Colony Capital Head of Industrial Lewis Friedland and Nuveen Head of US Real Estate Chris McGibbon

Colony Capital Inc. has dealt a light industrial portfolio to Nuveen Real Estate for $136 million.

The Downtown Los Angeles-based investor sold the 2.3-million-square-foot portfolio through its Dallas, Texas-based platform Colony Industrial, according to the L.A. Business Journal. It comprises 34 properties in Atlanta, Dallas, Houston, Pennsylvania, and New Jersey. About half are in Atlanta.

New Jersey has one of the hottest industrial markets in the country. Around $2.6 billion worth of property traded in 2018. Average prices rose 19 percent last year to $126.67 per square foot.

More broadly, the availability of warehouse space across the country last year was the lowest it’s been since 2000. Demand exceeded supply by about 6 million square feet in the fourth quarter alone, and 29 million square feet for the year.

Some investors are looking to cash in on demand. Black Creek Group is weighing a sale of its 240-property Industrial Property Trust REIT. The portfolio could be worth $3.5 billion.

Colony Capital found itself in the news earlier this month for chairman Tom Barrack’s bizarre comments in Abu Dhabi about Saudi Arabia’s killing of journalist Jamal Khashoggi. Barrack, whose company owns hundreds of millions of dollars of real estate in the region, downplayed the murder, saying, “atrocities in America are equal, or worse, to the atrocities in Saudi Arabia.” [LABJ] — Dennis Lynch 

Long Beach Mayor Robert Garcia and Angels Stadium in Anaheim (Credit: Wikipedia)

Does the Long Beach Angels have a ring to it?

Officials in the coastal city have reached out to the Los Angeles Angels about moving the baseball team to the city and building it a new stadium on a 13-acre property on its downtown waterfront, according to the L.A. Daily News.

It’s a real possibility — the $1.8 billion Major League Baseball franchise opted out of its lease at the aging Angels Stadium last year and is reportedly only seriously considering Long Beach and Anaheim for a new stadium.

Last year, the City of Anaheim extended the Angels’ lease through 2020, giving the team some time to look at its options. And talks have reportedly been positive since Anaheim got a new mayor in Harry Sidhu in December.

Angels president John Carpino said the team was exploring all options for a renovated or new stadium.

Moving the team to Long Beach wouldn’t be as easy as calling up some movers. For one, the site hasn’t yet been evaluated for a stadium. There’s currently no understanding about what party would pay for what.

Long Beach Mayor Robert Garcia said the city was in the “early stages” of due diligence on the property.

The Angels’ current stadium was built in 1966 and has been consistently upgraded over the years, But it is still the fourth-oldest stadium in the country, just behind Dodger Stadium, which was built in 1962.

The newest MLB stadium, SunTrust Park in Atlanta, cost $1.1 billion to develop and received $400 million in public funds, according to USA Today.

Still, bringing a major league team can be a major boost to a city’s economy. And the Angels are the MLB’s eighth-most valuable team. [LADN] — Dennis Lynch 

Michael Jackson and Neverland Ranch (Credit: Getty Images)

It’s the “Neverland Ranch” that never seems to sell.

After nearly four years and at least four agents’ efforts, the 2,700-acre former home of the late pop star Michael Jackson is getting another price chop.

The property is returning to the market for $31 million, less than a third of its original asking price of $100 milion in 2015, the Wall Street Journal reported.

The ranch, which is about 40 miles from Santa Barbara, had a hefty discount in early 2017. Then the sellers — a fund managed by Colony Capital and Jackson’s estate — slashed the price to $67 million.

The latest broker to list the renamed “Sycamore Valley Ranch” is Suzanne Perkins of Compass. Perkins was among the agents who originally listed the property in 2015. She told the Journal that the ranch failed to sell then because “a price tag of $100 million is not chump change.”

The latest price chop comes as an HBO documentary, “Leaving Neverland,” which details Jackson’s alleged child sex abuse, is set to air next week.

Jackson paid $19.5 million for the Los Olivos property in 1987, but stopped living there following his 2005 molestation trial. Amid his mounting debt, Jackson failed to pay a $23 million loan on Neverland, and it almost went to auction before Tom Barrack’s Colony Capital stepped in.

After the pop star’s death in 2009, Colony spent millions of dollars upgrading the ranch’s infrastructure and landscaping, with the intention to sell it. [WSJ] — Alexei Barrionuevo

Graham Espley-Jones, President of Western Community Housing and 11050 West Arminta Street (Credit: Google Maps)

Two nonprofit groups are planning an affordable housing complex with 110 units in the Sun Valley area of the San Fernando Valley.

