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Want to see Trump’s tax returns? Give him a mortgage

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Donald Trump (illustration by Lexi Pilgrim for the Real Deal)

From the New York websiteDuring Monday night’s presidential debate, Donald Trump once again refused to release his tax returns. But a few lucky banks and gaming regulators have had the privilege of seeing them over the years. The catch: they are legally barred from disclosing any information.

Employees of the Pennsylvania Gaming Control Board, for example, could face a criminal charges if they leak information on Trump’s returns, according to a spokesperson. The Missouri Gaming Commission isn’t even legally allowed to disclose if they have seen the tax returns. “I could not tell you whether we had them,” the commission’s general counsel told the Associated Press.

At Monday’s debate, Trump’s democratic opponent in the presidential race, speculated that Trump won’t release his tax returns because they would show he pays no federal income tax. Trump countered: “That makes me smart.”

All presidential candidates of the past decades have released their tax returns, in part to shed light on any potential conflicts of interest. Clinton has released hers, as has Trump’s running mate Mike Pence.

Presidential politics aside, Trump’s tax returns would also help shed some light on one of the real estate industry’s greater mysteries: how much Trump really is worth. Although tax returns don’t disclose net worth, income figures could offer clues. At Monday’s debate, Trump said his portfolio of properties was valued at $3.9 billion and he made $694 million in income last year. Earlier this year, Bloomberg estimated his worth at $2.9 billion. In 2013, The Real Deal took a stab at figuring out the Republican nominee’s worth.  [AP via WSJ]Konrad Putzier


Head of Wanda’s Beverly Hills subsidiary weighs in on development spat

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A rendering commissioned by the “No to HH” campaign of the 26-story tower proposed by developer Beny Alagem in Measure HH

A rendering commissioned by the “No to HH” campaign of the 26-story tower proposed by developer Beny Alagem in Measure HH

Wanda Group’s Beverly Hills subsidiary is upping the emotional ante in its ongoing dispute with a competing Beverly Hills project.

“The Beverly Hilton and some of the proponents of Measure HH have resorted to xenophobic language in order to try to discredit us and the One Beverly Hills project,” Rohan a’Beckett, the deputy GM of Wanda Beverly Hills Properties, told the Hollywood Reporter.

It is unclear what exact language was used, but the THR interview was the first time the real estate chief has stepped centerstage to fight back against allegations that some suspect came from his top competitor. He directly questioned the connection between Sacramento lawyer Gary Winuk, who has filed two publicized letters against Wanda’s $1.2 billion One Beverly Hills project, and its competitor next door, Beverly Hilton owner Beny Alagem’s 26-story condo tower proposal. Alagem is trying to get his tower approved via a ballot initiative dubbed Measure HH. Wanda Beverly Hills Properties has largely funded the opposition campaign, “No on HH,” which focuses on the project’s height.

Winuk’s first letter, sent on behalf of “anonymous citizens” accused former mayor Barry Brucker of breaking lobbying laws by consulting on the One Beverly Hills project. The second letter was sent on behalf of a labor union that represents workers at Alagem’s Beverly Hilton hotel. It accused Wanda of using foreign money to campaign against Measure HH. Through Winuk, labor union Unite Here Local 11 alleged the Chinese developer is illegally “funneling money” into the “No on HH” campaignThe Real Deal pointed out the same lawyer was involved in both separate complaints on Monday.

Beckett told the Hollywood Reporter that the Wanda Group was never contacted by Unite Here Local 11, which claims to have reached out to the company to discuss unionization of the hotel.

“For months, Mr. Winuk has refused to identify his client, despite numerous requests to do so,” a’Beckett told THR. “The union may be Mr. Winuk’s client on this scurrilous accusation, but he has refused to identify his client from his past accusations.”

Beckett went on to further suggest the lawyer was working for Alagem’s campaign.

“There is only one entity that benefits from Mr. Winuk’s attempts to derail the One Beverly Hills project and bully opponents of Measure HH,” he said.

When contacted by the magazine, Winuk said, without disclosing his client, “The relevant issue is whether there is an ethics violation and if so what is the appropriate measure for the city to take?” [THR]Cathaleen Chen

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Stop the presses: Harridge pays $120M for 26-acre LA Times printing plant site

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The printing plant site (via Harridge Development) and, from left: David Schwartzman of Harridge and Carl Muhlstein of JLL

The printing plant site (via Harridge Development) and, from left: David Schwartzman of Harridge and Carl Muhlstein of JLL

A partnership headed by Harridge Development Group purchased the 26-acre Los Angeles Times printing plant just south of the Arts District from Tribune Media’s real estate arm for $120 million, The Real Deal has learned.

The purchase price equates to a price per square foot of approximately $106 for the land.

The site at 2000 East 8th Street, bounded by Olympic Boulevard and Alameda Street, is the largest in a flurry of land grabs in and around the neighborhood in recent years, as its appeal spreads beyond its technical borders. JLL’s Carl Muhlstein, Jeff Adkison and Rob McRitchie brokered the deal, which closed this week.

“The Arts District is more a state of mind than a hard border,” Muhlstein said, adding that between the massive printing site, SunCal’s land and AvalonBay’s development, the area near the 10 freeway has “a lot of filling in to do” with new uses.

Seven acres of the printing plant site are immediately developable, and Harridge plans to build retail, including a mid-level grocery store, on that part of the site.

David Schwartzman, CEO of Harridge, called that plan “against the trend,” a reference to the spate of residential projects planned for the Arts District.

“There is so much residential, and a lot of high-end [stores] but you need everyday stuff,” he said. “You need the grocery stores, the Walgreens.”

The four buildings on the land — a pressroom, a plate-making department, a storage facility and a shipping area — are leased to the Los Angeles Times’ publisher, now known as tronc, until 2023.

