(Illustration by Fred Harper)

From the New York website: When the billionaire Republican activist and Hewlett-Packard CEO Meg Whitman endorsed Hillary Clinton for president last month, it had almost nothing to do with Clinton or her politics.

In an interview with the New York Times, Whitman lashed out against the GOP nominee Donald Trump, calling him “a dishonest demagogue” who has “undermined the character of the nation.”

A month before, Whitman had spoken with Clinton by phone. While the former secretary of state didn’t offer “assurances on how she would govern,” Whitman chose to give Clinton her vote. “I don’t agree with her on very many issues,” Whitman told the newspaper, “but she’d be a much better president than Trump.”

Whitman, who lost a well-publicized campaign for governor of California in 2008, is just one on a growing list of Republicans who’ve abandoned Trump — or opted to stay silent.

While Trump still has a number of high-profile backers in the industry, including Douglas Elliman owner Howard Lorber, developer Richard LeFrak, Vornado Realty Trust CEO Steven Roth and others, more than 100 current and former Republican lawmakers and officials have refused to vote for him, according to recent reports.

Former Massachusetts Governor and 2012 Republican presidential nominee Mitt Romney, South Carolina Senator Lindsey Graham and former Florida Governor Jeb Bush are prominent members of the anti-Donald GOP brood. And one Republican congressman, Richard Hanna from upstate New York, endorsed Clinton last month.

“I think Trump is a national embarrassment,” Hanna told the Syracuse Post-Standard. “Is he really the guy you want to have the nuclear codes?”

Now, even in the money-driven, Republican-leaning New York real estate world, where Donald Trump was born, raised and made, some of those who were thrilled with his decision to run when he first declared his candidacy are having second thoughts about pulling the lever for him on Nov. 8.

Many of those interviewed by The Real Deal cited Trump’s unpredictability, which they once found appealing, as a reason for rethinking their choice.

“His failure to switch his tack to become more presidential is concerning to me,” said Town Residential founder Andrew Heiberger, who told TRD in March that he planned to vote for Trump. “It’s kind of an insurmountable blemish on his character.”

Heiberger, who was excited by the prospect of a fellow Big Apple real estate mogul jumping into the election last summer, will now support Clinton, he said. He said that Trump’s treatment of a slain U.S. soldier’s parents, Khizr and Ghazala Khan, who appeared  at the Democratic National Convention, was the last straw.

“I didn’t like that he lacked compassion for the grieving family,” Heiberger said. “That really bothered me.”

In the last month alone, Trump has incited controversies over his repeated attacks on a Muslim Gold Star family, seemed to suggest that Second Amendment hardliners could shoot Clinton if she gets elected (a statement he later said was sarcastic) and called President Obama and Clinton the “founder” and “co-founder” of ISIS.

In early July, he was accused of anti-Semitism when he tweeted a six-pointed star resembling a Star of David and declared his opponent the “Most Crooked Candidate Ever!”  on a background overflowing with$100 bills.

Back in March, when TRD did an in-depth cover story on the real estate mogul, David Schechtman, a top investment sales broker at Meridian Capital Group, said he was supporting Trump — though he qualified it by noting that it  was “tough to say.” In a follow-up interview last month, he said it’s gotten even tougher.

“My reservations have been fortified by his campaign, especially of late,” he said. “I am absolutely aghast at some of the comments candidate Trump has made.”

Asked which comments were most troubling, Schechtman said ,“it’s the totality and the aggregate.” Asked who he would support now, he gave the vague response: “Perplexed. Confused. Frustrated.”

“Intelligence will prevail at some point,” Schechtman added, saying that supporting Clinton would also be “a tough pill to swallow.”

Schechtman’s boss, Meridian CEO Ralph Herzka, was one of the industry’s earliest Trump donors, giving the maximum allowable contribution of $2,700 to the campaign the month Trump threw his hat into the primaries. This January, however, Herzka gave the same amount to Clinton. A representative for Herzka declined to comment for this story.

Attorney Ed Mermelstein said in March that if Trump, a long-time acquaintance, became the Republican nominee, he would have his vote. “What we are seeing on television today is not who I know him to be,” he said at the time.

Asked last month if his enthusiasm for Trump had waned, Mermelstein said, “that’s a fair characterization.”

Top-selling Sotheby’s International Realty broker Nikki Field, who gave $10,000 to a Trump PAC  last year, told TRD that she was still “struggling to make a decision” about who to back.

Other Trump supporters have seemingly disappeared.

Louise Sunshine — an early Trump Organization executive and founder of Corcoran Sunshine — left a new gig at the start-up brokerage Compass in June to campaign for Trump in Florida and launch a group called Women for Trump, according to the New York Post.

During an interview on CNN in May, Sunshine said Trump gave her career opportunities that she otherwise might never have had, adding that she’s still in close contact with him.

(Click to enlarge)

“He was a leader. He taught me. He mentored me. He showed me the way. That’s it. I was, like, smitten,” she said.

It has now been more than three months since the seasoned broker left Compass, and TRD could not find an organization called Women for Trump in Miami Beach or Palm Beach, where Sunshine has homes, or anywhere else in Florida. Several social media accounts and websites with similar names exist (the New York-based Women for Trump Coalition, for example), but Sunshine does not appear to be connected to them.

Cindy Tindell, a Florida Republican State Committee member for Palm Beach County, was not familiar with any such group when reached by phone, and suggested contacting Sue Snowden, the Palm Beach County chair of the Trump campaign. An email sent to Snowden’s personal account went unreturned.

Marili Cancio Johnson, president of the Women’s Republican Club of Miami, Federated, said in an email that she knew of no such group.

Bonnie Re, founder of the Boca Raton chapter of the Contemporary Federated Republican Women’s Club, also said she had never heard of Sunshine or Women for Trump.

Reached by phone, Sunshine said that she did not care to comment on the presidential election. Asked if she ever started Women for Trump, she hung up. A subsequent email sent to Sunshine asking for clarification was never answered. And a review of campaign finance records shows that Sunshine donated $2,000 to the Clinton campaign in April of this year. She does not appear to have contributed any money to the Trump campaign.

Picking sides

Clinton — who has been embroiled in her own set of scandals — held a significant lead in almost every major poll conducted in August. In New York, she’s counted on support from some of New York’s oldest real estate dynasties, including the Rudins, Resnicks and Dursts, members of which have donated to either her or one of her affiliated funds.

