year-over-year.

The county saw 266,000 square feet of space delivered during the quarter. Miami-Dade represented more than half the region’s net absorption, with 2.7 square feet absorbed during 2020. Fifteen buildings totaling more than 3.1 million square feet are under construction, with 56 percent of that already leased. That means that it will not have much of an impact on the county’s vacancy rate this year, according to Newmark.

The top lease deals in the county included Keuhne & Nagel leasing 209,610 square feet at 3401 Northwest 72nd Avenue in Miami and IFS Neutral Maritime leasing 93,320 square feet of space at 1350 Northwest 121st Avenue in Miami.

Top industrial sales in the county included the $16.2 million sale of Doral warehouse by a family that owns an international logistics company.

Broward County

Broward’s vacancy rate continued to rise, reaching 5.6 percent at the end of the fourth quarter, the highest in the region. That’s an increase, quarter-over-quarter and year-over-year, of about 2 percent and 6 percent, respectively. But the vacancy rate remained below the 6 percent vacancy rate reported at the end of 2015.

The county saw 373,000 square feet of new space delivered during the quarter. About two-thirds of the 1.6 million square feet under construction is available for lease.

The average asking rent in the fourth quarter was $9.39, down 0.3 percent, year-over-year, and down 0.7 percent, quarter-over-quarter. Increased availability from second-tier space helped rents decrease, according to Newmark.

Amazon signed three of the top leases in the quarter in Broward for about 1 million square feet. Overall, Amazon is responsible for most of the largest leases signed during the year.

Elion Partners had two of the top purchases of the quarter, paying $31.5 million for a Dania Beach building and $12 million for Bennett Auto Supply in Pompano Beach.

Palm Beach County

The county’s vacancy rate was 5.4 percent in the fourth quarter, a new record high since at least the fourth quarter of 2015. Newmark credited this to the delivery of five buildings totaling over 768,000 square feet.

The average asking rent was $9.84, up 1 percent, quarter-over-quarter, and up 0.4 percent, year-over-year.

About 1.3 million square feet is under construction in the county, 1 million of it for an Amazon distribution center. The county had 77,000 square feet of industrial space absorbed during the fourth quarter.

The largest leases signed during the quarter include two in West Palm Beach: Tire Hub leasing 40,500 square feet of space at 305 Haverhill Road and Jamlyn Supply leasing 38,880 square feet of space at 6051 Southern Boulevard.

Top deals during the quarter included an Atlanta-based industrial investment group buying a newly built warehouse in the Palm Beach Park of Commerce for $27.2 million.

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Condo sales and closed dollar volume picked up in Miami-Dade after a slow start to the new year.

A total of 139 condos sold for $97.1 million last week, up from the 103 condos that sold the previous week for $49.6 million.

Units sold for an average price of nearly $700,000, up from $480,000 a week earlier. The average price per square foot of $382 was up slightly from $328 per square foot the previous week.

The most expensive sale was for a penthouse at The Ritz-Carlton Residences, Miami Beach. The unit sold for $15 million after 50 days on the Multiple Listing Service. Jennifer Markovich represented the seller, while Lucas Lechuga represented the buyer.

The second most expensive sale of the week was for unit N-615 at The Surf Club Four Seasons in Surfside. It sold for $8.6 million, or $2,843 per square foot, after 23 days on the market. Ximena Penuela represented the seller, and Miltiadis Kastanis represented the buyer.

Here’s a breakdown of the top 10 sales from Jan. 10 to Jan 16.

Most expensive
Ritz-Carlton Residences, Miami Beach PH12 | 50 days on market | $15M | $2,369 psf | Listing agent: Jennifer Markovich | Buyer’s agent: Lucas Lechuga

Least expensive
Atlantic 1 #701 | 188 days on market | $1.55M | $372 psf | Listing agent: Silvana Jimenez | Buyer’s agent: Moshe Biton

Most days on market
Oceana Key Biscayne 1206N | 426 days on market | $3.6M | $1,584 psf | Listing agent: Camila Polatti Cordeiro Schuback | Buyer’s agent: Arianne Sabatini

Fewest days on market
One Thousand Museum 4701 | 1 day on market | $6.3M | $1,301 psf | Listing agent: Anna Sherrill | Buyer’s agent: Reid Heidenry

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(Photos by Sonya Revell)

You could call it the tweet heard around the world.

In early December, Delian Asparouhov, a principal at venture-capital firm Founders Fund, threw out a proposal moving Silicon Valley to Miami. Francis Suarez, a real estate attorney who stepped into the mayor’s chair in 2017, quote-tweeted the investor. He asked, “How can I help?”

Suarez’s response went viral with more than 2 million impressions and thousands of likes. The mayor later likened it to “catching lightning in a bottle.” He was suddenly in conversation with major venture capitalists and tech executives from around the country, grateful for a friendly ear in what has become a political climate openly hostile to Big Tech. Keith Rabois, a member of the “PayPal Mafia” and an early investor in Opendoor, SoftBank Group CEO Marcelo Claure and Shutterstock founder Jon Oringer are among those palling up with the 43-year-old mayor on Twitter. Rabois has become the city’s most prominent evangelist among the tech community.

“I have met more new interesting people in Miami in 3 weeks than all of 2020 in the Bay Area,” Rabois tweeted Jan. 4.

For those marquee names and those who look up to them, Miami marks a sharp contrast to the governments that have “marginalized and rejected” them in the past, Suarez said in an interview with The Real Deal last month. “I’m letting them tell their story. There’s nothing more powerful [than that].”

It’s an overture that has South Florida real estate salivating. Developers, brokers and office landlords are anticipating a Big Tech gold rush that would build on the recent success Miami has had with financial firms. Last month, Rabois paid a record $29 million for a waterfront mansion in Miami Beach, and the following month announced his intent to attract at least 1,000 “founder caliber” technologists to the Magic City in 2021 as well as VC firms and established startups. That’s a lot of office space and a lot of high-end homes.

But Miami has a long way to go on several metrics important to Big Tech. It lacks efficient large-scale public transit and is well behind established tech hubs on health care and education. A surge in population might push the city’s infrastructure to the brink. Some warn that all the hype (and growth) could be short-lived. And Suarez, for all his enthusiasm and PR savvy, has very limited powers as mayor to bring about the sweeping changes that the tech industry will likely want.

If Miami really hopes to become the next Silicon Valley or Boston, it will need to address those infrastructure deficits, said Bernard Zyscovich, an urban planner and architect who Facebook tapped to study the Bay Area from an urban design and mobility perspective.

There is “no way” Miami can provide the same “brain trust” as Silicon Valley in the short term, Zyscovich said.  “Over time, Miami could become a place which generates its own feeder system for recruitment. But in the short term, recruitment is limited to Miami being a desirable place for startups and incubators. It has to be a large number of small scale investors that come here that can run their businesses from their computer.”

Oringer, who relocated to Miami Beach in the fall after keeping a pied-à-terre for years, described Miami’s situation as a “chicken or egg problem.”

“If we can find entrepreneurs down here, if we can launch enough businesses, if we can attract enough talent, we’ll be able to build lots of interesting companies down here,” he said. “People asked me the same questions in the early 2000s when I started Shutterstock in New York. New York was a finance town filled with Wall Street people. It had a little bit of tech, but if you wanted to start a tech company, you moved to San Francisco. I resisted that.”

Testing the waters

“Visiting Miami right now and I think I’ve seen more people from SF here than I saw in SF last year,” JD Ross, a co-founder of iBuying startup Opendoor, tweeted Jan. 10.

It’s a trend that’s been on since at least the summer, with South Florida’s residential brokers finding themselves inundated with requests for luxury waterfront rentals and for-sale homes. The single-family home market, particularly in Miami Beach and Palm Beach, saw a surge, and sellers called the shots.

In the second half of 2020, there were more than 3,000 sales of single-family homes priced at over $1 million, an increase of 99 percent, according to Analytics Miami. In Palm Beach, which saw the greatest gains, $1 million-plus single-family home sales more than doubled year over year with nearly 1,300 closings.

The wealthy buyers hailed from several industries: hedge funds, finance, real estate and entertainment. Martin Brand, Blackstone Group’s co-head of U.S. acquisitions, bought a waterfront home in Palm Beach, and Goldman Sachs managing director Douglas Sacks picked up a condo at Eighty Seven Park in Miami Beach.

Many buyers also purchased teardowns and empty lots. Builders are busy.

Jason Anderson, vice president of Coastal Homes, said buyers are upping the ask for amenities, including bowling alleys, indoor basketball courts and even built-out tunnels connecting properties divided by the street. Rabois’ Venetian Islands mansion came with a $1 million aquarium.

Miami’s waterways are bustling with hedge fund managers and tech investors, many of whom have recently become first-time boat owners. Boat slips, which were already in demand, are being snapped up. It’s the cool way to get around.

“They’re boating weekdays: Monday, Tuesday, Wednesday. Every day is a boat day,” yacht broker Boomer Jousma, who’s seen his sales double in 2020, said, referring to the influx of New Yorkers in South Florida. “They’re entertaining on the water. They’re meeting on the water; they’re social distancing.”

Another sign that the migration is less seasonal and more permanent? Schools are filling up.

“In the middle of Covid, where people would otherwise be potentially guessing private schools, there’s waiting lists,” Steve Hurwitz of JLL said. “People have already made those decisions.”

Land of the (tax) free

It’s not just the tech bros planting flags in South Florida. Though Suarez seems to have put Miami on the map with that industry, the city has long been working to attract blue-chip financial firms to the region. The pandemic, which normalized work from home, merely accelerated a migration that’s been underway for years, experts said. Florida’s lack of state income tax, pro-business leaders and warm weather have long drawn the wealthy.

Barry Sternlicht’s Starwood Capital Group, Tom Barrack’s Colony Capital, Carl Icahn’s Icahn Enterprises and David Tepper’s Appaloosa Management have all relocated to South Florida.

“The tours I used to have were with folks with second homes and second offices,” JLL’s Hurwitz said.