Harridge hasn’t finalized its plans for the part of the site where the Times’ still prints several newspapers, Schwartzman said. It’s not planning small lot homes, as it has in Frogtown, or a hotel and condo complex, as it has in Hollywood.

I never say never, but I don’t think it’s going to be a residential play,” he said. “It’s going to be consistent with the general plan, without a zone change.”

While it’s waiting to develop the site, Harridge will collect significant rent from tronc, which sources said pays roughly $4 million a year in rent. Completed in the late 1980s, the printing facility opened in 1990, with a staff of 1,500 people that printed only one newspaper. Now, a staff of 150 prints six newspapers on the site, Muhlstein said. 

The $106 per square foot for the land is significantly less than the roughly $207 SunCal paid last year for the 14.5-acre site where it’s planning 1,736 residential units, two hotel towers, shops, creative offices and a school, as well as 23,000 additional square feet for art and two parks.

What is actually possible to build in the Arts District proper is largely unknown, due to legal battles over the hybrid industrial ordinance — an attempt to eradicate spot zoning in the former industrial area that many say only complicate development. Projects that don’t require a zoning change have an advantage, including avoiding the possibility of being stalled out if the Neighborhood Integrity Initiative passes.

The sale of the printing plant was one of three properties sold this month by Tribune Media for a combined $430 million, according to a company release. Onni recently closed on the Times’ Downtown headquarters for $105 million, and L.A.-based CIM Group nabbed Chicago’s Tribune tower for $205 million. The company will continue to sell off its assets.

“We have made considerable progress toward achieving our goal of realizing at least $1 billion of gross proceeds from the sale of some of our most significant real estate holdings,” Peter Liguori, Tribune Media’s CEO, said in a statement.

The sales are part of a larger trend of newspapers inking deals to sell their properties, Muhlstein noted. Locally, the Korean Times sold its Park Mile building earlier this year. Meanwhile, the Herald Examiner building is being repurposed as creative office and retail space.

Donald Trump’s fortune takes an $800M hit: Forbes

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Donald Trump

Donald Trump

From the New York website: Donald Trump’s net worth reportedly checks in at $3.7 billion — $800 million less than the value of his fortune last year, according to Forbes.

Forbes claims that 28 of the presidential nominee’s assets have declined in value in the last year. If you believe the publication, 40 Wall Street, for example, declined $28 million in value. Trump Tower, according to Forbes, is now worth $159 million less than it was last year, having a net value of $371 million. Forbes says Trump Tower has declined due to an estimated 20 percent drop in net operating income and an 8 percent decline in the tepid commercial real estate market.

Trump also gave $7 million of his own money to his campaign and loaned another $48 million to it, which Forbes doesn’t think he’ll recover.

Forbes’ methodology for this investigation was not made clear. If the value drops are based on city property assessments, it should be noted that these figures don’t necessarily — and often don’t — reflect true market value.

Trump’s fortune has been a subject of controversy for several years — and a mystery exacerbated by the candidate’s continued refusal to release his tax returns. During Monday’s debate, Trump said his portfolio of properties was valued at $3.9 billion and that he made $694 million in income last year. Forbes says that’s not quite true, claiming he mixed income and revenue. He also noted that he’s been audited by the IRS every year for the past 15 years — not that he’s complaining. Earlier this year, Bloomberg pegged his worth at $2.9 billion.

In 2013, The Real Deal took a deep dive into the value of Trump’s assets. [Forbes] Kathryn Brenzel

Is Los Angeles the new Shanghai?

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Rendering of the Metropolis project (credit: highrises.com)

Rendering of the Metropolis project (credit: highrises.com)

For Greenland Group executive Winston Yan, the revival of Downtown L.A. looks awfully familiar.

“It reminds me of what’s happening in Beijing and Shanghai,” said Yan, whose company is developing the $1 billion Metropolis project downtown. “Now it’s happening here.”

The Chinese developer — and its cohorts such as Shenzhen Hazens and Oceanwide — has ample experience with mega-projects in its homeland. “Their ability to build on this scale is completely child’s play to them,” real estate lawyer Tony Nasis told the Times.

Indeed, the building boom has become something of a showcase for Chinese real estate companies, which are willing to pay a premium to establish themselves as global brands. Chinese developers are responsible at least seven of 18 land deals downtown since 2014, according to real estate firm Transwestern.

For Chinese developers, foreign markets like New York City, Sydney, and L.A. allow for diversification at a time when the Chinese real estate market has tempered. But building in L.A. does come with a few more headaches, they said.

“The speed is so dramatically different in China,” Sonnet Hui, executive project director for Shenzhen Hazens, told the Times. “There’s a lot of planning and study here, whereas in China it’s just ‘Let’s go, let’s go.’ ”

Her company is developing a $700-million mixed-use project across from Staples Center.

Many Chinese developers are courting middle- and upper-class buyers straight from China, including Greenland, whose Metropolis has been marketed to both Chinese nationals and New Yorkers. Foreign buyers can often pay in all-cash, but with China’s economy in flux, the developers may have to look to local buyers as well. [LAT]Cathaleen Chen

Maxxam Enterprises doubles down on Arts District with live-work projects

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The two development sites at 676 Mateo and 1100 5th

The two development sites at 676 Mateo and 1100 5th

Forget 90210. Beverly Hills-based Maxxam Enterprises is getting serious about the Arts District, where the developer recently filed plans for two live-work complexes.

The first project, filed Tuesday, calls for the construction of 172 live-work units in a mixed-use complex on the corner of Imperial and Mateo Streets. The project will also include 23,025 square feet of commercial space.

