Utility crews at site of Camp Fire

Pacific Gas & Electric Co. is assuming blame for the worst wildfire in California history.

On Thursday, the company said it is “probable” that its equipment caused the Camp Fire that killed 85 people at the end of 2018, the Los Angeles Times reported. The investigation into the exact cause is still ongoing.

The revelation by PG&E was the latest fallout from last year’s deadly wildfires, which affected residents in Northern and Southern California. In January, the utility giant filed for bankruptcy protection to protect it from liabilities of up to $30 billion.

Several survivors have filed lawsuits against PG&E, alleging its failure to properly maintain power lines set off the state emergency. One lawsuit claims the company misdirected “necessary safety-related expenditures” to boost the firm’s bottom line and shareholder profits.

California’s three largest utility companies caused more than 2,000 fires in the state between mid-2014 and the end of 2017. PG&E reported 1,552 equipment-related fires during that time.

The Camp Fire, which took place in November 2018, destroyed 21,000 homes across six counties in Northern California.

In Southern California, a group of more than 170 residents have also filed a lawsuit against Southern California Edison, which provides power for most of the region, including Los Angeles. The lawsuit claims the utility company was partially responsible for the Woolsey Fire, which destroyed more than 1,600 structures in November. The blaze caused an estimated $5 billion in damage, including around $1.6 billion in Malibu alone. [LAT] — Natalie Hoberman

Left: 2010 East Garvey Avenue, Right: 1829 East Garvey Avenue, Bottom: 2016 East Garvey Avenue South (Credit: Google Maps)

Buckle up, West Covina.

Three auto dealerships along Garvey Avenue changed hands this month for a total of $61.2 million.

Ayman Sarriedine, who controls a Mercedes-Benz dealership in Escondido, purchased the properties from Roger Penske, Jr., the former president of auto dealer group Penske Automotive Group.

Two dealerships, which combine for 390,000 at 1829 E. Garvey Avenue and 2010 E. Garvey Avenue, sold for $48.7 million. Records show that Penske owned the properties since 1997. He purchased each site for $3 million.

The third dealership, with more than 84,200 square feet at 2016 E. Garvey Avenue, sold for $12.5 million.

Penske is the son of auto racing billionaire Roger Penske. His brother, Jay Penske, is chief executive of the eponymous media company that publishes Rolling Stone, Deadline and Variety. He has been in the news recently for his disputed efforts to build an 11,000-square-foot mansion on a former First Baptists Church in Venice.

There has been high demand for residential investment in the West Covina area of the San Gabriel Valley. Last October, Abacus Capital bought the Atrium Apartment complex on Workman Avenue for $34 million. In August, StarPoint Properties sold an apartment complex on Glendora Avenue for $74 million. And about one year ago, Goldrich Kest Industries acquired the 182-unit residential complex in West Covina for $44.9 million.

A map of opportunity zones (Credit: Enterprise Community Partners and iStock)

The rush to buy Opportunity Zones sites has already begun, but then what?

Investors have started buying up properties and vacant land in designated Opportunity Zones sites around the country, even though some have no set plan about what they will build, according to the Wall Street Journal.

In one example, McDougal Cos. bought an 8,000-square-foot former movie theater in an Opportunity Zone in Lubbock, Texas, but isn’t sure how it will convert the theater. Companies like McDougal are speculating on these properties because of a provision in the federal program that requires investors to reinvest capital gains proceeds within 180 days. McDougal Cos. sold apartments last year so it had to reinvest the gains, according to the Journal.

Companies are buying these properties despite a number of unanswered questions around the rules of the federal program. Opportunity Zones legislation provides tax deferments and tax breaks for developers who invest in projects in designated low-income neighborhoods.

Many large institutional investors who have raised money are waiting for these rules to be announced by the U.S. Treasury and IRS before deploying capital into these Opportunity Zones projects. The latest guidelines are expected in the coming weeks.

There are more than 8,700 designated Opportunity Zones around the country. The program was put forward in President Trump’s tax plan in 2017. The biggest advantage comes if an investor holds an Opportunity Zone asset for at least 10 years. [WSJ]  — Keith Larsen

Nuveen CEO Mike Sales and 9536 Wilshire Boulevard (Credit: LoopNet)

Nuveen Real Estate, hot on the heels of an industrial portfolio purchase, is looking to unload some of its commercial assets.

The firm is marketing the Wilshire Rodeo Plaza in the prime Beverly Hills Triangle for sale for $350 million, The Real Deal confirmed. It’s also seeking to sell two other West Coast properties in Seattle and San Francisco.

