Hurricane Dorian is putting real estate deals in a holding pattern as it approaches South Florida.
Insurance companies hold the key to any real estate closing that involves a mortgage, so it’s no surprise that a major storm would throw a wrench in a buyer’s plans to close on a property.
In recent years, insurers have moved away from using the box method – which meant that if a storm fell within a certain geographic box, insurance companies would not bind new policies for properties in that area until after the storm passed and properties were re-inspected.
Now, insurers generally rely on the National Weather Service’s watches and warnings, according to South Florida real estate attorneys and title brokers.
Marcie Gregorio of Brickell-based Worldwide Title tells her clients to have their insurance agents bind their policies by the date of the closing, prior to the NWS issuing a warning or watch. “As long as they do it and bind it by that effective date, [the insurance company] will honor that,” she said.
Gregorio has some clients who had their closings delayed due to Hurricane Dorian, which is expected to make landfall in Florida as a Category 4 storm early next week. Others got their insurance binders before the storm became a threat.
“I always recommend a local insurance agent. They know exactly what happens, especially in your neighborhood,” she added.
Nancy Klock Corey, regional vice president of Coldwell Banker, said the brokerage has post-storm documents available to its agents that can be added to contracts if closings are delayed.
A hurricane can also impact refinances, said Gary Singer of the Fort Lauderdale-based Law Firm of Gary M. Singer. With home purchases, it’s important to make sure that buyers have their policies bound in time. “People get a quote and don’t bind it in time,” he said.
Lenders require homeowner’s insurance, but if it’s an all-cash deal the closing could still occur.
Most contracts include a force majeure clause, which would give the buyer or seller the ability to delay the closing within a certain period of time after the storm passes. After 30 days, either party could cancel.
“You want to get the house re-inspected” following a storm, Singer said. “Everything depends on the contract. Typically the seller is responsible to turn the property over in the condition it was in the beginning. … If that becomes too expensive, they may be released.”
Fred E. Karlinsky, co-chair of Greenberg Traurig’s Insurance Regulatory and Transactions Practice Group, said that if a property is damaged, that could impact whether it can be insured.
Karlinsky represents a wide range of commercial and residential insurers in Florida and across the U.S.
“Whenever you’re in a state like Florida, you always have these issues and you need to be cognizant of them when you’re dealing with real estate closings,” he said.
Brightview CEO Andrew Masterman and 24151 Ventura Boulevard
Calabasas’ latest big office deal is a Class-A property on Ventura Boulevard.
The buyer, 4M Investment Corporation, paid $24 million for the 76,000-square-foot building, records show. ValleyCrest Landscape Companies sold the property at 24151 Ventura Boulevard. Both cut the deal through separate entities.
4M Investment plans to convert the property to a multi-tenant operation. The firm’s last big play in the L.A. area was a joint venture investment with Elat Properties into a Universal City office property. The joint venture purchased the 103,000-square-foot property from Blackstone Group for $36 million.
ValleyCrest had the office custom built in 2004, tapping Nadel Architects for the design.
Lee & Associates’ Mike Tingus, Grant Fulkerson and Jonathan Bruce represented ValleyCrest in the deal.
Calabasas is best known for its celebrity residents, who include rapper Drake, along with Kanye West and Kim Kardashian West. But the city also has a strong office market, which attracts investors.
Kilroy Realty Group sold the 225,000-square-foot Calabasas Park Centre early this year to a joint venture of Related Fund Management and Cruzan for $78 million.
Rising Realty Partners owns the similarly sized Park Calabasas campus and recently signed worker’s compensation servicer Republic Indemnity to a 50,000-square-foot lease there.
137 Saxon Mist Drive (Credit: Scoop Nashville and Benchmark)
It happens all the time: a broker is showing a home to prospective buyers and almost has them ready to sign a contract, but they pull out at the last minute because they just can’t picture themselves having oral sex in the bedroom.
People interested in the 2,900-square-foot four-bedroom home at 137 Saxon Mist Drive in Nashville would likely not have this problem, as Benchmark Realty’s Miguel Calvo uploaded a photo of himself receiving fellatio to the listing, according to Scoop Nashville. The home has a $399,000 asking price.
Calvo confirmed to Scoop Nashville that he had uploaded the photo and that it was of himself, but he did not say whether he did it on purpose or by mistake.
The posting included 31 photos of the home, but for some reason, the oral sex photo has attracted more attention than the kitchen, bathrooms and pool photos. This could be because it’s the only photo that is basically porn.
The photo has since been taken down, but its legacy will endure forever. [Scoop Nashville] – Eddie Small
Design firm ASH NYC did the showcasing for 732 Hill Street in Southampton, which is listed with Corcoran’s Gary DePersia for $4.495 million.
There’s staging and then there’s “showcasing.” Ignore the difference between the two at your peril, Hamptons brokers.
Rather than staging — which East Hampton designer Greg McKenzie described as setting up a living room and bedroom to look like a hotel room — developers are hiring interior designers to do showcasing, in which they furnish homes down to the very last detail.
When a home is showcased, buyers not only get to see it completely furnished, they can also purchase it move-in ready, without having to pack their own kitchen utensils, let alone decor or appliances, McKenzie said. For staging, on the other hand, furniture is rented for showings and moved out when a sale is secured.
Another distinction between staging and showcasing? A designer hired to showcase a listing often works with an architect on the initial plans for a house, McKenzie said. The designer helps, for example, with making sure there’s wall space for a family-size sofa and selects custom tiles and flooring to keep spaces from looking generic.
“A lot of times an architect is all about symmetry, and a designer walks in and is like, ‘OK, this is great, but where is the TV going to go?’” he said. “All of those things a designer helps with, which in a bad market makes it feel like a much more custom home.”
Any little bit helps. Data shows that there’s a flood of high-end inventory on the local market (see our story on page 28). Douglas Elliman’s second-quarter report on the Hamptons (which does not include the North Fork) shows that the number of luxury listings — defined as the top 10 percent — on the market is nearly double compared to last year.
“Furnished for a billionaire”
With so many homes available, tricks like showcasing are essential, said Corcoran agent Gary DePersia. He represents several fully decked-out spec homes, including 732 Hill Street in Southampton, designed by ASH NYC and listed for $4.495 million. He’s also the listing agent on490 Hedges Lane in Sagaponack, priced at $17.5 million.
Interiors in the latter were done by James Michael Howard, who executes what DePersia called “mack daddy” showcasing, even having custom carpeting cut specifically to fit whatever shape of room an architect plans.
Image may be NSFW. Clik here to view.“When he furnishes those houses, they look like they’ve been furnished for a billionaire,” DePersia said. “They don’t look staged.”
Additionally, buyers often purchase at least some of furnishings along with a showcased property, he said. A $5 million home can cost about $250,000 to fill, “so whether you pay a designer to do it or buy the stuff that’s already there, what difference does it make?” And for those who close on a sale in the spring and summer, a pre-furnished home is ready to go for the season.
Naturally, showcasing comes with a bigger bill than simple staging. Showcase fees can run from $25,000 to $1 million depending on the size and scale of a project, sources said. Having a good relationship with a designer, or installing fixtures and hardware from companies that want the visibility for their products, can help keep the costs down.
“What I charge a builder is not necessarily what I would charge a client,” explained Elsa Soyars, a local designer who often works in the spec home market. “You have to give a break to those guys because builders are generally on a budget and they’re trying to sell a home.”
Soyars said her consulting rates start at $275 per hour for builders, compared to $375 for residential clients. However, if developers ask Soyars to pull furnishings from her private cache, a rental fee is tacked on.
But there are still some builders who try their luck in the market without any staging at all, McKenzie noted. “Some builders don’t want to spend the money, or they put the house on the market and see what happens first,” he said.
For others, showcasing has become a no-brainer. One proponent is Paramount Custom Homes, the developer behind the Fields, which divides 35 acres of land in Southampton into 28 custom homes (see our story on page 28 for more on the project).
“Seven years ago, we could throw anything out there,” and it would sell, often while still in the construction stage, principal Bill Locantro said. Today, not so much. Facing an oversupply of spec houses, his company has had to change its strategy and outfit the homes to the fullest.