And there’s more to come. In early January, Blackstone  took 41,000 square feet at the MiamiCentral development in downtown Miami, where it will hire more than 200 employees.

Billionaire hedge funder Ken Griffin, already the owner of some of Miami’s priciest real estate, is nearing a deal to lease space at the under-construction office tower 830 Brickell, according to Business Insider, where Microsoft is also close to a deal. Goldman Sachs is also considering a larger expansion into South Florida, and Virtu Financial has toured spaces in Palm Beach County. Google is eyeing an expansion in the Miami area, and Spotify last year inked a lease in Wynwood.

Thrive Capital, Joshua Kushner’s investment firm, is also in the market, according to sources. Twitter founder Jack Dorsey and the Winklevoss twins have expressed interest in investing in Miami.

Kelly Smallridge, president of the Business Development Board of Palm Beach County, acknowledged that there are no guarantees the businesses coming into town are here to stay. “However, our retention numbers are very high, and you can’t get away from no state tax on income,” Smallridge said. She is behind the effort to build up “Wall Street South” and said there are about 30 financial services firms in the pipeline in Palm Beach County. (Paul Singer’s Elliott Management is among them with plans to move to a 40,000-square-foot space at Related Companies’ 360 Rosemary office building in West Palm Beach.)

Danet Linares, vice chair of brokerage Blanca Commercial Real Estate, said new-to-market tenants have toured more than 1 million square feet of space in Miami-Dade over the past six months with Class A rents still increasing. Countywide, Class A rents rose to more than $48 a foot in the fourth quarter, according to Colliers International data. Brickell is still the most expensive with asking rents of nearly $60 per square foot. Though there is increased buzz surrounding the office market in South Florida, the vacancy rate was at 10.8 percent in the fourth quarter of 2020, up from 9.2 percent a year earlier, according to Colliers. The hospitality and retail industries are still reeling, and multifamily landlords aren’t able to collect rent from lower-income renters. In a way, it’s a tale of two cities, sources said.

Documentary filmmaker Billy Corben called the push for tech “the latest real estate hustle” in Miami.

“There is a commercial real estate depression happening right now,” said Corben, who’s known for the “Cocaine Cowboys” and “Screwball” documentaries. “No one wants to say the D word, especially down here where everything is about spinning reality. But the reality is you have one of the poorest cities in America and its residents and business owners are crying out for real and immediate help, without any response from their government.”

Moving’s easy. Living’s harder.

Let’s assume Big Tech does make the big move to Miami. Will the city be equipped to integrate it?

Transportation has long been a big issue for South Florida. Brightline, a train that runs from downtown Miami to West Palm Beach, is planning an expansion, as is Tri-Rail, a more affordable commuter rail option.

Suarez said that it was hard to predict what transportation requirements would be in a remote-work world, and pointed to Miami’s investment in walkable neighborhoods.

David Goldberg, general partner at Alpaca VC (formerly Corigin Ventures) noted that the cities attracting companies — Boca Raton, Miami, West Palm Beach, Fort Lauderdale and Miami Beach — are all far apart from each other, preventing the kind of cluster that tech firms love.

He also made reference to the area’s more easygoing ways as a potential hurdle.

“Is there a hard-charging hustlers mentality?” he said. “Or is it a bit slower, less ambitious, potentially shady?” A thin talent pipeline is another concern: “You don’t have the Stanfords, MITs and Berkeleys churning out entrepreneur talent,” said the University of Miami graduate.

Still, Goldberg made the jump to the city with his wife in August. He’s working out of a private office at the LAB Miami, one of the first startup hubs. When asked where his partners are based, he responded, “I don’t really know what that means anymore. I’m in Miami. Ryan [Freedman] is in Aspen. Aubrie [Pagano] is usually in New York, but she’s in Brazil right now.”

He added he’s been checking in on the tech scene in South Florida every couple of years, waiting for the inflection point. In 2014, he met with “everybody important” within 24 hours. “Now, I get introduced to five or six a day,” he said.

Though business leaders are promoting the pool of local talent, it’s also no longer necessary to recruit locally. Oringer and his business partner are launching Pareto Holdings to invest in startups that will be based in Miami — “whatever based means these days,” he said. He envisions a combination of remote and office workers, and said it will likely be much easier to hire remotely.

“I cannot imagine we’ll snap our fingers and work in our headquarters again,” he added.

Cometh the hour

Suarez’s powers as mayor are limited, and when he proposed becoming a strong mayor in  2018, Miami residents trounced the measure, leaving the city commission and the city manager with most of the clout. (There are 34 municipalities in Miami-Dade County, 31 in Broward and 39 in Palm Beach County. Suarez is mayor of just one city.)

That legislative weakness, according to attorney David Winker, could see Suarez’s push to bring companies over backfire.

“By not having a strong mayor, you have the tension that Miami’s open for business, but when you get here, you have to deal with a commission that may not be open for you to do business,” Winker said, referring to the ongoing battle between the popular Little Havana nightclub Ball and Chain and the city.

Businesses relocating to the city of Miami, for example, could be eligible for tax breaks promoted by business development agencies that include the Beacon Council. In some cases, those incentives packages are subject to approval by the Miami-Dade County Commission, or in the case of those offered by the DDA, subject to approval by the DDA’s board. Suarez can only veto decisions made by the Miami City Commission, which does not offer incentives.

“The mayor is a mascot in the head coach’s office. By charter, he does not have a lot of official power,” Corben said. “Ultimately, the buck stops with the commission, and the buck stops with the bureaucracy. The moment any of these people out west have to come out here and have to deal with someone in government, not Suarez, they will head right back for the hills.”

Condo market consultant Peter Zalewski cautioned against buying into the hype.

“Politicians sell a dream and a vision,” Zalewski said. “The problem is he [Suarez] doesn’t have the juice to be able to pull this off.”

Still, there’s no denying the astounding success of Suarez’s PR blitz.

Aaron Gordon, a partner at Schwartz Media Strategies, described the last two months as “rocket fuel” for the city’s corporate prospects.

“It took a bold, forward-looking mayor with a Twitter handle to open the floodgates,” Gordon said. “Francis has become the face of Miami’s tech scene in the span of four weeks, the same way Dwyane Wade was the face of the Miami Heat and Dan Marino the face of the Miami Dolphins.”

Suarez, who is the son of former Miami Mayor Xavier Suarez, is quick to respond, lighthearted and accessible. He’s what business leaders wish their government leaders would be like, Gordon said.

On a recent podcast, Suarez said that any city that is not competing to grow its tech community is being negligent toward its residents who could benefit from high-paying tech jobs.

“I want to seize the momentum. You don’t always get opportunities like this,” he told TRD. For the tech community, it’s the gesture that counts.

Some say it’s almost irrelevant that he doesn’t manage the city’s budget, or that he can’t direct who gets awarded what contracts, while others point out his power to sway the Miami commission and his connections to major developers.

Nitin Motwani, the developer of Miami Worldcenter and a DDA board member, said the incentives wouldn’t make or break a company’s decision to move to Miami.

“It’s not a life changing amount of money with these companies,” Motwani said. “What the incentive does is exactly what we wanted to do. It reinforces our message: How can we help? We want to show you that you’re important to us. People are so excited to come to a place like Miami knowing the community is embracing them.”

The post Paradise found: Can Francis Suarez make Miami the next Big Tech mecca? appeared first on The Real Deal South Florida.

Michael Cammarata (Linkedin, Neptune Wellness Solutions, iStock)

Michael Cammarata (Linkedin, Neptune Wellness Solutions, iStock)

A wellness and cannabis company is relocating to South Florida, marking another example of the surge in businesses moving to the region.

Neptune Wellness Solutions, a publicly traded company based in Canada, will open its U.S. headquarters in Jupiter in June, according to its CEO, Michael Cammarata.

Cammarata, who grew up in Florida and lives in Jupiter’s Admirals Cove, is the co-founder and former CEO of Schmidt’s Naturals, which he sold to Unilever for an undisclosed amount in 2017.

Neptune is leasing more than 5,000 square feet at 1044 U.S. Highway 1 and will have about 20 employees when it opens the office later this year, he said. Neptune, a plant-based wellness company, specializes in health and wellness products derived from cannabis. Cammarata said the company is considering bringing a facility to Florida as well.

According to Cammarata, some employees already have started relocating from around the country. Some are buying boats that they will use to get to and from the office. The company decided to make the move in December, and is in talks with the state regarding incentives for doing so. Cammarata said Florida’s business friendly laws drew the company to South Florida.

A growing number of companies are relocating to Florida due to the tax benefits, especially in the financial services industry. Tech giants such as Microsoft and Spotify are also expanding in the Miami area.

[contact-form-7]

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 Robert Morse, executive chairman of Bridge Investment Group, one of the major Opportunity Zone investors focusing on real estate. (Bridge, Stanford)

Robert Morse, executive chairman of Bridge Investment Group, one of the major Opportunity Zone investors focusing on real estate. (Bridge, Stanford)

 

It was a good year for Opportunity Zones.

More than $12 billion was invested in Opportunity Funds by the end of August, Bloomberg News reported, citing the most recent data available from Novogradac.

The tax deferral program, which was formalized in the Tax Cuts and Jobs Act of 2017, got off to a slow start partly because the regulations were unclear. Thanks to the rules finalized in December 2019, along with the strong rebound of the stock market last year, investors took advantage of the tax-deferral measure to reinvest their capital gains into Opportunity Zone projects.

“We actually turned away capital,” said Robert Morse, executive chairman of Bridge Investment Group, one of the major Opportunity Zone investors focusing on real estate. The firm’s investment amounted to nearly $2 billion — twice as much as in 2019 — and he expects to pour about $1 billion more into Opportunity Zones this year.

The tax deferral program aims to give developers incentive to invest into economically deprived neighborhoods. By investing their capital gains in Opportunity Zone projects, property owners and developers are allowed to delay paying capital gains taxes until 2026. If they keep the investments for more than a decade, the tax liability disappears.

