Rendering of the proposed tower at the corner of Hill and 5th Streets (Credit: CallisonRTKL via L.A. Times)

As the Wilshire Grand nears completion, developer Jeffrey Fish wants his own landmark in the L.A. skyline: cantilevered pools.

The developer recently filed plans with the city for an L-shaped, 60-story condo tower that would rise in an empty lot adjacent to the Pershing Square Building at 448 Hill Street. The kicker? Some units would have pools that extend from the structure and hover above the ground.

“This will be a landmark building unlike anything else seen in California,” Fish said in an email statement to the L.A. Times. He said the project would include a “multi-story open space cut out of the center of the building’s structure.”

There are two versions of the plan: The first envisions a 55-story tower with 11 condos, 200 hotel rooms and an additional 26,500 square feet for commercial tenants, and the second calls for 57 stories, 142 condos and 25,000 square feet of commercial space.

In both iterations, the structure itself would wrap around the Pershing Square Building to create a “sky lobby” that would light up the center of the building.

“He knocked it out of the park with what he is proposing there,” Cushman & Wakefield’s Mike Condon Jr., who isn’t involved with the project, told the Times.

Nearby, Pershing Square is getting a makeover of its own. The French landscaping firm Agence Ter will be redeveloping the park in a $50 million public-private partnership. The completion date is set to 2019.

Fish, best known for his historical restoration of the building at Fifth and Hill that houses the bar Perch on its roof, has been at odds with the city over his attempt to buy three parcels of Bunker Hill land owned by the defunct CRA. He lost out on one of them when the Colborn School purchased the land underneath its home at 200 South Grand Avenue. [LAT] — Cathaleen Chen

From the New York website: Currency outflows from China may be far bigger than previously thought, according to investment bank Goldman Sachs.

Bloomberg had previously estimated that a net $550 billion had left China between January and August. But that figure only counts funds that are converted from yuan to U.S. dollars within China and then moved out of the country. According to Goldman Sachs, savers often move yuan out of the country and then convert them to dollars in offshore markets.

Those transactions haven’t been included in counts of Chinese currency outflows. Goldman Sachs estimates that these offshore deals accounted for 56 and 87 percent of all outflows in July and August.

Selling yuan in offshore markets puts downward pressure on its exchange rate. The currency has depreciated 3.3 percent against the dollar this year.

Chinese savers looking to get money out of the country have been buying up New York properties for years, in a major boost to the market. [Bloomberg] — Konrad Putzier

Ryan Nivakoff and drought-resistant shrubbery in L.A. (Credit: CBS2, Landscaping Network)

If the cost of saving water was sad-looking lawns, it might have been worth it.

But thanks in part to the startup Turf Terminators — a private drought-tolerant landscaping operation that collected $44 million in city rebates before dissolving after two years in business — L.A.’s campaign for water-saving landscaping may have been a giant bust, according to Bloomberg.

In 2014, the third year of California’s now-five-year-old drought, the Metropolitan Water District of Southern California (MWD), as well as the L.A. Department of Water and Power, began offering generous rebates to homeowners and businesses for removing grass on their properties.

Enter Turf Terminators, headed by then-20-something Ryan Nivakoff.

The firm offered L.A. homeowners turf removal and landscaping services free of charge in exchange for their rebates. The company said it would install mulch or gravel turf, with “Mediterranean” or “Southwestern” plants, even receiving public approval from Mayor Eric Garcetti at one point.

But the grass — or rather, mulch — wasn’t as green as it seemed.

“My yard just looks worse than ever,” one resident told Bloomberg, 14 months after she hired Turf Terminators to strip her lawn and install low-water plants. “So sad, the plants may be drought tolerant, but certainly not heat tolerant. Soon I could end up with all rocks.”

In addition to unhappy customers with ugly lawns, there are allegations that Turf Terminators was shady in how they obtained the rebates. Emails obtained by Bloomberg indicate the company may have overstated the size of lawns, and used photographs that didn’t match addresses. In one case, Turf Terminators, while filing rebate paperwork, attached a photograph of a patch of green that, the MWD claim processor wrote, was actually a carpet.

Meanwhile, the city’s rebate programs burned through their fund. The MWD was getting $10 million worth of applications a week by spring 2015, and committed an additional $340 million to their initial $88 million that May. By July, all of it was gone.

