OJO Labs CEO John Berkowitz (Credit: BHGRE)

OJO Labs — which has developed an artificial intelligence-based assistant for the homebuying process — just raised $45 million in a Series C funding round.

The Austin-based company will use the money to expand and speed up its product development, the company said in a statement. Investors in the funding round include LiveOak Venture Partners, Realogy Holdings, Royal Bank of Canada and Northwestern Mutual Future Ventures.

OJO has a virtual assistant that seeks to help homebuyers and sellers through the home search and transaction process. The platform includes mobile messaging and a variety of web tools — including assistance with picking a neighborhood and financial guidance. Once a consumer is ready to start the process, OJO matches them with an agent.

So far, the product has been available in 12 U.S. markets and Toronto — and is now being rolled out nationwide. OJO has offices in Austin, Minneapolis-St. Paul and St. Lucia, with plans to expand its teams in each location. Specifically, the company hopes to grow its data science, engineering, product and design operations.

The company raised $20.5 million in a Series B round last year. Realogy, RBC and Northwestern Mutual Future Ventures participated in that round as well.

AI has had a growing presence among real estate startups and even traditional brokerages like Keller Williams.

From left: Sean Rawson, Paul Klink, and John Drachman

Two entrepreneurs in Orange County joined forces to create a new real estate investment and development firm. John Drachman, founder of Stillwater Investment Group, and Sean Rawson, founder of the Waterford Group, have created the Waterford Property Co. Yashaar Amin is a partner and chief operating officer. Collectively, the two founders have completed $400 million in acquisitions since 2015 — the bulk of which are in Los Angeles County, according to a release about the new venture. They plan on investing in the 20- to 150-unit residential projects, as well as value-add office projects. The firm has also already received entitlements for a 650-unit multifamily project in Pomona, the largest multifamily entitlement of its kind in the county last year, the founders said in an e-mail.

Paul Klink was recruited to lead the industrial division at Newmark Knight Frank. As executive vice president, Klink will guide the expansion of the firm’s industrial capabilities and recruit new industrial and capital markets experts to the team. Klink is joining from Cushman & Wakefield, where he served as executive managing director of investor services. He will be based in the firm’s Orange County office.

Christy Haubegger, an executive at Creative Artists Agency, has been appointed to Hudson Pacific Properties’ board of directors. She will replace Michael Nash of Blackstone. Haubegger leads multicultural business development at CAA. Previously, she founded Latina magazine in 1996, and worked as a producer on “Spanglish.” She is one of two women on HPP’s board.

Suffolk, a leading national building contractor, hired Mark Turner as its new chief operating officer. Formerly with Webcor Builders, Turner has worked on megaprojects including the Century condos in Century City, as well as the L.A. Live Marriott/Ritz-Carlton in Downtown Los Angeles. In his new role, he will be responsible for leading the construction operations of Suffolk’s projects in L.A. and Southern California.

Universe Holdings also tapped a new chief operating officer recently. Jonathan Cohen joined the Century City-based investment firm to oversee its national expansion. His new role involves identifying value-add residential property investments of 150 units or more, starting in the West Coast. Before Universe, Cohen worked as a managing member at a consultancy for 25 years, where he advised family offices and real estate firms in the multifamily sector.

Home sales declined in February (Credit: iStock)

Is it a buyer’s market yet?

Home sales declined in February as inventory grew in the U.S., according to a new report from Re/Max.

The 4.2 percent drop last month marked the seventh consecutive month of year-over-year declines. Inventory, meanwhile, grew 5.8 percent in February, the fifth consecutive month. Re/Max’s monthly survey covers 54 metro areas across the country.

“Trends of five months or more often indicate significant shifts, Re/Max CEO Adam Contos said in a release. “Year-over-year trends in declining sales and rising inventory have both reached that length now.”

Inventory in terms of months of supply grew as well, up to 3.4 months in February from 3.1 months in 2018.

Miami was among the five markets with more than six months of supply, at 7.6 months. A healthy market typically has six months of supply. Denver and San Francisco reported the fewest months of supply, with 1.4 and 1.6 months, respectively.

Homes spent roughly the same number of days on the market last month — 63 — according to the report. The cities with the fewest days on market were Omaha, Nebraska, at 34 and San Francisco at 37. Augusta, Maine, and Trenton, New Jersey, averaged 120 days and 113 days on the market before selling.

The median home sales price actually increased to $240,000, up 5.5 percent year over year. It rose in January as well. In February, the median sales price rose in Boise, Idaho, Cincinnati and Wilmington/Dover, Delaware, and it fell in markets that include Birmingham, Alabama, Hartford, Connecticut and Anchorage, Alaska.

