(Credit: Max Pixel)

EB-5, the once wildly popular green card program giving developers easy access to financing at low rates, is alive but in limbo.

Developer demand has fallen, and backlogs in issuing those green cards has created investor uncertainty. The program, which was scheduled to expire Sept. 30, received a reprieve Friday from President Trump, but only through Dec. 7. The extension was part of a spending package the president signed to avoid a government shutdown. Congress will have to decide whether to create a more permanent solution, but industry pros say it isn’t on the radar. If the government doesn’t create new legislation, more foreign investors will start to back out, market experts say, looking instead to similar visa programs in others countries.

The lack of clarity surrounding the federal initiative has already tamped down demand among developers, said Ronald Fieldstone. He is a partner at the Miami law office of Saul, Ewing, Arnstein & Lehr, which has represented developers and regional centers in EB-5 matters.

“This is the first time I can remember that there has been no recent active negotiations to try to resolve Eb-5,” he said. “This hasn’t been on the radar screen for months.

The EB-5 program gives foreign investors the opportunity to obtain a green card if they invest at least $500,000 in a project and create at least 10 jobs. It has been extended on a short term basis for the last three years. Direct foreign investment in EB-5 fell nationwide to $3.81 billion in 2016, a 13 percent drop from $4.37 billion in 2015, according to Invest in the U.S.A, a prominent industry trade group for EB-5 regional centers.

Though real estate developers looking to finance deals have been weaning themselves off EB-5 money, many investors — especially those from China — still like the program. Seventy-five percent of EB-5 visas, or more than 7,500, were awarded to Chinese mainlanders in 2017. The U.S. government now issues about 10,000 new EB-5 visas per year, and sets quotas on how many it awards to each country. Chinese demand has far exceeded supply. But there is a limit.

The list of EB-5 investors from China who are waiting for their green cards has gotten so long that many have begun backing out, exploring other option such as private equity or other countries with similar programs.

Developers are also turning to other countries, such as South America and India for EB-5 investors, though the demand is not as high in those places.

Meanwhile, Congress’ inaction comes at a time when much of the news about EB-5 has concerned fraud and abuse.

Earlier this year, two owners of a Vermont ski lodge were charged with misusing more than $200 million of EB-5 investor money and in South Florida, a group of EB-5 investors is suing the developers behind a failed hotel project in Fort Lauderdale Beach. The list goes on.

But Rodrigo Azpurua, the founder of Riviera Point Development Group, a Miami-based company that has successfully financed a number of hotel projects with EB-5 financing, said the program is a good one but needs repair.

“They definitely need to put more regulations and supervisions so it can be clear of the bad actors in the industry,” he said.

Others don’t see that happening soon.

“Honestly, we’ve had Democrats and Republicans administrations under the program…and no meaningful change,” said Michael Gibson, managing director at USAdvisors.org, an EB-5 advisory firm. “I don’t see any change coming.”

Vinod Khosla and the California coast (Credit: Wikimedia Commons)

The Supreme Court has refused to hear a tech billionaire’s appeal to overturn a ruling that gives public access to a path running through his coastal property.

Vinod Khosla, co-founder of Sun Microsystems, will now have to apply for a permit to close the road leading to Martin’s Beach, a popular surfing spot, according to the New York Times. Khosla has said he never actually wanted to win this court battle but was only fighting the case on principle to make a point about private property rights.

“If I were to ever win in the Supreme Court, I’d be depressed about it,” he previously said. “I support the Coastal Act; I don’t want to weaken it by winning. But property rights are even more important.”

California’s 1976 Coastal Act made public beach access a right in the state.

Khosla bought a 53-acre hillside with about 47 cottages on the Northern California coast soon after 2008, and decided not to leave the gate to Martin’s Beach open, unlike the previous owners. This sparked a lengthy battle, including the arrest of five surfers in 2012.

Dori Yob Kilmer, Khosla’s lawyer, told the Times in a statement that the ruling was still an intrusion on the rights of a private business owner. They will apply for a permit now, but the issue may not be totally settled.

