Act of God? Mall operator Unibail-Rodamco-Westfield said its lease agreements with Express cover such events, and still require the retailer to pay the rent.

Now Unibail is suing Express, saying the retailer owes $30 million in skipped rent across 27 locations throughout the U.S. Fourteen of those stores are in malls in California, according to the suit, filed in Los Angeles County Superior Court.

Many struggling retailers have argued the pandemic allows for missed rent under force majeure clauses included in many leases.

But Unibail says its leases with Express specify that even in “acts of God” cases, “governmental laws,” or other similar instances beyond reasonable control, rent is still due, according to the lawsuit.

Express did not pay rent at the 27 stores in April, May and June, according to the lawsuit. In some locations, it hasn’t made payments for September or October, either. Unibail sent the retailer notice of defaults in April.

Unibail declined to comment on ongoing litigation. Express did not respond to a request for comment.

In addition to California, the stores are located in New York, New Jersey, Florida, Illinois, Maryland, Connecticut and Washington state.

In some areas of California — where Unibail is the largest retail center operator — indoor malls were only recently cleared for reopening. The company has been aggressively pushing for its properties to reopen, and filed a lawsuit in late September against Los Angeles County, which had kept indoor malls closed because of coronavirus restrictions. Days later, the county said it would reopen malls.

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Few issues in California this year have generated as much debate as Proposition 15, the “split-roll” ballot measure that could raise property taxes on commercial and industrial properties for the first time in decades.

Groups representing California landlords and developers have spent $20 million this year opposing Prop 15. Supporters of the bill raised about $30 million during the same period of time.

Prop 15 would update Prop 13, a ballot measure passed in 1978 that restricts municipalities from reassessing property values unless their ownership changes. Prop 15 would alter the assessment schedule for commercial and industrial properties, mandating that they be reassessed each year to reflect their market value.

But residential properties would still be reassessed only when they come under new ownership.

The measure would generate up to $12.5 billion a year in new tax revenue, according to one nonpartisan analysis.

Some opponents claim Prop 15 will worsen the massive housing shortage in California by incentivizing municipalities to rezone residential districts to industrial to increase tax revenue. However, according to a recent analysis published by the nonpartisan Washington-based Urban Institute, that scenario isn’t very likely.

That’s because the number of parcels that could plausibly be rezoned to increase tax revenue is relatively low, according to the report. Parcels at risk of being rezoned to commercial and industrial include vacant lots and parcels with older housing that are near industrial or commercial areas. In Los Angeles, there are only 3,679 such parcels, according to the report.

Proposition 15 could actually lead to more housing, the analysis argued.

The measure will encourage some owners of decrepit commercial or industrial properties to seek to rezone them to residential to avoid the greater tax liability, according to the report. The Urban Institute researchers identified more than 8,000 so-called “opportunity parcels” in Los Angeles where commercial or industrial parcel owners could save on taxes by rezoning to residential.

But even though Prop 15 might stimulate some growth in the housing supply, the Urban Institute researchers note that “far more dramatic actions” are needed to address California’s housing shortage.

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Dealpath, the data management startup backed by the likes of Blackstone and JLL, received a new capital injection from Nasdaq’s investment arm.

Nasdaq Ventures provided Dealpath with the new funding to help the proptech company to expand its cloud-based platform that manages the workflow on investment transactions, the companies told The Real Deal.

Nasdaq declined to divulge the size of the investment.

The latest cash injection follows investments from real estate players like Blackstone, JLL Spark, 8VC, GreenSoil Investments, Goldcrest Capital, LeFrak, Milstein and Bechtel.

Gary Offner, the head of Nasdaq Ventures, said Dealpath is the first real estate company out of the 14 firms the venture capital arm has invested in.

“Our focus is on investments in market infrastructure,” he said. “Commercial real estate is a huge asset class, but it’s a market that’s very different from our core markets.”

Offner added that Dealpath solves some of the main problems Nasdaq Ventures is looking to solve, like managing workflow and reducing friction between different steps. The company’s software allows investors to move data from different sources like CoStar and combine them with, for example, financial models created in Excel or Argus.

Dealpath clients include Blackstone, AEW, Rockpoint Group, Oxford Properties, Bridge Investment Group, Manulife, L+M Development and Hutton. The company recently announced a partnership that allows its software to be used by buyers with JLL, which invests in Dealpath through its investment arm, JLL Spark.

Dealpath was founded in 2014 by Mike Sroka, Kenter Wu and Andy Lee.

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Beike Zhaofang, the Beijing-based online real estate platform, hit the New York Stock Exchange on Aug. 13 with a gargantuan “pop” as they say on Wall Street — despite all tensions between the United States and China.

Through its parent company KE Holdings, the Chinese housing intermediary backed by SoftBank sold 106 million shares at $20 each during its initial public offering, while first-day trading opened 75 percent above the offer price and would end the day up 87 percent.

This made for an even bigger splash than Twitter saw on its first day of trading in 2013, and marked the largest first-day pop for a billion-dollar IPO in the U.S. this century, according to investment adviser Renaissance Capital.

After two months of trading, Beike’s stock price has continued to soar, and the firm’s market capitalization stands at $75 billion as of mid-October, making it the world’s most valuable real estate tech company. By comparison, CoStar’s market cap is about $35 billion.

