Ben Carson, head of the U.S. Department of Housing and Urban Development, will be among the roster of speakers at The Real Deal‘s annual Real Estate Showcase and Forum in Miami.

This is the sixth year TRD is hosting the Miami forum, which is one of the most highly attended real estate events in the state. This year, the event will be held on Oct. 17 at Mana Wynwood, where panelists will include Grant Cardone, who operates a $1.2 billion property portfolio, and Peggy Olin, whose OneWorld Properties has done more than $3 billion in residential sales, and developer Don Peebles.

Panels will include discussions on gender- and race-diversity in the real estate industry, the long-term effects of the co-living and co-working economies and development.

The diversity panel will be led by Peebles, who recently launched a $500 million investment fund for minority and women developers in markets that include South Florida, New York and Los Angeles.

The event — at Mana Wynwood, 318 NW 23rd St, Miami — will run from 11 a.m. to 5 p.m.

Tickets can be purchased here.

Amazon continues to gobble up the e-commerce market but is also investing more into brick-and-mortar grocery stores, starting in Los Angeles.

The Everything Store has inked over a dozen leases for grocery stores in L.A. locations, some opening by the end of 2019, according to the Wall Street Journal.

The company is also eyeing Chicago and Philadelphia as early locations. Other places include the New York City area, New Jersey and Connecticut, the Journal reported.

Most of the stores are planned outside urban centers and are targeted toward middle-income suburban consumers, according to the report. In L.A., stores are planned in the affluent Woodland Hills area, Studio City, and Irvine in Orange County.

Amazon announced the grocery store venture in March. The stores are reportedly planned to be around 35,000 square feet, smaller than the typical 60,000-square-foot footprint of most chain grocery stores.

Amazon bought upscale grocer Whole Foods for $13.7 billion in 2017, but the new grocery stores are not Whole Foods-branded. The stores will sell items that Whole Foods doesn’t, including junk food and artificially flavored soda, according to the Journal.

Amazon has been experimenting with brick-and-mortar stores for several years, and not always with success. A few days after announcing its grocery store venture, Amazon announced it was pulling the plug on several dozen retail pop-up shops it started opening in 2014.

Amazon currently operates 16 Amazon Go stores nationwide, where customers can buy ready-to-eat food without a traditional checkout. It also operates 18 Amazon Books stores. [WSJ] — Dennis Lynch

Short-term rental companies including Airbnb are asking the city of Los Angeles to postpone a looming date to enforce its restrictive short-term rental ordinance.

Enforcement is slated to start on November 1, but Airbnb and HomeAway say they need more time to put together a computerized system to comply with the ordinance, according to the L.A. Times. The ordinance requires short-term rental platforms to regularly share information about listings with the city to assist enforcement.

The ordinance limits short-term rental hosts to renting out rooms or properties they actively occupy. It also limits them to renting those rooms or homes for no more than 120 days per year, although there are ways to exceed that limit.

Hosts have to register with the city and the platforms themselves must ensure that their hosts are registered.

Airbnb vigorously fought the ordinance, but the City Council passed it late last year. Ordinances in other cities have proven an issue for Airbnb. Listings dropped 17 percent in Santa Monica in the year after the city instituted a restrictive ordinance.

The LA ordinance went into effect in July, but the city has allowed a grace period for enforcement. Airbnb said that the city didn’t share crucial information needed to inform its system until August.

Department of City Planning spokesperson Yeghig Kesishian said the city is “prepared to enforce the ordinance come Nov. 1,” and said that Airbnb and other platforms can also share information via a spreadsheet while they built the system.

Airbnb said in its letter requesting the postponement that it would be an “excessive burden” to do so while building its computerized system. [LAT] — Dennis Lynch

A major corruption scandal that has unfolded in Chicago over the past year reveals how powerful real estate figures can become tied up in the city’s second-to-none corruption record.

In January, Alderman Ed Burke (14th Ward) was charged with bribing and extorting developers to win business for his property tax law firm. This came out of a yearslong FBI investigation into the connection between city politicians and real estate figures throughout the city. The findings, as told through court documents, exposed the two sectors entangled in a web of bribery, extortion and conflicts of interest.

In a study released less than a month after Burke was charged, the University of Illinois at Chicago found Chicago was the most corrupt city in America. Over the past 10 years alone, there have been several scandals that echo the patterns of corruption between real estate figures and politicians found in the most recent FBI investigation. Here are some of the biggest:

Ed Burke/Charles Cui/601W Companies

In May, Burke, the property tax attorney and 74-year-old kingmaker who headed the City Council Finance Committee, was indicted on 19 charges of extortion, racketeering and bribery. He was accused of trying to coerce developers into hiring his law firm in exchange for granting construction permits and approving their projects. He stepped down as committee chair in the face of the scandal, but was reelected as Alderman in February.

Developer and immigration attorney Charles Cui, who is also facing charges, allegedly bribed Burke. After the city denied a permit for a portion of his The Point at Six Corners retail complex in the heart of the city, Cui allegedly promised to bring work to Burke’s law firm in exchange for his help on approvals. The approval included a $2 million award in Tax Increment Financing funding for the complex. The case against Cui is ongoing. The City Council approved updated plans for The Point at Six Corners earlier in September.

Burke also allegedly approved 601W Companies’ West Loop redevelopment project The Old Post Office, after pressuring the company into using his property tax firm. 601W Companies had been seeking $18 million in TIF funding and a property tax break from Cook County, but in the beginning had resisted working with Burke. Finally, the New York developer relented and its project was approved by Burke’s committee in September 2018, and the full council a few days later. 601W is cooperating with the probe, and has publicly said it is a victim of Burke’s corrupt solicitation. In the months since the indictment, the West Loop office has since signed on a slew of new tenants to fat lease deals, including Uber.

Danny Solis/Brian Hynes/Fred Latsko/Cacciatore family

While former Alderman Danny Solis, who was head of the City Council Zoning Committee, was wearing a wire to help the FBI bring charges against Burke, he was also an actor in his own public corruption scandal. The scandal also ensnared developers the Cacciatore family and Fred Latsko, as well as lobbyist Brian Hynes, court documents revealed.

Hynes, a powerful Chicago real estate attorney, allegedly did Solis favors in exchange for his support on his clients’ development projects, according to court documents. In addition to the $30,000 Hynes donated to Solis’ company in 2011, the Chicago Sun-Times reported, he also arranged meetings between Solis and powerful developers whose projects would later pass with Solis’ approval.

Hynes once coordinated a meeting between Solis and developer Fred Latsko about a project that would later be approved by the Council. Solis also stayed at Latsko’s 180-acre Indiana farm for a weekend for free. Solis provided Latsko support over the years, according to court documents. Solis’ operatives also allegedly solicited the Cacciatore family, which owns property in his ward, for campaign donations in exchange for his aid in lowering their business’ water bill by $1 million. Solis, Hynes and Latsko have not been charged with a crime.

Calvin Boender/Isaac Carothers

In 2010, former Alderman Isaac Carothers and developer Calvin Boender were both charged with fraud and bribery. That followed an FBI investigation that found Boender allegedly paid $40,000 toward Carother’s home improvements, in exchange for Carothers’ support of zoning changes in 2006.

After allegedly buying Carothers’ support, Boender allegedly tried to wager that support for the project with powerful members of the Planning and Zoning Department. When the Department decided against making the entire lot open for commercial and residential development, Boender and Carothers met at a compromise — 10 acres of the lot could be developed for residential use and 15 acres could be developed for commercial use. This new zoning was passed.

Boender eventually sold the land — which is now home to a movie theater and residence — for almost double what he paid for it, according to The Chicago Reader. Boender personally profited nearly $3 million after the sale from the zoning change, according to FBI documents. Boender is still in the real estate business and now works primarily in agricultural real estate.

Tony Rezko/Rod Blagojevich

In one of the most famous recent corruption scandals, real estate developer Tony Rezko was one of several indictments to come out of the Rod Blagojevich trials in 2008. A political operative, fundraiser and businessman, Rezko was charged with 16 counts of fraud and bribery in 2008 and was sentenced to 10 years in prison. His most notable ties were to disgraced former Gov. Rod Blagojevich, along with former President Barack Obama. Court documents from Blagojevich’s trial showed that Rezko had donated over $1.3 million to Blagojevich’s campaigns. He recommended business associates to the then-governor and used his influence to demand hefty favors. Rezko also was fundraiser for Obama. The Obamas bought their family’s Chicago home from Rezko a few years before he was charged. Rezko was released from prison in 2015. Recently, he has become a part of his son’s business, DAC Developments, and will be involved in the firm’s latest project – a 24-story hotel on the North Side, according to Crain’s.

Department of Building and Zoning

In 2008, an FBI investigation found widespread corruption in the city Department of Building and Zoning, according to a University of Illinois at Chicago report. The investigation ended in indictments for 23 city officials. Most involved inspectors who were bribed to falsify inspection documents. Also indicted after the investigation was developer Dumitru Curescu, who was accused of over $10,000 worth of bribes and Beny Garneata, who was allegedly a key figure in a bribe-for-permit scheme.