The next few months will determine whether the shift in inventory and sales brings in a new wave of buyers, Contos said.

There have been other signs of an overall slowdown of the housing market.

A report released in December found that home flipping in the U.S. was down to its lowest levels in more than three years. The U.S. Commerce Department also reported that new home sales dropped 8.9 percent in October compared to September, marking an almost two-and-a-half-year low.

Skid Row, downtown Los Angeles

One year ago, Los Angeles lawmakers pledged to approve 222 new homeless housing units in each of their 15 districts by July 2020, for a total of 3,330. Today, most are far behind on reaching that mark.

No units have been approved for District 12 in the San Fernando Valley, according to the Lost Angeles Times, which laid out the issue in an investigation. Just 13 units have been approved in District 13.

Six of the districts are exceeding the goal. More than 800 units have been approved for the district with Downtown L.A. and Boyle Heights, and more than 650 units have been approved in District 1.

Downtown and Skid Row have the most homeless residents. But the pattern of where housing is built is causing concern that it is disproportionately set for lower-income areas, while wealthier neighborhoods also have hundreds of people without shelter. Five of the districts — which include downtown and South L.A. — account for 70 percent of the units approved under the $1.2-billion bond measure, Proposition HHH, for homeless housing.

City Council members blame high land prices and the struggle to build shelters in neighborhoods that don’t want them. New supportive units slated for Venice will quadruple the amount of homeless housing in that area but residents complain that too many homeless projects are slated for the neighborhood.

Last year, Angelenos protested a proposed 154-bed shelter there, and mocked Mayor Eric Garcetti’s “A Bridge Home” program that initiated the pledge from the Council members.

Similar protests against the program followed after homeless housing was proposed in Koreatown and Sherman Oaks. [LAT] — Gregory Cornfield

First and Broadway Park, or FAB Park (Credit: Studio-MLA)

The multimillion-dollar major conversion of a state office building in downtown Los Angeles into a modern green park space has been put delayed.

A new report to the Board of Recreation and Parks Commissioners reveals the cost of First and Broadway Park in Dow has surpassed the allotted budget by more than $10 million, putting construction plans on hold.

Costs of construction rose to $28 million, exceeding the $17.2 million cap, Urbanize reported.

So far, the Department of Recreation and Parks has been able to secure another $2.6 million. The money was pooled through the state’s Quimby Act, which developers contribute to in lieu of providing park space near their projects.

The park project was designed by Studio MLA and OMA. It involves repurposing the site of a decaying government office building, which was badly damaged after an earthquake. Spanning nearly two acres, the park will include a “restaurant hub” with a beer garden and several shaded areas.

Development in DTLA is booming, with several big projects in the works, including the Frank Gehry-designed, The Grand. The $1 billion mixed-use, twin tower project from Related Companies and CORE USA will include more than 400 condos and apartments, along with an Equinox hotel with 309 rooms. Plans also call for 176,000 square feet of retail space, 12,000 square feet of restaurant space, a movie theatre complex, and a public plaza. [Urbanize] — Natalie Hoberman

Homes prices are gaining at a slow pace in Southern California

Home price gains in Los Angeles slowed in February and prices in Orange County even dipped, continuing a months-long trend.

The median price of an existing home in Orange County dropped 1.6 percent on a yearly basis last month, marking the second decline in three months, according to California Association of Realtors data reported by the Los Angeles Daily News. There was also a 16.5 percent drop in sales over that period.

The Greater L.A. metro area — which includes Orange County and the Inland Empire — saw a modest 1.4 percent gain in pricing, much less than the 5.7 percent average year-over-year gains witnessed last year. In L.A. County alone, the median home price rose 2.7 percent to $541,390, and sales dropped 10.9 percent.

Southern California’s housing market has been one of the strongest performing markets in the country over the last several years, but it appears to have hit its upper limit last summer, at least in terms of price growth.

And on Wednesday, partly in response to a weakening housing market, the Federal Reserve held the benchmark rate steady and indicated it would do the same through the end of the year.

But there is some good news. Experts say a housing crash like the one seen preceding the financial crisis a decade ago isn’t likely because market fundamentals are stronger than they were before and during that period.

Zillow predicted in a year-end report in 2018 that home prices would climb about 5 percent in the L.A. metro area in 2019. While strong, that would lag behind the 7.7 percent growth the homebuying platform predicts for the rest of the country. [LADN] — Dennis Lynch 

Council member Gil Cedillo and a College Station affordable housing rendering

In December, the Los Angeles City Planning Commission said developer Atlas Capital could proceed with its massive College Station residential development as long the project included 37 affordable units.