“If denied, we will start this process over again,” she said. [NYT]  – Eddie Small

First Property Realty co-owner Micheal Geller and Hollywood 959

J.H. Snyder Company’s Hollywood 959 creative campus is now 75 percent leased, after inking a lease with an entertainment firm.

Deluxe Entertainment Services signed a lease for 47,000 square feet at the Hollywood Media District building on 959 Seward Street. First Property Realty Corporation of Beverly Hills represented Jerry Snyder’s eponymous company in the deal.

The lease comprises nearly a fifth of the 250,000-square-foot building. Rates are listed in First Property Group leasing materials as $4.65 per square foot, which puts Deluxe’s lease at around $2.62 million a year.

First Property’s Micheal Geller, Josh Bernstein, Ben Silver and Stefan Neumann represented J.H. Snyder. Cushman & Wakefield represented Deluxe Entertainment.

Deluxe Entertainment provides post-production, distribution, and editorial services to media companies. It also leases space in more than two dozen cities worldwide. The firm also occupies space at the nearby 900 Seward Street.

At Hollywood 959, Deluxe Entertainment joins Formosa Group, Southbay 3D, and Bold Films, among other media-related tenants at Hollywood 959.

Serendipity Labs also leased 36,000 square feet for a co-working space there in March.

First Property Realty has also leased office space for Koreatown giant Jamison. Last October the firm inked a lease with advertising agency Concept Arts at Jamison’s Harbor Building.

MG Properties Group CEO Mark Gleiberman and Carillion Apartment Homes

MG Properties Group is the latest firm to get in on the multifamily game in Woodland Hills and Warner Center area.

The San Diego firm paid $93 million for a 264-unit complex at 6301 De Soto Avenue. The purchase price worked out to roughly $352,300 per unit.

The seller was Fairfield Residential Company, also based in San Diego. Institutional Property Advisors represented Fairfield in the deal.

The complex, called Carillon Apartment Homes, was built in 2008 on five acres near the intersection of El Rancho Drive. It has one- and two-bedroom units with a pool and gym. The residence is near the Westfield Group-owned Westfield Topanga mall.

Woodland Hills and Warner Center are seeing an influx of multifamily investment over the last several months, in line with the steady stream of office investment there.

The city has encouraged development there, highlighted by the “Warner Center 2035 Specific Plan.” The plan increases density development, including in the multifamily sector.

LaSalle Investments paid $157 million for a 362-unit complex there in August. Hanover Company is also planning a big project, a 394-unit complex on an office and industrial site. Sandstone Properties of Westwood is making a similar play with a 184-unit residential development. 

(Credit: iStock)

Redfin Estimate could be inflating the value of certain homes.

Joseph Alongi, founder of the low-fee brokerage SoldNest, recently argued that the company has had a big impact over the past few years on rising home prices, according to Inman. He told the publication that Redfin’s estimate would adjust right after the home hit the market and then adjust two or three more times within the first two or three days. He believes user engagement plays a role as well.

At one house in Silicon Valley listed for $1.78 million, for instance, one of Alongi’s clients made a $1.9 million offer. The next day, the Redfin estimate hit $1.95 million, and it reached $2.21 million by the third day.

He maintains that part of the issue is Redfin’s status as a brokerage, meaning most of its revenue comes from agents making a commission.

A Redfin spokesperson told Inman that the company’s Estimate tool is automatically updated daily for homes on the market and weekly for homes off the market.

“The Redfin Estimate uses more than 500 data points, including market data and neighborhood information, to generate an estimated value for a property,” the spokesperson said. “We can’t share more explicit details about the kind of data the algorithm analyzes.” [Inman] – Eddie Small

(Credit: iStock)

Manipulating the Multiple Listing Service has been the talk of the industry ever since a soap-opera case involving the Jills came to light this summer. But gaming the system isn’t just restricted to one of the most famous brokerage teams in the country. With just a few steps, an agent can distort listing information to make a buyer believe a listing is fresher, or hide it altogether, a review by The Real Deal found.

