From left: Council President Herb Wesson, a rendering of District Square project, and developer Arman Gabay
A Los Angeles city body has nixed the almost 600-residential unit District Square project by developers Mark Gabay and Arman Gabay four months after approving it.
Citing a lack of affordable housing set asides – and noting federal bribery charges against one of the developers – the South Los Angeles Area Planning Commission voted unanimously Tuesday to grant a project appeal from the Crenshaw Subway Coalition and Loretta Higgins Mueller Trust regarding a 577-unit Arlington Heights neighborhood project.
The vote by the four volunteer commissioners, whose role is to hear appeals of developments, kills a project the City Council and Planning Commission approved of in June, city officials confirmed after the meeting.
The granting of a project appeal is exceedingly rare, Faisal Roble, a principal city planner, said after the meeting. Roble could not immediately recall another instance of it happening.
Roble testified during the fractious public meeting that the city never scrutinized the project too closely, because the Gabay development team never applied for a zoning variance.
“We didn’t look at this because it didn’t ask for anything,” Roble said.
That city approach, however, may soon be changing, as city officials join community activists in criticizing developers who do not propose affordable housing set asides.
Council President Herb Wesson, whose 10th district includes the Gabay’s nixed project at Obama and Crenshaw, came out against the project in September. Wesson has even proposed a citywide program effectively requiring all new developments to have affordable housing set asides.
Wesson was not at the meeting, but his view carried the day as public speakers and even commissioners railed against market-rate developments. “The applicant has no sympathy for us,” commissioner Antoinette Anderson said to applause regarding the Gabay team. “I feel the applicant needs to have a heart.”
Todd Nelson, a lawyer at Armbruster Goldsmith & Delvac, represented the developer at the hearing, and declined to take questions after the meeting, including whether the Gabays may go back to the drawing board, or file a lawsuit against the city.
The Gabays, who often do business under West Hollywood-headquartered Charles Company, first proposed a mostly retail project on Crenshaw and Rodeo (subsequently named Obama) boulevards in 2010, but later switched gears to residential.
Damian Goodmon, who testified Tuesday on behalf of the Crenshaw Subway Coalition, said that local community members at first didn’t give the project much thought, believing it would be mostly shops.
However, Arman Gabay, and his developments, gained more scrutiny last year when federal officials arrested Gabay on charges of bribing a Los Angeles County official. A trial is pending.
The bribery case took a backseat Tuesday to appellants demands for affordable housing, though allusions were made. “I don’t want to say too much,” Goodmon deadpanned at one point, “Because I know someone from the FBI is here,”
The Park Calabasas and Chris Rising (Credit: Jeff Newton)
Rising Realty Partners just filled its Park Calabasas office complex with the addition of its newest tenant, River cruise company AmaWaterways, The Real Deal has learned.
AmaWaterways will occupy 50,000 square feet at The Park Calabasas, which will be its new headquarters. Rising’s campus, at 4500 Park Granada, has 225,000 square feet of office space spread across 20 acres.
CBRE’s Matthew Heyn represented Rising in the deal, while CBRE’s Marc Spellman represented AmaWaterways.
AmaWaterways, which offer cruises around the world, is expected to move into its new location in June, from its current Calabasas headquarters at 26010 Mureau Road.
In August, worker’s compensation servicer Republic Indemnity, an affiliate of the Great American Insurance Group, signed a 50,000-square-foot lease at Park Calabasas.
The Downtown-based Rising — led by Chris Rising — paid $38 million for the campus in 2013, then transformed the aging development into a creative office complex.
Tenants include beauty company Coty — which just paid $600 million for a majority stake in Kylie Jenner’s Kylie Cosmetics — and IWG-owned Spaces co-working firm. Spaces leased 17,000 square feet in May 2018.
Construction is expected to begin in early 2020 on developer David Pourbaba’s six-story, mixed-use development along the busy West Adams Boulevard corridor.
The $20 million project features 115 residential units with private balconies, over flexible commercial spaces at the ground level.
A landscaped podium on the third level provides a shared common space. There also is a set-aside for 13 units for low-income households.
The project, which is located at 5181 W. Adams Blvd. near La Brea Avenue, is being built by Pourbaba’s 4D Development.
The permit will be pulled in the next few weeks, architect Mark Bittoni, principal with Bittoni Architects, told The Real Deal.
Santa Monica-based Bittoni Architects is the design architect on the project while Westwood-based AFCO Design is the executive architect.
The residential portion of the 5181 W. Adams Blvd. project is larger than 4D’s first proposal at the site. In 2015, the West Hollywood-based firm 4D filed for a four-story, 72-unit project.
The so-called “Rise on Adams” project had originally parking underground and nearly 34,000 square feet of ground-floor retail space.
Pourbaba has been active in the West Adams and Koreatown areas.
In February, Pourbaba proposed a new apartment complex in the booming area between East Hollywood and Koreatown, adding to the number of projects proposed in the community. The five-story complex near the Vermont/Wilshire Metro Station on Beverly Boulevard, would include 67 units above one level of retail.
SoftBank Group CEO Masayoshi Son has recently admitted that he made several big mistakes when investing in U.S. tech companies, especially with (surprise!) WeSomehowStillExistWork. It turns out that telling the eccentric leader of a new company he is not being crazy enough can occasionally end up not being the best advice.
As Son looks to restore the reputation of himself and his company, The Real Deal is here to help with some recommendations for investments that should prove to be much safer and more prosperous than his recent flops.
A giant Ferris wheel on Staten Island: The only thing that has kept New York from breaking into the top tier of global cities like London and Disneyland is its lack of a giant Ferris wheel, and Staten Island would obviously be the best place to build one. And since giant Ferris wheels are famously easy to build and find investors for, this would be the perfect type of low-risk project to help Softbank get its groove back.
Home Depot: Home Depot is profitable. That sums up just about everything I know about the company, but that should still be enough to make it a better investment for SoftBank than pretty much anything else it has put money into lately.
Beanie Babies: Every time my parents tried to tell me I didn’t need more Beanie Babies growing up, I would always tell them that they were very wrong because, even if I somehow got tired of Beanie Babies (which would never happen), I would just be able to sell them later on for extremely high prices. Since I usually won these arguments, I assume I was right about this and that Beanie Babies are now one of the most valuable commodities on the planet, making them a perfect place for SoftBank to store its money.
Whatever Billy McFarland is up to these days: Sure, he’s currently serving time on fraud charges in a federal prison near Elkton, Ohio, and, sure, that whole Fyre Festival thing didn’t work out quite the way he said it would, but as the old saying goes: fool me once, shame on you; fool me twice, please accept this $700 million investment and a complimentary Ja Rule album.
A restaurant that is pretending to be a technology company: This is basically just a normal restaurant, in the sense that customers show up and spend money to buy food, but its founder has the unique ability to talk for at least two consecutive hours about how it’s actually more of a technology company, in the sense that it uses all sorts of technology to technologize the restaurant industry, which is long overdue for some tech-based disruption. Please do not ask him any specific questions about the type of technology it uses. It’s a secret.
Bubbles: No, not financial bubbles like housing in the 2000s or dot-coms in the 1990s. Even I know those are bad. I’m talking about literal soap bubbles—the kind you see children joyously playing with as they run through beautiful parks on picturesque spring days. How could anyone possibly lose money investing in something as pure and gorgeous as that?