With 725 units in the complex, that would work out to about 5 percent of the total.

Now, a City Council committee has reversed that ruling, and will not require any affordable apartments in the complex.

The Council’s planning and land use committee approved the Chinatown project this week as a complete market-rate development, Curbed reported. The development, which will include 51,600 square feet of retail space, still needs final approval from the full City Council.

The committee’s decision comes as most developers in the city are incorporating some affordable units into their market-rate projects. The city’s and California’s affordable housing crisis has become a major talking point for Gov. Gavin Newsom. This week, state lawmakers unveiled a sweeping package of housing bills meant to address the issue.

A representative for New York-based Atlas argued there is no legal obligation for the company to build affordable units for the project. College Station would also not displace anyone, since it is set to rise on a vacant lot near Chinatown Gold Line station. L.A. has encouraged affordable construction near transit hubs through its Transit Oriented Communities, which gives density bonuses to developers whose market-rate projects rise there.

Council member Gil Cedillo sided with Atlas, claiming his district already has more than enough affordable units in the pipeline. His district includes Chinatown, Highland Park, Lincoln Heights and Westlake, where 676 units of permanent supportive housing have been proposed. [Curbed] — Natalie Hoberman

Jumbo loans fell by 12 percent by dollar volume last year (Credit: Pixabay and Wikipedia)

It turns out bigger isn’t always better.

Jumbo loans — mortgages too large to be sold to Fannie Mae and Freddie Mac — fell by 12 percent by dollar volume last year, according to a new report from the Wall Street Journal. It’s a warning sign for banks that pivoted to cater to wealthy borrowers in the wake of the financial crisis.

In general, a jumbo is any loan above $484,350, but in more expensive parts of the country it is a loan above $726,525. They are most common in expensive cities. Last year in Manhattan, 61 percent of mortgages qualified as jumbo, per that year’s loan limits, the Journal found.

The jumbo market has been hit by headwinds. Refinancings have slowed, as has the general U.S. economy, according to the Journal. House prices, while still rising, are also cooling, and new tax laws have reduced incentives to buy larger homes.

Several banks did more than half their U.S. mortgage business in jumbo loans last year, including First Republic Bank, MUFG Union Bank, Toronto-Dominion Bank and Bank of America, according to Inside Mortgage Finance. [WSJ] – Decca Muldowney

Oceanwide Holdings CEO Thomas Feng and Oceanwide Plaza

Oceanwide Plaza is sinking deeper in debt.

The megaproject in Downtown Los Angeles and its developer, Oceanwide Holdings, have been hit with new claims from contractors for unpaid work, bringing the total amount owed to $98.6 million. That’s almost twice as much as was owed last month.

The new claims against the Chinese developer are in the form of mechanic’s liens, which are placed against a property as compensation for unpaid work. They are most commonly used by contractors and material suppliers to recoup what they say is money owed.

Work on the three-tower $1 billion project halted two months ago. As of Wednesday morning, there were about 15 workers on site, according to Curbed. A representative for Oceanwide Holdings has yet to confirm whether construction restarted. At the time work stopped, Oceanwide said it was recapitalizing of the project and would resume construction in mid-February. It never did.

On Monday, a subcontractor filed a mechanics lien for $1.4 million for concrete work. Last month, Webcor Construction filed a $52.8 million claim. While some have been settled, there are still nine active liens on the project.

Lendlease, Oceanwide’s general contractor, has yet to file its own lien.

Once completed, Oceanwide Plaza will include two 40-story towers, a 49-story tower and a 150,000-square-foot mall. It is one of the largest real estate projects under development in the L.A. area. [Curbed] — Natalie Hoberman

Realogy CEO Ryan Schneider with an Amazon Alexa (Credit: Pexels)

“Hey, Agent X, schedule an open house.”

Realogy has debuted a new set of technology tools for agents, including a voice-activated artificial intelligence assistant called “Agent X” that will run through Amazon’s Alexa platform, and a “Social Ad Engine” designed in collaboration with Facebook, according to reporting from Inman.

“We’re going to shape the future of the real estate industry we’ve chosen to be a part of,” Realogy’s CEO Ryan Schneider told employees and agents at the company’s RGX conference in Las Vegas on Wednesday.

Sue Yannaccone, Realogy’s regional vice president, said that agents will be able to use Agent X to retrieve market data, schedule calendar events and access coaching tools, according to Inman. The “Social Ad Engine,” will allow agents to create ads on Facebook and Instagram.