The rebates, it turned out, were mostly used by private companies rather than individual homeowners. Turf Terminators alone received 12 percent of the total rebate money — the largest single contractor to take advantage of the fund. The company halted its grass-removal services a month after the MWD rebate money dried up, changing its name to Build Savings and shifting to contracting work.

As for water saved? Experts are unsure whether the new gravel lawns are actually saving water. Gravel can cause increased heat and evaporation, which lead to additional water usage in reviving the fried desert plants, specialists told Bloomberg.

City officials won’t know exactly how much water the rebate system saved until a few years from now, according to MWD manager Jeffrey Kightlinger. [Bloomberg] — Cathaleen Chen 

Invesco Real Estate CEO R. Scott Dennis and the property at 1555 4th Street

Talk about good timing.

A developer turned a $37 million profit on a parcel of land by entitling it ahead of a November ballot measure that will dramatically curb development in Santa Monica if passed.

In February, Santa Monica-based Worthe Real Estate Group acquired a developable lot at 407 Colorado Avenue for a mere $15.8 million. It took it through the entitlement process, getting city approval for a five-story 59,800-square-foot apartment building, according to Real Capital Analytics. Then, last month, Worthe went on to sell it to Atlanta-based Invesco for $52.7 million, according to property records.

Invesco paid roughly $880 per buildable square foot to acquire the .34-acre parcel, which currently houses a 4,600-square-foot shuttered bank building. Eastdil Secured brokered the deal, but could not be reached for comment.

Worthe’s disposition was astutely timed, as Santa Monica residents will vote next month on the looming Land Use Voter Empowerment (LUVE) ballot initiative. If enacted, the measure would subject every development taller than two stories to a popular vote to secure approval in the density-averse city.

It is easy to see why an already entitled parcel would be attractive to Invesco, especially given the possibility that competing developers could be shut out of the market by LUVE.

Invesco has been on both sides of several pricey deals this year, including its sale of an El Segundo creative office complex at 2175 Park Place. The firm sold it to Boston’s Intercontinental for $328 million —  six times what it paid in 2013. Three months prior to that sale, Invesco bought Runway Playa Vista, a 14-acre mixed-use retail complex, for a whopping $475 million.

Worthe and Invesco did not immediately return requests for comment.

“Vintage Burbank” site and Welltower CEO Tom DeRosa (via CBRE, Getty Images)

Welltower, an Ohio-based real estate investment trust, has agreed to buy a portfolio of 19 senior housing communities on the West Coast for $1.15 billion in a deal that makes it the largest owner of senior housing in Northern and Southern California.

It will pay the seller, Vintage Senior Living, approximately $445,000 per unit for the properties, 18 of which are in California, according to a release from CBRE. Matthew Whitlock, Lisa Widmier and Aron Will of CBRE’s capital markets national senior housing team represented Vintage in the transaction. 

The 2,590-unit portfolio contains nine Southern California properties, including three in Los Angeles County, four in Orange County and one in Ventura’s Simi Hills. It also includes nine communities in Northern California and one Tacoma, Washington. Some of the assets have excess land that Welltower could ultimately develop, but it will focus on filling the existing properties first, executives said on a quarterly earnings call last week.

“This is an ideal, strategic acquisition for us,” said Welltower CEO Tom DeRosa. “It allows us to go deeper into two important core markets, solidifying our number one market share in Los Angeles, gaining the number one position in San Francisco. That adds to our number one position in New York, Boston and Seattle – five of the sexy six core markets in the U.S.”

The acquisition will be funded primarily through dispositions in the remainder of 2016, DeRosa said.

The L.A. properties in the deal are the Vintage facilities at 11000 New Falcon Way in Cerritos, 2721 West Willow Street in Burbank and 4061 Grand View Grandview Boulevard in Culver City. The firm’s strategy is to get as close to the urban core as possible, which is atypical for senior housing, DeRosa said.

Vintage will transfer management of the facilities to Welltower’s operating partners Senior Resource Group, Sunrise Senior Living and Silverado.

On average, the properties acquired in Southern California are roughly 83 percent occupied, versus 84 percent in the portfolio overall. Welltower now owns 58 senior housing facilities in the Southern California region.

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Rick Caruso, Donald Trump and the Grove at 189 The Grove Drive

Donald Trump might have a tough time catching a flick at the Pacific Theatres or shopping at Barneys in West Los Angeles this fall.

