Downtown developer Jade Enterprises won approval from the Los Angeles City Planning Commission to build a campus-like, mixed-use project near the Arts District’s Soho Warehouse.
The members-only Soho Warehouse, with hip clubs scattered around the world, resides in the six-story, 100-year-old building at 1000 S. Santa Fe Avenue. It is just one of the many reuse projects hitting the Arts District with massive new office conversions, breweries and other developments.
The Jade Enterprises project is the latest to join the crowd in the Arts District.
The campus will be built at 2110 E. Bay St., and consist of three buildings built on top of subterranean parking containing 479 spaces, according to Urbanize.
On the campus’ east side, a six-story office building would be located while the remaining western half would incorporate an existing 30-foot tall “warehouse shed” that will be adaptively reused and incorporated as part of the two-level retail component fronting Bay Street.
An 11-story structure fronting Sacramento Street would contain 110 live-work apartments — including 11 for low-income renters. The other two buildings would include 113,000 square feet of office space and 51,000 square feet of commercial space.
The industrial development, designed by Studio One Eleven, would include both ground-up construction and the reuse of some existing buildings. The 11-story tall office structure would be linked to the other two buildings with a series of pedestrian walkways that criss-cross the 1.8-acre development site.
Jade Enterprises is run by brothers David, Albert, and Benny Taban, and is working on three other developments in Downtown Los Angeles dubbed the Emerald, Onyx and Topaz developments. It’s also working on the Sapphire development in Westlake.
A Jade spokesman was unavailable to comment on when construction would begin on the nearly three-year old project.
In voting to approve the project, the city planning commissioners also rejected an appeal from a group affiliated with the Laborers’ International Union of North America, which represents 500,000 energy and construction workers.
The union argued that the project did not comply with the California Environmental Quality Act and should require further study.
Softbank’s Masayoshi Son and Jared Kushner (Credit: Getty Images)
Talks for SoftBank to fund crowdfunding startup Cadre ended when Jared Kushner declined to divest his ownership stake in the company.
Ryan Williams — who co-founded the platform with Jared and Joshua Kushner in 2014 — was in talks with SoftBank CEO Masayoshi Son in early 2018, Bloomberg reported. Williams had even flown to Tokyo at Masayoshi Son’s invitation, but the talks fell through.
Cadre’s Ryan Williams (Credit: Getty Images)
Son, SoftBank’s CEO, was concerned that Jared Kushner may have had conflicts of interest or undue influence due to his appointment as senior advisor to President Donald Trump in 2017.
Cadre has had to contend with the Kushner’s political profile, executive departures and “inflated business claims,” according to Bloomberg.
According to one account of the pitch made to SoftBank’s $100 billion Vision Fund in 2018, Cadre demonstrated software that it had not been using in practice. Cadre denied that, and did not comment further on the contents of its pitch.
The startup has not yet realized its goal of creating an online marketplace to make commercial real estate investments available to the masses. The online platform is currently only available to verified high net-worth individuals. In its latest funding round in 2017, it was valued at $800 million. [Bloomberg] — Georgia Kromrei
California Governor Gavin Newsom (Illustrations by Paul Dilakian)
If there’s one home truth landlords have learned of late, it’s that millions of dollars in lobbying muscle can only take you so far.
With lawmakers in major U.S. cities prioritizing rent regulation, owners have been left to lick their wounds, evidenced in the statewide rent control measure recently passed in California. It’s a victory for the 4.6 million renters in properties that will be subject to the new law (AB 1482), which caps all rent increases at 5 percent plus the consumer price index and implements “just cause” eviction rules that prohibit landlords from rent-gouging or forcing tenants to vacate in order to raise the rent on a unit.
National politicians have piled on. Just a week after the law’s passing, Democratic presidential candidate Bernie Sanders proposed a $2.5 trillion plan that included an even stricter rent cap. He later dug in his heels with a tweet, proclaiming, “We need national rent control.”
Rep. Alexandria Ocasio-Cortez followed up with her own version of a rent control plan. It targets “market-controlling” landlords with five or more properties, capping their rent increases at 3 percent, and would revoke federal backing of mortgages for landlords who repeatedly harass tenants.
Rent control is spreading, but California’s bigger fight is yet to come.
AB 1482’s passage was largely a compromise that real estate could live with after the industry beat back activists’ push for local determination of annual rent limits. But even that bill may find new life.
At the end of last year, the Proposition 10 ballot measure, which would have lifted a ban on municipalities enacting their own forms of rent control, was roundly defeated. And though activist Michael Weinstein’s AIDS Healthcare Foundation’s “Housing is a Human Right” campaign failed, another fight is already ramping up. His new Prop 10 2.0 proposal, which would allow cities and counties to impose rent control on buildings after they turn 15 years old, has been spurred on by national calls for rent control.
“These are unprecedented federal platforms. It’s certainly eye-opening for folks in the industry who think that rent control is just a California or New York problem,” said Jim Lapides, vice president of the National Multifamily Housing Council (NMHC). “Now the stakes are that every state in the country could be impacted. If someone in the industry thinks it won’t affect them — it’s going to.”
Fightin’ words
Trash talk is reaching epic levels in the aftermath of the state law’s passage. Dennis Block, a real estate attorney who specializes in evictions, called AB 1482 “insidious” and said that the California Legislature “ripped the carpet out from underneath” real estate investors. Block predicted investors will be leaving the state for friendlier locales.
“I think [municipalities that have enacted ‘good cause’ eviction] are uncivilized societies, and they don’t believe in free enterprise,” Block said. “They are truly trying to destroy the market. What they’re trying to do is redistribute the wealth.”
Block gave a keynote address at a real estate trade show the week after AB 1482 was signed, encouraging landlords to evict their tenants as quickly as possible before the “just cause” provision set in.
Days later, advocates reported a surge in evictions. “We’re dealing with dozens of buildings calling our hotline,” said Trinidad Ruiz, an organizer with the Los Angeles Tenant Union. Katie McKeon, an attorney with the pro bono law firm Public Counsel, called it “a massive uptick in no-fault evictions” over the past two weeks.
