Marcelo Claure, a top executive at Japanese conglomerate SoftBank Group, paid $11.1 million for a waterfront teardown on Miami Beach’s North Bay Road, The Real Deal has learned.

Claure, CEO of Softbank Group International and executive chairman of New York-based co-working giant WeWork, bought the house at 5212 North Bay Road through a trust in his name, confirmed Nelson Gonzalez of Berkshire Hathaway HomeServices EWM Realty. Gonzalez brokered both sides of the deal.

Gonzalez said the home “hands down, is a teardown, but it’s not going to happen right away.” The 5,116-square-foot house was built in 1986 on a 0.6-acre lot. It was listed in October for $13.4 million, and was reduced in February to $12.9 million, according to Redfin.

The Isaac Olemberg Trust sold the property. The late Olemberg founded Olem Shoe Corp., and he and his late wife, Nieves, were philanthropists, endowing Olemberg Halls at Temple Menorah and Temple Beth Shmuel in Miami Beach, and at Michael-Ann Russell Jewish Community Center in Aventura. Nieves died in 2014, and Isaac in 2016, according to his obituary.

Gonzalez said Claure will be in New York for a while, but eventually plans to build a new house on the site, which has 150 feet of frontage on the open bay with a view of downtown Miami. “He is talking to architects and builders, so it may be sooner rather than later,” Gonzalez said.

Claure already owns a waterfront mansion at 2060 North Bay Road, which he purchased for $11.5 million from former Miami Heat player Rony Seikaly in 2010.

Bolivian native Claure, who is also COO of Tokyo-based SoftBank Group Corp., oversees the group’s operating companies. He is in charge of reworking WeWork’s strategy after its failed IPO attempt last year, as it continues to be pummeled by the effects of the pandemic on the office sector. In July, WeWork hired JLL and CBRE to help fill millions of square feet now vacant in New York City and Los Angeles. Last week, WeWork launched an “On Demand” pay-as-you-go offering that allows users to drop in for as little as an hour and $10 that is being piloted in New York City.

Claure is known as a hands-on leader, who has a track record of creating billion-dollar companies from scratch and turning around sinking ships. He is also active on Twitter, posting about marathons, travel and enjoying time with his wife and six children.

In addition to WeWork, Claure oversees Arm, Brightstar, Fortress, SB Energy and Boston Dynamics, as well as SoftBank’s ownership in T-Mobile US and SoftBank Latin America, according to his LinkedIn.

He is also chairman and part owner of Inter Miami CF, Miami’s major league soccer team, and runs Club Bolivar, Bolivia’s soccer team.

On North Bay Road, other high-profile homeowners include JDS Development’s Michael Stern, singer-songwriter Phil Collins, and basketball stars Chris Bosh and Dwyane Wade.

The bayfront street has seen several high-priced sales during the pandemic. Last month, Richard Lane, chairman emeritus of New York-based real estate firm Olnick Organization and his wife Barbara paid $9 million for the house at 6380 North Bay Road. Also in July, David Deshe, co-founder and president of Vero Water, purchased a lot at 4350 North Bay Road for $8.5 million.

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Bankrupt retailer J. Crew is saving $130 million in rent.

The retailer, which has 492 stores including Madewell and outlet locations, has negotiated about $70 million in concessions this year and about $60 million next year from its landlords, according to Retail Dive. That includes waivers and rent deferrals, as long as sales are in line with projections.

J. Crew had sought to exit leases through its bankruptcy proceedings, which began in May. Before it filed for Chapter 11, it had been closing J. Crew locations in favor of opening Madewell stores. It is unclear whether that is still the plan.

In bankruptcy court last week, the committee of unsecured creditors claimed that J. Crew and its secured lenders “have grossly undervalued” the business while overvaluing certain collateral, according to Retail Dive. Instead, the committee calculates the company’s enterprise value to be $2.94 billion, not the $1.75 billion or the revised $1.84 billion included in J. Crew’s bankruptcy plans.

As companies increasingly lean towards bankruptcy amid the coronavirus pandemic, landlords have been seeking ways to save businesses while avoiding falling behind on their own mortgages and debts.

Some estimates say that as many as 25,000 retail stores may close as a result of the pandemic.

J.Crew has reopened 458 stores, or about 95 percent of its fleet, in recent months. [Retail Dive] — Sasha Jones

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Residential rents continue to fall across Los Angeles, particularly at the top end of the market.

Average asking rent for Class A properties that are new and loaded with amenities fell around 4.3 percent from March to last week, according to the Los Angeles Times, citing Costar data. Rents in two of L.A.’s pricey submarkets, Mid-Wilshire and Downtown, fell 10 percent and 8 percent respectively over that period.

At Class B properties, which are slightly older but have been renovated, were down around 2 percent from March.

Meanwhile, at Class C properties, which are older and have few amenities, prices were essentially flat, inching down 0.2 percent, the report found. But that could change. Rents for Class C buildings tend to decline later in a recession, RealPage chief economist Greg Willett told the Times.

At the top end of the market, the unique nature of the pandemic is accelerating declines, John Pawlowski with Green Street Advisors told the outlet. Many of the amenities and perks of living in a pricey Downtown apartment building don’t factor in now, such as easy access to bars and entertainment, as well as in-building perks like pools, all of which are closed.

“There is no good reason to sign a luxury lease right now in a city,” he said.

Despite the falling prices, it’s difficult to pin down how bad landlords are hurting. Some have reported moderate declines in rent collections, while others have seen significant drops.