Spanning just over one acre, the site at 676 South Mateo Street is occupied by a warehouse, which would be demolished before the project breaks ground. In addition to a vesting zone change, Maxxam, under the entity District Centre, LP, applied for an alcoholic sales permit and a 20 percent density bonus. If the latter is granted, about 18 of the 172 units will be set aside for very low-income households.

Filed Wednesday, Maxxam’s second project of the week envisions 218 live-work units and about 22,000 square foot of open space and amenities, including a “resident gallery,” according to city documents.

The near-acre site at 1100 East 5th Street also hosts a warehouse. Maxxam aims for a 20 percent density bonus for this project as well, which requires about 24 units to be set aside for very low-income households. Based on its alcohol sales permit request, up to four establishments in the complex may be bars or restaurants.

It’s likely that Maxxam will take its time developing and holding these properties, according to a source familiar with the firm, regardless of any possible entitlement hiccups.

“They’re fundamental investors who know that in 10 years, this will be a great area,” the source told The Real Deal.

Maxxam acquired this warehouse as part of a portfolio sale for $18 million in July of 2015, according to CoStar. The other asset in the sale was the neighboring warehouse at 1130 East 5th Street. The investment firm spent $14 million last May on the Mateo Street property.

The Beverly Hills company has extensive holdings in the L.A. area, including the Promenade Gateway, a retail and creative office development at 1453 3rd Street Promenade in Santa Monica.

The developer could not be immediately for comment.

Eda Kouch contributed to the reporting

Wheels of fortune: Industry players are rethinking what a residential brokerage is worth

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wheels-of-fortuneFrom the New York September issue: When the venture-backed brokerage Compass secured a cash infusion of $75 million last month, the response from industry rivals was fast and furious.

The valuation being bandied about — more than $1 billion — did little to silence critics who claimed Compass’ math was lofty enough if it was deeming itself a tech startup, but downright artificial for a residential real estate brokerage.

But could there have been a hint of jealousy among the firm’s detractors? Few firms, if any, in New York City have a valuation that matches the figure Compass  hit roughly three years after launching.

In fact, residential brokerage is a notoriously thin-margin business, especially in New York.

Still, firm valuations have been thrust into the limelight in recent years amid an increased pressure for profitability that’s led to a wave of new mergers and acquisitions.

The mega-developer Related Companies kicked things off in late 2014 when it acquired a 50 percent stake in the boutique firm CORE. That was followed in October 2015 when rental giant Citi Habitats scooped up Brooklyn-based Aptsandlofts.com and Engel & Völkers NYC merged with boutique firm Mercedes/Berk. The following month, Sotheby’s International Realty acquired Fenwick Keats. And this past May, Citi Habitats went back for more, buying Miron Properties.

Most recently, in July, Town Residential founder Andrew Heiberger, who formerly built and sold Citi-Habitats, bought out former equity partner Joe Sitt of Thor Equities after a volatile, five-year partnership marked by dueling lawsuits.

While the purchase prices on those acquisitions were never publicly disclosed, speculation has run rampant about what each firm fetched. It’s also prompted some industry players to rethink how to financially evaluate firms in a business where your key assets are independent contractors — particularly these days, when loyalty is waning and poaching is widespread.

“The assets of a real estate company ride up and down the elevator every day,” said Brown Harris Stevens President Hall Willkie, using a common industry refrain.

Willkie said that as a result, firms looking to make acquisitions are often willing to pay a premium if the deal includes locking in top talent. Last year, for example, his company bought Miami-based Zilbert International Realty, which was doing $450 million in annual sales. Although Willkie declined to disclose the sale price, he described firm founder Mark Zilbert as a “rainmaker” and said he signed a 10-year contract to stay with BHS. “So that has extra value beyond what they’re doing today,” the BHS chief said. “You pay more for that.”

Because brokerages are traditionally valued at a multiple of their earnings, competition is fierce when it comes to recruiting top agents and winning listings.

CORE’s Shaun Osher, Brown Harris Stevens’ Hall Willkie and Elliman’s Dottie Herman

CORE’s Shaun Osher, Brown Harris Stevens’ Hall Willkie and Elliman’s Dottie Herman

“Most brokerages are always trying to increase volume, no question about it,” said Steve Murray, founder of consulting firm Real Trends, which has valued hundreds of firms nationally and advised on high-profile deals, including Barbara Corcoran’s sale of her eponymous firm in 2001 as well as more recent transactions like the Citi Habitats-Miron sale.

“If you increase volume, you get scale, you make more money, and the company is worth more,” Murray said.

Holding cards close

It’s nearly impossible for an outsider to determine the exact value of most New York residential firms, because many of them are privately held and not required to disclose earnings figures.

But there are a few owned by public giants.

For example, Douglas Elliman falls under the umbrella of the publicly traded Vector Group, while Corcoran Group and Sotheby’s are part of the New Jersey-based brokerage conglomerate Realogy Holdings. Those public ownership structures offer a peek under the hood of just how much these companies are valued at — even though they don’t reveal them outright.

For example, back in 2013 when Vector bought Prudential’s 20.6 percent stake in Elliman, it paid $60 million in cash, according to regulatory paperwork filed with the U.S. Securities and Exchange Commission. The amount pegged Elliman’s value at $291.4 million. That number, however, is likely to have gone up in the last three years. Last year, Elliman generated $637 million in revenue from its national real estate business — up from $435.6 million in 2013. And, earlier this year, Forbes estimated the net worth of CEO Dottie Herman — who owns roughly 30 percent of the company — at $270 million. Assuming that Herman’s fortune is derived entirely from Elliman, which seems to be the case given that she comes from humble beginnings, the firm could be worth nearly $1 billion, a figure one source said was closer to Elliman’s true value.