In an emergency ordinance, the Los Angeles City Council placed a moratorium on evictions and eviction notices sent over the last several weeks before the “just cause” eviction provision took effect.
Aids Healthcare’s Weinstein said that Block’s statements “help our cause tremendously.”
“I don’t know who is managing PR on the industry side, I don’t know if they care, but they look terrible,” Weinstein said.
The California Apartment Association (CAA) condemned Block’s statements as “unconscionable.”
“[Block] does not speak for the rental housing industry,” said Debra Carlton, who runs public affairs for the trade group. “Property owners should not make any decisions based on Block’s fear-mongering or the perceived ramifications of AB 1482.”
The devil you know
Not all industry figures saw AB 1482 as calamitous. The Business Roundtable, which counts Blackstone Group CEO Steven Schwarzman among its board members, even penned a letter in support of the measure.
CAA dropped its own opposition to AB 1482 when it realized the bill was likely to pass, and after getting some important changes to the “just cause” provision. In the final version of the bill, “just cause” protections do not kick in until 12 months after a tenancy starts. And that clock restarts if a tenant gets a new roommate, CAA CEO Tom Bannon said. But his group, which represents both real estate investment trusts and smaller property owners, is gearing up for a fight against Proposition 10 2.0.
“A lot of things were being discussed under the table,” said Paul Rutter, a real estate attorney at Cozen O’Connor. “It wasn’t as bad as it could have been.”
The ability to take vacancy units out of rent control was a key victory — one Lapides hopes the industry can hold on to in the coming legislative session.
“That’s the hope, at least. Vacancy control would be an absolute killer for the industry,” he said.
In fact, significant changes were made to the bill behind the scenes over the summer, including leaving vacancy decontrol in place — allowing for the deregulation of vacant apartments — and exemptions for month-to-month tenants in the measure’s “just cause” eviction component.
The rules around enforcement are another key component of the new law: Single-family homes are exempted from the “just cause” eviction component except if they are owned by a corporation. “To be very blunt, the data around renters is really lacking,” said a spokesperson for the lead sponsor of AB 1482, Assemblyman David Chiu.
It will largely be up to California’s courts to determine the implementation of the statewide rent cap and “just cause” eviction, according to Chiu. Unlike New York, which enacted sweeping rent regulation rules in June, California does not have a state agency devoted to the implementation of the new law.
“Landlord-tenant laws are enforced by the public being educated on their rights and individuals indicating their rights through our legal system,” Chiu said.
The battle on the horizon
If the industry hopes to fend off lower caps on rent increases, the time to act is now. That’s where national groups like the NMHC come in, according to Lapides.
Though based in Washington, D.C., the NMHC is focused on working with local groups, including the CAA.
The CAA’s Bannon said that his group, which pushed hard to fend off Proposition 10, is keeping a close watch on fights in California and beyond. He’s received many calls from around the country, he said, from multifamily owners asking what to do in the face of local rent control fights.
“You can’t help but look at this stuff because politics in California is a full-contact sport sometimes. You have to get ready,” Bannon said.
NMHC member Essex Property Trust, a publicly traded REIT specializing in affordable housing, attributes 83 percent of its annual net operating income to California. In its latest earnings call, CEO Michael Schall said that his firm was tracking the renewed push for Proposition 10 “pretty carefully.”
The political action committee the firm backs, Californians for Responsible Housing, is “alive and well and organized in case of this,” Schall said.
Californians for Responsible Housing spent $50 million opposing the Proposition 10 ballot measure. In addition to Essex Property Trust, its backing came from AvalonBay Communities; Blackstone and a Blackstone-linked single-family home rental company, Invitation Homes; Marcus and Millichap; Prometheus Real Estate; Equity Residential and the California Association of Realtors, according to California election filings.
Despite Essex Property Trust’s assurances to its investors, Californians for Responsible Housing spokesperson Steven Maviglio said that the PAC has not yet formed an official campaign, since Proposition 10 2.0 has not qualified for the ballot, though it is widely expected to get the signatures needed to do so.
Like the real estate industry’s advocacy groups, the tenant advocates do not always see eye to eye on strategy. According to Democratic Socialists of America Los Angeles member Arielle Sallai, the decision to push for a ballot measure came from Weinstein, a millionaire whom the New York Times once called an “ex-Trotskyite.”
Weinstein has made repealing the Costa-Hawkins Rental Housing Act his personal crusade. The law, passed in 1995, allows municipalities to craft new rent regulations, but only on rental properties built before 1995.
Weinstein commands a yearly salary of $458,000, and tenant advocates have questioned his willingness to collaborate.
“Tenant advocates did not choose to do a ballot measure. Michael Weinstein did, without much discussion… or any discussion,” Sallai said.
But Weinstein said that his group collaborates with 500 tenant groups across the state, although they have no formalized structure. And he is not dissuaded from his cause by developers who say a rent cap will stymie housing development.
“That would be a credible argument if they were producing any affordable housing,” Weinstein said. “Trickle-down economics has been completely debunked. It doesn’t matter how many Ferraris you can build if all you can afford is a Chevy.”
Chiu, the lead sponsor of AB 1482, said that the AIDS Healthcare Foundation did not support the bill and had no involvement in its development. Chiu continues to support repealing the Costa-Hawkins restrictions on rent control, although he has doubts about the strategy behind a ballot-measure campaign.
“I have always thought it would be best for legislature to craft policies rather than going to the ballot,” Chiu said. “I’ve been telling people for years that Sacramento’s failure to legislate anything would lead to intense ballot measures out of necessity.”
René Moya, the director of the AIDS Healthcare Foundation “Housing is a Human Right” campaign, said AB 1482 is “not rent control” and only prevents one-time rent gouging rather than stabilize rents. Moya warns that the cap — which will limit rent increases to 7 to 9 percent in practice — may spur landlords to seek the maximum rental increase each year, especially in the face of the spread of more stringent rent control.
“I’m no psychic. But the likelihood is that landlords will raise rent to that cap every year, now that there is a signal to them that it’s an acceptable rate,” she said.