KrOwew: This new startup company, fearlessly led by its charismatic and somewhat controversial founder Mada Nnamuen, focuses on buying office space and then subleasing it to smaller companies. Well, that’s what it focuses on for now, at least. Its eventual plan is to take over the world, provided it can get a large amount of money from SoftBank first.
Toilets: People are always going to need toilets.
Me: Do I have any grand, visionary plans to revolutionize the automobile industry or the office leasing industry or any other type of industry? No. But given that investing with those types of people hasn’t been working out too well for SoftBank lately, maybe it’s time they changed things up a bit.
Haroni Investments is tacking on another South Los Angeles development to its recent string of projects in the area.
The development firm, headed by Amir Ohebsion, filed plans Tuesday for another apartment complex at 6550 South Normandie Avenue in the Vermont-Slauson District, city records show.
The 93-unit project will be another through the Transit Oriented Community program — like Haroni’s other recent developments. It’s eligible for the program’s tier 1 benefits, according to the city, which can mean that 8 percent of the units must be affordable to extremely low-income households (or 11 percent for very low-income households, or 20 percent for lower-income households).
Haroni did not immediately respond to a request for comment.
Part of the development area appears to be a parking lot, though Haroni also will knock down a single-family home and commercial building already there.
The developer acquired the site last year for $1.5 million.
Haroni is no stranger to the area or TOC developments. In January, the firm filed plans for a separate 93-unit apartment complex at 6100 S. Hoover Street, replacing a defunct church with a project that will have some units set aside for extremely low-income residents.
Another recent Haroni development, also a TOC project, includes a 79-unit residential complex in Hyde Park.
The city’s planning department in 2017 issued guidelines for TOCs, meant to incentivize developers to construct affordable housing while streamlining the development process.
Developers have embraced the incentive program, filing for hundreds of TOC projects totaling nearly 20,000 units, around 3,900 of them affordable. Mayor Eric Garcetti has called it “an incredible weapon” in addressing the city’s housing crisis. Still, L.A. County is believed to be short roughly 500,000 affordable homes.
UPDATE: Wednesday, Nov. 6, 2019, 3:20 p.m.: Discount retailers. Luxury department stores. Children’s stores. Home goods giants.
The retailers that filed for bankruptcy so far in 2019 — and those on experts’ watch lists — have spanned the spectrum.
And with an ever-growing list of stores in the red, the outlook for the real estate they occupy continues to be grim. While some retailers, like young-adult fashion chain Forever 21, plan to use bankruptcy filings to right-size real estate portfolios, others, like Payless, have opted to close hundreds of stores.
As of the beginning of last month, U.S. retailers had announced plans to shutter almost 8,600 stores, a figure far surpassing the number from last year — which saw the bankruptcy of big-box retailer Sears. And store closures are on pace to hit nearly 12,000 by the end of the year, according to data firm Coresight Research, a retail consultant.
That 8,600 figure is already higher than the record-breaking 7,000 closures in 2017, which saw bankruptcy filings from household names like Toys “R” Us and RadioShack.
“There are a lot of stores that are too big out there, there are a lot of stores that become redundant,” said Gilbert Harrison, founder of retail financial advisory firm Harrison Group. “We’ve been overstored for a long time.”
For those in the industry, it’s a tired story. “I don’t think anyone’s devastated or surprised,” said Carl Mattone, president and CEO of Queens-based CFM Development, who has built about 1 million square feet, mostly in New York. “It’s just the world that we live in.”
In New York, the retail market has been in the midst of a correction for some time.
In the third quarter, average Manhattan asking rents dropped 5.7 percent year over year to $756 per square foot, according to CBRE. That came on the heels of a 4.5 percent decline the prior quarter. Rents along retail corridors like upper Madison Avenue (16.9 percent drop) and Broadway in Soho (14.9 percent drop) suffered the most.
The rental plunges come as parts of the city are seeing swaths of empty storefronts.
CBRE found 214 ground-floor availabilities across Manhattan’s 16 top shopping streets in the third quarter, down from the 2018 fourth-quarter peak of 230.
“New York is kind of bifurcated. The market today is resetting itself, and I don’t think anybody really knows where [it] is,” said Francis Greenburger, chair and CEO of developer and landlord Time Equities. (Greenburger said his New York portfolio has a retail vacancy rate of just under 10 percent, though he noted that ideally it would be around 3 percent.)
Outside the city, malls are feeling the pinch, as The Real Deal and others have long been reporting. Some experts predict that the number of U.S. malls, which now stands at roughly 1,200, could end up at just a few hundred once the dust settles.
That also means that major mall landlords will continue to take hits — even as sophisticated owners have taken proactive measures to buffer against major tenants collapsing.
Regional mall real estate investment trusts, for instance, posted annual losses of 13.5 percent, according to September data from Barclays.
Still, it’s not all bad news. While closures abound, retailers have so far said they would open about 3,600 stores this year, slightly more than last year’s 3,300.
And some reports have suggested that, at least in New York City, the retail vacancy problem has been overblown. The city, for example, conducted a study showing that while vacancies were up between 2008 and 2018, they did not increase by huge amounts.
In addition, tenants are taking advantage of the market.
“The tenant has a lot of control right now,” said Greg Tannor, executive managing director and principal at brokerage Lee & Associates.
As they do in tough markets, landlords are getting creative to fill space — whether it’s signing online-native brands or adding entertainment amenities to their properties.
The American Dream mall, which partially opened last month in New Jersey, will feature an indoor amusement park and ski slope, for instance. And Unibail-Rodamco-Westfield’s Garden State Plaza also in New Jersey, is getting a makeover that will include housing.
In addition, there’s demand from medical tenants and new food and beverage concepts, experts said. “The key to real estate — even if you heard this a million times — is location, location, location,” said Joseph French, a retail broker with Marcus & Millichap. “It may not be retail, but it will be something.”
Here’s a look at some of the retailers struggling the most.
Forever 21
Forever 21 may not be Forever after all.
The fast-fashion retailer filed for Chapter 11 bankruptcy in September.
The Los Angeles-based company, with 549 stores in the U.S. and another 251 overseas, said in its court filings that it did not have enough money to pay its vendors for the inventory it needs for the upcoming holiday season. It also blamed declining mall foot traffic and ballooning costs — the retailer was shelling out $450 million annually to stay in its stores.
The filing offered a glimpse into the family-run business, which had been controlled by husband-and-wife duo Do Won Chang and Jin Sook Chang since the company’s founding in 1984. Described in court records as the couple’s “American Dream,” at its peak Forever 21 was raking in more than $4 billion in sales annually.
But former employees and industry insiders told the New York Times that the Changs were reluctant to bring in outsiders to help with business decisions and that their micromanagement and overall keep-it-in-the-family ethos perpetuated the chain’s decline.
As part of its restructuring, the retailer announced that it would close 178 locations. Those closures include four outposts in Connecticut, 11 in New Jersey and 18 in New York state. Forever 21 will also be pulling out of Europe and Asia.
In the five boroughs, the brand’s Soho location at 568 Broadway — owned by Allied Partners, Aurora Capital Associates and A&H Acquisitions — will shutter, as will 490 Fulton Street in Downtown Brooklyn and its outpost in the Kings Plaza mall in Mill Basin, Brooklyn.
In the broader tristate area, Forever 21 sites in Short Hills, New Jersey; Stamford, Connecticut; and White Plains are also on the chopping block. Forever 21’s stores — generally considered “junior anchors” at between 20,000 and 40,000 square feet — may be more challenging to deal with, said Marcus & Millichap’s French.