Daniel Tenenbaum, founder of Pacific Crest Real Estate, said that his company has cut rents by as much as 6 percent in some buildings because tenants, particularly young service workers, were moving out, he told the Times. In some other buildings where tenants are staying, the firm has cut rent by around 3 percent. [LAT] — Dennis Lynch 

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Manhattan District Attorney Cyrus Vance’s office implied in a court filing last week that its investigation into President Trump’s finances — once thought to be focused on “hush-money payments” in 2016 — was in fact looking at a much broader range of financial fraud.

The prosecutors did not directly disclose details about their investigation because of grand jury secrecy rules. But Trump’s lawyers want to change that.

Vance “refuses to disclose to the president the nature of the grand jury investigation and has offered shifting reasons for why he copied a congressional subpoena,” Trump’s lawyers wrote in a letter to the judge filed Monday, the New York Times reported.

The Manhattan DA’s office has subpoenaed eight years of the president’s tax records and other financial documents — or “every document and communication related to the president and his businesses over about the last decade” according to Trump’s lawyers.

A previous attempt to block the subpoena made it all the way to the Supreme Court, which ruled against the President by 7 to 2 last month. Trump’s lawyers had then argued that a sitting president was immune from state criminal investigations, and are now seeking to raise other objections in the lower courts.

The subpoena in question is directed at accounting firm Mazars USA. Last week, the Times reported that the Manhattan DA’s office had also subpoenaed Deutsche Bank — Trump’s main lender since the 1990s — and that the bank had complied with the subpoena.

“The seeking of discovery is an interesting tactic, though unlikely to succeed,” white-collar criminal defense lawyer Andrew Lankler told the Times, referring to Trump’s lawyers. He noted that the issue at hand was of limited scope — “namely whether the D.A.’s office has discretion to issue broad grand jury subpoenas, which it does.” [NYT] — Kevin Sun

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The coronavirus pandemic put an abrupt end to the co-working industry’s years of rapid expansion, and one in five co-working locations in the U.S. could soon be up for grabs.

While closures impacted just 1.5 percent of co-working space in the top 20 U.S. markets so far this year, according to a CBRE estimate, things are expected to get much worse.

Of the 4,500 or so co-working locations in the U.S., JLL estimates that a fifth — or about 25 million square feet — will close or change hands, according to the Wall Street Journal. JLL head of office research Scott Homa attributed the slow pace of closures thus far to rent relief provided by landlords, as well as the fact that closures take time.

Remote work and social distancing have reduced the appeal of densely packed collaborative office space, and economic disruption has also weakened overall demand for office space.

Abandoning leases can be difficult and costly for co-working firms due to corporate guarantees and letters of credit covering lease obligations. When WeWork scrapped plans to move into 149 Madison Avenue in Manhattan in June, for example, landlord Columbia Property Trust got a $6.4 million payout.

Knotel is facing lawsuits from landlords for over $1.6 million in unpaid rent, and flex-space provider IWG (formerly Regus) has sought to exit lease obligations through bankruptcy of its single-purpose entities.

JLL estimates line up with public statements from WeWork and Knotel, both of which have expressed intentions to close — or at least rethink — one in five of their leases.

In the longer term, however, some industry observers think a post-pandemic shift to remote and flexible work could actually end up benefiting co-working firms — or the ones that survive, at least.

“Everybody’s pretty bullish on the concept of shared workspace when we come out of this,” Bond Collective CEO Shlomo Silber said. “But getting out of this is the struggle.” [WSJ] — Kevin Sun

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Marriott International believes the hotel industry believes the worst is over, so it’s halting its relief measures for hotel owners’ bills and forging ahead with new development.

While announcing the hotel company’s second quarter earnings on Monday, CEO and president Arne Sorenson acknowledged the cataclysmic effect the coronavirus pandemic has had on its business, before sounding a note of optimism.

“This is by far the most significant crisis ever to impact our business,” he said. “We’re a company that is 92 years old and has weathered the Great Depression, World War II, and numerous natural disasters around the world, that is saying something.”

The company’s net loss totaled $234 million for the quarter, a nosedive from the $232 million in net income Marriott reported during the same period last year. Total revenue fell 72 percent to $1.5 billion last quarter, from $5.3 billion during a year earlier. Revenue per available room for the quarter fell 84 percent worldwide.

Despite grim earnings, Sorenson said “overall negative trends appear to have bottomed in most regions around the world.” He pointed to rising bookings from domestic travellers in China and some properties in the U.S. As of Monday’s call, Marriott said 91 percent of its hotels are open.

Marriott’s CFO Kathleen Kelly Oberg said that the company’s 50 percent fee discounts and payment deferrals in April and May have meant most of Marriott’s hotel franchisees and owners are intact.

“We think overwhelmingly that the system is surviving so far. Obviously, it will get tougher the longer it lasts. But we do think we’re at bottom,” she said.

She estimated that so long as hotels have 10 percent occupancy, properties are better off being open.

“The losses will be lower than the losses associated with being closed,” she said. “Broadly, you’re going to probably break even at 30 percent or so occupancy in the select brands and maybe 40 percent occupancy in the full service brands. But again, still do better by being open at occupancy levels which are lower.”

She said during the earnings call that discounts and payment deferrals will not continue: “We expect to get paid. We provide those programs and services, and the owners have an obligation to pay us.”

Marriott is also continuing new hotel construction and conversions of competitors’ hotels into Marriott-branded properties. Other companies, such as Hilton, are doing the same.

Marriott said it added 11,400 rooms to its global portfolio during the second quarter, up 4 percent year over year. About 2,000 of the rooms were conversions from competing hotels. Its pipeline of new units now totals 510,000 rooms and approximately 45 percent of that are under construction.

Sorenson said the pace of new deals has slowed, but there hasn’t been an uptick in deals falling apart despite the crisis.

“Like us, many owners are taking a longer term view on the market opportunity,” he said.