In L.A., Nuveen is shopping the 262,000-square-foot complex at 9536 Wilshire Boulevard. It includes a 178,000-square-foot, five-story structure, as well as a smaller 84,000-square-foot, three-story building.

Tenants at the site include UBS, Merrill Lynch and talent agency William Morris Endeavor.

Real Estate Alert first reported the news.

TIAA Financial Services, which acquired Nuveen in 2014, paid $193.6 million for the property in 2006, property records show. TIAA renamed its asset management division to Nuveen in 2017.

Nuveen is also selling a 40-story skyscraper, dubbed Fourth & Madison, in Seattle for $625 million. And it’s marketing the KPMG Building in San Francisco for $400 million.

Combined, the three properties could fetch $1.4 billion.

Earlier this week, Nuveen paid $136 million to Colony Capital to acquire a light industrial portfolio. The bulk of the 34 properties are based in Atlanta, with others found in New Jersey, Texas and Pennsylvania.

The firm is a massive global investment manager, with $125 billion of real estate assets under management.

Barry Sternlicht Chairman of Starwood Capital Group (Credit: Wikipedia)

Starwood Property Trust’s Barry Sternlicht told analysts the real estate investment trust increased its offshore spending in 2018, particularly “in the beer-drinking countries” of Europe, and expects to continue investing internationally this year as the U.S. economy keeps slowing.

On Thursday, the REIT, an affiliate of Miami Beach-based Starwood Capital, reported a drop in profits in 2018, a year in which it invested a record $11.6 billion, up 58 percent compared to 2017.

In 2018, Starwood’s net income totaled $358.8 million, or $1.42 per share, down 10.5 percent year-over-year. Its fourth quarter earnings dipped only slightly, down 0.5 percent to $92.1 million or 33 cents per share.

Its core earnings in the fourth quarter totaled $155.4 million, or 54 cents per share, meeting analysts’ expectations. For the full year, Starwood’s core earnings totaled $608.1 million, or $2.19 per share.

The REIT has nearly $900 million in offshore investments, mostly in northern Europe, and committed to $450 million in February, said Sternlicht, chairman and CEO.

In 2018, the company lowered its borrowing costs, creating a larger cash cushion that will allow it to act quickly on deals without raising new debt or equity. Starwood expects to sell “some of the more senior bonds we’ve held onto,” increasing its return on equity, Sternlicht said

Sternlicht said the 2020 election will create uncertainty for the U.S. economy. Starwood pulled back on investing in late 2018 in the U.S., due to turbulence in the market.

“We have to be super careful in the hotel space” because of “supply and volatility of the economy,” Sternlicht said.

Overall, Starwood continued diversifying outside of real estate last year, closing on the $2.5 billion acquisition of a GE energy-finance business in September.

“Diversification allows us to sleep at night,” Sternlicht said, later adding that the REIT “looks more like a bank than a mortgage trust.

Its total assets at the end of 2018 totaled nearly $68.3 billion, up from about $63 billion the previous year.

Existing property, like Starwood’s portfolio of affordable housing in Florida, is worth more because of rising construction costs, Sternlicht said. The drop in multifamily construction starts is due to an “extreme rise in construction prices, up 10 percent in some markets” year over year.

“Slow growth is nirvana for the property cycle,” he said, adding that it keeps cash in the pockets of the real estate community as they evaluate their next moves.

From left: Jay Martinez and Darin Spillman with 6901 South Western Avenue in Chesterfield Square (Credit: Hudson Partners)

More redevelopment is coming to South L.A., where investment has been on the rise.

Plans were filed this week to add a five-story apartment building with 88 units in the Chesterfield Square area of South Los Angeles. The property at 6901-6927 S. Western Avenue is owned by the David A. and June Simon Trust.

The owners may be looking to entitle the site and sell it to a developer. Investment brokerage Hudson Partners is marketing the property for $2 million as an affordable housing development opportunity.

Los Angeles has seen a growing market for entitled properties and shovel-ready sites as developers choose to skip the years-long and costly approval process.

The site is eligible for tier-2 incentives from the city’s Transit Oriented Communities program, which was designed to give density bonuses to projects with affordable units near transit stops. If approved, the project could include up to 95 units.

An appliance parts store, a one-story commercial building, and a two-story residential building are currently on the property. The project site is next to the Hyde Park area, where a developer plans to build a 47-unit permanent-supportive housing structure at 6578 S. West Boulevard using tier-3 TOC incentives.