In August, agent Kevin Tomlinson was sentenced to extended probation for attempting to extort Coldwell Banker’s Jill Hertzberg and Jill Eber. Tomlinson had discovered that the Jills had manipulated MLS data by hiding multimillion-dollar homes that had been sitting on the market for months, giving off the impression that listings they took on sold much faster than they actually did. During the trial, the Jills put the blame on an employee in their office, saying they weren’t aware of how he was keeping properties “off the hot sheet.”

At the time, many agents questioned how the Jills were able to hide listings, but now “everybody knows how to do this,” brokers have said. Manipulating the MLS can distort home appraisal amounts, mortgages and comparable sales, and paint a faulty impression of how the market is doing.

It’s not only easy to alter property data on the platform, the system of checks and balances to prevent it from happening is not fully reliable, brokers say.

You might, for example, be looking on Realtor.com for a Coconut Grove condo, but a unit meeting your specifications is actually located in North Miami Beach.

That means a property identifier in the listing has been changed, possibly by an agent with broker-level access. But many agents don’t have access to edit listings on the MLS, with their brokerages delegating the task to office managers who have administrative assistants input them. Others, like some flat-fee brokerages, give their realtors full access.

If an agent does have access to create and edit listings, it wouldn’t take much to hide one. To obscure a property that’s been on the market for a long time, an agent could change the zip code – putting a property in another city, let’s say – or change the legal description, subdivision number, parcel number, coordinates or other identifiers. Those fields could be changed to zeroes, or an agent could add spaces that aren’t supposed to be there.

The Miami Association of Realtors (MAR), like others across the country, uses the iCheck program to catch errors in the MLS. The system runs automatically, scanning the MLS for incorrect information, incorrect photos, typos and fields that weren’t entered, said Deborah Boza-Valledor, the association’s COO and chief marketing officer.

“There are some brokerages that the agents do not have add/edit capabilities and they have admin assistants who do, and other companies that the agents are given full add/edit capability themselves,” Boza-Valledor said. In the case of the Jills, they were able to edit their listings beyond the standard ability to add photographs, property descriptions and attached documents.

At EWM Realty International, “the agent doesn’t do any of that with the MLS. The manager is the ultimate person at each office who is responsible for that,” said Ron Shuffield, CEO of the firm.

EWM has a listing coordinator submit new listings at each of its 10 offices, and an office manager has to approve any changes to them once they’re live. “We just want to maintain the integrity of our files,” Shuffield said.

Whoever is entering the listing has the option to auto-populate information from the property appraiser’s office, or manually enter every field. The process of entering a listing can be tedious: a PDF version totals 11 pages, calling for the legal description, design, construction type, parking and more. And some industry insiders say that the “archaic” software encourages errors.

The iCheck system sends the errors to MAR, which then sends a notification to the agent, giving them two days to to correct the error.

“It’s far from foolproof,” said Peter Zalewski, a principal with the Miami real estate consultancy Condo Vultures. “If anything, it encourages foolishness.”

State Senator Scott Wiener and construction

A pair of bills California’s governor has approved could lead to more dense zoning across California, which would be a boon for developers.

On Sunday, Gov. Jerry Brown signed into law Senate Bill 828, which requires that local governments zone to accommodate 100 percent of the projected local housing need if they haven’t already. The bill’s author, State Senator Scott Wiener, originally wanted that to be 200 percent of local housing need, but it was reduced in debates in Sacramento.

The governor also signed into law Assembly Bill 1771, which requires more data be used when determining local need. The law tries to ensure that local governments are not able to massage numbers to reduce the amount of required residential zoning.

Possibly the most impactful measure in SB 828 for developers requires that local governments zone for existing need, not just future need. The previous law only called for local governments to zone for future need. For example, if a city was short 2,000 units and projected an increase of 1,000 residents in the coming years, it would only have to zone for those 1,000 additional residents. Now it will be required to also zone for the existing 2,000 units needed.

An official familiar with SB 828 projected that the new law in some cases could result in a 150 percent boost in the number of units local governments will need to accommodate.