Despite the Trump administration’s trade war and attempted crackdown on WeChat and TikTok, as well as increased scrutiny of some U.S.-listed Chinese companies, Beike and many others have continued to raise capital in the states without incident, netting Wall Street banks hefty fees in the process.

Beike’s impressive stock performance is a clear indication that investors are buying into its vision — one driven by the growth potential of China’s housing market coupled with ambitions to reinvent the country’s still underdeveloped and somewhat chaotic brokerage landscape.

Representatives for Beike and KE Holdings did not respond to requests for comment.

Beike’s “successful debut reaffirms the advantages of listing in the US, the world’s deepest capital markets,” Renaissance Capital wrote about the firm’s IPO, “particularly for large and fast-growing Chinese issuers.”

Open sesame

With 2.1 trillion renminbi (more than $300 billion) worth of deals completed in 2019, Beike is now China’s second-largest internet online marketplace — just behind industry leader Alibaba Group.

And the e-commerce giant founded by Jack Ma is quickly emerging as one of Beike’s most serious competitors.

Last month, Alibaba launched Tmall Haofang, which means “good home” in Chinese, a real estate channel within its popular cross-border B2C platform Tmall. Alibaba partnered with the publicly traded Chinese real estate agency and big data provider E-House.

In August, Alibaba had invested $107 million in E-House, upping its stake in the 20-year old company from 2 to 8 percent.

“In China, the infrastructure for the housing transactions and services market had been significantly underdeveloped.”

This move was seen as opening up another phase in Alibaba’s long-running competition with WeChat owner Tencent, Beike’s largest outside shareholder with a 12 percent stake.

At a time when the pandemic and geopolitical tensions have made cross-border business all the more complicated, observers note that China’s domestic real estate market presents a safer growth opportunity for the country’s tech giants.

“Alibaba and Tencent are huge in scale, and they must continue to get involved in new businesses to fill the gap and maintain high-speed growth,” Meng Shen, a director at boutique Beijing investment bank Chanson & Co., told the trade publication Mingtiandi.

The idea of tech giants like Google and Amazon going head-to-head in a market dominated by firms like Zillow, Douglas Elliman, Redfin and Realogy would certainly seem far-fetched in the U.S.

But the brokerage landscape in China is very different.

“In China, the infrastructure for the housing transactions and services market had been significantly underdeveloped,” Beike notes in its IPO prospectus. “For example, the lack of an industry-wide listing inventory similar to the Multiple Listing Service in the United States makes it challenging for housing customers and agents to easily access reliable and authentic property listings.”

The absence of a framework for exclusive listings in China has led to a fragmented market with low productivity and high agent turnover, while fake or duplicate listings are still widespread, according to the online brokerage platform.

But the opportunity in the market is also huge, with the country’s urban population expected to grow by another 150 million people in the next decade, according to a report by China Insights Industry Consultancy (CIC) that Beike cites extensively.

For now, Beike still has the upper hand over competitors like Tmall on several fronts, said Robert Cowell, an analyst with Shanghai-based equity research firm 86Research.

“Beike is the market leader in terms of customer experience, data utilization, and software for brokerage operations,” Cowell said.

Lianjia lineage

Beike Zhaofang — which means “seashell house-hunting” — started as Lianjia, a more traditional residential brokerage founded in Beijing in 2001 with just 37 employees. Lianja is now one of several brokerages on Beike’s platform that handle both sales and rentals.

As of June, Lianjia had about 7,700 brokerage offices and more than 134,000 agents across 29 cities in China. Beike as a whole, meanwhile, has 260 real estate brands, more than 42,000 stores, and over 456,000 agents in 103 cities, according to its prospectus.

The company’s founder, Zuo Hui, had arrived in China’s capital from the northwestern province of Shaanxi to study computer science at a local university, and spent a decade struggling to make his way in insurance marketing before getting into the real estate business.

Zuo also brought with him first-hand experiences with some of the problems that some renters and first-time buyers face in China’s housing market.

“I graduated university in 1992 and bought my first apartment in 2004,” he said at a panel in 2017. “In the 12 years in between, I rented ten different apartments, and I know what it’s like to get scammed big-time.”

By 2009, Lianjia had become the largest real estate brokerage in Beijing, according to the CIC report.

Zuo’s next move was to take his business online.

In 2008, the company created its Housing Dictionary, a database of verified listings that grew to 226 million properties in more than 300 cities by 2020. In 2010, Zuo brought in Peng Yongdong, a senior consultant of strategy and evolution at IBM, to serve as the brokerage’s vice general manager.

Peng is now Beike’s CEO, while Zuo serves as its chairman.

A new “playing field”

Starting in 2014, Lianjia began expanding beyond its home base in Beijing and buying up competitors across the country.

The brokerage also began attracting investor interest around this time. Tencent made its first investment in the company in 2016, and international venture capital players like Softbank’s Vision Fund, Sequoia Capital and Gaw Capital participated in subsequent funding rounds.

By 2018, Lianjia had established a presence in 29 cities across China and the company made its next big move by expanding its services into an open platform, Beike, and reorganizing its corporate structure under a new holding company, KE.