Realogy is an investor in AI startup OJO Labs, which has developed a virtual assistant for the homebuying process. OJO just raised $45 million in a Series C round.

The Agent X announcement follows a year of falling profits for Realogy, the parent company of brokerages like the Corcoran Group, Sotheby’s International Realty, Coldwell Banker and Century 21.

Rival franchise brokerage Keller Williams said that in 2018, over 27,000 live referrals were sent through its virtual assistant “Kelle,” representing $8.3 billion in sales volume. [Inman] – Decca Muldowney

Orlando Bloom and his Beverly Hills home (Credit: Wikipedia)

It was just two years ago that Orlando Bloom purchased his Beverly Hills bachelor pad.

But a lot has happened in that time for the “Pirates of the Caribbean” actor, notably his Valentine’s Day engagement to pop star Katy Perry.

Now, Bloom has listed his estate in Beverly Hills for $9 million, the Los Angeles Times reported. He purchased the 4,000-square-foot, single-story home almost for $7 million.

Located in the Trousdale Estates area on North Hillcrest Road, the home includes four bedrooms and four bathrooms. It was built in the 1960s and backs up to a hillside on a 28,544-square-foot lot.

Before Bloom purchased the estate, it was the first residential property to be redesigned by resort architect Miguel Angel Aragones. Bloom also recently completed his own additions and renovations, including a zero-edge swimming pool and Ipe wood decking.

Listing agent Jason Oppenheim, of the Oppenheim Group said Bloom’s recent engagement to pop star Katy Perry shifted his plans, the Times reported.

A few weeks ago, the “California Gurl” sold a home in the Hollywood Hills for $9.4 million to restaurateur Michael Chow. The singer also owns a $19-million estate in the Beverly Hills Post Office area.

Bloom also starred in “The Lord of the Rings” series, and “Troy,” while Perry has been nominated for 13 Grammy Awards. [LAT] — Gregory Cornfield

David Brickman (Credit: Freddie Mac)

Freddie Mac has promoted its president, David Brickman, to CEO, marking the company’s fourth leader since the financial crisis.

Brickman will take over in July, replacing Donald Layton, who has been CEO since 2012 and plans to retire, according to the Wall Street Journal.

Before he was named Freddie Mac’s president in September, Brickman was head of the government-sponsored enterprise’s multifamily lending.

He will lead the mortgage-finance giant at a time when discussion has been circling around whether Freddie Mac and Fannie Mae should be privatized.

Lawmakers have been trying and failing to overhaul Freddie and Fannie for more than 10 years.

Both agencies were brought under government conservatorship in 2008, during the financial crisis. They are regulated by the Federal Housing Finance Agency, which has control over much of their business decisions.

Officials in President Trump’s administration have made recent statements indicating they plan to take the companies out of conservatorship soon.

On Wednesday, the Federal Reserve indicated that it will likely not raise interest rates in 2019, holding a rate of 2.25 to 2.50 percent. This could lead to lower mortgage rates and more demand for Freddie Mac mortgages. [WSJ] — Keith Larsen

Next week brings a couple of new real estate events to Los Angeles.

On Tuesday, March 26, Bisnow is hosting an event on the Future of Downtown Los Angeles at the Wedbush Center, 1000 Wilshire Boulevard from 8 a.m. to 11 a.m. Come to this event to network and to hear from industry leaders about the transformation of Downtown Los Angeles. Related California CEO Bill Witte and Gilmore Associates CEO Tom Gilmore will be among the speakers.

From March 27, to Saturday March 28, CREtech is hosting its Los Angeles event for 2019 at the Shrine Expo Hall, 649 West Jefferson Boulevard. Attend for networking opportunities and discussions about the intersection of technology and commercial real estate. Speakers at the event include Granit Gjonbalaj of WeWork and Richard Sarkis of Reonomy.

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

Jesse Slansky, President and CEO of West Hollywood Community Housing Corp., and the seven-story Elden Elms project set for the Pico-Union area of Los Angeles (Credit: Urban Architecture Lab)

The West Hollywood Community Housing Corporation secured a $43.7-million construction loan to build the second of two affordable senior housing complexes near Downtown Los Angeles.

MUFG Union Bank provided the nonprofit developer with the funding for the 93-unit project for  low-income tenants at 1255 S. Elden Avenue in the Pico-Union area.

Called the “Elden Elms,” it will be 141,100 square feet development. The Elden Elms plan was approved in late 2015 and includes density bonuses and affordable housing incentives to increase the floor area by 35 percent.