“It’s a big chunk of space that’s going to be hard to fill,” he said. “Honestly, these landlords, the malls today are struggling for tenants … a box of that size, there aren’t a lot of players in that space.”
Forever 21 at 568 Broadway in Soho
And some landlords will get hit harder than others. For example, Unibail-Rodamco-Westfield has 18 Forever 21 stores closing, including one at Garden State Plaza and one at the Sunrise Mall in Massapequa on Long Island.
Combined, mall REIT Macerich and Taubman Centers will see 26 stores shutter.
Meanwhile, those two, along with Simon Property Group, Brookfield Properties and Vornado Realty Trust, rank among the company’s 50 largest unsecured creditors. Forever 21 collectively owes those five mall owners $20.9 million, bankruptcy records show.
Taubman — which counted Forever 21 as its biggest tenant, accounting for 4.3 percent of its malls’ gross leasable area — told investors that it anticipated the shift and proactively took back some Forever 21 spaces. CEO Robert Taubman said the company recaptured about 5 percent of Forever 21’s square footage, including two large stores in China that have been re-leased. “There’s a lot of uncertainty. … But we’ll have to see, and it is a very fluid situation,” he told investors during a second-quarter earnings call.
French said the “smarter mall operators have already seen this coming.”
“They’re not shocked by it,” he said. “They’ve been looking for tenants to backfill this space.”
Payless ShoeSource
Payless ShoeSource filed for Chapter 11 in February — and not for the first time.
The discount-shoe company filed for bankruptcy just two years before, and re-emerged having closed 675 stores and shedding $435 million in debt.
But that restructuring wasn’t enough. This year, the roughly 60-year-old company closed nearly all of its 2,500 stores in the U.S., Puerto Rico and Canada, including about 30 in Connecticut, 80 in New Jersey and 150 in New York state.
In New York City, 27 locations were clustered in Brooklyn — including on Avenue J in Midwood, on Flatbush Avenue in Ditmas Park, in Prospect Lefferts Gardens and in Sheepshead Bay. Stores in Jersey City, Stamford, Port Washington and Westwood, in New Jersey’s Bergen County, were also among the shuttered tri-state area locations.
French said, however, that the company’s spaces won’t be as difficult to fill because they average only 3,000 square feet, according to A&G Realty Partners, which was hired to dispose of the locations. “It depends where they are … [but] they are a much more manageable size,” French said.
Still, Payless’ bankruptcy marks an epic downfall for the Kansas-based company, which was founded by cousins Louis and Shaol Pozez and at its peak had over 4,500 stores.
Payless — which was owned by private equity firms Blum Capital and Golden Gate Capital thanks to a 2012 leveraged buyout, then later taken over by a group of lenders including Alden Global Capital — cited production issues and an inventory oversupply among the chief reasons it needed bankruptcy protection. While its North American locations have been liquidated, the company has no plans to shut down its 790 international stores.
One source said the company’s heavy debt load — which clocks in at $450 million — is a result of its private equity buyout. That, he said, has led to its insurmountable financial woes.
“Payless Shoes didn’t fail because of e-commerce. Payless Shoes failed because of [private equity],” French said. “Private equity has killed more retailers than e-commerce.”
Forever 21 at 568 Broadway in Soho
Barneys New York
Barneys is known for carrying designer brands — think $450 J Brand jeans, $1,500 Victoria Beckham boots and $3,000 Prada purses — that are unaffordable to the masses. But the department store chain could not afford its own rent.
And it has made no bones about that, attributing its August bankruptcy to rent hikes.
Ashkenazy Acquisition — the landlord at the store’s 275,000-square-foot flagship on Madison Avenue — slapped Barneys with the biggest increase.
Last January, the landlord, which bought the iconic building during Barneys’ first bankruptcy in the 1990s, increased the rent to $30 million from $16 million. The jump stemmed from a provision in Barneys’ lease that allowed Ben Ashkenazy’s firm to bump rates up to fair market value.
Lee’s Tannor said department stores are getting hit particularly hard by online competition because it’s more convenient to click and buy than to walk into a behemoth of a store. They also have slimmer margins because they’re selling a collection of brands from third parties. As a result, he said, they can’t handle escalating rents.
Barneys’ filing indicates that rents are out of line with “where the reality is,” Tannor said.
And Barneys’ bankruptcy made clear that it’s not just the mid-tier players hurting. “The luxury end of the market is suffering in general,” said Stephen Selbst, chair of the restructuring and bankruptcy group at the law firm Herrick Feinstein.
Neiman Marcus also has been hindered by a large debt load, and two years ago Ralph Lauren shuttered its flagship on Fifth Avenue.
While Barneys’ Madison Avenue store will remain open, the retailer plans to shut 15 of its 22 outposts. That includes its 10,000-plus-square-foot Co-Op on Atlantic Avenue in Brooklyn — which set a new bar in 2010 and paved the way for other national brands in the then-untested borough — and its Riverhead outlet store on Long Island. It’s also shuttering six locations in California.
The retailer counts some of its landlords among its biggest (unsecured) creditors.
For example, it owes Jenel Management Corporation, which co-owns 660 Madison with Ashkenazy and owns another Barneys Beverly Hills outpost, $5.98 million. It also owes Thor Equities, which owns its Chicago site, $2.23 million. That’s not to mention the fashion brands from Gucci to Prada that also have piles of unpaid bills.
Barneys also filed for Chapter 11 in 1996, partly because of a dispute with a Japanese retailer and department store chain it had partnered with, according to court records. The company re-emerged two years later.
This time around, Barneys is close to locking in a new owner. As of press time, Authentic Brands Group, which owns designers like Frye and Vince Camuto, appeared to be close to buying the luxury store for about $270 million.
Gymboree
The competition in the kids’ clothing world got the best of Gymboree this year.
The children’s store filed for bankruptcy in January and announced that it would close all of its nearly 800 Gymboree and discount Crazy 8 stores in North America.
Gap, however, bought Gymboree’s high-end children’s clothing line, Janie and Jack, and plans to keep those 147 locations open. And in October, the Children’s Place announced that it will reopen 200 Gymboree stores in select locations and online.
Gymboree was mostly located in malls. And the retailer’s bankruptcy filing provides details about some of the landlords and locations impacted.
The company, for example, owes Simon and Brookfield a combined $3.6 million in rent. Simon’s stores in the tri-state area include a Janie and Jack at Roosevelt Field Mall in Garden City, and Brookfield has a Gymboree at Bridgewater Commons in New Jersey. And among Taubman’s stores is a Gymboree at the Short Hills Mall, bankruptcy records show.
In general, unsecured claims, which most landlords file, are not prioritized in bankruptcy court, said Herrick’s Selbst. In the Sears case, “No unsecured creditor is going to get anything,” he said.
And in its initial bankruptcy filings, Gymboree provided no “cure” amounts to its landlords for breaking the leases.
One source, who works for a national landlord and asked to remain anonymous, said that owners get regular financial updates from tenants and take back space if they sense closures coming.
“Our leasing team has been very proactive to get in front of these bankruptcies,” the source said, noting that the landlord began taking back spaces from Sears in 2010, long before that company went bankrupt.