Meta Housing Corporation and Western Community Housing are planning to demolish three existing structures with a total of 18 units at 11050 W. Arminta Street to make way for a four-story building with 45 permanent supportive units and 65 units for low-income households.

The Arminta Square Apartments will also include almost 22,600 square feet for social services office space, a community room, a gym, and common areas. Y&M Architects is designing the project.

On Wednesday, the L.A. Housing & Community Investment Department is expected to authorize the city’s housing authority to request more than $3.19 million in Section 8 voucher funds from the U.S. Department of Housing and Urban Development. The project’s cost is estimated to be $53.6 million, according to reports.

The complex has been in the works since plans were first submitted in 2009. Meta Housing Corporation purchased the property last May for $8.3 million from the original project applicant, an individual named Kurken Alyanakian, who was planning a $19.7-million project.

The Sun Valley area is expecting to see more multi-family development soon. Among the new projects are Hankey Investment Company’s 432-unit mixed-use project called “Lankershim Crossing,” which will have 40,000 square feet of retail and community space.

Meta Housing is planning affordable redevelopments throughout Los Angeles, including a 55-unit project in the Mid-City area; an affordable housing project in Carson intended for artists, which is also being designed by Y&M Architects; and a 103-unit project in Baldwin Hills for seniors and low-income renters.

Ben Ashkenazy (left), Ric Clark, and the Atlantis Resort in the Bahamas (Credit: Getty Images and Nassau Paradise Island)

Ashkenazy Acquisition Corporation has walked away from a deal with Brookfield Asset Management to acquire the 3,805-key Atlantis resort in the Bahamas.

The New York-based investor, which was said to be financing the acquisition with funds from Qatar’s sovereign wealth fund, ended talks after discovering surprise deferred maintenance costs during due diligence, according to Nassau’s Tribune 242 newspaper.

But Ashkenazy, once a minority owner of the Plaza Hotel, was unable to renegotiate the sale price, according to sources who spoke to Tribune 242.

“They found more and more issues and they walked,” a source told the paper.

Ashkenazy and Brookfield had signed a letter of intent, which allowed for a 30-day due diligence period. Neither party responded to requests for comment.

Ashkenazy has done a number of deals with backing from Qatar. The most notable was with the country’s former prime minister and royal Hamad Bin Jassim Bin Jaber al-Thani, or HBJ, from whom Ashkenazy borrowed money to purchase the Grosvenor House hotel in London. At the Plaza in New York, HBJ acquired a mortgage when Ashkenazy was a minority owner of the hotel.

Brookfield has twice refinanced its debt on the Atlantis since acquiring it in 2012. It completed a $1.9 million recapitalization of the property in 2019, according to the Wall Street Journal. [Tribune 242] — Will Parker

From left: Joe Francis and Steve Wynn

After years of trying, disgraced casino mogul Steve Wynn has finally wrested control of a Bel Air mansion from his legal foe, “Girls Gone Wild” creator Joe Francis.

Wynn has been squabbling with Francis over the 6,500-square-foot mansion since 2012, when a jury ordered Francis pay Wynn $19 million for slanderously claiming Wynn threatened to kill him, according to Yolanda’s Little Black Book.

He took possession of the home through a foreclosure, despite Francis’ attempts to shield the mansion from Wynn using shell companies and bankruptcies.

The 0.89-acre property is valued at $6.7 million. It has five bedrooms and seven baths. Neighbors include legendary record producer Quincy Jones and hedge fund manager George McCabe.

Wynn, a billionaire who lost control of his company Wynn Resorts last year amid sexual misconduct allegations from dozens of women, likely won’t be moving in. He’s got his own 20,000-square-foot mansion in Beverly Hills.

As for Francis, he’s hasn’t lived at the Bel Air home in a number of years, according to Yolanda. He owns a 40,000-square-foot mansion in Punta Mita, Mexico, that he rents out regularly to celebrities. Kim Kardashian and Kanye West have rented the sprawling property, called Casa Aramara.

But all is not well south of the border. In late 2017, a judge ordered that Francis not be allowed to take any profits from the property until he pays off his debts. [Yolanda’s Little Black Book] — Dennis Lynch 

Realogy CEO Ryan Schneider (Credit: iStock)

Realogy’s stock plunged 21 percent on Tuesday, as Wall Street reacted grimly to the company’s dismal earnings report.