“As the brokerage industry is still developing in China, consumers look to brokerage brands as a powerful signal of service quality,” 86Research’s Cowell said. “As such, Beike’s main [first-party] brand, Lianjia, has been able to consolidate over 15 percent share of China’s existing home market.”

The expanded platform, according to Zuo, would enable brokers to collaborate on transactions with the goal of improving service quality, similar to an MLS in the states. In particular, Beike’s Agent Cooperation Network would serve to “foster a culture of transparency, collaboration and shared success” in the industry, he noted.

But some competitors were skeptical.

Since Lianjia would be going head to head with other brokerages on a platform it controlled, critics argued that the company was trying to be “both player and referee.” A group of major brokerages formed an “anti-Beike alliance,” vowing to resist its unconventional and anti-competitive tactics.

Zuo rejected these claims, and responded by expanding on the analogy.

“We’re building a playing field, in the hope that more and more people will come play ball, and the rules get better and better,” he told local media in 2018.

A year later, Century 21’s Chinese franchise defected from the anti-Beike alliance, delivering the platform a major win. The move signaled to brokers across the country that the material benefits of joining Beike could outweigh concerns about unfair competition.

“This influx of new connected brokerages is helping Beike to consolidate [market] share in large cities and expand into lower tier cities,” Cowell noted.

Cross-border contentions

At the same time, other challenges were mounting on a global scale as Trump’s trade war with China rattled financial markets.

Just a week before Beike’s blockbuster IPO, the Trump administration put forward a plan that would require all U.S.-listed Chinese companies to comply with financial audits by U.S. regulators, or be forced to delist.

Similar legislation had passed both houses of congress earlier this year with bipartisan support, and California Democratic representative Brad Sherman emphasized to the Wall Street Journal that “This is not an anti-China provision. This is an investor-protection provision.”

In the light of recent debacles like that of the former Nasdaq-listed Luckin Coffee — a one-time Starbucks competitor that was revealed this spring to have fabricated more than $300 million in sales — concerns over Chinese firms’ accounting practices do have some basis.

And as the White House has put pressure on apps like TikTok and WeChat over national security concerns, these moves have become another point of contention in deteriorating relations between the two countries.

Some Chinese companies have already started to back off.

This summer, 58.com, “the Craigslist of China” and the owner of Beike competitor Anjuke, finalized an $8.7 billion deal to go private and delist from the NYSE. Alibaba established a secondary listing in Hong Kong last fall in part as insurance against U.S. delisting measures, and its fintech subsidiary, Ant Financial, is foregoing the U.S. altogether with a dual listing in Shanghai and Hong Kong.

Geopolitical rhetoric aside, however, nearly as many Chinese firms — more than 100 — have listed in the U.S. during Trump’s four years in office as Barack Obama’s eight years in Washington, according to data from research firm Dealogic. Seven Chinese firms have launched IPOs in the U.S. in the third quarter alone, including two electric vehicle makers and two education companies, according to Renaissance Capital.

Unlike companies with transnational business interests like TikTok and Tencent, the fact that Beike’s business is contained within China’s borders may have helped shield it from global uncertainty.

But the firm acknowledges that could change.

“If we plan to expand our business internationally in the future,” Beike’s prospectus notes, “any unfavorable government policies on international trade, such as capital controls or tariffs, may affect the demand for our products and services, impact our competitive position, or prevent us from being able to conduct business in certain countries.”

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The pandemic continued to batter the Los Angeles office market in the third quarter.

Overall vacancy climbed to 15 percent from 13.7 percent from the second quarter and 12.6 year-over-year, according to a CBRE report cited by the Los Angeles Times.

Across the city, office leasing was as bad as it’s been since 2009, the worst year of the Great Recession, according to the report.

Overall occupancy fell by a staggering 2.7 million square feet, compounding a drop of 1.9 million square feet in the second quarter.

The plummeting demand still has not prompted landlords to lower rents just yet. Asking rents for Class A space hit $3.97 per square foot, up from $3.88 per square foot in the second quarter, and $3.71 per square foot year-over-year, the report noted.

An increasing number of tenants continued to offer up their space for sublease. Around 2 million square feet of space has come up for sublease since the beginning of the pandemic, about twice the amount since July.

A lot of that space is available for short-term lease periods, CBRE’s Todd Doney said, according to the Times.

There was one bright spot. The third quarter saw the biggest lease of the year when Netflix inked a deal for 171,000 square feet at Burbank Empire Center for its first dedicated animation studio. [LAT] — Dennis Lynch

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Los Angeles City Council member Kevin de León, newly sworn-in to fill the seat vacated by disgraced former Councilman Jose Huizar, vowed to speed up the development of affordable housing and work to bring 200 homeless shelter beds to downtown.

De León said he would be a “voice for the voiceless” during pre-recorded remarks as the new Council member for the 14th District, according to the Los Angeles Times.

He won the seat in March and was expected to take office in December. That was moved up to this week after federal law enforcement arrested Huizar in June on a litany of corruption charges tied to development projects.

As part of his video message, the new Council member said he would bring hundreds of transitional housing units to different parts of his district, which includes Eagle Rock, El Sereno and Boyle Heights.

He would also work to remove “outdated rules” governing affordable housing projects,” the Times reported. Already, De Leon said he had begun working with the Department of City Planning “to trim away more than 800 pages of convoluted and unnecessary code written decades ago.”