A landlord with a master lease for one tenant in multiple stores often has the upper hand, said bankruptcy attorney Brett Miller, managing partner of Morrison Foerster’s New York office. “That becomes harder for the company to just say, ‘Well I don’t want these three but I want the other 10.’”
Like Barneys and Payless, the Gymboree filing was the second for the company — its first was in 2017. At that time, it cut $900 million in debt and closed about 330 stores. But that gutting didn’t do the trick.
Charlotte Russe
Discount women’s apparel store Charlotte Russe filed for Chapter 11 in February, and then kicked off liquidation sales at its 500-plus U.S. stores.
In the tri-state area, outposts at Danbury Fair, Stamford Town Center, Westfield Trumbull and Galleria White Plains were expected to close. That was in addition to stores across New Jersey, including in Wayne, Paramus and Livingston. In New York City, a store on 34th Street in Manhattan already shuttered.
But in April, after the closings commenced, Charlotte Russe tweeted that it, too, was staging a comeback, with plans to launch a new online presence and open 100 stores. It has since announced openings in places like Jersey City’s Newport Centre and the Brass Mill Center in Waterbury, Connecticut.
Still, the filing marks a reversal from just six years ago, when growing sales had the retailer considering an initial public offering. Mounting debt from a private equity takeover in 2009 — it was bought by Advent International — and declining sales shelved those IPO prospects.
Last year, the California-based company secured concessions from landlords and trimmed expenses. But sales continued to plummet, and in its bankruptcy filing it acknowledged that it failed to balance its e-commerce needs with its in-store expenses — a common land mine for retailers these days.
Bed Bath & Beyond
Also on the chopping block is Bed Bath & Beyond, which last month announced it would close 60 stores nationwide — a figure that’s risen from initial estimates.
The company, which has not filed for bankruptcy, hasn’t identified which stores it’s shuttering, but it has 58 outposts in New York state —including six in Manhattan and two in Brooklyn — plus 36 in New Jersey and 17 in Connecticut.
The New Jersey-based company, which has 1,534 stores (including offshoot concepts) in North America, has installed a new board and CEO and has plans to upgrade about 160 of its highest-volume stores. Meanwhile, it said, it will continue to negotiate leases with all of its landlords and is exploring sale-leaseback deals across about 4 million square feet of space it owns.
Pier 1 Imports
The home goods retailer also has yet to file for bankruptcy, but it appears to be on industry watchlists — this year, S&P Global Ratings said the company was on the brink of collapsing.
And Pier 1’s planned closures have gone from bad to worse.
In April, the Texas-based company said it would close 45 of its roughly 1,000 stores in North America. But it later revised that, saying it may shutter up to 15 percent of its entire portfolio.
The company has yet to release a store closure list, but its website notes that it still has five outposts in New Jersey, including two in Paramus and one in Jersey City. There are five others scattered throughout New York City’s outer boroughs, including at Vornado’s Rego Center in Rego Park, Queens.
Meanwhile, Pier 1 has signed on with A&G Realty to optimize its store footprint and renegotiate its rents. The retailer expects to close more stores as it continues those negotiations, interim CEO Cheryl Bachelder said in a September earnings call.
“We have been holding active discussions with our landlords and are continuing to make progress in realizing occupancy cost reductions,” she said. “We are encouraging those landlords who have not yet participated in discussions to work with us.”
Correction: A previous version of this article provided the wrong owners for Payless. Private equity firms Blum Capital and Golden Gate Capital had acquired the company in a leveraged buyout in 2012, but a group of lenders led by Alden Global Capital took over Payless during the firm’s first bankruptcy proceedings.
The five most expensive homes that sold in Los Angeles County last week combined for $31.2 million, a dip from recent totals in the area.
The priciest home sale last week was a $12 million Holmby Hills mansion that was built in the 1960s by a noted architect. From there, prices plummet to around $5 million. The other homes are located in Bel Air, Brentwood, Encino and Venice.
While last week’s total is well below the $73 million recorded in the first week of November, the amounts can sharply swing from week to week, and there have been lower amounts. August saw totals of just under $30 million.
The data and information was compiled from the Multiple Listing Service, Redfin and Zillow from Nov. 13-19.
783 Bel Air Rd | Holmby Hills | $12 million
This 16,000-square foot property was built by architect William Hefner in 1964. The home abuts the Holmby Hills and Bel Air neighborhoods, and includes views of Bel Air West and the Pacific Ocean. Jeff Hyland of Hilton & Hyland, and Drew Gitlin of Berkshire Hathaway HomeServices California had the listing. Gitlin also represented the buyer, who purchased the entire parcel at approximately $750 per square foot.
1087 Moraga Dr | Bel Air | $5.3 million
Another mid-century Bel Air mansion that sold, this home went for 67 percent over its $3.3 million acquisition price in 2017, according to Zillow. The listing notes that this 1959 home has “lush landscaping transforming the place into your own private oasis.” The price per square foot for the 3,622-square-foot home pencils out to $1,476. James Harris and David Parnes at The Agency were the listing agents. Timothy Enright of The Enright Company represented the buyer.
2520 La Condesa Dr | Brentwood | $5.2 million
This newly-built, 5,852-square-foot home has five bedrooms and six bathrooms. The property’s price per square foot was pegged at $888. The home was billed as a “smart home residence” with “control lighting, a high end sound system, intercom, and security cameras.” Anush Miduran of Keller Williams represented the seller, and Compass’ Cassandra Bloore worked on behalf of the buyer.
901 Flower Ave. | Venice | $4.5 million
Venice is developing fast, but its homes don’t always make the county’s top residential sales list. The two-year-old, 7,294-square-foot property was built by Peter Vincents Architects and Amber Interiors Design. It features a “cocktail pool,” custom built outdoor kitchen, and a custom-built treehouse. The home sold for $1,223 per square foot. Jennifer Hughers of Bulldog Realtor was the listing agent, and Christopher Feil of Berkshire Hathaway HomeServices California represented the buyer.
5420 Louise Ave. | Encino | $4.2 million
Another newly built home, the 6,497-square-foot valley estate penciled out to $643 per square foot. The home may appeal to a sports inclined buyer. Amenities include a mini-golf course, and half basketball court along with an infinity pool. Yair Harpaz of Harpaz Realtor served as listing agent, and The Agency’s Elizabeth Friedman worked for buyer.
From left: Nuveen CEO Vijay Advani, Graymark founder/CEO Brian Hecktman, and the creative office building in El Segundo
Nuveen Real Estate and Graymark Capital partnered to pay $97.5 million for a creative office building in El Segundo, a fast-growing hub for technology, entertainment and media companies.
The seller was a joint venture of El Segundo-based North Sea Capital Advisors and Boston-based AEW Capital Management. The deal for the 201,000-square-foot office building at 101 Pacific Coast Highway pencils out to $483 per square foot.
The complex is 91 percent leased to four tenants, with semiconductor manufacturer Infineon occupying nearly two-thirds of the building for its U.S. headquarters. Web hosting company DTI Services is also a major tenant.
Kevin Shannon’s team at Newmark Knight Frank represented the seller and announced the deal. NKF’s Eric Lastition and Geoff Ludwig handle leasing at the property.
Graymark, a San Francisco-based real estate investor and Nuveen, a unit of New York-based financial services company TIAA, were self-represented.
Over the past three years, North Sea Capital and AEW Capital spent nearly $20 million to renovate the 2.9-acre campus.