South L.A. has seen a surge of development and investment the past few years, highlighted by massive multi-family developments, creative office conversions, and the transformation of Earvin “Magic” Johnson Park.

1057 South Western Avenue

Prana Investments has offloaded a 76-unit apartment complex in Harvard Heights for $12.6 million.

The San Francisco-based firm sold 1057 S. Western Avenue to an LLC tied to Texollini, a Carson-based textile company. Texollini secured an $11.3 million acquisition loan for the purchase from Prime Finance Partners.

The high loan-to-value ratio suggests the new owners may have borrowed more money to finance a renovation of the 84-year-old building.

Texollini specializes in “high-tech” fabrics, like moisture-wicking and stretch materials used in activewear.

Prana Investments owns around two dozen other buildings in Los Angeles, as well as buildings in San Francisco, Alameda County, and New York City, according to the San Francisco Tenants Union.

The union claims Prana has evicted around 1,000 tenants from its buildings in Oakland alone and is highly critical of its strategy, implying it is overly aggressive with its evictions. Prana founder Peter Larsen could not be reached for comment.

Last fall, Prana picked up an eight-property portfolio in the Bronx from Morgan Group for $65 million. In March 2018, Prana paid $18.1 million for three properties in northeast L.A., according to Multi-Housing News.

From left: Zoe Ma, a rendering of 701 Seventh Avenue and Nick Mastroianni (Credit: PBDW Architects, and Nicholas Mastroianni)

An EB-5 activist known for organizing Chinese investors filed a racketeering lawsuit against Nicholas Mastroianni and his regional center, U.S. Immigration Fund — the latest legal battle between the two parties.

The complaint repeats allegations that USIF coerced EB-5 investors into redeploying money from a Manhattan project — an increasingly common practice as the government deals with a backlog of visa applications. Among a number of new claims is that the regional center colluded with a lawyer and a Chinese partner to make misrepresentations to some of the project’s investors.

Mastroianni’s regional center is one of the most active in the country, having deployed more than $2.9 billion in EB-5 capital across 25 projects in New York, New Jersey, California and Florida, according to its site.

Zoe Ma, who previously filed a whistleblower complaint with U.S. Securities and Exchange Commission alleging fraud by USIF and its CEO Mastroianni, filed the federal RICO suit (Racketeer Influenced and Corrupt Organizations Act) in Illinois last week. Ma, who is an EB-5 advisor and independent paralegal, is representing herself. She describes herself as a “self-taught EB-5 project developer,” and has previously worked at a regional center and run her own EB-5 investment project.

Some of the repeated allegations are over Maefield Development’s 701 Seventh Avenue skyscraper, where 124 of the project’s EB-5 investors last fall sought to stop their money from being redeployed into a hotel project across the street after they said they were “coerced” by Mastroianni. The investors withdrew their suit in September and USIF announced in December that the funds had been redeployed. (The original loan for 701 Seventh Avenue had been paid off, and government rules require EB-5 investors keep their capital at risk until their green cards are approved.)

Mastroianni has already denied many of the allegations in Ma’s new complaint. In October, he filed a defamation and fraud suit against Ma and her former business partner, Chicago-based attorney Douglas Litowitz, who had both been in touch with some of the 701 Seventh investors (but did not represent them in the suit). Filings describe Litowitz as “desperate” and “bankrupt,” and accuse Ma of engaging in “fraudulent behavior.”

Apart from redeployment, Ma claims in the latest suit that USIF and its Chinese partner, Qiaowai, made repeated misrepresentations about EB-5 to investors in China, in order to secure $500,000 investments and additional $50,000 in fees for investments in U.S. real estate projects. Those misrepresentations include Qiaowai allegedly asking investors, who seek U.S. citizenship through EB-5 investments, to sign documents it prepared in English without Chinese translations and then sending “doctored” agreement documents to the United States Citizenship and Immigration Services agency, which administers the EB-5 program.

In an email, Mastroianni called Ma’s claims “far-fetched and completely baseless.”

“This is a thinly veiled attempt to retaliate and move the narrative away from the pending N.Y. action against her for fraud and related causes of action,” Mastroianni said.

Ma’s suit also alleges Miami attorney Ronnie Fieldstone, who has worked with Mastroianni in the past, colluded with Mastroianni by taking on 24 Chinese investor clients and advising them to support Mastroianni’s redeployment plan from 701 Broadway to 702 Broadway. (Fieldstone is not a defendant, however.)

