Berkshire Hathaway CEO Warren Buffett and Dubai (Credit: Wikipedia and Unsplash)

Warren Buffett’s Berkshire Hathaway HomeServices, now the largest residential brokerage in the United States, is opening its doors in the Middle East.

The brokerage will open an office in Dubai under the flag Berkshire Hathaway HomeServices Gulf Properties, according to Bloomberg. The new location will be led by CEO Phil Sheridan and Chairman Ihsan Husein Al Marzouqi, and have a team of 30 advisers and support staff.

HomeServices has been acquiring other brokerages across the U.S. in a bid for market share, and overtook Realogy’s NRT as the largest residential brokerage in the country in a Real Trends ranking from last month.

While growing at home, Buffett’s brokerage has simultaneously been expanding internationally. The brokerage teamed up with one of its two franchisees in Europe, London-based Kay & Co., to expand into Milan, Dubai and Vienna. It’s also said to be in talks with partners in Paris and Madrid, and considering options in Hong Kong, Mexico City and Tokyo.

Although the market has predicted a rebound for Dubai’s property market, it has been going through a slump since October 2014. Prices could fall by as much as 10 percent this year, according to S&P Global Ratings.

HomeServices hopes to open a second office in Abu Dhabi within a year. [Bloomberg] – Eddie Small

The We Company CEO Adam Neumann (Credit: Getty Images and iStock)

The We Company, formerly known as WeWork, submitted a filing with the U.S. Securities and Exchange Commission that would allow it to go public, the company announced in a press release.

The announcement gives voice to rumblings in recent months that the flexible-office giant, now valued at $42 billion, was considering an initial public offering, as other unicorns enter the public markets with lukewarm reception.

Adam Neumann, the company’s CEO, told employees he had been celebrating his birthday last week when he decided to file the paperwork that would allow the company to become public, stating that it was “part of keeping all options open.”

In an internal memo, Neumann wrote that, “As one of the world’s largest physical networks, it is our responsibility to help lead the way and set the global example for people and corporations on how we should take care of each other and of our planet.”

Neumann said there is no timeline for an IPO, and is restricted from discussing the matter further.

Last month, ride-hailing service Lyft registered as a public company and is valued at $17.3 billion. Its chief rival Uber is also planning its own public offering with a valuation between $80 billion and $90 billion. Other startups, including Pinterest and PageDuty, have filed for public offerings. Office instant-messaging app Slack is also preparing for its own public offering.

But many analysts have also predicted that 2019 could bring to an end the booming economy of recent years. The Real Deal reported last week that WeWork made some prescient moves ahead of a purported downturn in the U.S. commercial leasing markets, which would serve as an existential test to WeWork’s business model.

The firm has said that in the event of a market decline, demand for its business would in fact increase, and that it has over $6 billion cash and cash commitments to fund its expansion over the next four to five years.

But some observers have pointed to the fact that the firm’s success lies somewhat in the hands of deep-pocketed investors, including Japanese conglomerate SoftBank Group, which has so far committed $6 billion to the company. In January, however, investors confidence in WeWork was shaken after SoftBank’s Vision Fund walked back a $16 billion commitment, and Masayoshi Son’s SoftBank Group ponied up $2 billion.

Like the other unicorns striving for the public markets, the We Company is yet to turn a profit. WeWork’s latest financials show that revenue in 2018 about doubled year-over-year to $1.82 billion. But during that same span, net losses more than doubled, to $1.93 billion, and the company’s marketing spend almost tripled – a sign of its urgency to grow its customer base as occupancy rates and average revenue per member take a hit.

Car wash site at 2870 Olympic Boulevard (Credit: Google Maps and iStock)

Last October, a labor union successfully blocked plans to develop a six-story hotel in Pico Union. Now, the property’s new owner wants to try something different.

Perri Lee, acting through an LLC, is requesting approval to build a new 126-unit apartment building at the same site, according to documents published with the city.