Clinton’s real estate supporters see her as a much-needed unifying force in a country racked by division on everything from immigration to policing, several of them told TRD.

“We are in a period of social and political instability,” said Time Equities CEO Francis Greenburger. “You can’t have businesses succeed if there’s an enormous amount of social unrest and problems out there.”

Greenburger added, “Hillary has a very real program to bring more and more people into the economy [with] more and more jobs.”

Trump’s explosive remarks aside, many Clinton supporters in the real estate and finance industries see the Republican candidate as a wild card who might bring volatility to a commercial and residential rebound that has soared under President Obama.

“To be honest with you, if you own real estate in New York City, this is the best it’s ever been,” said Newmark Grubb Knight Frank’s chairman, Jeff Gural, a major Clinton donor and fundraiser. “I just borrowed money at 3 percent, and I never thought it could get that low.”

Trump’s supporters, however, consider Clinton untrustworthy and argue that her policies won’t offer the spark needed to jump-start the economy. Those in the top-earning 1 percent of households, the class Republicans often refer to reverently as “the job creators,” are expected to see their annual tax burdens rise an average of $78,000 under a Clinton administration, according to the Brookings Institution’s Tax Policy Center.

Many also believe she was purposefully deceitful in using a private email server as secretary of state and negligent in her decisions leading up to the 2012 Benghazi terrorist attack in which four American officials were killed.

Others, including Tom Barrack, the CEO of Los Angeles-based private equity firm Colony Capital, had less harsh assessments of her but think Trump would just be better.

“I think it really comes down to who’s going to do a better job at stimulating growth and incentives for entrepreneurs to build businesses so that there’s more demand and supply and real estate developers can build things, otherwise it’s a pretty boring business,” Barrack said.

Douglas Elliman retail broker Faith Hope Consolo said Trump is a strong leader who can bring stability to the market. “I think it’s even more important now because there’s not calm and continuity in the city.”

Lorber — who along with Vornado’s Roth and others was appointed to Trump’s economic advisory team in August — told TRD that the Republican candidate has already proven the good work that he can do.

“He’s created thousands of jobs,” the Elliman chairman said. “When they couldn’t get the Wollman Rink [in Central Park] done and it was over budget, he came in and opened it quick. He basically restored the Grand Central area to be a vibrant area with the old Commodore Hotel.”

Edward J. Minskoff, who developed the speculative office tower 51 Astor Place, said Clinton is in no position to set a sound economic agenda.

“She has no strong business background, she’s basically been a politician all of her life,” he said. “We need someone that has a business background that can surround themselves with businesspeople.”

Still, Minskoff, who plans to write Michael Bloomberg’s name on his ballot, will not endorse Trump, either, though he said that the candidate would likely pick “bright, capable people” to help him make decisions in the White House.

Clinton is not an option for him. “I think she failed as secretary of state; I don’t really trust her,” he said.

Ackman Ziff broker Jason Meister — who is working on Trump’s New York campaign alongside former GOP New York gubernatorial candidate and Tea Party favorite Carl Paladino, a Buffalo real estate developer— dismissed what he sees as overreactions to single comments Trump has made at rallies and on social media. Meister said those individual remarks are not sufficient grounds for abandoning Trump.

“I don’t think that’s what this election is about,” Meister said, adding that what’s most important is a “referendum” on eight years of Obama. “It’s not so much about Trump, he’s lucky to be where he is at a time that people want an outsider.”

Clinton, Meister said, “is running a global pay-to-play criminal enterprise” with the Clinton Foundation and is “a symbol of Washington, D.C.” and its corruption.

Meister and his father, the real estate attorney Stephen Meister, who has represented Trump in the past, published an editorial in the Washington Examiner in August criticizing Clinton’s record for everything from flunking the bar exam to allegedly pushing to invade Libya out of personal oil interests to collecting charitable donations from members of crooked foreign governments.

“Hillary doesn’t care if women can choose to drive, let alone have an abortion; nor whether gays have the right to live, let alone marry: She took millions more from Sharia-run regimes that punish or kill women and gays,” the Meisters wrote.

Money talks

All in all, Clinton has greatly outraised Trump.

Trump’s campaign committee raised more than $62 million in June and July, beating many expectations. That, however, was still not enough to match Clinton, who raked in more than $86 million during the same time.

Clinton also maintains a substantial fundraising lead by outside groups and PACs. Her total raised through July — including PAC cash, but excluding money raised by the party and joint funds — comes to $446.4 million, according to a Bloomberg analysis. Trump’s total, by comparison, comes to $137.3 million.

And while the Republican Party has brought in more dollars than the Democratic Party so far this cycle ($202.4 million versus $150.5 million, according to Bloomberg), only a portion of those funds can be spent on the presidential campaigns. The rest is earmarked for other party obligations.

High-profile billionaires including George Soros, Haim Saban and J.B. Pritzker have together poured tens of millions of dollars into Clinton-affiliated PACs and committees. Meanwhile, top executives, including Larry Fink, CEO of the world’s largest money manager, BlackRock, are rumored to be in the running for Treasury secretary if Clinton is elected.

Both Trump and Clinton have unsettled some Wall Streeters with some of their comments.

Trump, for one, has floated a refinancing of U.S. foreign debt and said hedge-funders are “getting away with murder.”

Clinton’s campaign, however, has also actively attacked the hedge-fund world.

“There’s something wrong when hedge-fund managers pay lower tax rates than nurses or the truckers that I saw on I-80 as I was driving here,” Clinton told a group of supporters in Iowa in April.

Despite that, she is still largely favored by Wall Street. Billionaire hedge-funder James Simons — who tucked $7 million into the pro-Clinton PAC Priorities USA Action in the first quarter of this year — told CNBC that Trump is “not a good investment” and called him “a wild man.”

Paul Singer, the hedge-fund billionaire behind Elliott Management who has donated more than $14 million to conservative spending groups during the current election cycle, recently told the same network that a Trump presidency would cause a “global depression.”