But critics have argued some of the designated zones didn’t need any incentives to attract investors or were not poor areas, while others said they enrich developers without any evidence or metrics to show their Opportunity Zone projects benefit the neighborhoods they are in.

President-elect Joe Biden has suggested reforms to the program, including incentivizing developers to partner with community organizations, and a more robust system for reporting on the impacts of developers’ investments.

[Bloomberg News] — Akiko Matsuda

 
[contact-form-7]

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Dwyane Wade and Gabrielle Union dropped the asking on their Sherman Oaks mansion, a year after buying big in Hidden Hills. (Getty, Hilton & Hyland)

Dwyane Wade and Gabrielle Union dropped the asking on their Sherman Oaks mansion, a year after buying big in Hidden Hills. (Getty, Hilton & Hyland)

Dwyane Wade and Gabrielle Union are lowering the ask on their Sherman Oaks mansion.

Wade, the former Miami Heat superstar, and Union, an actress, are now asking $6 million for the 8,650-square-foot home, according to the Los Angeles Times. That’s $200,000 less than they had been seeking, and the exact amount they paid for the property in 2018, a year after it was built.

Last year, the couple paid $18 million for a 17,000-square-foot Hidden Hills mansion.

The Sherman Oaks home is a three-level Mediteranean-style, and sits on three-quarters of an acre on a private road at 15234 Rayneta Drive. It has five bedrooms and 8.5 bathrooms, along with a home theater, wine cellar and an elevator.
Annie Marie Simpliciano with Hilton & Hyland and Althea Bowman of B&B Investments have the listing.

[LAT] — Dennis Lynch 

The post Dwyane Wade and Gabrielle Union drop asking on Sherman Oaks manse appeared first on The Real Deal South Florida.

Stuart Elliott

It seems like the whole world is heading south for the winter — and staying there.

Since the pandemic hit, South Florida — despite seeing an enormous number of Covid cases — has benefited with rarely a day going by without news of a mammoth luxury sale or prominent company relocating some of their employees from elsewhere in the country.

In our cover story this month, we explore an idea that has gained currency in recent weeks as Miami’s fortunes have surged: Can the city capitalize on its growth to eventually become a tech hub? Maybe even the next Silicon Valley?

Prompted by Miami Mayor Francis Suarez, a real estate attorney who took office in 2017, the idea went viral last month.

As reporter Katherine Kallergis writes, a principal at venture capital firm Founders Fund threw out a proposal in early December to move Silicon Valley to Miami. Suarez quote-tweeted the investor, asking, “How can I help?”

The response went viral with more than 2 million impressions and thousands of likes. The mayor compared it to “catching lightning in a bottle.” More importantly, “Suarez was suddenly in conversation with major venture capitalists and tech executives from around the country, grateful for a friendly ear in what has become a political climate openly hostile to Big Tech,” Kallergis writes.

While some are optimistic, others see it as unlikely, labeling it “the latest real estate hustle” in Miami. We explore the idea — and what’s next for Miami’s real estate market overall — in our story.

In another big piece, we dive into the fallout in the country’s multifamily market amid the pandemic. While office landlords have taken a huge hit, hotels have been slammed, and the already suffering retail sector has faced even bigger challenges, the market for rental buildings has performed better than expected.

The number of people paying their rent mostly has held up, and there have been fewer distressed properties as a result. But the real pain could still be ahead, hitting in the next six months to a year.

Meanwhile, it’s no secret that 2020 was (somehow) a good year for the stock market, despite steep job losses and widespread economic pain. It was also the biggest year for IPOs since 2007, and instant-homebuying startup Opendoor and home-services software company Porch.com were among the companies that debuted. Both went public in December and saw their valuations climb to $18 billion and $1 billion, respectively.

Next up is the long-awaited IPO of residential brokerage Compass. As with any startup, the earliest backers could reap the biggest rewards. Reporter E.B. Solomont breaks down who invested and who is best poised for a windfall. We also look at the biggest winners from Opendoor’s IPO, including its CEO Eric Wu, who’s now a billionaire.

Elsewhere in the issue, we look at the real estate reaction to the violence at the Capitol earlier this month. The fallout for the Trump Organization has been severe, and those in the industry are among those turning away: Cushman & Wakefield has quit leasing duties at Trump properties, and JLL backed off its assignment to sell the Trump hotel in D.C. At the same time, some real estate agents’ use of social media app Parler had sparked concerns early this month, though the app has recently been cut off by Big Tech.

Finally, don’t miss our investigative piece looking at the implosion of crowdfunding firm Prodigy Network, where investors poured in a staggering $690 million. And check out our sit-down Closing interview with Ray McGuire, the New York City mayoral hopeful who has some of the biggest business backers on his side.

Enjoy the issue.

The post Editor’s note: Miami mania appeared first on The Real Deal South Florida.

Pierre Pomerleau and Eighty Seven Park (8701 Collins Avenue, Miami Beach)

Pierre Pomerleau and Eighty Seven Park (8701 Collins Avenue, Miami Beach)

The CEO of one of the biggest construction companies in Canada bought another oceanfront condo at Eighty Seven Park for $8 million.

Pierre Pomerleau, president and CEO of Pomerleau, bought the unit at 8701 Collins Avenue in Miami Beach from 2020 87 Park LLC, a Florida LLC managed by Coral Gables attorney Joseph M. Hernandez, records show. Pomerleau paid nearly $2,500 per square foot for the condo.

In 2019, Pomerleau bought a three-bedroom unit in the same tower for $6 million.

Founded in 1964, Pomerleau also owns Beaubois, which specializes in architectural woodwork, and co-owns Borea Construction.

The seller of Pomerleau’s latest unit bought it in August for $7.5 million. The unit was listed in September, asking $8.5 million.

Mick Duchon of Douglas Elliman represented the Florida LLC, while Michael Martirena of Compass represented Pomerleau.

The condo features three bedrooms and three-and-a-half bathrooms, spanning 3,202 square feet, according to property records. The listing shows it also has a 2,867-square-foot wraparound terrace that has views of the ocean as well as downtown Miami.

Developed by Terra and completed in 2019, Eighty Seven Park is the first project in the United States by architect Renzo Piano. The 66-unit, 18-story condo tower has an underground parking garage, a gym and spa, wine bar, and two pools.

Pomerleau will be living among the likes of tennis star Novak Djokovic, who bought a unit for $5.8 million in 2019, and former politician Michael Huffington, who spent $7.5 million on a unit in September.

In October, a penthouse in the tower sold for $37 million, marking a record for the development.

[contact-form-7]

The post Canadian construction mogul buys another condo at Eighty Seven Park appeared first on The Real Deal South Florida.

Billionaire hedge fund manager Dan Loeb and renderings of 6440 North Bay. (Third Point, To Better Days Development)

Billionaire hedge fund manager Dan Loeb and renderings of 6440 North Bay. (Third Point, To Better Days Development)

 

Spec home developer Peter Fine sold a Miami Beach mansion to billionaire hedge fund manager Dan Loeb for $20 million, The Real Deal has learned.

Fine’s 6440 NBR LLC sold the six-bedroom, 13,386-square-foot home at 6440 North Bay Road to a Delaware entity named after the address. Sources confirmed the buyer is Loeb, founder and CEO of Third Point, a New York-based hedge fund.

Loeb is worth about $3 billion, according to Forbes. He founded Third Point LLC, a New York-based activist hedge fund in 1995, and is CEO of the company. Loeb is also developer Shahab Karmely’s silent backer, TRD reported in 2017.

Coldwell Banker’s The Jills Zeder Group brokered the deal. Jill Hertzberg represented the seller, and Danny Hertzberg, who declined to comment on the sale, represented the buyer.

Fine launched his spec home development firm, To Better Days Development, in 2015, with plans to build ultra-luxury spec mansions in Miami Beach.

Property records show Fine’s company paid $6.6 million for the 0.6-acre lot in 2013. The home hit the market in 2015, before it was completed, for $29 million. Choeff Levy Fischman designed the mansion.

The home features a gym, wine cellar, home theater, elevator, rooftop deck, separate entrance for the guest quarters, and a pool and dock, according to the listing. It had been on and off the market since 2015, most recently asking $23.5 million in September. The property has 100 feet of water frontage.

Fine, a New York and Miami developer, sold 4420 North Bay Road in August for $10.8 million. He also sold the spec mansion at 6010 North Bay Road to Yext founder and CEO Howard Lerman for $17 million in February 2019.

Fine and Loeb did not immediately respond to requests for comment.

Sales have surged in waterfront neighborhoods in Miami Beach, including North Bay Road, the Venetian Islands and the Sunset Islands.

Danny Hertzberg said that the high-end, single-family home market has not shown signs of slowing down. “We’re still going seven days a week,” he said. “It’s extremely busy.”

Nearby at 5800 North Bay Road, Phil Collins has his waterfront mansion under contract. It’s on the market for $40 million with Jill Hertzberg.

Earlier this year, Venezuelan oil tycoon Gerardo Pantin Shortt sold his waterfront Sunset Islands mansion for $17.4 million.

[contact-form-7]

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Fabric co-founder, CEO Elram Goren (Getty, Elram Goren via LinkedIn)

Fabric co-founder, CEO Elram Goren (Getty, Elram Goren via LinkedIn)

 

A startup that focuses on creating last-mile fulfillment centers aims to compete with logistics giants.

Fabric, which was founded in Tel Aviv but is now headquartered in New York City, has raised $136 million in funding from venture capital, Business Insider reported. The company has partnered with retailers on last-mile distribution centers, often by repurposing former big-box stores or gyms. (FreshDirect is one of its biggest clients.)

Last-mile fulfillment facilities have been in high demand as shoppers increasingly flock to online retailers, and the trend has only accelerated during the pandemic. Some developers and retailers have already experimented with turning empty storefronts into so-called “dark stores,” which exist for the sole purpose of fulfilling online orders.

Fabric’s centers are typically 10,000 to 15,000 square feet, which is much smaller than the typical Amazon fulfillment center, which clocks in at about 800,000 square feet. The startup works with its retailer partners by integrating its system into retailers’ existing stores, or by fulfilling orders from its own micro-warehouses. Those can typically process about 500 orders per day, the publication reported.