El Segundo, once known for its aerospace industry, has in recent years become a magnet for media and tech firms searching for a lower-cost alternative to Silicon Beach markets like Venice and Playa Vista.
In September, GPI Companies acquired a manufacturing complex leased by toymaker Mattel, less than a month after it closed a $300 million commitment for its real estate fund from a state pension fund.
The Nuveen-Graymark acquisition is also near where Continental Development Corp. recently began redeveloping several of its properties in the massive Continental Park, turning them into creative office spaces. That 3 million-square-foot campus is comprised of low- to mid-rise retail, restaurant, hotel and entertainment properties spread across 86 acres.
For Vicki Gaily — co-owner and marketing director of the northern New Jersey-based brokerage Brook Hollow Group — this year is shaping up to be far better than 2018.
Gaily’s firm, which is affiliated with Christie’s International Real Estate, has closed 45 residential deals at an average price of nearly $2 million so far this year, she said. That’s up from 37 deals for all of last year.
While many homebuyers had been holding back on purchases for a good chunk of the last 18 months as they agonized over the new federal cap on state and local tax — aka SALT — deductions, they’ve finally started transacting again.
“We are selling a lot of the higher-end homes that have been sitting for a long time,” said Gaily, whose territory includes the wealthy Bergen County towns of Saddle River, Upper Saddle River, Franklin Lakes and Mahwah.
Many in the suburban markets around New York City had been bracing for higher tax bills after the $10,000 cap on SALT deductions went into effect last year as part of President Donald Trump’s 2017 sweeping tax overhaul. Some were also anticipating a trickle-down effect that would hit local economies as financially squeezed homeowners put the brakes on spending at local stores, restaurants and other businesses.
The National Association of Realtors and others argued that the cap would virtually nullify the benefits homeowners had been reaping from the mortgage-interest deduction — a financial incentive widely touted as making buying residential property more attractive.
New York Gov. Andrew Cuomo went as far as calling the cap an act of “economic civil war” because it was handed down by a Republican White House and Congress and penalized heavily Democratic states most.
But many say concerns over how the changes to SALT would hurt residential sales were something of a self-fulfilling prophecy, causing buyers to hold off as they worried about their tax bills.
Brokers say, however, that buyers are now getting back into the game.
In addition to the fact that sellers have started lowering prices, part of the newfound ease comes from having a full tax year (and then some) on the books.
Many well-to-do homeowners, it turned out, couldn’t have received the full benefit of the SALT deductions anyway, since they would have been subject to the alternative minimum tax (AMT) — which limits or eliminates the SALT deduction.
A recent Bloomberg analysis of IRS data from 10 of the wealthiest U.S. counties — including Westchester, Nassau, Fairfield, Bergen and Morris — estimated that nearly 75 percent of those who paid more than $10,000 in state and local taxes in previous years were required to pay the AMT. (And the good news for those who do get hit with the AMT is that it was also modified under the tax reform and is now less onerous and has higher income thresholds.)
While the tax code is clearly complicated, buyers have a better sense of how all of these changes are impacting their wallets. And that is at least creating more clarity over what they can spend.
“Buyers have digested the situation and are moving on,” said Angela Retelny, a Compass agent who specializes in properties in Scarsdale, Edgemont and other parts of southern Westchester. “Tax deductibility was a great factor in 2018, and the market stalled for a while until buyers understood the full impact and sellers realized that the market has changed.”
The under-$1M club
That’s not to say buyers — especially at the top of the market — are no longer wary of increased tax burdens.
One client who was recently looking at $2 million homes in Chappaqua ended up buying one for $1.5 million because he was concerned about taxes, said Douglas Elliman’s Nancy Strong, who also covers Westchester.
“Every deal is much harder,” she said. “Everyone is looking at the taxes, and everyone wants to pay less.”
But Strong said she expects more deals to close this year at $999,999, allowing homebuyers to at least dodge New York’s new mansion tax — a 1 percent levy on home sales starting at $1 million.
President Donald Trump’s tax overhaul had a lot of tri-state residents and brokers concerned.
In some cases, that’s more psychological than anything else. “If [buyers] can avoid the mansion tax, it makes them feel better,” Strong noted.
Real estate appraiser Jonathan Miller said sellers are pricing closer to the market than they have been in years. Additionally, the interest rate slide over the past year — the Federal Reserve has cut rates three times this year, most recently by a quarter of a point at the end of October — has been reinvigorating buyers in Westchester and Fairfield counties. That, he said, has mitigated much of the damage from SALT.
“The drop in interest rates is drawing out more buyers, and with sellers getting more realistic, it is such a powerful combination,” Miller said.
In the third quarter — post-income tax season — the number of sales was up 19.7 percent over the second quarter in Westchester and 10.5 percent in Fairfield, according to Elliman.
On Long Island, meanwhile, the North Shore of Nassau County saw sales jump 32 percent between the two quarters, Elliman found. And in Bergen County, sales of single-family homes were up 15.2 percent year-over-year in September, according to the New Jersey Realtors Association, which does not track sales on a quarterly basis.
Of course, some buyers are still flocking to income-and mansion-tax-free havens.
For ultrawealthy residents in New York, New Jersey and Connecticut — along with other high-tax states — the savings from living in a state like Florida are often enough of a reason to relocate, according to local agents. And the presence of the SALT deduction — even if it turned out to be less of an issue for some — was still, well, salt in the tax wound.
Bill Hernandez, an Elliman broker in Miami Beach, pointed to real estate bigwigs Barry Sternlicht, Michael Stern and Jamie LeFrak, who all purchased homes there this year. In early November, Trump joined them, changing his primary residence from Manhattan to Palm Beach.
“Look at the names coming down here,” said Hernandez, noting that his team has had “numerous conversations with clients who feel like they’re not being treated fairly” in New York, New Jersey and Connecticut.
“We’re taking hundreds of millions of dollars in tax revenue from those states,” he added.
Candace Adams, president and CEO of Berkshire Hathaway HomeServices New England, New York and Westchester Properties, echoed that sentiment.
“There’s a bit of a migration out of our states,” she told TRD in a recent interview. “There was already an exodus out because of the state taxes, the inheritance taxes … I think SALT was sort of the tipping point for a lot of people saying, ‘You know what? That’s it.’”
But Adams also noted that she’s seen some buyers who moved to Florida four or five years ago — before the changes to SALT, but because of high taxes in general — “boomerang” back to the tri-state. She attributed those reversals to “lifestyle — just missing the city.”
Salty buyers
While not as many were hurt by SALT as expected, there were homeowners in the metro area who felt pain.
In Westchester, average annual state and local taxes for big earners exceed $80,000, according to Bloomberg’s analysis. While Bloomberg found that 75 percent of those who paid $10,000-plus in state and local taxes were required to paid the AMT, that still leaves 25 percent who were not. And those homeowners are undoubtedly feeling the pinch, given that they still pay SALT and were likely deducting more than the $10,000 they’re now allotted.
In addition, Trump’s Tax Cuts and Jobs Act lowered the allowable mortgageand home-equity interest deduction to $750,000, down from $1 million, initially putting a further damper on sales in high tax suburbs around New York.
From left: Vicky Gaily, Angela Retelny and Scott Elwell
And buyers, of course, look at these changes in their totality.
Syracuse University tax expert Leonard Burman said those who pay the AMT or are affected by the SALT cap “don’t have a tax incentive to get a more expensive house.”