Write to Erin Hudson at ekh@therealdeal.com

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After testing facial recognition technology on users for years, Facebook will soon have to decide whether to opt in or out of facial recognition for its own employees in New York.

Vornado Realty Trust, which has operated face-reading systems at a handful of properties for the past five years, now plans to expand the technology across its entire portfolio, Business Insider reported. That will include Facebook’s future 730,000-square-foot space at the Farley Building, as well its current offices at 770 Broadway.

The technology, which will allow office workers to quickly enter buildings with minimal physical contact, could become more important for office buildings in a post-coronavirus world.

“We are constantly looking to adopt new, cutting-edge technologies that will make our buildings more efficient and life more convenient for our tenants,” Vornado vice chairman David Greenbaum told the publication. He first began discussing the technology with CEO Steve Roth six years ago, after noticing some tenants had to carry two entry cards for both the building and their own company’s space.

The landlord first installed the technology at five properties, one of which was later sold. In the wake of the Covid-19 crisis, the firm has installed facial recognition tech at seven more properties.

The company has not laid out a timeline for full deployment of the systems, but plans to install the technology at One and Two Penn Plaza in the near future. The system is already in operation at 1290 Sixth Avenue and 340 West 34th Street.

The use of facial recognition technology has been the subject of much controversy due to privacy concerns, although proponents insist there are ethical ways to use the technology, by giving participants the option to opt out and by storing the data securely — measures which Vornado has adopted.

At the four Vornado properties that had face-reading cameras installed before this year, about 40 percent of tenants opted in, representing about 6,000 of the 15,000 office employees at those buildings. Data is not yet available for the other seven buildings because most tenants have yet to return to the office.

“Virtually everyone who has used the technology has liked it,” Greenbaum said. “I never had a preconceived notion of what the adoption rate would be, but as our tenants see others using it, they are becoming increasingly comfortable with the technology.” [BI] — Kevin Sun

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Airbnb plans to file IPO paperwork with the Securities and Exchange Commission later this month, a move that would allow the peer-to-peer home-rental giant to potentially sell shares to the public before the end of the year.

Morgan Stanley was tapped to lead the IPO, the Wall Street Journal reported.

In May, Airbnb laid off almost 2,000 employees — some 25 percent of its staff — as it grappled with the fallout from the pandemic, which devastated the travel industry and saw Airbnb’s valuation fall to $18 billion from a high of $31 billion. Airbnb CEO Brian Chesky announced in July that the president of Airbnb’s Homes division, Greg Greeley, would step down after two years with the company.

Since the pandemic struck, Airbnb has secured private-equity financing at high interest rates, and increased its focus on longer-term rentals.

Despite economic disruption caused by the coronavirus, technology companies whose services do not necessarily depend on fixed physical locations have soared in value.

The Nasdaq Composite index which lists many tech companies has risen by nearly 14 percent this year.

Rental insurance provider Lemonade scored a valuation of $3.8 billion when it went public in early July, more than doubling its share price on the first day of trading.

Airbnb has said that despite the pandemic, guests booked more than one million nights’ worth of future stays on July 8 alone, the highest level of bookings since March 3. [WSJ] —Orion Jones

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Simon Cowell may have a hidden talent for selling homes.

The creator and host of “America’s Got Talent” sold his Beverly Hills mansion for $25 million, well above what listings platforms Redfin and Zillow had valued it. The off-market deal was also more than three times what Cowell had paid for the property more than 15 years ago.

Cowell sold the 9,600-square-foot home at 717 North Palm Drive to the Alon Abady Trust, a Beverly Hills-based holding company, according to Los Angeles County Clerk’s Office. Alon Abady is also managing partner of Waterfall Bridge Capital. In one of his deals, he paid $15.3 million for a Sawtelle office building in 2017, which bought from real estate attorney Ronald Richards.

Messages left with Abady were not returned.

Cowell, who helped spawn the talent show competition TV boom with “American Idol,” purchased the Beverly Hills home for $8 million in 2004, according to Redfin. The seller reportedly was Jennifer Lopez, according to Canyon News, a Westside Los Angeles news site. The site reported two weeks ago that Cowell was shopping the home.

The home is on nearly an acre of land and was built in 1985. It has five bedrooms and eight bathrooms, and was renovated a couple of years after Cowell bought it. Redfin’s estimate had the home valued at $19.2 million, while Zillows pegged it at $15.3 million.

Cowell also owns a $25 million home on the Pacific Coast Highway in Malibu, which he purchased in 2017. On Saturday, he had an accident while cycling around his Malibu enclave on a newly purchased electric bike, and underwent surgery after breaking his back in several places, according to CNN.

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Realogy settled part of its lawsuit over the aborted $400 million sale of its relocation business.

In a regulatory filing, the brokerage conglomerate said it entered a “confidential settlement agreement” with would-be buyer Sirva Worldwide and its parent company, Madison Dearborn Partners, regarding the sale of its relocation business, Cartus. The two sides have come to terms on the termination fee related to the purchase and sale agreement, according to sources.

A spokesperson for Realogy declined to comment beyond the regulatory filing, which doesn’t indicate whether the brokerage will pursue other legal remedies to force the sale.

Realogy and Sirva announced the deal involving Cartus in November 2019. Realogy said at the time that it planned to use proceeds to pay down more than $3 billion in corporate debt. The firm is the parent company of Sotheby’s International Realty, Coldwell Banker and the Corcoran Group.

But the agreement fell apart when the fallout from Covid became clear. Sirva and MDP backed out of the transaction in April on the grounds that the pandemic had a “devastating” impact on Cartus. It further alleged Realogy was flirting with “insolvency,” which would make it impossible to close the deal. In Realogy’s August lawsuit, filed in Delaware Chancery Court, the company accused Sirva and MDS of buyer’s remorse, and say they made “false claims in an attempt to avoid their obligations under the purchase agreement.”