The stock closed at $14.14 per share after a volatile day of trading, down nearly 42 percent year-over-year, and its lowest mark yet. The New Jersey-based conglomerate reported Tuesday that its 2018 profits dropped 68 percent to $137 million, and it lost $22 million during the fourth quarter. For the full year, Realogy reported $6.1 billion in revenue, $35 million less than 2017.

“Most of the challenge in the 2018 market showed up in the last half of the year,” CEO Ryan Schneider said during an earnings call, in which he attributed the weak earnings to the slow U.S. housing market.

As its share price took a nosedive, Realogy’s market cap dropped to just $1.67 billion, down from $2.1 billion on Monday. Throughout the day, investors also bought and sold 12.7 million shares of the company’s stock, compared to an average daily volume of 1.9 million.

At its peak, Realogy’s market cap was $7.5 billion in May 2013, roughly a year after going public, according to the research firm Macrotrends. But the value of the company has declined precipitously over the past few years, amid heightened competition and the high cost of agent commissions, which increased by $52 million last year. Realogy’s market cap dropped to $3.32 billion in February 2018, according to Macrotrends. By comparison, Realogy’s venture-backed rival Compass was valued at $4.4 billion in 2018, after closing a Series F from SoftBank and the Qatar Investment Authority in September.

On Tuesday, Realogy executives said they’ve been investing in agent recruitment tools and other marketing and technology to improve their value proposition to agents. They’re also looking to cut $70 million in costs in 2019 and reduce the company’s debt load. “In the first half of the year, you will see us focus on debt paydown,” interim CFO Tim Gustavson said.

But analysts zeroed in on Realogy’s lackluster performance compared to the national average. In 2018, Realogy’s total transaction volume dropped 5 percent year-over-year. Nationwide, sales volume dropped 4 percent, according to the National Association of Realtors.

“Realogy missed analyst expectations on the top and bottom lines — badly,” wrote Matthew Frankel, an investor advisor and founder of Frankel Wealth Management in South Carolina, in a recap of the company’s earnings published on the Motley Fool.

Schneider said the steeper-than-average sales volume was a result of regional weakness. “New York remained pretty weak in Q4. California was incredibly weak, and we’re over-weighted in both of those related to NAR and our competitors,” he told analysts during the earnings call.

Not all analysts were buying it. JPMorgan’s Anthony Palone said Realogy’s financial results weren’t much worse than expected considering the national housing data of late. But he noted that as brokerage companies invest in “agent centric” models, it’s the agents who stand to gain the most — not shareholders.

“With the residential brokerage brands also pushing hard to keep their share of (and grow) agents, the agents are getting a lot out of the deal,” Palone said. “We wonder when will the shareholders of the brands be rewarded?”

From left: James Dolan, Steve Ballmer, and James Butts with a map of the proposed site

Representatives for the City and the Los Angeles Clippers expressed concern almost three years ago that Madison Square Garden Company would learn about the team’s plans for a new NBA arena in Inglewood.

As early as April 2016, both parties worried whether MSG would find out about the arena plans before the New York-based company agreed to surrender the parking lease, the Los Angeles Times reported, citing documents recently made public by Los Angeles County Superior Court.

MSG doesn’t want a competing arena about a mile from the Forum Arena, after recently investing $100 million to renovate it for concerts and other performances. The company is concerned the Clippers’ arena near Century Boulevard could also be used for such events.

The project, which is subject of another lawsuit, also calls for a practice facility, office space, a sports medicine clinic, retail space, and a hotel.

L.A. Clippers owner Steve Ballmer is planning to build the Inglewood Basketball and Entertainment Center across from the L.A. Rams’ stadium development. Some of the land had been leased to MSG for the Forum, but the company terminated that lease in 2017.

MSG is suing the city, claiming Mayor James Butts tricked them into forfeiting the lease to make room an office park development, not a competing arena. The mayor has denied the allegations. In a court deposition in August, he said he originally told the Clippers that Inglewood did not have any sites available for an arena.

The Clippers’ lease at Staples Center, about 11 miles from the proposed new arena, expires in 2024, when the team expects to move to Inglewood. [LAT] – Gregory Cornfield

CoStar CEO Andy Florance (Credit: CoStar via YouTube and Pixabay)

Real estate data giant CoStar Group exceeded $1 billion in revenue in 2018. And by the end of 2023, it hopes to roughly triple that figure to $3 billion.

