Monthly Archives: November 2018

National Cheat Sheet: Fed warns of rising commercial real estate prices, Airbnb adds Amazon exec ahead of IPO … & more

Clockwise from top left: Federal Reserve issues warning about the effects of rising commercial real estate prices, firm plans $1B worth of co-living inventory as arrangement’s popularity grows, entrepreneur who claims he was a Compass co-founder seeks $200M in suit and Airbnb taps a former Amazon executive to be its new CFO.

Fed, highlighting asset bubble dangers, red flags rising commercial real estate prices
A report released Wednesday by the Federal Reserve warns that soaring commercial real estate prices across the country could harm financial markets, according to the Wall Street Journal. The warning came from the Fed’s first-ever financial stability report, which cited “elevated asset prices, historically high debt owed by U.S. businesses and rising issuances of risky debt” as factors posing the biggest problems for the country’s financial system. The report also pointed to asset bubbles, and not inflation, as the impetus for the past two recessions. Fed Chairman Jerome Powell spoke about the subject Wednesday at The Economic Club of New York. [TRD]

Firm plans $1B worth of co-living inventory as arrangement’s popularity grows
Property Markets Group is going all in on co-living. The New York-based firm is planning to roll out $1 billion worth of co-living inventory and is partnering with Raven Capital Management to commit $300 million in equity to a “multifamily housing division” known as X Social Communities. PMG, which was one of the first developers to board the co-living train, currently offers co-living units in Chicago and Miami. The company is planning to put co-living apartments on the market in Fort Lauderdale and Miami, among other locales. “Our product provides incredible value to our customers,” PMG principal Noah Gottlieb said. [TRD]

Entrepreneur suing Compass revealed to be seeking $200M
A tech entrepreneur who claims Compass used his ideas to found the company without crediting or compensating him is seeking a stake in the business now worth roughly $200 million. Avi Dorfman sued the SoftBank-backed brokerage and its CEO Robert Reffkin four years ago, but his specific monetary claim was not initially disclosed and subsequently redacted in court filings. During a recent court hearing in New York, it was revealed that Dorfman believes he was entitled to a 15 percent stake in Compass at the time of its founding. After multiple funding rounds by the company, which was recently valued at $4.4 billion, Dorfman’s potential stake would be diluted to about 4 percent. “We believe Mr. Dorfman has a very strong claim as one of the founders of Compass,” his attorney, Susman Godfrey partner Arun Subramanian, told TRD. Compass claims Dorfman turned down a job he was offered at the company to work at a hedge fund instead. [TRD]

Airbnb taps Amazon exec to be its new CFO
A former Amazon executive will take the lead on Airbnb’s finances starting in January, Bloomberg reported. The home-sharing startup has hired Dave Stephenson, who was vice president and chief financial officer of Amazon’s worldwide consumer organization, to be its new CFO as it ramps up for an initial public offering. Stephenson oversaw global website sales at Amazon, and is filling a position that has been vacant since Laurence Tosi left Airbnb in February over reported differences with the company’s CEO. Airbnb, which has a private valuation of $31 billion, is reportedly preparing to launch an IPO by 2020. [TRD]

MAJOR MARKET HIGHLIGHTS

HUD’s New York head to move into a NYCHA building amid utility outages
Lynne Patton, who oversees the Department of Housing and Urban Development for the New York region, said she plans to move into a New York City Housing Authority building to protest and shed light on the lack of heat and hot water at NYCHA buildings throughout the city, PIX11 first reported. In a tweet, Patton, who was appointed by President Donald Trump in 2017, wrote that “[basic human conditions are non-negotiable.” In February, the Trump administration proposed a multibillion-dollar budget cut that would slash financial support for a fund that benefits NYCHA and other public housing authorities. [TRD]

Chicago home prices rise, but still fall short nationally
Home prices in Chicago are on the rise, but they still aren’t as high as they are nationwide on average, Crain’s reported. Prices rose 3 percent in September after rising for six straight months, but the national average was 5.5 percent, according to data from S&P CoreLogic Case-Shiller. “Home prices plus data on house sales and construction confirm the slowdown in housing,” David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, said in a statement provided to Crain’s. Nevertheless, the Windy City still ranks as the second-most affordable large city in the country to buy a home. [TRD]