Of the 126 units, 13 would be set aside for extremely low-income residents. An existing auto repair shop and single-family home would have to be demolished to make way for the new development.

Plans for the site at 2870 West Olympic Boulevard reflect a stark contrast to what the building’s previous owner, David Lo, had envisioned.

In 2015, he filed plans to build a 120-room hotel with 6,100 square feet of retail space at the site. After securing approvals last September, he was blocked by UNITE HERE Local 11, which appealed the project. The union claimed the construction’s environmental impact analysis did not comply with state regulations.

Property records indicate that Lo then sold the development site in December for $15 million to 2870 O Consortium, an entity Lee controlled. Lee, who is also tied to an escrow company based in Koreatown, did not respond to requests for comment.

Larry Green and Warner Center

The French commercial real estate firm that bought mall operator Westfield is advancing with its plan for a 15,000-seat arena at Warner Center, part of its $1.5 billion mixed-use redevelopment project.

Unibail-Rodamco-Westfield has reached the environmental review stage of the proposed arena, part of the massive redevelopment, the Los Angeles Daily News reported.

The final environmental impact report for the proposed 320,000-square-foot arena is still in the works, and company officials have not released all the details, according to the report. An executive for Unibail said it was discussing terms with potential tenants, including a professional soccer team, a minor league baseball, and concert venue operators.

In addition to the arena, the redevelopment project aims to replace a vacant mall at 6100 N. Topanga Canyon Boulevard in Warner Center with 1,430 residential units, 244,000 square feet for shops and restaurants, 629,000 square feet for office space, and 572 hotel rooms.

Earlier this month, Hanover Company secured a $94-million construction loan for a 394-unit complex at 6636 Variel Avenue in Warner Center, and Douglas Emmett filed plans to build a three-story office complex on Canoga Avenue in its 360,000-square-foot campus.

Warner Center is set to see 24,000 new residential units by 2033. Last month, California Home Builders secured a $90-million loan for its residential project on Topanga Canyon Boulevard with 347 units. [Daily News] — Gregory Cornfield

Eric Garcetti and city hall

Citing the “existential threat” of climate change, Los Angeles Mayor Eric Garcetti wants to transform the city’s buildings with zero-emission technologies, likely imposing a significant financial burden on property owners.

Garcetti’s version of the Green New Deal calls for sweeping changes to L.A.’s buildings, which account for 75 percent of the city’s emissions, the Los Angeles Times reported. The plan — inspired by the one New York Congresswoman Alexandra Ocasio-Cortez proposed — would require all new buildings in L.A. to be “net-zero carbon” by 2030, and the city’s entire building stock to be converted with new technologies by 2050.

That would require landlords and building owners to replace all gas-powered systems, dishwashers, stoves and laundry machines with electric appliances or cleaner fuels. Faber O’Connor, the city’s chief sustainability officer, said that task may be easier to achieve than it sounds as new building would follow updated code requirements and rebates, and electric appliances will be installed in old buildings as gas-powered appliances break down over time.

State lawmakers are developing similar plans for buildings. Southern California Gas Co. has pushed back against those plans as it could threaten their business model.

The consulting firm Energy and Environmental Economics released a study earlier this month that found that newly built all-electric homes in California can save residents $130 to $540 per year, and that most single-family homes with gas furnaces and air conditioners would save money with electric heat pumps.

Earlier this month, Garcetti proposed a property tax measure based on square footage to improve education in the city. [LAT] — Gregory Cornfield

Lacera CIO Jonathan Grabel and the South Park apartment complex (Credit: LinkedIn and Realtor)

Hot on the heels of announcing its plan to spend $250 million on international investments, the Los Angeles County Employees Retirement Association wants to shed a chunk of its real estate assets on its home turf.

The pension fund has a plan to sell off as much as $1 billion in properties as it seeks to restructure its portfolio, according to the publication, Chief Investment Officer.