Nevertheless, Moya said the effort to repeal Costa-Hawkins is in a “much better place” than it was before.
“We have collected half a million signatures for our ballot measure,” Moya said. “We will mention this to the public. Rent control works, works at scale and works fast.”
The Real Deal will be celebrating its 250th issue this January! This special commemorative issue will include a look back at the first two decades of New York real estate in the new millennium, and some of The Real Deal’s most notable coverage. Don’t miss our stories on the billion-dollar dealmakers and the billion-dollar deals that have helped shape the city and its skyline.
Our first issue of the new decade will also include a tally of the records and milestones of 2019 as well as stories on rent reform, one of the most pressing issues facing the industry today. Other coverage will examine LLC laws shielding owners’ identities and the changing social media strategies being used to sell properties today.
Bill Cunningham and Citi Habitat’s Gary Malin. The longtime president of sales is leaving the firm.
Bill Cunningham, the Corcoran Group’s president of sales, is leaving the firm, The Real Deal has learned. The move is part of a broader shakeup that will also see Gary Malin, president of sister firm Citi Habitats, add the role of COO of Corcoran to his responsibilities.
Corcoran CEO Pam Liebman
In an email to agents Thursday, Corcoran CEO Pam Liebman said Cunningham’s departure is one of several changes underway at the company, which is a subsidiary of publicly traded Realogy. Corcoran is realigning its management team to focus on a “regional support structure” that Liebman will oversee, she wrote. In Cunningham’s wake, Michael Sorrentino, who oversees Brooklyn sales, will add oversight of Manhattan to his responsibilities.
“Corcoran is an incredibly strong brand, and I am confident these changes will make us even better,” she wrote in the email, a copy of which was reviewed by TRD. Sources familiar with the discussions said that among the changes was Malin’s elevation to the COO role at Corcoran. Malin has been leading Citi Habitats, which specializes in rentals, since 1998.
Cunningham joined Corcoran in 2001 and worked his way up to running the firm’s flagship office on the East Side. In 2014, he did a brief stint as president of Trump International Realty, before rejoining Corcoran as general sales manager.
In that role, he served as Liebman’s top deputy and confidante as the firm battled to maintain its dominance in the face of stiff competition and aggressive recruiting, particularly from Compass. With 1,320 Manhattan agents and $4.5 billion in closed sell-side deals, Corcoran was the No. 2 firm in the city last year, down 28 percent year-over-year, according to an analysis by TRD.
Neither Corcoran nor Cunningham immediately returned calls for comment.
Cunningham’s departure comes two months after Corcoran was hit by a major data breach, in which agent splits, marketing budgets and gross commission income were leaked to the entire company in an email. Though the email came from Cunningham’s account, Corcoran said criminal hackers were to blame.
Still, the trove of leaked information shed light on the health of the firm, which is one of the most successful subsidiaries of Realogy. The New Jersey-based conglomerate, which is also the parent company of Sotheby’s International Realty, Citi Habitats and Coldwell Banker, has seen its stock plummet over the past 18 months amid a slowdown in the luxury market and heightened competition for top agents. In addition to rolling out cost-cutting measures, Realogy announced last week that it is selling its relocation business for $400 million to help pay down $3.5 billion in debt.
In Thursday’s email, Liebman hinted that Corcoran, too, has been impacted by the changes to the brokerage landscape. She called Cunningham a colleague and a “very good friend,” and said she’d be spending more time with agents in the field, “actively listening, collaborating and supporting” them. She also said she’d be attending rotating sales meetings each week, and having biweekly breakfasts with agents.
“As always, I will be available to help you with my favorite thing, getting your deals done,” she wrote.
WeWork is reportedly facing an SEC probe (Credit: iStock)
The U.S. Securities and Exchange Commission has launched an inquiry into WeWork to determine if the company violated reporting rules ahead of its doomed planned public offering.
Citing two unnamed sources, Bloomberg reported that SEC investigators are scrutinizing disclosures made to investors while the company embarked on aggressive fundraising efforts and completed transactions that posed potential conflicts of interest.
The agency’s inquiry is reportedly in its early stages, and may not lead to allegations of wrongdoing. WeWork has reportedly retained Andrew Ceresney, a former head of the SEC’s enforcement unit.
A WeWork spokesperson declined to comment.
The report adds to mounting concerns for shareholders. During a period that involved the departure of CEO and co-founder Adam Neumann and a $39 billion drop in valuation, WeWork reported to shareholders Wednesday that it lost $1.25 billion in the third quarter as expenses again trumped growth.
And on Thursday, The Real Deal reported that SoftBank has delayed the launch of its promised $3 billion tender offer for more than a week. The offer is contingent on meeting “required regulatory approvals” and the absence of litigation, bankruptcy proceedings and debt defaults. Following the report, WeWork’s junk bonds value sunk while their risk jumped.
Some shareholders have begun to revolt. A former WeWork employee and shareholder filed a derivative lawsuit in California last month, accusing Neumann, other key executives and its main investor, SoftBank, of self-dealing and unjustly enriching themselves. The lawsuit is seeking class-action status.
The SEC inquiry is reportedly focused on claims WeWork executives made to investors ahead of the planned IPO. According to Bloomberg, WeWork spent big ahead of the IPO to demonstrate expansive growth to existing investors. By doing so, it depleted cash reserves and shortened the timeframe in which WeWork would run out of cash. SoftBank, its largest investor, ultimately saved the company and committed to a $9.5 billion lifeline, which included the $3 billion tender offer.
Multiple transactions disclosed in the company’s pre-IPO filing to the SEC, known as an S-1, have faced extensive scrutiny by investors, including a $5.9 million payment to Neumann for giving the company rights to the trademark “We.” Other transactions involved WeWork leases with buildings owned by Neumann. These arrangements have since been unwound.
However, another transaction that has been scrutinized is WeWork’s $850 million purchase of the Lord &Taylor building in Manhattan. Multiple executives — including Eric Gross and Neumann — had dual interests in the acquisition, as TRD previously reported. Board member and investor Steven Langman had interests in three sides of the deal.