But the large conveyor belts in massive warehouses are no longer needed to create last-mile fulfilment centers, said Fabric’s Chief Commercial Officer Steve Hornyak.

“Now it’s a whole different approach to automation that allows you to shrink it down,” he said, noting that at the same time, retailers are scaling back on their store footprint, and excess space is often perfectly situated to become micro-fulfillment centers. “The big-box guys don’t need the entire square footage that they have, so why not leverage that in order to do e-commerce and click-and-collect?”

[BI] — Akiko Matsuda

[contact-form-7]

The post Startup wants to bring “micro-warehouses” to vacant retail appeared first on The Real Deal South Florida.


Which Compass investors have the most to gain?

Compass investors in line for payday, $100M for a flex-living startup

Compass investors could be in line for a windfall when the residential brokerage goes public later this year.

Since its launch in 2012, Compass has raised more than $1.5 billion from investors, who collectively hold a 60.25 percent stake in the startup, according to data from Pitchbook.

We took a deep dive into its cap table so you didn’t have to.

Seed | $8M | Share price and stake unknown
Urban Compass launched in 2012 with salaried rental agents. Backing came from Goldman Sachs, Founders Fund, Joshua Kushner’s Thrive Capital, American Express CEO Kenneth Chenault, .406 Ventures and others.

Series A | $20M | $10/share | 13.21%
Advance Publications (parent of Condé Nast) and Marc Benioff, founder and CEO of Salesforce invested in 2013. In early 2014, Compass pivoted to a traditional commission model.

Series B | $42M | $20.77/share | 4.37%
Advance, Benoiff, Chenault et al re-upped in 2014, letting Compass expand outside New York.

Series C | $50M | $40.50/share | 3.27%
IVP led the round in 2015 at a $810 million valuation. Developer Miki Naftali and LeFrak, with other prior backers, also chipped in to bulk up engineering.

Series D | $75M | $42.63/share | 6.1%
Wellington Management led the round, which crowned Compass a unicorn in 2016, fueling IPO rumors.

Series E | $550M | $65.88/share | 19.39%
In November 2017, Fidelity, IVP and Wellington wrote a check for $100 million. A month later came SoftBank’s mega-check for $450 million. With a $2.2 billion valuation, Compass began an acquisition spree.

Series F | $400M | $118.57/share | 8.12%
SoftBank doubled down in 2018, co-leading a round with Qatar Investment Authority at a $4.4 billion valuation. Compass honed in on a “2020 by 2020” goal of hitting 20 percent market share in 20 U.S. cities by 2020.

Series G | $370M | $154.27/share | 5.78%
Compass’ most recent round valued it at $6.4 billion in July 2019. The round, led by SoftBank and Dragoneer, was earmarked for geographic expansion plus R&D.

“They’re not yearning to see Times Square. What they are yearning to do is to see their friends and their family … Mass travel is going to be replaced by meaningful travel.”

— Airbnb’s Brian Chesky 

SPACs go hunting for proptech deals

It’s a good time to be a startup with IPO aspirations.

Investors plowed more than $83 billion into blank-check companies last year — and 15 days into 2021, they’ve invested $14.4 billion more. A growing number are targeting proptech deals, including Fifth Wall Ventures, Tishman Speyer, CBRE, SoftBank and others.

But raising money isn’t the hard part. Sponsors need to have an edge to convince investors to write checks, said Evan Ratner, a securities analyst at asset management firm Levin Easterly. “You’re not looking for the also-ran,” he said.

And with so many SPACs out there, it may become harder to find merger partners at a good price. “The seller is going to be able to say, ‘Hey, seven SPACs want to buy us, we’ll sell to the highest bidder,’” said Jay Ritter, a University of Florida finance professor who collects IPO data.

Something in the water?

The second week of January brought a flurry of C-suite news for proptech firms.

💦 After pivoting from homebuying to lending, Knock tapped Michelle DeBella, a former Lyft and Uber exec, as its new CFO. At both companies, she helped scale the finance teams ahead of their IPOs. Knock has raised more than $600 million in debt and equity since 2015.

💦 Vacation rental startup Vacasa, which has raised $634 million since 2009, hired Jamie Cohen from ANGI Homeservices to help lead the “next stage” of its growth. Cohen helped oversee ANGI’s 2017 IPO.

💦 On the heels of a $170 million round in June, hospitality startup Sonder beefed up its C-suite as it embarks on major growth in Canada. CFO Sanjay Banker will add “president” to his title. And Satyen Pandya will join as CFO from Flexport, a SoftBank-backed freight forwarding startup.

Well, that was fast

Three weeks after its IPO, Porch snapped up four startups for $122 million.

The Seattle company said it is buying Homeowners of America, an insurance company, for $100 million in cash and stock, and V12, a marketing platform for $22 million, plus two smaller firms for an undisclosed amount.

Before going public though a SPAC, Porch’s recurring losses put the company at risk of insolvency. Though its valuation soared to $1 billion after the IPO, Porch projected $53 million to $55 million in 2020 losses — up $20 million from earlier estimates.


STAT OF THE WEEK

$150B

Annual VC investment hit a record in 2020, per Pitchbook and NVCA


Landing gets $100M for flex living

Bill Smith sold his grocery-delivery startup Shipt to Target for $550 million in 2017.

His latest venture, Landing, a membership-based furnished apartment startup, just raised $100 million in debt and equity. The $45 million equity round was led by Foundry Group, with Greycroft and Maverson.

Founded in 2019, San Francisco-based Landing is a flexible, long-term solution for members, who can move between apartments as often as monthly. Members pay $199 to access furnished one- and two-bedroom apartments. Since March, Landing has expanded to 10,000 apartments in 75 cities.

Airbnb’s “insurrection” fallout

Airbnb straight-up cancelled all reservations in Washington, D.C., for the week of President-elect Joe Biden’s inauguration, the company said this week.

It won’t be cheap — Airbnb plans to refund all travelers and reimburse hosts — but the decision was made after local elected officials discouraged people from traveling to the U.S. capitol. Previously, Airbnb said it would block people tied to the insurrection at the Capitol on Jan. 6.

In addition to guidance from local officials, Airbnb cited new reports that armed militias and known hate groups would attempt to disrupt Biden’s inauguration.


Title insurance gets white-label treatment

Digital title startup Spruce has found a way for more people to avoid clunky pen-and-paper closings: The company said it’s launching a white-label product that brokerages, iBuyers and others can use for their own title businesses.

That will allow companies to operate digital title agencies without having to build or buy the technology, co-founder and CEO Patrick Burns told Business Insider. “Our mission is to turn every transaction into a one-click checkout,” said Burns. Spruce will collect a flat fee, corresponding to the client’s volume of transactions.

The New York City-based company has raised $50.1 million since 2016, including a $29 million in May. Scale Venture Partners led the round, with Zigg Capital and Bessemer Venture Partners.

During the pandemic, demand for digital services has surged. Spruce says it saw a 450 percent increase in transactions on its platform.

Small bytes

📣 Former Compass COO Maëlle Gavet was named CEO of startup accelerator Techstars.
💰 Neat, a mortgage lender, raised $22.5M.
💰 Own Up, a mortgage marketplace, raised a $12M round led by Brand Foundry Ventures.
🏠 La Haus, a Colombia-based real estate marketplace, closed a $35M round led by Greenspring Associates. NFX, co-founder by Trulia founder Pete Flint and Zillow co-founder Spencer Rascoff also invested.
💰 LEX, a real estate securities marketplace, raised $6M from investors including Brookfield chairman Ric Clark and others.
🛋 Outer, an outdoor furniture startup that sells directly to consumers, raised $10.5M.
🏠 On the heels of a $69M funding round, real estate tech and services startup Orchard is doubling its footprint by adding four new markets in the Southeast.
🎊 Piñata, a new app, wants to act as a loyalty program for property mangers by giving renters rewards for paying rent on time.

In unprecedented times, you need clarity. Get the facts delivered straight to you. Subscribe and support The Real Deal.

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Don Peebles

Developer Don Peebles founded his eponymous firm in 1983. Since then, the Peebles Corporation has built out a portfolio that totals $6 billion and spans more than 7 million square feet in Boston, Los Angeles, Miami, New York, Philadelphia, San Francisco, Washington, D.C., and Charlotte, North Carolina.

Peebles has long been outspoken about the need for real estate companies to address the lack of economic opportunity for minorities in the industry. He once served on the Real Estate Board of New York’s board of governors, but stepped down before the end of his two-year term, citing frustration that the group wasn’t doing enough.

Last year, he announced that his company is launching a $500 million fund to invest in minority and women developers, targeting multifamily and commercial projects ranging from $10 million to $70 million.

In an interview with The Real Deal this month, Peebles talked about the fund and how the industry missed its chance to lead the way on economic inclusivity. Developers and other commercial real estate players, he said, now have no choice but to change how they do business.

Last year you announced the launch of a $500 million fund for minority and women developers. How much has been raised so far? The typical fund, especially a new fund, I’ve been told, takes about 18 months, and we are about a year into this. It’s been a lengthy and arduous process, but we are making progress now. We are in due diligence with several institutional investors. The pandemic and the inability to meet people in person, and so forth, made it more difficult. But everybody’s adapting.

Do you have a time frame for having the platform up and running? I’m hopeful, by year end, we’ll be able to begin to deploy some capital to entrepreneurs who need it and who can produce good returns. Frankly, since the murder of George Floyd and the resulting protests, the issue of equal economic opportunity for African Americans has become more of a topic in the business community and has become one of the more current issues of focus. As a result of that, we’ve seen a significant increase in interest in our fund, in our entire platform, in terms of raising equity and providing equity to minority and women developers, as well as the projects that we develop.