Taking note of the trend, the staging department of the New York City design mega-firm ASH NYC has been heading out to the Hamptons to showcase its work in addition to opening an office in Sag Harbor last summer. Along with DePersia’s Southampton listing, the company was hired by Shoshi Builders and MSB Development to do the interiors of 117 Montauk Highway in East Hampton at the suggestion of Compass, the listing brokerage.
“The word ‘partnerships’ keep coming up,” said ASH NYC’s director of staging, Andrew Bowen. “People like to align their brand with another.” In this instance, ASH NYC gave the team behind 117 Montauk Highway a discount in exchange for some creative freedom, though the exact fee is confidential, Bowen said.
However, “we couldn’t go too far in one stylistic direction or make it too conceptual because even though it might look amazing, at the end of the day we did it to help sell the property,” Bowen said.
A buyer hasn’t been found yet. The house has been on the market for a year, and its price was recently cut to $2.995 million from $3.5 million. But the ASH NYC furnishings and the publicity surrounding the firm’s work are making a noticeable difference, listing agent Evan Kulman said.
“The house wasn’t staged for nine months and ASH just staged it three months ago, and since then our traffic into the house has increased,” Kulman said. “If you look at the pictures [of 117 Montauk Highway], it looks like a very cool, sexy house, versus a vacant, empty house.”
5800 Green Valley Cir, Culver City (Credit: Google Maps)
An entity tied to Jones & Jones Management Group has purchased a multifamily property in the heart of the Fox Hills area in Culver City, which has recently been mostly defined by a plethora of headline-grabbing office deals.
The group purchased the 71-unit property for $22 million, records show. The seller was The Sheffield Apartments, which is associated with Stephen B. Shaw.
The property is located at 5800 Green Valley Circle. It was first built in 1970, and includes more than 55,100 square feet of space. Like the rest of the multifamily properties in Culver City built before 1995, the building is under a one-year, three percent rent increase cap after the city joined other area municipalities in imposing local controls earlier this month.
The Sheffield Apartments are around the block from a 4.9-acre office campus called Bristol 61 , which was recently renovated and sold for $39.2 million to Alexandria Real Estate Equities in February. The building is also on the same block as the Parkway Plaza Apartments, as well as the Pinnacle Creative Campus, which is owned by Steaven Jones Development Company.
In addition to big names like Apple and HBO, other tech and media companies have swarmed Culver City the last few years as developers build more creative office space and apartments.
Co-working firm Blackbird, which focuses on women of color, is set to open in September in Culver City at 10600 Virginia Avenue. Credit Karma is also opening a new office in One Culver at 10000 Washington Boulevard, joining WeWork at the complex. And earlier this summer, Lincoln Property Co. put one of its Culver City office properties, called Blackwelder, on the market. It is expected to garner offers around $150 million.
Jones & Jones Management Group is based in Baldwin Village near Culver City. The seller is based in Long Beach.
After spending years as a champion of brick-and-mortar stores, the firm is launching a new business called ThorLogis that plans to spend $900 million on purchasing and developing logistics properties, according to the Wall Street Journal. It is already at work on two sites in Red Hook, Brooklyn and the Netherlands.
Thor bought the site in Red Hook for $40 million in 2005, and originally intended an 800,000-square-foot office complex at the site. As The Real Deal first reported, those plans were killed earlier this year. Thor now plans to break ground early next year on a warehouse spanning 700,000 square feet that should open sometime in 2021. The Dutch flower company Bakker, meanwhile, will occupy its 430,000-square-foot facility in Amsterdam.
Thor’s traditional retail sector has been struggling lately, and CEO Joe Sitt told the Journal that the firm “basically shut down” buying retail properties in the United States seven years ago. It has now sold off most of its retail properties in the United States and in Europe.
Sitt said he is still meeting with several of the same executives in retail, “except now I’m serving their needs for a logistics space instead of serving their needs for a [store] space.” [WSJ] – Eddie Small
In June 2017, the founder of a Los Angeles-based multifamily property firm sent an arrangement of flowers to a female employee.
“I was going to get you sex toys, but you have all the latest and greatest…Wish you were in L.A.,” the founder, Marc Menowitz, allegedly told the woman, Alice Vysata. A year later, Vysata and another female employee, Kinga Tabares, filed separate sexual harassment lawsuits against Menowitz. Among the allegations, they claimed the owner of the Miracle Mile-based firm solicited naked photos from them, propositioned them and withheld commissions when they refused his advances.
Those lawsuits, filed in Los Angeles, are still ongoing. But this year, Menowitz has filed 10 lawsuits of his own against the two women.
His complaints, filed from July 2018 to May in California, Texas and Florida, primarily seek to recover commissions he alleges were wrongfully earned. Menowitz also denies both women’s allegations of sexual harassment. In the case of the flower arrangement sent to Vysata — who was in Florida at the time — he alleged in one of the lawsuits: “any writings speak for themselves.”
Menowitz’s Apartment Rental Assistance II operates roughly 18,000 rental units across 22 states, including L.A. complexes in Mid-City, Fairfax, Compton and Harbor City. His lawyer declined to comment for this article.
All but one of the lawsuits Menowitz filed is against Vysata, who was fired as director of acquisitions. The other is against Tabares, his personal assistant until she was let go.
Vysata’s attorney, Dan Kalish, said Menowitz’s strategy of filing numerous suits in different states is meant to “essentially bankrupt her so she has to dismiss her lawsuit.” He added that Menowitz’s claims that the commissions should be returned are “of course absurd.” Vysata earned the commissions as an employee, Kalish said, and is therefore entitled to them.
Vysata said she is undeterred by Menowitz’s lawsuits and intends “to fight it all the way through.”
“From one day to the next, he stripped me of everything, demoted me, banned me from the office and took everything I dedicated myself to for seven years,” she said in an interview with The Real Deal. “I want to make sure that not only do I get what’s rightfully mine and owed to me, but also that this doesn’t happen again.”
Her story dates back to 2011, when Vysata was hired as an intern. She quickly climbed the ranks, and became a top producer at the firm, according to the suit. In her seven years there, Vysata alleges she received unwanted advances from Menowitz “weekly.” In some instances, he would request she “dress sexy” or “send dirty pictures.”
She was ultimately fired in February 2018, at which point Menowitz allegedly withheld $140,000 in commissions she’d earned from two property sales that had recently closed. The money would be released if she agreed to “finalize the separation” with a “mutual agreement” that would relinquish claims against Menowitz, the lawsuit states. She refused.
Since Vysata filed her lawsuit last summer, Menowitz filed nine different complaints or petitions against her through a variety of his shell companies, court documents show.
The suits aim to recover commissions Vysata earned “illegally” when she didn’t have a valid real estate broker’s license and was allegedly performing brokerage services, according to the filings. Four of the lawsuits Menowitz filed were in Florida — where Vysata now lives — three in Texas and two in California. Some of the shell companies have Texas addresses.
Roughly half his lawsuits have been dismissed, according to Kalish. Menowitz is appealing those, he added. The remaining suits have not been heard by a judge.
Menowitz also filed a counter complaint alleging “tortious interference with prospective economic advantage” against Tabares, who had also accused him of sexual harassment and wrongful termination. Tabares’ attorney said the court dismissed Menowitz’s counterclaim, which he is now appealing.
Every day, The Real Deal rounds up Los Angeles’ biggest real estate news. We update this page throughout the day. Please send any tips or deals to tips@therealdeal.com
This page was last updated at 2:17 p.m. PT
Urban Stearns has a new Opportunity Zones project in the works. The developer filed plans to build a 120-unit apartment complex near the San Pedro waterfront. The $40 million project, which will seek Transit Oriented Communities bonuses by adding a certain number of affordable units, is expected to break ground early 2020. [Urbanize]
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Available listings for an average earner spending 30 percent of their income on housing.