WeWork is discussing a freeze of expansion plans in China, where it has 60 locations, sources familiar with the matter told The Real Deal.

Executives are also considering stalling expansion plans in Hong Kong and South Korea, according to a source. However, the discussions are ongoing, and no final decisions have been made.

WeWork did not immediately provide comment. A spokesperson for SoftBank, which is the majority investor in WeWork’s Asia operations, declined to comment.

The consideration comes just after WeWork formally shelved plans for its IPO, and CEO Adam Neumann stepped down after facing pressure from SoftBank. Now, WeWork executives are trying to shore up a reported $3 billion debt deal provided by a group of banks led by JPMorgan Chase — financing that is contingent on new equity.

In addition, the company is weighing drastic cost-cutting measures that include selling off non-core businesses and potentially laying off thousands of employees.

The company’s Asia expansion plans were largely driven by SoftBank, WeWork’s largest investor. It valued the Asia business at $1.6 billion, which included joint ventures in China, Japan and the Pacific region, according to its S-1 filing to the U.S. Securities and Exchange Commission.

However, WeWork’s investments in China have driven down the company’s likelihood of profitability. According to its prospectus, a WeWork profit margin known as the contribution margin, declined by 3 percentage points due to the China business. And as the company has expanded into international markets, its revenue per customer has declined in lower-priced markets. Other countries with locations included in those joint ventures include Singapore, Korea, the Philippines, Malaysia, Thailand, Vietnam and Indonesia.

SoftBank holds a 50 percent stake in the Japan entity, a 40 percent stake in the Pacific entity and a minority stake in the China entity, alongside investors Hony Capital and Trustbridge Partners. It has a strong grip on the Japan and Pacific ventures, where WeWork is barred from issuing dividends without SoftBank’s consent.

WeWork previously disclosed the joint ventures as a risk factor.

“A significant part of our international growth strategy and international operations will be conducted through joint ventures,” WeWork stated in its S-1, “and disputes with our partners may adversely affect our interest in these joint ventures.”

It also faces an uphill battle against competition in China. Local firm UCommune has twice as many locations in the country than WeWork, and has raised $650 million from investors including Sequoia Capital, ZhenFund, Matrix Partners and Sinovation Ventures, according to Forbes.

Amid WeWork’s failed IPO and restructuring, other negotiations to secure overseas locations have stalled or fallen apart. In Dublin, WeWork reportedly walked from a lease deal to take space in an office tower there, according to Bloomberg.

Return to this page for updates.

Forever 21 identified a quartet of New York City stores on its list of 178 locations in the United States that the struggling retailer has slated for closure.

The brand also slated 20 stores in the Los Angeles area, along with nine in Chicago and three more in South Florida.

In Manhattan, the fast fashion pioneer included its stores at Allied Partners’ 568 Broadway in Soho and Westfield’s World Trade Center Mall on a list of underperforming locations it plans to close as part of a Chapter 11 restructuring, according to paperwork filed in bankruptcy court in Delaware Tuesday.

In Brooklyn, the company plans to shutter stores at Crown Acquisition’s 490 Fulton Street in Downtown Brooklyn at Macerich’s King Plaza Mall in Mill Basin.

In South Florida, the stores include those on Lincoln Road in Miami Beach as well as in The Gardens in Palm Beach Gardens and in Pembrokes Lakes Mall in Pembroke Pines.

Among Forever 21’s top 50 creditors, Simon Property Group, Brookfield Property REIT, Macerich, Westfield and Vornado Realty Trust claim in court papers that Forever 21 owes them a combined $20.9 million in unpaid rent.

The brand’s filing is the latest blow to the retail market, following in the footsteps of companies like Sears, Toys R Us, Barney’s and Payless among others that have collapsed.

Forever 21 expects to start closing stores no later than Oct. 31, and finish vacating the locations by the end of the year. The company operates 549 stores across the country, and already owes millions to its largest landlords.

The list is subject to change. Forever 21 noted in court filings that unlike other retailers who have sought Chapter 11 relief, the company expects to receive support from its landlords in order to put together a “consensual solution to an industry-wide problem.”

That’s not always the case in these kinds of proceedings, according to Ballard Spahr attorney Craig Ganz, a bankruptcy specialist who is not involved in the case.

In a typical retail bankruptcy, he said, landlords won’t hear from their debtors’ attorneys until either the eve of the bankruptcy filing or there will be no communications and the debtor will simply file.

“I think one thing that is significant here is that four landlords hold 50 percent of all the leases in Forever 21’s portfolio,” he said. “That percentage is giving the landlords some leverage here and that may be a reason why Forever 21 has taken this active approach.”

The Arts District has become a draw for tech and media tenants and for renters. Now, Los Angeles County is getting in on the action.

The county selected Sawtelle-based Urban Offerings to develop its 4th and Hewitt mixed-use project, which will include 232,000 square feet of creative office space, affordable housing for artists, and 11,000 square feet of retail space, according to Curbed. Office Untitled is architect.

The redevelopment project would replace the existing offices of the Department of Public Social Services at 813 East 4th Place, along with a separate parking garage. Urban Offerings is expected to enter into a 99-year ground lease for the two properties.

Plans for the project include 43,000 square feet of office for DPSS and about 870 parking spaces, according to the report.

Among the bigger-name tenants that have moved to the Arts District recently are Spotify, which just expanded its lease in the At Mateo complex; and WeWork, which took over the entire Maxwell redevelopment project at 405 Mateo Street. [Curbed] — Alison Stateman

WeWork isn’t the only company whose value sank when the co-working giant stumbled.

Some firms it bought with a mix of cash and stock options are suddenly worth a lot less, at least on paper.

And now they are on the chopping block as the office-space startup tries to right itself after weeks of turmoil and an abandoned IPO. WeWork is also looking to cut costs and raise capital, potentially by laying off thousands of employees and severing ancillary business lines.

Among those measures is the sale of three startups — Managed by Q, Meetup and Conductor — that WeWork acquired in recent years in part with stock options that are now worth much less. The Information first reported that the startups are for sale.

“The companies will trade at a discount because WeWork is trying to shore up its finances,” said Jeff Berman, a general partner at venture capital firm Camber Creek, which targets real estate technology investments. “It stands to reason that their holding is worth less.”

The startups are among 14 acquired by WeWork since 2014, including six this year, according to VentureSource. Other acquisitions could be cut loose too.

“It’s devastating. They trusted and believed in WeWork’s promise and their valuation,” said Eric Schiffer, chief executive of investment firm Patriarch. “Many of these companies had alternative routes to go without decimating their valuation.”

WeWork declined to comment.

Managed by Q, an office-management platform, raised $97 million from investors including Google Ventures, RRE Ventures and Kapor Capital before it was acquired by WeWork in April for $220 million.

That acquisition consisted of $100 million cash and $120 million in preferred stock priced at WeWork’s $47 billion valuation. With estimates of WeWork’s value now ranging from $10 billion to $15 billion, Managed by Q’s acquisition value is now closer to $140 million — an $80 million discount on its purchase price six months ago.

A source familiar with the matter said Managed by Q is raising funding to smooth its exit from WeWork. A spokesperson for Managed by Q declined to comment. Investors Google Ventures and RRE Ventures did not respond to requests for comment. Kapor Capital declined to comment.

Another startup, Conductor, a marketing software company that provides search engine optimization, was founded in 2006 and by 2015 had raised $60 million from investors including Catalyst Investors, Investor Growth Capital Limited and Matrix Partners.

WeWork acquired it in March 2018 for $113.6 million, which included $16 million in cash and $98 million in stock priced at WeWork’s $21 billion valuation. WeWork’s recent drop in valuation discounts that acquisition price by almost $40 million.

A person familiar with the matter said that Conductor had begun discussions to break away from WeWork months ago because of a lack of “synergies” between the two companies. The source added that the company is in discussions with a potential investor to finance its split from WeWork. A spokesperson for the company declined to comment. Conductor’s investors did not respond to requests for comment.

Other startups up for sale won’t be as affected. WeWork acquired Meetup — a platform that facilitates thousands of group meetings — in December 2017 for $156 million in cash. Meetup’s CEO, Scott Heiferman, did not respond to a request for comment. WeWork declined to comment.

WeWork’s minority investment in The Wing, a female-focused co-working firm, is also said to be for sale, according to Bloomberg. It took a 25 percent stake in 2017, which in June 2019 WeWork valued at $58.8 million, according to the prospectus for the larger firm’s ill-fated IPO. (The Wing said it was valued at $400 million in December).

Investors have even bristled at Wework-owned companies not said to be on the market. SpaceIQ, a workplace management software company acquired by WeWork in July, was purchased with cash and stock that matched WeWork’s $47 billion valuation. One investor told the Wall Street Journal that the acquisition was initially protested and that “the $47 billion price is ridiculous.”

For companies purchased with stock that manage to avoid WeWork’s fire sale, there may be an upside to sticking with WeWork’s stock, said Eric Frank, founder of Lightbox, a real estate technology company that has acquired multiple firms.

“There’s nothing to say that if you hold onto it for four years, it won’t go up,” Frank said. “But at the moment it’s not looking great.”