What did you think of the real estate industry’s overall response to the Black Lives Matter movement and George Floyd’s death? I think that the industry is very late to the game. It’s almost too little, too late. While the industry over the last couple of decades has talked about diversity, they have approached it in generally philanthropic ways — helping the most neediest of Black people, as opposed to doing business with Black [firms], deploying capital to businesses and entrepreneurs who are talented but haven’t had fair access to capital.

[Investing in minority firms] is a very profitable endeavor, but our industry has looked at the Black community as one that is lesser than, and that’s unfortunate. In terms of providing real economic opportunities, real career opportunities, the New York commercial real estate industry has failed miserably, and the results are clear.

What are the results? People of color, when it comes to New York commercial real estate, are almost nonexistent. New York City is a market that is forgiving. People fail. They give their properties back to their lenders, and yet they live to fight another day constantly, and they get more institutional capital. You have an industry that has low barriers to entry with low educational barriers to entry, and people are building some of the biggest projects in the city with very limited educational or career backgrounds in the space, and the reason why is they get access to capital.

The people who deploy the capital, deploy it in a discriminatory manner. Whether that’s intentional or not is another story, but that result is the same. If you think about where private equity gets invested, it’s certainly not reflective of the population demographics of New York. Nor is it reflective of the investors of the capital in these funds because the biggest contributors to real estate private equity are public employee and labor union pension systems, whose memberships are heavily represented by minorities and women.

Can you describe what you mean by the discriminatory manner [in how capital is deployed]? I’ve been in the business for 35-plus years. So, when I see developers and owners give their properties back to their lenders or litigate with their lenders — or overpay and lose money for their projects — and they continue to get capital, I’ve often asked some of the people in the financial markets, “How’s that possible?” They explained to me that generally when a deal is underwritten in New York City, the investors and the lenders look at the deal first. When it comes to minority and women developers, they look at the sponsor first, with a microscopic eye, and then they look at the deal.

That’s a very different way of treatment, because there’s this overriding presumption, unfortunately, that somehow minorities and women are not as competent. Of course, that couldn’t be further from the truth.

You singled out New York City, but have you found real estate to be more diverse in the other markets you work in? If you look at Miami, the commercial real estate industry is more reflective of the population demographics. Latino developers are heavily in the Miami and South Florida marketplace. In fact, the largest condo developer in the state of Florida, Jorge Pérez, is a Latino American. David Martin and his father Pedro, again, are Latino Americans doing some of the most exciting projects in South Florida. The list goes on.

African Americans are underrepresented in Florida, and that is a consistent theme around the country. I think you have probably the best representation in Washington, D.C., and that really is because the government and the leaders of the city back in the 1980s made an affirmative push to create economic opportunities for Black businesses. And Washington, D.C., was a majority Black city.

For several years, you’ve called out the industry for its lack of diversity. What do you think should happen now? I think that the industry needs to provide economic and career opportunities to individuals and companies who are community-based and to create opportunities for other people to start new businesses. The industry just has been myopically focused on efficiency and profits and being incestuous with doing business with the same people over and over and over again. They haven’t felt the need to be inclusive, but now that’s changed.

I’ve been telling our industry for years that the business model of exclusion is not sustainable — that if the industry didn’t address these issues, if it didn’t address the diversity issue and affordable housing, those things would be imposed on the industry in ways it may not like. We’d be better suited to draw out the blueprint ourselves, and there wasn’t much interest in that. Unfortunately, now we’re going to see. These topics are not going away and the expectation of economic opportunity is not going to go away.

This interview has been edited for length and clarity.

The post Don Peebles’ diversity capital call: Developer says push for equal economic opportunity is “not going away” appeared first on The Real Deal South Florida.

Phil Collins is in contract to sell his waterfront Miami Beach mansion amid a legal battle with his ex-wife, Orianne Bates. (Getty, Coldwell Banker Realty)

Phil Collins is in contract to sell his waterfront Miami Beach mansion amid a legal battle with his ex-wife, Orianne Bates. (Getty, Coldwell Banker Realty)

 

Phil Collins found a buyer for his waterfront Miami Beach mansion.

Collins’ sale of his home at 5800 North Bay Road is pending, according to Realtor.com and other listings websites. The 11-bedroom, 10-bathroom mansion, which once belonged to Jennifer Lopez, hit the market in December for $40 million. Jill Hertzberg, of the Jills Zeder Group at Coldwell Banker, has the listing.

The 10,769-square-foot Mediterranean Revival estate, built in 1929, sits on a 1.2-acre lot. It has 184 feet of waterfront, a pool and dock, as well as a 6,000-gallon koi pond, according to the listing. Collins’ 5800 North Bay Road Miami LLC paid $33 million for the property in 2015.

Collins has been in a legal tussle with his ex-wife, Orianne Bates. She and her new husband, Thomas Bates, paid $5.5 million for a waterfront house in Fort Lauderdale last month. They eloped in Las Vegas in August, allegedly a month after Collins and Orianne broke up.

Through his lawyer, Collins demanded last year that Orianne and Thomas vacate his Miami Beach home and filed a lawsuit against the newlywed couple in October alleging unlawful detainer and forcible entry. Orianne has alleged that Collins verbally promised her 50 percent ownership interest in the house, which is owned by Collins’ LLC.

Collins’ complaint also alleged that Orianne blocked the listing agent, Hertzberg, from showing the property last year.

Court records show both parties agreed to a settlement that requires that Orianne and Thomas Bates leave the property by Thursday, Jan. 21. Once they leave, the mediated agreement calls for the dismissal of the LLC’s pending claims against them.

Collins reportedly provided Orianne with a nearly $47 million settlement when the couple divorced in 2008. Though Orianne remarried, Phil and Orianne got back together in 2016, prior to her recent marriage to Bates. Orianne, a jewelry designer, owns Orianne Collins Jewellery and Spa in the Design District.

[contact-form-7]

The post Phil Collins finds buyer for waterfront Miami Beach estate listed for $40M appeared first on The Real Deal South Florida.

Miami City Ballet (City of Miami Beach, Google Maps, iStock)

Miami City Ballet (City of Miami Beach, Google Maps, iStock)

A seven-story workforce housing project with dorm space for Miami City Ballet dancers will be built on a city-owned lot in South Beach.

The Miami Beach City Commission on Wednesday approved three ordinances that will enable Servitas, a Texas-company specializing in building student housing, to construct a 48,500-square-foot facility on a half-acre lot near Collins Park, South Shore Library, and Miami City Ballet’s headquarters at 224 23rd Street.

Once completed, the project will include a 32-bed dormitory for Miami City Ballet dancers, 6,000 square feet of ground-floor retail, and 80 units of workforce housing.

Miami Beach has a goal to build 6,800 affordable and workforce housing units by 2030. In the case of the Collins Park Artist Workforce Housing Project, rents would range from $1,260 for a studio to $2,300 for a two-bedroom for households making between $51,200 and $89,600 a year. Artists, teachers, nurses, police, firefighters, and Miami Beach employees will be given first priority to rent within the project. Tier 2 prospective tenants will be employees working in hospitality and entertainment.

The retail space will be rented out for $28 a square foot, according to a city manager’s report to the commission.

The project is slated to be finished by 2023. “This is one of those vision items,” Mayor Dan Gelber told commissioners.

Although the project will be built on a surface lot with 21 spaces, the city manager’s report insists that the 513 spaces provided by the Collins Park Garage mitigates the loss of parking.

But attorney Tony Recio, who represents Palm Court office building owner Ronald Bloomberg, disagreed during the Miami Beach meeting. Recio insisted that parking spaces have been steadily disappearing around the Collins Park area. As a result, the Collins Park garage quickly fills up. Recio said it will only get worse if 58 spaces in the garage are reserved for the affordable workforce housing complex, as the city recommends.

“This is going to impact the neighborhood negatively,” Recio said, adding that the lack of parking will impact the ability of Palm Court, at 309 23rd Street, to operate. Recio begged the commission to defer the item for 60 days so this can be studied. But the commission approved the item unanimously.

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Steven Fried and 308 Alicante Drive, Juno Beach (Linkedin, Google Maps)

Steven Fried and 308 Alicante Drive, Juno Beach (Linkedin, Google Maps)

A former executive of a West Palm Beach-based energy production company sold his waterfront home in Juno Beach for $11.5 million.

Steven Fried, and his wife, Jill, sold their house at 308 Alicante Drive to Jeffrey S. Narlinger, as trustee of a trust in his name, records show.

Steven, now retired, was the former COO at mineral mining company Oxbow. The company deals with marketing and production of petroleum coke, coal and other resources, according to its website. Fried continues to do consulting work, according to his Linkedin page.

Narlinger is the director of marketing and technology at Brookline Investment Group, an Aliso Viejo, California-based real estate investment firm.

The Frieds bought the home for $7.5 million in 2012, records show.

Built in 1997, the 6,408-square-foot house was first listed in 2018 at $15 million. After price chops, the most recent asking price in August was $12 million.

Todd Peter with Sotheby’s International Realty represented the Frieds, and Erin Sykes of Nest Seekers represented Narlinger.

The two-story home has four bedrooms and four-and-a-half bathrooms on a half-acre lot. It also features a pool, a three-car garage and views of the Atlantic Ocean from every major room, according to the listing.

Nearby in North Palm Beach, the CEO of an electrical distribution company recently sold his waterfront home for $7.3 million, the head of a construction management company bought a home for $9.5 million, and an orthopedic spine surgeon sold his home for $6 million.

[contact-form-7]

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The Real Deal’s January national issue is live for digital subscribers and will begin hitting doorsteps around the country soon.

Just two weeks ago, the world bid farewell to what many considered the most trying and tumultuous year of their lifetimes. And with pro-Trump riots in the nation’s capital in early January, it’s been a rough transition, to say the least.

Now the real estate industry, like so many others, is looking forward to the possibility of a less financially, politically and emotionally taxing future.

In our first issue of the new year, we take a look at what 2021 could bring, including in-depth coverage of:

… And much more! Subscribe today and check out the new issue here.

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Joan Collins and 110 East 57th Street #8EFG (Getty, BHS)

Joan Collins and 110 East 57th Street #8EFG (Getty, BHS)

Joan Collins is saying goodbye to Midtown.