Choices are few for renters on a $61,000 salary looking for a place in L.A. An interactive map the Los Angeles Times created shows you how many rental properties are deemed affordable in ZIP codes across California. But the unaffordability of L.A. is stark. [LAT]
Speaking of affordable, an 85-unit affordable housing complex broke ground in El Sereno. The Rosa de Castilla Apartments is one of 19 affordable projects financed by Measure HHH funds. The developer, East LA Community Corporation, is reserving more than half of the units for homeless veterans. [Curbed]
L.A. is accepting proposals to redevelop West L.A. Civic Center. The aging city government outpost in Sawtelle has five buildings connected by a central plaza. Councilman Mike Bonin highlighted the need for a senior facility and outdoor public space, along with “sorely needed affordable housing and workforce housing for local seniors and residents.” [Urbanize]
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Aerial view of 611 N. Brand Boulevard and Rossano de Cotiis (Credit: Hunter Kerhart Architectural Photography)
Onni Group pivots to massive hotel in Glendale. The Canadian developer is busy with a handful of residential projects in Downtown L.A., but now wants to build an 857-room hotel on North Brand Boulevard. Onni would demolish an office tower at the site it purchased two years ago, and where it had intended to build a 600-unit residential complex. [TRD]
Half of a Palmdale shopping center sells. About 55,000 square feet of the Rancho Vista Plaza property sold for $11 million. The complex has tenants including MetroPCS, Subway and State Farm. It’s the latest in a string of retail center trades over the last couple months, despite wariness over the sector’s long-term viability. [TRD]
The S&P 500 is up 2 percent this week and 19 of the 29 stocks that The Real Deal follows have risen, signaling somewhat diminished fears of a trade war with China. The winners this week were commercial brokerages Marcus & Millichap, which rose 4.12 percent, and Newmark Knight Frank, which rose 4.11 percent. Realogy, on the other hand, was down 26 percent this week, another terrible week for the resi brokerage conglomerate. [TRD]
A New Mexico Attorney General says that the state should take possession of Epstein’s ranch. Epstein apparently planned to inseminate hundreds of women at his ranch before his death at a New York City jail by suicide. The Attorney General said Epstein should never have been granted the leases in the first place and suggested turning the lands over to local farmers. [WSJ]
A Benchmark Realty real estate agent added a “sexy selfie” Tuesday to an otherwise unremarkable listing. The photo, which has since been removed, was attached to a listing for a four-bedroom home asking $399,000. The risky shot shows the agent engaging in a sex act with a lover faced away from the camera in a bedroom. [NYP]
Builders around the world are using novel construction methods to reduce emissions. Former Whitehouse advisor Steve Bannon suggested using “hempcrete” to build walls, while firm JustBio Fiber Solutions plans to fill orders to produce enough hemp bricks to build 2,000 homes. [Bloomberg]
For just $105,000, you can buy a 44,000 pound, 774-square foot home on Amazon called “The Cliff.” It’s listed as currently unavailable on the site, but in theory, would be delivered on-demand to the purchaser. The home is a big step up from the $7,000 tiny home that sold within hours on Amazon earlier this year. [Inman]
FROM THE CITY’S RECORDS:
An LLC associated with Jones & Jones Management Group has purchased a 71-unit apartment complex at 5800 Green Valley Circle in Culver City for $22 million.
An LLC managed by SoCal Better Homes CEO Curt Ranta has filed plans for a 26-unit TOC apartment building on Brynhurst Avenue in Hyde Park. The location is eligible for Tier 3 incentives. [LADCP]
The Miami skyline and a satellite image of Hurricane Dorian (Credit: Getty Images, iStock)
Across South Florida, developers and builders are securing tower cranes to blow with the wind like a weather vane, putting away debris that could become projectiles and emptying out dumpsters of loose materials as Hurricane Dorian barrels toward Florida’s coastline, projected to become a powerful Category 4 storm.
As of Friday afternoon, the hurricane was a Category 3 storm with maximum sustained winds of 115 miles per hour, approaching the Bahamas. South Florida could begin to feel the effects of tropical storm winds on Sunday or Monday, with landfall currently expected between Palm Beach and Martin counties early Tuesday.
At Estates at Acqualina in Sunny Isles Beach, workers started on Wednesday removing trash, tying down loose materials, and removing wind screens from the top of the building, said developer Jules Trump. The site’s tower cranes will be secured so that they can blow freely in the wind. And before the storm approaches, anything electrical will be disconnected in case of water intrusion. Computers will be covered and placed on the floor.
“We are taking all precautions,” Trump said.
Nearby, Developer Gil Dezer said the Residences by Armani/Casa construction site in Sunny Isles Beach is already “all buttoned up and sealed up” now that the interiors are being built out.
For Hurricane Irma, Dezer housed supercars in his Porsche Design Tower in Sunny Isles Beach. He said the offer is now on the table for Brett David, owner of Prestige Imports, who stored a handful of high-end cars, including a $5 million Ferrari and a $15 million Pagani Zonda during Hurricane Irma.
In Boca Raton, Penn-Florida Companies, the developer of Via Mizner, a 2-million-square-foot mixed-use project, has had teams securing equipment since Wednesday, removing loose debris and banding all material, according to a spokesperson. Columns and shear wall forms were also poured with concrete to secure them for the storm.
Workers also have been checking the fence lines and screens, relocating all gas and oil products to a safe area, and have cancelled any new deliveries to the site. Sedimentation tanks are being filled with water to add weight for protection against high winds. And in advance of the storm, engineers are also removing awnings and signs and filling up life safety generators.
“Our project managers are meeting with their onsite teams and subcontractors after every advisory to further evaluate and prepare,” the spokesperson said in a statement.
Moss Construction, which has 45 projects within the storm’s forecast cone, follows a specific storm protocol, with preparations lasting all week, said Scott Gerrard, vice president of safety, health & environment, in a statement.
The sites stopped delivery of materials on Wednesday, and Thursday started securing the sites, making sure construction materials are stored properly, debris is removed and/or secured and ensuring IT equipment and heavy machinery is protected, the spokesperson said.
“This year we will be using 16 licensed drone operators to conduct fly-overs of all of our sites to check that storm preparations are on schedule,” he said in a statement.
Similarly, at Kolter Homes’ South Florida projects, workers have been disassembling and securing scaffolding, removing wind screens from fences, and bundling up roof tiles and zip-tying them on the roof, according to a spokesperson.
Peter Dyga, CEO of Associated Builders and Contractors Florida East Coast Chapter, said most plans are put in place 72 hours out from the hurricane’s approach, so preparations are already underway.
“The biggest problem is loose items that can be projectiles,” Dyga said.
Securing tower cranes is, of course, also vital.
Key International Co-President Inigo Ardid said in a statement that its AC Hotel by Marriott site in Fort Lauderdale Beach stopped the use of its tower crane at noon on Wednesday to ensure it was secured by the end of that day. Any materials on the above-ground floors were also brought down to the first level for safety.
“We will continue procedures to secure the project,” he said, “and are monitoring the hurricane’s path to determine when site work can resume.”
Josh Schuster’s Silverback Development has snagged a $50 million capital investment to seed a new Opportunity Zone Fund and expand to additional markets.
The three-year-old firm wrapped up a second funding round from Silverpeak, the investment firm co-founded by former Lehman Brothers execs, which has backed Schuster since 2016. The developer said the new tranche will accelerate its expansion to markets including Louisiana and North Carolina, and will also be invested in local projects through a $200 million opportunity zone fund.
“We’re deploying that capital now,” Schuster said.
The developer said Silverback has four OZ sites — a project at 38-11 41st Street in Astoria; a commercial office building at an undisclosed site in Long Island City; a multifamily project in the South Bronx; and a 372-unit, ground-up rental in Stamford, Connecticut.
To date, Silverback has financed and developed more than 1 million square feet of real estate in New York and Florida. Schuster, who left DHA Capital three years ago to launch the firm, said it currently has $2 billion in the pipeline representing 1,000 residential units and 500,000 square feet of commercial states in Florida, Connecticut and Washington, D.C.
Silverback’s current projects in New York include a 13-story condo at 359 Second Avenue that will have between 53 and 55 units and a total sellout of $150 million. In June, Silverback landed a $90 million construction loan for the project from Och-Ziff Capital Management Group and Michael Dell’s MSD Partners.
This year, Silverback and AEW Capital Management paid $40 million for an under-construction multifamily project at 16 Queens Plaza South in Long Island City.
With additional funding from Silverpeak, Schuster said he’s hunting for opportunities in Louisiana and North Carolina. In the former, there’s still demand for jobs and housing in the wake of Hurricane Katrina. In the latter, Schuster said he’s encouraged by strong employment growth and the relatively low cost of living, which has attracted millennial buyers and renters.