The 90210 zip-code dominated Los Angeles County’s list of the five priciest home sales last week.

The headliner, by far, was the $43 million sale of developer Max J. Fowles-Pazdro’s estate. In all, the five sales totaled $91 million, more than doubling the total from the week before.

The information was compiled from the Multiple Listings Service and Redfin, from Sept. 24-Oct. 1.

1155 Angelo Drive | Beverly Hills Post Office | $43M

The sale of this Max J. Fowles-Padro-built spec home was the biggest of the last seven days. The 24,000-square-foot home sold for $3.5 million below its first asking price when it hit the market in April. But considering L.A.’s slowing luxury residential market — and even worse spec home market — that isn’t a big chop. The eight-bedroom, 11-bathroom home has several interior courtyards and large doors leading out to a landscaped backyard with gardens and a pool.

Fowles-Pazdro developed the home in partnership with London & Regional Properties. Jonathan Nash and Stephen Resnick with Hilton & Hyland had the listing. Patrick Fogarty, also of Hilton & Hyland, represented the buyer.

705 N. Arden Drive | Beverly Hills | $14.8M

This 10,400-square-foot home in Beverly Hills was built in 1927, but was “restored, remodeled and expanded” in recent years, according to its listing. The home’s interiors are in keeping with its era, featuring arched doorways, plaster walls, beamed ceilings, and tiled floors throughout. There are also more modern spaces, including a home theater, gym, and an updated kitchen. The home has seven bedrooms and 10 bathrooms. David Offer with Berkshire Hathaway had the listing. Douglas Elliman’s Forrest O’Connor represented the buyer.

1116 Laurel Way | Beverly Hills | $13.7M

The six-bedroom, eight-bathroom home is decked out with parquet floors, a large kitchen, and a maid’s room. French doors lead to a mostly tiled backyard with an elaborate pool, that evokes the era it was built — in the early 1990s. Michael and Myra Nourmand of Nourmand & Associates had the listing. Compass’ Michael Libow represented the buyer.

613 N. Sierra Drive | Beverly Hills | $11.7M

This new construction Spanish-style home spans 6,300 square feet and has six bedrooms and seven bathrooms. The kitchen has professional-grade appliances and a center island that rivals in size most formal dining room tables. The backyard has a pool and a detached gym area. Rochelle Maize with Nourmand & Associates had the listing. Jaime Cuevas of Compass represented the buyer.

32453 Pacific Coast Highway | Malibu | $7.8M

Malibu has two main categories of high-priced homes: those on the beach and those in the hills. This 12,700-square-foot mansion straddles those categories. The 2001 home sits on a hilltop just off the Pacific Coast Highway and overlooks the ocean within 1,000 feet. The home has a massive main living room, seven bedrooms, 12 bathrooms, and a pool and patio area facing the water. Chris Cortazzo with Compass had the listing, while Greg Saffer of Premier Lending Group represented the buyer.

Alex Rodriguez has seen both his professional and personal life covered exhaustively in newspapers across the country for decades now.

But since retiring as the Yankees’ star third baseman in 2016 — and, according to Forbes, pocketing over $480 million during his 22-year, pro-baseball career — he’s become even busier.

He’s now juggling regular media appearances with color commenting baseball games (he’s a broadcaster for Fox Sports and part of ESPN’s Sunday Night Baseball team) and growing his real estate and investment empire, which all operates under his A-Rod Corp. umbrella.

He is also co-hosting a podcast, which launched last year, called The Corp, where he’s interviewed guests ranging from Martha Stewart and Kevin Bacon to real estate tycoons like Barry Sternlicht and Barbara Corcoran. Oh, he also has two daughters, ages 11 and 14, and is engaged to superstar singer, producer and actress Jennifer Lopez — aka J.Lo.

Since he founded the Miami-based A-Rod Corp. in 2003, the firm has purchased over 15,000 apartments across the U.S., deploying hundreds of millions of dollars on real estate and investing in companies like the hospitality startup Sonder, private jet startup Wheels Up, Snapchat and NRG eSports.

Sternlicht said Rodriguez has shown that he’s willing to put in the time and energy needed to succeed in business and said he comes to an “informed decision based on reasoned information and careful diligence.”

“Alex approaches business with the same dedication and passion he did baseball,” Sternlicht told The Real Deal via email. “Alex wants to win, really crush, in his work as he did in the majors.”

In July, A-Rod Corp. closed on a $4.5 million condo at Terra’s Grove at Grand Bay, twin luxury towers in Miami designed by starchitect Bjarke Ingels. (The company is building out its unit as an office and creating a ground-floor event space).

Meanwhile, in May, the Miami-based Monument Capital Management, A-Rod Corp.’s multifamily arm, launched its fourth residential fund focused on workforce housing with the majority of the roughly $50 million it raised coming from family offices and high-net-worth individuals, including fellow professional athletes (though he declined to name any).

It’s planning to buy about $200 million worth of real estate and has already closed on properties in Illinois and Tennessee with a third under contract in North Carolina. And it’s looking to launch a fifth fund, for $100 million, in 2020.

Workforce housing has been “one of the best places to take your money” because it has “tremendous yield and protective downside,” he said, during one of two interviews with TRD last month. The first of those conversations was at partner Stonehenge NYC’s Manhattan office, the second at his sprawling 11,000 square-foot Florida home, which has an indoor basketball court and where his art collection is on display.

In Miami, Rodriguez’s company is also investing in at least two developments, the Fairchild Coconut Grove, a boutique condo project, and a 31-story rental tower at 40 Northwest Third Street, the latter with Grand Station Partners.

On the New York front, last December, Adam Modlin, Rodriguez’s personal broker in New York, introduced him to Stonehenge CEO Ofer Yardeni and, six months later, the trio announced a partnership to buy rental buildings and condos in the Big Apple. They’re now in contract on their first deal: A 100-plus-unit rental building on East 51st Street in Manhattan.

The partners will be tapping their personal networks to raise about $500 million and then leverage that to buy $1 billion worth of value-add multifamily real estate in the city in the next 18 months, said Yardeni.

“Collaborating with [Rodriguez] will be extremely beneficial to all of us,” Yardeni said, noting that Rodriguez has a “tremendous network and an excellent reputation.”

“The vast network that he has can help Stonehenge go and raise capital from family officers, high-net-worth individuals and more institutional players because when Alex calls, everybody listens,” Yardeni added.

Modlin also gushed about Rodriguez, saying the retired Yankee has been “thinking about investing in New York City multifamily for years” and that he “brings a secret sauce.”

“Alex is a partner that anyone would dream to have,” Modlin said.  

The 44-year-old Rodriguez — who just sold a home in Los Angeles (which he bought from Meryl Streep) for $4.4 million and unloaded a $17.5 million pad at 432 Park Avenue — spends about half the month in Miami. The other half is spent jet setting on his Gulfstream IV to New York, L.A. or wherever else his broadcasting responsibilities take him.

Below is an edited and condensed version of his conversations with TRD — which were more focused on real estate stats than baseball stats.

You made your first real estate purchase in your early 20s, only a few years into playing for the Seattle Mariners. Tell us about that deal. It was a duplex out of Miami. The reason I liked the investment was because it was 10 minutes from Miami Beach and 10 minutes from Coral Gables and it was near the water. I needed around $48,000 [for the] down payment. I was very nervous about it. It was near the Miami arena. My thesis for the investment was very simple — it was around fear. I felt that if I bought some real estate that over time, if I signed a 15- to 20-year note, that by the time I was 30 or 40 I would have a handful of assets with very little debt. That was my answer to not going bankrupt, owning hard assets.

So, is that why you initially got into real estate? You said you didn’t want to go bankrupt. That’s all I’ve ever known. I always say, stick to what you’re passionate about and what you know. Coming from a single mother, all we knew was renting. We never bought anything. I envisioned one day as a young man that if I got an opportunity to trade places with a landlord that I would.

Do you only purchase multifamily? We’re really focused. Yes, I play sports. But I play baseball. Yes, I play real estate, but I play multifamily. … I’d say [our] average is Class B properties. There’s always an added-value component to them.

You spent the majority of your baseball career on the Yankees under Joe Torre and Joe Girardi. What did you learn from them about running and managing an organization? Joe Torre and Joe Girardi were both great managers. They both held me accountable. They expected you to show up early and leave late and they did not micromanage. Joe Girardi was more hands on, and Joe Torre was more like the Godfather. I remember one time I was struggling and Joe Torre brought me into his office. He thought I was overworking. I was nervous because it was 2004 and it was my first year as a Yankee and they have this incredible history with so many championships. I thought he was going to be mad and really get upset with me and he said ‘Look, I think you’re pressing too much. If you turn around, there’s a beautiful bottle of wine, Silver Oak and next to it a cigar.’ He said, ‘I want you to go home, drink that bottle of wine.’ I said, ‘Well, I’m not much of a drinker of wine.’ He said, ‘Drink it and have a cigar, and come back, tomorrow’s game is at 7. If you show up before 6 o’clock I will fine you. So just show up and play.’ It made me so nervous to show up to the park so late. Usually, you’re there five or six hours before the game. [But] I show up around 6 o’clock. That night, I go out and hit a home run. The next night I go out and hit two home runs and off I went and finished that season very strong.