“When it comes to homelessness and housing affordability, what we are seeing today in Los Angeles is a modern-day human catastrophe, a dystopian nightmare unlike anything we’ve ever seen before,” he said.

De León was a state Senator from 2010 to 2018, Starting in 2014, he served as president pro tempore, the most powerful position in the state Senate. He was an Assembly member from 2006 to 2010.

Following the Huizar scandal, the City Council is trying to rework its real estate development approvals process to close loopholes in the development process that governs the way projects are approved. Huizar had been head of the power Planning and Land Use Committee when he allegedly accepted $1.5 million in cash and gifts from developers. https://therealdeal.com/la/2020/07/31/huizar-indicted-on-34-counts-related-to-bribery-and-corruption-scheme/

Earlier this month, developer Shenzhen Hazens admitted to bribing Huizar for his support, and agreed to pay a $1 million fine. Huizar has maintained his innocence. [LAT] — Dennis Lynch 

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Amazon’s industrial footprint in New York City is officially Bigfoot-sized.

The e-commerce giant secured a 975,000-square-foot warehouse at the Matrix Global Logistics Park in Staten Island, Crain’s reported. It was the largest industrial deal of the past quarter, according to a CBRE report that did not identify the tenant.

Amazon has already leased two other warehouses on the site near Goethals Bridge, bringing its capacity there to nearly 2.3 million square feet. Ikea is also a tenant at the complex, having leased a 975,000-square-foot warehouse.

Since losing its proposed HQ2 in Long Island City in 2019, Amazon has been on a tear through New York City’s property market. On the office side, the company leased 335,000 square feet of office space from SL Green near Hudson Yards and bought the Lord & Taylor building on Fifth Avenue from WeWork for $1 billion.

It’s also picked up a significant amount of industrial space, leasing a Bronx warehouse spanning more than 200,000 square feet last year. It also reportedly signed a lease on RXR Realty’s massive vertical warehouse in Maspeth.

Leasing activity in the industrial sector has seen an uptick in demand as home-bound shoppers make more of their purchases online, according to CBRE. E-commerce companies have dominated new leases signed in that sector.

Industrial tenants inked deals for 1.6 million square feet of space in the five boroughs during the third quarter of the year, a nearly 71 percent increase over the same time last year, according to CBRE. [Crain’s] — Orion Jones

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Developer James Loewenberg, whose vision for architecture and livable neighborhoods helped shape the modern Chicago skyline, died at 86. The cause was pancreatic cancer, according to Crain’s.

Loewenberg’s recent achievements include developing the Aqua and Vista skyscrapers downtown, which he did as co-CEO of Magellan Development Group, Crain’s reported.

Loewenberg created Lakeshore East development, an 83-acre site stretching from Michigan Avenue to Lakeshore Drive with high-rise residential towers flanked by shops, parks and transportation. It “forever changed Chicago,” said Lynn Osmond, president of the Chicago Architecture Center, according to the Chicago Tribune.

Last year, Loewenberg resigned as co-CEO of Magellan, and with partner Joel Carlins, sold his stake in the company to BLG Capital Advisors of Chicago and Winter Properties of New York, according to Crain’s.

Under the leadership of Carlin’s son David, Magellan recently bought out the 90 percent ownership share of Vista Tower, held by Chinese developer Dalian Wanda Group, for $270 million. Magellan is now the 100 percent owner.

Construction of that 101-story building at 375 E. Wacker Drive, with a 191-key hotel and roughly 400 condos, is nearly complete. With Wanda’s exit, it’s unclear what will happen to the hotel portion; the hotel sector has been particularly hard hit by the pandemic.

Magellan continues to hold a partial ownership stake in Aqua Tower. The 86-story building has 474 apartments and 224 condos above a 334-key Radisson Blu Aqua Hotel.

Born in 1934, Loewenberg received his architecture degree from the Massachusetts Institute of Technology in 1957 and later joined his family’s architectural firm in Chicago. Crain’s listed among hit development projects Gallery on Wells, Wolf Point West apartments, Grand Plaza and One Superior Place in River North, and two buildings — Cirrus and Cascade — still under construction in Lakeshore East. [Crain’s, Tribune] — Orion Jones

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In the past month, the Internal Revenue Service has announced two new audit campaigns targeting overseas investors who own or hold interests in U.S. property.

The campaigns focus on foreign investors selling their interests in U.S. real estate and those who receive rental income from their American properties.

The IRS generally expects to collect 15 percent of the amount a foreign seller realizes off a transaction, though exceptions can be made if the property is sold at a loss or the price is under $300,000, among other factors. The taxes the IRS collects from foreign investors earning rental income ranges depending on how the property is owned, but can go up to 30 percent annually.

Audit campaigns began in 2017 as a way for the IRS to target issues it determines to be at a high-risk of noncompliance. The campaign issues also represent areas where the federal agency believes it has a good chance of recovering unpaid taxes.

When the IRS debuted the strategy, it announced 13 campaigns, a number that has since ballooned to nearly 60. Though the number and focus of the audit campaigns fluctuate over time, tax professionals take heed because once a target is announced, businesses and clients operating within that area have a higher likelihood of having the IRS dig through their returns.