But on July 17, the court dismissed the suit. Realogy later appealed, asking the state’s top court to revive part of its lawsuit to compel the sale. In an August 7 letter, the lower court judge urged higher-ups to wait.

Representatives of Sirva did not immediately comment. But in a statement after the July 17 ruling, the company said it was pleased with the outcome.

“As the court concluded, Realogy — not Sirva — caused the transaction to fail,” the company said.

Like other players in residential brokerage, Realogy began cutting expenses in March. It slashed marketing expenses and executive pay and shortened employee workweeks.

Last week, Realogy said it lost $14 million during the second quarter, compared to net income of $69 million during the same period last year. Realogy also said revenue fell 25 percent to $1.2 billion.

In 2019, Realogy reduced its net debt by $78 million. CEO Ryan Schneider said at the time that selling Cartus meant the company was “divesting a non-core, very complex business.”

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While serving as California attorney general, Kamala Harris could have gone after Steve Mnuchin for alleged mortgage fraud at his company, OneWest, but didn’t.

OneWest foreclosed on more than 36,000 California homeowners in the years following the Great Recession. Harris’ office conducted a preliminary investigation, and deputy attorneys general recommended the state take action, but no charges were brought.

On other occasions, however, Harris, who was just named by Democratic presidential nominee Joe Biden as his pick for vice president, has taken the battle to the industry.

In 2012, she negotiated the second-largest civil settlement in U.S. history for predatory practices that contributed to the foreclosure crisis, securing $25 billion for homeowners from the country’s
biggest lenders, including Bank of America, Wells Fargo, JPMorgan Chase and Citigroup. Even though the banks had agreed upon a far lower amount with the Obama administration and other states, Harris walked away from the table until they agreed to pay up billions of dollars more.

Harris is the first African-American female vice presidential candidate — in a year when longstanding racial tensions have roiled communities. The police killing of George Floyd unleashed a public outcry and nationwide protests against police brutality. The haphazard federal response to the Covid-19 crisis has also given more force to criticism of President Donald Trump, whose Wall Street donors have mostly abandoned him in favor of Biden.

James Whelan, president of the Real Estate Board of New York, called Harris’ nomination an “exciting moment” that will impact generations to come.

“In a country as diverse as ours, we must continue to make strides like these to include a broader spectrum of voices in every industry and every institution, including the highest office in the land,” he said in a statement.

A lot has happened since Harris threw her hat in the ring for the Democratic presidential nomination. She officially withdrew her candidacy on December 3, 2019, and endorsed Biden three months later.

Her presidential platform, however, included points that may not sit well with real estate interests, including her position that “housing is a human right.” In November 2019, she and Rep. Maxine Waters introduced a bill that would invest more than $100 billion in affordable housing, including $10 billion to ease or eliminate zoning requirements.

Harris said she would pass legislation to provide a tax credit for renters spending over 30 percent of their income on rent and utilities, the level at which tenants are considered to be rent-burdened. She also supported a federal minimum wage of $15, which developers have said would drive up their construction costs.

Last year, she also teamed up with Rep. Alexandria Ocasio-Cortez – the subject of intense criticism from many in the real estate community – to eliminate the “one-strike rule” in public housing, a Clinton-era policy allowing residents to be evicted for violent or drug-related crimes. The legislation aimed to prohibit public housing authorities from denying someone housing if they had a criminal record.

Harris has challenged Trump’s tax cuts, calling them a “trillion-dollar tax scam” and said that she would reverse his 2017 corporate tax cut. And she joined 37 of her Democratic colleagues last year to argue against a capital gains tax cut, calling it an “illegal action that would defy longstanding Justice Department policy.”

(Biden has also called for a reform of the tax code, specifically going after real estate’s favorite tax loophole, the 1031 “like-kind” exchange. )

She has proposed additional taxes on the financial sector, calling for a new tax on banks with more than $50 billion in assets. Many of New York’s largest construction lenders would fall into that category.

But while she may take largely populist political stances, Harris’ personal taste, at least as real estate goes, runs more to the posh. She owns a 3,500-square-foot pad in the posh Brentwood neighborhood of Los Angeles, a property that Zillow estimates is worth $4.8 million.

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Mall landlord Macerich posted a $26.7 million net income loss in the second quarter as the Santa Monica-based firm continues its struggle to collect rent across its portfolio.

The dismal quarter compared to Macerich’s profit of $13.9 million over the same period in 2019.

At its earnings call on Tuesday, the retail real estate investment trust reported revenue fell 22 percent to $178 million year over year.

All Macerich-owned malls shut down for a time during the pandemic, and some of its properties in California and New York have only been open a few days during the pandemic.

“Given that most of our centers were closed for April and May, rent collection was a challenge,” Macerich CEO Thomas O’Hern said during the call.

Macerich collected 40 percent of rent from tenants in April and May, O’Hern said, a vast improvement over the company’s initial reporting that it had collected just 26 percent of April rent. That lower figure was as of mid-May.

June rent collection rose to 58 percent, as malls began reopening throughout the country, then ticked up again to 66 percent in July.

O’Hern said that the company reached agreements with tenants on rent deferrals, for which rent will only be partly paid until 2021. He said the company could not reach a resolution about rent with “5 to 10 percent” of its tenants.

But he sounded an optimistic note. “We can clearly say that the third and fourth quarter will be much better than the second quarter,” O’Hern said.

While acknowledging the financial blow from the pandemic, the last few months haven’t prompted a shift in long-term thinking, officials said.

“Our leasing strategy hasn’t changed,” Macerich CFO Scott Kingsmore said during the call.