Though tumult in the stock market contributed to a dip in CoStar’s market value, the company finished 2018 with a strong balance sheet, it disclosed in an earnings report on Tuesday. On the company’s subsequent earnings call, chief executive Andrew Florance said the firm posted $1.2 billion in revenue, a jump from $965 million for 2017. CoStar ended the year with $238 million in net income, up 94 percent over 2017’s $123 million. Its adjusted EBITDA checked in at $418 million, a 49 percent increase year-over-year.

“2018 was an outstanding year for CoStar with strong revenue growth and substantial margin expansion,” Florance said on the call, telling investors that the firm successfully integrated ForRent in the fourth quarter, which he called its strongest ever. He also said CoStar sees a “huge opportunity to further monetize LoopNet,” which, along with other commercial products, has the potential to “reach the size of Apartments.com.”

Florance briefly touched on two other 2018 acquisitions, noting that it picked up Cozy Services and Realla, the U.K.’s largest CRE marketplace, and signed client contracts with brokerages Marcus & Millichap and CBRE.

“We anticipate acquisitions will continue, but we anticipate most of our growth will be organic,” Florance said.

CoStar has long been the market leader for commercial real estate data, but is now facing a threat from Moody’s Analytics, which recently launched a new platform of real estate data services produced by firms including CompStak and Rockport VAL. Florance told Bisnow last week that while he welcomed the competition, Moody’s platform is “not exactly a big bang.”

CoStar’s share price has seen a spike since the beginning of 2019, jumping from $334 to $411 on Tuesday. Its market capitalization is currently at $14.8 billion. In 2019, CoStar is anticipating between $1.37 billion and $1.38 billion in revenue.

From left: Ori Allon, Zvi Band, and Robert Reffkin (Credit: Getty Images, Zvi Band, and Contactually)

As it looks to burnish its tech offerings, Compass said it had acquired Contactually, a cloud-based customer relationship management system popular with some of the brokerage industry’s biggest brands.

Terms of the deal, announced Wednesday, were not disclosed. But the Washington, D.C.-based software firm, which launched in 2011, previously raised $12 million from investors including Grotech Ventures, Flight Ventures and Rally Ventures. Contactually generated $7.3 million in 2017 revenue, according to the Inc. magazine’s annual ranking of the 5,000 fastest-growing companies.

The companies said 32 of Contactually’s employees will join Compass, the $4.4 billion SoftBank-backed brokerage. They will work under Compass’s chief technology officer Joseph Sirosh and head of product Eytan Seidman’s team of 175, the companies said.

Compass launched its own CRM last year, powered by Contactually, and the companies said in a statement Wednesday that said the acquisition would accelerate further development of the Compass CRM tool. “Adding their technology and talent to our own will supercharge the Compass offering and bring us closer to our vision of the industry’s first end-to-end platform,” Compass founder Ori Allon said in a statement.

The cloud-based CRM bills itself as an “intelligent” system that uses machine learning in features like “Best Time to Email.”

“After working extensively with the Compass team, it was apparent that joining forces would accelerate our missions,” co-founder and CEO Zvi Band said in a statement.

Compass has been doubling down on technology over the past six months, after raising $400 million from investors including SoftBank and Qatar Investment Authority. In December, Compass launched a product and engineering campus in Seattle.

But the rapid pace of innovation has come with some growing pains. In an end-of-year email to agents, Compass CEO Robert Reffkin acknowledged several missteps, the result of launching new tech products without fully vetting them with agents. “To hit deadlines, we released new software before it was ready,” he wrote. “The new tools were designed to simplify agents’ lives, but bugs in the technology made agents’ lives more complicated instead.”

In Contactually, Compass has acquired a software already used by major brokerage firms. Contactually claims to manage more than 200 million client relationships and works with major names in residential real estate, including Realogy’s Climb Real Estate; Berkshire Hathaway HomeServices Fox & Roach Realtors and multiple Sotheby’s International Realty franchises.

The companies said Contactually’s existing customers will be able to continue to use the platform.

Southern California homes (Credit: iStock)

The number of home sales in Southern California continued to dip in January, reaching their lowest levels since the housing market crash in 2008.

A new report from real estate data firm CoreLogic reveals the number of homes sold last month dropped 17 percent year over year to 12,665. That’s the lowest that has been recorded for that month since January 2008, when 9,983 homes sold.