The IRS declined to comment on the new campaigns or its expectations for funds recovered from foreign investors.

William Kambas, a tax partner at Withers Worldwide, said the agency’s new property investor-focused campaigns are a factor of the pandemic.

“The restraints and constraints on the government now financially has put a new focus on collecting whatever is due,” Kambas said. “Now is the time that the IRS has decided to pursue more rigorous audits.”

The IRS’ aggressive strategy will likely hit the mid-market institutional, private equity investors the hardest, said Kenneth Dettman, a managing director at tax firm Alvarez & Marsal.

Another group that may particularly feel the crunch is foreign investors who own second homes in markets where property values have soared during the pandemic, such as South Florida.

In recent months, Dettman said he’s seen an influx of overseas clients looking to sell their U.S. homes in such markets — and many aren’t aware the IRS levies a tax on the sale, which is indicative of a larger problem.

“From the perspective of foreign persons investing in the U.S., there is a general sentiment that they’re foreign and they’re not subject to the U.S. tax net,” he said. “Their fear of enforcement activity is not very high and therefore they’re very quick to turn a blind eye to it.”

He said the new audit campaigns will likely work hand-in-hand with the IRS investigating the history of a property being sold by a foreign investor to ascertain whether they collected rent.

Most overseas landlords and their stateside tenants deal in all-cash transactions without any rental platform as a middleman, Dettman said, so the IRS has no visibility into the rental income generated off a foreign-owned U.S. property unless it undertakes a major audit.

Vasiliki Yiannoulis-Riva, a real estate partner at Withers, agreed. “There’s a lot of money to be made,” she said. “They’re not actually collecting what they could be collecting.”

According to CBRE, investment in U.S. commercial real estate accounted for nearly half of the global volume in 2019, despite more than half of foreign investors pulling back on pouring money into the U.S.

Not everyone’s concerned, however. Michael Kosnitzky, a partner and co-leader of Pillsbury Winthrop Shaw Pittman’s private wealth group, said the IRS campaigns confounded him.

“I’m just surprised that there’s such a gross lack of compliance,” he said. Kosnitzky’s clientele includes institutional investors and ultra-wealthy individuals, who he said come with a phalanx of lawyers and accountants hired to ensure compliance.

There are also doubts about the agency’s ability to execute. In recent years, the number of audits conducted by the agency have fallen. Of the audits that were conducted by the large business division, only about half closed without the agency collecting any additional revenue, according to a report released earlier this year.

If the IRS can follow through, however, Dettman believes the audits have the potential to change attitudes among mid-level property investors.

“The results of bad audits find their way into social circles in clusters in foreign countries,” he said. “[If there are] audits that come out with very harsh results, I do think it could instill a bit more fear.”

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Not everyone is reaping the benefits of a low-mortgage rate environment.

As mortgage lenders tighten their belts, available housing credit has hit the lowest level since February 2014, leaving hopeful homebuyers with poor credit scores struggling to qualify for loans, Bloomberg News reports.

The Mortgage Bankers Association’s index tracking available housing credit monthly has fallen eight of the nine months this year. The index is down 35 percent year-over-year.

One of the starkest examples is the tightening measures taken by Ginnie Mae, which guarantees loans predominantly for lower-income borrowers and first-time homebuyers.

In January 2019, 44 percent of Ginnie Mae’s purchase loans were issued to borrowers with FICO scores below 700 and debt-to-income ratios over 40 percent. This January, that number fell to 38 percent and by August it had slipped to 36 percent.

For Ginnie Mae’s refinance loans for borrowers of that same profile, the agency cut the number of loans from 38.5 percent in January 2019 to 12.8 percent this January. In August, those borrowers represented just 5 percent of Ginnie Mae’s refinance loans.

Ginnie Mae’s tightening up has meant its issuance of mortgage bonds has dropped by $3 billion, year-to-date, compared to the previous five years, according to Bloomberg News.

Meanwhile, the mortgage market overall is humming for borrowers with good credit, who’ve rushed to take advantage of low rates to buy or refinance. The supply of mortgage bonds is set to reach its highest level since 2003 this year with $2.8 trillion in gross issuance.

[Bloomberg] — Erin Hudson

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UPDATED, Oct. 16, 12:50 p.m.: The owner of a European hotel chain bought a waterfront Boca Raton home for $5.5 million from an Iranian princess who is the granddaughter of the former Shah of Iran.

Mikhail Avrutin bought the house at 444 East Alexander Palm Road from Mehrdad Fallah-Moghaddam and Mahnaz Zahedi, according to records.

Zahedi is the daughter of Shahnaz Pahlavi, a princess of Iran and the first child of the former Shah of Iran, Mohammad Reza Pahlavi and Princess Fawzio Faud of Egypt, according to published reports.

The buyer, Avrutin, is the owner and developer of Baltic Hotel Group, a hotel chain that operates two hotels in Estonia. Avrutin is also listed on his Linkedin as the president and founder of AFP of North America.

Records show Zahedi and her husband, Fallah-Moghaddam, had purchased the home in 2001 for $1.9 million.

Jackie Feldman  and Geri Penniman of Premier Estate Properties brokered the deal. The home was first listed in 2018 at $6.3 million and after a few price changes, was most recently listed for $6 million in September of this year, according to Realtor.com.