MedMen Enterprises’ national cannabis retail strategy is going up in smoke. And to trim costs, it’s selling its interest in Treehouse Real Estate Investment Trust.
The Culver City-based MedMen was instrumental in forming Treehouse alongside Venice-based investment firm Stable Road Capital earlier this year. Treehouse had planned to make leaseback deals with MedMen for all classes of properties, including retail stores, and cultivation and production facilities.
But that’s over now.
As part of a larger restructuring plan announced Friday, MedMen said it partially sold its stake in the REIT manager for total net proceeds of $14 million.
MedMen chief executive Adam Beirman did not return phone calls Friday afternoon.
It’s been far from smooth sailing ever since the nearly 10-year-old MedMen became the first U.S.-based cannabis company to go public on the Canadian Securities Exchange in 2018 (it’s also traded in the U.S.). The retailer had roughly $105.6 million in debt at the end of March, according to a company document.
In an attempt to slow the cash-burn, MedMen also announced plans to lay off 190 employees, cut its corporate spending from $154 million on an annualized run-rate basis to $85 million by the end of its fiscal third quarter in 2020. Layoffs have happened sporadically all year long as it attempted to regain its financial footing, according to company documents.
Last month, MedMen scrapped its all-stock, $682 million acquisition of Chicago-based PharmaCann, a deal that would have greatly expanded MedMen’s footprint to several states in the mid-Atlantic coast.
In a statement on Friday, MedMen said it would prioritize high-growth retail markets such as Los Angeles, Las Vegas, New York City, Miami and Chicago, and limit exposure in what it called non-core markets.
The company currently operates in nine states with 33 licensed retail stores in California, Florida, Illinois, Nevada and New York – with a handful of others scheduled to open in coming months in Arizona, Massachusetts, Michigan and Virginia. Overall, MedMen has 70 licenses to sell cannabis nationwide.
The company also said that it would limit new store openings in 2020 to stores with revenue potential that the company believes is greater than $10 million within the first year of becoming operational. Plans for medical marijuana expansions in Arizona and New York are on hold.
MedMen, which also will consolidate its corporate offices to reduce rent costs, has seen a revolving door of senior level executives, as well as top executives give up salaries as they fight for financial survival.
MedMen has also hired Canaccord Genuity Corp. to explore strategic alternatives for certain operations and licenses in states that are currently deemed not critical to the company’s retail footprint.
Herb Wesson is proposing drastic measures to regulate market-rate residential development. (Credit: Getty Images)
There have been many efforts to regulate Los Angeles development in order to create affordable housing units. And then there’s Herb Wesson’s vastly ambitious proposal that passed L.A. City Council last Wednesday.
Council members voted unanimously to direct the city attorney’s office, city Planning Department, and Housing and Community Investment Department to draft an “anti-displacement zone” ordinance.
The plan, authored by City Council President Wesson and adopted in a Planning Land Use Management committee report, recommends that nearly all L.A. residential projects have an affordable housing component, a policy known as inclusionary zoning. It’s been used in other California cities but never tried throughout L.A.
More controversially, Wesson’s plan also recommends capping rent increases at every single residential unit within a one-mile radius of a new market rate development.
Developers and their lawyers are not sure what to make of the proposal, and how it will change after city officials draft an ordinance (a process that could take months).
“This seems like an opening salvo to go ahead and start a discussion on these issues,” said Ryan Leaderman, a land use and environmental attorney at Holland & Knight.
Even affordable housing advocates wonder if Wesson is for real.
“I’m not sure if it’s legal,” said Casey Maddren, executive director at United Neighborhood Los Angeles. “Whatever ordinance is drafted will be controversial and real estate interests will push back against it.”
Other observers, who requested anonymity, wondered if the proposal is misdirection by Wesson, who is wrestling with a Planning Commission appeal on a 577-unit market rate building in Arlington Heights by developer Arman Gabay, who faces federal bribery charges. Wesson has recently voiced concerns about the project lacking an affordable housing set aside.
Wesson has also been fielding tough questions on his relationship with Rosewood Corp.’s Michael Hakim. The Los Angeles Times reported last month that Wesson may have traded favors with Rosewood, shepherding a 27-story Koreatown development through City Hall while his son received a rent freeze on his apartment.
Wesson’s office said the council president is serious about enacting this new plan into law.
“This is what needs to happen in order to protect renters in Los Angeles today and protect communities from displacement due to gentrification,” said Wesson spokesperson Michael Tonetti.
Wesson’s original motion drafted in September referred to luxury residential units in gentrifying neighborhoods – such as West Adams and Arlington Heights in Wesson’s 10th district – that could effectively price out long-time community residents.
However, Tonetti confirmed that what Wesson currently seeks is grander in scope. “The recommendations from the planning committee are to apply these laws throughout the entire city,” Tonetti said.
Wesson wants two key things.
The first is a required affordable housing component for all forthcoming residential development.
All new developments must either utilize the city’s transit-oriented communities projects (in which developers apply for zoning breaks on projects within a half-mile radius of a major transit stop, and have a subsidized housing component for low-and-moderate income renters); use a program that eases density caps if there is a subsidized housing component; or set aside 30 percent of all units for renters with federally subsidized Section 8 vouchers.
The Section 8 component could be a poison pill for landlords who do not make use of city affordable housing programs.
“Anecdotally, most landlords will not take people with Section 8 vouchers,” Maddren said. “It is real tough for those people to find housing.”
As of 2017, the Los Angeles County Housing Authority reported about 17,000 people were on the Section 8 voucher waiting list in L.A. County.
While contentious, the affordable housing component could pass legal muster, said Doug Smith, a lawyer at legal nonprofit Public Counsel.
Smith said that after 2017 passage of Assembly Bill 1505 – which was in response to a lawsuit by L.A. megadeveloper Geoffrey Palmer – California municipalities can pass a law requiring all developments to have an affordable housing component.
Northern California cities including San Jose have such ordinances, and L.A. adjacent municipalities Long Beach and Glendale are weighing similar measures.
“Inclusionary zoning hasn’t gained much traction in L.A.,” Smith said. “But it is a tool the city can use.”