You went straight to the Mariners from high school, forgoing a scholarship to the University of Miami. Have you considered going back to school and getting any degrees? I’ve always thought about it. Joe Girardi always said that I was a teacher and a student at heart. And I think he’s right. I love to learn. I’m constantly trying to educate. I’ve been self-taught because I didn’t have any formal education. But I wouldn’t rule it out.

Does your team scout out opportunities and bring them to you? How involved are you in the whole process? I mean if you talk to Lane LaMure, Jeff Lee, Lisa Peier and Erin Knight [from my team], they’d probably tell you I’m involved too much. But I think that as we scale, we have to really count on our team. Ideas and opportunities come from all over the place.

How big is the company? It’s fluctuated. We were at one point 10,000 apartments. Today we might fluctuate by 3,000 to 6,000 depending on whether we’re buying or selling. We feel that it’s fairly late in the cycle right now. We take the philosophy that we sell 3,000 but we buy 1,000.

Are you worried about a recession? Are you preparing for that? We’re definitely in a defensive mode. We have our feet on the brakes a little bit. We made the decision about three years ago to start selling some of our portfolios and preparing for an opportunity. So, while we’re still buying, we’re cautious.

You’re investing in Chicago, New York and Miami. What other cities are you eyeing right now? We like to buy, fix [and] refinance. We’ve had a lot of success in secondary and tertiary markets, especially in the southeast. North Carolina has been great. We’ve had a lot of success in Texas. Chicago has been an incredible investment for us. … We’re very fortunate to have [Monument’s Chief Investment Officer] Stuart Zook leading the way. He’s always identifying new markets. Interesting markets where we haven’t been before are Tucson, Reno, Portland and Seattle. As we kind of move into the West Coast for the first time, it’s been a fun process. [Zook is] really good about picking what’s next. He’s got some great cities up his sleeve.

I read that you know Warren Buffet. What’s the best advice he’s given you? One of the lessons learned from Warren Buffet has been to do what you absolutely love to do with the people you love and respect. One of the interesting things I found with Warren is that he’s 89 and to this day, he’s still putting in six days of work. He’s in the office every day at 7:30. He reads five to eight hours a day.

Who else do you look up to in the real estate industry? I look up to Stuart Zook. I feel incredibly fortunate that I met him almost 11 years ago. I thought it was the biggest break of my [business] career to find a guy that’s managed over $2 billion in assets over the course of his career and who understands the game so well. Someone who’s extremely ethical and incredibly conservative. We do this all the time [head butting motion] because I want to buy, and he says ‘No, no, no.’ That’s why he’s a much better investor than I am and why our returns have been incredible. He’s like Ted Williams. If it’s not right down the middle, center cut … he does have Buffet-esque discipline. I wish mine could be that good. But I’m a little more aggressive.

Does being a celebrity works against you in business? It’s a great question. As an athlete, there’s a gift and a curse. Sometimes, people celebrate and take the meeting. But for the most part, they’re thinking that you’re just an athlete. So I think part of what you have to do as an athlete is surround yourself with institutional-type investors with incredible background so a) they understand that your infrastructure and your team is one that can play at the big-league level and b) be one that can actually follow through and do the things they say they can.

There were reports that you are launching a business reality show in the same vein as “Shark Tank” on NBC. What can you tell us about it? We can’t talk much about the business show, but we’re very excited about and it has a little bit of a “Shark Tank” twist.

You told a crowd at a 2018 real estate convention that J.Lo loves real estate and has a “superpower to see what’s good and what’s not.” Do you guys talk about real estate and do you have plans to invest in any projects together? Jennifer loves residential real estate. I love commercial real estate. So, we make a good team there. She has impeccable taste, obviously. When you walk into her home, it’s always impeccable, smells good and is always in great neighborhood.

You two recently sold your condo at 432 Park. Why did you sell? Was it an investment decision or a personal decision? It was a trade. We love the building. We went in, we bought it. We have a big family — we didn’t fit. We needed a little bit more space.

Are you looking for a new apartment in New York City? I wouldn’t say so. We’re happy.

You announced your engagement to J.Lo in March. When’s the wedding? Now that was a nice pivot. We went from New York real estate to the wedding. Why don’t we go back to New York real estate?

How did you first meet Adam Modlin and how did you make the jump from broker-client to business partners? I met Adam over 25 years ago over at Bergdorf Goodman when he was selling suits. I knew I was going to like Adam from the get-go because the suit cost $500 and he tried to sell it to me for $5,000. I said this guy’s a pretty good salesman. Adam Modlin is a savant when it comes to New York real estate.

What about Ofer Yardeni? I met Ofer through Adam. I met him in South Florida over dinner [at Prime 112 in Miami Beach]. We quickly hit it off. Then we set a meeting together that lasted three days on the West Coast. My partner, Lane LaMure, came out. Adam came out. Over the course of two or three days we put together what we thought was a really great idea to buy real estate in New York City. Ofer has an incredible background. He served in the Israeli military. … He has a great family, great morals, great ethics and great background. He brings that intensity from his [military] background. He’s up every day at 4 a.m., he’s working out by 5, in the office by 6:30 or 7. With my background in New York, it’s always been a dream of mine to own real estate [there]. It’s the best real estate in the world. To have an operator who essentially is like Michael Jordan in his space … I thought it would be a great partnership.

When do you plan to make your first NYC investments? We’re close to having a letter of intent for an asset right here in Manhattan. It’s a great opportunity for us. It’s rentals and it’s in Manhattan.

Where else do you see potential in New York? Around Yankees Stadium or around Citi Field in Willets Point and Flushing? I think that there’s upside around Yankee Stadium and around the Mets [at Citi Field]. I think both have a lot of upside. Anywhere in New York City, you have the potential. … But I think for this particular venture, we’re really focused on Manhattan.

A-Rod Corp. is moving to a condo in Coconut Grove. One your execs, Erin Knight, said the firm is bullish on the area. Are you planning any other investments there? Well, Erin Knight is from Miami and she went to school right down the street at Ransom Everglades. So, we ended up buying this beautiful office space. The kids go to school nearby and right across the street we’re developing about 27 apartments in a place called the Fairchild Coconut Grove, which is right on the water. We’re very bullish when it comes to Coconut Grove. In five or seven or 10 years, you’re not going to be able to recognize Coconut Grove. It’s going to be awesome.

Where else in Miami? We’re developing about 31 stories, 300 units in downtown Miami. We love rentals and it’s just a place that’s on fire. I love Coral Gables, Coconut Grove, Miami Beach. I wish I was spending more time in Miami

I read that $20 million of the $50 million you raised for that fund came from high-net-worth individuals. Have you tapped any other athletes or celebrities? We’re very diversified. They come from the private equity world, hedge funds and entertainment. We have probably a dozen athletes that have come on board. One of the things I’m very proud of with our LPs [limited partners] is that over 95 percent of anybody who’s come in has never left us. They just keep doubling, tripling down.

What advice do you give to young athletes who want to invest in real estate or start their own business? Do you get that question? Yeah, I do. We have several dozen athletes that have invested with us, and every single one of them has come back for more. [I say] ‘I made mistakes, just like I made mistakes in baseball. I had some failures, that’s part of it. But I think never trying to be involved, that’s also a mistake.’ Even if you’re not interested, you have to be interested in protecting your future. I think you have a responsibility to yourself and a fiduciary duty to your family. … Real estate, with the right partner, is a great hedge to the W2 income you earn as an athlete. While your career earnings potential downgrades, your real estate appreciates. The No. 1 thing I would say is find a great partner. … No. 2, find yourself a great lawyer [who can] structure deals in a way that you have downside protection and you’re not putting yourself out there. No. 3, I would say, never personally guarantee. No PG for an athlete. So many people have gotten hurt like that. And then fourth, I would say, find [a deal where] everybody has skin in the game.

Have they been happy with their investments? The greatest thing for me is when I send them their returns. I’ll send them an email, and they’ll call me right away. They’re like, ‘What? Are you serious?’ It makes me happy because a) it’s interesting to them and b) they’re connected and they have some passion behind it. And athletes are really smart people. … They just need a little financial coaching, financial literacy. But once they get it and they’re confident, they’re quick learners. They just have to have people that look out for them.

Is there someone who did that for you? I’ve always had a passion for it. And then I looked up to some of my buddies like Magic Johnson, Greg Norman, Arnold Palmer, Pat Riley. All of them became friends and mentors. I really think that for athletes, picking great mentors is an incredible way to go. Almost like picking a board of advisers as diverse as you could think of — from age to gender to skill set. One thing that’s always going to be true is that you’re going to come into some challenges and choices. To be able to have a handful of people that you’ve very carefully put together, it’s so powerful. For me it’s been incredibly powerful to have people in the tech space, to have strong women, to have people in finance, to have people in sports. I can’t just have five athletes on my board.