The 5,248-square-foot house was built in 1980. It has five bedrooms, four-and-a-half bathrooms and is on the Intracoastal Waterway.

This summer, the 12,000-square-foot New York mansion of the princess’ aunt, Princess Ashraf Pahlavi, sold, after a legal battle.

Among other recent sales in Boca Raton, the COO of a South Florida-based real estate investment firm sold his house for $5 million, a mansion in the Royal Yacht & Country Club sold for $9.4 million and a plastic surgeon paid $5.5 million for a home.

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Blackstone Group sold a portfolio of 93 life-science buildings to a separate fund the asset manager controls for $14.6 billion, in a transaction that represents a $6.5 billion gain in value from when it acquired the properties in 2016.

The New York-based commercial real estate behemoth said that rather than cash out of the BioMed Realty Trust holdings, which is the second-largest owner of life science buildings in the U.S., investors opted to stay in, the Wall Street Journal reported.

Blackstone’s profit in the sale is the third-largest it has achieved in any fund it manages. Prior to the transaction, which is the first of its kind Blackstone has carried out, the firm considered taking BioMed public or selling the company.

BioMed’s properties are concentrated in the San Francisco bay area, San Diego, Boston, Seattle and New York, as well as Cambridge in the United Kingdom, according to its website. Investment bank Morgan Stanley will also seek bids to determine if a higher offer exists.

The demand for life-science buildings has intensified, especially as new treatments are developed by startups instead of at large pharmaceutical companies. The existing demand for space intensified with the onset of Covid-19, as researchers work to develop a vaccine.

Kathleen McCarthy, Blackstone’s global co-head of real estate, said that the BioMed life sciences portfolio has not suffered the drops in rent collections that have plagued other sectors. The portfolio’s occupancy stands at 97 percent, McCarthy told the Journal, and about half of its tenants are working on Covid-19 testing or vaccines.

Although the sector does face risks of high maintenance costs for labs, and there can be a significant lag time between research and selling treatments to the public, other investors are bullish on life sciences, too.

In San Francisco, Ventas, a publicly-traded healthcare REIT based in Chicago, acquired a life-sciences campus from Bain Capital Real Estate for $1.02 billion. Bain acquired the Genesis South San Francisco campus in 2015.

“Strong and growing capital flows into the life science sector are accelerating innovation and discovery,” said Ventas CEO Debra Cafaro.

[WSJ] — Georgia Kromrei

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Rents are free-falling in the country’s most expensive market.

The median monthly rate for a studio in San Francisco in September was $2,285 per month, Bloomberg reported, citing data from Realtor.com. That’s 31 percent lower than it was a year prior. In comparison, rents fell about 0.5 percent nationally.

Median rents for one-bedroom units were down about a quarter year-over-year, while two-bedrooms dropped in price by 21 percent, according to Realtor.com.

Santa Clara and San Mateo, both in the Bay Area, also saw big drops in their median studio rents — 19 and 18 percent, respectively.

San Francisco’s rent drops are among the largest in the country since the coronavirus pandemic began. Its vacancy rate has risen, too; it was at 6.2 percent as of May.

Even though that trend hasn’t borne out nationally, it has in the country’s other ultra-expensive rental market: In Manhattan, studio rents have fallen by 15 percent to $2,495 per month, and the vacancy rate recently hit a historic high of 5 percent.

The precipitous drop in rents in some markets can be directly attributed to the pandemic, which has led more employees to work remotely. “Renters are likely heading to more affordable areas where they can get more space at a cheaper price,” said Realtor.com chief economist Danielle Hale.

Some companies have taken notice. San Francisco-based Stripe is among the firms that want to cut salaries of employees who move out of cities like San Francisco, Seattle and New York, and offer a one-time bonus instead. Facebook and Twitter are reportedly considering similar moves.
[Bloomberg News] — Dennis Lynch

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Got an old Billy bookcase or Poang chair to get rid of? Good news: Ikea will take them back, no questions asked.

The Swedish giant will begin a buy back program on November 24 to coincide with what is traditionally Black Friday in the U.S. retail market, Reuters reported.

Customers who sell furniture back to the company will get a voucher to use in the future, with the value based on the condition of the item being returned.

Furniture will have to be returned fully assembled and will be resold at discount prices; if an item can’t be resold, it will be donated.

IKEA is marketing the move as part of its wider effort to become “a fully circular and climate-positive business by 2030,” according to Reuters. The company has previously been criticized for environmentally unfriendly supply chains.

The growth in popularity of cheap flat-pack furniture over the last decade and a half has also coincided with an increase in furniture waste, or “f-waste,” in landfills, according to Curbed.

The timing of the program’s launch isn’t a coincidence; in a press release, the company said it “hopes that the initiative will help its customers take a stand against excessive consumption this Black Friday and in the years to come.” [Reuters] — Dennis Lynch

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One of modernist architect Richard Neutra’s most famous homes is hitting the market in Palm Springs.

The Kaufmann Desert House, located at 470 West Vista Chino in Palm Springs, has listed for $25 million, the Wall Street Journal reported.

The home was built in 1946 for Edgar J. Kaufmann, the department store magnate who also happened to be a huge fan of modern architecture. (He also commissioned Frank Lloyd Wright’s Fallingwater.)