O’Hern led the cheer for physical retail, diminishing the impact of Amazon and other e-commerce competitors.

“E-commerce is an expensive business model due to high delivery costs, greater product returns, and high consumer-acquisition costs,” O’Hern asserted. “The crisis has shown the importance of brick and mortar locations.”

But like Macerich, most retailers across the country have struggled through the pandemic while Amazon recently reported $88.9 billion in second quarter sales, its best quarter ever.

Macerich’s indoor malls have been particularly hard hit. Those properties in California reopened then had to close back down on July 13 after a spike in Covid cases. O’Hern acknowledged that nine of Macerich’s 13 California malls were affected by the state order from Gov. Gavin Newsom.

The company has also been stung by the parade of retailers from J.C. Penney to Lord & Taylor that have filed for bankruptcy.

O’Hern said the Chapter 11 retail filings did not take him by surprise.

“Covid-19 accelerated bankruptcies that, frankly, were going to happen anyway,” the CEO said. He added that the troubled companies “were on our watch list for a number of years.”

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The state court’s rulemaking body plans to extend — but only briefly — the statewide eviction and foreclosure moratorium, which had been expected to end this week.

The Judicial Council proposed delaying until Sept. 1 any consideration to end the temporary ban, which has been a lifeline for struggling renters and homeowners, according to the Los Angeles Daily News. In April, the Judicial Council essentially imposed the ban, by ruling that California courts would not process orders related to commercial and residential evictions and foreclosures. It has been in effect ever since.

California Chief Justice Tani Cantil-Sakauye said earlier this month that it was up to the state’s legislative and executive branches to come up with a solution to mitigate what some tenant advocates and academics have said could be a wave of evictions statewide.

UCLA projected in May that more than 350,000 renters in L.A. County alone could be evicted when the ban is lifted.

Cantil-Sakauye reiterated that position in a statement on Tuesday, saying that “the judicial branch cannot usurp the responsibility of the two other branches on a long term basis to deal with the myriad of impacts of the pandemic.”

The brief extension gives state lawmakers less time than they requested to craft and vet a bill. Earlier this month, two top state Democrats asked the Council to delay any vote on the moratorium to no earlier than Sept. 5. They said that “speeding up the legislative process is nearly impossible.”

Among the proposals up for debate is Assembly member David Chiu’s bill, AB 1436. It would prohibit evictions until 90 days after the state lifts its pandemic emergency or April 1, 2021, whichever comes first. [LADN] — Dennis Lynch 

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Lori Loughlin and Mossimo Giannulli could be spending some time in jail soon, but they’ll have a new place to call home when they get out.

The couple purchased a newly constructed 11,750-square-foot home in Hidden Hills for $9.5 million, according to Variety. The home has six bedrooms and nine bathrooms.

The home is about the size of the Bel Air mansion they sold last month for $18.7 million. It sold for more than what they paid in 2014, but well below the original ask of $28.7 million in January.

The two are scheduled for sentencing on Aug. 21 for paying bribes to secure their daughter’s admission to University of Southern California.

Nearly three dozen parents paid consultant Rick Singer more than $25 million over several years to fraudulently get their kids accepted to colleges. Bay Area developer Bruce Isackson and Irvine-based developer Robert Flaxman were among those also charged.

Loughlin is expected to spend two months in prison, while Giannulli is expected to spend five months in prison.

The couple will have around 1.6 acres to themselves when they get out. Their new home has a gym, movie theater and views of the San Fernando Valley. [Variety] — Dennis Lynch 

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Brooks Brothers has found its white knight in mall giant Simon Property Group and apparel licensing firm, Authentic Brands Group.

A venture between the two companies, known as Sparc Group, has agreed to buy the retailer for $325 million, the Wall Street Journal reports. Brooks Brothers will close 75 of its 200 stores as part of the deal.

Sparc submitted a $305 million stalking horse bid last month. Brooks Brothers, which filed for Chapter 11 bankruptcy in early July, had until Aug. 5 to find a higher offer.

Brand management firm WHP Global was reportedly interested in making a bid before Sparc’s offer was finalized.

Sparc has previously acquired retailers such as Aéropostale, Forever 21 and Nautica. Separately, the partners also have a long track record of scooping up troubled chains.

Authentic Brands acquired Barneys last year, and Simon Property is said to be considering buying J.C. Penney.

[WSJ] — Erin Hudson

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Applications for home loans rose last week, though concerns about supply and the economy linger.

The volume of applications to purchase homes rose by 2 percent, seasonally adjusted, compared to the week prior.

The metric, known as the purchase index, is tracked in the Mortgage Bankers Association’s weekly survey of 75 percent of the residential mortgage market. The index saw declines in the final weeks of July, but year over year is up 22 percent, according to Joel Kan, MBA’s head of forecasting. It’s the twelfth consecutive week that the purchase index has reported annual gains.

The 30-year fixed-rate mortgage rates also hit a record low in the history of MBA’s weekly survey, which has been running since 1990 for both conforming and jumbo balances. The 30-year rate for loans under $510,400 fell to 3.06 percent from 3.14 percent the week prior, as jumbo rates sank to 3.40 percent from 3.51 percent.

The low rates drove an increase in refinancing. MBA’s refinance index surged 9 percent, adjusted, compared to the previous week, and up 47 percent year over year.

Refinancing accounted for 66 percent of MBA’s surveyed applications during the first week of August. That was the highest level of refinance activity since April, according to Kan.

MBA’s overall index of all home mortgage applications increased an adjusted 6.8 percent over the final week of July.

Still, Kan cautioned that “the gradual slowdown in the improvement in the job market and tight housing inventory remain a concern for the coming months.”