Schuster said he’s still bullish on New York, even though developers like Steve Witkoff, Michael Stern and Gary Barnett said recently they’re looking beyond the city in the wake of the new rent law and increased transfer taxes.
“Part of our investment philosophy has been somewhat contrarian with the rest of the market,” Schuster said.
“Folks are fearful and capital is sitting on the sidelines. We think the time to build is now,” he added. Projects built now will hit the market when there’s a dearth of inventory and that will lead to quick absorption, he said. “As long as you’re building the right product for the right end-user, then the product will rent or sell.”
From top: Ellen DeGeneres and Portia de Rossi, Jan Koum and Ron Meyer, and Pierce Brosnan with his new home in Santa Monica (Credit: Getty Images)
It was a big and busy week in Los Angeles for celebrity home buyers and sellers. To start it off, a Whatsapp founder shelled out a nine-figure sum for NBC Universal vice chairman Ronald Meyer’s Malibu mansion. Meanwhile, Ellen DeGeneres, who has serious real estate chops, sold a Beverly Hills home for a modest profit and former 007 star Pierce Brosnan put down roots in Santa Monica.
Meyer sold his Malibu mansion to Jan Koum, co-founder of the messaging service Whatsapp for $100 million. The home hit the market in January for $125 million. It has five bedrooms, six bathrooms, a large pool, a tennis court, a spa and access to a secluded beach. The property also features two guest houses. It was designed by Charles Gwathmey. Kurt Rappaport of Westside Estate Agency represented both sides of the deal. [TRD]
DeGeneres and wife Portia de Rossi flipped a Beverly Hills mansion for $15.5 million, after buying it for $15 million less than a year ago. The sale price was also 13 percent lower than its asking price. The Hollywood Regency-style home used to belong to actress Marjorie Lord. It spans 5,100 feet, with five bedrooms, four-and-a-half bathrooms. Rappaport also had the listing. Stephen Resnick and Jonathan Nash of Hilton & Hyland represented the buyer. [TRD]
Brosnan — who played 007 in four James Bond movies — and his wife Keely Shaye Brosnan bought a Santa Monica home for $3 million. The home in the College Streets neighborhood hit the market last month. The new home includes 2,319 square feet with four bedrooms and three bathrooms. Alejandra Martinez-Sorensen of the Agency had the listing. [TRD]
In anticipation of another NFL season next weekend, two L.A. Rams players made separate real estate plays this week. Four-time Pro Bowler Andrew Whitworth paid $6.1 million for a 10,000-square-foot mansion in Westlake Village. His new home includes eight bedrooms, nine bathrooms, a swimming pool and basketball court. It hit the market in May for $6.9 million. Earlier in the week, his teammate, Rob Havenstein, paid $1.75 million for a custom-built home in Thousand Oaks. It’s a single-story residence that spans over 3,900 square feet, four bedrooms and a swimming pool. [LAT]
UPDATED April 18, 1:23 p.m.: There’s been a lot of chatter about housing prices nearing the edge of a cliff, a bubble about to burst, an impending market crash. But — perhaps unsurprisingly — that’s not how the luxury brokers in Los Angeles see it.
Yes, the market is leveling a bit. Sure, the fourth quarter of 2018 slowed to a crawl. No, sellers can’t automatically receive the astronomical asking prices of a few years ago. But brokers said that’s more a reflection of prices stabilizing and buyers demanding value than it is of an overall market decline.
To get a look at the residential playing field in Los Angeles County, The Real Deal ranked the highest-performing luxury brokers between March 1, 2018, and Feb. 28, 2019.TRDanalyzed single-family home sales of $4 million and higher to identify the 20 top-producing agents. Agents were credited with both listing and buying sides, including deals for which they were the co-broker. An agent who represented both parties received full credit for each side. Off-market sales were included when brokers provided evidence of a commission received for the transaction.
Westside Estate Agency’s Kurt Rappaport tops our list with $513.4 million in sales. The Williams and Williams team at Hilton & Hyland clocked in at second place with $412.5 million. David Offer’s team at Berkshire Hathaway ranked third with $281.1 million. Aaron Kirman Partners, which became part of Compass last year, came in fourth with $261.2 million. And Coldwell Banker’s Jade Mills rounded out the top five with $248 million.
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There were some monster deals that closed last year. Hard Rock Cafe co-founder Peter Morton’s Malibu home sold for a record $110 million (Rayni and Branden Williams were the seller’s agents). The Holmby Hills estate of a former movie executive sold for $69 million (the listing was shared by Linda May of Hilton & Hyland, No. 9 on our list, and Stephen Shapiro of the Westside Estate Agency). Le Belvedere, a property once owned by developer Mohamed Hadid, sold for $56 million (the Agency’s Stacy Gottula and Coldwell Banker’s Joyce Rey, whose team is No. 11 on our list, both represented the seller). Rappaport and Branden and Rayni Williams closed Beverly Hills’ 826 Greenway Drive for $27.6 million in December.
“The high-end areas of L.A. haven’t suffered a big adjustment,” said the Agency’s Santiago Arana, No. 6 on our list. “On a deal-by-deal, property-by-property basis, [the decline] hasn’t been dramatic.”
Brokers said the buyers are still there, but they’re just being more cautious and waiting for prices to go down. It’s a different picture from that of the last few years, when prices were skyrocketing and everyone was scrambling to get in.
“Before, it was sellers setting prices and breaking records,” said David Parnes, who, with James Harris, was No. 10 on TRD’s ranking. “Now they can’t set outrageous prices and expect the buyers to meet them.”
Much of this was due to a lack of clarity about where the market was going. The stock market saw incredible volatility throughout the year, and the Dow Jones Industrial Average finished 2018 down 5.6 percent — the worst performance in a decade. Worries over monetary policy, U.S. politics and the global economy also contributed to a general sense of uncertainty.
On top of that, November’s Woolsey Fire hit Malibu hard, destroying about 400 single-family homes in the area. Arana said he lost about $50 million that was in escrow when buyers pulled out of the deals as a result of the fires.
All of those factors contributed to a slowdown in the luxury market, particularly in the fourth quarter of the year. Between March 2018 and March 2019, inventory in Los Angeles County increased by 5 percent, while properties sold decreased by 15 percent, according to a market report from Douglas Elliman. The trend was more pronounced in luxury pockets like Bel Air-Holmby Hills, where inventory increased by 13 percent and properties sold decreased by 33.3 percent.
The competitive edge
Being upfront about the realities of the market is one of the main things that helped Arana hit $247 million in sales volume last year, he said.
“As agents, our job is to communicate,” Arana said. “If we’re proactive with doing that, we’ll be selling those properties. If you do nothing, you might lose the listing to someone who has the ability to explain [where the market’s at] and get it sold.”
Coldwell Banker’s Rey attributed part of her success last year to the premium she put on her buyers. She saw buyers’ attitudes start to shift because of the uncertainty in the marketplace and said she told her entire team to focus more on buyers’ needs, as opposed to focusing quite so much on acquiring new listings.
Offer at Berkshire Hathaway said that after 28 years in real estate, he gets most of his client base from referrals.
“I’ve never been someone who believed in parking fancy cars in the show garage and serving sushi. I think that’s smoke and mirrors,” he said.
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Parnes and Harris, on the other hand, have made a name for themselves with over-the-top parties that showcase their homes. They’ve hosted everything from a Burning Man-themed party in Hollywood to a Havana Nights party on the Sunset Strip to a “Great Gatsby”-themed party in Bel Air, many of which were featured on Bravo’s “Million Dollar Listing Los Angeles,” on which they both star.
“At the end of the day we want to get as many good people into a house as possible,” Parnes said. “We’ve got a great contact list of clients and top agents and have sold a phenomenal amount of real estate to buyers or friends of buyers who’ve come to events.”
Kirman of Compass, meanwhile, said his team is focused on constantly innovating in order to stay on top.
“Agents don’t have clients anymore. I don’t have clients,” he said. “As many as I have, a client is going to go with whoever they think is going to get highest dollar in the shortest amount of time in the most ethical way.”