Ma says in the complaint that when she confronted Fieldstone’s law firm, SauI Ewing Arnstein & Lehr, about this, the firm denied wrongdoing and then allegedly fired Fieldstone’s junior attorney, Wen Qian, who had been assisting Fieldstone in the representations.

A spokesperson for Saul Ewing said the firm “will not comment on specific allegations in the complaint beyond saying that we believe that the facts will demonstrate that our partner Ronald Fieldstone and our former colleague Wen Qian (who resigned from Saul Ewing Arnstein & Lehr LLP to accept an in-house legal position) acted appropriately.”

Redeployment has become an increasingly contested issue as wait times for Chinese EB-5 visas has ballooned from five years to 15 years.

Because USCIS rules require EB-5 investments to remain “at risk” until visas are approved, development loans must be refinanced into new projects after the original loan has been paid off, usually a period of five years. However, hundreds of Chinese investors, after learning how long the full visa process will realistically take, have considered forfeiting their EB-5 applications and getting their money back instead. When they’ve had difficulty doing that they’ve hired lawyers like Litowitz, Fieldstone and others.

Ma told The Real Deal that she thinks the RICO statute is “one more angle to expose what they actually did to these 701 investors.” She added that she’s prepared to file five or six other RICO lawsuits against other regional centers.

“RICO is the only way to tell the whole dark side of EB5 and how they induce Chinese investors into this trap,” she said.

Mastroianni called Ma an “ambulance chaser” who was only interested in duping investors into paying her legal fees.

Other investors have accused Mastroianni of refusing to give them their return on investment even after obtaining their green cards. In October, 60 investors who obtained resident status in one of Mastroianni’s Florida EB-5 funds alleged that they were never paid back, even though the project they invested in, the Harbourside Place hotel in Jupiter, completed construction more than four years ago. (Mastroianni filed a motion to dismiss in November, but that hearing has yet to be scheduled.)

The middle class is being thinned out in the San Fernando Valley (Credit: iStock)

The San Fernando Valley economy is booming. But high housing costs are contributing to the exodus of an increasing number of working-age adults, shrinking the region’s middle class and putting pressure on companies in the area.

The lack of workplace housing is one of the biggest risks to the Valley’s economy, according to a report by the Center for Economic Research and Forecasting at Cal Lutheran University, which was reported by the Los Angeles Daily News.

The exodus of workers is part of a broader statewide trend as housing prices climb. Despite recent signs of a cool-off, housing data shows that the media cost of a single-family home in the 818 ZIP code rose 9 percent last year to $675,000.

“Many hundreds of thousands of employees in retail trade, leisure and hospitality and education and health services are finding it increasingly difficult to live in the Valley,” the CERF report said.

Matthew Fienup, CERF’s executive director, said there has been a “hollowing out” of the Valley’s middle class. He called that a “cautionary note” in the otherwise positive outlook for the region’s economy, which has been outpacing the rest of Southern California.

Gross Domestic Product in the Valley grew by 4.3 percent from 2014 to 2018, compared to 3 percent in Los Angeles, and zero growth in Ventura County.

CERF expects growth in the Valley to average 4 percent over the next two years, the Daily News reported, which will “significantly outpace” Greater L.A. [LA Daily News] — Alexei Barrionuevo

Jeff Bezos (Credit: Getty Images and iStock)

Amazon is planning to launch a new line of grocery stores in several major U.S. cities.

The first store is set to open in Los Angeles as early as the end of the year, as the e-commerce giant grows its footprint in the food business, the Wall Street Journal reported, citing people familiar with the matter. The company has reportedly already signed leases for at least two other locations slated to open early next year.

Amazon is in talks for stores in San Francisco, Seattle, Chicago, Washington D.C. and Philadelphia. The new chain will be separate from the Whole Foods Market brand, which Amazon owns. The stores are intended to provide a wider variety of products than the upscale Whole Foods chain rather than directly competing with it.

Despite signed leases, there’s no guarantee Amazon will open stores in those locations, the report said. Retailers can back out of contracts or delay openings if certain conditions aren’t met. Amazon has sought flexibility in lease negotiations because it doesn’t want restrictions on the types of goods it can sell. The company has been targeting new developments and occupied stores with leases ending soon. Locations will reportedly be about 35,000 square feet, smaller than the typical 60,000-square-foot supermarket.