Rick Caruso, owner of beloved L.A. shopping and retail complex the Grove, told TMZ he’d consider blacklisting the presidential candidate from his signature property.

Caruso told a TMZ reporter Monday night that he’d “be happy” to ban Trump for his explicit remarks about women.

“That’d probably a good thing to do,” he said, leaving Craig’s of West Hollywood.

“If you want to be in public office, you’ve got to be compassionate, you’ve got to be a gentleman, you’ve got to professional, you’ve got to care about people. I just don’t see him being any of that. I think he’s actually a pretty angry human being. I’m not into that.”

Trump is not the first to have gotten on the wrong side of the billionaire real estate developer. Caruso told TMZ earlier this year that boxer Manny Pacquiao was no longer welcome at the retail center because of his comments comparing gay people to animals. But Caruso, a former active Republican, rescinded that ban Monday, when the same photographer told him Pacquiao has since apologized.

“Forgiveness is important,” he said.

Caruso is currently in the midst of redeveloping 116,000 square feet in downtown Pacific Palisades into another retail and entertainment complex. No word on whether Trump will be banned here as well.

Watch the video from Monday night,  below:

[TMZ] — Cathaleen Chen

From left: Hans Nordby, Sean Coghlan and Conor Flynn

From the New York September issue: This September, investors who bet on the stock market’s broad indexes got a new tool. They can now invest in real estate investment trusts separately from financial stocks and insurance firms — a category that REITs had been lumped into for more than 15 years. The strong performance of the sector prompted that coding change. Since 2000, REITs have returned an average of 12 percent a year, versus 7.9 percent returns on high-yield bonds, and 4.1 percent returns on large-cap U.S. stocks, according to J.P. Morgan Asset Management. REITs, which own buildings that range from residential, office, retail and hotel properties to data centers, cell phone towers, prisons and farms, have certainly matured as an asset class. Yet, the same low interest rate environment that has made them so popular with investors has also made it harder for REITs to acquire new properties at valuations that make sense, industry sources told The Real Deal.

Many public real estate companies have adjusted to that change on a national level by upgrading their current properties and paying off debt to prepare for the next downturn. Another approach for those focused on the New York market is to look beyond Manhattan. REITs represented just 2 percent of total investment volume in the borough through the first half of the year, compared to 11 percent in all of 2015 and 15 percent in 2014, according to JLL. But while those transitions come with some uncertainties, the index classification change is attracting attention from new potential shareholders. “We are already starting to see that many generalist investors are trying to ramp up and educate themselves on the nuances and nomenclature of the REIT industry,” said Conor Flynn, CEO of the New York-based REIT Kimco Realty Corporation — the largest publicly traded owner and operator of open-air shopping centers in the U.S. For more on the latest challenges and trends affecting REITs, we turn to the experts.

Anthony Paolone
Senior REIT analyst, J.P. Morgan

Why have REITs outperformed other asset classes to such a degree and how much longer can the bull run last?

The [REIT] space has grown in size and liquidity, which has made it more mainstream for investors. Moreover, investor return requirements have shrunk. Fifteen years ago, people wanted a 10 percent return. Now they’ll settle for 8 percent or less. REITs are a good total return vehicle because of their dividends combined with growth in earnings.

REIT shares have attracted investors because they are big dividend payers. What’s the risk that some REITs will cut their dividend payouts in the near future?

I don’t see it as a notable risk factor right now. Most of these companies are paying dividends that are less than their cash flow; they have a lot of room and pretty safe dividends.

Which class of REITs has shown the biggest returns in the past year? Why is that?

Healthcare and net lease REITs have been attractive to yield-oriented investors. These property types have low organic growth and are more bond-like in nature. Think of a health care facility or a drugstore with a 15-year lease and rent bumps of 1 to 2 percent annually. They tend to be assets that are purchased for the income more than the growth.

Which has been the poorest performing?

Storage, year-to-date, has been the worst-performing sector. It had a very strong 2015, but growth is now slowing. The stock market wants to be in front of marginal changes in growth, and thus you’ve seen investors move out of this space.

Which property types in NYC are the most and least attractive to REITs right now?