“Ultimately, the way people decide about home ownership is by looking at their budget, seeing that they are paying $2,000 less in taxes and [therefore] can afford more than they could before,” said Burman, who is the chair of behavioral economics at Syracuse’s Maxwell School and a co-founder of the nonpartisan Tax Policy Institute think tank.
And buyers did, indeed, start changing their behavior as soon as the tax reform went into effect at the start of 2018.
In 2018’s first quarter, residential sales in Westchester were down 7.3 percent year-over-year. That worsened to a nearly 18 percent decline in the second quarter, according to Elliman. In Fairfield, meanwhile, sales were down 3.4 percent and 7.4 percent, respectively, in the same periods.
While it’s generally impossible to point to one single reason for the way an entire market moves, those drops extended into early 2019 before sales started picking up. Brokers say that’s because many were waiting to see what their tax returns would reveal.
But even as many of the counties in the tri-state area have seen an uptick in sales volume, brokers say SALT is still a big topic among clients. And that may be because everyone is searching for answers when properties don’t sell.
Elliman’s Strong said some homeowners are still micromanaging listings and “want to believe everything but price is the reason a house isn’t selling.”
The migration situation
In certain Bergen County areas like Old Tappan, Coldwell Banker agent Paula Clark said, there’s less concern about SALT — especially when a buyer’s local tax bill is below $25,000.
In fact, said Clark, “we’re still getting bidding wars in some markets.”
New York Gov. Andrew Cuomo called the SALT cap an “economic civil war.”
Hoboken-based Jill Biggs, also a Coldwell agent, said she’s seeing less of an impact on sales from SALT than she is from new limits on H-1B visas. Those caps affect foreign workers who often buy closer to Manhattan, in Hoboken and Jersey City.
“They stopped buying and re-signed their leases,” said Biggs. “If they are not going to be able to stay in the country, they are not going to spend money [to buy a house].”
Up in Westchester, meanwhile, some homeowners are even migrating across the state line, seeking relief from SALT caps — a boon to some sellers (and brokers) in lower Fairfield, despite the taxes there. Greenwich broker Leslie McElwreath of Sotheby’s International Realty said she’s seen a boost in business from people fleeing higher-tax towns.
“It has actually helped us in Greenwich, because we have very low taxes,” said McElwreath. “We have really benefited.”
Alexander Chingas, of the boutique brokerage Riverside Realty Group in Westport, Connecticut, said he’s also seeing buyers moving into the area to lower their tax load.
“I wouldn’t call it an exodus,” he said. “But I can attribute a handful of sales directly to people who decided to move here from Westchester because the $10,000 deductible cap goes a little bit further.”
Chingas said 2019 is finishing stronger than it started, as sellers have become savvier about the market and pricing has adjusted to levels where buyers can find value. “[Sellers] know that if they want to make something happen, they have to be more realistic,” he said.
Scott Elwell, Elliman’s regional vice president of sales for Westchester and New England, said that “we’re seeing a lot of older inventory pass through now.”
“At all price points, including the higher end, sellers are coming to better terms of what a house is worth, and buyers are getting a better grasp on what they are willing to spend,” he said.
Brokers said buyers started stepping up shortly after they found out what the damage was from their 2018 tax bills.
“When buyers met with their accountants, it was almost like a faucet went on,” said Deborah Doern, regional vice president for Houlihan Lawrence in Westchester.
“They knew how it affected them or didn’t affect them — and moved accordingly,” she added. “Once that time passed, the number of sales went way up.”
From left: Hiten Samtani, Bridgid Coulter of Blackbird, Kat Lau from Industrious and Jim Doorn of IWG
WeWork’s implosion could be the hard reset needed for the co-working industry.
“We didn’t really estimate the magnitude of what that fallout meant for Industrious and throughout the industry,” said Katherine Lau, senior director of real estate for flexible space firm Industrious. “What we see is a normalization of the growth rate of co-working. In many ways, WeWork propped up the real estate markets, drove up rents and drove down vacancy. We’ll see what the real estate markets are really made of in 2020.”
Katherine Lau
Lau joined Bridgid Coulter, founder and CEO of Blackbird House, a co-working space for women of color, and Jim Doorn, executive vice president for IWG’s western division, on Wednesday for The Real Deal and Spaces’ panel discussion on the state of co-working in the L.A. market.
Hiten Samtani, TRD’s associate publisher, moderated the discussion, which was held at Spaces’ Playa District location at 5999 Center Drive. Over 300 people were in attendance.
A portion of the crowd at the event
The WeWork meltdown –– in which the company’s enigmatic CEO was ousted, its valuation slashed from $47 billion to $8 billion, and about one-third of employees in line for layoffs –– was front-and-center on the minds of the panelists.
“It’s really made the operators say, ‘Man, I’ve got to button up. Man, I’ve got to do this a little better and make money,” said Lau. “That been our M.O. at Industrious since our inception in 2013. We feel we are well positioned for that.”
Lau said New York-based Industrious, which has raised more than $200 million in funding from venture capital firms such as Fifth Wall Ventures and real estate firms like Brookfield Properties, is projecting profitability by the end of 2020.
Jim Doorn
Doorn said IWG, a major rival of WeWork that operates brands such as Regus and Spaces, has benefited from the dramatic rise of co-working. His company is profitable after surviving the last downturn, has a market cap of $3.5 billion, and sports half-a-dozen locations in Southern California.
“When I think of what the customer needs and what we started with, we are seeing a significant demand of flexibility,” he said. “We also are seeing customers want stability.”
Coulter didn’t see a direct impact on Blackbird from the WeWork meltdown.
“We are absolutely in a different market,” said Coulter, noting that her firm’s single co-working space in Culver City, which is a hub for entertainment and media startups, targets women of color.
“We are really building a brand from the community up. Our mission and motto is to be of service in a very specific way in to a demographic way,” she said. “We are positioning ourselves to be a different model.”
Bridgid Coulter
Coulter, an actress and interior designer – and wife of Don Cheadle – said her co-working club includes a podcast studio and fitness classes. It even hosted an event with Democratic presidential candidate Kamala Harris this fall right before Blackbird’s official launch.
Lau and Doorn also are seeing some Fortune 500 companies show interest in becoming tenants, looking at potentially shifting departments such as IT into their spaces.
Lau, meanwhile, said that her firm is trying to monetize “outdoor space” at some of its locations – such as with outdoor exercise classes or bringing in food trucks.
Coulter said she’s been surprised to see interest in everything from podcasters to sewing classes. “These are unique things I just didn’t expect.”
WeWork co-CEOs Sebastian Gunningham and Artie Minson (Credit: Getty Images and Twitter)
As thousands of WeWork employees prepare to be laid off this week, the embattled company’s leadership has issued a warning to them: don’t leak information, and don’t delete anything.
In an email sent Wednesday evening from co-CEOs Artie Minson and Sebastian Gunningham, employees were reminded that the company would take violations of its policy “seriously.”
“It has come to our attention that some employees may be considering deleting materials from their WeWork computers, or forwarding information and documents outside of WeWork,” the email read, a copy of which was seen by The Real Deal.
“You should all be aware that company computers are WeWork property and you may not delete or destroy company materials on these devices. Additionally we want to remind you that you may not share information or documents outside of the company.”
When asked, a WeWork representative would not say if a particular incident prompted the email, and declined to comment further.