The project is next to WHCHC’s Westmore Linden complex, which is under construction. That building at 1250 S. Westmoreland Avenue is set for 72,000 square feet, with another 93 affordable units for seniors. Fifteen of the units will be reserved for homeless households with special needs.

Urban Architecture Lab designed both projects. The firm also designed LaTerra Development’s two mixed-use projects on Hollywood Boulevard.

WHCHC has developed 17 apartment buildings in Los Angeles County, including 14 in West Hollywood, according to its website. The group also filed plans earlier this year to build a 41-unit affordable housing complex, also located in the Pico-Union area, at 1055 S. Mariposa Avenue.

Point CBO Eoin Matthews (Credit: Point and iStock)

A startup that buys equity in homes and then offers to sell it back to residents has raised $122 million.

Point, a Palo Alto-based firm, said Wednesday it raised $22 million in a Series B funding round led by Prudential Financial and DAG Ventures, according to Inman. Previous investors Bloomberg Beta, Ribbit Capital and Andreessen Horowitz also joined the round. The firm received a further $100 million investment from Las Vegas-based Kingsbridge Wealth Management to invest in homes.

The startup’s business model centers on offering an alternative to traditional home equity lines of credit, and offers to pay for a share of the appreciation the home would receive. To meet the criteria, the home must be in an area where it is likely to appreciate, the homeowner must hold up to 30 percent equity in the property and have good credit, among other factors. Providing the requirements are met, Point sends a third-party appraiser to value the property and then gives the homeowner a lump sum, while taking a handful of fees.

The homeowner can choose to buy back Point’s share in the property within 10 years, or if it is sold, the startup will receive 20 percent of the home’s appreciation.

Investor confidence in the startup comes at a time when homeowners across the country are choosing to hold onto their home equity, as interest rates rise. A report in July found that Americans have almost $6 trillion in equity, close to double the level in 2011.

“2019 is proving to be a year of exponential growth for the company,” the startup’s chief executive, Eddie Lim, said in an interview with Venture Beat. “We expect that growth to continue as home equity investments open up critical liquidity for a lot more homeowners.”

The firm, which launched in January 2015, is currently operating in 14 states, including New York, California, Illinois and Florida. It said the new funding will allow it to double in size to 30 states. [Inman, Venture Beat] — David Jeans 

Charles Kushner and 666 Fifth Avenue (Credit: Sasha Maslov)

One day after a press conference was held outside 666 Fifth Avenue accusing his family’s real estate company of illegally operating eight buildings, Charlie Kushner penned an op-ed defending his family and his business.

In a letter to the Washington Post, Kushner defends the companies investment in 666 Fifth Avenue — the over-leveraged tower where Brookfield Asset Management swooped in and purchased a 99-year lease for the office portion of the building. Brookfield paid $1.3 billion.

“First, 666 Fifth Ave. was not a big financial loser. Even before we recouped most of the initial investment, the property represented a small portion of the company’s overall holdings; the Kushner Companies’ health was fine,” he wrote. “Second, trophy assets in New York often appeal to foreign investors — that’s a legal and appropriate stream of funding.”

He also notes that his son Jared Kushner’s role in the White House has led to “unprecedented scrutiny of the Kushner Companies from the media and government investigators.” He said the company has passed up “many business opportunities” to “avoid even the appearance of conflicts.” Last year, the New York Times reported that Kushner Companies received more than $500 million in loans in 2017 from lenders who had recently met with Jared Kushner at the White House.

This isn’t the first time that Kushner has sounded off about his family business. In an exclusive interview with The Real Deal last year, he spoke at length about how his son has separated himself from Kushner Companies.

“We’ve created a very concrete barrier wall between us and Jared in Washington, which is what was required ethically, and we’ve done that successfully,” he said. [WP] — TRD

Duarte Mayor Tzeitel Paras-Caracci and the city’s new proposal for the site

The City of Duarte wants to shift its redevelopment plan for a 19-acre industrial site, nearly tripling the number of residential units amid Los Angeles’ continued housing crunch and the proposed expansion of a nearby hospital.

An update to its six-year-old plan would boost the number of residential units to 1,400 from 475, while slashing the amount of commercial space and eliminating a planned hotel, according to Urbanize. Uner the new proposal, there would be just 100,000 square feet of office space from 400,000 square feet, and 2,500 square feet of retail space from 12,000 square feet, according to the report.

The 250-key hotel, which was part of the 2013 Duarte Station Specific Plan, would also be canceled. The planned development is near the Metro Gold Line’s Duarte/City of Hope station.