Still, even that higher figure may be less than Compass’ estimated valuation — which some pegged at $1.3 billion in July when firm founder Ori Allon and CEO Robert Reffkin were raising their latest round of cash.

Many industry sources, however, consider it futile to compare traditional brokerages to Compass, because the firm has pitched itself to investors as a tech startup rather than a real estate company.

According to Garrett Black, a senior analyst at the venture capital database PitchBook, investors use completely  distinct metrics to evaluate the two sectors.

wheels-of-fortune-pull-quote“Venture capitalists looking to value [tech] holdings have to include more projected metrics overall, versus looking at revenue multiples,” he said.

For example, early- and mid-stage tech companies may not have robust revenue, but they may have promising business models that investors believe could lead to big returns down the road. In those cases, investors often look at the size of a company’s customer base and how much it costs to acquire customers, in addition to how much cash it’s burning through. Sometimes, the investors also simply have a personal connection with the startup’s founder.

For later-stage companies, investors evaluate the company’s sustainability and its ability to return investment dollars.

Tech companies like Compass are far from the norm in New York City’s brokerage business, which still relies on the age-old model of hard sales and profits to determine a company’s worth.

The standard formula for traditional firms, according to multiple sources, takes into account gross commission and profit margin, and then multiplies the firm’s earnings by 4 to 6.

If Compass — which claims to be doing $6 billion in nationwide sales — were evaluated using that equation, its valuation would come to $46.8 million, a number that makes more sense when looked at next to other firms in the city.

Realogy, for example, is an industry giant and has a market cap of $3.99 billion.

While that company does not break out the performance of brands, its NRT division — which owns Corcoran, Sotheby’s, Citi Habitats and others — sold $167 billion worth of real estate in 2015. The company told The  Real Deal in March that Corcoran inked contracts worth $21 billion last year, including $5.6 billion from Corcoran Sunshine Marketing Group, its new-development market arm.

By comparison, Terra Holdings — which owns BHS and Halstead Property — says on its website that it brokers $7 billion in sales annually in markets including New York City, New Jersey, the Hamptons, Westchester, Long Island, Connecticut and Florida. Using that sales figure, TRD estimates the company’s value to be $54.6 million.

Meanwhile, Town Residential said it sold $2.7 billion worth of real estate in New York City in 2015, putting its value at $21.1 million, according to TRD’s back-of-the-napkin calculation. A Town spokesperson disputed that figure, calling it a “gross underestimate,” and said Town closed over $71 million in commission revenue in 2015 alone. Compass does a similar number of transactions and its investors value it at $1 billion, she pointed out.

But earnings are just one factor affecting the market value of residential firms. Companies are also impacted by less tangible things, including the strength of their brands, their leadership and other hard-to-quantify metrics such as whether top-producing agents are likely to stay after a sale, industry players told TRD.

Past sales provide a window into how much firms can go for, depending on how much business they’re doing.

More than a decade ago, for example, Corcoran reportedly paid $49.6 million for Citi Habitats, which had combined sales and rental volume of $900 million at the time. More recently, in 2014, Realogy shelled out $166 million for California-based tech brokerage ZipRealty, which sold $2.7 billion worth of real estate in 2013 and grossed $32 million in profits that year. Locally, Realogy is rumored to have paid $10 million for Aptsandlofts.com. Meanwhile, Related’s deal with CORE was worth $26 million, according to sources with knowledge of the deal. Officials at the firms declined to comment.

Citi Habitats David Maundrell

Citi Habitats’ David Maundrell

“A traditional brokerage basically operates on how much revenue it can earn and still retain top-producing brokers. It all emanates from your brokers,” said Stuart Siegel, CEO of Engel & Völkers NYC.

Siegel noted that these mergers and acquisitions offer firms instant market share. “Or frankly,” he added, “it’s another way to get talent.”

Likewise, in the cases of Aptsandlofts.com and CORE, purchase prices were no doubt bolstered by the charisma and experience of each firm’s founder. Citi Habitats President Gary Malin, for example, touted Aptsandlofts.com founder David Maundrell’s deep ties to the Brooklyn market when announcing the deal in late 2015. And in 2014, Related CEO Jeff Blau said CORE founder Shaun Osher was the “No. 1, 2 and 3” reason he bought a piece of the firm.

“At first I wanted to see if we could steal Shaun away and have him come work here,” Blau said at the time. “But he is very committed to his company, and out of those conversations came the idea to make a significant investment in CORE. As the slogan goes, ‘I liked it so much I bought the company.’”

Pricing-fueled profits

Whether brokerages are evaluated with cold, hard numbers or with less tangible factors, there’s almost always a clear correlation between what companies are worth and the market’s performance. For the past few years, soaring prices and the boom in luxury development in New York have pumped up brokerage values. Despite the general consensus that the market has stabilized or even plateaued in recent months, the pace of the latest mergers and acquisitions hasn’t been seen since the early to mid-2000s.

“The last 18 months in New York and around the country have been every bit as busy,” said Murray of Real Trends.

Even as the market slows, he predicted a long runway of brokerage deals. Two of the largest national residential conglomerates — Berkshire Hathaway and Realogy — see acquisitions as a path to growing market share, as well as a way to acquire top-producing agents.

Elliman Chairman Howard Lorber put it this way: “You’re worth more if you have market share. If you ever want to sell, having big market share is what you get paid for,” he said, adding, “When you’re a market leader and you have big market share, you’re always going to survive.”

In fact, the founders of smaller firms may want to get out now before the next downturn, especially if they’ve hit a wall in terms of growth, sources told TRD.

Jed Garfield, owner of the townhouse-focused brokerage Leslie J. Garfield Real Estate, said he’s resisted buyout offers in the past, although he understands why they’re appealing to some.