The company is also weighing acquisitions to grow the new grocery store brand — a strategy that would entail purchasing regional chains operating about a dozen stores.

The news is the latest move in Amazon’s foray into brick-and-mortar locations. The company is rolling out cashierless Amazon Go locations in urban areas nationwide — including in New York, Seattle, San Francisco and Chicago.

It’s unclear whether the supermarket brand will also be cashierless, the report said. [WSJ] — Meenal Vamburkar

Here are the real estate event in Los Angeles on tap next week:

On March 6, InterFace Conference Group will host its 10th Annual Heathcare Real Estate West event at the Omni Los Angeles Hotel at California Plaza, 251 South Olive Street, from 7 a.m. to 3:30 p.m. Along with networking opportunities, this event will offer discussion on the possibilities regarding the potential outlook for the healthcare real estate space in 2019. John Pollock, COO at Meridian Property Company; and Trask Leonard, CEO of Bayside Realty Partners will be among the speakers.

On March 7, the ULI Women’s Leadership Initiative and the Commercial Real Estate Finance Council Women’s Network are teaming up to hold the 4th Annual Speed Mentoring event at Paul Hastings, 200 Park Avenue from 6 p.m. to 8 p.m. This event will offer the chance to connect with professionals, and gain insight on topics that relate to the road to success in the real estate industry. Speakers include Jenny Marler of Guggenheim Partners and Val Achtemeier of CBRE.

To search for future industry events or browse past ones, click here. And to submit more industry events, please reach out to events@therealdeal.com.

Kylie with La Quinta’s Madison Club (Credit: Getty Images and Zillow)

An open lot in La Quinta’s Madison Club community is the latest star of the Jenner family real estate adventures.

A trust linked to Kylie Jenner paid $3.25 for the undeveloped parcel on Ross Avenue, the Los Angeles Times reported. The land, which is just under one acre, is located about a half-mile from an 11,000 square-foot home that was purchased by a trust tied to her mother, Kris Jenner.

Plans for a 15,000-square-foot home were also included in the deal. The original asking price for the lot was $3.75 million, according to Zillow.

The seller was a trust tied to Gala Asher, a Los Angeles-based developer. Asher sold a Holmby Hills showplace to billionaire Tom Gores three years ago for a then-record $100 million. Coldwell Banker real estate agent Ginger Glass, who is Asher’s wife, had the listing.

Although Jenner and her family are better known for starring on reality television shows and launching fashion companies, the La Quinta sale extends the list of Kardashian-Jenner real estate ventures.

Last year, Kylie bought a home in the Beverly Hills Post Office area with hip-hop artist Travis Scott for $13.5 million. She has also built a hefty real estate portfolio with profitable home flips. In the past couple years, she sold a home for $6.7 million, sold another in Calabasas for $3.2 million, and purchased a 13,200-square-foot spec mansion in Hidden Hills for $12.4 million. [LAT] — Gregory Cornfield

741 South Pacific Avenue

A staple in San Pedro’s monthly art walk is eyeing to become a more permanent fixture in the bustling community.

The 21,000-square-foot building at 741 South Pacific Avenue, located near the Art Deco movie theater, is being considered for Historic-Cultural Nomination status, according to a filing with the Department of City Planning.

Owners and art enthusiasts Patti Kraakevik and George Woytovich bought the property in 2002 for $775,000, deed records show. It was left vacant after the Montgomery Ward department store closed, presenting an opportunity for the new owners to transform the space into an art gallery with a live/work loft, bar, office, and retail space, the Daily Breeze previously reported.

Renamed Deco Art Deco, the 1930s building is now used to hosts events, classes and “speakeasy” cabaret, according to its website. It also doubles as a filming location.

In addition to a huge Art Deco collection, the owners have lined the place with antiques, such as brass doors from the Westclox Factory Building in Peru, Illinois, and a vintage Wurlitzer jukebox.

It’s unclear who filed the application for landmark status.

Nearby, two developers are joining forces to build a 91-unit affordable housing development at 456 West 9th Street. LINC Housing and National CORE proposed a mixed-use development that would rise six stories and include 4,900 square feet of commercial space, a 4,000-square-foot community room and parking for 111 vehicles.

LA officials at a groundbreaking ceremony for the Purple Line Extension in 2014 (Credit: Flickr)

A potential real estate development boom for the Westside of Los Angeles from a new subway extension will cost twice as much as what was originally estimated.