If that sounds familiar, it’s because a similar situation occurred in December 2018, when home sales dropped 20.3 percent to 5,291 — the lowest level since 2010.

CoreLogic incorporates data from Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties.

A drop in mortgage rates in December, which made prices more affordable that month, is likely to blame for January’s slowdown, Andrew LePage, a CoreLogic analyst, said in the report. There was a nearly 20 percent drop in sales from December to January across the six counties, according to the report.

In L.A. County, the number of homes sold dropped 15.8 percent year over year to 1,778 homes in January. The median sales price inched up 2.6 percent to $579,500.

That’s slightly higher than the median sales price for the combined counties, which rose 2 percent year over year to $505,000.

The slowdown was most pronounced with newly-built homes. In January, sales of new homes, which includes detached houses and condos, dropped 57.8 percent below the historical long-term average dating from 1988.

Sluggishness is also evident in the luxury market. The number of homes that traded for more than $800,000 fell 12.7 percent year over year, while sales surpassing $1 million dipped 16 percent.

Home sellers in the upper echelons of the market are struggling to move their properties, as evidenced by the frequency of re-listings taking place. In one extreme example, the sellers of a 157-acre spread in the Beverly Hills Post Office recently dropped the asking price from a record $1 billion to $650 million.

Photo of L.A. skyline from Echo Park (Credit: Wikipedia and iStock)

At least 30 percent of Angelenos who earn $100,000 or more per year are renting their home, new data shows.

In 2008, about a quarter of L.A. residents making six figures were renting. But a new report by Apartment List shows that share had risen five percent by 2017, when the city was home to more than 450,000 high-income renters. CurbedLA first reported the story.

Only San Francisco and San Jose have larger percentages of six-figure earners who rent. The West Coast cities are part of a nationwide trend of residents choosing to rent rather than own.

The report attributes some of the change to increased development of luxury housing, one part of why developers often favor high-priced rental towers over more affordable projects.

“This trend will likely lead to greater inequality within the rental market,” as high earners compete with lower income families at a higher rate, said Rob Warnock, an Apartment List researcher.

Home prices are close to an all-time high in Los Angeles, meaning high-income renters may not see owning as a viable option. Last year, a separate report from Attom Data Solutions found that making mortgage payments on a median-priced home in L.A. would require an income of $167,182, well above the $100,000 classified as “high-income” in the Apartment List report. [Curbed] – Gregory Cornfield

From left to right: Toby Moskovits, Steven Adler, Seth Pinsky, Ben Miller, Bob Knakal, and moderator Maury Golbert

The burgeoning Opportunity Zone program could be one of the best development initiatives the country has ever seen, but investors and developers still shouldn’t expect it to turn every deal into a winner, top real estate executives said Wednesday morning.

“While the Opportunity Zone program certainly offers benefits that should over time reduce the cost of capital and therefore make some marginal projects that weren’t feasible, feasible, it’s not going to take projects that were absolutely infeasible and turn them into projects that are,” said Seth Pinsky, executive vice president at RXR Realty. “You still need to have an underlying project that makes sense.”

Pinsky spoke on an Opportunity Zone panel Wednesday morning with JLL’s investment sales chair Bob Knakal, Fundrise CEO Ben Miller, Heritage Equity Partners president Toby Moskovits and Meridian Capital Group managing director Steven Adler at an event thrown by The Real Deal and Berdon LLP. The panelists were very optimistic about the program overall.

The Opportunity Zone program, included in the 2017 Tax Cuts and Jobs Act, allows investors to defer taxes on income from capital gains until 2026 provided that 90 percent of their investment is in areas designated as low-income communities. The program has already proven to be extremely popular with the real estate community even as developers and investors still wait on key information about it.

Knakal described the initiative as “brilliantly conceived” with the potential to “create the best community development program the nation has ever seen.” However, he cautioned that it would only work if the people buying properties in Opportunity Zones were making a profit, something that was proving to be a challenge based on how much owners of properties in Opportunity Zones think their land’s value has increased.

He summed up the situation by inverting a famous quote from the 1987 film “Wall Street.”

“Greed, for lack of a better word, is bad,” Knakal said.

The program, Pinsky said developers looking to make Opportunity Zone deals at reasonable prices should look to secondary and tertiary markets where transactions have not already been occurring. In areas that were already seeing a good amount of activity before they were designated as Opportunity Zones, it will be much harder to find a good deal.

RXR and Heritage have both already launched Opportunity Zone funds of their own: a $500 million one for RXR and a $100 million fund for Heritage.