The email follows a steady string of news reports about the company’s demise, many of which cited anonymous sources. Since abandoning plans to go public at a valuation of $47 billion over the summer and then ousting disgraced CEO Adam Neumann (who received a $1.7 billion golden parachute), the company has been in freefall.
Sources told TRD that as many as 4,000 employees are expected to be laid off in coming weeks, though WeWork said Thursday that 2,400 would be affected globally. It’s unclear if WeWork’s figure includes 1,000 maintenance workers who would be transferred to JLL, or employees at other companies WeWork acquired.
Fear that employees could delete or remove documents is the latest concern for WeWork executives as regulators begin to pick apart the downfall, and probe allegations of self-dealing. Following a whistleblower complaint, the firm is being investigated by the U.S. Securities and Exchange Commission about allegations WeWork executives approved the $42 million acquisition of another office-space startup, Spacious, without going through due diligence — a highly unusual move. The New York Post first reported the investigation.
A separate investigation was launched by the New York State Attorney General’s office to probe multiple transactions involving former CEO Adam Neumann that were scrutinized for potential self-dealing.
The company’s largest investor, SoftBank, last month committed to a $9.5 billion financing package to save WeWork from potential bankruptcy, a payment that included Neumann’s $1.7 billion exit package.
Mohamed Hadid says he doesn’t have the $5 million needed to demolish his Bel Air mansion (Credit: Getty Images, iStock)
Mohamed Hadid says he can’t tear down his controversial Bel Air spec mansion as the city insists.
Why? Because the luxury developer now claims he doesn’t have the millions it would cost, according to the Daily Mail of London.
That’s the latest legal argument Hadid made through an attorney, in the years-long civil lawsuit against his 30,000-square-foot home that the city of Los Angeles says is illegal.
Hadid’s lawyer, Bruce Rudman told an L.A. County Superior Court judge that his client doesn’t have the estimated $5 million needed for demolition of the unfinished home on Strada Vecchia Road. City Attorney Mike Feuer’s office earlier this month said Hadid should tear down the building because its foundation does not meet minimum reinforcing requirements.
Hadid, father to supermodels Gigi and Bella, also says he doesn’t have the coin to pay an expected $500,000 fee to place the property in city receivership, according to the report.
Neighbors suing Hadid over the house say they aren’t buying his argument.
“We don’t accept his word for anything,” said Ariel Neuman, an attorney for the group suing, according to the Daily Mail report.
Hadid’s big real estate plays over the years have included the Le Belvedere mansion in Bel Air, which he sold for $50 million in 2010.
Hadid and the city have been battling it out in court over the spec mansion for over five years. In 2017, Hadid pleaded no contest to charges that he built the home in violation of city codes and has since torn down parts of the mansion to bring it up to code. But the city Department of Buildings and Safety told Hadid that his proposed renovations weren’t satisfactory. The developer maintains he did nothing wrong and only pleaded no contest to move forward.
The EB-5 program’s new federal regulations take effect today, and will double the minimum dollar amount that all foreign visa-seekers must plow into development projects.
The rules are designed to clamp down on abuse, to modernize the 30-year-old federal program and to keep up with inflation. EB-5 allows foreign investors get U.S. green cards in exchange for investing in American businesses and creating at least 10 jobs.
While it was intended to spur development in distressed and rural areas across the U.S., it has come under criticism for serving as a tax break for the wealthy real estate developers.
Industry experts say the new rules will make it more difficult for developers to secure financing for projects. While scores of EB-5 projects across the country have been completed, many have faced litigation and complaints from investors.
Under the new regulations, investors must contribute $900,000 from the previous $500,000 for a project in a low employment zone — known as a targeted employment area. The investment amount will also climb to $1.8 million in all other areas, from the previous from the existing $1 million.
The new rules also prohibit developers from tacking a sliver of a targeted employment area on to a project in a wealthier area in order to qualify for the lower investment amount.
The investment generally goes into a project as a loan that offers developers rates significantly lower rates than traditional financing.
More than $1.2 billion of EB-5 money went to Related Companies’ Hudson Yards megaproject in Manhattan, considered the largest private real estate development project in U.S. history.
Recently, investors have been less reliant on EB-5 for their projects because of weakened demand from Chinese investors who have to wait years for their green cards.
In one notable example of EB-5 abuse could be seen in the Palm House Hotel, a condo-hotel project in Palm Beach, Florida. The developer assured roughly 90 investors that their $500,000 stakes would go to building the last 5-star hotel in the area. Instead, the developer used the money to pay off his personal debts, and buy a 151-foot yacht named “Alibi.”
The Blackstone Group sold its last piece of Invitation Homes.
The private equity giant sold nearly 11 percent of Invitation Homes’ shares for about $1.7 billion. In all, Blackstone made about $7 billion since the home rental business went public in 2017, according to the Wall Street Journal.
Blackstone founded Invitation Homes after the financial crisis, scooping up suburban homes at the bottom of the market to rent to people who could no longer afford a mortgage.
Even though Blackstone sold its stock in the company, Invitation Homes’ share price has kept rising. As of 2:40 p.m. Thursday afternoon, the stock price was $29.60 per share, up 48 percent since the company went public at $20 a share over two years ago.
Jonathan Gray, Blackstone’s president, who led its real estate division when it launched Invitation Homes, said the biggest challenge was building the business. “We created a company from scratch. It was created on a yellow pad. It was an idea. Now it’s a real business,” he told the Wall Street Journal.
Since Invitation Homes was created, Blackstone acquired real estate from its competitors in the single-family rental business, including the portfolios of Starwood Capital Group and Colony Capital, making it the largest landlord of single-family homes in the U.S. [WSJ] – Katherine Kallergis
From left: Shawn Yari and Steven Yari, managing principals of Stockdale Capital Partners, with a rendering of the tower in Beverly Grove.
Stockdale Capital Partners has proposed building a $174 million medical office tower in Beverly Grove, The Real Deal has learned. The 145,000-square-foot complex would be the real estate investment firm’s first ground-up medical office construction.
The 14-story outpatient complex would rise at 656 S. San Vicente Boulevard, about a mile from Cedars-Sinai Medical Center in Beverly Hills.
The Westwood-based company filed plans with the Los Angeles Planning Commission for the Beverly Grove construction, according to a source close to the project. The firm hopes to begin construction in two years, and the project will be self-funded.
Stockdale paid $23 million for the property in 2016, which now consists of land, along with a Big 5 Sporting Goods store, a now-shuttered Montessori school. Big 5 signed a one-year lease extension for the 10,000-square-foot store, but Stockdale intends to tear down both buildings to make room for the tower.
Though this would be Stockdale’s first medical office construction, the firm has owned several healthcare properties in and around L.A.
In August, Stockdale sold the 147,000-square-foot 3rd Street Medical Center in Downtown L.A. for $85 million. It also spent $140 million on three medical office buildings in Downtown, Santa Monica and in Beverly Hills in 2015 and 2016.
Earlier this year, Stockdale was in discussions to develop other medical office buildings in the San Fernando Valley as well as in Portland, Ore.
SoftBank is looking to whittle down its WeWork rescue package.
The $9.5 billion agreement has drawn ire from WeWork employees because of a generous payout to founder and former CEO Adam Neumann, according to Bloomberg.
SoftBank has already provided a $1.5 billion investment to the struggling co-working giant, which abandoned IPO plans in September. But as The Real Deal reported last week, Masayoshi Son’s company has delayed a $3 billion tender offer to WeWork.