Besides encouraging residential development near transit stations, Duarte city officials are considering the massive expansion at the nearby City Hope medical campus, a major employer in the area, according to Urbanize. In 2017, Duarte approved an expansion plan to add 1 million square feet of new hospital space there over the next two decades.

The Duarte/City of Hope station opened in 2016 as part of the Gold Line Foothill Extension project. It connected the so-called “Foothill Cities” to the Metro system, opening new development opportunities there.

Other newly-minted Gold Line stations have received attention as well — Richman Group is developing a 296-unit residential complex next to the Monrovia station. [Urbanize] — Dennis Lynch

Betty Ford and the Hollywood Hills property

An 18-acre undeveloped property in the Hollywood Hills with ties to former First Lady Betty Ford, and whose current owner tried to zone it for a large residential building, is on the market.

Listed for $30 million, the parcel was created by merging two separate properties, according to Forbes, which first reported the story. One parcel was owned by the former first lady, and the other by violinist Israel Baker.

The location, at 2864 Cayuenga Boulevard East, is on a ridge between the Hollywood Reservoir and the 101 freeway, in the shadow of the Hollywood Sign.

The current owner and now seller is Behzad Forat, a Studio City businessman. In 2015, he revealed plans to build a 250-unit residential complex on the land, and requested a zoning change with the city of Los Angeles to do so. The plans called for the units to be spread between two buildings.

Forat had been in talks with former Los Angeles City Councilman Tom LaBonge for a zoning change in exchange for a donation of some of the land to the city for public use, according to the Hollywood Hills West Neighborhood Council.

Now, it is being marketed as a mansion, including for a spec home developer. Neither would be out of character in the Hollywood Hills, which has seen an increase in spec home constructions.

Compass agents Sally Forster Jones, Janet Muradian and Shauna Walters have the listing. [Forbes] — Dennis Lynch

Clockwise from top left: The Federal Reserve has held interest rates steady and indicated that they will not rise this year; Facebook revamps its housing ad policy after settling discrimination lawsuits; JLL buys HFF in a $2B cash-and-stock deal that it hopes will ‘accelerate growth;’ and a Re/Max report finds the U.S. set for a ‘significant shift’ as home sales decline and inventory grows.

Report: ‘Shift’ as US home sales decline, inventory grows
U.S. home sales continued to fall in February, dropping 4.2 percent, even as inventory grew by 5.8 percent, according to a new report from Re/Max. The decrease in home sales marked the seventh consecutive month of declines year-over-year, although the increase in inventory was the fifth month in a row of growth, the report said. Trends that last five months or more “often indicate significant shifts,” said a statement from Re/Max CEO Adam Contos. “Year-over-year trends in declining sales and rising inventory have both reached that length now,” he added. Homes in San Francisco and Omaha, Nebraska, were on the market for the least amount of time at 37 and 34 days, respectively, according to the report. [TRD]

JLL buys HFF for $2B in effort to ‘accelerate growth’
Chicago-based JLL announced this week a $2 billion cash-and-stock deal to acquire Dallas-based HFF. The proposed combination, which could usher in a period of poaching as rival commercial brokerages seek to attract individuals displaced by the union, values HFF at $49.16 per share based on its March 18 market closing price. The merger, which should be finalized in the third quarter of this year, still requires HFF shareholder approval, but already has the assent of both companies’ boards. “The combination with HFF provides a unique opportunity to accelerate growth and establish JLL as a leading capital markets intermediary, with outstanding capabilities,” said a statement from JLL global CEO Christian Ulbrich. JLL and HFF are both in the top 10 in The Real Deal‘s recent ranking of investment sales firms. [TRD]

Opendoor valuation hits $3.8B after funding round
San Francisco-based startup Opendoor, which has sought to make a name for itself in the iBuyer space, has raised $300 million in a funding round led by General Atlantic, Fifth Wall Ventures, GGV Capital, Hawk Equity and Japan’s SoftBank Group, according to TechCrunch. The outlet noted the move brings Opendoor’s valuation to $3.8 billion. Founded in 2014, Opendoor has since raised $1.3 billion in equity, with another $3 billion in debt financing to purchase properties. The company, which received a $400 million investment from SoftBank late last year, plans to use its latest round of funding on product development and expansion. Opendoor co-founder Eric Wu told TechCrunch that his company intends to remain focused on the private home buying market, rather than cars, commercial real estate or loans. [TRD]