The bill is meant to help alleviate the housing crisis in California by allowing the state to build itself out of its shortage. The lack of needed housing has caused rents and home prices to skyrocket, which has prompted other campaigns like Proposition 10, which would allow governments across the state to enact new rent regulation laws.

Developers around the state could see more dense residential zoning in cities that previously had few development opportunities. Local governments will have less power to oppose densification.

The real estate industry has come out in support of SB 828. The California Association of Realtors and the California Apartment Association — a trade organization for multifamily owners — have thrown their names behind the bill. HKS Architects, a respected design firm in L.A., also supports the bill. Even Facebook has expressed support for the bill.

But a number of local cities — including L.A., Long Beach and Redondo Beach — strongly opposed the bill, mostly because it would transfer planning powers away from local governments and into the hands of the state. Some neighborhood groups, including United Neighborhoods of L.A. and Coalition to Preserve L.A., also said they were against it.

Gary Gilbert, a co-owner of the Cleveland Cavaliers, purchased a home in the Beverly Hills flats for $26.5 million (Credit: Google Maps)

While he won’t be donning a Lakers jersey anytime soon, a co-owner of the Cleveland Cavaliers is making the same sort of big bet on L.A. real estate as former Cavs star LeBron James.

Gary Gilbert purchased a home in the flats neighborhood of Beverly Hills for $26.5 million, the Wall Street Journal reported. Entrepreneur Jared Pobre, husband of former professional wrestler Stacy Keibler, was the seller. Pobre had bought the home through a holding company in 2015 for $20.5 million.

Located on North Hillcrest Road, the 12,532-square-foot home includes five bedrooms and an outdoor pool, according to property records.

Gilbert is president of Gilbert Films, which co-produced “La La Land” and “The Kids Are All Right.” He also owns a minority stake in the Cleveland Cavaliers. His brother, Quicken Loans founder Dan Gilbert, is the majority owner.

While a sizable investment, the Gilberts may have to step up their game if they want to compete with James in L.A. The NBA superstar, who is now on the Lakers, owns two homes in Brentwood he bought for $21 million and $23 million.

Steven Schaefer and Jay Luchs, co-founders of Newmark Residential, brokered the deal for Gilbert. [WSJ] – Gregory Cornfield

Nile Niami and his $65 million spec mansion

Nile Niami has delivered another mega-mansion to the Los Angeles market, and once again it’s in Bel Air.

The prolific developer has listed a $65 million behemoth that overlooks the Bel Air Country Club, according to real estate blogger Yolanda’s Little Black Book.

It is not the $500 million Bel Air spec manse Niami has dubbed “The One,” which was expected to hit the market before the end of the year. But it’s still way over the top.

The 27,000-square-foot mansion was designed by Niami’s frequent collaborator, Paul McLean, who also designed The One.

Inside, there are eight bedrooms and expansive spaces decorated with a black and white theme, including highly polished black French Oak floors. There’s a ballroom, wine cellar, a wet bar made of black marble, and a gym. Outside there is a pool, rooftop terrace, large driveway, and landscaped lawns overlooking the golf course.

Niami is known for listing his spec projects with ambitious prices, so who knows how much this latest creation will eventually fetch. Niami’s “Opus” mansion hit the market last year for $100 million, and even it’s seriously racy promotional video couldn’t attract a buyer. He chopped $15 million off the price tag in September 2017. [Yolanda’s Little Black Book] – Dennis Lynch 

President Donald Trump (Credit: Getty Images)

President Donald Trump and his family engaged in a series of elaborate schemes, some potentially illegal, over several years to avoid paying taxes on the late Fred Trump’s estate, according to a New York Times analysis of the family’s financial records.

The Times’ investigation also found that Donald Trump received at least $413 million in today’s dollars from his late father over several decades, undercutting his claim that he is a self-made man.

In one instance in 1987, the report said Fred Trump bought a stake in Donald Trump’s Upper East Side condo development, Trump Palace, worth $15.5 million.

Four years later, Fred Trump sold the stake for just $10,000, according to financial statements. Those statements do not indicate who the buyer of the stake was, but other records — including an affidavit from Donald Trump — show that it was sold to his son. The deal essentially equated a $15.49 million taxable gift, but Fred Trump never reported it to the IRS and did not pay taxes on it. That would have amounted to a 55-percent tax on gifts, or $8 million, according to the report.