The soap star, best known for playing the conniving Alexis Carrington Colby on “Dynasty,” and her husband, producer Percy Gibson, have listed their three-bedroom co-op at 110 East 57th Street for $2.095 million. The couple used the apartment primarily as a pied-à-terre, according to the New York Times, and also have homes in London, Los Angeles, and the south of France.

The home was created by combining three units on the building’s eighth floor, and includes a master bedroom suite that used to be a studio apartment. There’s a formal dining room and a galley kitchen. There are three full bathrooms, including an aqua-tiled one that’s as gloriously retro as you’d expect from the home of an 1980s soap star.

And there was one amenity that the famously fashionable Collins particularly loved.

“The clincher for me was the 16 closets it has,” she told the Times.

Though the couple made additions and renovations to the apartment over the years, it could also accommodate additional changes, according to listing broker Carolyn Weiner-Trapness of Brown Harris Stevens. “The kitchen could easily be opened up to the living and dining room to give it a loftlike feeling,” she said.

[NYT] — Amy Plitt

[contact-form-7]

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The penthouse at 3150 South Street in Washington, D.C. (Photos via Redfin; Homevisit)

The penthouse at 3150 South Street in Washington, D.C. (Photos via Redfin; Homevisit)

A penthouse at the Ritz-Carlton Georgetown in Washington, D.C., is hitting the market for $18 million.
If it sells near that price, the 5,500-square-foot unit would break a record for the priciest condominium sold in Washington, according to the Wall Street Journal.

The three-bedroom is one of five penthouse units at the Ritz-Carlton. It has 1,800 square feet of terrace space. The sale also comes with a small unit on the ground-floor of the building.

The seller is the estate of Michelle Smith, the daughter of prominent area developer Robert H. Smith. Michelle Smith, who died last year, worked as a vice president for Charles E. Smith Residential Realty and its successor REIT, Archstone-Smith.

She bought the two units for around $6 million in 2005. They were raw spaces that she built out over the ensuing years. Smith had the floors, moldings, and staircase built from limestone, and built out a wood-paneled library, office, bar, family room, and other spaces.

Listing agent Matt McCormick of TTR Sotheby’s International Realty estimated she spent $20 million on the purchase and work. Smith also furnished the unit with furniture by French designer Jean-Michel Frank and art by Alberto and Diego Giacometti, and Francois-Xaxier Lalane. Those objects and items, however, will be sold separately.

There are no other units available in D.C. anywhere near the $18 million listing, according to prices on Redfin. The next most expensive unit on the market is asking $6 million. [WSJ] — Dennis Lynch 

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(Super Gen via Twitter/ArjunKharpal, Getty)

(Super Gen via Twitter/ArjunKharpal, Getty)

 

A nearly 5.4-million-square-foot e-sports complex will be built in Shanghai, meant to solidify the city as the center of the competitive gaming industry.

Work has begun on the Shanghai International New Cultural and Creative E-Sports Center, expected to cost nearly $900 million, according to CNBC.

“E-sports” refers to both competitive video games and the wider industry that’s emerged around them. That industry generated about $1.1 billion last year, according to games market research firm Newzoo, and is attracting big investments worldwide. In New York City, Dynamic Star is planning an e-sports arena for its Fordham Landing project in the Bronx.

Epic Games, the company behind the hit game, “Fortnite,” recently purchased a nearly 1 million-square-foot mall in North Carolina it will convert into its headquarters.

China-based company SuperGen, which owns the e-sports team Edward Gaming, is the main backer of the project in Shanghai. The complex is designed as a place where e-sports teams and companies can be based. It’s anchored by a 6,000-seat arena and a hotel, according to sports venue news outlet Coliseum.

The complex can host around 10,000 people per day and SuperGen plans to host around 300 competitions each year. The complex is being developed in phases and is expected to open in 2024.

China is the largest e-sports market in the world. About 70 percent of the 720 million gamers in the country play e-sports, CNBC reported. Shanghai hosted the 2020 World Championship of “League of Legends,” one of the largest e-sports events in the world. The event was watched by 3.8 million people.

[CNBC] [Coliseum] — Dennis Lynch 

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BentallGreenOak's Dan Klebes and Avex Group's headquarters (Photos via Avex; BentallGreenOak)

BentallGreenOak CEO Sonny Kalsi and Avex Group’s headquarters (Photos via Avex; BentallGreenOak)

UPDATED, Jan. 22, 2021, 11:01 a.m.: BentallGreenOak isn’t wasting any time putting into action its plan to spend billions on Japanese real estate.

The unit of Canadian insurance giant Sun Life Financial agreed to pay $693 million for an 18-story Tokyo office building, according to the news outlet Mingtiandi.

The building is the headquarters of Avex Group, a Japanese entertainment conglomerate that recently announced it expected operating losses for 2020 because of the pandemic.

BentallGreenOak, the investment unit Sun Life, said last month that it plans to double its staff in Japan, and invest $10 billion into real estate there over the next three years.

BentallGreenOak isn’t the only investor ramping up its activity in Japan. Investment in Japanese commercial real estate was up 27.6 percent in the first nine months of 2020 compared to the same period of 2019.

BentallGreenOak expected that $7 billion of its planned investment will go toward purchases of office properties in Japanese central business districts. The Avex Building sits off Omotesando street, a premier shopping district stretching through Shibuya and Minato districts.

Dan Klebes, BentallGreenOak’s head of Japan, said that the pandemic will lead to softening prices, “presenting some very good opportunities over a five-year hold period.”

Avex will continue to lease the property through the closing, which is expected sometime in the first quarter. [Mingtiandi] — Dennis Lynch 

Correction: A previous version of this article misidentified BentallGreenOak’s CEO.

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Before the pandemic, national tenants paid 94 percent of rent. (Getty)

Before the pandemic, national tenants paid 94 percent of rent. (Getty)

 

The pandemic has exacerbated the retail sector’s pre-existing problems, deteriorating rent collections and forcing landlords to make compromises with their tenants. But there were some encouraging signs as 2020 came to a close.

Before the pandemic, national tenants paid 94 percent of rent. When Covid-19 hit, that all came crashing down, according to the latest report by Datex Property Solutions, with that figure dropping to just 62 percent in the second quarter of 2020.

“It was a major body blow,” Datex Property Solutions CEO Mark Sigal said.

But by the end of 2020, things returned to something resembling normal: In the fourth quarter, rent collections had rebounded to 90 percent, which Sigal defines as the “new normal.”

For the entirety of 2020, rent collection was at 83 percent — only about 2 percent lower than it was in 2019.

The chains included in Datex Property Solutions’ survey all have a minimum gross monthly rent of $250,000 or lease 10 or more locations. The report does not account for any rent relief provided to the retailers by their landlords.

Some sectors fared better than others: Apparel fell from having 89 percent rent collection at the start of the year to 34 percent in the second quarter of 2020. By the fourth quarter, collections had gone back up to 87 percent.

And supermarkets — which were classified as “essential” during the pandemic — never saw rent collections fall below 96 percent, according to the data.

The fitness category, meanwhile, had a huge drop in rent collections at the beginning of the year, going from 95 percent in the first quarter to 14 percent in the second. By the fourth quarter collections were still down at 72 percent, while occupancy costs took up 49 percent.

The chain 24 Hour Fitness saw rent collections plummet to 8 percent in the second quarter, but even by the fourth quarter, collections were only at 29 percent. For the year, 24 Hour Fitness paid only 40 percent of its rent. The company filed for bankruptcy in the middle of the year.

Few retailers did worse than that, but one that did was Regal Cinemas, which paid only 32 percent of its annual rent. After increasing from 4 percent in the second quarter to 18 percent in the third, the movie theater chain dropped to 5 percent in the fourth quarter. The chain faced major financial struggles as its theaters remained closed in many markets, but got a $450 million bailout near the end of the year.

Despite the struggles, it looks like few retailers gave up. Total occupancy remained around 87 percent throughout the year, while early terminations remained low.

However, occupancy costs have risen across the board. That, coupled with rent costs and further pandemic-related lockdowns, means that challenges remain for retailers in 2021.

“It’s not like these tenants have magically gotten healthy,” Sigal said. “It’s not like most landlords have dramatically cut back their overhead. It’s not like banks have said, ‘Hey, don’t worry about the loans.’”

[contact-form-7]

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News of President-elect Biden’s $1.9T stimulus plan held promise for employment and economic activity. (Getty)

News of President-elect Biden’s $1.9T stimulus plan held promise for employment and economic activity. (Getty)

Real estate stocks ended the week in positive territory while the broader market gave up its gains after President-elect Joe Biden rolled out a $1.9 trillion stimulus proposal.

Stocks tend to rise when Washington injects money into the economy, but negative reaction from some members of Congress — or fears that the measure would pass and spark inflation — might have triggered some selling. For real estate, though, the damage was muted.

“Employment and economic activity are pillars of real estate,” said John Kim, a real estate investment analyst at BMO, “although concerns about the inflationary impact of government spending is typically a headwind for the industry.”

The real estate market index climbed nearly 2 percent this week. The index, XLRE, measures the performance of real estate management and development companies, as well as REITs.

Simon Property group climbed 7.5 percent this week to close at $93 and Boston Properties rose 5.6 percent to $95; Hilton Worldwide closed just below its pre-Covid peak after its shares fell 3 percent. Retail, hotel and office sectors have been hammered by the pandemic.

The Federal Reserve signaled this week it will keep interest rates low and continue its monthly asset purchases, which help prevent capital markets from stalling.

While the economy continues to be weighed down by the pandemic, major real estate companies have weathered the second wave of the virus better than the first.

“The first wave of Covid caused a full shutdown of real estate transactions,” said J.D. Parker, executive vice president at real estate servicer Marcus & Millichap, but now “employees are up to speed in the virtual world, and have successfully reimagined much of their workflow.”

The S&P 500 index and Nasdaq Composite closed down 1.3 percent for the week. The Dow Jones Industrial Average was flat.