The Metro Board of Directors approved a new $3.2 billion budget for the third leg of the Purple Line extension on Thursday, according to Curbed. That far surpassed an early estimate of $1.4 billion and an updated estimate of more than the $2 billion following the approval of Measure M in 2016, which funded transit.

The third phase of the extension stretches 2.6 miles between Century City and the Veterans Administration hospital in Westwood. In July, Metro signed off on a $410 million contract with construction firm Tutor Perini Corporation to dig the tunnels for the extension. Tutor Perini is also building stations for the project.

The entirety of the nine-mile long extension — from Koreatown to Westwood — will cost around $1 billion per mile, Metro staff told officials on Thursday. That would connect the Westside directly to Downtown L.A.

Around half the funding for the line would come from the federal government. It could be completed by 2026.

The Purple Line extension could be a boon for development in the area, which is characterized mostly by single-family homes. Both the city of L.A. and the state are pushing to incentivize dense development along transit lines. The city provides density bonuses to developers that build affordable units near transit through its Transit Oriented Communities program.

Governor Gavin Newsom also has plans to financially reward cities and counties that approve housing near transit, as well as hold back funding from those that don’t approve housing.

Not everyone is jazzed about the Purple Line though. A group of locals in Beverly Hills have fought tooth and nail to block a tunnel route that is part of Phase 2. [Curbed] — Dennis Lynch 

Compass CEO Robert Reffkin and Contactually CEO Zvi Band

It’s only been a few days since the $4.4 billion SoftBank-backed brokerage Compass bought Contactually, a cloud-based customer relationship management system used by major brokerages Sotheby’s International Realty and Berkshire Hathaway. And already clients of the CRM are expressing doubts about the future.

Current Contactually users are worried about data privacy, the rate of Compass’ tech development and the potential conflicts of using a CRM owned by a rival company, according to Inman.

“As Compass feels the pressure to start delivering on promises made to its agents, and given their well-known and admitted technology development challenges, it comes as no surprise to us that they would use their venture capital dollars to purchase a CRM instead of continuing to try to create their own,” John Peyton, president and CEO of Realogy Franchise Group, told Inman in a statement, “Contactually clients should get assurances – in writing – regarding the protection of their data from Compass’ use.”

Contactually posted on their website that no data would be shared with Compass.

“It’s also our long-standing policy to never sell, give, or trade your data to other companies – even in the case of third-party partnerships – without your consent,” the post said, adding that data is stored on a server that will not be accessible to Compass.

Other agents raised concerns about paying a rival brokerage for access to the CRM.

“What I fear is that the Contactually innovations will go first to the Compass products, leaving Contactually behind a bit,” Bill Tierney, a real estate agent with Gibson Sotheby’s International Realty in Massachusetts commented on an Inman post. “And I am not willing to pay to fund a competitors product line.”

In a email to company employees in January, Compass Robert Reffkin said that the company had made mistakes in their tech expansion in 2018.

“We launched some technology without testing it thoroughly with agents,” Reffkin wrote, “and learned we can move too fast.” [Inman] – Decca Muldowney

The We Company laid off as much as 3 percent of its workforce this week.

The We Company, the SoftBank-backed co-working giant that was last valued at $47 billion, laid off as many as 300 employees this week, The Real Deal has learned. That’s about 3 percent of its workforce and the biggest number of layoffs since its inception.

The company formerly known as WeWork has conducted layoffs globally, across its three divisions: WeWork, WeGrow and WeLive, according to sources.

Asked to comment, the We Company, which says its headcount is roughly 10,000, said that it plans to hire 6,000 employees this year, or 500 per month.

The company is said to be conducting annual reviews this week and the layoffs are being positioned as performance related, sources said. The We Company last conducted a series of layoffs in 2016, when the startup was valued at $16 billion. At the time, it let go of 7 percent of its more than 1,000-person workforce and cut back on perks such as salmon-and-bagel breakfasts. At the time, the company told Bloomberg it would resume hiring and increase its headcount that year.

Despite the latest cuts, the company remains in a state of rapid expansion. SoftBank abandoned a $16 billion majority-stake investment in the company earlier this year, reducing its commitment to $2 billion. That deal gave the company a $47 billion valuation, and the company now says it has $6 billion in cash and cash commitments.

The firm has signed a series of big deals this year, including a 200,000-square-foot lease at 199 Water Street, and leases for 110,000 square feet across four locations for its HQ by WeWork platform, a service that provides spaces for companies without WeWork branding.