The second big change Wesson is seeking may be on a bit shakier legal footing: a provision to cap rents on all buildings within a one-mile radius of a new development, which is intended to prevent displacement of long-time residents.
State laws, including a recently passed rent control ordinance, forbid rent caps on buildings constructed after 2004.
“I think we need a little more clarity on what’s proposed with rent controls,” Smith said.
Tonetti said that during the ordinance-drafting process, “All the potential legal hurdles are worked out.”
An affiliate of KOAR Institutional Advisors paid $25.5 million for a portfolio of eight industrial buildings in Glendale that could offer redevelopment potential with multifamily housing.
The northern L.A. suburb area is suddenly catching on in the industrial space due to its proximity to rail transportation.
KOAR, through an entity called CPD Los Angeles LLC, bought the portfolio of buildings totaling 131,000 square feet from Pacific States Box & Basket Co. Inc., in what it describes as one of the largest deals to take place in the Tri-Cities market over the past two years.
The Tri-Cities market includes Burbank, Glendale and Pasadena.
Glendale has an industrial vacancy rate of below 1 percent, according to Lee & Associates. The buildings sold at roughly $198 square foot.
The portfolio consists of industrial buildings ranging in size from 3,000 to 59,000 square feet. The properties are located at 1225, 1275, 1295 and 1291 Los Angeles St.; 440, 444 Cypress St.; and 437, 449 Fernando Ct.
Listing brokers for the 5.21-acre Pacific States Box properties were Mike and Tony Maniscalchi with Systems Real Estate Management Inc. of Glendale. The buyer was represented by brokers Hunter Warner and Brett Warner with Lee & Associates.
In May, industrial developer Goodman Group paid Southern California supermarket chain Ralphs, a unit of Cincinnati-based Kroger Co., about $130 million for a sprawling manufacturing facility in Atwater Village. That property, developed over 30 years ago, spans about 37 acres on San Fernando Road near Colorado Street.
While demand for industrial properties in L.A. County remains high, industrial activity has been the strongest in the Inland Empire.
KOAR, led by Laurent Opman, Bruce Rothman and Jay Roth, has acquired, redeveloped and sold several office properties in the Los Angeles area in recent years. In Beverly Hills, KOAR redeveloped a 108,000 square foot office building at 100 North Crescent Dr., and a 65,000 square foot office building at 8447 Wilshire Blvd. It’s also done industrial repositionings in Santa Monica, Sylmar, Burbank and Riverside, according to its website.
More than 4,000 people are expected to receive notice in coming weeks (Credit: iStock)
More than a third of WeWork’s 12,000 employees will likely receive notice this week that they no longer have a job. The layoffs are part of an effort by the struggling office-space company to cut costs, close ancillary businesses and narrow its offering to subletting office space.
In a company email sent by chairman Marcelo Claure, employees were told that layoffs will begin this week in the U.S., and that a planned all-hands meeting will be postponed from Tuesday to Friday, where Claure will present the company’s five-year plan.
“In the areas of the business that do not directly support our core business goals, we have to make some necessary job eliminations,” Claure said in the email, which was seen by The Real Deal. “We are going to eliminate and scale back certain functions and responsibilities, which will increase efficiency and also accountability.”
A person familiar with the matter told TRD that employees in the legal and human resources departments will begin receiving notice Monday.
WeWork declined to comment.
WeWork employees have waited weeks to hear notice of the layoffs, since the company abandoned plans for an IPO and had its valuation slashed from $47 billion to $8 billion. After CEO and co-founder Adam Neumann left the company in October, SoftBank, its largest investor, committed to a $9.5 billion lifeline to bail out the company, and installed a Claure to implement a turnaround strategy.
In sum, more than 4,000 people are expected to receive notice in the coming weeks, according to multiple people familiar with the matter.
Those include 1,000 maintenance workers who have been informed that their employment will be terminated on Dec. 9, according to a group of employees. The group, WeWorkers Coalition, formed in recent weeks and sent a letter to management earlier this month stating that they “don’t want to be defined by the scandals, the corruption and the greed exhibited by the company’s leadership.”
The group announced over the weekend that WeWork had reached an agreement with JLL to accept close to 1,000 maintenance and cleaning workers, many of whom would then be contracted to work in WeWork buildings.
However, the group raised alarm at the terms of the deal, and said that employees were told by WeWork to sign the terms of the contract by Monday, otherwise it would consider their resignations voluntary. The group said on Twitter that the contract has confused employees with pay discrepancies, and demanded a deadline extension.
In a separate tweet, the group added that WeWork “is not following through on its promise to treat employees with ‘dignity and respect’ during this restructuring process.”
Many employees and shareholders with stock options are also waiting to hear when a $3 billion tender offer by SoftBank will be launched, after being delayed for almost two weeks.
The bombshell probe also found that minorities had to meet more stringent financial qualifications than white buyers. (Credit: iStock)
A three-year undercover investigation by Newsday found 40 percent of agents on New York’s Long Island routinely discriminate against minority buyers.
Black testers experienced unfair treatment 49 percent of the time, Latinos 39 percent and Asians 19 percent. Black buyers were on average shown the fewest of an agent’s listings in majority-white neighborhoods, Newsday found.
The bombshell probe also found that minorities had to meet more stringent financial qualifications than white buyers. In seven cases, minority buyers without a pre-approved mortgage were blocked from home tours, but whites were not.
A quarter of the brokers directed white buyers to listings in majority-white communities, while black and Latino buyers were steered toward more integrated communities. Brokers spoke with white buyers about the racial or ethnic makeup of certain communities, which is illegal according to fair housing laws.
Newsday used paired-testing, a federally approved method for finding violations of fair housing laws. One white and one black, Asian or Latino tester would approach the same agent for help, providing similar financial details and identical preferences in home location and features.
Testers approached some of the island’s biggest brokerages: Douglas Elliman, Century 21 Real Estate LLC, Charles Rutenberg Realty, Coldwell Banker Residential Brokerage on Long Island, Coach Realtors, Daniel Gale Sotheby’s International Realty, Laffey Fine Homes, Keller Williams Realty, the Corcoran Group, Signature Premier Properties, Realty Connect USA and RE/MAX LLC.