Kirman said building a big team with a lot of hyperspecific focus areas has helped him stay ahead of the curve. He currently has more than 65 people on his team who handle everything from administrative support to creative strategy. Kirman said they spend “hundreds of thousands of dollars” experimenting with new strategies to tell their story and acquire new clients.
The team can end up losing thousands of dollars on a bet that doesn’t pay off, but when they do, Kirman said it’s a game changer. One of the strategies that’s been successful for them is using hypertargeted digital ads through Google’s AdWords and AdSense, which allows them to show individualized properties to potential buyers.
“Based on intelligence we have through our website, we can curate who’s looking at any price point in our area and send them any piece of inventory in their area,” Kirman said.
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From there, his team does extensive follow-ups, which could involve everything from sending specialized books to flying potential clients out to Los Angeles.
Kirman said a targeted campaign helped them connect with a Russian billionaire who was looking to spend between $50 million and $80 million. That unidentified individual is now coming to Los Angeles to look at properties.
“Bottom line, this is a changing market and we refuse to be status quo,” Kirman said. “We want to be the market leader, and we know it’s changing so quickly that if you’re not changing with it, you’ll be left behind.”
The poaching problem
Kirman’s team is entirely self-contained, even though it’s now part of Compass, which bought Pacific Union International in August. That was just one of Compass’ many acquisitions as it continues to lead the real estate industry’s rapid push to consolidate. Even so, brokers not affiliated with Compass don’t appear overly concerned with its buying spree.
“Our model is completely different,” said Arana, one of several managing partners at the Agency. “Are they poaching our agents? They are. And some are leaving, but at the same time, we’re going after other agents who have gone [to Compass] and that’s not what they want.”
He said the Agency prioritizes quality over quantity and looks for agents who have years of experience, are well-connected and can hit the ground running. In his view, Compass’ “only goal is to gain market share… We’re not targeting the same people and not targeting the same things.”
Offer, similarly, didn’t put much stock in all of the buzz about industry changes.
“Most of my clients don’t even know where I work,” Offer said. “They don’t care. They’re listing with David Offer, not Berkshire Hathaway. I can’t imagine [the consolidation is] having a negative impact other than people losing phone numbers because [the numbers are] changing so often.”
Pricing, pricing, pricing
It’s become difficult to advise buyers and sellers on pricing because there have been “fewer data points,” according to Offer.
“In a market where the direction is very clear and prices are appreciating and there are lots of transactions, it’s relatively easy to provide a narrow range of value for the property,” Offer said. “When things are choppy and fewer transactions are happening, it can be more challenging to pinpoint the value.”
High-end buyers are increasingly looking for a property that has something special — and don’t mind paying if they find it, added Kirman, citing a 4,500-square-foot condo in Santa Monica that sold for $12 million and Ricky Schroder’s ranch in Topanga, which sold for $9.3 million. Both went for relatively high prices, considering what they were at face value.
“We’re seeing the unique and the interesting are selling, the out-of-the-box are selling, while some of the run-of-the-mill stuff is really sitting, including the view properties because they’re all similar and some aren’t as defined as they should be,” Kirman said.
Arana added that he sets realistic expectations upfront. That means leveling with sellers that they might not get the asking prices of a few years ago, but also making sure buyers know that a lowball offer might mean they lose the house because “some things aren’t going to take a hit.”
And while a lot of the ultra-high-end luxury homes have seen price reductions over the last year, brokers said that doesn’t necessarily mean the market is falling, but perhaps that the homes were overpriced to begin with. Arana cited Bruce Makowsky’s so-called “Billionaire” spec home, whichwas originally priced at $250 million but is currently on the market at $150 million.
“It’s created the sense in the consumer that the market is crashing,” said Arana, adding that he thought the Bel Air home was worth something closer to $85 million.
Off-market’s waning appeal
In the last few years, pocket listings have proliferated for these ultra-high-end listings. Offer said he’s had sellers who are increasingly open to such a route, especially in a more “rational market,” where bidding wars are less likely and clients want the discretion that often comes with an off-market listing.
“At the same time, sometimes in order to have success you need more exposure than the pocket listing can provide,” Offer said. “Pocket is sometimes out of sight, out of mind.”
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Hilton & Hyland’s Branden and Rayni Williams and Westside Estate Agency’s Kurt Rappaport sold 826 Greenway Drive in Beverly Hills for $27.6 million.
Jade Mills of Coldwell Banker said that as inventory has increased over the last year, she’s seen pocket listings go down.
“I think sellers want to jump in with both feet and be seen,” said Mills, who’s one of the listing agents for the $245 million Chartwell Estate in Bel Air, the most expensive property currently on the market.
Rey said her office did an analysis of sales in the first quarter of 2019 and found that pocket listings had decreased. She, too, believes that in this market sellers want and need the exposure that comes with the MLS.
“The minute you list with our company, we have a service that automatically translates it into 40 languages and sends it to 80 countries,” said Rey, referring to ListHub, which Coldwell Banker uses. “Off-market, you don’t have that benefit.”
Kirman is also focused on his global reach. He got back from a trip to Asia in March and said that as China’s growth is slowing, he’s starting to target wealth managers in Indonesia and Vietnam. Not only does this expand the potential client base, it gets outside of the Los Angeles real estate bubble.
“I was in Hong Kong with a buyer who was ready to spend $100 million on a 4,000-square-foot property. I couldn’t believe my eyes!” Kirman said. “I wanted to tell him, ‘You need to buy in L.A. — I could sell you a kingdom!’”
Editor’s note: This article has been amended to reflect that both Branden and Rayni Williams co-brokered the sale of 827 Greenway Drive with Kurt Rappaport.
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You can’t play tennis at night in Hidden Hills — lights aren’t allowed. You aren’t allowed to park on the street overnight, and there are no sidewalks, though miles of bridle paths abound. There are rules dictating ridge lines, the size of the second story, the percentage of permeable material allowed on your lot, even the 600 square feet you have to set aside for a horse barn, even if you don’t have a horse.
But one freedom the 2,000 or so residents do enjoy in this wealthy gated community in the San Fernando Valley is the ability to name your own house. In front of most of the 650 homes in Hidden Hills are charming wooden placards set near the split rail fences (which are also mandated), with names like “Ellis Island” and “Wonderland.”
One lawyer used his naming rights to send the city a message after the architectural committee tried to dictate where he could place a swimming pool on his property. He wanted to put it on the hill overlooking the street; the city wanted it on the other side. As the house was being planned, he pushed back again and again, saying, “it’s not your house,” said Marc Shevin, a Berkshire Hathaway agent and friend of the homeowner. Eventually, he was able to build the home with the pool where he wanted it, and he put a sign with his chosen name out front: “It’s not your house.”
Located a little over 20 miles from Hollywood — but very much in its orbit — Hidden Hills is a throwback to a time long since passed. It’s a gated time capsule to the 1950s, the era that spawned the city, whose ethos is spelled out at the main gate: “Relax. Slow down. Children and horses at play.”
Yet for all its old-fashioned, rules-obsessed and equestrian-minded ways, Hidden Hills is a magnet for dozens of A-list actors, reality TV stars and music artists who continue to buy multimillion-dollar homes here.
Three guard-gated entry points prevent the paparazzi from camping outside the compound of Kanye West and Kim Kardashian, as well as other celeb spreads. When they lived here a few years back, actress Jessica Simpson would regularly walk her children to a neighbor’s house to pet and feed the ponies, and Jennifer Lopez would don sweatpants and a bandanna and push a stroller down the street, Shevin said.
“People who are very high-profile live a normal life in Hidden Hills,” said Shevin, who has represented Simpson and Lopez. “And that’s not always the case in other cities.”
The obsession with “normal” has made Hidden Hills a tough competitor to neighboring Calabasas, where homes and streets in the gated communities look more like “money,” as Shevin put it. Hidden Hills is also a more affordable but exclusive alternative to the more storied enclaves for the rich and famous of Beverly Hills and Bel Air.
The city has long been thought to be a relative bargain, brokers say. While homes in Beverly Hills sell for $3,300 to $3,500 per square foot, in Hidden Hills — where no residential lot is smaller than an acre — they average $1,300 to $1,400 per square foot, said Tomer Fridman, an agent at Compass whose clients include West and the Kardashians.