Write to Erin Hudson at ekh@therealdeal.com

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New York real estate developer Michael Shvo’s proposal to build a 200-foot-tall tower beside three Art Deco hotels was continued yet again by Miami Beach’s Historic Preservation Board.

Tuesday’s unanimous vote to continue the item to Sept. 8 came after four hours of discussion, during which three board members expressed concern about the tower’s massing, height and location on the 3-acre oceanfront South Beach site anchored by the landmark Raleigh Hotel. Because Shvo’s plans require zoning waivers, five affirmative votes from the seven-membered board is required.

The development, near 1751 Collins Avenue, includes the neighboring Richmond and South Seas hotels. Tuesday’s continuance marked the third time since June that the board delayed a vote on the project.

Shvo wants to completely restore the 80-year-old Raleigh Hotel, substantially gut and renovate the 79-year-old South Seas and Richmond hotels, and construct a brand new 18-story 84-unit residential tower. Once completed, there would be 86 hotel rooms, a 15,350-square-foot spa, and bar and restaurant venues with seating for nearly 1,000 people.

Shvo insisted the residential tower is needed to help finance the Raleigh’s renovation and to restore the facades of the South Seas and Richmond hotels to their original circa 1941 form. Shvo warned that delaying the project will make the “economics…. even more complicated.”

“We paid a record price for these properties because we believed in Miami Beach,” Shvo told the board. “…If we continue to sit around not doing anything, at some point it doesn’t make sense to do it.”

Last year, Bilgili Holdings and Deutsche Finance America, forked over $103 million to obtain The Raleigh, $52 million for the South Seas and $64.6 million for the Richmond. In September, Shvo promised to invest another $500 million redeveloping the site.

As part of his redevelopment plans, Shvo pushed for a new ordinance that would allow property owners with more than 115,000 square feet of land between 16th and 21st streets along Collins Avenue to build ground level additions up to 200 feet tall. (Shvo and his partners control 132,816 square feet of land in that area.) The Miami Beach City Commission passed the ordinance a year ago.

The concept of a new high-rise within the densely developed Ocean Drive/Collins Avenue Historic District unnerved some neighboring property owners and preservationists. But by Tuesday’s meeting, many of those critics were appeased by Shvo’s tweaks to the tower’s design and location within the assemblage. Shvo hired one of his project’s opponents: Jean-Francois Lejeune, who previously served on the city’s planning board, proposed removing 35 feet of density from the building’s top two floors, which was included in the latest batch of design changes.

But Shvo also picked up a new nemesis: Mitchell Cohen, the COO of Westdale Properties, which, along with partners, purchased the neighboring Shelborne Hotel at 1801 Collins Avenue for $120 million in February. Cohen told the historic preservation board that the size of the proposed tower would negatively impact the Shelborne and “overwhelm” the historic district’s predominately low-scale character.

Shvo’s main architect, Kobi Karp, and his attorney, Alfredo Gonzalez, pointed out that there are already more than a dozen buildings on Collins Avenue exceeding 100 feet in height, including the 385-foot tall Setai Hotel at 2001 Collins Avenue.

Board member Nancy Liebman, a former Miami Beach commissioner, said that while she was against the city code legalizing 200-foot-tall towers, she wholeheartedly supported the project.

Jack Finglass, chairman of the historic preservation board, disagreed. “It will be one more step on our march to have Miami Beach become another Sunny Isles and that I’m fairly opposed to,” Finglass said.

Finglass said that the project would have been just as financially viable if Shvo opted to build townhouses or 85-foot tall residential buildings on the site instead of a high-rise. But Shvo wouldn’t budge on making the tower shorter or substantially smaller, insisting that the residential addition makes the overall project possible.

Shvo was amenable to requests made by board members Barry Klein and Scott Needelman to create more setbacks on the top floors or to reposition the tower further west, but pleaded for a positive vote on Tuesday.

“If we don’t get approved today with something, we will be [at the permitting stage] for the next hurricane season,” Shvo said. “Every hurricane season that the [hotels] are boarded up, the buildings deteriorate.”

But Deborah Tackett, the city’s chief of historic preservation, said the developer will need to submit a full set of new plans if he aims to make more design changes, and suggested that the matter be continued until October. Gonzalez, Shvo’s attorney, begged for an earlier date.

“We’ll need all the revised plans no later than Aug.17,” Tackett cautioned. “That’s a lot of work to do. The renderings will require updating.”

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Airbnb’s revenue fell by a reported 67 percent in the second quarter, as the startup weathered the fallout from a halt in global travel.

The company’s quarterly revenue plunged to $335 million — down from more than $1 billion in the same period last year, according to Bloomberg, which cited sources familiar with the matter.

By contrast, Airbnb generated $842 million in sales in the first quarter, the publication said.

The company reportedly posted a second quarter loss before interest, taxes, depreciation and amortization of $400 million. In the first quarter, the adjusted loss was reported as $341 million — up from a loss of $292 million in the same period of the prior year.

Despite the dismal results, Airbnb is proceeding with a 2020 public offering, and plans to file paperwork with the Securities and Exchange Commission as early as this month.

Airbnb had initially planned to start the process in March, but shelved those plans because of the pandemic. Morgan Stanley has been selected to lead the offering, according to the Wall Street Journal.

The company that goes public will be fundamentally different than the one that announced its plans for an IPO last year. In May, Airbnb laid off almost 2,000 employees and saw its valuation fall to $18 billion from $31 billion. In an interview with CNBC in June, CEO Brian Chesky acknowledged that after 12 years of building the business, “we lost almost all of it in a matter of four to six weeks.”

The company has since reported an uptick in bookings, as travel restrictions loosen and quarantine-weary residents explore domestic options. According to Airbnb, guests booked more than one million nights of future stays on July 8 — the highest level since March 3.