No unfair treatment was exhibited by agents from the Corcoran Group or Daniel Gale Sotheby’s International Realty, according to the study. [Newsday] — TRD Staff
Matt Khourie Chief Executive Officer of Trammell Crow and a rendering of the project (Credit: HKS and RELM)
Two years ago, Greenland USA stepped away from its partnership with Trammell Crow to develop a massive mixed-use complex in North Hollywood.
Now, Trammell Crow and the Los Angeles Metropolitan Transportation Authority are moving ahead with the $1 billion transit-oriented project, according to the Los Angeles Times.
The developer and the MTA will apply for permission from the city to build District NoHo, according to the report. The 16-acre development would stand next to subway and bus stations and include 1,500 apartments, a 10-story, 400,00-square-foot office tower; along with retail stores, bars and restaurants.
District NoHo would be the biggest commercial development surrounding an MTA station. It would also stand near an adjacent hub for connecting bus routes, including the Orange Line to Warner Center; and Chatsworth in the San Fernando Valley.
The development site around the NoHo train station was assembled by the former L.A. Community Redevelopment Agency, which was disbanded seven years ago. Other stations in L.A. are being built in developed neighborhoods, such as at Wilshire Boulevard and La Brea Avenue in the heart of the Mid-Wilshire District.
Dallas-based HKS is the master architect for the project and L.A.-based RELM is the master landscape architect.
The apartments are to be divided among six buildings. Around 1,200 units will be market-rate, with the remaining 300 units designated affordable. Average monthly rents in the area were a little under $2,400 in September, according to Zillow.
Trammell Crow is no stranger to teaming with local government on massive projects. Last year, it broke ground on a $450 million county office complex in Koreatown, which it is partnering on with Los Angeles County. [LAT] — Pat Maio
Close to 100 employees were given notice on Monday morning (Credit: iStock)
Ten-X Commercial, an online real estate transaction platform, laid off half its workforce after efforts to sell the company fell through.
Close to 100 employees in offices in Texas, New York and California were given notice on Monday morning during a call with executives, according to people on the call and those familiar with the matter.
Thomas H. Lee Partners, the private equity firm that owns Ten-X Commercial, has been trying to sell the company since the start of the year. CoStar Group had been in talks for a potential acquisition until recently, according to former Ten-X employees.
Thomas H. Lee Partners declined to comment. Ten-X and CoStar did not respond to multiple requests for comment.
Ten-X says that more than $50 billion in real estate transactions have been conducted through its marketplace. It was founded in 2007 as Auction.com, a residential real estate deal platform. In 2016, it launched a separate platform known as Ten-X Commercial, which provided a marketplace for commercial properties. Along the way, it received investments from multiple firms, including Barry Sternlicht’s Starwood Capital, Stone Point and CapitalG.
In 2017, Thomas H. Lee Partners purchased a majority interest in Ten-X for close to $1.6 billion. The private equity firm quickly set about separating the two products — Auction.com and Ten-X Commercial — into siloed companies. Shortly after, Ten-X Commercial cut about 10 percent of its staff in early 2018.
Since the private equity firm began marketing Ten-X earlier this year, it attracted multiple suitors, including Newmark Knight Frank. Newmark declined to comment.
Robert Reffkin and 11726 San Vicente Boulevard (Credit: Google Maps and iStock)
Compass has shuttered one of its Brentwood offices, the second Los Angeles location the firm has closed in as many months.
The SoftBank-backed brokerage — which has been rapidly expanding in Southern California — had three locations in the affluent Westside neighborhood.
Compass said it would cease operations at 11726 San Vicente Boulevard, which had 61 agents. The group is moving into the larger location, at 11601 Wilshire Boulevard, which has 114 agents. The company will also keep its office at 11999 San Vicente Boulevard, less than a half-mile from the one that closed.
In a press release, Compass broadly explained the closing as a “strategic union of two of its three Brentwood offices.” A source close to the firm said there would be no layoffs resulting from the consolidation.
In September, the residential brokerage closed its Hancock Park office less than a year after it opened. Agents at that office — which Pacific Union had intended to move into until Compass acquired it in a blockbuster deal — relocated to the Beverly Hills space.
Compass, which entered the L.A. market in November 2015, now has 32 offices in Southern California. It has made splashy additions to its roster of L.A. agents in the past year. In August alone, it poached Chris Cortazzo and Ginger Glassfrom Coldwell Banker, along with 20 other agents and staff. In August 2018, it acquired Pacific Union, which was one of the largest brokerages on the West Coast.
But in early January, Compass announced it would not expand into new markets this year. The firm in July was valued at $6.4 billion after a $370 million funding round, but more recently has seen a string of notable departures. Still, it has not deviated from its stated goal of a 20 percent market share in the 20 biggest U.S. markets by 2020, which it calls its “20/20 by 2020” plan.
Attorney General Letitia James (Credit: Getty Images)
The New York State Attorney General’s office has launched an investigation into WeWork, Reuters reported.
The embattled office-space company, which is soon set to lay off thousands of workers, confirmed to the news outlet that it had received a request from the state’s AG office, led by Letitia James.
James’ office is reportedly looking into multiple transactions involving former CEO Adam Neumann that were scrutinized for potential self-dealing. One arrangement involved millions of dollars paid to Neumann by WeWork to lease buildings that he owned. Another transaction reportedly being examined is a $5.9 million payment to Neumann by the company to buy from him the trademark “We.”
The inquiry follows a Bloomberg report last week that stated the U.S. Securities and Exchange Commission had launched a separate probe into WeWork, and pointed to the same transactions as potentially being examined by the agency. [Reuters] — David Jeans
Eden, a proptech startup that helps landlords manage parts of the workplace like scheduling cleaning services and ordering snacks, raised $25 million in its Series B funding round.
Soho-based venture-capital firm Reshape led the funding round, Eden announced Tuesday.
San Francisco-based Eden launched in 2015. Its technology is available in 25 major U.S. metro areas, the company said.