Mansion in Florida sets sales record, only to be demolished and replaced
A mansion in Naples that set the record for the priciest home sale in Southwest Florida no longer exists. The 24-year-old mansion on Gordon Drive was demolished by its buyer, 2500 Gordon Land Trust, which plans to build a new home at the site. The six-bedroom mansion was built in 1994 and was originally listed for $60.9 million, but ended up selling for $48.8 million in June. Architect John Cooney will design the new home at the site and Newbury North Associates will build it, according to the Naples Daily News. [TRD]

Deadly Woolsey Fire leaves LA and Ventura counties with $5B in damage
Los Angeles and Ventura counties are still recovering from California’s catastrophic Woolsey Fire and face up to $5 billion in real estate damages as a result of the blaze, according to an estimate by property data firm CoreLogic. That figure could include anywhere from $3.5 billion to $4.5 billion in residential property damage, as well as up to $500 million in commercial property damage, the OC Register reported. The Woolsey Fire, one of several blazes to tear across the Golden State in November, killed three people and left three firefighters injured before it was contained on Nov. 21. It also destroyed more than 1,600 structures and burned nearly 97,000 acres of land. [TRD]

Seattle’s housing market sees a decline as Amazon looks to the East Coast
With all eyes on Amazon’s East Coast plans, growth in the e-commerce giant’s hometown of Seattle has been waning, the Wall Street Journal reported. Bidding wars on properties in the city declined as Amazon spent the past six months searching for a locale for its so-called HQ2, and median growth is the slowest it has been in Seattle since January 2013, according to the outlet. Landlords, meanwhile, have been offering perks like Amazon gift cards and free rent in an attempt to entice tenants and buyers. “If you’ve got that much going on and you’re really trying to get New york and Virginia up and running, you have a tendency to ignore Seattle,” RealPage chief economist Greg Willett told the newspaper. [TRD]

Google drops $1B for office complex near its Mountain View headquarters
Alphabet, Google’s parent company, has snapped up a business park in California for $1 billion, Bloomberg reported. Alphabet recently bought Shoreline Technology Park, which is not far from its “Googleplex” Mountain View headquarters. Google also recently bought office space in Sunnyvale and is hoping to build a new development in San Jose, though its plans have been stymied by legal issues. Earlier this year, Google bought the Chelsea Market building in Manhattan for $2.4 billion. The internet search giant’s latest purchase comes not long after Amazon’s HQ2 announcement, as well as the latter’s announced plans to open a regional hub in Nashville. [TRD]

Source:: The Real Deal

Phoenix Realty pays $70M for North Lauderdale rental complex

J. Michael Fried of Phoenix Realty and the Hamptons at North Lauderdale (Credit Apartments and Phoenix Realty Group)

New York-based Phoenix Realty just paid $69.7 million for an apartment complex in North Lauderdale, more than 22 percent what the property traded for just two years ago.

Parrots Landing LLC, which is managed by Sewesattie Ramsamooj of Parkland, sold the 408-unit, 17-acre development at 7900 Hampton Boulevard for about $171,000 per unit, property records show. Parrots Landing bought The Hamptons at North Lauderdale property in 2016 for $53.8 million.

The apartments range from one-bedrooms, starting at $1,175, to three-bedrooms, starting at $1,620, according to Apartments.com.

Phoenix Realty is led by J. Michael Fried, who was previously the founder and CEO of Related Capital Company (the real estate financial services arm of The Related Companies), according to the firm’s website.

The purchase signals a growing interest in Class B multifamily properties in western Broward County and in areas outside the urban core.

The majority of the top multifamily deals in South Florida between August 2017 and July 2018 were for apartment buildings located in suburban cities west of I-95, the Florida Turnpike and the Palmetto Expressway. Over the next three years, Robert Given of Cushman Wakefield previously said he expects institutional investors’ appetite for suburban assets to continue based on millennials moving into these areas.

Source:: The Real Deal

New owners of Fort Lauderdale Beach hotel project score $52M loan

Magna Hospitality Group’s Robert Indeglia and the Las Olas Resort. (Credit Magna Hospitality Group, Expedia, and iStock)

The new owners of an embattled Fort Lauderdale Beach hotel project just secured a $51.5 million loan to complete construction of the building.