Office actually looks pretty good to us. In the apartment business, you had a pretty strong run of rent growth a few years back, but that has weakened. There are now concessions, rents are down, and there’s a surge of supply either underway or that’s been recently delivered. Where it gets interesting is on the office side. A couple of the larger office platforms, like SL Green and Vornado, are trading below real estate value. If you look through to the assets, you can buy New York City office and street retail properties cheaply through those stocks right now. Yes, there is concern about supply, at Hudson Yards and downtown at World Trade Center. But below that, in the $60 to $70 square- foot segment, these landlords are seeing double-digit rent growth. Meanwhile, fear about demand if the financial industry and tech pull back might be overblown. For financials, the culling of space occurred over the last five to seven years. They seem pretty lean at this point.

Steven Marks
Managing director and head of U.S. REITs, Fitch Ratings

What are the most surprising trends you’re seeing with REITs that invest in NYC?

The high degree of office and multifamily development in Brooklyn — particularly the Downtown submarket — is a surprise. The market is becoming saturated with supply, and while there is an expectation of unbridled growth, it appears to be getting ahead of itself.

How do the trends in New York differ from what’s taking place nationally?

New York is unique compared with most other U.S. markets in that there is a consistent base of equity and debt investors willing and able to commit to the market, regardless of where we are in the cycle. That depth of investor demand supports higher valuations compared to all other markets, where investor demand can dry up if there is perceived or actual weaker fundamentals. Many large institutional investors view New York as a safe market and a store of value.

And how do REITs fare in competition for high-profile Manhattan properties with insurers, pension funds, private equity firms and sovereign wealth funds?

It is challenging for public companies to compete with private buyers, because REITs typically have a higher cost of capital. Private buyers can and do use significant amounts of leverage, and thus can pay more for properties than REITs. REITs can compete by having more and better local knowledge, strong relationships with existing property owners and lenders, and the ability to invest within all levels of the capital structure, such as equity, preferred stock, senior and junior debt. Also, REITs can establish strong tenant relationships and have several properties in the market to accommodate growing or shrinking tenants [by moving them] to a different property or reconfiguring space in an existing building.

Any REITS that investors should be wary of?

There are a few REITs whose dividends exceed, or are close to, their cash flows, and a dividend reduction would enhance these companies’ liquidity. In particular, Liberty Property Trust has a dividend payout ratio [a dividend of $1.90 a share, 4.88 percent yield, according to Yahoo Finance] that is well above the sector average. Fitch generally views persistently high dividend payout ratios as a weakness in corporate governance that is evidence of a focus on shareholders over bondholders.

David Lukes
Chief executive officer, Equity One

Which property types in NYC are the most and least attractive to Equity One right now?

Our existing asset base, which includes everything from the new Barneys store in Chelsea to Trader Joe’s in Queens and a recently completed development site in the Bronx, is performing extremely well, which just reinforces our demand to own more retail assets in the area as long as we can get them for a reasonable price. Our best investments have been in locations where the tenant does exceptional business and can afford the occupancy cost of being in our building. In some NYC locations, we’re not seeing the store profitability offer much safety to the landlord and therefore the value story is absent.

What sort of buying and selling activity are you expecting from REITs in the last quarter of 2016 and in 2017 when it comes to NYC properties?

The wild card I can foresee is [if] street retail vacancy increases. If existing owners capitulate and accept that their rent expectations are too high, asset prices will correct, allowing the market to clear a pent-up supply of assets for sale. That sort of price correction would almost certainly allow the public markets places to increase their buying activity. Equally, though, if current owners stick to their guns on rents, you could see street retail transaction volumes generally slow over the next year.

How do REITs fare in competing for high-profile Manhattan properties with insurers, pension funds, private equity firms and sovereign wealth funds?

When REIT shares are trading at premium valuations, as they were up until just a couple of weeks ago, REITs have an advantage and should take market share. But historically, this has happened only for limited time periods. When our stocks are trading at or below spot asset value, private buyers who generally have lower return hurdles and higher appetites for leverage can often beat us.

What are the biggest challenges Equity One faces at this point in the cycle?

I’m happy to say that our list of real challenges is limited at the moment. Our assets, which are located in the best gateway markets in the country, are in high demand from tenants, so day-to-day operations are strong. That leaves us with longer-term challenges like gaining tenant and municipal approvals for a long list of future redevelopments in Bethesda [Maryland], Cambridge, Los Angeles, San Francisco and Atlanta, and retaining and rewarding our top-notch talent. 

Hans Nordby
Portfolio strategy managing director, Co-Star Group

Which property types in NYC are the most and least attractive to REITs right now?