But Hidden Hills’ rep as a comparatively affordable bastion for the well-heeled may not last much longer. Sales prices have surged in the first half of this year, with 26 single-family homes selling for a combined $112.1 million, a 51 percent increase in dollar sales volume over the first half of 2017, according to The Real Deal’s analysis of Redfin data.
It was the second year in a row that sales dollar volume has risen by at least 50 percent in the first half of the year.
Canadian singer the Weeknd spent $18.2 million for his nine-bedroom spread last July, property records show, helping to solidify a new price floor in the city, agents said.
But as prices have risen, tensions have heightened over Hidden Hills’ rules and restrictions on home sizes. Increasingly, agents say, buyers are pushing to tear down many of the older ranch homes and build even bigger. “Part of the renaissance in Hidden Hills is the new construction that is going on there,” Fridman said.
Take, for example, a rustic home with a horse arena out back, which was once owned by Frankie Avalon, the singer-actor famous for ’60s-era beach party movies. The 2-acre property features a tennis court, a bar, a putting green, a guest house, a three-horse barn and a pool. Compass agents Dana Olmes and Jeff Biebuyck listed the home for $5.5 million.
“Some people would say they would tear it down,” Olmes said, adding that in the Trousdale Estates neighborhood of Beverly Hills, “this property would probably be listed for $20 million.”
A-list pioneers
Since its creation in the 1950s, Hidden Hills has been “discovered” by several waves of celebrity pioneers. Before there were Kim and Kanye, there was Leo Gorcey.
The prolific Hollywood actor was the first homeowner in Hidden Hills in the ’50s. Gorcey paid $35,000 for one of two model homes, a one-story ranch-style house on Long Valley Road. Back then, 1-acre lots were selling for $4,750.
The city, which incorporated in 1961, was the vision of landscape architect A.E. Hanson, who previously planned Rolling Hills and Palos Verdes Estates, which are similarly rustic neighborhoods.
Over the years, wealthy families from the Nordstroms to the Disneys have discovered the place. But Shevin, who has been selling homes here for three decades, traces the current celeb craze to the mid-1990s, when a Santa Monica developer, EGC Luxury Homes, took a bold gamble to build two large spec homes, each about 10,000 square feet.
Residents thought the developers were crazy, but Shevin sold the homes when they were still in drywall, for record prices over $6 million. At the time, the highest sales price in the enclave was around $4 million, he said.
One of the spec houses was purchased by music producer Rob Cavallo. He converted half of his six-car garage into a music studio, where artists like Faith Hill and Green Day came by to record. Soon they brought their friends to visit, and Shevin’s phone was ringing with more entertainers interested in buying homes in Hidden Hills.
“It got a certain cool factor,” Shevin said. “So as people came out and discovered the lifestyle, developers started to build bigger homes to accommodate these buyers.”
But coolness alone was not enough to attract celebrities. They wanted privacy and security.
In 2005, when “Friends” was winding down, actor Matt LeBlanc complained to Shevin about how the paparazzi stalked him outside his gated house in Encino, often following him to the TV studio and back. When he learned that Hidden Hills had three guard gates, he bought a home there for $9 million. (LeBlanc sold it just over a year later, after his divorce was finalized.)
Hidden Hills presents a definite challenge for the paparazzi. While photographers sometimes congregate at the elementary school just outside one of the gates, the security force is vigilant, agents said. While passing through the main gate, Olmes admitted, she has sometimes let photographers in, mistakenly thinking they were part of the client’s entourage.
But no family has shaken things up in Hidden Hills quite like the Kardashians, who have lived there on and off for over two decades.
The second home that Kris and Bruce Jenner bought in the city, in 2006, was ground zero for the first few seasons of “Keeping Up With the Kardashians.” As the children became rich and famous they started buying homes of their own in Hidden Hills, within a few blocks of their mom.
In 2014, Kim and Kanye bought their 15,000-square-foot compound from spec developer Joseph Englanoff, who had torn down Lisa Marie Presley’s former home. After paying $19.75 million for the 3-acre spread, which has a full music studio and spa, “Kanye has about $20 million into the house already” in renovations, Compass’ Biebuyck said. “It’s nuts.”
Eventually, the city grew tired of TV production crews. A year after the Kardashians’ show debuted in 2007, the arrival of another reality show, “It’s Complicated” with actress Denise Richards — who sold her Hidden Hills home last month — led to a clampdown on filming, Olmes said. These days very little of the Kardashians’ show is filmed in Hidden Hills, she said, even though it’s where they actually live.
The go-to brokers
Real estate agents are practically family to Hidden Hill residents, brokers said. Shevin and Olmes have sold dozens of homes to two and three generations of families.
Through an accident of history — and perhaps sheer determination — only three teams working for two firms, Compass and Berkshire Hathaway, control the majority of listings here, agents said. Shevin said his team — which consists of his brother, Rory, his daughter and an assistant — sold 20 properties totaling $140 million last year. They have already sold 18 properties totaling about $100 million through the first half of this year, he said.
Compass poached Fridman, Olmes and Biebuyck last year from Sotheby’s-affiliated Ewing & Associates, where they made their name in the Calabasas area. Olmes and Biebuyck said they did 14 transactions totaling $30 million in 2017. Half of those, or $5 million worth, were off-market, Biebuyck added. So far in 2018, they say, they have sold 12 properties totaling $60 million, with two of the transactions, or $12 million, being off-market.
The intricacies of Hidden Hills could be one reason why so few agents get the listings. Outside agents sometimes struggle to learn their way around the more than 40 streets, with spotty cell phone coverage and no street lights to aid them. “It takes years to figure it out,” Biebuyck said.
But for agents who have made the commitment, the struggle can be well worth it. At any given time, some 20 homes are for sale in the city, Olmes said.
Many of those are spec homes. Ashley Ridge, one of the neighborhoods within Hidden Hills, was named after developer Mike Ashley, who catered to the mansion-seeking crowd by building more than 70 homes in the town.
The newer areas feature spec homes like one built by developer Avi Wazana on Long Valley Road. “This was a teardown for $2.75 million,” Biebuyck said. Now it’s listed at $12.4 million. The 11,000-square-foot home, which has been on the market for eight months, has six bedrooms and six baths, a guest house and a distinctly modern feel.
Wazana took advantage of loosening rules. Developers can now build the second floor up to 50 percent of the size of the first, an increase from the previous 40 percent. The maximum ridge line has risen by a few feet, to 30 feet. The Hidden Hills Community Association, which approves construction and modifications, made both changes in the last two years.
While developers and some agents wanted more dramatic changes, the city was only willing to go so far, agents said. “The architectural committee should be open to design advances and modernized details that would enhance home elevations and choices for new homeowners, as well as remodels,” Biebuyck said.
The association would not give in to some developer requests.“They want to keep it more rural, more ranchy,” Shevin said of the association.
Even with prices rising to never-before-seen levels, Fridman, for one, doesn’t see Hidden Hills becoming a land of McMansions anytime soon.
“This is a community that is striving in a very modern world to maintain its identity and character,” he said. “That is what draws people there … Just because something is new doesn’t make it better.”
Though luxury yachts might be viewed as floating mansions for the peripatetic elite, the yacht brokerage industry bears only passing similarities to the real estate business. (Credit: iStock)
Early in August, reports surfaced that luxury developer Miki Naftali was being sued for $725,000 in Florida for allegedly stiffing yacht broker Scott Goldsworthy out of a commission on a deal to buy a megayacht from Italian shipbuilder Baglietto. It was the latest installment in a saga that started with Naftali requesting a declaratory judgement in New York Supreme Court, stating that Goldsworthy wasn’t entitled to a commission in the first place.
Understanding the boat drama begins with the basics of yacht sales — including what being a yacht broker, or a yacht sales professional (YSP) in the lingo of the trade, actually means.