Gerard Bisignano of Vista Sotheby’s International Realty has the listing.

Kaufmann commissioned the Palm Springs property as a summer home, and Neutra — who started his career working for Wright — created what has since become an example of desert modernism. The five-bedroom, six-bathroom house is anchored by a central living and dining room, with four wings that extend out from the center. One holds the master bedroom, while another is home to a guest suite, and another has a pool. The home spans about 3,200 square feet and is set on a two-acre property.

Its current owners, who bought the property in the 1990s, worked with design firm Marmol Radziner on an intense renovation of the home, according to the Journal. Several out-of-character additions were made over the years, so the firm consulted the Neutra archives at UCLA to ensure it was being restored to its original mid century glory.

Two decades later, the home is considered the “crown jewel” of Palm Springs, The Agency’s Jeff Kohl told the Journal. If it sells for the full ask, it would be the most expensive property sold in the area, according to the Journal. [WSJ] — Amy Plitt

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A few months after making a blockbuster deal in Hollywood, Blackstone Group is making another big bet on streaming video with the purchase of a San Jose office property leased to Roku.

Blackstone’s non-traded real estate investment trust, BREIT, will pay $275 million, or around $770 per square foot, for two buildings in the Coleman Highline development, Bloomberg News reports.

Roku moved its headquarters to the property last year and has nine more years on its lease. The digital media company rents 730,000 square feet of office space at the complex, which was developed by Hunter Properties.

In August, Blackstone bought a 49 percent stake in Hudson Pacific Properties’ $1.65 billion Hollywood production studio and office portfolio.

Netflix leases 31 percent of the space, and ABC, Disney and CBS/Viacom lease are among the other main tenants.

San Jose has attracted attention from major Bay Area companies in recent years, according to the Mercury News. Adobe is expanding its office complex in downtown San Jose. Not far away, Google has proposed a 79-acre office-heavy mixed-use development near San Jose’s Diridon Station. Apple has been buying properties for an 85-acre campus in north San Jose.

[Bloomberg] — Dennis Lynch 

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An Upstate New York resort that has been featured in Amazon’s “The Marvelous Mrs. Maisel” is hitting the market for the first time in its 150-year history.

The 1,000-acre Scott’s Family Resort in the small town of Deposit has been listed for $6 million after an auction ended without a qualified bid, according to the New York Post.

The lakeside resort has served as a summer getaway for the fictional character of Miriam Maisel in the Amazon comedy, which is set in the 1950s and 1960s. The property is called the Steiner Resort in the show.

The property has much of the old school charm seen in the show, including a ballroom, a 1900s-era bowling alley with hand-set pins, and an ice cream and soda fountain. The grounds have courts for tennis, volleyball, and shuffleboard. Oquaga Lake is steps away from the main building.

The resort has 134 rooms set across several buildings and small cottages. It’s usually open from Memorial Day to Columbus Day but has been closed this year because of the pandemic, which has devastated the hospitality industry nationwide. It remains open for private events.

The owners are now in their 90s and are selling to pay off lingering debts, among other reasons, according to the report. [NYP] — Dennis Lynch

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Cyprus is ending a citizenship program after an undercover investigation found elected officials were willing to help criminals get passports if they made real estate and other investments.

The Cypriot government announced Tuesday the Cyprus Investment Programme would end Nov. 1, according to Al Jazeera.

The statement came just a day after Al Jazeera published a report implicating high-ranking officials in schemes to help convicted criminals obtain Cyprus passports, which allow access to the rest of the European Union and its markets.

The citizenship program granted passports to anyone who invested at least $2.5 million into the country. The program has attracted $8 billion worth of investment in Cyprus since 2013.

The program has been criticized in the past, including by European Union officials, who said it allows criminals to launder stolen assets and dirty money.

In August, Al Jazeera published 1,400 documents showing that Cyprus officials failed to comply with its own laws meant to prevent criminals and fugitives from obtaining passports.

Al Jazeera reporters posed as representatives of a Chinese national seeking a passport through the program. They were open about their fictional client’s prison term for money laundering, which legally precluded him from participating in the program.

Several parties including a real estate developer, a parliament member, and the speaker of parliament told them that the prison term wouldn’t be an issue if their fictional client invested enough money in the country.

“You can tell him that he will have, without mentioning my name or anybody else’s, full support from Cyprus,” said parliamentary speaker Demetris Syllouris. “At any level — political, economic, social, everything.” [Al Jazeera] — Dennis Lynch

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Can Porch get off the deck?

As it prepares to go public with a blank-check company, Porch.com disclosed recurring losses, liquidity concerns and “substantial doubt” by accountants over its viability.

But founder and CEO Matt Ehrlichman and the company’s investors say proceeds from the deal will leave it with more than $200 million in cash and no debt, allowing Porch to grow its business twentyfold within five to seven years.

Founded in 2011, the Seattle startup provides software to home-services companies in exchange for info on their customers; it then sells other home services to those clients. In July, Porch disclosed it would go public by merging with a SPAC led by Abu Dhabi Investment Authority veterans Thomas Hennessy and Joseph Beck. According to an IPO filing, Porch generated $77.6 million in revenue last year. It’s projecting $120 million in pro forma revenue in 2021.