“People on Wall Street saw Romney as a kindred spirit,” said Jack Pitney, a political-science professor at the California-based Claremont McKenna College, adding that they see Trump as a “loose cannon.”  But Trump has supporters in the finance world as well. Among them are hedge-funder John Paulson, now part of the Republican candidate’s economic advisory team, and Anthony Scaramucci of SkyBridge Capital, who hosted a fundraising event for the Republican candidate at the restaurant Le Cirque in June.

In New York real estate, Trump still has some of the biggest names in the business on his side. In addition to LeFrak and Lorber, Peter Kalikow, Ziel Feldman and Michael Stern have all given to PACs or funds supporting the candidate. And, of course, Trump’s son-in-law Jared Kushner is backing him and acting as one of his closest advisers (see related story on page 56). Curiously, Vornado’s Roth — who, as noted above, is on his economic advisory team — has still not donated any money to the campaign, a review of campaign finance records shows.

Meanwhile, Trump has yet to win over all of the usual Republican donors in real estate.

Related Companies’ Stephen Ross, who was an active Romney fundraiser in 2012, has not given to Trump this election cycle. Ross declined multiple times to comment on the election through a representative.

Likewise, Sheldon Adelson — the Las Vegas casino mogul who is often regarded as one of the most powerful Republican donors in the country — still has not dropped a dime into Trump’s campaign coffers.

Barry Sternlicht, CEO of Starwood Capital Group, gave to Romney in 2012 and Jeb Bush in the 2016 primaries but has donated nothing to Trump. He did, however, make substantial contributions to Clinton’s 2008 presidential run as well as to her previous Senate campaigns. Sternlicht was not available to comment.

“A lot of the big Republican donors in the 2012 election are certainly somewhat uncomfortable with Donald Trump, so they probably won’t be contributing to his campaign,” said Lee Drutman, a senior fellow at the Washington, D.C.-based nonpartisan New America policy think tank.

However, he added that “there’s some turnover in who are the top donors from election to election. Different people get excited by different elections for different reasons, or whatever connections they have to a particular candidate.”

Unknown unknowns

For more than a year, critics have complained that they do not know what either candidate would really do in office.

Clinton is seen by many as a political opportunist, picking policy positions based on what’s popular at the time — rather than on her true beliefs. Those critics point to changes in her stance on international trade, the criminal justice system and gay marriage as key examples of that.

At the same time, Trump has given his own mixed messages on a slew of policy issues. Most recently, he seemed to backpedal on his immigration policy, which until last month called for deporting 11 million undocumented immigrants.

In the real estate industry, many see the Republican nominee as a giant question mark hanging over the market.

“I don’t think he’s said anything yet that you can wrap your arms around that would support or not support how he’s going to deal with the economy,” Minskoff said. “I don’t think he’s focused on it.”

The murkiness of the responses from the Trump campaign is translating to uncertainty among his supporters in terms of their expectations, Mermelstein said, explaining the new Trump supporter malaise.

“Uncertainty is the kiss of death when it comes to politics,” he said.

As for Trump’s controversial slights and jabs, they haven’t impressed Mermelstein, either.

“He’s still showing us more of the individual that we were seeing on the television shows than the individual that we expect him to be as the president of the United States,” he said.

Greenburger of Time Equities said he doesn’t understand why real estate executives support the Republican candidate at all, commenting that he has not “heard reasoned responses.”

“I don’t know what Donald would do,” said Gural of Newmark Grubb Knight Frank, referring to the policies the candidate would implement if he took office.

Aby Rosen, RFR Holding’s flamboyant condo developer, made headlines in August when he emblazoned a Noho construction site with the words “Vote Your Conscience,” a nod to Republican Senator Ted Cruz’s Trump-defiant speech at the Republican National Convention in which he never actually endorsed the candidate.

While Rosen has not spoken publicly about it beyond posting a photo of the billboard to his Instagram account, his partner Michael Fuchs told TRD that as a Democrat he, too, stands by the billboard’s message.

Others said Rosen feels very passionately about this election.

“He’s deeply concerned that a Trump presidency is damaging to the world economy,” one source, who asked not to be named, said. “The fear of the unknown is what’s scared him the most.”

Others aren’t too concerned that the industry will be greatly affected either way.

Even Heiberger, who is no longer backing Trump, isn’t concerned that either candidate’s platform will mean a plague upon the property biz.

“As far as New York and New York City real estate goes, everyone is a winner,” he said. 

Happy Labor Day

In honor of Labor Day, The Real Deal will not be posting on the Monday holiday (but we’ll still keep our eyes peeled for breaking news). We resume our regular full posting schedule on Tuesday.

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Bijan storefront at 420 North Rodeo Drive

The Bijan store on Rodeo Drive made history this summer as the most expensive retail property ever sold in the state, but it may soon come tumbling down.

Louis Vuitton’s parent company LVMH Moet Hennessy Louis Vuitton is likely planning to tear down the yellow storefront to make way for a bigger building in order the maximize the 7,629-square-foot lot, the Los Angeles Business Journal reported.

Under city density regulations, the luxury brand can build a structure as big as 15,258 square feet and as tall as three stories.

LVMH purchased the property at 420 North Rodeo Drive for $122 million, or $19,405 per square foot, from the Barton C. Brooks Trust.

“They don’t want someone else’s cute little building, they want their own look,” Stephen Algermissen of Cushman & Wakefield told the publication. Algermissen was not involved in the deal, for which Holliday Fenoglio Fowler’s Bryan Ley, Marc Schillinger and Bill Fishel were the listing agents.

Chanel, which held the previous record with a $152 million acquisition on Rodeo Drive in December, has its own plans to tear down the existing structure to make room for a larger, more stylized building. [LABJ] — Cathaleen Chen

(Credit: Airbnb.com)

Airbnb is finally pushing back against Santa Monica’s ban on short-term rentals more than a year after the ban was first passed.

The short-term stay website filed a lawsuit Friday against the city of Santa Monica, alleging the ordinance violates the First and Fourth Amendments rights of its hosts on the basis of privacy infringements, the L.A. Times reported.

Under Santa Monica’s 2015 ordinance, hosts are required to post their business licenses online and rental websites are forced to turn over their data when probed.

Airbnb may in fact have a case, according to Eric Goldman, a law professor at Santa Clara University.

“They’re trying to hold the website accountable for what their [hosts] are doing,” he told the Times. That’s against federal law.