Eden targets “the enormous workplace market that we believe can be radically transformed,” Reshape partner Vik Patel said in a statement.
The company provides a platform building owners and tenants use to streamline different tasks that go in workplace management like HVAC repair. Eden’s clients include Convene and VTS, among others.
It has also received significant interest from real estate firms investing in proptech. Early investors include RXR Realty, Thor Equities, Mitsui Fudosan and Fifth Wall Ventures. So far, the startup has raised $40 million.
On Wednesday, Nov. 20, The Real Deal and SPACES are bringing together leaders of the multibillion dollar co-working industry for a panel event at Playa District LA. Come hear from industry experts as they discuss their strategies and solutions in today’s landscape. The discussion will be moderated by Hiten Samtani, TRD’s Associate Publisher.
Residential agents are uniquely positioned to assist buyers who are in the in-between phase (Credit: iStock)
Once the gatekeepers to sales listings, real estate agents are increasingly in front of another key aspect of the home-buying process: the financing.
To help clients increase their purchasing power, a number of residential brokerages have launched bridge loan programs that let clients borrow money to pay for a new home before they sell their old one. In addition to boosting sales, the programs are a way for firms to distinguish themselves from the competition — which is increasingly coming in the form of instant home buyers, who make instant cash offers to purchase homes.
“The fact that banks don’t really give you credit for your home equity until you move is tough for a lot of people,” said Tim Heyl, a top agent at Keller Williams who last year launched Homeward, which lends buyers funds to make all-cash offers. At closing, the Austin, Texas-based startup takes possession of the property until the buyer secures a mortgage, or it turns over the keys through a leaseback.
According to Heyl, Homeward is completely separate from his 50-person real estate team, which handles $350 million in annual sales.
Residential agents are uniquely positioned to assist buyers who are in the in-between phase, brokerage heads said.
“Not all banks will do a bridge loan, it’s not your typical mortgage,” said David Golden, co-founder of Chicago-based @properties, which partnered with Canadian Imperial Bank of Commerce (CIBC) to offer buyers bridge loans.
Golden said the impetus was buyers who’ve had good deals get away from them. “We’ve seen clients come to us and say, ‘What can you do to help me?’” he said.
Like @properties, Compass recently launched a bridge loan program through a partnership with lenders Better.com and Freedom Mortgage.
Michael Coscetta, the firm’s chief strategy and sales officer, said rates offered by traditional banks and hard-money lenders tend to be “prohibitively high.” In an email, he said a bridge loan program was one of the “most-requested” services from agents and clients in 2019.
Through Compass’ bridge loan program, buyers can also apply to have six months of their loan payments fronted by Notable, an independent lender.
By partnering with lenders, brokerages may also be looking to mitigate the risk of customers defaulting on their loan. “Not every property is going to sell,” said David Goldin, who founded Excelerate, a lending startup that fronts the costs of renovations and staging for sellers.
“If [sellers] don’t have the means to pay the money back, now you have the brokerage firm either suing the client or charging the commission back to the agent,” said Goldin, who previously started Capify, to provide hard money loans to small businesses. “That’s not going to fly too well.”
Proptech players
Investors have also been pouring money into startups that aim to help homeowners finance their purchases. New York City-based Knock, founded by former Trulia executives, has raised $600 million in equity and debt since 2015 to purchase homes on behalf of sellers and then represent customers in the sales of their old home.
Better.com, a direct lender that is one of Compass’ bridge loan partners, raised $160 million in August, bringing its total funds raised to $254 million and a $600 million valuation.
And in San Francisco, Homelight — best known as a matchmaker between sellers and agents — recently raised $109 million to build up its mortgage lending and iBuying businesses. In July, the company purchased Eave, a digital mortgage lender that uses technology to underwrite loans in 24 hours.
“Currently, the way homes transaction, there are all these contingencies. The buyer really doesn’t know if they have access to a mortgage until deep in the closing process,” said founder and CEO Drew Uher. “We’re turning every buyer into a cash buyer, if they want to be.”
Competing with iBuyers in real-time
Though most broker-affiliated financing programs focus on sales, agents John Giannone and Jac Credaroli, cousins who work for Douglas Elliman in New York, launched a loan origination platform called Feeasy to provide up to $50,000 to buyers and renters. For a fee, Feeasy connects renters and buyers to a San Francisco-based lending partner, Upgrade, whose loans are originated by Utah industrial bank WebBank.
“It was really a means of us adding value to our deals and adding value to our clients,” Giannone told The Real Deal earlier this year.
According to Heyl, Homeward captures business that may otherwise be lost to iBuyers including Redfin, Zillow, Offerpad, Opendoor and Knock. (This month, a study of iBuyer purchases found the companies typically pay sellers close to market value for their homes.)
“The thing is, the iBuyers offer a great solution to people who want to buy and sell at the same time,” Heyl said.
If iBuying is on one end of the real estate spectrum, and traditional brokerage on the other end, Seattle-based Flyhomes falls somewhere in between. Founded in 2015, the brokerage makes cash offers on properties. To date, it claims to have brokered $1 billion in sales. It recently launched a “Trade Up” program that leverages the seller’s home equity to land bigger mortgages, and provides a guaranteed price for the home (or Flyhomes will buy it).
Flyhomes is backed by $160 million in debt and equity, and a third-party lender guarantees a mortgage for customers who are trading up. The company said “Trading Up” customers who’ve been approved for homes in the $700,000 to $800,000 range can see their power power go up to $1.1 million.
“We are highly focused on human touch points, so in that way we’re a traditional brokerage,” said Sam Kasle, Flyhomes’ head of brokerage, who oversee 80 agents in Boston, Portland, Southern California and San Francisco. “At the same time, we do have deep roots in proptech.”
Kasle said Flyhomes is operating under the notion that the future of real estate is vertical integration, because that’s what customers want. “Nobody goes to the milk store to buy milk,” he said. “You go to the grocery store.”
Michaekl Rapino of LiveNation, Richard LeFrak, and 7060 Hollywood Boulevard
Live Nation Entertainment, one of the world’s largest concert promotion companies, plans to leave its Hollywood digs next year, leaving brokers scrambling to backfill its soon-to-be vacant office space.