In 1992, the Trumps set up the company All County Building & Supply Maintenance in an apparent bid to funnel money from Fred Trump to his children without having to pay the 55-percent gift tax, according to the Times. The four children, including Donald Trump, each owned 20 percent of the company, which would pay contractors and suppliers for building maintenance as an intermediary, according to the Times.

But All County charged Fred Trump’s business a drastically inflated price, records show. The difference between the inflated bills it sent to Fred Trump and those it paid to suppliers were the equivalent of substantial cash gifts, according to the Times, but Fred Trump never paid gift taxes on them.

The late Trump also used the inflated bills from All County to justify raising rents in rent-stabilized properties, pointing to supposedly costly capital improvements.

“All of this smells like a crime,” Adam Kaufmann, a partner at law firm Lewis Baach Kaufmann Middlemiss and former chief of investigations for the Manhattan District Attorney, told the Times. He said that although the statute of limitations has since passed, such actions would have called for an investigation into the defrauding of tenants and tax fraud.

And in the mid-1990s, the Trumps used friendly appraisals to lower the taxable value of Fred Trump’s properties when he moved them into a trust for the benefit of his children. The maneuver potentially saved President Trump’s family hundreds of millions of dollars in gift taxes, according to the Times.

The Trumps’ appraiser, Robert von Ancken, concluded at the time that a portfolio of 25 apartment complexes and other properties were worth $93.9 million. In his 1995 tax filings, Fred Trump put the value at $41.4 million, and the Internal Revenue Service settled on $57.1 million. The Trump children sold the properties for $737.9 million in 2004.

Donald Trump’s attorney Charles Harder told the Times that should the publication, “state or imply that President Trump participated in fraud, tax evasion or any other crime, it will be exposing itself to substantial liability and damages for defamation.” [NYT] — Konrad Putzier

The Atrium Apartments in West Covina changed hangs for $33.9 million (Credit: CBRE)

In a sign of mounting demand for investment in the area, a New York-based firm bought an apartment complex in West Covina this week.

An affiliate for New York-based Abacus Capital Group, LLC, bought the Atrium Apartments at 1829 E. Workman Ave. for $33.9 million, CBRE said. It was the firm’s first purchase in Southern California.

San Diego-based MG Properties Group was the seller.

The 138-unit property in the San Gabriel Valley features two- and three-bedroom apartments, which each have an average of more than 1,000 square feet. The property includes three swimming pools and a fitness center. It has averaged less than 4-percent vacancy since 2016.

The West Covina area has been a “submarket with extremely high barrier to entry,” said Dean Zander with CBRE, who represented MG Properties Group. Earlier this year, CBRE also represented a partnership associated with Landmark Properties in the purchase of another West Covina multi-family complex for $18.8 million.

In August, StarPoint Properties sold an apartment complex in West Covina for $74 million. And in March, Goldrich & Kest Industries bought a 182-unit complex at 1234 W. Cameron Ave. for $44.8 million.

A lack of supply and the strong demand have buoyed rents and kept occupancies high, according to CBRE research. Only one conventional market-rate property, with 450 units, has been built in the West Covina/Covina submarket since 1990. No new projects are planned.

A concept drawing of the new theater and the existing theater at 1345 W. First Street (Credit: Gareth Simpson via Flickr)

It’s curtains for The Bob Baker Marionette Theater in Westlake.

The theater company will exit its historic location by December, to make way for a 104-unit mixed-use development, according to Curbed.

Developer Eli Elimelech’s 1st Street Properties will build the mixed-use project. The complex was first planned in 2014, after Elimelech bought the property at 1345 W. First Street for $1.3 million.

The theater was named a Historic Cultural Monument in 2009, which acknowledges its cultural significance. The building is expected to be demolished to make way for the new construction, according to Curbed.