Out of the $1 billion in selloffs, roughly half those assets would be multifamily properties. The bulk of the sales are expected to take place over the next year, a LACERA executive told CIO.

LACERA ended 2018 with 11 percent of its total capital in real estate. It’s aiming to bring that number down to 7 percent with the dispositions.

The retirement fund has already started selling off some multifamily assets. In January, LACERA sold a mixed-use apartment building in South Park for $180 million — the county’s most expensive multifamily deal that month.

Though LACERA plans to be a net seller for the next two years, it will still invest in real estate properties that fit its criteria. Roughly four months ago, the pension fund announced a plan to invest $250 million in international real estate funds. Nearly all of LACERA’s $6.2 billion in real estate assets are in the United States.

Grabel has also asked LACERA’s board to consider allocating $500 million for new acquisitions, which could include office and retail properties. LACERA invests through separate investment managers, including Deutsche Bank affiliate DWS Group, Clarion Partners, Heitman, among others. [CIO] — Natalie Hoberman

817 Vine Street, 1350 North Western Avenue, and Netflix CEO Reed Hastings (Credit: Getty
Images)

Netflix has signed two new leases for a combined 170,000 square feet of office space in Hollywood, The Real Deal has learned.

The deals come on the heels of another major expansion, bringing the streaming giant’s footprint in the submarket up to nearly 1.3 million square feet.

Netflix has fully leased 817 Vine, a 100,000-square-foot office campus that Lincoln Property Company owns. It’s also taking over a 68,000-square-foot sublease at 1350 North Western Avenue, formerly leased to ZestFinance.

The deals closed late last week, sources said.

A spokesperson for Netflix did not respond to immediate requests for comment but Daniel Chiprut, the Newmark Knight Frank broker who is listing Zest’s sublease, confirmed that move. A representative for LaTerra Development declined to comment, while Lincoln Property Co. could not be reached.

Netflix’s new office at 817 Vine is less than a mile from where Kilroy Realty’s Academy on Vine project is rising. Netflix is set to occupy 355,000 square feet there once it’s completed. The sublease on Western, meanwhile, stands about half-a-mile from Netflix headquarters at the Sunset Bronson Studios, owned by Hudson Pacific Properties.

Originally built for the Musician’s Union of Hollywood, the renovated office campus at 817 Vine Street includes two office buildings with a private landscaped courtyard in the middle. Lincoln Property tapped HLW International to design the rehabilitation project, which completed this year.

At 1350 North Western, Netflix will be taking over Zest’s 68,800-square-foot lease at the mixed-use complex, which is owned by LaTerra Development and Gemdale. Listing platforms advertise rents at the building for $47.40 per square foot per year, valuing Netflix’s lease around $3.3 million.

As Netflix looks to expand its content for a growing audience, it has at the same time boosted its real estate presence in Los Angeles. In addition to the office space it leases at several Hollywood buildings, the company is reportedly also looking to become a landlord.

Earlier this month, reports circulated that the streaming service was in talks to purchase the historic Egyptian Theatre in Hollywood. The deal would allow Netflix to operate the movie theater on weekdays, as well as for premieres of its exclusive films.

The cost of living in LA has some considering a move

For Los Angeles County residents, it’s not the economy. The high cost of living — particularly housing — has become the top concern.

According to a new UCLA survey, L.A. County homeowners are generally happy with their healthcare, economy and the state of race relations, but are not at all pleased with the cost of living, according to the L.A. Times.

And amid L.A.’s affordable housing crisis, those escalating costs now weigh more heavily than they did three years ago. The survey, which scored satisfaction on a 100-point scale, found an eight-point drop in satisfaction from 2016 to 2019. UCLA surveyed 1,400 county residents.

Housing was a key contributor to those feelings ­— for the first time, a majority of respondents said that housing is the most important factor in overall satisfaction, the Times reported.

Multifamily property owners have benefited from high rent growth over the last several years, but those same rising prices have taken a toll on tenants. According to a recent report, L.A. has one of the highest percentages of rent-burdened households nationwide, which refers to tenants who pay more than 30 percent of their income on rent.