But first, some history: While the roots of yachting date back to the reign of Charles II of England in the late 1600s, recreational cruising grew increasingly popularity over the 20th century. The Yacht Brokers Association of America (YBAA) was founded in 1920; Robert Bertram, the man sometimes cited as the father of the modern yacht brokerage, earned his reputation as a pioneer during the early 1960s. Ebbs, flows, and the formalization of the trade followed. Vin Petrella, the current executive director of YBAA, joined Hellier Yacht Sales in New London, Connecticut in 1981 and stayed in the industry for the next 40 years; in the early 2000s, he helped introduce a certification program with an aim of professionalizing yacht sales. “We were trying to disassociate from the ‘used car dealer’ reputation,” Petrella told The Real Deal. And for the most part, he thinks it was successful.
“There will always be shysters,” said Steve Messenger, a broker with Denison Yachting. “When you have any business that deals with large sums of money and is unregulated, you’re going to have a lot of people who are trying to take advantage,” he said, pointing to an incident in the early 2000s in which a Snug Harbor broker was caught stealing deposits.
In the years since its creation, the CYPB licensing credential–which must be renewed every three years and requires ongoing education to remain current–has created more legitimacy, transparency, and trust, brokers said.
Though luxury yachts might be viewed as floating mansions for the peripatetic elite, the yacht brokerage industry bears only passing similarities to the real estate business. “The due diligence process is pretty much the same,” said Petrella.
That said, the industry is not as regulated: California and Florida–where the vast majority of transactions take place–are the only states that require brokers to hold licenses.
North American cities with the most CPYB brokers:
1. Seattle, WA (42)
2. Annapolis, MD (17)
3. Ft. Lauderdale, FL (15)
4. Vancouver, BC (13)
5 (tied). St. Petersburg, FL (12)
5 (tied). Newport, RI (12)
Nor are yacht sales as complicated as property sales; Messenger likens it to the process of buying a car. A yacht on the market for $250,000 can be sold, start to finish, within three weeks, depending on surveyor inspection findings and the sea trial. Yachts under five net tons displacement must be state registered and titled in states where titling is available. Vessels over that limit require federal documentation; in times of war, those yachts can be commandeered by the Navy or Coast Guard, Patrella explained, though it’s highly unlikely today.
Then there’s the inventory, which can cost anywhere from tens of thousands to millions, depending on the specifics of the yacht. While new vessels enter the water every year, the used boat market has become very strong, according to Messenger, but also very limited. He estimated that there are about 130,000 yachts worldwide on the market at the height of the recession; today, that number has fallen to about 70,000. “Used boats are hard to come by, and good listings are valuable,” he said.
Largest Brokerages by CPYB Broker Count:
1. Galati Yacht Sales, 21 brokers in Florida, Texas, Alabama
2. United Yacht Sales, 10 brokers in Florida and North Carolina
3 (tied). East Coast Yacht Sales, 7 brokers in Massachusetts, Maine, Rhode Island
3 (tied). Brewer Yacht Sales, 7 brokers in Connecticut, Rhode Island, Massachusetts, New York
As in the real estate business, commission rates are benchmarked but open to negotiation. But recently, yacht brokerages have shifted commission structures. Before listings moved online, when buyers had to seek out YSPs to find yachts for sale, the commission split was traditionally was split 70/30, between the selling broker and the listing broker, respectively, explains Patrella. As commission splits evolved with the rise in Internet listings, selling brokers began sending buyers to listing brokers, who began to do more of the work in the transaction, and the split shifted to 60/40. With fewer used vessels on the market, commission structures have adjusted to 50/50–though Patrella adds that most YSPs split based on value added to the transaction.
Nowadays, buyers arrive at the table with new environmental concerns: underpaint on boats, LED lighting, eco-friendly materials and energy efficiency are several aspects Petrolla mentioned. Property tech has changed the way that people monitor their yachts, while mechanical innovation has made captaining easier. At the same time, the industry continues to contract, a fact reflected by the diminished number of new brokers and potential buyers.
“There’s a lot of attrition in our industry, and we’re not attracting as many new people,” says Petrella. He estimated that there were up to 600 CYPB yacht brokers in the late 1990s; now there are likely around 525 to 550. Furthermore, a new generation just isn’t as into the lifestyle. “It used to be that people were committed to yacht clubs: That’s what they did. They put on their blue blazer, went down to the Stamford Yacht Club or the New York Yacht Club–sailing and boating was their passion.”
Today, the passion appears to have cooled. People don’t want to buy a boat; they want to try a boat and then move onto something else. “Millennials like to experience a lot of things. They have less inclination to own things,” says Messenger. For that reason, he predicts growth in yacht chartering services in the future, adding says that if indeed the market enters a recession, the industry will feel the impact. “In a downturn, the boat is the first thing to go.”
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Every day, The Real Deal rounds up Los Angeles’ biggest real estate news. We update this page at 9 a.m. Please send any tips or deals to tips@therealdeal.com
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DirectoDirector Anthony Russo (credit: Gage Skidmore via Wikipedia)
“Avengers” director Anthony Russo is the mystery buyer of “Dynasty” mansion. Russo paid $15.6 million for the Arden Villa in Pasadena, an estate that appeared in the 1980s soap opera and several films. [LAT]
Bow West wraps West Adam creative office project. The Downtown L.A.-based developer completed its creative office conversion of La Cienega Place, a former industrial building outside Culver City. Bow West purchased the property in 2017 and started on its conversion shortly after. It totals 29,000 square feet. [LABJ]
Gov. Newsom and state lawmakers strike state-wide rent cap deal. State policymakers agreed to cap rent increases at 5 percent plus inflation per year for the next decade. They also agreed to renter protection measures. The deal was announced late Friday and will need the approval of both state legislative bodies within two weeks. [LAT]
Olivia Wilde and Jason Sudeikis pick up Silver Lake villa. The Hollywood couple paid $3.5 million for the 2,833-square-foot home that overlooks Silver Lake Reservoir. Local design firm DISC Interiors remodeled the 1928 home in 2016. The home hit the market a couple of weeks ago and there was seemingly healthy competition for it: Wilde and Sudeikis closed $150,000 above listing. [Variety]
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T.J. Maxx is bucking the closure trend (Credit: Mike Mozart via Flickr)
Nationwide retail store closures could top 12,000 by year-end. Large retail chains including Payless, ShoeSource and Gap have already announced 7,888 closures this year, putting those on pace to blow away the record 8,139 closures seen in 2017. Some off-price retailers, such as T.J. Maxx, however, are expanding. [NREI]
Keller Williams is recommending agents charge nothing for clients selling on Offerpad. Instead, agents will receive a 1 percent fee from the instant buyer, and potentially another 1 percent commission for listing the property. The arrangement — which Keller Williams emphasizes is just a recommendation — comes as part of the brokerage’s new partnership with Offerpad. [Inman]
Opportunity Zones could boost investor returns by 70 percent. In an analysis of projects from the Far West Side of Manhattan to New Orleans and Houston, the New York Times found that investors taking advantage of the Opportunity Zone program have been focusing on the 7 percent of zones that already have above-average household incomes. And many of the projects that will benefit from the tax break were underway before the Legislation was enacted. [NYT]
Governor Gavin Newsom (credit: Gage Skidmore via Flickr)
A group of California lawmakers have agreed to a rent regulation package that would cap rent increases across the state for the next decade.
Gov. Gavin Newsom and members of the state Legislature leadership announced late Friday that an agreement had been settled on for Assembly Bill 1482, which would cap rents at 5 percent plus inflation, and implement greater tenant eviction protections, according to the Los Angeles Times.
The deal comes as an increasing number of municipalities around Los Angeles have adopted new and stricter rent control laws and tenant protections. More than half a dozen cities have implemented new regulations since a statewide ballot measure to widen rent control was defeated last November.
The current bill will need approval from both houses of the state legislature within two weeks, which isn’t guaranteed. Real estate interests fought vigorously against an earlier version of the bill with a 5 percent cap and later accepted a version of the bill with a seven percent cap.
The California Association of Realtors plans to lobby state lawmakers to oppose the bill, according to its president, Jared Martin.
The bill “will not incentive production of rental housing or help more people find an affordable place to live,” he said.
Newsom pushed to tighten up that version of the bill, saying last month he wanted to “take it another notch up.”
There are other rent regulation proposals under consideration in Sacramento, but Assembly Bill 1482 is the strongest and has received the most attention.