According to the Los Angeles Conservancy, the new development “will surround and form a bridge over the theatre building. The theatre will be truncated and converted into a residential lobby, with interpretive displays exploring the history of the site. The puppet studio and party room will be repurposed as a common area for residents.”

Last year, the Cultural Heritage Commission worked out a deal with the Elimelech and theater management to reopen.

the theater in the new mixed-use space by 2020. But theater management has since decided to move elsewhere.

The theater will announce its new home at the end of November, when a final show is expected. [Curbed] – Dennis Lynch 

An empty mall with “For Rent” signs (Credit: iStock)

Despite all the doom and gloom over shopping malls, one key figure remained fairly strong. Nationwide, average rents have either stayed the same or ticked up from one quarter to next for the last seven years.

Until now.

In the third quarter, the average rent for malls was $43.25 a square foot — down from $43.36 in the second quarter, the Wall Street Journal reported. Rents had not slid quarter over quarter since 2011, the report said.

At the same time, mall vacancies climbed to 9.1 percent from 8.6 percent in the second quarter, as e-commerce continues to grow. That’s also the highest level since 2011. The Bon-Ton Stores and Sears closings boosted the vacancy rate.

Many lower-end malls have faced an uphill battle despite stronger economic indicators. They have struggled, particularly in areas like Pennsylvania, Ohio and Michigan, which have an oversupply of shopping centers. Earlier this year, large retail vacancies hit an all-time high in the Chicago area.
But one expert was not hitting the panic button just yet.

“The retail sector is still correcting,” Barbara Denham, senior economist with Reis, told the Journal.

On the flip side, malls in more affluent areas are faring well. Higher-end shopping centers with features like restaurants and theaters, and less competition, have been drawing in wealthier customers.

Other mall owners, like Macerich and Hudson Pacific Properties, are seeking alternatives for unused space or shuttered properties, such as bringing in co-working companies and creating flexible office space. [WSJ] — Meenal Vamburkar

Konoike Group CEO Tadahiko Konoike and the largely vacant lot where his company wants to build its new cold storage facility

A Japanese transport and engineering company wants to build its third refrigerated storage facility in the South Bay neighborhood of Wilmington.

Konoike-Pacific California Inc., a subsidiary of the Konoike Group, filed plans on Tuesday for the 55,000-square-foot facility. The building would stretch along N. McFarland Avenue from East E Street to East F Street, directly next door to another Konoike cold storage and shipping facility.

The company needs city approval to build to a requested height of 54 feet, nine feet over the 45 feet allowed by zoning.

Konoike specializes in logistics, including temperature-controlled storage and transportation services in the United States. It also is involved in manufacturing and engineering in Japan. It operates one other facility in Wilmington, as well as one further north in South Gate.

The Wilmington site is comprised of a series of lots that are mostly vacant. The development would require demolishing a 3,800-square-foot commercial building along N. McFarlane Avenue. The property has been owned by the Community Redevelopment Agency of the City of Los Angeles since 2007, according to property records.

South Bay’s industrial market is red hot, giving landlords the pick of the litter when it comes to tenants. In some cases, landlords are booting out existing tenants when leases expire to make way for major national and Fortune 500 companies. Demand for modern Class A industrial properties are driving up demand — and prices — for Class B and Class C properties as well.

Google’s CEO, Sundar Pichai and The Spruce Goose Hangar (Credit: Hunter Kerhart Architectural Photography)

Google is officially loose in the Spruce Goose.

The company moved into the historic former hangar in Playa Vista on Tuesday, closing the loop on a four-year endeavor, according to a city-sponsored corporate blog.

With the new headquarters, Google is tripling its footprint in Los Angeles, Curbed reported. The tech giant’s move, which is expected to involve hundreds of workers, will cement booming Playa Vista as the heart of Silicon Beach, L.A.’s offshoot of Silicon Valley.

Prior to the move to Spruce Goose, Google had been leasing 100,000 square feet at the Frank Gehry-designed binoculars building in Venice, since 2011.

The tech firm first made waves in the neighborhood in 2014, when it spent $120 million to purchase 12 acres of vacant land adjacent to the hangar. Two years later it leased the 319,000-square-foot structure, formerly owned by Howard Hughes, where he kept the infamous Spruce Goose plane with a record wingspan.