Patrick Church, a broker with commercial real estate firm JLL, said that Live Nation plans to downsize, vacating seven floors at 7060 Hollywood Blvd., by late 2020. It will continue to lease four floors at the 12-story Hollywood building, which is owned by New York-based real estate firm LeFrak.
JLL is in discussions with multiple tenants to take over the space, but Church declined to disclose their identities.
“It’s a very tight market in Hollywood. This is one of the larger spaces to come available at this time,” he said.
As it leaves behind space in Hollywood, Live Nation plans to expand into a total of 195,000 square feet of space in two other office complexes in West Hollywood and Beverly Hills, where the concert promoter is headquartered.
In total, Live Nation — which has a market capitalization of roughly $14.5 billion — will give up 91,000 square feet of space at the 175,000-square-foot Hollywood Boulevard property by the end of 2020, according to Church.
As part of a multi-year agreement with LeFrak, LiveNation will retain about 52,000 square feet in the bottom four floors.
LeFrak paid $50 million to acquire the building in 2007, after the prior owner unsuccessfully attempted to convert the building into condos. LeFrak performed a full gut-renovation and in 2009 fully leased the property out to Live Nation, I.D. Media and Buffalo Wild Wings.
These days, the average rent for Class A office space in Hollywood is $5.37 per square foot, with total vacancy estimated at 10.6 percent, according to JLL’s third-quarter statistics. It’s a pricier and more desirable submarket than the Mid-Wilshire District, where rents average $3.19 a foot and the vacancy rate is 19.1 percent.
LeFrak, a family-run business headed by President Trump’s friend Richard LeFrak, owns scores of real estate across the U.S, including more than 30 office buildings. Office holdings include 40 West 57th Street in Manhattan and 9701 Wilshire Blvd., the tallest building in the Beverly Hills triangle.
In January, Live Nation said it would lease nearly all of the Worthe Real Estate Group’s under-construction post office in Beverly Hills – taking 95,000 square feet at the 105,000-square-foot property at 325 Maple Dr.
Live Nation is headquartered at UTA Plaza and the Ice House, an office campus in Beverly Hills owned by Rockefeller Group Investment Management. It’s unclear whether Live Nation will remain there.
Last month, Live Nation signed a lease to take up 98,000 square feet at developer CIM Group’s 1041 Formosa Avenue – the still under-construction Courtyard Building at The Lot office complex in West Hollywood.
A Live Nation spokesperson did not respond to requests for comment, nor did a representative for CIM.
Last week was a quiet one for the L.A. luxury market. Between Nov. 12 and Nov. 18, not a single property hit the MLS asking more than $13.5 million. Combined, the five most expensive listings to debut last week totaled just $58 million.
The most expensive property is a Bird Street locale owned by designer Lindsay Chambers that Chambers first put on the market in January for $19 million. The property that Chambers bought for $10.9 million in 2014 has now been re-listed and slashed for a second time — it was most recently listed for $14.9 million.
1435 Tanager Way | Hollywood Hills | $13.5 million
Branden Williams of Hilton & Hyland and Dustin Nicholas of Nicholas Property Group are the listing agents on the property, which resurfaced on the MLS this week, replacing Jayden Chen of Re/Max Advanced Realty.
The four-bed, four-bath home’s value in part derives as being one of 15 properties on the front row of the Hollywood Hills, which the listing bills as “offering the best views in all of Los Angeles.” The colorful estate description goes on to note that, “Mature olive trees and drought-resistant paintings invoke the Italian Riviera” and that the locale lends itself to “feeling at home with the stars.” (The section of Hollywood Hills is home to Leonardo DiCaprio, Keanu Reeves, and Walmart heiress Page Laurie.) The property itself is just under .3 acres, though the home spans 4,500 square feet, giving it a total asking price of $3,000 a square foot.
2462 Solar Dr. | Hollywood Hills | $12.5 million
The next priciest listing from the past week is also in the celebrity-soaked Hollywood Hills area, this one adjacent to Runyon Canyon. The locale is listed by Vicky Sheng and Robert Crawford of We Are Realty Inc. The hilltop property spans 16 acres, was built in 1995, and it lists for just over $1,200 per square foot. The 9,800-square-foot home features seven bedrooms, 7.5 baths and includes a grand staircase, 16-seat dining room, 14-seat movie theater, billiard room, wet bar, and solarium.
1047 Napoli Dr. | Pacific Palisades | $11 million
The newly built, five-bedroom, seven-bath house sits on one of the toniest streets of the Pacific Palisades. The 7,900-square-foot estate features coffered ceilings, French doors, and is “surrounded by high hedges for complete privacy,” according to the listing. The selling agent is Gary Glass of Berkshire Hathaway HomeServices California.
1476 Carla Ridge | Beverly Hills | $10.8 million
This three-bed, five-bath home is one of several built by real estate developer Paul Trousdale in Beverly Hills near the Santa Monica mountains during the 1950s and 60s. The 59-year-old, 3,600 square foot abode (roughly $2,960 square feet) is billed as remodeled and featuring a bird’s eye view of Los Angeles and the Pacific Ocean. The listing agent is Brent Watson of Coldwell Banker Residential Brokerage.
10824 Chalon Rd. | Bel Air | $9.9 million
This six-bedroom, seven-bath Mediterranean-style home advertises as a “tropical paradise,” replete with three waterfalls, gardens, pool, and an outdoor tea, meditation and massage area. Steven Kirshbaum of The Agency is the listing agent on the 89-year-old home, which spans 6,800 square feet ($1,455 a square foot).
“I think [municipalities that have enacted ‘good cause’ eviction] are uncivilized societies, and they don’t believe in free enterprise,” Block said. “They are truly trying to destroy the market. What they’re trying to do is redistribute the wealth.”
In fact, significant changes were made to the bill behind the scenes over the summer, including leaving vacancy decontrol in place — allowing for the deregulation of vacant apartments — and exemptions for month-to-month tenants in the measure’s “just cause” eviction component.