Santa Monica is the third city Airbnb has sued this summer. It’s also gone up against its hometown of San Francisco and Anaheim over their versions of essentially the same provision. [LAT] — Cathaleen Chen

From the New York website: A laundry list of luxury amenities isn’t just for new construction towers. College students are also getting the hotel suite treatment.

Stainless steel appliances, hardwood floors, en suite bathrooms and in-unit washer/dryers are fast becoming standard at large public universities across the country, according CNBC.

Developers are investing in privately owned student housing and upping the ante on amenities, resulting in approximately 47,700 new beds in the pipeling for this fall semester. Universities in the Southeast are the primary target, according to Axiometrics, an apartment research firm.

“Privately owned student housing is quickly becoming an integral sector in real estate, and performance metrics demonstrate its strength,” Jay Denton, senior vice president of analytics at the firm, told CNBC. “Axiometrics forecasts rent growth to remain strong over the next five years and occupancy to stay above 95 percent, as enrollment continues to rise nationwide.”

As enrollment strengthens at state universities, housing has become increasingly scarce.
a
“The interest really started two or three years ago. A lot of the capital — institutional investors — needed to be educated on the space itself and what it meant to be in student housing. We had to do a lot of convincing that it wasn’t all ‘Animal House’ structures, but actually really stable cash flow properties,” J.J. Smith, chief operating officer of CA Student Living, told CNBC. “Now that we have educated the institutional world, we’re seeing a lot of capital interested in these properties.” [CNBC] –Christopher Cameron

The warehouse at 330 South Alameda Street and Greystar CEO Bob Faith (Credit: Loopnet, Greystar)

Greystar of Charleston, South Carolina has become the latest developer to seize upon Downtown L.A.’s Arts District.

The firm filed plans last week to construct a seven-story mixed-use complex with 186 live-work lofts, 22,340 square feet of commercial use and 402 parking spots according to city documents.

The site at 330 South Alameda Street is currently occupied by a 31,456-square-foot industrial building, CoStar shows, and is owned by an LLC in connection with ZDI, Inc., a Santa Monica-based development firm.

The property last changed hands since 2000, according to property records.

Less than a mile south, Los Angeles developer Hillcrest Company recently proposed a 122-unit live-work complex at the corner of 7th and Decatur Streets. Also nearby,San Francisco-based Carmel Partners is planning a mixed-use development for a two-acre site at 520 to 532 South Mateo Street.

In July, Greystar acquired a 215-unit Rancho Palos Verdes apartment complex for $105.5 million in one of 2016’s priciest multifamily deals. The firm — which also has projects in Hollywood, Santa Monica, Culver City, Glendale and North Hollywood — could not be immediately reached for comment.

From clockwise: a midcentury house designed by Frank Lloyd Wright in Arcadia, Arizona, a highly anticipated pedestrian bridge in Providence, Rhode Island and Nashville

From the September issue: After a decade-long delay, a highly anticipated pedestrian bridge expected to revitalize the heart of the Rhode Island capital is set to move forward this fall, according to the Providence Journal.  [more]

Gov. Jerry Brown and a construction site near LAX

California Gov. Jerry Brown lost a major skirmish with NIMBYs last week when his by-right housing proposal faltered on the Assembly floor. The initiative — which promises $400 million worth of funding toward affordable housing in exchange for a more streamlined approval process for developments that include affordable units — is dead until at least December. But he received a consolation prize at the last minute.

Known as AB 2501, a bill that strengthens the state’s existing density bonus policy is headed for his desk, after collecting bipartisan support on August 31, the last day of the legislative session. The governor is expected to sign the bill, spearheaded by Santa Monica Assemblymember Richard Bloom, when it reaches his desk.

Although AB 2501 isn’t as bold as Brown’s promise of $400 million in affordable housing, the measure would force local governments to abide by California’s 2005 law that grants developers permits for up to 35 percent of extra building space if they promise to include a certain number of affordable housing units.

Under current law, some municipalities can still curtail developments seeking density bonuses by imposing additional requirements or making them vulnerable to organized opposition.

Typically, cities will create their own policies based on the state law, according to Brett Gladstone, land use attorney and partner at Hanson Bridgett, LLP. “But some cities — particularly the cities where there’s a progressive elected body — are saying, ‘No, we don’t think [we have] to follow the state law,” he told The Real Deal. “[Bloom’s bill] would light a fire under these cities.”

Los Angeles follows the state regulations more closely than cities like Beverly Hills and Santa Monica, experts said. L.A.’s City Council passed its own version of the density bonus bill in 2008.

Jeff Weller, principal of Lion Real Estate Group, told TRD he has benefited from the bill. His latest multifamily project in Echo Park was streamlined as by-right. The 121-apartment complex at 401 North Boylston Street called for 14 low-income units.

“It took 12 months and it was a decent process,” he said.

Peter Wilson, a founding member of development firm Premier League Inc. agreed. His company has completed between 40 and 50 multifamily projects in the past two decades, all ranging between 20 and 100 units. Since the density bonus ordinance passed, every one of his developments utilized the incentive.

“[Density bonus] tends to be a streamlined process,” Wilson previously told TRD. “We really have no complaints.”

Still, the bonuses alone could not serve as the remedy to the housing shortage crisis.

A recent study found that L.A. housing density has barely increased as a direct impact from zoning changes. By identifying the residential zoning designations of more than 780,000 parcels in 2002 and 2014, author C.J. Gabbe found that “downzoning” — or when an area is allowed less density in 2014 than it was in 12 years ago — occurred nearly as often as “upzoning,” or the opposite; the difference was less than one-quarter of a percent of total land area every year.

In other words, zoning changes that result in higher residential density haven’t offset zoning restrictions.

“My findings show that changes are rare and cover a relatively small land area,” Gabbe, a recent PhD graduate of the UCLA Luskin School of Public Affairs told TRD. “Change is happening but the pace of this change is not keeping up with the (population) growth that’s coming to Los Angeles.”

And for affordable housing advocates, the biggest draw in Brown’s by-right develop proposal wasn’t the incentive for developers to build a measly 20 percent of under-the-market units — it was the $400 million that would go toward structures with 100 percent of under-the-market units.

“I think it’s remarkable that the governor took very strong leadership on this issue,” Carol Galante, an affordable housing professor at UC Berkeley, told TRD. “The fact that the issue has been elevated at the state level was a very positive step.”