The hangar is currently owned by Japanese conglomerate ASO Group. The investment firm paid developer Ratkovich Co. $273 million for the hanger and three other buildings, in late 2016.

Google tapped ZGF Architects to design the redevelopment, which included building a three-story office structure in the cavernous property. ZGF also installed new windows and skylights.

In Playa Vista, Google will be joining other tech companies such as Facebook, Belkin, YouTube and Yahoo. [Curbed] — Natalie Hoberman

Canyon Partners provided a $49-million loan for the development of a five-story, 200-room Hyatt House Hotel at USC’s Health Sciences Campus. (Credit: LosAngelesArchitects.org)

Canyon Partners is giving a jolt of life to a Hyatt hotel project near Downtown Los Angeles.

The firm provided a $49 million loan for the development of a five-story, 200-room Hyatt House Hotel at the University of Southern California Health Sciences Campus, about three miles northeast of Downtown.

The new building, which will be the only hotel on the health sciences campus, will include about 18,000 square feet of conference center space and 14,000 square feet for “fast-casual” restaurants, according to a press release from Canyon. The hotel will also include a fitness facility, pool and spa, and a lobby bar.

The developer is an affiliate of The Mayer Corporation.

The investment comes five months after crews started building a pair of new Hyatt projects near LAX. The Westside-based California Real Estate Regional Center – an EB-5 developer – started building a 272-room Hyatt Place LAX and 129-room Hyatt House LAX on Century Boulevard. And Mayer recently renovated the 517-room Hyatt Regency, and expanded the 437-room Hilton Waterfront Hotel, both in Huntington Beach.

Andrew Cuomo, Trump Palace at 200 East 69th Street, and Donald Trump (Credit: Wikipedia and Getty Images)

The New York State Department of Taxation and Finance is launching an investigation into the Trump family for possible tax evasion following an explosive New York Times report.

“The Tax Department is reviewing the allegations in the New York Times article and is vigorously pursuing all appropriate avenues of investigation,” a department spokesperson told Bloomberg.

Although the statute of limitations prevents authorities from filing a criminal case over the allegations, the agency can still file a civil case that could result in large penalties.

The Times investigation, published Tuesday, includes detailed evidence that President Trump, his siblings and father Fred Trump were part of a sophisticated scheme to create sham companies and artificially lower the valuations of its properties to save hundreds of millions of dollars in gift and estate taxes.

“The New York Times’ allegations of fraud and tax evasion are 100 percent false,” said President Trump’s attorney Charles Harder. “There was no fraud or tax evasion by anyone. The facts upon which the Times bases its false allegations are extremely inaccurate.” [Bloomberg] — Konrad Putzier 

Kurt Rappaport and the property

Kurt Rappaport has paid about $40 million to acquire 23,000 square feet of retail space in Beverly Hills, the first major commercial venture for the longtime residential broker, The Real Deal has learned.

Rappaport, co-founder of luxury brokerage Westside Estate Agency, acquired seven storefronts on Canon Drive, home to prominent high-end residential brokerages and upscale restaurants, in an off-market deal that closed Friday.

An unidentified doctor, acting behind an entity named Canon Ball LLC, sold the properties, which include 448 – 460 N. Canon Drive, listing broker Jay Luchs said. The entity purchased the parcels from the estate of the late real estate mogul Fred Sands just two years ago, property records show.

For Rappaport, the deal represents a shift from his bread and butter — high-end residential homes.

Earlier this year, he broke Los Angeles County records when he sold his own seven-bedroom home in Malibu’s Carbon Beach for $110 million to billionaire Daryl Katz. Rappaport also acquired one of his own listings, the Brentwood home of former Viacom executive Frank Biondi Jr., for $16 million in July. In the past, he’s sold homes to Tom Cruise and Tinder co-founder Sean Rad.

“There’s a lot more speculation with residential,” Rappaport said. In commercial, “values just continue to go up.”