A company tied to Rhode Island-based Magna Hospitality Group can now finish the 12-story, 136-room hotel at 550 Seabreeze Boulevard, known as Las Olas Resort, that is about 70 percent complete.

The project came to a halt in January after Bancorp Bank filed a foreclosure suit of $37.6 million against the previous owners. The development group then filed for Chapter 11 bankruptcy in February, which allowed Magna Hospitality to buy the property at auction.

The previous development group, led by Ray Parello, Ken Bernstein and Jack and Eugene Kessler, were longtime associates or employees of Turnberry Associates, the Aventura-based development group led by the Soffer family. About $30 million of the project’s initial financing came from 60 EB-5 investors, a federal cash for visa program.

More than 20 of these EB-5 investors are now suing the former development group, alleging that it misled them on the project.

Magna Hospitality is a privately held hotel real estate investment firm that owns and operates more than 20 hotels, according to its website. The company did not immediately respond to a request to comment.

Because Magna Hospitality acquired the property out of bankruptcy, it is not responsible for any liens or claims, including any of the EB-5 fallout, according to court documents. Though the project is more than 70 percent completed, court documents show it could require another year of construction.

Rhode Island-based company Magna will use the same contractor and many of the same subcontractors on the remaining work. Magna has agreed to comply with certain reporting guidelines that will assist the EB-5 investors, but only in obtaining their visas.

Source:: The Real Deal

Kushner brothers-backed Cadre looks to cash in on Opportunity Zones

From left: Jared Kushner, Josh Kushner, and Ryan Williams in Sunset Park (Credit: Getty Images)

Cadre, the real estate crowdfunding platform partially owned by Jared and Josh Kushner, is leaping headfirst into the Opportunity Zone craze.

Cadre’s CEO Ryan Williams tweeted about the launch on Friday morning, framing it as an opportunity for investors to deploy funds into “under-served markets throughout the U.S.”

Cadre was also a major sponsor of an Opportunity Zones conference in New York City on Thursday, though it didn’t announce what cities it would target.

The program, enacted as part of the Trump administration’s tax overhaul, provides tax deferments and tax breaks for developers who invest in projects in designated low-income neighborhoods across the country. Those who make qualified investments in an opportunity zone can defer capital-gains taxes from an unrelated investment, and any gains on an investment in the zone are tax exempt as long as they’re held for a decade. Treasury Secretary Steven Mnuchin believes the program will spur $100 billion in capital investment across the country.

Though the size of Cadre’s Opportunity Zone funds was not disclosed, the firm will join the ranks of established real estate players who are placing sizable bets on the program. In the last two months, Skybridge Capital, RXR Realty, Normandy Real Estate Partners, YoungWoo & Associates, Toby Moskovits and Somerset Partners have all announced plans for funds at $100 million or more.

In October, The Real Deal profiled Williams, who left Blackstone Group and launched Cadre in 2014 alongside the Kushner brothers. Cadre raised $65 million in a Series C funding round last year for what was a reported $800 million valuation. It also has a $250 million partnership with Goldman Sachs, which pledged to allow its wealth management clients use the Cadre platform.

Senior White House adviser Jared Kushner, who, according to a federal disclosure form owns a Cadre stake valued at between $5 million and $25 million, has also not fully divested from his family’s real estate business. WNYC reported that his family firm Kushner Companies has at least 10 properties in Opportunity Zones. Cadre says neither Kushner brother is involved in the decision-making at the firm.

Source:: The Real Deal

Hotel developer Quadrum Global buys Wynwood site

2217 Northwest Miami Court, Miami (Credit: iStock)

Quadrum Global just picked up a development site in Wynwood.

Remy Jacobson’s Wynwood Design Center LLC sold the 30,000-square-foot property at 2217 and 2233 Northwest Miami Court to Quadrum Pacific LLC, according to Metro 1. The $8.55 million deal closed on Thursday.

Quadrum Global, an international real estate investment and development firm, owns the Nautilus South Beach, a 250-key hotel at 1825 Collins Avenue in Miami Beach. The company also owns two Arlo-branded hotels in New York City, as well as hotels in Chicago and Orlando, and commercial properties in London, Kiev and the country of Georgia. The Nautilus is being marketed for sale and brokers could sell for as much as $180 million.