Do you see opportunities in esports and other types of entertainment from a real estate angle? We own a big stake in NRG eSports in San Francisco. We’re building a new arena for them in SF, which we’re very excited about. We’re bullish about the space. When you think about esports in general, there’s more kids today playing esports than physical sports. While it’s great for the business of esports, it’s scary for the next generation.

How much cash do you have in your pocket? I have zero cash in my pocket. My money is in real estate. Why, do you want some of my money?

How do you manage your time? You’re extremely busy. I would say that it’s a blend between running A-Rod Corp. [and] media obligations. First and foremost is obviously being with my family and the kids.

Is this the busiest you’ve ever been? For sure. I thought I was busy when I played baseball. Even with baseball there’s a predictable schedule every day. This changes every day.

Do you still have an intense workout schedule? I try everywhere I go to get a workout in. I try every day to break a sweat, especially when I travel. I try to incorporate hot yoga. It relaxes me, it’s like meditation.

If you didn’t have baseball or real estate, what would you be doing? I think private equity. I love building things. I like curating great teams. I love to see other young people win and make a lot of money. There’s nothing that makes me happier than to see people on my team the first time they make a million dollars. It’s life changing. Coming from team sports, you just love to win with teammates. I don’t think it’s a lot of fun to win by yourself. What fun is it to get rich alone? That sucks. You want to share the pie a bit. What happens is when everyone tastes that champagne or how sweet the cake is, then everyone gets to the office at 6:30 in the morning instead of 7:30. And now you’re looking at the next deal, and the next deal. The power of alignment is everything.

What do you want people to know about you that they don’t already? I feel like they know a lot. One, that I’m a terrible cook and an even worse dancer. Other things they probably don’t know is that I enjoy business just as much as I enjoy sports … and I go at business just like the way I approach sports. You’re only as good as your team — you’re an average of the five people you surround yourself with every day.

Every day, The Real Deal rounds up Los Angeles’ biggest real estate news. We update this page in real time, starting at 9 a.m. PT. Please send any tips or deals to tips@therealdeal.com

This page was last updated at 9 a.m. PT

Gwen Stefani sells Beverly HIlls estate after price cuts. The rocker singer and her ex-husband Gavin Rossdale listed the 15,500-square-foot manse for $35 million in 2016. With no bites for nearly three years, they cut the ask to $24 million and have unloaded it for $21.7 million. The home was built in 2003 in a gated community off Mulholland Drive near Franklin Canyon. It has seven bedrooms and bathrooms and a tennis court in the backyard. [WSJ]

Newsom signs into law an environmental exemption for affordable housing in L.A. Assembly Bill 1197 allows projects funded with bond money as well as temporary homeless shelters, to skip the lengthy and often expensive environmental review process required by the state. It only applies to projects within L.A. city limits. [Curbed]

Martin Cadillac, Westside landmark, to be razed for mixed-use development. The Martin family and development partner Hines have demolition permits to tear down the well-known auto dealership to build the Martin Expo Town Center. The project, which has approval from the city, is planned with 150,000 square feet of office space, around 600 apartments, a grocery store and a restaurant. [Urbanize]

The 90210 dominated the top end of sales over the last week. Four of the five top home sales in L.A. County were in the coveted zip-code. The $43 million sale of a 24,000-square-foot spec home in Beverly Hills Post Office topped the list. Max J. Fowles-Pazdro and London & Regional Properties built the home. [TRD]

Amazon has inked at a dozen leases around L.A. for its grocery store chain. SoCal is ground zero for the e-commerce giant’s push into the grocery store business. Some of the L.A.-area stores could open by the end of the year. The goods will be less expensive than the ones at Amazon’s Whole Foods chain. [TRD]

WeWork installs new head of Japan amid Asia shakeup. Kazuyuki Sasaki, the former managing director of WeWork Japan, is replacing Adam Neumann ally Chris Hill as CEO of Japan operations. The company is also considering halting its growth plans in China, which would fall into line with drastic cost-cutting measures meant to reduce mounting losses. [TRD, Bloomberg]

Justice Department’s broker commission inquiry widens. The agency acknowledged Monday that it sent a civil investigative demand to CoreLogic linked to a probe into residential real estate brokerages. Two class action lawsuits allege that multiple brokerages are inflating seller costs. And a source told Law360 that the DOJ’s inquiry likely involves other firms. [Law360, Inman]

FROM THE CITY’S RECORDS:

A 69-unit Transit-Oriented Communities project is planned at 1350 W. Court Street in Echo Park. The applicant is Lee Rubinoff with 1350 Court Partners LP. [LADCP]

Plans were filed on Tuesday for a four-story, 49-unit apartment building at 9502 N. Van Nuys Boulevard in the San Fernando Valley neighborhood of Panorama City. [LADCP]

One third of the Corcoran Group’s gross commissions last year came from just 37 of its 1,239 brokers.

The New York firm gave at least one top agent a $120,000 marketing budget.

And, besieged by well-funded rivals who’ve poached top producers, Corcoran has shelled out sums as high as $275,000 for agents to use at their discretion.

These are some of the revelations gleaned from documents leaked to every Corcoran agent last month, and analyzed by The Real Deal.

The trove of information also contains agents’ gross commission income, or GCI — the fees generated by deals before the firm takes its cut — and the commission split for each. Further details include various perks, such as marketing budgets and car service allowances. TRD is publishing an anonymized analysis of the documents for several key reasons including: to examine the health of the firm, which is touted as the most successful subsidiary of publicly traded Realogy Holdings; and to shed more light on how the residential brokerage industry manages its agents.

Corcoran has previously stated that it’s investigating what it’s called a criminal incident with the help of law enforcement and a third-party forensic investigator retained by Realogy. No arrests have been made yet.

In a statement, a representative for Corcoran said the analysis of data was “distorted” and its publication “irresponsible.” Previously, the firm called the leaked information inaccurate.

“Publishing this information serves no purpose other than to perpetuate and magnify the wrong that has been done to Corcoran and its agents,” a spokesperson said in an emailed statement. “The person or entity who did this was trying to create maximum damage by spreading erroneous data.” (Corcoran’s full statement is appended.)

These details are rarely disclosed outside a close-knit circle of executives who use splits and perks as bargaining tools to woo agents. Any attempt by brokerages to standardize fees could be classified as price-fixing, thus running the risk of violating antitrust laws.

The data analyzed by TRD is not comprehensive. Most critically, it does not include figures for Corcoran Sunshine Marketing Group, which is one of the city’s largest new development marketing firms and is overseeing sales efforts at Hudson Yards and 220 Central Park South. And sources said a spreadsheet of earnings, dated Sept. 8, 2019, is incomplete because some top agents don’t submit pending deals until they close.

In the aftermath of the breach, brokerage leaders at rival firms expressed empathy for Corcoran and feared there could be bigger implications for the industry, which has been struggling to deal with new well-funded rivals, an incursion of Big Tech into the brokerage space, the rise of superagents and a softening high-end market. “Generally, we all have similar business practices,” Scott Durkin, Douglas Elliman’s president and COO and a Corcoran alumnus, said a week after the breach. “I don’t wish this upon any competitor.”

Heavyweights take a hit
It’s an adage of sorts in residential brokerage: 20 percent of agents do 80 percent of the deals. Based on Corcoran’s leaked finances, that rings true.

Last year, the top 5 percent of Corcoran’s 1,239 agents accounted for 44 percent of the total GCI shown in the documents.

The top-producing offices hold a few surprises. While Corcoran’s East Side flagship dominates with roughly 25 percent of the firm’s 2018 GCI, the documents show, its offices in Brooklyn Heights and Park Slope were the second- and third-highest grossing offices last year, earning 8.9 percent and 8.4 percent of the firm’s total GCI, respectively.

Florida, where Corcoran has been expanding with a new office in West Palm Beach and another in Miami Beach, accounted for 8.3 percent of the firm’s total sales shown in the documents.

This comes as South Florida’s condo market has taken a beating over the last two years. For Corcoran agents there and in New York, which is going through similar challenges, the earnings reflect the new reality.

Among Corcoran’s top 10 agents company-wide — including Carrie Chiang, Robby Browne, Deborah Rieders and Paulette Koch — GCI dropped to $37.6 million last year, down 24 percent from $49.5 million in 2017, according to a document that listed agent perks.

In an interview earlier this year, Corcoran CEO Pam Liebman didn’t shy away from the fact that the market has turned, resulting in the firm closing $4.5 billion sell-side deals in 2018, a 28 percent drop from the year prior.

“It’s nothing to be embarrassed about; $4.5 billion is a great number,” Liebman said at the time. “We’re not crying, we’re OK.”

Going Dutch
Despite a sluggish market, Corcoran’s top earners have continued to make bank.

The leaked data shows Corcoran’s splits — the sliding fee structure based on sales volume — range from 45 percent to 85 percent. The average split company-wide, based on the leaked data, was 60.3 percent, and the most common was 50 percent. In Florida, where commission splits skew higher, Corcoran agents saw average splits of 75 percent, according to TRD’s analysis.

What that means for agents’ take-home pay is complicated. According to a 2014 split schedule, Corcoran splits start at 45 percent for agents with GCI under $100,000, meaning an agent responsible for those commission dollars takes home $45,000. Agents with GCI of $395,000 can earn 70 percent or more.