For the UCLA study, about 70 percent of respondents who rent said they or their close friends and relatives have thought about leaving L.A. for somewhere cheaper. That number dropped to about 57 percent when including homeowners as well.

While overall housing prices and rent growth have slowed across the country — the first quarter especially — that can be attributed in part because overall pricing was already at its upper limit, experts have said. [LAT] — Dennis Lynch 

Keller Williams CEO Gary Keller (Credit: Wikipedia and Ken Teegardin via Flickr)

Keller Williams’ lifetime profit sharing program, which has distributed more than $1 billion in revenue since 1997, is under fire.

A “small group” of the firm’s “top profit share earners, market center owners and regions” proposed major changes to the program at a meeting in Austin last week, Inman reported.

“On an annual basis, multiple proposals are brought forth to a vote at one of two annual IALC meetings,” CEO Gary Keller told Inman. “If our profit share system is to change, our agents will decide. No changes to the system will be made without the approval of our associates.”

Under the current system, agents who have been at the firm for at least three years are entitled to a cut of their former market center’s profit for life, even if they move to a competing brokerage. The program has been described as a “cornerstone” of the firm’s culture.

The issue of profit sharing with competitors has come up in the past. Last July, Keller challenged all former KW agents now with competitor eXp Realty to return the shared profits they had received. The firm has seen some high-profile defections to eXp in recent months.

“I can’t tell you how many times I was in a room with [Keller] when he said we would never do anything like this because it would totally break the integrity of profit share and the commitment they made,” Kevin Kauffman, one former KW agent now at eXp, told Inman.

Keller Williams has faced pressure to become more profitable, and changes to the profit sharing model could be one way to achieve that goal.

“Those [votes] always seem to go the way the company wants them to go somehow,” Kauffman said.

In its April magazine edition in Los Angeles, The Real Deal examined Keller’s new direction under founder Gary Keller, who returned in January. [Inman] — Kevin Sun

Max Fowles-Pazdro and his Bel Air spec manse

Almost exactly a year after buying one of Mohamed Hadid’s spec mansions in Bel Air, a local investor is now listing his own luxury project. This time it’s in Beverly Hills.

Max Fowles-Pazdro is selling a 24,000-square-foot spec mansion for $46.5 million, according to the Los Angeles Times.

The eight-bedroom, 11-bathroom home has all the trappings of ultra-luxury, including marble and stone and floor-to-ceiling windows. There are five kitchens and seven powder rooms on an acre of land. Jonathan Nash with Hilton & Hyland has the listing.

Last May, Fowles-Pazdo paid $56 million for a Hadid-built 35,000-square-foot spec mansion in Bel Air. That marked a serious price chop from its original $85 million asking price.

In addition to his forays in development, Fowles-Pazdro also appears to be a fashion designer and somewhat mysterious mogul. A website for his L.A.-based women’s wear line calls him a London native.

His LinkedIn page lists says he is head of acquisitions for London and Regional, a U.K. developer that purchased the Hotel MdR in Marina del Rey last year. He also appears to have started two L.A.-based companies since then, including one called Blackpearl Real Estate that doesn’t appear to be actively investing.

[LAT] — Dennis Lynch 

Michael Burke CEO of AECOM and a rendering of the project

The Los Angeles City Council on Tuesday approved $17.3 million in tax incentives for AECOM Capital’s planned 258-key hotel in Downtown, which will next to its own mixed-use tower project and amid the Convention Center’s massive redevelopment.

The investment firm is set to receive the tax incentives over 25 years. The 16-story project will rise at 1155 South Olive Street, about half a mile from the Los Angeles Convention Center. It will be 121,000 square feet, including 2,700 square feet of restaurant space and 900 square feet of retail space.

The city is also considering similar incentives worth $100 million over 25 years for both the 850-room expansion of the J.W. Marriott at L.A. Live, and the $1.2-billion expansion of the Convention Center. Both will be redeveloped by Anschutz Entertainment Group.