Here is a snapshot of how various real estate sectors are doing:

REITs

Hotels, retail and offices lost substantial business to the pandemic as people curtailed travel, shopped online and worked from home.

Major hotel stocks have fared better than hotels themselves, as investors anticipate the release of pent-up demand for travel following vaccinations. Shares of Hilton Worldwide have climbed 36 percent since the summer, closing Friday slightly below their pre-Covid peak.

Meanwhile nationwide hotel occupancy has fallen to 37 percent, its lowest level since June, according to STR. That figure does not take into account hotels that are closed.

Marriott International dipped this week to close near $126, about 17 percent below its pre-Covid high. The company was one of many to halt campaign donations to politicians who voted against certifying the presidential election.

The single biggest daily gain in share price for many large real estate companies since the onset of the pandemic came in November, when results of vaccine trials were first released.

Investors remain less optimistic about brick-and-mortar real estate, as consumers during the pandemic have grown more accustomed to shopping from home. Macy’s and Bed Bath and Beyond, anchor tenants at many malls, have announced plans to close hundreds of stores in the coming years. Investors have since lifted the companies’ share prices.

Shares of Simon Property Group, the nation’s largest mall owner, rose this week after the company issued new debt to cover $550 million that comes due this year. Low interest rates have encouraged companies to borrow money instead of sell assets to cope with the financial effects of Covid. (Real estate servicers such as Marcus & Millichap earn fees on borrowing transactions.) Simon shares remain 36 percent below a 2020 high of $147; they peaked at $227 in 2016.

High-profile bankruptcies, from Neiman Marcus and J.C. Penney to Sears, have plagued mall owners for years.

Office

Rent collection rates have remained high among office landlords, but employees’ newfound desire to work from home presents long-term challenges to the sector. The uncertainty has pushed down the share price of office building owners such as SL Green.

SL Green stock, despite ending the week in positive territory, remains almost 35 percent below its February 2020 price. The New York office giant has responded by committing more money to stock buybacks, believing its shares are undervalued.

“A majority of office deals this year have come from [lease] renewals,” Kim said, adding that asset values remain above where markets have priced shares belonging to office building owners. In other words, the real estate market values offices more than stock investors do.

Industrial & Storage

Buoyed by the steady rise of e-commerce, which was accelerated by the pandemic’s keeping consumers away from brick-and-mortar shops, owners of industrial properties have benefited from increased demand for last-mile delivery infrastructure. Large industrial REITs such as Prologis are trading near their pre-pandemic highs.

Frank Cohen, chief executive of Blackstone REIT, said in a statement last year, “Similar to logistics, self-storage is a resilient sector through economic cycles because of low tenant turnover, minimal maintenance costs and stable cash flows.”

Homebuilding

Against the backdrop of a persistent national housing shortage, demand for new homes sent the share price of home builders higher. Lennar Corporation stock climbed 4.4 percent this week to $76.60 and since last summer has remained above its pre-pandemic share price. Toll Brothers closed at $44.62, an increase of 1.3 percent this week, nine months after sinking to a low of $16 per share.

IPOs/Tech companies

The share price of Opendoor Technologies, which buys and sells homes through its online listing service, has declined 10 percent from its initial offering price in late December of $29 per share to $26,. The decline comes amid a slowdown in U.S. home sales — in November, 6.69 million homes were sold, snapping a five-month streak of gains — after a record-setting year in which buyers took advantage of low interest rates to relocate or buy larger homes.

Airbnb, which cancelled all reservations in Washington, D.C., during the week of the presidential inauguration, continued drawing investor interest this week. Its share price closed above $169, an increase of over 16 percent since Monday. The hotel substitute more than doubled its opening share price of $68 on its first day of trading on Dec. 10, despite reduced travel trends during the pandemic.

Shares of technology company CoStar Group slid for the second week in a row, ending this week down more than 7 percent at about $853, after the Federal Trade Commission objected to it acquiring RentPath, a rental property listing service. CoStar is fighting a $60 million termination fee over the deal; it recently purchased the url houses.com.

[contact-form-7]

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Christopher Forest Longsworth (Invesca)

Christopher Forest Longsworth (Invesca)

Christopher Forest Longsworth, CEO and founder of Plantation-based Invesca Development Group, has died. He was 36.

Longsworth died on Dec. 22, according to an online obituary. His company confirmed his death on its website. The obituary did not give a cause of death and the Los Angeles County Medical Examiner-Coroner’s office said more testing was required to determine the cause. Longsworth died in West Hollywood.

“Chris was a leader, a visionary and a shining light of all we can accomplish with hard work, creativity and passion,” according to the company’s website. “We will keep his memory alive in all of Invesca’s future endeavors. Our thoughts are with his family and everyone who loved and respected him.”

Longsworth founded Invesca in 2001. His other ventures include the Nexus shooting range in Davie, according to his LinkedIn.

Invesca was active in South Florida’s multifamily market last year. In November, Invesca landed a $50 million loan to refinance Envy Pompano Beach, a 214-unit, 11-story rental building. In April, Invesca scored a $102 million loan from Madison Realty Capital for two South Florida multifamily projects — to finish construction on a 214-unit apartment project in Pompano Beach, and to begin construction on a 330-unit multifamily development in Plantation

[contact-form-7]

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Jenna Ryan was part of a group who flew on a private plane from Denton, TX, to Washington, D.C., with the intention of joining the protestors (Twitter.com/DotJenna)

Jenna Ryan was part of a group who flew on a private plane from Denton, Texas, to Washington, D.C., with the intention of joining the protestors (Twitter.com/DotJenna)

A Texas real estate agent is facing criminal charges for her participation in last week’s attack on the U.S. Capitol Building.

Jenna Ryan, a Realtor based in Frisco, Texas, was charged with disorderly conduct and “knowingly entering or remaining in any restricted building or grounds without lawful authority,” according to a criminal complaint filed in federal court on Friday.

She was part of a group who flew on a private plane from Denton, Texas, to Washington, D.C., with the intention of joining the protestors, some of whom subsequently breached the Capitol on Jan. 6.

Ryan is self-employed, according to her LinkedIn page. Her company’s website is down and she could not immediately be reached. But in an interview with HousingWire earlier this week, Ryan disputed her involvement in the destruction at the Capitol. “I was just there to let my voice be heard and document the events,” Ryan said. “I was not part of the violence.”

But according to the complaint, filed in U.S. District Court of the District of Columbia, Ryan repeatedly filmed her involvement in the unrest and allegedly referenced “storming the Capitol” several times.

Before the event, she posted a video to Facebook in which she said, “We’re gonna go down and storm the capitol. They’re down there right now and that’s why we came and so that’s what we are going to do. So wish me luck.”

Ryan is also allegedly visible in security footage taken of the crowd that entered the Capitol. At one point while livestreaming from the Capitol steps, she turns her phone’s camera to face herself, and says, “y’all know who to hire for your Realtor. Jenna Ryan for your Realtor.”

The complaint also states that Ryan posted a since-deleted tweet that said, “We just stormed the Capital. It was one of the best days of my life.”

In an interview with Spectrum News, Ryan said that she “answered the call” from President Donald Trump to be at the Capitol, the Dallas Morning News reported.

Realtor trade groups have widely condemned the mob attack, and some have suspended political contributions in the wake of the events of Jan. 6.

But it’s unclear if agents who participated in the unrest will face repercussions from the National Association of Realtors or from their respective states. The Texas Real Estate Commission released a statement this week in which it said that a Realtor’s license can be suspended if he or she is convicted of a felony or criminal act that involves fraud, but outside of that, revocation is “limited to conduct the license holder undertakes while engaged in real estate brokerage.”

NAR, meanwhile, told Inman that participation in the insurrection does not violate the trade association’s newly amended code of ethics, which now bans public hate speech. It did say, however, that it has not ruled out penalizing those who stormed the Capitol.

“We stand with federal law enforcement as they work to thoroughly investigate this week’s events and ensure all those accused of breaking the law are prosecuted to the fullest extent,” a spokesperson for NAR told Inman.

Chicago real estate agent Libby Andrews was fired from her job at @properties after her involvement in the chaos in D.C. came to light. It’s unclear if she has been charged with any crimes.

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Celebration Pointe and Andrew Farkas (Garco)

Celebration Pointe and Island Capital Group’s Andrew Farkas (Garco)

A Texas-based real estate investment company paid $64 million for a 282-unit Margate apartment complex.

An affiliate of C-III Capital Partners bought the 295,000-square-foot complex at 5555 Celebration Pointe Lane, called “Celebration Pointe,” according to records. The deal equates to about $227,000 a unit.

C-III is owned by real estate merchant bank Island Capital Group, based in New York. Both are led by Andrew Farkas.

The seller is an affiliate of Pride Homes, a Miami-based developer. The affiliate’s managers include Carlos Garcia, Martha Fernandez and Omar Fonte, according to records. Pride Homes also does work under the name Garco.

Garco bought the land in 2013 for $7.4 million and built the complex in 2016, records show.

Tal Frydman, Hampton Beebe, Avery Klann, Jonathan Senn and Tyler Minix of Newmark represented the seller, according to a release.

Units available at the complex range from $1,454 for a one-bedroom unit to $1,774 for a two-bedroom unit, according to an online listing.

Last year, Island Capital Group paid $78 million for several buildings within a Plantation office park.

Recent multifamily deals in the area include Cortland Partners paying $91.7 million for a 336-unit Hollywood apartment complex and CA Ventures paying $80 million for a 159-unit student housing complex in downtown Boca Raton near Florida Atlantic University

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Porch CEO Matt Ehrlichman (iStock)

Porch CEO Matt Ehrlichman (iStock)

Porch isn’t wasting time on the acquisition front: Just three weeks after going public, the home-services startup scooped up four companies for $122 million.

The Seattle-based company said it inked a deal to buy Homeowners of America, a Texas insurance company, for $100 million in cash and stock, Geekwire reported. It will also buy V12, a marketing platform, for $22 million in cash, plus two smaller startups — PalmTech and iRoofing — for an undisclosed sum.