Some experts, in fact, questioned the impact of the density incentive route.

“Obviously there’s no shortage of building in L.A. under current rules — We’re seeing new construction levels that are the highest since the late 1980s,” CoStar multifamily analyst Steve Basham told TRD. “But the people who are getting projects through are the institutional developers and investors at the top level” — not necessarily the middle-income or lower-income housing builders.

With the density bonus incentives alone, he said, “there is a sense that it’s a band-aid on a much larger wound.”

Meanwhile, another weighty matter looms in the horizon. The Neighborhood Integrity Initiative, a measure that would force a two-year moratorium on any development in L.A. that require a zone change — which given the zoning code, is most developments — recently garnered enough signatures to earn a spot on the March ballot.

But between now and then, Brown’s proposal has another shot. When the next legislative session begins December 5, the by-right plan could return to the table, Gladstone said.

The plan’s most formidable opponent, he explained, was construction labor groups that sought a minimum construction salary equivalent to union wages. The measure has a chance if the governor works with labor groups, he said.

Although Brown has yet to announce a specific plan of action, compromise seems inevitable.

“The governor has been very clear that we need to constrain development costs and improve the pace of housing production,” a spokesperson from Brown’s office told TRD in an emailed statement.

“We will continue working toward solutions in the days and months ahead.”

The retail center at 13450 West Maxella Avenue (Credit: West L.A. Estates)

A massive housing complex may soon rise in Marina del Rey.

Plans for a mixed-use building with 658 apartment units and 27,300 square feet of commercial space were filed last week with city planning for the site at 13450 West Maxella Avenue. Sixty-six of the units will be reserved as affordable housing.

The owner of the property, according to CoStar, is an entity linked to Steve McKenzie of Channel West, a boutique real estate firm based in Malibu.

The 6.8-acre site is currently occupied by a two-story retail strip built in 1977. It’s nearly fully leased, records show, by tenants such as DSW Shoe Warehouse and La Pain Quotidien.

In addition to a vesting zone change and general plan amendment, the project requested an alcohol sales permit for 12 establishments, city documents show.

McKenzie could not be immediately reached for comment.

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The London office complex Chiswick Park, which was sold at a discount by a closed fund during the last downturn.

From the New York September issue: When news broke earlier this summer that the Blackstone Group was planning to take its rental-home company, Invitation Homes, public by the first half of 2017, it came as little surprise.

The private equity giant bought up 50,000 rental homes nationwide in the aftermath of the most recent financial crisis, with the intention of flipping them for a profit — either by selling them individually, unloading them in bulk or taking the portfolio public. [more]

In many ways, the City of Angels is reaching for the stars — not only on the sidewalks, but through the rapidly ascending skyline as well.

Developers are building projects that are taller, bigger and more amenity-rich than ever before. All-cash deals are being cemented with foreign buyers for gleaming new luxury condos, while thousands of new hotel rooms fill the pipeline. And yet, dealmakers and financiers are beginning to raise questions about whether there is enough demand to justify the recent building boom in Downtown Los Angeles. 

Many of the largest and most extravagant development projects are being financed by foreign investors. Metropolis — at 2 million square feet, the largest project in DTLA — is spearheaded by Chinese development firm Greenland USA. One Beverly Hills, a 900,000-square-foot mixed-use complex, comes to us from Chinese firm Wanda Group. The Wilshire Grand, which already stands as the tallest structure in west of the Mississippi, is backed by Korean Air. At least for the time being, market watchers think that foreign investors will drive commercial development.

We explore trendy neighborhoods — such as Silicon Beach and DTLA’s Arts District — while diving deep into the public opinion battle between rival developers brewing in Beverly Hills and the clandestine family company Jamison.

Our debut Los Angeles magazine also brings you Q&A’s with Christopher Martin, the architect behind the Wilshire Grand, and with Los Angeles Mayor Eric Garcetti.

On the luxury residential front, the Playboy mansion changed hands at the jaw-dropping price tag of $100 million. We check in on this deal and other cases of VIP home swapping. We also provide our first-ever ranking of L.A.’s luxury home market (deals valued at $5 million or above). And we keep tabs on the hunt to snare top-tier brokers away from the competition.

We explore these and other fascinating stories in the inaugural issue of our Southern California market report. Enjoy the issue! – TRD

A lounge in Amoroso’s C on Pico complex at 12301 West Pico Boulevard

Calabasas-based investment firm Amoroso Companies has filed plans to build a seven-story apartment complex with 90 units in the Pico neighborhood near Koreatown, The Real Deal has learned.

Of the 90 apartments, 82 will be market rate and the other eight will be reserved for very low-income households. In exchange for building affordable units, Amoroso was granted permission to build a  bigger structure than typically allowed for the lot size and to add additional parking.

The site, at 1056, 1060 and 1066 South La Cienega Boulevard, contains two parcels: One spans under half an acre and is currently empty, property records show. The other contains a 6,213-square-foot, one-story retail building. Amoroso acquired the properties under affiliated LLCs for a combined $10.3 million last October, according to Propertyshark.

The family-run company has an investment portfolio of 32 properties, according to its website, ranging from hotels and storage units to multifamily apartments. In 2014, Amoroso opened C on Pico, a 95-unit complex on the westside.

As California is slated to adopt a density bonus measure in hopes of incentivizing more affordable housing, Amoroso is among the Los Angeles. developers that are already one step ahead. The city passed its own density bonus ordinance in 2008.

A rendering of the Waldorf Astoria hotel

From the L.A. print issue: It took 19 heated hearings for the City of Beverly Hills to approve developer Beny Alagem’s plan for two condo towers and a Waldorf Astoria on land surrounding his Beverly Hilton hotel. Even then, he had to face a voter referendum organized by opponents of the development, which narrowly passed in 2008.

Yet Alagem’s quest didn’t end there. The Israeli-American entrepreneur, who made his fortune founding Packard Bell Electronics in 1986, wants more. More height, specifically. His real estate firm, Oasis West Realty, wants to amend the project to take the 110 condo units that have already been green-lighted and merge them into a single 26-story structure. He’s advocating for the change while the 170-key Waldorf Astoria adjacent to the condo project is already 70 percent complete, with a scheduled opening in 2017.