The city has provided similar breaks for other hotel projects the past few years, and was criticized last year by the City Controller for doing so. The controller, Ron Galperin, argued City Hall doesn’t have a comprehensive strategy to ensure the practice is transparent or “advantageous to taxpayers.”

The city also approved $345 million in incentives for the Frank Gehry-designed Grand Avenue Project, Fig + Pico hotel and the Cambria hotel.

About a block away, AECOM is developing another project. Last year, it announced plans with Mack Urban for two mixed-use towers, one 51 stories and the other 60 stories.

Lands’ End Manor at 8 Lands End Road in Locust Valley (Credit: Lands End Manor)

Lands End Manor — one of the last Gatsby-era mansions on Long Island’s Gold Coast — is hitting the market for the first time in more than four decades. But the price is “upon request.”

The value of the property, which dates back to 1926, is estimated to be north of $35 million, broker Dolly Lenz told Mansion Global. Lenz is handling the listing for the property.

Lands’ End Manor at 8 Lands End Road in Locust Valley (Credit: Lands End Manor)

The estate’s current owners are Sherrell Aston and Muffie Potter Aston. Aston is among the world’s leading plastic surgeons and chairman of the Department of Plastic Surgery at Manhattan Eye, Ear and Throat Hospital — and his wife, Muffie, is a former executive of Van Cleef & Arpels.

Walker and Gillette, a prestigious 20th century architectural firm, designed the home. It was built for Harvey Dow Gibson — a businessman who was president of Liberty National Bank, which is now Bankers Trust, as well as Manufacturers Trust, which eventually became Citibank — and his wife Helen Whitney. The family entertained often, and their houseguests included Zelda and F. Scott Fitzgerald, the author of, “The Great Gatsby.”

Only one other family lived on the property since 1929, the report said.

The Astons began putting together the 32-acre estate in the mid-1980s. The 13,000-square-foot main house has six bedrooms, and an attached two-bedroom staff apartment has its own separate entrance as well as access into the main house.

The estate also includes a six-bedroom cottage, a five-stall stable with two caretaker cottages, a greenhouse, a pool with a Georgian-style pool house, and a gazebo. There are seven gardens designed by architect Frederick Law Olmstead, who designed Central Park.

The Astons said they’re moving because they no longer use the property as much with their twin daughters having grown older. Their primary residence is on the Upper East Side. [Mansion Global] — Meenal Vamburkar

Brookfield Property Partners CEO Brian Kingston

Brookfield Asset Management is the latest firm getting into Opportunity Zones.

The firm’s New York real estate division, Brookfield Property Partners, is going to launch an Opportunity Zone fund, Bloomberg reported.

“We are launching a fund in the next month or two,” Brookfield Property Partners’ CEO Brian Kingston said at a conference in California on Monday, according to the outlet. There were no specifics on the size of the fund or where it would invest.

Brookfield joins a host of other real estate firms looking to get in on Opportunity Zones. For example, Silverstein Properties and Cantor Fitzgerald are aiming to fund raise $2 billion for their own fund. And Anthony Scaramucci’s SkyBridge Capital and Westport Capital Partners hope to bring in $3 billion for theirs.

The federal program came out of the 2017 tax reform, and provides government incentives to developers who invest in low-income areas. However, uncertainties remain over the specific regulations that will govern the program.

Still, such incentives are designed to promote building in places “that are otherwise crippled,” Kingston said, according to Bloomberg. [Bloomberg] — Mary Diduch

NeueHouse CEO Josh Wyatt and the inside of the Bradbury Building (Credit: Wikipedia)

Co-working is coming to one of Downtown Los Angeles’ most historic buildings, made famous in films like “Blade Runner” and “500 Days of Summer.”

NeueHouse, a co-working firm based in New York, has leased 28,000 square feet at Bradbury Building for its third L.A. location, The Real Deal has learned.