TRD’s analysis of the leaked documents found that the four agents with splits of 85 percent or higher had a median GCI of $3 million last year. (All four are in Florida.) Meanwhile, agents with splits of 70 percent had a median GCI of $402,433.

But across the industry, rising commission payouts over the years have squeezed profits for firms, including Corcoran parent Realogy.

Under CEO Ryan Schneider, the company has attempted to rein in costs by standardizing commissions in select markets. But if it’s a choice between losing money and letting an agent go elsewhere, Schneider said the company will opt for the latter.

“We’re not going to lose money just to retain people,” he said during this year’s second-quarter earnings call.

Perking up
The leaked documents, however, show that Corcoran has no bones about paying to keep and attract agents.

A three-page document lists 267 agents who have riders on their independent contractor agreements showing a slew of perks — including marketing budgets, junior agents and car service allowances. Of that group, 74 agents received a “Normandy Advance Payment,” a type of bonus compensation offered to agents to help them recoup lost business from their prior firm.

The leaked documents show the highest such payment was for $500,000, followed by $350,000 and $160,000. The average Normandy payment was $57,745, according to TRD’s analysis.

The rationale for Corcoran’s Normandy agreements is that residential firms, in general, have enacted tough policies for agents who leave. Such clawback policies routinely roll back commission splits to 40 percent on pending deals, and some firms now charge agents “returnable costs” (including reimbursement of marketing dollars).

For the most part, Corcoran’s recruiting appears to have been steady over the years. But the firm got an influx of new agents last year from Town Residential — at least 50, according to a TRD analysis — including Million Dollar Listing New York star Steve Gold, along with Danny Davis, Dana Power, Nicole Hechter and Asaf Bar-Lev.

Along with Normandy agreements, Corcoran offered annual marketing allowances to 182 agents, ranging between $2,000 and $120,000. The median was $8,000, according to TRD’s analysis.

Seven agents also have access to discretionary funds, ranging from $5,000 to $275,000. The median discretionary purse was $78,000. It should be noted that because the funds are to be used as an agent sees fit, the money can go toward marketing, for a junior agent, etc. Another four agents got dedicated car service allowances ranging from $1,000 to $10,000.

According to the documents, a total of 132 agents were allotted money to hire a junior agent, receiving between $5,000 and $227,810 for that purpose. (The average was $45,257.)

The revelation of agent perks comes as Corcoran and Realogy have been stung by losses to competitors — namely Compass. For years, Compass, most recently valued at $6.4 billion, has drawn criticism from competitors who accuse it of offering high splits and six-figure bonuses — though the firm denies such practices. In July, Realogy accused its rival of “predatory” poaching and illegal business practices in a new lawsuit.

Analysts that follow Realogy seem to generally view agent-recruitment perks as positive but say more is needed.

“This is a multifront battle where [Realogy] needs to invest and innovate,” read a September report from Barclays. “The capital and dollars behind the competition in many ways undermines RLGY’s efforts.”

Judging from his “Die Hard,” “Matrix,” and “Lethal Weapon” franchises, producer Joel Silver knows how to put together successful sequels. But that’s not exactly correct in the real estate world.

Last year, he sold his Malibu estate for $38 million, after having originally listed it in 2017 for $57.5 million.

Now, he’s looking for a blockbuster in Brentwood.

Silver has listed his 26,000-square-foot modernist home in the Westside neighborhood for $77.5 million, according to the Los Angeles Times.

The striking home is the work of late Mexican modernist architect Ricardo Legorreta, who died in 2011. Its most distinct features include its circular atrium, the pyramid ceiling above its dining room, and a family room with 30-foot-high ceilings and hydraulic doors.

The property spans five acres that include an English garden, a sunken basketball court, and a pool. There are several outdoor areas meant to be used as individual living spaces, according to the Times.

Silver has enlisted Judy Feder with Hilton & Hyland and Kurt Rappaport with the Westside Estate Agency to sell the property. Feder was also the listing agent for Silver’s Malibu beach house that sold last year.

Silver was also involved in a Venice office property that sold in May for $22 million. He purchased the property in 2012 and started a renovation to make it the headquarters of a new production company, but the plan encountered community resistance and slowed. [LAT] — Dennis Lynch

A cosmetics distribution company sold its Westlake Village headquarters in a leaseback deal will allow it to remain in the location. The buyer plans to redevelop the remaining space into a self storage complex.

Jafra Cosmetics International unloaded the 126,238-square-foot office and industrial property for $28.2 million or $223 per square foot, it said in a statement.

The buyer was PS Southern California One Inc. NAI Capital represented both sides in the transaction.

Jafra Cosmetics will maintain its headquarters by leasing back approximately 46,000 square feet of office space at the two-story building at 2451 Townsgate Road. It spans 9.6 acres at the border of Westlake Village and Thousand Oaks.

Jafra, a privately-held company that utilizes a direct sales model similar to Avon and Mary Kay, has owned the property since 1988, according to property records. It plans to reinvest proceeds from the sale into the business.

The new owner said it will develop the remaining portion of the property, built in 1978, for a self storage facility. Demand for that sector is strong, said Chris Jackson of NAI Capital. In Los Angeles, so too is demand for industrial. It has been one of the best performers in commercial real estate in the Los Angeles area. By the end of last year, tenants in the Inland Empire region signed 20 of the top 100 industrial leases in the country, totaling 18.98 million square feet. The market has remained active in 2019.

Avi Dorfman, who says he’s a co-founder of Compass, has been fighting for a $200 million stake in the firm for five years. Now, a jury will decide if he’s entitled to it.

In an Oct. 1 ruling, a New York judge denied the SoftBank-backed firm’s motion for summary judgment, and said Dorfman is entitled to a jury trial. He may also be in line for monetary damages related to his claims that he helped CEO Robert Reffkin work on a concept for Compass but was later cut out of the action.

“The record is clear that they exchanged, among other things, emails that set forth offers and counteroffers as to how Dorfman would be compensated as a ‘founding team member’ of the new venture,” Supreme Court Judge Andrea Masley wrote, ordering a trial date to be set within 30 days.

“We are excited for the opportunity to tell Avi Dorfman and RentJolt’s story to a Manhattan jury soon,” Steve Susman, Dorfman’s legal representative, said in a statement to The Real Deal. (Dorfman claims he was offered a stake in Compass, plus a salary, in exchange for Reffkin’s purchase of his venture RentJolt. The deal never transpired.)

Compass declined to comment. But it previously argued that Dorfman “spurned multiple offers” to work at Compass only to file an “opportunistic” lawsuit against the firm.

“Dorfman now seeks a do-over of that decision, claiming he should be awarded tens of millions of dollars in equity in Compass far in excess of what he could have earned if he had actually chosen to join that venture,” Compass said in its motion for summary judgment.

In legal filings, however, Dorfman claims he developed a 120-day plan to launch the company that would later become Compass; supplied Reffkin with information to present to investors; provided competitive information about other real estate companies; and recruited Chairman Ori Allon, among other things.

“Dorfman has submitted enough proof to show that he provided these types of services that went beyond the negotiation of a business opportunity,” Masley wrote.

Dorfman sued in 2014, claiming Reffkin used a business concept they worked on together in 2012 as the basis for Compass. At the time, Compass was valued at $360 million after raising a $40 million Series B round. This July, Compass’ valuation reached $6.4 billion, after raising a $370 million Series G.

Although the original suit did not specify damages, a lawyer for Compass inadvertently disclosed Dorfman’s monetary claim — that he’s entitled to a 15 percent stake of the company at founding — during a hearing last year. Using back-of-the-napkin math, sources said Dorfman would stand to collect around $200 million.

In 2016, the Manhattan Supreme Court ruled that Dorfman could continue to call himself a co-founder of Compass.

Nick Jonas, who recently got married and just got the Jonas Brothers band back together, broke up with his Beverly Hills pad.

The actor and musician flipped the 4,129-square-foot home, selling it to tennis star Naomi Osaka for $6.9 million, according to Variety. The sale came about a year after Jonas, who was married to Priyanka Chopra in December 2018, paid $6.5 million for it, according to the report.

Jonas’ flipping game isn’t as strong as fellow celebrity Ellen DeGeneres. In the last two years, she has closed $150 million in residential deals, buying and selling at least eight properties around Southern California.

Overall the Los Angeles luxury market has been stuck in neutral for the last year, with homes lingering on the market and sellers being forced to chop the asking price multiple times before closing a deal. Industry experts say “aspirational pricing” is to blame for the price cuts.

Osaka, the former No. 1 ranked player, bought a five-bedroom, four-and-a-half bath mansion that is perched in the mountains above Beverly Hills.

The home was built in 1965 and was completely redone by its former owner, L.A. nightlife owner Jason Lev. He purchased the property in 2012 for $1.8 million, and after the improvements — which include a two-story guest house — listed it for $7.4 million in late 2016. It sat on the market for over a year before Jonas bought it, at the million-dollar price cut. [Variety] — Alison Stateman 

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Alex Rodriguez has been investing in real estate for decades. He made his first purchase — a duplex outside of Miami that he needed a $48,000 downpayment for — when he was 22.