The rescue package — which values WeWork at $8 billion — staved off a bankruptcy this month. But any change to the agreement, which would allow former CEO Adam Neumann to sell $970 million worth of WeWork stock to SoftBank, could result in a legal battle, a source told Bloomberg.
Meanwhile, SoftBank is reportedly raising funds for the rescue package, and is negotiating to receive as much as 300 billion yen, or $2.8 billion, from Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group. [Bloomberg] — Georgia Kromrei
Now, Representative Ilhan Omar has added her own housing plan to the field of left-leaning elected officials who have proposed dramatic expansions of how government funds housing.
The Minnesota Democrat is calling for $1 trillion to be invested into affordable housing and public housing across the country, which she says will create 12 million units over the next decade.
The proposal, dubbed the “Homes for All Act,” would scrap the Faircloth Amendment, which has barred the federal government from constructing new public housing units since it was signed into law 20 years ago.
“Our current free-market housing system is not meeting the needs of working families,” said Omar, a Democrat who has aligned herself with Cortez and has sparked controversy with some of her statements.
Under Omar’s plan, the inclusion of operating and capital expenses would be mandatory for the construction of new public housing. In New York City, which has the largest public housing authority in the country, the agency has a budget shortfall of $32 billion.
The congresswoman’s plan also includes $800 billion over the next decade to build 8.5 million new public housing units and $200 billion to construct 3.5 million permanent deeply affordable private housing units.
The Somali-American politician also wants a $200 billion “Community Control and Anti-Displacement” fund that would be managed by the federal housing agency. The fund would disperse money to local governments for projects to house displaced people and stabilize neighborhoods.
It would also tighten rules for “exploitative” developers and ensure that residents have the right of first refusal, which would grant homeowners the right to purchase their buildings — such as in the case of foreclosure proceedings — before anyone else can.
Omar is the latest politician on the national stage to call for an expansion of funding for public housing. Sen. Sanders, along with Rep. Ocasio-Cortez have released plans of their own in recent months. While both their plans include “good cause” eviction and limits on annual rent increases, those provisions are absent from Omar’s plan.
The massive $2.5 trillion Sanders plan would cap annual rent increases at 3 percent or 1.5 times the consumer price index, whichever is higher. The Vermont Democrat and presidential candidate would also allow states and cities to pass their own rent-control standards, even if they had stricter limits on rent increases.
AOC’s housing plan, released shortly after the Sanders’ plan, would cap annual rent increases for landlords with at least five properties to 3 percent of the average rent or the consumer price index, whichever is greater. The New York congresswoman’s plan also includes $10 billion over the next decade for lead abatement, $6.5 billion to fund tenants’ right to counsel for eviction proceedings and expanded data disclosure requirements for large “market-controlling” landlords.
Abel Tesfaye, AKA The Weeknd, will be rocking out at a Beverly West penthouse (Credit: Google Maps and Getty Images)
Luxury living in Los Angeles is increasingly going vertical, and a musician’s purchase of $21 million condo at Emaar Properties’ Beverly West project represents one of the biggest high-rise deals yet.
Abel Tesfaye, who performs under the name The Weeknd, paid just over $2,550 a square foot, for a penthouse condo at 1200 Club View Dr. in the Beverly West neighborhood, the Los Angeles Times reported.
Advertised as “The Mogul” unit, the condo occupies the entire 18th floor of The Beverly West, a 22-story, 35-unit condo complex built in 2009 by Dubai-based developer Emaar Properties. The tower features a rooftop helipad among other amenities.
Bill Simpson, Jeff Hyland, and Susan Pekich of Hilton & Hyland represented Emaar Properties in the deal. Angel Salvador of The Agency represented Tesfaye.
The 8,200-square-foot condo residence features floor-to-ceiling windows, oak floors, and walnut wood paneling. The sponsor unit was priced at north of $23 million.
Tesfaye’s purchase represents a growing trend in high-end real estate where more luxury buyers are moving away from sprawling estates in the Pacific Palisades, Malibu, and Brentwood and into high-rise living that retains the privacy of L.A.’s signature mansions.
Two years ago, another pop star, Rihanna, relocated from her Palisades mention to a condo at The Century in Century City, developed by the Related Companies. And billionaire real estate titan Richard Lewis matched the Tesfaye’s purchase price in July, buying a $21 million penthouse condo in the same Beverly West building. Tesfaye and Lewis’ purchases are the biggest condo deals since Candy Spelling’s $35 million duplex deal in The Century in 2010.
In an interview earlier this month, Simpson said high-end buyers are attracted to condos so long as there is 24/7 security, and amenities including pool, gym, and multiple-car garages.
Simpson also said prospective condo buyers tend to be younger and more artistically-inclined.
“The high-rise lifestyle is getting a little hipper, and the penthouses are the cream of the crop,” he said. [LAT] — Matthew Blake
Landlords in L.A. have been retrofitting vulnerable apartments to protect them against earthquakes (Credit: iStock)
Landlords in fast-developing neighborhoods like Koreatown, Hollywood and Mid-City have been retrofitting an increasing number of vulnerable properties to strengthen them against earthquakes.
Overall, roughly a quarter of the 11,400 wood-frame apartment buildings around Los Angeles having been strengthened with steel frames and stronger walls, according to a Los Angeles Times analysis of city records.
The data reveals that 29 percent of the “soft-story” residential developments on the Westside and in the San Fernando Valley have been retrofitted, and 26 percent in central L.A, which includes the Koreatown, Hollywood and Mid-City districts.
Only East L.A. is behind in retrofitting, with 17 percent of identified retrofits completed.
The overall numbers are a marked increase from January, when property owners in just 1,500 of the nearly 13,000 vulnerable buildings had completed retrofits. City officials began requiring the updates in 2015. Property owners have until 2040.
Retrofits can cost around $130,000 for a typical soft-story apartment building, but could run into the millions for larger concrete buildings. Some owners have simply sold off their vulnerable buildings instead of retrofitting them. In L.A., the City Council has said owners can pass along half the retrofit costs to renters over a 10-year period — but with no more than a $38 increase per month. [LAT] — Pat Maio
Chris Kelly, who also serves as vice chairman, will resign from the flexible office provider by the end of the year, according to Commercial Observer. He will still advise the startup.
Convene has raised $260 million since its founding in 2009. Its backers include RXR Realty, the Durst Organization and Brookfield Asset Management.
Kelly announced the decision Friday at a company meeting. He said he had been thinking about stepping down for years. The move signals a “vote of confidence in the company and its leadership,” he said, according to the report.
The departure leaves open the role of vice chairman and president, a position Kelly vacated in February. Convene doesn’t plan to find a new vice chairman and has put aside hiring a new president, Kelly said.
Kelly, who co-founded New York-based Convene with CEO Ryan Simonetti, said he plans to take some time off before his next full-time role.
Besides New York — where it has locations that include 75 Rockefeller Plaza, 780 Third Avenue and One Liberty Plaza — the company has space in Los Angeles, Chicago, Boston, Philadelphia and Washington, D.C. In August, it inked its first international deal, taking on 100,000-square feet at 22 Bishopsgate in London. At the under-construction tower, Convene will offer 50,000 square feet for meetings and conferences and an additional 50,000 square feet for flexible office space. [CO] — Mary Diduch
T
But many say concerns over how the changes to SALT would hurt residential sales were something of a self-fulfilling prophecy, causing buyers to hold off as they worried about their tax bills.