The firm already has a spot in Hollywood, located at 6121 Sunset Boulevard. It’s also planning on moving into one of Snap Inc.’s former spaces in Venice.

NeueHouse and Goodwin Gaw’s Downtown Properties, which owns the 125-year-old Bradbury Building, declined to comment.

Located at 304 South Broadway, the landmark building spans five stories and 78,500 square feet. It’s best known for its ornate interiors, which feature a skylit atrium and intricate ironwork.

Commissioned by mining magnate Lewis Bradbury and designed by George Wyman, the building makes cameos in film and television shoots. Built in 1893, it’s one of four L.A.-based properties on the National Register of Historic Places.

Gaw bought the building for $5.9 million in 2003, property records show. His firm, which is the U.S. arm of Hong Kong-based Gaw Capital Partners, owns several other historic buildings in the area.

Neuehouse announced it would be expanding in L.A. late last year after a $30 million funding round, though it was unclear where exactly. In Venice, the firm has subleased an 11,530-square-foot space at 73 East Market Street.

Cypress Equity Investments founder and CEO Michael Sorochinsky and the 53-unit project on Wilshire Boulevard (Credit: Cypress Equity Investments)

The Santa Monica Planning Commission will vote Wednesday on a 40,400-square-foot mixed-use project on the city’s northeastern border with L.A.

Cypress Equity Investments proposed the 53-unit apartment building with 5,418 square feet of commercial space at 3223 Wilshire Boulevard, the Santa Monica Daily Press reported. Four of the units will be affordable to households earning 30 percent of the area median income.

Cypress purchased the property at the corner of Centinela Avenue for $11.8 million in 2017, records show.

The building will include a range of units, from 519-square-foot studios to 1,077-square-foot three-bedroom apartments. The new construction will replace the eclectic party gift store “Aahs,” which was built in 1955 on Wilshire Boulevard.

Cypress Equity has several mixed-use projects locally and around the country. The firm is also working on a mixed-use project on Lincoln Boulevard in Santa Monica, closer to the beach. That project will include 66 residential units and 7,000 square feet of retail.

Last month, Santa Monica put a temporary ban on market-rate projects in the city that call for apartment units under 375 square feet. The ban is in effect until May 10. The Cypress Equity project is exempt since its studios are larger than micro units that have been banned.

Despite the micro-unit ban, residential developers have been active in Santa Monica. Earlier in April, Fifield Cos. secured a construction loan for a 282-unit project on Lincoln Boulevard, and in March NMS Properties proposed a 100-unit project on 7th Street. [SMDP] — Gregory Cornfield

Nicolas Maduro and Juan Guaido (Credit: Wikipedia and Google Maps)

UPDATED, Feb. 21, 4:10 p.m.: As Venezuela descended into economic turmoil in recent years, real estate values plummeted and investors looked elsewhere, including to South Florida. Eventually, that too dried up, as the government’s grip tightened and the country grew more isolated. Now, as Venezuela’s opposition leader vies for control amid a humanitarian crisis, some of those investors are turning their attention back to the country, sensing or hoping for a light at the end of the tunnel.

Venezuela’s opposition leader Juan Guaido — backed by the U.S. and dozens of other countries — “has invigorated a lot of interest in Venezuela,” said Craig Studnicky, principal and owner of ISG. “A lot of Venezuelans [in South Florida] are lining up to do cheap real estate deals in Venezuela.”

Vicky Fulop, senior counsel in the Miami office of Holland & Knight, said her Venezuelan friends who listed their homes for sale before leaving the country in recent years, hadn’t gotten any offers — until recently. In the last few weeks, she said, “the brokers have been calling them like crazy.” The real estate movement, she said, “has been incredible in the last two weeks.”

A change in Venezuela’s regime could benefit the country’s real estate market and eventually bring Venezuelan buyers back to Miami, local industry pros said.