Facebook settles lawsuits, revamps housing ad policy
Online housing advertisements will no longer target Facebook users by ZIP code, the Wall Street Journal reported. A new policy enacted by the social media giant will also set a 15-mile minimum radius for geographic ads and restrict housing, job and lending ads from targeting users by age and gender. Facebook is making the changes to settle five discrimination lawsuits filed by plaintiffs, including the National Fair Housing Alliance. “There is a long history of discrimination in the areas of housing, employment and credit, and this harmful behavior should not happen through Facebook ads,” company COO Sheryl Sandberg wrote in a blog post. [TRD]

Fed holds interest rates, indicates no raises this year
The Federal Reserve isn’t raising interest rates right now, and will most likely hold them steady for the rest of the year due to concerns about an economic slowdown. In 2018, the Fed raised rates four times. In minutes this week, officials indicated that 2020 will only see one rate raise. The decision reflects a relatively recent change of mind on behalf of top Fed officials. At the end of last year, only two two officials said they thought the Fed would keep interest rates unchanged in 2019, as opposed to 11 out of 17 right now. The Fed also plans to scale back its plan to downsize its portfolio of government-backed securities. Low interest rates have been a boon to real estate investment trusts and could lead to more demand for mortgages from Freddie Mac, a government-sponsored entity that the Trump administration is considering privatizing. This week Freddie Mac promoted president David Brickman to CEO. [TRD]

MAJOR MARKET HIGHLIGHTS

Manhattan’s Hudson Yards development officially opens
A star-studded extravaganza of business moguls, celebrities, developers, elected officials and even Big Bird turned out last week to celebrate the grand opening of Hudson Yards on Manhattan’s West Side — first at an invite-only evening soiree on March 14 and again at a ceremony the next morning. New York Sen. Chuck Schumer called Related Companies chairman Stephen Ross the “only person in the universe” who could have brought the decade-long development to fruition. Ross, meanwhile, said he was “still awed” to see the project become a reality. Since the opening, critics have raised concerns about Related’s use of surveillance in the neighborhood, as well as its controversial policy regarding photos taken from a 15-story climbable sculpture known as “The Vessel.” [TRD]

Boston, LA touted as top cities to endure economic downturn
Among the cities that could remain among the most resilient amid the country’s economic slowdown is Boston, one of several places that investors have set their sights on that are less likely to feel the effects of a downturn, Bloomberg reported. Boston is considered a less riskier investment because it has a traditional financial services base, as well as a biotechnology and life sciences sector, according to the outlet. Los Angeles is another city that’s drawing in investors due to its media and technology industries. Cities such as Austin, Texas, which rely predominantly on a single industry or company, are considered riskier places to invest. [TRD]

ISG founders reach ‘amicable resolution’ in partnership dispute
Two founders of Miami-based luxury brokerage International Sales Group have officially parted ways after settling dueling lawsuits last month. Philip Spiegelman had accused Craig Studnicky of mismanaging “large amounts of cash,” while Studnicky had claimed Spiegelman pushed out a third founding partner of ISG and alienated clients with his “overbearing narcissism and obnoxious personality.” The litigation initially left the future of the brokerage up in the air, but Studnicky’s lawyer Robert Stok said the two have “reached an amicable resolution.” Stok’s client will take over ISG, while Spiegelman will get development rights to a mixed-use project in New Orleans. [TRD]

Michigan nonprofit moves into OZs in Florida
The Troy, Michigan-based Kresge Foundation is the latest entrant in the race to reap the benefits from federal Opportunity Zones. The philanthropic group, a registered nonprofit, has partnered with Boston-based Arctaris Impact and Fort Lauderdale-based Community Capital Management to launch an OZ-focused fund. Kresge has provided a combined $22 million to both funds, which have agreed to adhere to certain investment guidelines, such as deploying capital to create jobs and help low-income communities. OZs allow investors to defer paying capital gains taxes if they invest in specially designated geographic areas. U.S. Housing and Urban Development Secretary Ben Carson told The Real Deal earlier this month that he would give preferential treatment to OZ developers and investors that build affordable housing. [TRD]

PMG to bring another co-living complex to Chicago
Property Markets Group plans to open another co-living rental complex in Chicago, principal Noah Gottlieb told The Real Deal. The New York-based developer, which started its co-living unit in 2017, has already opened two “X Social Communities” complexes in the Windy City and one complex in Miami. New apartment buildings are in the works in Denver, Oakland, Phoenix and several cities in Florida, and the group is eyeing Atlanta, Houston and Minneapolis for future projects, Gottlieb said. Beds start at $995 per month in PMG’s “X Chicago” building in the University Village neighborhood. [TRD]