Both firms said they have been seeing interest from investors looking to put their money in economically challenged areas. Moskovits said investors saw it as a way to both get helpful tax benefits and make a positive impact.

“I’m getting a lot of calls from friends of mine in the private wealth industry who are advising on impact investing and getting calls from their clients asking about how to move money into these neighborhoods where they’re getting what we call the double bottom line, or doing well by doing good,” she said.

Opportunity Zones were designated based on census tracts, some of which are in areas where a large amount of development activity was already taking place. In New York City alone, this includes places like the Far West Side and the Lower East Side.

Pinsky said it is important to have capital flow into census tracts that have not already seen a lot of development to make sure the Opportunity Zone program is a political success.

“If, at the end of this program, all that’s happened is that more money has gone into the areas that were already getting capital, then the program will have proven to be a missed opportunity,” he said.

(Credit: Unsplash and Pixabay)

U.S. housing prices recorded their slowest growth in four years during 2018, signaling that this year may be a trying time for the real estate industry.

The S&P CoreLogic Case-Shiller National Home Price Index, which tracks average home prices in cities across the country, rose 4.7 percent by the end of December, down from 6 percent the previous year — the slowest growth margin since 2014, according to The Wall Street Journal.

Construction has also taken a hit. Housing starts dropped 11.2 percent in December from the previous month, marking the most significant decline in two years. For all of 2018, new single-family home constructions grew 2.8 percent in 2018, down from 8.5 percent the prior year.

Taken together, the declining indicators could spell out a rough 2019 for the real estate market.

“This year probably isn’t going to be gangbusters,” Ralph McLaughlin, deputy chief economist at CoreLogic, told the Journal. “It’s probably not going to collapse, but it’s not going to be a record year on many fronts.”

In December, homebuyer Redfin predicted that 2019 housing price growth would decline to 3 percent in the first half of the year, but added there is a “real chance” prices could fall into negative growth for the first time since 2011. [WSJ] — David Jeans

Jeff Bezos is backing his company out of a massive real estate deal in downtown Seattle (Credit: Getty Images)

UPDATED, Feb. 27, 3:53 p.m.: Amazon is walking away from another huge real estate deal, this time in its hometown of Seattle.

The e-commerce giant is cancelling a 722,000-square-foot lease for the entirety of Wright Runstad & Company’s 58-story Rainier Square tower, currently under construction, according to the Seattle Times. Last year Amazon threatened to pull the plug on the lease if the city passed a proposed business tax, which it ultimately did not.

The decision comes just two weeks after Amazon shocked real estate watchers and abandoned plans for a new 25,000-job headquarters in New York’s Long Island City neighborhood. In doing so, the company turned away from a $3 billion incentive program amid intense opposition to the deal from some city, state, and federal lawmakers.

Both the Seattle and Long Island City episodes show Amazon is willing to leave major deals on the table if it can’t get the economic concessions it wants from local governments. Seattle’s so-called “head tax” would have taxed large companies around $275 per employee to pay for services and housing for people experiencing homelessness.

The Rainier Square lease was one of the biggest in Seattle’s history. The facility would have been large enough for 3,500 to 5,000 employees, who would have cost the company between $692,000 and $1.4 million in head taxes.

The tower is set to be the second-tallest in Seattle and will cost $600 million to develop. It’s one of the largest real estate projects underway in the country.
Amazon currently has around 45,000 employees working in 40 buildings in Seattle. [Seattle Times] – Dennis Lynch 

Correction: A previous version of this story incorrectly stated that Seattle had passed the proposed business tax.

Bruce Makowsky and 924 Bel Air Road (Credit: Wikipedia and Zillow)

Bruce Makowsky’s Bel Air spec megamansion, dubbed “Billionaire,” seemingly has it all. There are 21 bedrooms, 21 bathrooms, two champagne rooms, a 40-seat home theater and a moat-like canal around the property.

The only thing it doesn’t have is a buyer, but until recently that’s not what Zillow was showing. Now, the Los Angeles developer is suing the listings giant, alleging it had falsely reported the $150 million on-the-market mansion as sold. Makowsky filed the suit through his 924 Bel Air Road LLC in federal court this week, seeking $60 million in damages.

It alleges Zillow erroneously published the 38,000-square-foot residence as sold on three different occasions with varying prices. The first time, on Feb. 4, it said the home at 924 Bel Air Road was scooped up for $110 million. On Feb. 8, it showed there would be an open house, according to the lawsuit, which was first reported by Inman.