“For a lot of people, it’s nice to be like, ‘You know what? I built this business, I will get a nice chunk of change and relieve myself of all the headaches of running the business,’” said Garfield.

Of course, national brands have tried unsuccessfully for years to breach the New York City market. But even when it comes to local horse trading, mid-sized firms — as well as smaller firms like Garfield’s — are in a precarious situation: Often, they serve as something of a farm team for larger firms, and they can be viewed as perpetual takeover targets.

“People with smaller firms realize it’s very, very hard to go to the next level. You need a ton of money,” said one brokerage head who asked to remain anonymous.

Realogy CEO Richard Smith

Realogy CEO Richard Smith

Lorber offered a particularly dire prognosis for mid-sized firms. “[They] can’t compete. How can they spend the money on marketing that we can? It’s almost impossible,” he said. “It’s mostly the mid-sized [companies] that have expenses but not economies of scale. Boutique and big firms can ride it through.”

Meanwhile, Murray said, once a big company gets to a certain size, buying out other firms — rather than growing organically — offers the fastest and most reliable way to expand. As a result, big players such as Terra and Realogy are eyeing more deals, he said. “Those guys want to acquire more companies in New York City,” he added.

Realogy’s reality

When it comes to understanding the dynamics of running a brokerage, recent volatility at Realogy reflects the tenuous state of the business.

The company’s $3.99 billion market cap may sound high, but it’s actually a 45.8 percent drop from 2013, when it clocked in at $7.36 billion.

CEO Richard Smith declined comment for this article, but in an Aug. 3 earnings call he blamed a “challenging” second quarter on frothiness in the high-end market as well as vicious poaching of top-producing sales agents. During that quarter, NRT saw transaction volume slide 1 percent and average sale price drop 2 percent. Overall, NRT pulled in $1.27 billion in revenue — a $21 million drop from the prior year, as sales above $2.5 million slowed.

“The market is always competitive for agents,” Smith said, noting that the “trend has recently become more pronounced, as new entrants to the industry as well as well-established firms use short-term economic incentives to build market share.”

Analysts say Realogy’s own market share is at risk if it does not make a change.

In a late-July research note to investors, JPMorgan analyst Anthony Paolone wrote that the company was lagging behind and losing market share “due to outside competition, agent attrition or its geographic mix.”

During the August call, Smith said the company would roll out an “action plan” to retain and recruit agents over the next 12 to 18 months in anticipation of a pickup in the luxury market.

Still, in a follow-up note, Paolone wrote that Realogy’s expenses related to such a plan would come at a cost, by putting “pressure on agent splits” and “on the company’s other cost savings initiatives.”

Real Trends’ Murray said Realogy’s challenge is that it has “the biggest footprint in the country.”

“The bigger you are, the harder it is to grow unless you’re a tech player,” he said.

Or unless you go on a buying spree. Realogy has demonstrated its appetite for acquisitions in New York over the past year with its subsidiaries’ purchases of Aptsandlofts.com, Fenwick Keats and Miron Properties — moves that industry players said reflect long-term strategic thinking. “You either have market share or you don’t,” said one longtime player.

The numbers game

While agents are key to driving revenue, they are also expensive to keep on board. As a result, savvy principals need to be strategic about how many agents they have — and how much those agents are paid. Firms are increasingly under pressure to pay higher and higher commission splits amid an ultra-competitive market for top talent. A recent Real Trends analysis found that the average brokerage keeps only 20 cents for every commission dollar earned by agents.

wheels-of-fortune-pull-quote-2“If we could give our agents everything under the sun we would, but there are limits to what you can give and still operate a successful business,” said one New York City brokerage head.

Engel & Völkers’ Siegel said agents who are not productive cost a firm valuable dollars. He said he’d rather have one agent who produces $250,000 in commission annually than 10 who bring in $25,000 apiece. That may be because agents must typically generate gross commission incomes of $100,000 to $150,000 to cover desk fees and marketing costs that are paid for by the firm, according to sources.

“You have to think of it like a pyramid,” Siegel said, explaining that the ideal agent mix includes just a handful of agents with splits north of 70 percent and the bulk of brokers earning between 50 percent and 70 percent. “Top agents help you with your brand and drive visibility, but the agents who are tiers below help you with your profitability,” he said.

“As an owner-operator, I’m happy to have great agents earn a lot because it’s helping me drive market share, but I can’t have a business dominated by them because then I don’t have profitability,” Siegel added.

Of course, a firm’s success depends on its ability to get listings and make sales. But there are different schools of thought on how to achieve that goal.

Heiberger said that at Town he’s strived to diversify everything from agents’ experience levels to the size and location of their listings.

“Is your income all resting on one or two brokers’ laps? Or is it diversified over 100 to 200 people?” he told TRD. Similarly, to protect a firm’s exposure, he said, you wouldn’t want to have everyone focused on the $20 million-plus market, in case that segment implodes.

At Town, he insists he’s done both, despite losing several top guns — including director of sales Wendy Maitland and executive vice president of sales and leasing Itzy Garay — in the wake of the buyout.

“Notwithstanding the noise surrounding the company,” he said, referring to the messy split with Sitt, “the platform is primed to grow.”

For the largest and most established firms, such as Elliman and Corcoran, signing on agents, increasing transaction volume and controlling as many listings as possible is the name of the game.

And for its part, Terra thinks there’s value to be had by tapping multiple segments of the market — hence its portfolio, which includes both BHS (targeting the high-end Manhattan luxury market) and Halstead (playing the volume game citywide).

Willkie, whose firm has just under 500 agents, said BHS has “never been about being big.”

The average agent in its main office grossed an impressive $500,000 last year, while company wide that number stood at $400,000, he said.

“It’s a different model” than other firms, he said. “It’s like the difference between Bergdorf’s and Macy’s.”