A proposal to allow rent control for units built as recently as 2005 could be on the 2020 statewide ballot. State law currently limits rent control to units built before 1995. [LAT] — Dennis Lynch
Medical office building at 2100 W 3rd Street and HTA CEO Scott D. Peters
Healthcare Trust of America paid $85 million for a Westlake medical office building, with tenants that include UCLA Health and Children’s Hospital Los Angeles.
The purchase, which closed Friday, was part of a third quarter in which the real estate investment trust closed $115 million in new acquisitions.
Stockdale Capital Partners was the seller of the Westlake property, which is located at 2100 West 3rd Street, records show. The company made a considerable profit, after having acquired the property in 2016 for $52 million.
Spanning 147,170 square feet, the Class A medical office building was built in 1990. The property is 90 percent-leased.
In a statement released last week, Healthcare Trust of America said the deal puts its total commercial real estate investment in L.A. at more than $325 million.
The medical office operator also announced it is planning two new developments, totaling 190,000 square feet, in Bakersfield, and in Texas. Its Memorial Hospital project in Bakersfield will span 84,000 square feet. The project is expected to cost $30 million to develop, with an expected completion date of 2021.
Jonah Hill and the home (Credit: Getty Images and Realtor)
The deal for the four-bedroom Southern Colonial in Santa Monica wasn’t “Super Bad” for Jonah Hill, but in Los Angeles’ sluggish luxury market, it wasn’t a steal.
The actor paid $6.8 million for the 3,100-square-foot home that includes 4.5 bathrooms, according to Variety. The seller was singer/songwriter Jesse Jo Stark, who bought the two-story home for $4.6 million five years ago, according to the report.
It features a tree-shaded, private backyard with a swimmer’s pool, spa and patio off the main house. A guesthouse has a bedroom suite, fireplace, sauna and patio. It faces the faces Santa Monica Canyon.
L.A. luxury sales have been in something of a tailspin over the last year, with some notable exceptions, including most recently the $100 million sale of NBC Universal vice chairman Ron Meyer’s Malibu mansion to Whatsapp co-founder Jan Koum.
Meanwhile, Hill, whose star has been on the rise since films like “Superbad” and “Moneyball,” and most recently the Netflix series, “Maniac,” owns real estate on both coasts. In 2016, he paid $9.2 million for a 3,200-square-foot condo in Manhattan. [Variety] — Alison Stateman
From left: Rexford Industrial co-CEOs Howard Schwimmer with 3150 E. Ana Street in Rancho Dominguez and Michael S. Frankel with 18115 S. Main Street in Carson (Credit: Google Maps)
Los Angeles industrial giant Rexford Industrial Realty has added nearly half a million square feet of industrial space to its portfolio.
The Westside-based real estate investment trust picked up five properties for $110.3 million and sold off two others for $12.8 million, it announced this week. The properties acquired total 488,000 square feet.
Rexford is one of L.A.’s most active industrial investors. The firm focuses almost entirely on infill properties and more specifically on warehousing and logistics facilities. Growth in the e-commerce sector has created strong demand for those properties.
Two of the properties were located in the red-hot South Bay submarket, where warehouse space in particular is in high demand. Rexford closed an $18.8 million leaseback deal for a six-acre property in Rancho Dominguez and acquired a fully-leased 2.7-acre site in Carson for $6.8 million.
It also paid $3 million for a 1-acre paved parcel in L.A.’s Atwater Village neighborhood.
Another two properties, including the largest of the five, are in the San Diego area. Rexford paid $73.6 million for a 38.6-acre property with 312,000 square feet of leasable space. The firm also bought a 3.8-acre property in San Diego for $8.2 million.
The two warehouses Rexford sold were outside San Diego and in the north end of Orange County. The money raised from those sales went toward Rexford’s five acquisitions through a 1031 tax exchange.
The deals bring Rexford’s portfolio up to nearly 25 million rental square feet of space across 201 properties. Rexford manages another 19 properties totaling 1 million square feet.
Most general contractors are back to work in South Florida, after securing and shutting down their job sites last week in anticipation of Hurricane Dorian’s arrival. While South Florida escaped the storm’s wrath, developers and contractors saw their costs rise as the days ticked by.
The once-Category 5 storm, now a Category 2, devastated the northern Bahamas in recent days, but its core stayed offshore of the United States, bypassing much of the tri-county area. At least five people died in the Bahamas, although that number is expected to rise.
In South Florida, after developers and builders worked to lock down their construction sites, in some cases bringing down cranes late last week, they began returning to normal on Tuesday. The slow-moving storm paralyzed cities and towns in its path.
Henry Torres, the president and CEO of Astor Companies who recently completed the condo project Merrick Manor in Coral Gables, said preparing and securing a large construction site such as The Plaza, a mixed-use project in Coral Gables, could be very expensive.
“To prep and prepare a project like the Plaza, it could spend a million dollars preparing (for a hurricane),” said Torres.
Sean Murphy, co-president of Coastal Construction, said his construction sites in Miami-Dade County, with the exception of Sunny Isles Beach, re-opened on Tuesday. The company’s Palm Beach office remained closed. The city of Sunny Isles kept construction sites shut down on Tuesday, Murphy said.
The Coastal projects that reopened include Aston Martin Residences in downtown Miami, the Plaza in Coral Gables and the University Bridge Residences project near Florida International University. The Aston Martin Residences construction site had been shut down for three days, according to a spokesperson.
Some sites began preparing for the hurricane on Tuesday of last week, which means that work was halted for nearly a week in some cases. After Thursday, Coastal’s workforce became depleted, Murphy said. And on Tuesday, construction workers were slow to return to their jobs. Murphy expects 75 percent of his workforce will be back by Wednesday.
Shahab Karmely of KAR Properties, who is developing 2000 Ocean, a luxury condo building in Hallandale Beach, said delays from hurricane preparation set the company back about five days in its construction timeline. Karmely also said the company is planning to resume construction within the next two days.
Before a project site can reopen, a project superintendent will assess the site and report any damage. Projects will be re-secured for construction, which means that fences and wind screens will go back up, dumpsters will be moved back onto the sites and more.
In some cases, builders had to lower tower cranes before the storm, which adds to the delays. Whether the general contractor or developer takes on the cost depends on how the contract is structured.
Peggy Marker, president of Marker Construction, said the delays for Hurricane Dorian, which created little to no damage, pushed projects back three to five days. In the tri-county area, Marker Construction has up to 20 projects under construction, including hotels, car dealerships, multifamily, marina and restaurant developments.
For contracts with liquidated damages, Marker Construction will apply for an extension, which means that the company will not get charged for additional days of work but it will have to eat additional costs.
Josh Atlas, an attorney at Saul Ewing Arnstein & Lehr, who is part of the firm’s construction and commercial litigation practices, said the main costs from the missed hurricane are the time and energy spent preparing for a direct hit.
He added, however, there can be indirect costs if the storm makes landfall somewhere else, increasing labor prices and material prices “as resources get spread thin.”
Marcelo Kingston, managing partner of Multiplan Real Estate Asset Management, said the 57 Ocean construction site in Miami Beach will go back to operating normally on Wednesday. Because Moss Construction and its workers are still in the foundation stage of construction, Kingston doesn’t expect the hurricane will have created any delay in completing the luxury condo building at 5775 Collins Avenue.
“Everyone in this town at that level has gone through so many hurricanes. That‘s what makes Florida different,” Kingston said.
If anything, the hurricane impacted sales during the holiday weekend. Multiplan shut the sales gallery down on Friday and expects to reopen it on Thursday.
Edgardo Defortuna of Fortune International Group, a co-developer of the Ritz-Carlton Residences, Sunny Isles Beach, said shutting down that construction site was “a lot less painful” because the Ritz-Carlton is about four to five months from being completed.
“The potential for damage is a lot less when you’re at the stage of construction that we’re at,” he said.
Defortuna said it’s difficult to estimate the cost that the delays will bring because construction workers could make up the lost time before the planned delivery date. Suffolk Construction is the general contractor for the 52-story luxury condo tower at 15701 Collins Avenue. Fortune is co-developing the project with the Château Group.
“If indeed it turns out we’re delayed one week in delivering units, we have a $150 million loan outstanding, so it could be hundreds of thousands of dollars in interest,” he said. “Everything, as little as it seems, does create delays.”