The Wynwood property is zoned T6-8-O, allowing for buildings of up to 12 stories and about 248,000 square feet of development with bonuses, according to the property flier. About 103 residential units or 203 hotel rooms can be built on the site, which currently includes a 19,065-square-foot warehouse.

Construction cranes are taking over Wynwood. Goldman Properties just completed the first parking garage in Wynwood at 301 Northwest 26th Street, and a number of apartment, office and retail projects are underway. A few hotels have been proposed, including one from former Miami Beach mayor Philip Levine and developer Scott Robins, but none have broken ground yet.

Tony Cho and Andres Nava of Metro 1 represented the seller and Fabian Graff brought the buyer. The Miami Herald first reported the sale.

Quadrum Global could not immediately be reached for comment.

Source:: The Real Deal

Sorry, home appraisers, bots are coming for your jobs

(Credit: iStock and Pixabay)

Federal regulators are looking to pave the way for computers to replace humans in an increasing number of home value appraisals.

The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Federal Reserve proposed altering regulations related to when a home must be assessed by a licensed appraiser, the Wall Street Journal reported. Currently, homes valued at $250,000 or less can be bought and sold without an appraiser visiting the property. The federal agencies want to increase that threshhold to $400,000.

Such a change could prove lucrative for upstart property valuation companies that use algorithms, artificial intelligence and drones to value homes. If these rule changes had been in effect last year, roughly 214,000 additional home sales, or some $68 billion worth, could have traded hands without an appraiser.

In the proposal, the regulators noted that “the cost and time of obtaining an appraisal can, in some cases, result in delays and higher expenses.”

Not everyone — especially the human appraisers — are happy about the possible change.

Some are worried that relying on automated valuations could introduce new risks into the $10.7 trillion home loan market, because such valuations are largely unregulated.

Regulators have yet to propose standards for automated valuations, even though such controls were required under the 2010 Dodd-Frank Act. [WSJ] — Kathryn Brenzel

Source:: The Real Deal

Habitat Group launches second phase of Brickell condo project

Santiago Vanegas President of the Habitat Group and renders of Renderings of Smart Brickell

Habitat Group is launching sales of the second tower at Smart Brickell, a condo-hotel complex with flexible short-term rental options.

The three-building project sold out the first tower, with 50 hotel rooms and 50 condos, and is planning on breaking ground on the 25-story building in March, developer Santiago Vanegas said. The condo sellout is about $19 million for the first tower and the estimated sellout for the second building, also with 50 hotel rooms and 50 condo units, is $19.5 million.

Smart Brickell is priced lower than most new developments in the neighborhood, with units ranging in price from $300,000 to $600,000. Vanegas said about 70 percent of the buyers in the first building are investors and 30 percent are end users.

The project offers owners the ability to rent their units out 24 times a year, or about twice a month. “We are seeing that the rental restrictions in most condos are limiting for a lot buyers that want to have more options,” Alicia Cervera Lamadrid of Cervera Real Estate said in a release. Cervera is handling sales of the condos, which range from 558 square feet to 1,117 square feet.

Buyers can also participate in a two-year, fixed annual leaseback program. Other developments are also beginning to offer looser rental restrictions, like YotelPad in downtown Miami.

Habitat Group expects to break ground on the second building later next year, between six and nine months of beginning construction on the first tower. The 1.23-acre project will also include a third building, similar to the first two.

Smart Brickell will feature an amenity deck with a terrace, resort-style pools, a fitness center, cafe on the ground floor, rooftop lounge bar and business center. Architect Hernando Carrillo and Gensler are designing the project, and Arquitectonica is designing the fully finished units. The apartments will include smart home features, Bosch appliances and more.

Source:: The Real Deal

New home sales fall nationwide to lowest levels in 2 years

(Credit: iStock)

October marked the worst month for new home sales in the U.S. in more than two years, another blow to homebuilders who had already endured higher mortgage rates and along with bumps in construction and supply costs.

“It adds another nail to the coffin to the housing market expansion,” said Ralph McLaughlin, deputy chief economist with property data firm CoreLogic.