This month, WeWork Property Advisors, an investment vehicle managed by the We Company and private equity firm Rhône Group, closed on an $850 million deal for the Lord & Taylor’s former Fifth Avenue flagship. The We Company will redevelop the property and use part of the building for its headquarters.

A couple paying their mortgage (Credit: iStock)

It’s a real estate and social barometer that doesn’t get a lot of publicity, but it’s important: More Americans are paying their mortgages on time today than they have in nearly two decades — maybe even longer.

That’s a big deal, because when large numbers of owners do the opposite — stop paying on their home loans for months at a time — the entire economy feels the effects. Spiking delinquencies in 2007-2008 ushered in the global financial crisis and spawned tidal waves of foreclosures that devastated borrowers and their communities. Some of the wounds are still fresh. Delinquency rates may sound like a yawn, but they are a key economic bellwether that shouldn’t be ignored by anyone serious about real estate.

So here’s the good news: The national delinquency rate on home loans hit the lowest level it’s been in 18 years as of the final quarter of 2018, according to data compiled by the Mortgage Bankers Association. Borrowers with conventional mortgages, those eligible for sale to investors Fannie Mae and Freddie Mac, are the best performers; roughly 97 percent of them are paying on time. Borrowers with Federal Housing Administration-insured (FHA) mortgages pay late nearly three times more frequently; even so, more than 91 percent of them are on time. The big gap between homeowners with conventional loans and FHA borrowers shouldn’t be surprising, because FHA borrowers have lower credit scores, higher debt-to-income ratios and lower down payments on average. All three factors multiply the risk that borrowers will pay late. Yet even at 8.65 percent, the current FHA delinquency rate is much better than it was a decade ago, when it hovered around 14 percent.

Overall, says Freddie Mac Chief Economist Sam Khater, U.S. homeowners are performing better today in terms of on-time payments and foreclosure avoidance than they have in 30 years.

What’s contributing to this good behavior? It’s no secret: Since 2010, stricter federal underwriting rules imposed on the mortgage industry have banned some of the lending industry’s previous worst habits, and required them to screen out high-risk borrowers — essentially limiting their customer base to people who can truly afford the mortgages they’re seeking. In the conventional market, that’s why Fannie Mae and Freddie Mac — the country’s two largest sources of mortgage money — have kept their average FICO credit scores near a relatively pristine 750, well above levels typical before the financial crisis. (FICO scores run from 300 to 850, with low scores indicating a high probability of future delinquencies and foreclosures.)

An improving economy has helped significantly as well. Mortgage interest rates continue to be below historical averages. Unemployment has fallen steadily and is now at or near multi-decade lows. Plus many of today’s owners are sitting on sizable equity gains as they pay down mortgage balances on their homes while price inflation pushes their values up. The Federal Reserve estimates homeowner equity now totals a stunning $1.5 trillion, the highest ever. For some owners, that cushion functions as an insurance policy should anything threaten their ability to pay the mortgage.

How long can the current impressive performance continue? No one can be certain, but here are a couple of observations. Mortgages originated in the past several years under strict federal rules constitute what lenders and investors call “the cleanest book of business” they’ve seen in many years. If the lending industry begins to relax underwriting standards in any significant way in order to dig deeper into the pool of riskier credit applicants to pump up their volume of home-purchase mortgages, it’s inevitable that delinquencies will rise.

There’s some evidence that a modest loosening of standards got underway last year. Homeowners’ demand for refinancing dissipated with rising interest rates, and some lenders began easing standards to include a broader mix of applicants. FICO itself confirmed in a study that average credit scores were on the decline in the home-mortgage arena. Fannie Mae relaxed its policy on debt-to-income (DTI) ratios for buyers, allowing more applicants with DTIs up to 50 percent to pass muster for a loan. Previously, the cut-off was 45 percent. Meanwhile, the FHA has seen notable declines in average credit scores and is approving low-down-payment purchasers with DTI ratios well above 50 percent.

Steps like these may appear — and be — helpful for marginally qualified first-time buyers. But what will they look like through hindsight during the next recession?

Gelena Skya, founder of Skya Ventures and 1317 North New Hampshire Avenue (Credit: Google Maps)

A boutique real estate firm is planning a 92-unit apartment building in East Hollywood with affordable housing.

Skya Ventures filed plans this week to build the seven-story project at 1317 N. New Hampshire Avenue, near Barnsdall Art Park and Hollywood Presbyterian Medical Center. The apartment building would include 82,700 square feet and 11 affordable housing units.