Here’s the twist: Rather than pushing the project through the laborious city planning process again, Alagem wants voters to approve the changes in a ballot referendum, which has become known locally as “the Hilton initiative.”

Never before has a developer sought to use the ballot box to sidestep the rigorous Beverly Hills planning department and environmental review processes. The changes that Alagem is seeking to the approved plan — which include creating a garden in the footprint of the tower that would be eliminated — have been presented to voters as the “Beverly Hills Garden & Open Space Initiative.”

If approved, the 371,500-square-foot tower would become by far the tallest building in Beverly Hills. Standing 375 feet at its highest point, the Robert A.M. Stern Architects-designed building would eclipse the city’s tallest tower, the 165-foot Beverly Wilshire hotel.

Alagem’s efforts to make an end run around the established procedures have incensed Beverly Hills Mayor John Mirisch, who told The Real Deal that he had tried, unsuccessfully, to convince the developer to go back through the normal planning process. “This is not Legoland,” he told TRD. “You can’t just stack things on top of each other and call it a day.”

Developers at odds

Neighboring the site in question is another condo-and-hotel project that is almost as large, although not nearly as tall, as Alagem’s proposed project.

Known as One Beverly Hills, the project calls for a 134-key boutique hotel, 193 luxury condominiums and retail space at 9900 Wilshire Boulevard. Chinese billionaire Wang Jianlin’s Wanda Group is behind the proposed $1.2 billion development.

Beny Alagem

The condo tower was already approved at 728,978 square feet under previous site ownership, but Wanda is seeking permission to replace some of the condo units, and all of the retail space, with hotel rooms. It is going through the standard environmental review process to seek these revisions, even though the project’s footprint won’t change. The revised development would span a total of 901,514 square feet and rise 185 feet tall.

Michael Nourmand, the president of the luxury Beverly Hills brokerage Nourmand and Associates, said that having two luxury condo projects next door to each other in Beverly Hills inherently makes them competitors. “There is a finite number of high-end condo buyers, so too much supply in a short time period could be problematic,” he said.

Indeed, as the ballot initiative campaign nears its close, both developers have taken out advertisements in local newspapers. Alagem’s advertisements, as well as pro-initiative op-eds, fill the Beverly Hills Courier. Wanda’s ads in Beverly Hills Weekly — which also carries op-ed pieces critical of the Hilton initiative, by former mayor Mirisch  — focus on the differences between the Hilton initiative and its own project, in order to “clear up the confusion.” They highlight the fact that Hilton is avoiding the standard planning processes, while Wanda is not.

“We chose a different path that allowed for community input, a thorough environmental review and consideration by the city’s planning commission and council,” Rohan a’Beckett, deputy general manager of Wanda’s Beverly Hills subsidiary, told TRD.

Wanda also formed a PAC in early August with the goal of questioning the Hilton initiative’s language on the ballot.

Alagem told TRD that neither he nor anyone involved with the Hilton initiative had ever officially opposed the One Beverly Hills project. However, the word “officially” is key: An attorney representing the initiative voiced grief over various elements of the project during its first Planning Commission meeting in August, calling it “a transportation disaster for the Hilton and the community.”

Getting out the vote

Alagem’s Oasis West Realty spent just over $3 million — widely considered to be a large sum for a local ballot measure — during the first six months of the campaign, from January 1 to June 30. During that time, the firm concluded successful signature-gathering efforts and got the measure on the ballot. Records also show Alagem hired multiple campaign consultants, attorneys and public relations firms throughout the campaign. 

“They are willing to spend an unlimited amount of money to pass this, and that is unusual,” said Josh Gross, publisher and founder of Beverly Hills Weekly, adding that “it’s one of the most aggressive campaigns I’ve ever seen.”

Gross’ paper reported that the Hilton initiative had spent $6,329 during a three-month period at Tiffany’s alone. When TRD asked the campaign about that particular expenditure, a representative explained it was for giveaways at a party celebrating getting the initiative on the ballot, as well as champagne glasses to toast the occasion, naturally.

But these costs are comparatively small next to the ultimate cost of the tower and garden, which Alagem estimated will amount to at least $350 million, with the total project cost landing somewhere around $700 million.

“We are giving voters a decision,” Alagem said in a soft voice inflected with an Israeli accent when TRD sat down with him in his Century City office. “It’s simple … Do you want an eight and an 18-story building? Vote no. Do you want a park? Vote yes.”

Neighborhood pushback

The plan has clearly ruffled some feathers, with local residents and politicians saying the focus on the garden in the campaign’s website, advertisements and renderings — many of which don’t even show the proposed building — could be construed as deceptive.

Mirisch called the website for the initiative, “a masterpiece of hucksterism” in a public letter published in the Beverly Hills Weekly and Huffington Post.

“This is a skyscraper initiative masquerading as an open-space initiative,” Mirisch told TRD. “They’ve got a lot of money to spend, and they are counting on casual voters who like the idea of a garden. Success or failure will be based on how many fall victim.”

Marie Garvey of the Garvey Group, a spokeswoman for the Hilton initiative whose firm was paid almost $85,000 in the three-month period from April 1 to June 30, said that the garden was front and center in the marketing materials because it was the biggest change to the project. The use of the condos and the floor area would remain the same, she said.

Alagem stressed the appealing aesthetics of the luxury high-rise building, saying it would be “gently designed” to blend with the new Waldorf, which will include a restaurant by Jean-Georges Vongerichten. Robert A.M. Stern himself will be hands-on during the design, he said. An acknowledged fan of the starchitect, Alagem lived in Stern’s 15 Central Park West tower in New York until 2009.

Regardless of how the project is cast, many of its opponents say the real issue is whether the developers of major skyscraping projects should be able to use the ballot box in order to go around established land-use rules and environmental review processes.

“For the first time, a developer has chosen not to go through the local planning process,” Beverly Hills Council member Kathy Reims told a council meeting in July 2016. She cautioned that this could “open the floodgates” to additional dense development projects.

Some local residents agree. “My concern isn’t about one project or one developer; it’s really about the future of our low-rise community,” said longtime Beverly Hills resident Alma Ordaz. She said that if the initiative succeeded, “it will be open season on Beverly Hills for any developer willing to come in and spend the money.”