Here’s what else the filing said:

Porch has accumulated $263.5 million in losses and its accountants raised “substantial doubt” about its ability to stay in business given the red ink building up. The IPO filing adds that without raising additional cash, Porch “will not have sufficient cash flows and liquidity to fund its planned business for the next 12 months.”

The profitability question is real, with losses of $50 million in 2018 and $56 million in 2019. On an EBITDA basis, Porch said it entered positive territory in June 2020 and it projected $7 million in EBITDA in 2021. Losses will narrow, but are still expected to total $34 million this year and $11 million in 2021.

In an investor presentation, Porch said the business has an upside of $1.5 billion. By growing its core business 20x, Porch projects it could generate up to $500 million in annual revenue from it. Other revenue opportunities include mover marketing ($200 million), insurance expansion ($400 million) and new home services ($400 million).

The capital structure of the deal will leave a newly-traded Porch with zero debt and $205 million on its balance sheet to fund operations.

“We want to be strategic. We want to be innovative. We want to be impactful. We want to be WeWork.”

Adam Neumann is back

He was down, but Adam Neumann is not out. The controversial WeWork co-founder just invested $30 million in Alfred, a startup that provides services such as dog-walking, rent-processing and maintenance in apartment buildings.

The check, from Neumann’s family investment office, was part of a $42 million Series C for the startup, also known as Hello Alfred, which has raised $100 million since 2014. Alfred claims to be in 100,000 units in 20 markets and bills itself as an “operating system” for apartments. Prior backers Spark Capital, New Enterprise Associates and Greystar also participated in the round.

Meanwhile, WeWork is returning to its roots. It is changing its name back from the We Company, a moniker meant to reflect its expansion into co-living, which stalled at two buildings, and education, which was sold to Neumann’s wife, Rebekah Neumann.

Masa Son jumps on SPAC train

Forget Vision Fund 2. SoftBank’s next move is a blank-check company.

The Japanese tech giant is planning to launch a special purpose acquisition company in the upcoming weeks, according to Rajeev Misra. The SPAC’s target size has yet to be determined, but SoftBank plans to combine outside funds with some of its own money, sources told Bloomberg. SoftBank will be looking to merge with a company outside its existing portfolio, Axios reported. SoftBank portfolio company Opendoor is going public in a $4.7 billion SPAC deal with Chamath Palihapitiya’s Social Capital.

Knock Knock …

It was bound to happen: Startups Knock and EasyKnock are facing off in court over alleged trademark infringement and unfair competition.

According to court docs, Knock — which helps owners buy new homes before selling their old ones — incorporated August 2015 and has been using the mark “KNOCK” since 2016. The company, started by Trulia co-founder Sean Black, applied for a trademark last month.

EasyKnock — which buys homes and leases them back to the owners — incorporated in October 2016 and filed two trademark applications for “EASYKNOCK” in June 2017. “Our legal action is more than defending a trademark,” EasyKnock CEO Jarred Kessler told Inman. “We have built a strong company because our programs work. Their company is responsible for creating a confusing product.”

STAT OF THE WEEK

-31%

Mortgage in a snap

With the mortgage business booming, Snapdocs has raised $60 million to meet demand for digital paperwork. The Series C was led by YC Continuity with participation from Lachy Groom, Maverick Ventures and Docusign, plus prior backers Sequoia Capital and Founders Fund.

Founded in 2012, San Francisco-based Snapdocs serviced 170,000 home sales totaling $50 billion in August, or about $300,000 per home. It projected 1.5 million in deals this year, nearly double its 2019 volume. CEO Aaron King declined to disclose the company’s valuation but told TechCrunch that Snapdocs has raised $103 million — most of which is still in the bank.

Show me the smart money

“Smart” hospitality startup Casai has raised a $48 million debt and equity round led by Andreessen Horowitz. The round includes $23 million in equity and $25 million in debt. Alongside Andreessen, other investors are Kaszek Ventures, one of Latin America’s largest venture funds, as well as Global Founders Capital and others.

Casai was started in 2018 by CEO Nico Barawid and hotel industry veteran María del Carmen Herrerías Salazar. Google alum Andrés Páez Martínez, the CTO, is building custom products for Casai apartments.

Each unit has features such as keyless entry, smart TVs and Google Home thermostats, which can be controlled by a hardware hub called Butler. The company uses technology to boost efficiency in other ways, including an app called Breezeway to manage housekeepers. On the marketing front, it relies on data-driven digital ads that take into account things like airline schedules. Casai currently has 200 units in Mexico City and will launch in Brazil as part of an international expansion. The company has a combination of leases and revenue-share agreements with landlords.

Small bytes

Hospitality startup Kasa Living, which operates units in vacant hotel rooms and apartments, raised $30 million.

Startup PassiveLogic raised $16M for smart-building design.

Cove.tool raised $5.7M to sustainability-focused building design.

Zillow named Hines executive Claire Cormier Thielke to its board, making good on a pledge to diversify its directors.

Breather, which rents office space one day at a time, is testing a membership program starting at $1,500 a month.

iBuyer Offerpad is partnering with relocation company Aires, extending cash offers to select clients.

OJO Labs, an AI startup whose digital assistant works with homebuyers, acquired personal finance startup Digs.

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