But now, most Venezuelans struggle to pay for basic items as inflation soars. On Friday, President Nicolas Maduro shut the border to Brazil and said he may also close the border to Colombia to block incoming aid.

Over the last three years, more than 3 million people have fled the country, according to United Nations estimates. Over the same period, foreign investment from South America into the U.S. has largely dropped off.

Between 2012 and 2015, condo buyers from Venezuela represented roughly 25 percent of Latin American real estate sales in Miami, Studnicky said. Now, that figure is essentially down to 1 percent, he said.

Several brokers say it will be a long time before Venezuelan nationals are again buying real estate in Miami.

Sergio Pintos, who works for ISG and Property Markets Group, believes it will be another two to three years before the country begins to improve. Most of the major real estate brokers left Venezuela in recent years, he said, and are no longer doing business in their home country or in Miami. Even if conditions improve quickly, most Venezuelans don’t have enough wealth to buy property, and those who do, he said, have ties to the Maduro government.

But Fulop, who was born and raised in Venezuela, is more optimistic. Once the oil and gas sector reactivates, she said, real estate, hospitality and other industries will follow. Despite the chaos, Fulop added, property values are already rising. Fulop is now part of a new group at her firm, made up of 20 partners working with clients with interests in Venezuela. The group’s expertise lies in real estate and hospitality, sanctions and trade, corporate and tax, international disputes and energy and natural resources.

“Even though people left in massive numbers, they always kept a foot firmly grounded in Venezuela. They kept their businesses, they kept their residences,” she said. Those who remained and who have the means, “will definitely be at the forefront when things change and pick up.”

Alicia Cervera of Cervera Real Estate expects that a change in government would create wealth in Venezuela that would eventually arrive in Miami. Most wealthy Venezuelans have already moved their money out of their home country, she said. And while some are still buying in Miami, Cervera said, the number is not “as much as we would like to see.”

But like other Latin American countries that faced political and economic instability, and whose investors returned to South Florida, Cervera said the same will happen in Venezuela.

“Colombia is back, Brazil is back, Mexico is here. … The bottom line is that Miami tends to win when there’s a good turn in the politics and Miami tends to win when there’s a problem,” Cervera said.

Correction: An earlier version of this story misspelled Vicky Fulop’s name.

Starwood Capital Group’s Barry Sternlicht and Israeli Bond Market (Credit: iStock)

Starwood Capital Group is facing allegations that it misled investors about the risks of its Israeli bonds that backed struggling shopping centers in the U.S.

The lawsuit stems from the struggles facing Starwood’s mall portfolio, where vacancy rates have increased and net operating income dipped, according to Wall Street Journal. It also adds to the challenges facing investors who bought debt in the once booming Israeli-bond market as the market has now soured.

Two groups of bond investors, known as Oporto Securities Distribution, filed the class-action lawsuit on March 24, alleging Starwood failed to properly disclose risks involved in the debt, according to the Journal. The lawsuit claims the damages total 74 million shekels or $21 million.

The bonds, which are backed by seven malls and trade in Tel Aviv, have fallen almost 50 percent in price since they were first offered in March 2018.

The investors are also suing S&P Global Ratings’ Israeli subsidiary, where it alleges that a ratings report failed to state that Starwood might not be able to repay certain debtors, according to the Journal.

Miami Beach-based Starwood bought a portfolio of malls in California, Indiana, Ohio and Washington state from Westfield Group in 2013. It then refinanced the portfolio by raising 910 million shekels (about $250 million) on the Israeli bond market.

Starwood said in a statement that the allegations are without merit, according to the Journal.

A number of real estate firms such as Extell Development, Delshah Capital and GFI Real Estate Limited turned to the Israeli bond market, where financing was cheaper than in the U.S. In recent months, that market has taken a turn, and bonds issued by American companies in Israeli have seen values fall at unprecedented rates. [WSJ] — Keith Larsen

Access Industries founder Len Blavatnik and the warehouse in DTLA

Just weeks after purchasing the landmark Ford Factory building, Access Industries picked up a pair of warehouses just around the block in Downtown’s Fashion District.