Two weeks after speaking with TRD, Ordaz filed a writ of mandate, which calls for the authors of the ballot to remove allegedly false and misleading language in favor of the initiative prior to the printing of the ballot pamphlet. Her lawsuit was sponsored largely by Wanda’s Beverly Hills subsidiary and its development partners, Athens Group. 

Former mayors club weighs in

In Beverly Hills, the former mayors are “an institution” and “a clique,” Gross said. Some of them lobby for developers, who see them as invaluable because of how many people they know in the city and the prestige their former title carries.

A rendering of One Beverly Hills.

A handful of these former mayors are involved in the drama that surrounds the Hilton initiative and One Beverly Hills.

One former mayor, Barry Brucker, registered as a lobbyist on behalf of Wanda’s competing project in 2014, two years after leaving office. Over the summer of 2016, he was sent a letter on behalf of “anonymous citizens” who were represented by Sacramento attorney Gary Winuk. The letter, which was made public in the Los Angeles Times, claims that Brucker violated a city policy preventing former officials from working as paid lobbyists for projects that they voted on while in office. The former mayor signed on with One Beverly Hills six years after voting on it while in office.

Brucker has since resigned from the project. However, he said in a public statement that he resigned only out of an abundance of caution, and believed he was exempt from the cited rule because when he voted on the site’s use it was under different ownership and had a different site plan. He said he had never actually lobbied. “My scope of services did not include lobbying any elected or appointed official in the City of Beverly Hills,” he said. “To ensure that I was abiding by the spirit of the law, I registered as a lobbyist with the City of Beverly Hills to make my participation transparent and known.”

Wanda spokesman Eric Rose said in an emailed statement to TRD that it was “disappointing” that an “anonymous opponent” of the project would “besmirch the good reputation of Mayor Brucker for its own purposes.” He went on to describe One Beverly Hills as the “only major development project in Beverly Hills that is following the City’s environmental review process” — the only other major development in the neighborhood not following the process obviously being the Hilton initiative.

Brucker had voted against Alagem’s original plan in 2008, leading to much local speculation about whether the anonymous letter was connected to the developer. While Alagem and those involved with his campaign have denied that, suspicion remains.

Gross said the developer is being very aggressive with his opponents. “The towers were controversial when they passed in 2008, but some people, myself included, supported them. Then they were never built, and some of the people who originally supported them are mad,” he said, adding that Alagem has “unlimited funds” to fight this battle.

Meanwhile, some former mayors have come out to support the Hilton initiative. Former mayor Robert Tanenbaum, who previously opposed it, wrote op-eds in the Courier in favor of it. Former mayor Linda Briskman is a “community volunteer sponsor” of the initiative.

Perhaps most controversially, former mayor Jimmy Delshad’s company American International Business Inc. received $8,000 from the Hilton initiative in the first three months of the campaign, and $18,000 in the second three months, Beverly Hills Weekly reported. He voted “yes” on the original plan and was an outspoken supporter of the project, subjecting him to the lifetime ban against lobbying. He did not register with the city as a lobbyist.

At first, Delshad explained to TRD that he was a “community activist helping the project.” When presented with the campaign finance filings, he described himself as a “consultant” rather than a “lobbyist.”

“I was very instrumental in helping the City of Beverly Hills get a small garden next to Montage, and I see now how people love that garden,” Delshad said, referring to the luxury hotel just off Wilshire Boulevard. “I’m supporting the Hilton initiative because I think it’s a better plan now, with a garden three times as large [as the one at the Montage]. I can imagine how much more people will enjoy it, and come and play games with children, and have movie night.”

Mirisch said the lines between who is a lobbyist and who is paid in some other capacity are often blurry. “The difference between lobbyist and consultant is sometimes no more than semantics, especially if they aim to influence a legislative outcome,” he said.

What’s next

An independent report commissioned by the city projected that Alagem stood to gain $48.2 million more in profits (once all units are sold) if voters approve the Hilton initiative in November. It further projected that the city would gain $33.4 million more in taxes, based on the higher property values, over a 30-year period.

It’s estimated that the new plan for One Beverly Hills would generate $84 million in direct revenues to the city over its first 10 years of operation, an increase of more than $65 million over the previously approved project, according to a report by CBRE.

As of press time, Wanda Group was awaiting its next planning meeting, in September, and deliberating the next action of its PAC against the Hilton initiative.

Meanwhile, the Alagem campaign was preparing for its final push to make the initiative attractive to voters in November. It posted a slick new video on its website featuring images of people biking, walking through gardens strewn with fountains and a voice-over saying, “Beverly Hills is different from neighboring Los Angeles … like an oasis amidst the hustle and bustle.” The initiative is then introduced, and the soothing voice ends on, “It’s a better plan for more open space and a greener Beverly Hills.”

From left: The Waldorf Astoria and Anbang building in Beijing

From the New York website: Anbang Insurance Group plans to take a breather from its acquisition frenzy and play with the $13.5 billion in overseas assets it already has.

Anbang, which acquired the Waldorf Astoria hotel last year for $1.95 billion, told Bloomberg that it’s going focus on its existing companies before seeking out new ones. Since 2014, the Chinese insurer has purchased $13.5 billion in overseas assets, including the $6.5 billion purchase of Strategic Hotels & Resorts.

“We want to build up the existing synergies a bit first, and consider new deals when appropriate opportunities emerge,” Vice Chairman Yao Dafeng told the website. “You can’t just keep buying everyday. You need to also digest and absorb.”

Anbang joins other major Chinese companies in pulling back on foreign acquisitions. The Fosun Group, for instance, announced in August that it plans to sell $6 billion in assets to help boost its credit ratings.

Anbang made headlines last week over its confusing ownership structure. The New York Times reported that Anbang is controlled by a group of companies that are owned by roughly 100 people. Yao told Bloomberg that the report was “not factual” and that Anbang is a “private company that strictly abides by Chinese laws and regulations.” [Bloomberg] — Kathryn Brenzel

Aerial view of the four properties at 5314 to 5334 Cartwright Avenue

A set of boutique condos could soon rise in North Hollywood.

Private property owner Leon Kaplan has filed a tentative tract map for a 33-unit condominium project on the corner of Cartwright Avenue and Chandler Bikeway, city documents show.