Then on Feb. 9, a Zillow page reported a $90.5 million sale. And a day after that, it showed the home had been sold for $94.3 million.

Ronald Richards, an attorney for Makowsky, said the erroneous information led to “a real impact causing a loss,” but failed to provide further details. In the suit, Makowsky claims that reporting the property had sold for millions of dollars below its ask “corrupts the listing price dramatically.” Listing brokers Shawn Elliott of Nest Seekers, and Branden and Rayni Williams of Hilton & Hyland, declined to comment.

The property, which also features a Louis Vuitton-designed bowling alley, recently re-listed in January for well below its $250 million original ask, from 2017.

In the lawsuit, Makowsky alleges Zillow allowed a fake user to claim to be the homeowner, and that the company failed to immediately remedy the situation after it was flagged. Zillow does not “manually check” the validity of a user, according to the suit, if that user is able to provide responses to a series of verification questions. In the case of the “Billionaire” mansion, the fake user was able to gain access to the home’s listing page by using a phone number with nonexistant area code, according to the suit.

Zillow spokesperson Kate Downen declined to comment on pending litigation. In an emailed statement, she added the firm “goes to great lengths to display current and accurate data on our site.”

It comes at a time when listings portals like Zillow and Trulia are providing an increasing amount of data to potential buyers. In L.A., the wealth of information sites like Zillow offer on homes have provided breadcrumb trails for burglars at pricey homes belonging to celebrities.

For Zillow, the lawsuit follows a soft fourth quarter, and recent C-suite shakeup, with CEO Rich Barton back at the helm.

As of Wednesday, the listing was back on the market for $150 million. The company was said to be working on updating its verification process.

Henderson Nevada (Credit: Wikipedia)

You’re welcome, Nevada?

The mass exodus of Californians being priced out of their homes has helped rebuild the town of Henderson, Nevada, the Wall Street Journal reported.

The city suffered when housing prices crashed during the recession, but it has come back with a vengeance thanks to an influx of people from the Golden State.

California has been losing more residents than it gains from neighboring states for years, but few places have been as affected as Henderson. Its population surged 20 percent over the last decade, transforming it into Nevada’s second-most populous city with more than 300,000 people, ahead of Reno.

Fifty-six percent of new arrivals in Henderson between 2013 and 2017 came from California. At the 1,300-acre MacDonald Highlands community, Californians accounted for about 70 percent of purchases in 2018, up from 30 percent two decades ago.

But the influx has brought some growing pains.

Average housing prices in the Las Vegas metro area rose from $120,000 in 2012 to $278,000 in 2019, according to Zillow. About 47 percent of Vegas-area residents can afford those higher prices in 2019, down from 88 percent just after the recession.

Home prices are cooling in Southern California. But there aren’t many signs that the exodus will slow, as the cost of living continues to be unaffordable for many residents. The median home price in California soared 83 percent between 2012 and 2018. And buying a house is unaffordable to all but 28 percent of the state’s population, according to the California Association of Realtors. [WSJ] – Gregory Cornfield

A Toll Brothers home in California and Toll Brothers CEO Doug Yearley (Credit: Getty Images and Facebook)

The disappearance of buyers in California and a tepid luxury market in New York helped send Toll Brothers’ new home orders down 24 percent in the first fiscal quarter of 2019, its worst showing since the throes of the Great Recession.

In the first quarter, the company’s revenue grew but contract volume dropped significantly due to broader market sluggishness. Home sales revenue was up 12 percent year-over-year to $1.32 billion, but at the same time, net signed contract value tumbled 31 percent to $1.16 billion — and units in contract fell 24 percent to 1,379.

In terms of new homes going into contract, it was was the worst quarter for Toll Brothers since a 27 percent year-over-year drop in the third quarter of 2010.

The company attributed the decline to “a lack of current inventory in certain locations and the industry-wide slowdown that began in the second half of 2018,” CEO Douglas Yearley said in the statement. “Although we experienced a year-over-year decline in contracts each month of this first quarter, the decline decreased as the quarter progressed.”

Overall in the quarter, net income was $112.1 million, compared with $132.1 million a year earlier. The decrease was due to the federal tax law change, Toll Brothers said. Pre-tax income was $151.4 million, a 15 percent increase.

Toll Brothers’ City Living segment, which primarily focuses on the New York City metro area, saw 23 contracts totaling $39.7 million. That was down from 47 units totaling $61.8 million a year earlier. The average price per unit rose to $1.72 million from $1.32 million, helping boost revenue.