But in the years since, the former Yankee third baseman, who is now 44, has built a sizable national real estate portfolio. He has thousands of units, all under the A-Rod Corp. umbrella, in U.S. markets like Chicago, North Carolina and Texas. Now, he’s turning his sights on South Florida and New York.

Click here to read the full Q&A with A-Rod

In New York, he recently announced a partnership with his longtime personal broker, Adam Modlin, and developer Ofer Yardeni, the CEO of Stonehenge to buy up $1 billion worth of multifamily real estate in the next 18 month.

Watch here for a behind the scenes on A-Rod’s photo shoot with the The Real Deal and to hear him talking about what he learned from his Yankees’ managers — Joe Torre and Joe Girardi — and how being a celebrity can cut both ways in the business world. Spoiler alert: He didn’t share the guest list for his upcoming wedding to J.Lo.

Virtual brokerage eXp Realty is getting into the instant-homebuying game.

The fast-growing firm said Thursday it will join the ranks of Redfin, Zillow, Keller Williams and Opendoor by offering sellers the chance to instantly offload their property to buyers.

Through Express Offers, eXp agents will submit properties “to a number of institutional buyers,” the company said. The program is available in California, and eXp said it plans to open in 10 more states by the end of 2019.

Founded in 2009, eXp is one of the fastest-growing brokerages nationally with 20,000 agents as of August. At a time when traditional firms have been competing for agents, eXp offers high splits, revenue-sharing and company stock options.  During the second quarter of 2019, eXp reported a “record” $266.7 million in revenue, up 104 percent year over year. The firm also reported a $2.2 million net loss, up 16 percent.

But eXp is joining a crowded field of iBuyers. Zillow, for instance, has pinned its future growth on the ability to buy homes and originate mortgages. And Opendoor, the SoftBank-backed iBuyer founded in 2013, most recently raised $300 million at a $3.8 billion valuation.

Brokerages like Redfin, Keller Williams and Realogy are also in the iBuying game — albeit with different approaches. Realogy’s Coldwell Banker customers have access to cash offers through a partnership with Home Partners of America.

In August, Keller Williams teamed up with Offerpad to boost its iBuying program. Through their partnership, Keller agents steer sellers seeking all-cash offers to Offerpad, which looks to flip homes within 10 days. Offerpad uses Keller agents to market the properties on the back end.

Despite the rush of players betting on iBuying, skeptics abound, particularly because of the high cost of purchasing homes from sellers. In July, Opendoor laid off 50 and asked 300 employees to relocate to Phoenix. Steve Eisman, the famed short-seller, has shorted Zillow stock. Earlier this year, he said instant homebuying is like a ticking time bomb that could explode during a downturn.

“In a recession, you’re going to get your head handed to you,” he said.

Days before Christmas in 2016, Karen Harvey was making plans for the holiday with her daughter when a piece of paper slid under her apartment door. It was an eviction notice.

Harvey and 200 other tenants in Philadelphia’s Penn Wynn apartment complex were told they would have to be out by March. “I was crushed. I felt like I’d been kicked in the face. The prospect of having to move in three months was overwhelming,” Harvey said. “Where was I going to get $2,400 to move?”

The owner, Cross Properties, didn’t realize that their business strategy would be a catalyst for the city’s tenant movement. While some renters found new apartments and others fought to stay, many joined the Philadelphia Tenant Union. A year later, Harvey spearheaded a successful campaign for the city’s first “good cause” eviction bill. Now, organizers and socialists show no signs of stopping, as they canvass neighborhoods in small teams to build support for rent control.

“From February to June we’re going to bang down City Council’s doors, just like we did with ‘good cause,’ until we get a rent control bill passed,” Harvey said.

There isn’t a single, organized rent control movement across the country. Instead, a loose network of groups like Harvey’s are winning key fights in some of America’s biggest cities and states. They’ve won “good cause” eviction requirements for New York mobile home communities and successfully fought for rent caps in Oregon and California. Groups across the U.S. and Canada are also sharing notes. One regular monthly conference call brings together 30 different tenant unions, including groups from British Columbia, Los Angeles, Iowa and Suffolk County. And they’re pushing for major reforms in Seattle, Colorado and Illinois.

Much of the reason the debate is generating such interest now is simply demographics: at least 5.4 million single family homes were converted into rentals in the decade after the foreclosure crisis. No longer just a stop on the way to homeownership for those near the poverty line, the share of renters has dramatically increased. Renters are now the majority in the 100 largest cities in the United States, according to a 2017 Harvard study.

Meanwhile, local landlord groups are lobbying city and state officials but haven’t yet tackled the issue as a united front. In some cases, including in California and Oregon, real estate owners have actually thrown support behind rent control, as a way to fend off more extreme reforms. Some states have enacted rent control sporadically or, in the case of 24 states, banned the practice entirely with preemptive bans. With at least one presidential candidate and a sitting congresswoman calling for nationwide rent control, tenant organizers are setting the agenda and the real estate industry is gearing up for more fights.

“Our country was based on something called the free economy,” said Dennis Block, a Los Angeles attorney whose eponymous firm evicts hundreds of tenants each month. “For some reason, when your name happens to be landlord, that concept is thrown out the window.”

Rent control, a brief history

Rent control has existed in some form in the United States since federal “fair rent” committees were created in 82 cities during World War I. Rent control gained popularity in cities after World War II in response to a housing shortage and rising rents. The housing boom of the late 1940s and 1950s saw many cities ditch such controls, though there was a resurgence of rent control in the 1970s when more than 200 communities sought to deal with a deluge of evictions. Since the 1980s, such policies have largely declined across the country.

Outside the U.S., rent control can be traced as far back as the Middle Ages. In 1562, Pope Pius IV in Rome eased housing restrictions and other forms of persecution against Jewish tenants, ordering their Christian landlords to stabilize rents, according to the Cornell Law Review. Though, there’s some speculation that the issue popped up in ancient Rome. An unsourced New York Times story in 1923 describes a Roman senator who took his landlord to court in 150 BC after he doubled his rent, causing Caesar at the time to cap rents of certain types of homes.

Urban Institute, a Washington, D.C.-based think tank, notes in a January 2019 report that there’s a gap in the research around rent control. Most crucially, analysis often doesn’t take into account the potential benefits of regulating rent increases, nor does it factor in how local regulations — like restricting condo conversions — can balance out the potential consequences of rent control.

“One of the big criticisms, which is why it’s in Economics 101 books, is that it throws off the natural supply and demand of the market,” said Mark Trekson, one of the authors of UI’s report. “What it does help is, it lets people stay in a unit longer than they would otherwise. It gets rid of those one-year shocks.”

Modern reports on the impact of rent control often laud the policy for creating greater stability for renters, who are able to stay in their apartments or neighborhoods for longer stretches of time. These reports, however, often temper such benefits with the looming concern that landlords will react by converting rental housing into condos or by simply neglecting their properties.

A widely cited 2018 Stanford University report, which studied the impact of San Francisco’s 1994 rent control law, found that owners reduced the supply of rental housing by 15 percent, largely through converting their properties. Another 2019 report by Columbia University found that rent control has a net positive impact and doesn’t lead to an overall decline in the quantity of rental housing, though it may mean apartments are built in areas outside urban centers. Stijn Van Nieuwerburgh, a professor of real estate and finance at Columbia and one of the report’s authors, noted that it’s crucial that affordable housing policies target lower-income residents and are paired with other regulations.

“Rent control does not create any new housing units, so it can never be a panacea to housing problems,” he said.

Roderick Hills, a professor of law at New York University, has advocated for making rent caps conditional on easing up zoning restrictions to encourage the construction of new housing.

“I am becoming more convinced that it is impossible to reduce regulatory obstacles to new housing without rent control,” Hills said. “Rent control might be an essential part of any package of policies designed to curb NIMBY zoning that is strangling our cities.”

Landlords shrug on the West Coast

On Feb. 4, Jim Straub, a third-generation landlord and director of the Oregon Rental Housing Association, appeared before the state Senate to offer his thoughts on a forthcoming rent control bill. The chamber likely expected the usual proclamations from landlords faced with new regulations: it will kill investment, conditions will deteriorate for tenants, and the housing crisis will only get worse. But that’s not what Straub told lawmakers.

“Let’s recognize it for what it isn’t: an industry killer,” he said. “There are drastic changes for landlords and investors in SB 608, but as written, I do not believe it will be catastrophic.”

When the sausage was finally made, Oregon had passed the nation’s first statewide rent control bill. But it didn’t look much like rent control, or what people traditionally think rent control looks like. While the legislature passed a “just cause” eviction provision, rent increases were capped at 7 percent, plus the consumer price index, which was 2.6 in August 2019, according to the Bureau of Labor Statistics. It was far higher than the two-to-three percent cap that had been rumored.

“It’s been a mixed bag. The bill may not be exactly what we wanted, but it was a significant step in the right direction,” said Katrina Holland, executive director of Community Alliance for Tenants, a group that pushed for the statewide measure.