CAA managing partner sells Beverly Hills home for $5.2M

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Meryl Streep, Kevin Huvane and the house at 1720 Ambassador Avenue

Meryl Streep and Kevin Huvane (by Kevin Mazur, Getty Images) and the house at 1720 Ambassador Avenue (via the Agency)

Talent scouting powerhouse Kevin Huvane sold his Beverly Hills abode for $5.2 million Tuesday, just days after it hit the market for $4.95 million.

The buyer is a real estate attorney from Bel Air and his family, buyer’s broker Rochelle Maize of Nourmand & Associates told The Real Deal.

The traditional-style residence sits on Ambassador Avenue — a quiet stretch of north of Sunset. It spans 4,139 square feet and contains four bedrooms and four bathrooms. 

“Houses like this don’t come in often at a relatively low price,” Maize said. “When they do, they’re gone very quickly.”

Huvane — who claimed to have felt, as a 16-year-old in the 1970s, Meryl Streep’s greatness when he saw her in Shakespeare in the Park — is the managing partner of the Creative Artists Agency. His rolodex of clients include the likes of Brad Pitt, Halle Berry and yes — Streep herself. He acquired the house in 1988 for $1.65 million, according to property records.

The listing agent was Ed Fitz from The Agency.

China’s richest man warns the country is facing a RE bubble

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From the New York website: Wang Jianlin — who built a massive fortune developing real estate in China — says the market is now facing the “biggest bubble in history.”

Jianlin, who is the country’s richest man, says the problem is that prices are continuing to rise in cities like Shanghai, but are dropping in thousands of smaller cities where there are vast numbers of vacant properties.

“I don’t see a good solution to this problem,” the Dalian Wanda Group chairman said in an interview with CNN Money. “The government has come up with all sorts of measures — limiting purchase or credit — but none have worked.” He’s not worried of a sudden collapse in economic growth.

China’s economy is slowing and its debt levels are rapidly rising. There is an enormous amount of money tied up in the real estate market. According to Capital Economics, direct loans to the sector were 24 trillion yuan, or $3.6 trillion USD, at the end of June. Last year, millions of small investors lost their life savings when the country’s stock market tumbled.

The Chinese are some of the biggest investors of real estate in New York City and Los Angeles, seen as a safe place to park money.  In L.A., one of the biggest projects in the pipeline is the Wanda Group’s $1.2 billion One Beverly Hills project. In DTLA, Greenland USA’s $1 billion Metropolis is already under construction.

But, as The Real Deal reported earlier this month, firms based in China are also increasingly taking on risky and complex ground-up developments. August was the 24th consecutive month of net capital outflows from China, with $51 billion leaving the country after accounting for capital inflows — good news for the city’s real estate market. [CNN Money] Miriam Hall

WeHo developer Faring Capital buys City National Bank building in Long Beach for $47M

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100 Oceangate Street Jason Illoulian

An investment and development firm that’s hyperactive in West Hollywood is taking a big leap into Long Beach.

Faring Capital just closed on the purchase of a 229,000-square foot Class A office tower at 100 Oceangate Street for $47 million, CEO Jason Illoulian told The Real Deal. It paid the seller, Steelwave, $205 a square foot for the property, which has views of the ocean.

Eastdil Secured’s Steve Somer and Mike Kathrein brokered the transaction.

Faring will modernize the building with a focus on utilizing courtyard space and common areas, Illoulian said.

Long Beach is becoming a real live, work, play downtown, and we like the affordability aspect, he said. “This project would cost 3, 4, or 5 times more if it was an L.A. property.”

The building is 90 percent leased, with City National Bank — which has offices, signage and a storefront bank — as the anchor tenant. Other tenants include the city attorney’s office.

It is a high performing building for the area, where many office properties have struggled — so much so that several of them were converted to residential towers in recent years. The vacancy rate in Downtown Long Beach was 17 percent in the second quarter, according to a report by Transwestern — and it has hovered around that number for the past several years. Meanwhile, residential vacancy has been comparably tight in the walkable and relatively affordable beachside city, which has a wealth of restaurants and nightlife.

Steelwave made a significant profit on the City National Bank property, which it acquired for $38 million, or $167 a square foot, in 2005.

The $205 a square foot Faring paid was roughly on par with area averages in Long Beach. It is, however, an extreme discount to the pricing in West Hollywood, where the majority of Faring’s projects are based. In that city, a medical building traded in the first quarter for over $600 a square foot, and the Hustler store site traded for almost $900 a square foot.

Faring has been an aggressive developer in West Hollywood, across all property types. It is building 3 hotels, 1,000 residential units and a couple hundred thousand square feet of office and retail, Illoulian said. All of its projects are in Los Angeles County, with the vast majority in West Hollywood. It developed the Catch restaurant that just opened on the roof of 8711 Melrose Ave, and recently broke ground on a 50-condo complex on Doheny that has private elevator access and a bowling alley.  

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Ratkovich wants to sell Google’s Playa Vista airplane hangar

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Ratkovich CEO Wayne Ratkovich, Google CEO Sundar Pichai and the Spruce Goose hangar at

Ratkovich CEO Wayne Ratkovich, Google CEO Sundar Pichai and the Spruce Goose hangar at 5865 South Campus Center Drive (Credit: Youtube, Search Engine Land and Playa Vista Home Sales)

A mere three months after Google leased its former “Spruce Goose”airplane hangar in Playa Vista, developer Ratkovich Company is making moves to sell the property and several adjacent buildings.

The four buildings, collectively known as the Hercules Campus, are expected to sell for up to $300 million. Together, they will span 525,000 square feet after Google completes its buildout.