The complex would sit on four lots totaling over a half-acre piece of land, which Kaplan acquired between April and October of 2014, property records show. He paid about $2.3 million in total. Three of the four parcels are occupied by single-family homes, while the other one houses a four-unit residential building.

City documents show that Kaplan is represented by Steve Nazemi of DHS & Associates, a planning and land surveying firm based in Tustin.

From left: Jeff Weller of Lion Real Estate, the property at 5919-5939 Reseda Boulevard and singer Chris Brown (credit: Steve Granitz, Wire Image)

Multifamily investors don’t only look for properties that are, or will soon be, in walking distance to a Blue Bottle. Case in point: Tarzana, in the San Fernando Valley.

Rent in the residential neighborhood, which has long served as a hideaway for celebrities (Chris Brown, with his manse in recent headlines, among them), grew 6.2 percent from the second quarter of 2015 to the second quarter of 2016, according to a report by Steve Basham of CoStar. Its growth far exceeded the L.A. metro average of 4.2 percent.

“Tarzana has enjoyed record-low vacancies in recent years, helping to spur some of the strongest rental gains in the [L.A] metro,” Basham said.

Meanwhile, the corner of Tarzana north of Ventura Boulevard — where its apartment properties are sequestered off, away from its higher-end homes — has seen an uptick in investment and development interest in recent months.

Lion Real Estate, a firm with properties in hip areas like Echo Park and the Arts District, has been on a buying spree in the much-less-hyped neighborhood, as well as in the area where Tarzana meets its northern neighbor Reseda. Lion is about to close on an $11 million off-market transaction for 48 units on 1.5 acres at 5911-5917 Reseda Boulevard, The Real Deal has learned. The property sits next to the 112 units it bought for $19 million earlier in the year at 5919-5939 Reseda. Counting another property it acquired on the Reseda border, it now owns 160 units in the area.

“I think that people are being pushed out of the city center as rents rise, and they are seeing that [Tarzana] is just a few stops off the highway,” said Jeff Weller, who co-owns Lion with Mory Barak, adding that renters can get more for their money in Tarzana and Reseda than they can in Warner Center, with a shorter commute to L.A.

He said the firm is getting $1,600 to $1,800 a month for fixed-up one-bedroom units in Valley neighborhoods that were topping out at $1,200 only recently. Rents at 5911-2917 Reseda are 20 percent below market rate, Weller said. Lion plans to invest $800,000 in renovations and to increase rents as soon as current leases expire, he said.

Vacancy has reached record lows in Tarzana, hitting 2.3 percent in the second quarter, according to CoStar. The neighborhood’s population has increased by more than 6 percent over the past five years, topping the L.A. metro rate of 4 percent. Apartment inventory, on the other hand, has not grown to meet it. The only new construction that has taken place in Tarzana in the past five years is the 50-unit complex at 17720 Magnolia, which delivered in July 2015, according to Basham’s CoStar report.

“Tarzana has been a dead zone for multifamily development in recent years,” he said, noting that 95 percent of its inventory is over 20 years old, making the neighborhood’s supply some of the oldest in L.A. It is also a small supply, totaling roughly 6,700 units.

The pace of development, however, could soon change. Los Angeles-based development firm Gelt has also been making moves in Tarzana. It recently submitted plans to the city for its second apartment complex, a 170-unit building at 5521 North Reseda Boulevard. The project sits just a block away from its first proposed development in the area, The Watermark, which would have 15 studio apartments, 112 one-bedroom units, 114 two-bedroom units and 13 three-bedroom units.

The surrounding areas are also seeing some action. Northridge has also seen project proposals from the likes of Harridge Development as rents increase across several San Fernando Valley submarkets. Woodland Hills, the West San Fernando Valley and Sherman Oaks have all seen steep increases, as renters are priced out of city centers like Downtown and Koreatown, Basham said. 

Seeing this trend, Lion is attempting to acquire a couple thousand units in the Valley over the next few years, Weller previously told TRD. 

“The whole area is changing with more development along Reseda, including [Harridge CEO] David Schwartzman’s development at 8400 Reseda [in Northridge],” he said.

Rent growth in Tarzana and other “secondary markets” fits into the trend of L.A. rents rising fastest at the lower end of the market. Tarzana rents average around $1,650 a month, about 10 percent lower than the Metro as a whole, according to Basham’s report.

The low — albeit swiftly rising — rents show a neighborhood divided. While Tarzana’s average income tops $100,000 in the swanky residential areas in the Santa Monica Mountains, where celeb manse’s trade for $3 and $4 million, the multifamily corner to the northeast is more in line with the San Fernando Valley’s $50,000 average.  

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From the L.A. print issue: We were thrilled to open the doors to our Los Angeles office at the start of this year, when we launched our fast-paced website. Since then, we’ve been breaking real estate news, analyzing reports, profiling major players and investigating industry gossip as we watch the Downtown skyline rise right outside our windows.

Los Angeles has always been a unique and complicated region, containing 88 cities with their own nooks and crannies and market eccentricities. But now, more than ever, Los Angeles is seeking to shape its identity — how dense it should be, how walkable, what its architecture conveys to the outside world, and so much more.

Online, at TheRealDeal.com/LA, we track these questions every day. We cover the rise of DTLA’s residential towers, as new luxury apartments flood the market and landlords offer incentives to compete. We track how mansionization restrictions, zoning battles and NIMBYism affect residential markets from the Westside to Northeast L.A. We follow the density-curbing initiatives headed to our ballot and the pushback against them. We watch the new faces of the movie business, like Netflix, sign leases — ironically, in old Hollywood. We cover the quick growth of Silicon Beach and the creative office craze. We cover the dozens of downtown centers outside of DTLA, tracking trends from Beverly Hills’ Golden Triangle to Old Town Pasadena.

We also report on the industry itself, as consolidation and competitive poaching fuel a broker shakeup in the commercial sector, and new residential players like Douglas Elliman and Compass step on the Westside’s gilded residential turf. We cover lawsuits, unveil LLC buyers and find the projects seeking EB-5 funding.

We cover the dirt that, for a long time, was left unturned. We look forward to continuing to report on the wheelings and dealings in this real estate town that is often misunderstood as being all about fame and glamour — though don’t worry, we cover celebrity house trades, too. We’ll see you online.