Jim Lapides, vice president of the National Multifamily Housing Council, watched from afar when the bill passed. For his group, which lobbies across the country for real estate-friendly legislation, it was a path forward for similar legislation in the nation’s biggest state.

“California’s bill was definitely modeled after Oregon’s,” Lapides said.

Like 23 other states, California has legislation in place from the 1990s that prevents municipalities from enacting their own rent control measures. Tenant groups and activist Michael Weinstein made a habit of trying to overturn the rule. In 2018, Weinstein’s AIDS Healthcare Foundation spent $17 million to repeal the ban through a statewide referendum. But they were outgunned by the real estate industry, which spent $96 million and won in a landslide.

“The coalition had mapped out priorities in December, and a statewide rent cap was one of them,” said Arielle Sallai, chair of the Los Angeles Democratic Socialists of America Housing Homeless Committee. “When we saw rent control passing in other states like Oregon, it made it seem even more viable. We were hoping the national momentum would force our legislators to get a kick in the pants to finally do something.”

Months later, apparently responding to California’s housing affordability crisis, legislators proposed a rent control bill. Ahead of the vote, Essex Property Trust, a real estate investment trust that last year reported 83 percent of their income came from California, called the measure “balanced” on a quarterly earnings call.

The legislature passed the bill: a 5 percent plus consumer price index limit on annual rent increases. The real estate industry was quick to warn that the measure would drive investors away from California.

“Whether it’s California, Oregon, Illinois or New York— rent control will be another impetus for investors: do I want to put my incremental dollar in a higher risk or a lower risk environment?” said Jon Woloshin, a real estate analyst at UBS Global Wealth Management.

Publicly, landlords decried the rent control measure for all the normal reasons. But privately, many were relieved: Essex Property Trust, for example, already had an internal policy of limiting increases to 10 percent. Anything higher would lead to “push back and phone calls almost immediately” from residents, Essex Property Trust CEO Michael Schall told his firm’s investors.

While maintaining the appearance of rent control, the real estate lobby had successfully pushed for a few key provisions — it got a narrower definition of “good cause” eviction and exemptions for single family homes. More importantly, the rent control preempts any repeal of the statewide ban on municipalities enacting their own rent control measures. In other words, a bill the industry could live with wasn’t very toothy, and wouldn’t get worse than that.

Sallai, of the DSA, wasn’t surprised that the rent control bill was watered down. Gov. Gavin Newsom has balked on rent control since 2014, she said.

“We snuck in to a meet-and-greet to ask him about rent control — and he did his usual ‘walk away’ and said we needed a compromise,” she said. “It seems like with AB 1482, he finally got it. And it goes to show — if [private equity giant and landlord] Blackstone is happy about it, it’s not as strong as we want it to be, but I guess it’s better than nothing.”
Newsom is expected to sign the legislation as soon as October.

No rent control allowed

Chaining themselves together in the middle of Governor J.D. Pritzker’s office in Springfield, Illinois, 28-year-old Diego Morales and a half-dozen other activists from the “Lift the Ban” rent control coalition were hoping for a Hail Mary at the end of the legislative session.

After six hours locked together with zip ties, the group did get a meeting— not with Pritzker, but with his staff. Their efforts were unsuccessful: the bill to repeal the statewide ban on rent control died in committee without ever making it to the floor for a vote. But the campaign led to some surprising political developments.

The organizations behind the effort, a coalition of left-leaning community groups, unions and the Democratic Socialists of America, used the unsuccessful campaign as a springboard, helping get six DSA-endorsed city council members elected. The candidates have all endorsed the “Lift the Ban” campaign and spurned campaign contributions from developers.

The result is a socialist bloc on Chicago’s 50-member City Council that is a constant thorn in the side of the real estate industry.

“DSA is not like other socialist organizations that are sometimes like reading clubs. We were out in the rain, in sub zero temperatures knocking on doors,” said Morales, a member of the DSA. “Now more than one tenth of the city council is socialist because we put boots on the ground.”

Brian Bernardoni, Chicago Association of Realtors senior director of government affairs, said he expects efforts to repeal the ban to be resurrected in the coming year, and the real estate industry should be wary of a rising movement that marries progressive groups with organized labor.

“It’s good politics but lousy economics,” Bernardoni said. “The progressive movement has taken root. We’ve been watching this for a while in Chicago and Cook County. Progressive candidates, organized labor and service employees unions are really addressing issues that are exciting voters.”

Rent caps in the Beltway
Meanwhile, some 80,000 rent controlled units in the nation’s capital stand to become market rate in December 2020 if the Washington, D.C. City Council doesn’t act.

The law, on the books since 1985, applies to apartments built before 1975, and permits landlords to hike rents each year by the consumer price index for urban wage, which was 1.0 in July 2019 for Washington D.C., plus 2 percent of the rent. Such increases are further capped for elderly and disabled tenants. Earlier this month, Council member Anita Bond proposed a bill that would extend rent control through 2030. It looks likely to pass.

“Despite nearly half a century of rent control, the District now has less than half as many low-cost apartments as there were 15 years ago,” a spokesperson for Bond said. “Without the District’s most important affordable housing program, rent control, the District’s population will become less diverse … Workforce housing will all but disappear.”

Tenants have also mobilized in the city. In July, residents launched a District-wide tenants union, with one of its goals being to fight for the renewal of the city’s rent control law. The city’s local DSA chapter also formed an anti-eviction campaign dubbed “Stomp Out Slumlords” in 2017. Stephanie Bastek, a member of the campaign and a board member of the tenant union, said elected officials haven’t done enough to ensure more units aren’t deregulated.

“[Bond] talked about expanding rent control and making it better when in fact she’s just maintaining the status quo,” she said.

Allison Hrabar, an organizer of the campaign, added that if the debate over reforming rent control heats up, she doesn’t expect it to be as controversial among local landlords as other housing issues in the city. The reason is simple — much of the district’s rental housing supply is made up of single-family homes, which are excluded from the city’s rent control law.

In the U.S., three states — Maryland, New York and New Jersey — have a form of rent control that only applies to certain apartments, according to the National Multifamily Housing Council. Only 1 percent of New York’s housing stock — about 22,000 apartments — are rent controlled, according to the last U.S. Census Bureau’s housing and vacancy survey. Rent control applies to tenants living in a building constructed before 1947, who have lived in the apartment since July 1, 1971 — or are a direct descendant of the original tenant. Far more apartments, roughly 1 million, are rent stabilized, meaning that annual rent increases in these units are decided by the city. The state legislature enacted other limitations on rents hikes in June with the passage of the Housing Security and Tenant Protection Act.

Local rule in Jersey

Across the Hudson River, it’s up to individual municipalities in New Jersey to decide whether to cap rent increases. According to the most recent survey of rent control throughout the state, conducted in 2009, more than 100 municipalities have rent control measures in place. Many are based on CPI, though some have provisions that set the limit based on whether tenants pay their own heating costs.

In April, Jersey City Council member James Solomon released a report that underscored the need to reform the city’s “broken” rent control system. According to the report, most tenants don’t realize that their apartment is regulated, leading to landlords to routinely disregard annual rent caps. In Jersey City, landlords who own multifamily buildings constructed before June 1983 with more than four units can only raise rent every 12 months by the lesser of 4 percent or the difference between CPI three months prior to the end of the lease and three months before the lease was signed.

Perhaps following New York’s lead, Jersey City is also considering amending how landlords are able to increase rents through renovations.

“We do want to strike a balance where there are still real incentives to keep apartments maintained,” Solomon said.

Landlords in Jersey City are represented by Ron Simoncini, executive director of the Jersey City Property Owners Association and president of marketing firm Axiom Communications. Simoncini, who has helped landlords in more than 30 municipalities oppose rent control measures, said city officials should instead focus their energy on ensuring landlords properly register their units as rent controlled and enforcing other elements of the existing city ordinance before trying to put in place new regulations. He’s heartened by some of the discussions he’s had with council members and housing advocates, saying that many have realized that “rent control is not about affordable housing.” He said the issue of poor conditions at some properties shouldn’t be conflated with rent control.

“When people are hampered in their ability to generate returns, the capital leaks out of the business,” he said. “The notion that you punish the entire set of property owners because some set of property owners don’t care for their properties is the most dangerous notion in New Jersey, despite the fact that it’s absolutely ridiculous.”

Columbia’s Van Nieuwerburgh said that while “one-size-fits-all doesn’t usually work very well,” instituting state or national-level policies could help get around local resistance.

“It’s the Nimbyism of the local homeowners,” he said. “The more local you go with the problem, the more likely you are going to run into opposition.”

Back in Philadelphia, the real estate industry is facing a growing threat, and one that is rousing national interest.

In September, presidential candidate Elizabeth Warren endorsed Kendra Brooks, who is running for city council in Philadelphia on the Working Families Party ticket. As part of her platform, Brooks is seeking to end a 10-year tax abatement granted to developers in the city — and enact rent control.

“Everywhere I’ve been in the last four or five years has a tenant movement,” said Philadelphia Tenant Union coalition coordinator Emily Black. “It’s the hottest issue on the left right now.”

Correction: An earlier version of this article misstated the net worth of Michael Weinstein. 

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