[Bloomberg] — Sylvia Varnham O’Regan

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The shocking death of George Floyd at the hands of Minneapolis police in May prompted real estate executives around the country to speak out against racism and encourage non-violent protests.

Glenn Kelman, CEO of the national brokerage Redfin, for one, pledged in a blog post that his company would commit to “hiring and developing more people of color to positions of power.”

But following that announcement, some former Redfin employees rebuked Kelman’s comments as disingenuous based on their own experiences at the Seattle-based firm.

The Real Deal spoke at length with Kelman in July and August to discuss the criticisms against his firm and what Redfin is doing to address a lack of diversity in the real estate industry.

A number of people felt that nepotism sometimes guided hiring decisions in [Redfin’s] Boston office and other offices. Is this a problem at the company?

More than any company I’ve ever worked at, Redfin has a huge number of agents whose children and parents are also agents. We pride ourselves on being a good employer. I think in the past, there was a market manager who hired a cousin, or two cousins, which is not unusual in a place like Boston, and we did think that was not good management practice. He left the company, maybe eight years ago.

The concern, based on my interviews, [is that] if you are a person of color seeing relationships between people and those in positions of power at a company, you might read that as not necessarily a commitment to diversity within your office.

I can understand that. I think that the challenge in diversifying your workforce, generally, is that you recruit who you know. We now have focus requisitions where they’re open for three months to candidates of color — essentially before others — because our recruiters tend to [focus on] areas where we’ve recruited in the past. We draw on our social networks, and it doesn’t reinforce diversity. We should be having a conversation about how many referrals we take, as opposed to other types of candidates.

I don’t want to beat on our chest and say that we’re perfect. We’re far from that. But on the other hand, I don’t think we’ve ever been more aggressive about slating for diversity in real estate operations and bringing people into the company who did not have a real estate background at all. Some of our top performers have been people who had no history with real estate, who are people of color, and who are just tearing it up.

I spoke to a former recruiter who said that she felt like there were times where, because managers were so involved in the hiring process, they sometimes defaulted to hiring people who had a traditional real estate background, rather than someone who might come with different skill sets that would be great for a position. Do you think that happens?

Generally, I think there are situations where employees who have no management experience apply for roles, and the role isn’t an entry-level manager position.

I can’t think of really anyone at Redfin — white, Black, male, or female — who has been able to make that leap. We try to create roles so that people can get management experience by managing a small team. I know that one of our challenges, quite apart from that, is taking people from a real estate background and bringing them into headquarters to become a software developer, a marketer or a program manager.

What’s difficult about that transition?

We have lots of people who come into the business as real estate agents and support staff who want to develop into high-paying roles at headquarters. [For that, you] have to be really good at developing business skills that you don’t develop as an agent, whether it’s writing software, whether it’s learning an income statement, whether it’s understanding statistical significance and analytics. And that is something that we are invested so much in right now, because work from home is going to free us from having to tell someone: “You have to move to Seattle.”

Telling candidates of color, in particular, that you have to move to Seattle has been fraught, because we don’t have as many Black people in Seattle as we should. So we’re hopeful that there will be more cross-pollination, that there will be more opportunity, that there will be more mobility.

What do you say to employees who are critical of basing executive bonuses on increasing diversity at the company, since it would mean predominately white executives making money from bringing in lower-level employees of different races?

I feel perplexed about this criticism. With many of the others, I understand where it’s coming from. I’m focused on a result: The result that I want is a diverse workforce and a diverse management team. If we’re trying to increase agent productivity, if we’re trying to improve customer success rate, we change a thousand things with our software and with our real estate policies and with our payment programs, until we get the result that we want. To me, holding executives accountable for diversity has already had a galvanizing impact on the company. Executives aren’t going to earn more money this way. The bonus that they normally would have gotten for other priorities, they will now have to earn by diversifying the company.

If I had to choose a priority to have in corporate America that has eluded most businesses, it would be diversifying — especially in the senior ranks. It would be one thing if you could hit the target by hiring a thousand entry-level people of color, but the only way to hit the target is by … diversifying management ranks. We have to drive revenue growth, we have to drive profit. It’s the only way to sustain the business. But we also are not going to build a sustainable business or one that we’re proud of if we only recruit white real estate agents or white software engineers.

Last month, you mentioned that Redfin was considering dropping customer surveys as part of promotion decisions. Have you made a final decision on that?

We did decide to discontinue using surveys. It is part of a larger recognition that systems designed to take customer input can replicate customer bias. When we announced that decision within the company, I viewed it as a significant event. But I was still surprised when one of our Black real estate agents called me and said: “This is the happiest day. I’ve worked here for 10 years. Every once in a while I got a survey, and we all knew why people gave me bad marks, and now we’re finally doing something about it …”

All I could do was apologize for taking so long to make that change. We had actually clung to surveys, in some ways, to avoid manager discretion because that subjectivity is fraught with its own possibilities of bias. I waited too long to make that change. I was the proponent for keeping surveys for a long time. That’s a perfect example of how Black Lives Matter made me see that in a totally different way.

Are you eliminating all customer surveys then?

We’re not using them for any promotion or disciplinary decisions. We still need to systematically hear the voice of the customer. But it is our right to decide when to disregard that. A customer gets out of the car, sees that his agent is Black and immediately develops a strong aversion to that agent, we can just set that aside. We have to have the latitude to do that.

What do you think of corporate America’s response so far to the death of George Floyd and the Black Lives Matter movement?

Time will tell if it was purely symbolic, but I still think the degree to which corporate America swung behind Black Lives Matter was startling. It was a movement that most people felt hesitant about supporting. There was always this argument that all lives matter, and of course they do. But I think corporate America felt compelled to recognize the special threats to African Americans, so every industry has been going through a moment of introspection.