Under its 16-year lease, Google is paying $11 million in rent every year for the properties. That’s about 50 percent below the average asking rate in Playa Vista, REAlert reported, attributing the discount to the fact that Google is spending an additional $250 million to build out the complex to its specifications. HFF has the listing.

Hercules has an additional 194,000 square feet of space, nearly half of which is also occupied by Google and its affiliates.

Buyers will have to embrace the prospect of a long-term relationship with Google. As part of the current lease agreement, the company’s rent will increase by 3 percent annually. Google also has the option of three 5-year lease extensions and the option to buy the property at a five percent capitalization rate after its first lease ends.

Google inked the hangar lease in June, The Real Deal reported, while also buying an adjacent plot of land from Lincoln Property Company. That parcel is zoned for almost 900,000 square feet of office space. [REAlert] — Cathaleen Chen

Fashion mogul Guy Attal relists Coldwater Canyon compound for $22.8M

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Attal's Coldwater Canyon estate

Guy Attal’s Coldwater Canyon estate

Fashion mogul Guy Attal, the head of label Fabrizio Gianni, has slashed the price of his Coldwater Canyon home by nearly $3 million, bringing the ask to just $22.8 million.

The price cut is the latest in a string of price slashes and hikes Attal has made since first listing the gated estate for sale in 2010. At its priciest, it was listed for $28.5 million.

Attal bought the nearly 15,000-square-foot Paul Williams-designed estate for just $2.55 million in 1999, records show. It was last taken off the market in August, priced at $25.8 million.

Williams & Williams Estates has the exclusive listing.

The multi-winged estate has a home croquet lawn, an outdoor dining room, a two-lane bowling alley, a two-bedroom guesthouse, a tennis court, a swimming pool and spa.

The house was reportedly built in 1941 for Bert Lahr, who played the lion in “The Wizard of Oz.” Hollywood stars such as Melanie Griffith, Ozzy and Sharon Osbourne and Paul McCartney also lived there over the years.

Investor lists longtime Holmby Hills compound with funicular for $79M

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The estate at 300 Delfern Drive (Credit:

The estate at 300 Delfern Drive (Credit:300delferndr.com)

For well-heeled buyers who want the sprawling estate without the walking that comes with it, this $79 million Holmby Hills estate comes with its own funicular.

Investor Gary Wilson, the former Northwest Airlines chairman, is selling the four-acre estate, which comprises four residences, two swimming pools and two greenhouses. The funicular, or inclining railway, allows residents to traverse a hill on the property without breaking a sweat.

Wilson started assembling the compound in the early 1990s when he purchased the 11-bedroom main house from socialite Edith Mayer Goetz. Goetz was the daughter of Hollywood heavyweights Louis Mayer and William Goetz, and often screened movies in the home. He later nabbed three additional guesthouses from a neighboring property when it came on the market.

Jeff Hyland and Drew Fenton of Hilton & Hyland share the exclusive listing with Aaron Kirman of John Aaroe Group.

The main abode spans 20,000 square feet and features a well-preserved art deco den with oak paneling and herringbone floors.

In Holmby Hills — an area known for sprawling compounds such as the Playboy Mansion and the Owlwood estate, both of which exchanged hands this year — the median sales price of a single-family residence is $2.2 million, according to Redfin. [WSJ]Cathaleen Chen


US Bank reaches $13.5M settlement over foreclosed homes scandal

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Former City Attorney Carmen and the US Bank Tower in L.A. at 633 West 5th Street

Former City Attorney Carmen and the US Bank Tower in L.A. at 633 West 5th Street

U.S. Bank agreed to pay $13.5 million in a settlement with the Los Angeles City Attorney over allegations it neglected hundreds of its foreclosed properties, most of which are located in low-income areas of South L.A. and the San Fernando Valley.

Under the terms of the settlement, U.S. Bank would pay $11.9 million in civil penalties for violating the Municipal Code and agree to maintain foreclosed properties for two years, as required by law, the L.A. Business Journal reported. The settlement must still be approved in court.

The lawsuit against U.S. Bank, filed in 2012 by City Attorney Carmen Trutanich, focused on 170 L.A. properties U.S. bank acquired through foreclosure. It said the bank, which is the fifth largest commercial bank in the country, failed to bring to the properties up to compliance standards, despite multiple notices from city agencies.

As part of the settlement, U.S. bank will also designate one full-time senior employee to be the liaison between city agencies and properties that may have code violations [LABJ]Cathaleen Chen

Angelo, Gordon & Co sells Cerritos Corporate Center for $62M

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Cerritos Corporate Center at

Cerritos Corporate Center at 13810-13950 Cerritos Corporate Drive

New York investment firm Angelo, Gordon & Company has sold its seven-building Cerritos Corporate Center for $62 million, less than four months after it hit the market for $60 million.

The buyer was Beverly Hills-based Black Equities on behalf of investors, according to CBRE broker Rebecca Perlmutter.

Perlmutter, along with her colleagues Darla Longo​, Barbara Emmons, Michael Kendall, Rick McGeagh​ and John Biven, represented both parties in the deal.

Angelo owned the industrial park at 13810-13950 Cerritos Corporate Drive in a partnership with Crownsnest Properties, who managed the operation of the property. The two firms acquired the 453,000-square-foot campus for $42.4 million in 2013. Under their ownership, the center underwent slight renovations, including upgrades to the façade and landscaping.

At the time of the sale, the property was 96 leased with 14 tenants.

The new owner is to increase rents that are below market, Perlmutter told The Real Deal.

“In this core submarket, where vacancy is 0.5 percent, competition is tight for buyers,” she said.

Black Equities sold a 8.5-acre site for $83 million to car dealership mogul Hooman Nissani in July, TRD reported. The firm also owns the 27,000-square-foot industrial space at 750 Lairport Street.