For its latest haul, the New York-based industrial firm paid $32 million for 2020 E. 7th Place and the adjacent 2045 Violet Street, records show.

The seller was Los Angeles-based Lion Real Estate Group, which focuses on value add properties.

The building at 2020 E. 7th sold for $19.8 million. It was built in 2002 and includes 31,700 square feet and 17 loading docks. The other property sold for $12.2 million. It was built in 1941 and includes almost 11,650 square feet of space. Lion Real Estate purchased the property in 2000 for $684,000.

Last month, Access Industries paid $195 million for the 271,000-square-foot Ford Factory building. The privately-held industrial group owns Warner Music Group, which is the building’s tenant.

The Fashion District and neighboring Arts District have been undergoing transformations since the days when they held mostly empty warehouses.

Lowe development firm is building a 100,000-square-foot office project half a block away at 2130-2148 E. Violet Street.

Next month, Urban Offerings and ESI Ventures are redeveloping the 100-year-old Dearden’s property at 700 S. Main Street. It will transform into a mixed-use space with offices, restaurants and retail. The joint venture is also renovating the nearby Norton Building at 755 S. Los Angeles Street.

Charles Park and the Koreatown development site (Credit: Google Maps)

Koreatown’s multifamily construction boom doesn’t seem to be slowing down any time soon.

The latest is a proposal for a 251-unit apartment complex, which would include live-work units and a retail component.

Karen and Charles Park control an LLC that owns the seven parcels comprising the planned construction, records show. That LLC — Charles Park & Associates — purchased the seven parcels about a year ago for a combined $20 million.

The city published plans for the complex on Tuesday. The eight-story property would replace a low-rise retail stretch whose properties include 3433 W. 8th Street. Plans call for a food court space and restaurant space.

The Parks own Downtown apparel manufacturing company Offline Inc. It was not known if the Parks will develop the building. They could not be immediately reached for comment.

Plans are to set aside 28 of the 252 units for low-income renters. In exchange, the developer is asking the city to allow it to reduce the rear setback and reduce open space by 20 percent. Residential units would be studios through two-bedroom units and 18 would be live-work units.

The square footage of retail space isn’t specified, but the developer wants a liquor license for two planned restaurant spaces and also wants to build a food court or market space.

It’s possible the owners plan to sell the property after entitling it for the 251-unit development. That strategy has become increasingly popular in Los Angeles, where the often grueling entitlement process has created a niche market for sellers of shovel-ready projects.

Koreatown development remains strong. A couple of blocks south, development firm Choi Bo Sung Inc. wants to build a 252-unit complex at 3170 W. Olympic Boulevard.

LPC’s David Binswanger, Angelo Gordon’s CEO Michael Gordon and the property (Credit: Yardi Matrix)

As multifamily developers and commercial firms flock to Warner Center, one joint venture is looking to cash out.

Lincoln Property Company and Angelo Gordon have put their sprawling office campus, dubbed Campus @ Warner Center, on the market for $215 million, The Real Deal confirmed. Real Estate Alert first reported the listing.

The complex, formerly known as LNR Warner Center, is comprised of two six-story office buildings located at 21255 and 21215 Burbank Boulevard. It encompasses 509,000 square feet.

Campus @ Warner Center is nearly fully leased, with the bulk of those leases signed in the last year. Anthem Blue Cross signed a deal to occupy 169,000 square feet at the campus last July, vacating its longtime home at 21555 Oxnard Street. Other tenants include Activision Publishing, WeWork and New York Life.

The joint venture paid $147 million for the campus in 2016, property records show.

As it explores the sale of this property, Lincoln Property is pouring tens of millions into repositioning another one nearby. That 14-story building, recently left vacant by Anthem, is owned by Abraham Lerner. Lerner and Lincoln Property will work on a $50 million renovation on the complex, which has been on the market since October.