Porch went public last year after merging with Proptech Acquisition Corp., a blank-check firm formed by Abu Dhabi Investment Authority veterans Tom Hennessy and Joe Beck. The deal helped Porch raise $322 million, and its valuation soared to more than $1 billion on its first day of trading.

The influx of cash came just in time: Company accountants said recurring losses raised “substantial doubt” about Porch’s ability to continue, according to its IPO filing.

Porch’s preliminary results for 2020, which it disclosed on Thursday, project a net loss of between $53 million to $55 million — $20 million more than previously estimated, according to Geekwire. Executives attributed the higher losses to sales and marketing and R&D spending.

Porch is projecting $170 million in 2021 revenue, up from an earlier projection of $120 million. It is expecting $72 million in revenue for 2020.

[Geekwire] — E.B. Solomont

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International Inn at 2301 Normandy Isle, Miami Beach (Google Maps)

International Inn at 2301 Normandy Isle, Miami Beach (Google Maps)

Miami Beach approved a redevelopment deal that will preserve the 65-year-old waterfront International Inn in North Beach while allowing the owner the right to build an 80-foot-tall, or eight-story addition.

Commissioners approved the historic designation and zoning amendment for the International Inn at 2301 Normandy Isle on first reading Wednesday afternoon. The ordinance will come back for a final vote on Feb. 10.

Nancy Liebman, a former Miami Beach commissioner and board member of the Miami Design Preservation League, was among several preservationists who encouraged the deal, which would ensure that the International Inn would be designated historic. Under such a designation, applications for demolition or significant alteration must be approved by the city’s historic preservation board or, in the case of an appeal, the city commission.

The fate of the International Inn has been discussed for years. At the request of the Miami Design Preservation League, the city’s historic preservation board directed city staff to look into the feasibility of designating the International Inn historic in May 2017, establishing a temporary moratorium on any demolition on the site.

A deal was later worked out with International Inn owner Belsa Tsay. In exchange for Tsay not opposing the historic designation, the city would allow for the construction of an 80-foot-tall addition. Under the site’s current zoning, a new structure would be limited to a 50 feet in height, and could only be a residential building with 51 units.

Besides additional height, since November, zoning changes would allow new hotels on historically designated, RM-1 zoned properties of over 30,000 square feet north of Normandy Drive. The International Inn sits on a property that is 37,292 square feet.

The amended zoning would also allow the International Inn to have restaurants that serve alcoholic beverages, and to seek approval for outdoor entertainment performances and an outdoor bar counter between 10 a.m. and 10 p.m. The owner can also provide off-site parking in a mile radius of International Inn, so long as it is within Miami Beach’s city limits.

Built in 1956, the 71-room hotel was designed by Melvin Grossman, a renowned post-World War II architect who designed such Miami Beach buildings as the Deauville, the Seville Hotel, and the Doral Beach Hotel. Originally known as the Carnival Motel, the building was later renamed the International Inn Motel in 1963. The “Motel” moniker was later removed.

A June 2019 report from the city’s planning department stated that the International Inn displayed all the characteristics of a significant Miami Modern, or MiMo, structure, an architectural style spanning from 1945 to the mid-1960s. It was even featured in a 2002 exhibit on mid-century modern architecture by the Municipal Art Society’s Urban Center in New York.

Nevertheless, the hotel later became infamous for crime and calls to police. In September 2019, commissioners stalled approval of the zoning deal following reports of criminal activity at the hotel, including prostitution, according to a published report from RE Miami Beach.

According to the city manager’s report to the mayor and commission, there hasn’t been any significant code violations at International Inn since 2016. Calls for police included a Baker Act for someone who left the inn without clothes in October, and complaints of a large party on Dec. 5 from North Bay Village residents. A man was also arrested for dealing drugs on the property Dec. 5.

Besides those events, the police department has seen a “marked improvement” in the operation of the International Inn over the last two years, the city manager’s report stated, adding that the management has implemented “permanent security enhancements,” including security cameras, hiring security and requiring that guests have proper identification.

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Joseph Moinian and the NBA Store at 545 Fifth Ave. (Google Maps, iStock)

Joseph Moinian and the NBA Store at 545 Fifth Ave. (Google Maps, iStock)

UPDATED, Jan. 15 2020, 4:15 p.m.: Talk about a foul: The NBA Store at 545 Fifth Avenue, which has remained closed throughout the pandemic, now owes $7 million to its landlord, the Moinian Group.

The dispute is the basis of a lawsuit, first filed in New York State Supreme Court in June, by the landlord against NBA Media Ventures. At the time the suit was filed, the NBA owed the landlord nearly $1.9 million in back rent. But now, seven months later, that number has spiked to $7 million.

While Moinian claims that the store has broken its lease by not paying rent, the store claims that the Covid-19 pandemic has made it impossible to operate.

“Like other retail stores on Fifth Avenue in New York City, the NBA Store was required to close as a result of the coronavirus pandemic. Under those circumstances, we don’t believe these claims have any merit,” said NBA spokesman Mike Bass. “We have attempted, and will continue to attempt, to work directly with our landlord to resolve this matter in a manner that is fair to all parties.”

But the store was struggling prior to the pandemic, incurring losses of $20 million since it opened in 2015. In an May email to Moinian that was submitted as part of the lawsuit, the league’s senior vice president of global partnerships, Hrishi Karthikeyan, said “our continued ability to operate the Store is only sustainable inasmuch as there is a discernible path to profitability.”

“We did not open the Store to serve as a promotional vehicle for the NBA,” Karthikeyan wrote.

The NBA signed a 20-year lease for the store in 2014. It takes up over 25,000 square feet within the building — which also counts Knotel and Best Buy as tenants — and has 76 feet of frontage along Fifth Avenue.

“It’s unclear why the NBA has not opened their doors, even during the busier holiday season, while the neighboring retailers have been open since retail restrictions were lifted. The NBA is a multi-billion-company and yet they seem to think the law does not pertain to them,” said Edward E. Klein, managing partner of the Klein Law Group, which is representing the developer. “While we wait for the NBA to make good on their outstanding rent balance, we are hopeful that at the very least, the matter will be rectified through the court.”

As of May, the store’s $625,000 monthly rent made up 20 percent of the location’s base rent, according to data from Kroll Bond Rating Agency. A notice to cure was delivered to NBA Media Ventures May 19.

Under the terms of the lease, NBA Media Ventures owed $7,500,000 per year in rent, with that figure increasing to $8,437,500 starting next year. It will eventually reach a maximum of $10,678,710.96 per year until the lease expires.

The Fifth Avenue retail corridor between 42nd and 49th streets has been suffering due to the pandemic: According to REBNY’s most recent retail report, the average asking rent fell 16 percent year-over-year, and in the period since the NBA signed its lease, rents have fallen 40 percent.

UPDATE: This story was updated to add a statement from a lawyer for Moinian Group. 

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As companies leave Silicon Valley, Austin, Texas is becoming a top destination. (Getty)

As companies leave Silicon Valley, Austin, Texas is becoming a top destination. (Getty)

 

As the pandemic rages across the U.S., it’s unclear when employees will be able to return to their offices. That’s led to a huge shift in San Francisco real estate that may impact the city for years to come.

While companies try to figure out what the future of work looks like, some of their employees have abandoned the Bay Area, the New York Times reported. Now, those firms are following suit.

Some of the companies that are fueled San Francisco’s most recent tech boom — including Twitter and Airbnb — are trying to get out, or at least substantially decrease their footprint in the city. Twitter and Dropbox have sought to sublease their San Francisco offices as they allow employees to work from home forever. (Facebook has also given employees that option.)

And Pinterest paid a staggering $90 million to cancel its 490,000-square-foot lease at 88 Bluxome, an in-the-works development project.

The result: The city’s office vacancy rate in the city has jumped to nearly 17 percent.

Moreover, rents in San Francisco have dropped substantially — by 27 percent compared to the same time last year — and Zillow reported more homes for sale in San Francisco than a year ago. And 90 percent of the searches involving San Francisco were for people moving out, the newspaper reported, citing data from MoveBuddha.

Other states have emerged as strong Silicon Valley contenders. Austin, Texas, has proven popular with those leaving the Bay Area; plus, Alphabet, Amazon, Oracle and Facebook have all either expanded their footprints in the city or have plans to.

Elon Musk, the Tesla founder, also said he has moved to Texas.

[NYT] — Sasha Jones

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Steven R. Dingle and the property he sold at 298 West Key Palm Road. (SRD Building Corp, Royal Palm)

Steven R. Dingle and the property he sold at 298 West Key Palm Road. (SRD Building Corp, Royal Palm)

 

The former CEO of Cantor Fitzgerald sold his mansion in Boca Raton’s Royal Palm Yacht & Country Club for $9.4 million.

Records show Philip Marber and Siobhan Carty sold their home at 298 West Key Palm Road to Steven R. Dingle, vice president of SRD Building Corp.

Until 2009, Marber was the CEO and president of equity capital markets at New York-based financial firm Cantor Fitzgerald. In December, he bought a different house in the same neighborhood for $5.6 million.

David W. Roberts of Royal Palm Properties brokered the latest deal. According to Realtor.com, the house was first listed in 2018 with an asking price of nearly $10M.

Marber bought the home in 2011 for $7.2 million, records show.

Built in 1972, the 12,354-square-foot mansion sits on an acre of land. It features six bedrooms, eight full bathrooms, two half-bathrooms and garages with room for more than four cars. The mansion also comes with a pool and separate lap pool, tennis court and a dock with a boat lift.

SRD Building Corp. is a Boca Raton-based construction company that has built over 130 homes in the Royal Palm Yacht & Country Club neighborhood, according to its website. Dingle did not respond to a request for comment on plans for the property. Dingle, and his brother, Scott, sold a spec home in the Boca Raton neighborhood for $6 million in November.

Also at the Royal Palm Yacht & Country Club, Bill Pulte, the grandson of the late founder of PulteGroup, recently paid $6 million for a waterfront teardown.

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