Mid-century modern Berkson Residence pocket-listed for $4.25M

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The property at 4620 Rubio (by James Moss) and young Michael Jackson ( by Michael Ochs Archives, via Getty Images)

The property at 4620 Rubio (by James Moss) and young Michael Jackson ( by Michael Ochs Archives, via Getty Images)

The home known as The Berkson Residence, after its former owners, has been pocket listed for $4.25 million, sources told The Real Deal. The residence, at 4620 Rubio Avenue in Encino, was designed by famed architect J.R. Davidson and built in 1939.

The four-bedroom, six-bathroom home measures about 5,500 square feet and sprawls across nearly three-quarters of an acre that sits south of Ventura Boulevard. The site abuts the late Michael Jackson’s childhood home, where the previous owner reportedly often watched Jackson and Sir Paul McCartney playing billiards.

The property at 4620 Rubio (by James Moss)

The property at 4620 Rubio (by James Moss)

“It’s a one-level mid-century modern that’s been thoughtfully added onto,” said Alan Taylor of John Aaroe Group, the home’s listing agent. “They relocated the pool and created a master suite, but one of the best things about this house is the landscaping. The grounds are spectacular and make it incredibly private.”

The Berkson Residence caught the eye of architectural photographer Julius Shulman, whose eye for mid-century modern helped spread the design’s popularity. Shulman’s photographs of the Berkson Residence have been displayed at Getty Center in Los Angeles and are now part of the archived collection.

The property at 4620 Rubio (by James Moss)

A bathroom in the property at 4620 Rubio (by James Moss)

German-born Davidson relocated to L.A. in the 1920s, where he worked for architect Robert D. Farquhar and as an assistant to MGM art director Cedric Gibbons, who designed the Oscar statuette. He later opened his own architectural firm and designed several familiar sites in L.A., including the interior of the famed Coconut Grove nightclub. After he designed the property on Rubio Avenue, Davidson was one of the architects to participate in the famed post-World War II Case Study Houses program.

The Case Study Houses program, sponsored by Arts & Architecture magazine, invited select architects to design and build efficient model homes. The idea was to get ahead of the expected demand as soldiers returned from WWII and needed affordably priced housing. The program ran from 1945 to 1966 and Davidson designed Case Study Homes one, 11 and three.

PHOTOS: TRD celebrates LA magazine launch with intimate Beverly Hills fete

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  • Jeff Hyland Mauricio Umansky  Katherine Clarke
    Jeff Hyland, Mauricio Umansky and Katherine Clarke (Photos by Adam Southard)

The Real Deal broke bread this week with real estate movers and shakers on the West Coast to toast the magazine’s launch in the Los Angeles market. 

Some of L.A.’s biggest real estate personalities gathered for the event at Mastro’s steakhouse in Beverly Hills, where they dined on strip steaks and perused the magazine’s first ever L.A. print issue.

The Real Deal is 100 percent independent and has no shareholders and no debt. We answer to no one but to our readers,” publisher Amir Korangy said in a speech. “The greater the transparency we provide, the more informed our readers can be, which makes for a more stable market, which is good for everyone.”

Attendees came from both the residential and commercial sides of the business — and even included Beverly Hills Mayor John Mirisch. Other big names in attendance included Jeff Hyland of Hilton & Hyland; Beth Styne and Joyce Rey of Coldwell Banker; Carl Muhlstein of JLL; Mauricio Umansky and Billy Rose of the Agency; Michael and Myra Nourmand of Nourmand & Associates; developer Behzad Souferian and Rohan a’Beckett of Wanda Group.

Hannah Miet, the managing editor of TRD LA; West Coast advertising director Frankie Morales and senior national reporter Katherine Clarke also mingled about the crowd.

Vornado Realty Trust is shopping its last LA property for $150M

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Kevin Shannon of NGKF, Steven Roth of Vornado and the property at 800 Corporate Pointe

Kevin Shannon of NGKF, Steven Roth of Vornado and the property at 800 Corporate Pointe

It looks like New York-based Vornado Realty Trust is done with La La Land.

The real estate investment trust is seeking a buyer for its last L.A. property, a 243,000-square-foot Class A office property at 800 Corporate Pointe in Culver City. The asking price is roughly $150 million, sources told The Real Deal.

Kevin Shannon and his team at Newmark Grubb Knight Frank are marketing the property, which is 98 percent leased by tenants including Ares Management and Thomson Reuters. Vornado acquired the property and its adjacent parking structure for $95.7 million in 2012. 

If Vornado gets its asking price, the deal would pencil out to about $617 a square foot, far exceeding the $317 a square foot Olive Hill Group paid in May when it acquired 200-300 Corporate Pointe for $65.5 million.

Culver City, however, is a lot cheaper than its Westside counterparts. Sources told TRD the offering for 800 Corporate Pointe compares the relative basis in the area to Playa Vista, which has seen trades for higher than $700 a square foot. Last year, Vornado sold another of its Westside buildings, at 520 Broadway in comparably pricey Santa Monica, to Tishman Speyer for $805 a square foot.

The 800 Corporate offering touts the fact that 22 percent of the property is occupied by tenants with leases expiring in 2018, giving the buyer the opportunity to raise rents that are 18 percent below market rate, sources said.

The property is the last man standing in Vornado’s L.A. portfolio, which the REIT has been downsizing over the past four years. In addition to the Santa Monica deal, it sold the Beverly Connection shopping center to Ashkenazy Acquisition Corp. for $260 million, or $744 a square foot, in 2014. It sold L.A. Mart at 1933 South Broadway for $55 million, or $69 a square foot, in 2012. That same year, it sold off the project known as the Reef at 1933 South Broadway for $53 million, or $67 a square foot.

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