New home sales in October fell 8.9 percent to 544,000 compared to September, marking an almost two-and-a-half-year low, according to U.S. Commerce Department figures released Wednesday. The October numbers also represented a 12 percent decline from October 2017.

And in a separate report from the National Association of Realtors, pending nationwide homes sales — or sales under contract — dipped 2.6 percent last month, to a four-year low.

The news is another indication that the long-predicted end to the post-recession housing boom is finally at hand, market experts said.

McLaughlin said the decline in new home sales is triggered by a rise in mortgage rates, which is making homeownership less affordable and pushing some people out of the market. For a 30-year fixed-rate mortgage in October, the average interest rate was 4.83 percent. While still historically low, it’s far higher than the 3.47 percent it was at two years ago.

Rising rates are compounded by challenges facing homebuilders, who are struggling to make homes affordable from increasing construction, supply and labor costs.

Rising costs have pushed home prices to levels too high for many consumers, said Jack McCabe, owner of McCabe Research & Consulting. The median price of a new house stood at $309,700 in the U.S. in October, according to Commerce Department data.

“Housing prices have increased at a much higher level than household incomes,” said McCabe, who also predicted a sharp drop in luxury home sales.

Danielle Hale, chief economist at Realtor.com, said she still expects prices to rise about 2 percent next year, despite declining home sales, partly from pressures facing suppliers.

But the developers are also making concessions. The Wall Street Journal recently highlighted how homebuilders in the Dallas area are offering steep discounts to attract buyers, cutting prices by up to $150,000 in one nearby suburb to lure potential bidders.

But experts also say the drop in new home sales could be a good thing for the overall market. Last year was one of the best for new housing market, McLaughlin said, so a dip means the industry is rebalancing itself for buyers and sellers.

The recent data also shows that homeownership is rising among consumers under 35, a positive note for the future of the housing industry, McLaughlin said.

The nail in the coffin analogy may signal the end of expansion, he said. “But it doesn’t mean that housing market is going to collapse.”

Source:: The Real Deal

Hey, batta batta! Red Sox owner lists Boca Raton mansion

Boston Red Sox owner John Henry (Credit: iStock)

Boston Red Sox owner John Henry is hoping for a home run.

Henry is listing his Boca Raton mansion for $25 million, as he and his family plan to build another home in Boca, according to the Wall Street Journal.

The 27,832-square-foot lakefront estate at 6011 Le Lac Road was built in 1995. Records show Henry paid about $850,000 for the 6.3-acre property in 1991.

The seven-bedroom home features a recording studio, movie theater with a full concession stand and an underground wine cellar. The den where he once kept his World Series championship trophies and other memorabilia comes equipped with a sports bar and professional card game table.

Other features include an outdoor dining area with a wood-burning pizza oven, and a guest wing with a separate entrance and parking.

Prior to buying the Red Sox in 2002, Henry founded the investment firm Henry & Company. He also owns the professional soccer team Liverpool Football Club and the Boston Globe newspaper.

Douglas Elliman’s Senada Adzem is listing the Boca Raton home. [WSJ] – Amanda Rabines

Source:: The Real Deal

SoFla’s residential construction starts rise in October, commercial plummets

South Florida residential construction (Credit: iStock)

Residential construction in South Florida picked up in October, year-over-year, while commercial construction dropped off significantly, according to a new report by Dodge Data & Analytics.

Commercial construction starts decreased 34 percent last month to $453.7 million, while residential construction starts increased 3 percent to $686.2 million according to the report.

Due to the sharp decline in commercial construction, total building activity dropped 16 percent to about $1.14 billion in October, year-over-year.

Commercial construction includes office, retail, hotels, warehouses, manufacturing, educational, healthcare, religious, government, recreational, and other buildings, while residential includes single-family and multifamily housing, according to the report.

On a year-to-date basis, commercial starts fell 4 percent to $4.86 billion, while residential spiked 27 percent to $6.08 billion. In September, residential construction already outpaced last year’s total of $5 billion in residential spending.

Year-to-date, total building activity increased 11 percent to $10.9 billion.

Despite the increase in residential building (which includes multifamily), federal data suggests the apartment boom may be waning thanks to a consecutive monthly decline in building permits.

Source:: The Real Deal