Skya Ventures purchased the lot between Sunset Boulevard and Fountain Avenue last June for $1.8 million. It’s located in an East Hollywood Opportunity Zone, which creates tax benefits by allowing owners to delay capital gains taxes from early transactions.

The development is also eligible for the highest available incentives from the city’s Transit Oriented Communities program, which provides bonuses for developments with affordable units near transit stops.

The area has seen consistent multifamily investment lately. Skya Ventures’ property is less than one mile from where Taylor Equities plans to build a 21-unit building, which also qualifies for TOC bonuses. The vacant land at 1825 N. New Hampshire Avenue last sold for $2.1 million in April, records show.

Taylor Equities’ property is across the street from where Pacific Urban Residential is planning a “dramatic remodel” of the Los Feliz Club Apartments at 1800 N. New Hampshire Avenue.

From left: Michael Jackson and Neverland Ranch, and Elizabeth Taylor (Credit: Getty Images)

Red Carpet preening at the Oscars and teary testimony from Michael Cohen offered stiff competition for celebrities hoping to make big splashes in the Los Angeles real estate market.

And once again the week was characterized by new listings and steep discounts in the ever-slowing luxury market.

Following some bad press from a new HBO documentary, the sellers of Michael Jackson’s famous Neverland Ranch have re-listed the 2,700-acre spread at less than a third of its original asking price. The ranch is now on the market for $31 million, down from $100 million in 2015. A fund managed by Colony Capital and Jackson’s estate are selling the property, located about 40 miles from Santa Barbara. The late singer paid $19.5 million for the home in 1987. Colony then poured in millions to renovate the property after Jackson died in 2009.

A Hidden Hills property spanning 7.4 acres has hit the market for sale for $25 million, potentially setting a new record in the celebrity enclave. The property includes a 14,500-square-foot residence with six bedrooms, eight bathrooms, a movie theatre and gym. There’s also a 65-foot swimming pool and spa, a barn, two sports courts, and a pair of par-three golf holes, the Los Angeles Times reported. If sold at that price, the deal would top the most expensive deal in the gated community — Kim Kardashian and Kanye West’s $19.7 million purchase in 2014.

In Beverly Hills Post Office, the former home of the late actress Elizabeth Taylor is being shopped around for $12 million. The current seller, retired attorney Marvin Gross, first listed the home for nearly $16 million last year. Spanning 7,760 square feet, the single-story residence includes six bedrooms, seven bathrooms and a swimming pool. Taylor lived in the home with her second husband, Michael Wilding, in the 1950s.

Disgraced casino mogul Steve Wynn is now officially the owner of a 6,500-square-foot Bel Air-mansion that was formerly owned by “Girls Gone Wild” creator Joe Francis. The two entrepreneurs had been involved in a legal squabble over the property since 2012, when a jury ordered Francis pay Wynn $19 million for slanderously claiming Wynn had threatened to kill him. Wynn, who stepped down from his eponymous company amid sexual misconduct allegations, had taken possession of the home through a foreclosure. The 0.89-acre property, which is valued at $6.7 million, has five bedrooms and seven baths.

The owner of James Franco’s former home is shopping the West Hollywood villa for nearly $7 million. Located directly below the Chateau Marmont, the 5,200-square-foot home has four bedrooms and five bathrooms. An individual named Alba di Angeli is selling the home, which she bought for $3.3 million in 2010. Franco, a Hollywood actor, lived in the home for four years before that, Yolanda’s Little Black Book reported.

University housing programs match students with seniors who have extra space in their homes (Credit: Getty, Pixabay)

Student housing has become so unaffordable in expensive cities like San Francisco and Los Angeles that many universities are desperate to find ways to lower costs for their students.

At UC Berkeley, one unusual solution seems to be picking up steam: graduate students now have the opportunity to live with retirees, Daily News reported. So long raucous dorm parties.

The program matches students with seniors who have extra space in their homes. Students will pay below market rent — less $1,000 per month — for a bedroom inside the home, while retirees benefit from social interaction and added help around the house. Rents for a typical Berkeley apartment goes for around $3,500, according to Zillow.

Much like online dating, the prospective housemates will go on “dates” to ensure it is a good match. Once a background check is completed, they will then sign a “Living Together Agreement” that goes into strict detail about rules, such as when it is acceptable to watch TV. The pilot program at Berkeley will begin this spring with the matching of six students with seniors.

A similar program is also being run in the Big Apple by New York University and the New York Foundation for Senior Citizens. [DN] – Natalie Hoberman