Have you seen a difference between the responses from private companies versus publicly traded ones?

To some degree. But I honestly think much of the response is driven by the executive team having some moment of recognition and by the employees in the organization and the degree of public attention the company gets — regardless of whether it is publicly traded. So, Airbnb would be an example of a company that isn’t publicly traded, but is very much in the spotlight. One change that we’ve noticed is the competition for Afridan-American board members. We’ve been running a search for African-American board members, and almost everyone I’m talking to is being courted by many many companies. I think that will lead to a lasting change.

What changes should real estate companies be making, specifically?

I would start with enforcement of the Fair Housing Act. [Real estate agents] are in the car alone with customers at their most unguarded moments, when they are talking about their aspirations for their families. It affects the shape of our society for a generation and, in that moment, I don’t think there’s much anxiety about fair housing enforcement.

It’s not just a government obligation. Every broker should be talking about this. We use a portion of every all-hands kickoff each year to talk about fair housing. It’s only a matter of time before a Redfin agent serves a Black customer differently than a white customer, and it is to our shame. That legacy is hard to live with. When you run a company with hundreds of thousands of people, each who has their own experiences and biases, conscious or unconscious, you just have a responsibility to work against that and try to create a better society.

What did you think of President Trump’s decision to repeal the Affirmatively Fair Housing rule?

I try not to criticize political figures, but my hope is that NIMBYism, in general, is down for the count. I know so many people who are well-meaning progressives and conservatives — who favor integration in many ways — but then go absolutely ape when a condominium is zoned for their neighborhood.

Are there any cities or towns that you think would serve as a model for others in the U.S.?

I think that parts of Maryland around Baltimore are really good examples of how zoning and government support for affordable housing can really make a difference. Those are some of the most integrated neighborhoods in America, and it’s an example where the government didn’t just throw money at the problem; it really engaged.

Write to Kathryn Brenzel at kathryn@therealdeal.com

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Turkish real estate mogul Serdar Bilgili tapped his Rolodex two years ago to build a partnership that’s been buying trophy U.S. properties with abandon.

But now that Bilgili claims his partner Michael Shvo cut him out of the team’s most recent deals, and has turned to the courts to demand access to his partner’s books. 

Shvo’s ability to charge his partners for expenses was limited because “of the fact that he had previously been indicted for and pleaded guilty to tax fraud, and that investors in the projects needed comfort that he was subject to review and oversight by the other partners,” according Bilgili’s lawsuit filed Wednesday in Manhattan Supreme Court. It is the second lawsuit Bilgili has filed against Shvo in less than a month.

Bilgili claims Shvo overcharged the partnership $400,000 on $6.4 million of expenses — as well as $600,000 in unsubstantiated travel expenses. The suit also alleges Shvo has refused to go to arbitration, as specified in their joint-venture agreements.

Most of the money Shvo allegedly overcharged, according to the filing, “appears to have been spent on private jet travel to project and nonproject locations, and BLG is unable to identify any reasonable basis for the size and nature of these charges.”

Bilgili is asking the court to order Shvo to hand over his books and records so the Turkish businessman can audit his expenses, and to order the two sides to work things out in arbitration.

An attorney for Shvo and Deutsche Finance, Proskauer’s Bradley Ruskin, called Bilgili’s petition a shameless attempt to extract money from the partners, and suggested it was in part motivated by financial stress he is experiencing from his properties in Europe due to the coronavirus.

“It had one purpose and one purpose only – to try to create some leverage in Mr. Bilgili’s California claim that he is somehow entitled to be a partner of Mr Shvo’s and Deutsche Finance,” Ruskin wrote in an email to The Real Deal. “It is ironic that Mr. Bilgili is apparently desperate to be partners with Mr. Shvo and Deutsche Finance yet attacks them both, which speaks volumes about Mr. Bilgili’s credibility and the credibility of his baseless claims.”

Bilgili’s lawsuit appears to stem from the breakup of the partnership he and Shvo formed in 2018 to invest German pension fund and insurance money in U.S. properties.

Bilgili claimed he was instrumental in bringing to the table Germany’s largest pension fund — Bayerische Versorgungskammer (BVK) — and its biggest public insurer, Versicherungskammer Bayern Group (VKB), which were reluctant to do business with Shvo because he had just pleaded guilty to tax evasion.

With the German institutions as anchor investors, Bilgili, Shvo and Deutsche Finance formed the BSD Partnership, which over the next two years bought properties worth more than $2 billion. In Manhattan, those included the former Gucci headquarters at 685 Fifth Avenue — which they’re converting into condominiums and a Mandarin Oriental hotel — the Coca Cola Building at 711 Fifth Avenue and 530 Broadway in Soho.

The partnership also began developing property in Beverly Hills and several hotels in Miami.

As the face of the partnership, Shvo grabbed the industry’s attention as he went around making one big-ticket deal after another at a time when many investors were sitting on the sidelines.

But things went sour this year, when Bilgili claims Shvo muscled him out of deals to buy the Transamerica Pyramid in San Francisco and Chicago’s “Big Red” office tower. Bilgili filed a lawsuit in California last month seeking damages. The latest legal filing comes on the day that Shvo and Deutsche Finance closed on the Chicago tower.

As part of Bilgili’s latest suit, he claims Shvo charged the partnership a $30,000 monthly rental payment for his personal penthouse at the Setai in Miami.

Over the past year and a half, Bilgili claimed he sent at least 26 emails to Shvo requesting details on the reimbursements, none of which were answered.

Contact Rich Bockmann at rb@therealdeal.com or 908-415-5229

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