“It’s okay,” Yearley said of the City Living market during the earnings call. “It’s not strong, but it’s okay.”

While Toll Brothers is still keeping an eye out for land deals, Yearley noted the markets in Hoboken and Jersey City have slowed — and many sellers remain unrealistic about land prices.

“It’s too risky a business with the price of land,” he said. “We’re going to be very disciplined.”

Meanwhile, the company also saw a large drop in California, with 149 contracts totaling $268.9 million. That’s down from 62 percent from the same period last year, when 388 contracts totaled $646 million. Yearley noted that last year was “unique” for California because of the number of communities the company opened and the pent-up demand that existing upon openings. Going forward, the backlog provides some visibility into the market, he said.

Toll Brothers also continues to look at mergers and acquisitions options, Yearley said. Last year the company looked at 30 potential deals, despite not following through — and Toll Brothers is on pace for the same level of interest this year. The company seeks to use M&A as a way to enter new product types or price points.

In the second quarter, Toll Brothers expects deliveries between 1,650 and 1,850 units with an average price between $860,000 and $890,000. Because the market is still in the early stages of spring selling season, the company said there are many possible results for full-year earnings — so it is holding off on providing guidance beyond the second quarter.

Insomniac CEO Ted Price and Media Studios Campus (Credit: Wikipedia)

The brainchild behind Marvel’s Spider-Man video game is slinging for some office space in Burbank.

Insomniac Games has renewed its 42,000-square-foot lease at the Media Studios campus in Burbank for another five-and-a-half years, according to an announcement from CBRE.

The video game software company has been occupying the top floor of the five-story office building at 2255 North Ontario Street since 2002. In addition to Spider-Man, Insomniac has developed the games Ratchet & Clank, Spyro and Resistance.

Prolific landlord Worthe Real Estate Group manages the complex, which spans 1.2 million square feet and is comprised of five buildings. Amenities include a fitness center, convenience store, day care, massage room and several sports courts.

Blackstone Group purchased a majority interest in the campus, as well as five other office properties in the Burbank Media District, for a combined $1.7 billion in September 2017. Worthe, which continues to manage the properties, retained a 20 percent ownership stake.

Media Studios has 900,000 square feet of office space, leased to tenants that include NBCUniversal, Kaiser Permanente, Deluxe Entertainment, TiVo, Technicolor, 20th Century Fox, Hasbro and Disney Television Animation, the Los Angeles Times previously reported.

Yahoo Inc. used to occupy two buildings on the site until it shuttered its office there in 2016.

Todd Doney, Doug Marlow, Ryan Pettersen and Juliana Sampson of CBRE represented Worthe in the most recent deal. Matt Brainard of Savills Studley represented Insomniac.

Governor Kate Brown and Portland (Credit: Getty Images and Unsplash)

Oregon is poised to become the first state to implement statewide rent control.

Lawmakers passed a measure that would impose limits across the state on how much landlords can raise rents, the New York Times reported. The legislation would limit increases to 7 percent annually plus the change in the Consumer Price Index, which measures inflation.

Some newer and smaller buildings would be exempt, the report said. The move comes as states and cities across the country have struggled with housing affordability — with rents rising faster than wages. In Oregon, the median rent has increased by more than 14 percent statewide.

“There is no single solution — not one entity, or one person — that can solve Oregon’s housing crisis,” said Gov. Kate Brown. “This new legislation is one of many actions Oregon needs to take to address our housing crisis. While it will provide some immediate relief, we need to focus on building supply in order to address Oregon’s housing challenges for the long term.”

In New York, Brooklyn State Senator Julia Salazar submitted her first housing bill last month, which would pave the way for “universal rent control” in New York State. The “good cause” eviction bill is a proposed amendment to the state’s real property law and would prevent tenants in nearly any market-rate apartment from being evicted for not paying an “unconscionable” increase in rent.

Unconscionable is defined as an annual increase of more than 150 percent of the regional Consumer Price Index, as it stands in the month of August of the preceding year. The Salazar bill could effectively cap rent increases this year at just 3.3 percent at virtually every unregulated New York City rental apartment, and by similar amounts elsewhere.

Other cities are also considering legislation to tackle the affordability crisis. In Boston, there is a proposal for steep taxes on developers, and in Denver, the city is considering allowing for more carriage houses to be built. [NYT] — Meenal Vamburkar