Santa Monica’s Clock Tower Building sells for $58M
Sorgente Group of America has sold the historic Clock Tower Building in Santa Monica to Rockwood Capital for $58 million. The 53,500-square-foot Art Deco tower, which opened in 1930, was the tallest building in the beachfront city for four decades. It’s considered Santa Monica’s first skyscraper and is also still one of the tallest buildings in the vicinity due to height restrictions. The building, which has a four-story clock tower, is currently home to Chinese digital media company Hylink, investment firm Bold Capital Partners and H Code media, among other tenants. Italy’s Sorgente Group, whose other properties include the Flatiron Building in Manhattan, bought the Clock Tower Building in 2013 for around $34 million. [TRD]

A wave of land-only listings presents new opportunities in Los Angeles (Credit: iStock)

Eri Kroh, a commercial real estate developer, didn’t know what he was about to get into when an agent took him “just to look at” a 30-acre plot of land in Bel Air 15 years ago.

Initially eyed as a business opportunity, Kroh began envisioning the dirt, for which he paid $6 million, as the setting for his family’s dream home. Blueprints were even drawn up, with the names of his children written in their planned bedrooms.

But securing entitlements from Los Angeles for what would be a 40,000-square-foot mansion dragged on…for almost two decades.

“He had no idea how long it was going to take,” said Lynn Teschner, his agent at the Agency.

Finally given the go-ahead to build but with his kids now grown, Kroh has put the sprawling piece of land on the market. Asking price: $60 million.

He is among an increasing number of property owners who are now listing their undeveloped land lots for tens of millions of dollars. The parcels are entitled for residential building, so potential buyers can forego the city’s arduous process — just ask Kroh — and move right to construction. The recent spurt of land-only listings comes as fully built, luxury homes sit on the market, unable to trade even with discounts and deal sweeteners.

Since last summer, at least 317 acres in Beverly Hills and Bel Air alone have hit the market, seeking more than $1 billion combined, according to a property review by The Real Deal. The most expensive, the so-called Mountain of Beverly Hills, was listed for $1 billion last summer, before it was slashed to $650 million in February.

In addition to Kroh’s $60 million parcel, the estate of Microsoft co-founder Paul Allen is selling 120 acres in Beverly Hills for $150 million. Near the Hotel Bel Air, developer Domvs London and investment firm Junius Real Estate Partners are selling a 10.6-acre spread, rezoned into three separate lots, for $150 million.

A rendering of the house to be built on the 10.6-acre plot

And this week, an 18-acre parcel near Lake Hollywood Park hit the market for $30 million. The undeveloped land was once owned by former first lady Betty Ford.

Compass broker Tomer Fridman points to L.A.’s spec home craze of 2014 to 2016 as the reason all the pricey land listings have been hitting the market. Construction permits filed years ago are finally getting approved, he said. And in a market that has seen home sales steadily dip — especially in luxury real estate — property owners are not wasting any time.

There is also incentive for potential builders of massive mansions. The land listings come with approvals for home that are much more extravagant than what is permitted today, Teschner said.

Developers have put in time and “knowledge to execute the permits, and that’s valuable,” Fridman added. “If they see an opportunity to sell it entitled, that provides a good revenue stream for them.”

It is a similar situation in L.A. for commercial properties. Recently, developers have been selling their shovel-ready sites at a premium, luring buyers who don’t want to deal with the years-long process of zoning changes.

Even when a property is fully entitled, there are obstacles. Escrow transactions, especially, are more complicated because unlike a home, land deals have nothing to inspect except the dirt.

“There’s a lot of investigation into what has actually been approved and what you can actually build there,” Fridman said. Often times, the city will leave the permits “a little ambiguous,” resulting in a “very complex due diligence process,” he added.

There’s also the potential financial risk for owners who hold onto a piece of undeveloped land, even entitled, because it doesn’t have the easy appeal of a built home. Case in point: the selling entity behind 157-acre Mountain of Beverly Hills, which would likely be a multi-home project, has already lowered their ask to attract a sale.

The view from the Mountain of Beverly Hills (Credit: Alexei Barrionuevo)

For an agent, selling the undeveloped plots of land come with their own set of challenges.

While the vacant parcels allow buyers flexibility to customize as they wish, they also make it difficult to imagine a house on the property and to convince someone to shell out millions just for the land.

“You need to have a buyer that actually has a vision,” Fridman said.

Teschner, from the Agency, added that land listings also require tens of thousands of dollars spent in marketing videos and renderings.

“It has been hard in the past,” she said. “We’re selling a dream. Someone has to embrace the dream.”

Kroh, reflecting on his 15-year Bel Air saga, says he would not have bought the unentitled property if he could do it all over again. “I don’t need to spend the next five to seven years dealing with something like this.”