His plans for the Canon Drive property include renovating the buildings to their “original 1930s Beverly Hills feel.” That means updating the property’s facade, tearing down walls and “making the spaces more functional to today’s tenant,” he said. There will be retail on the first floor and office space on the second, he added.

Rappaport, who said he’s “actively looking” for more commercial opportunities, isn’t the only broker working both ends of the real estate spectrum.

In 2016, Luchs, a Newmark Knight Frank commercial vice chairman who brokered Rappaport’s recent deal, expanded into residential real estate with his partner Steven Schaefer. Collectively known as Newmark Residential, the two recently sold a 12,500-square-foot mansion in Beverly Hills to Gary Gilbert, co-owner of the Cleveland Cavaliers.

Stuart Miller (Credit: iStock)

Lennar reported strong third quarter earnings on Wednesday, yet indicated that new home orders and deliveries would be below expectations in the upcoming quarter as a result of Hurricane Florence.

The Miami-based company reported earnings of $453.2 million in the third quarter or $1.37 per share, beating analysts expectations of $1.19. Net income rose about 82 percent from the same period last year largely due to its acquisition of CalAtlantic earlier this year.

The homebuilder expects fourth quarter home deliveries, however, to fall to 14,500 from its previous forecast of 15,000 due to the impacts of Hurricane Florence, according to a conference call with analysts.

But overall, demand remained strong in the quarter. New home orders in the third quarter increased 62 percent from the same period of last year to 12,319 homes for a total of $5.1 billion.

Lennar CEO Rick Beckwitt said the results suggest buyers are still interested in Lennar’s reasonably priced new homes. In contrast, nationwide home sales are reportedly slowing down in some major U.S. markets.

“The basic underlying fundamentals of the housing industry of low unemployment, higher wages and low inventory levels remain favorable and are likely to support longer-term strength in the housing market,” Beckwitt said in a statement.

Homebuilders across the country are battling higher supply costs and labor shortages. Rising interest rates have also made mortgage payments more expensive. These issues are putting increasing pressure on homebuilders’ margins.

Possibly highlighting these pressures, Lennar’s gross margin on home sales fell to 20.3 percent in the third quarter of 2018 compared to 22.8 percent in the third quarter of 2017.

In the second quarter, Lennar also beat analysts’ expectations, earning $310.3 million, or $0.94 per share — exceeding Wall Street’s expectations of $0.45 per share. The results largely reflected new homes sales following Lennar’s $9.3 billion acquisition of CalAtlantic in February. Analysts said the move helped Lennar gain scale to boost its negotiating power for labor, supply and land costs.

Jeff Strain and the so-called “Castle” in the Hollywood Hills

Whoever said that playing video games can’t make you rich hasn’t been to Los Angeles lately.

Jeff Strain, who helped create the massively popular computer games “World of Warcraft” and “Starcraft,” dropped $12 million for a mansion in the Hollywood Hills that’s been nicknamed the Castle, according to Yolanda’s Little Black Book.

The 7,770-square-foot home was recently renovated by the husband-and-wife home flippers and design team Robert and Cortney Novogratz. They’re the stars of the short-lived “9 by Design” show on Bravo and “Home by Novogratz” on HGTV. The couple bought the home in 2015 for $3.8 million to live in with their seven kids and did extensive renovations.

They documented the project with an internet series appropriately called “The Castle Next Door,” in 2016 and spoke to the The Real Deal about the show.

They knocked out some walls — reducing the bedroom count from seven to four — updated the kitchen, and installed new hardwood floors, according to Yolanda’s Little Black Book. The home also has a home theater, a basketball court, and a game room that should go down well with Strain and his wife Annie’s five children.

Strain made a name for himself at video game development company Blizzard and then founded a series of successful game companies that were bought out by much larger developers.

A recent buyout by Microsoft of his latest company, Undead Labs, could be what prompted his move to Los Angeles, although it isn’t clear what Strain was paid in the sale. Strain appears to be staying on board and the company will remain headquartered in Seattle. Still, L.A. is a lot closer than his family’s last digs, which were in New Orleans. [Yolanda’s Little Black Book] – Dennis Lynch