Many REITs are accomplished developers and builders. With trophy assets trading at prices at or over the price to build a new building, the best investments may be those the REIT builds for its own book. In particular, the office sector appears attractive. Over the next four years, 13.6 million square feet of new office buildings are forecast [for] delivery. While that may sound like a big number, that represents only 2.4 percent of Manhattan’s office inventory. In contrast, 11.1 percent of San Jose’s office inventory is expected to deliver over that same period. New assets in Manhattan lease up well and stay that way for a long time. Is there a risk of delivering that building into a recession? Sure, but that same risk could be an even worse bet for someone who overpays now and doesn’t have a top-quality building. Older buildings require capital investment that a new building does not, and may face more challenges maintaining occupancy than a newer building.

There is some opportunity in the [residential] sector for investors in market average or workforce housing. Less luxurious complexes are likely to hold up better in terms of occupancy as the supply wave impacts the market, as they are slightly more affordable for renters. There is no shortage of people who’d like to live in New York, but not everyone can afford to do so. REITs might do well to pick up portfolios of these “affordable” options, not all that differently from what Blackstone has done by picking up Stuyvesant Town and Kips Bay Court.

What are the most surprising trends you’re seeing with REITs that invest in the five boroughs?

The fact that REITs have pushed into Brooklyn and Queens. The general idea is: Take advantage of some of the fastest growing, most rapidly gentrifying neighborhoods in the city. For instance, Vornado purchased a 440,000-square-foot Class B building in Long Island City [in March 2015]. The push allowed it to take advantage of a little higher yield going in and the ongoing craze with “creative” office in neighborhoods that might be desirable to tech tenants.

How do REITs fare in competing for high-profile Manhattan properties with insurers, pension funds, private equity firms and sovereign wealth funds?

Since early 2015, REITs have been less competitive in the acquisition of high-profile Manhattan assets. For many REITs, their dividend yields are higher than the going-in yields for assets trading. Therefore, the deals would dilute near-term earnings. As a result, many REITs have rightfully shifted to development — or redevelopment of existing assets.

Conor Flynn
Chief executive officer, Kimco Realty Corporation

Real estate is getting its own category in the Global Industry Classification Standard rather than being lumped in with banks and insurance companies. What effect will this have on REITs as a sector?

We think it’s going to have a long-term positive effect on REITs, as it will bring a more diversified investor base, including generalist investors. That’s because previously, portfolio manager[s] didn’t need to invest in REITs when they were in the financial sector in order to remain benchmark neutral. With REITs being a standalone sector, investors risk being underweight if they elect not to include REITs in their portfolios.

Why have REITs outperformed other asset classes to such a degree and how much longer can the bull run last?

By definition, REITs must pay out 90 percent of their income in dividends. Global interest rates being close to zero and in some cases negative has driven a thirst for yield, which is driving capital into REITs that pay a healthy dividend.

What’s the chance of a repeat of what happened in 2007 and 2008, when REITs lost 15.7 percent and 37.7 percent, respectively?

Real estate is a cyclical business. The key is to learn from your mistakes and to try not to repeat them. In the Great Recession, a number of REITS, including Kimco, had too much leverage and were overextended. When the capital markets shut down, it had an impact on all stocks, especially REITs. REITs are a very capital intensive business. We require capital to build out space for tenants, or to redevelop assets, and to maintain the assets to the highest standard. We try and focus on what we can control, which is to make sure the company is in a position of strength for the next cycle and to have a war chest, or a tremendous amount of capital, available at all times to weather the next storm.

Which property types in NYC are the most and least attractive to Kimco right now?

Kimco focuses on open-air shopping centers, which we believe is in the sweet spot of retail today. We have a number of grocery-anchored centers in Brooklyn, Queens and Staten Island that have significant redevelopment potential. We think this asset type is the most attractive, as you can redevelop and add density and take advantage of the growing population by creating a vibrant shopping experience, with the potential for mixed use. This is our core competency, so we really stay away from high street luxury retail, office, hotels and apartments.

What are the biggest challenges Kimco faces at this point in the cycle?

Currently, one of the biggest challenges in NYC and nationally is the demand for high- quality open-air shopping centers and the lack of supply. That is why we have focused on redevelopment and working to expand and enhance the 550 assets we already own and manage. Redevelopment is the best use of our capital, as we are able to produce double-digit incremental returns. We’re directly tied to the health of the consumer, and retailer sales of late have been flat to slightly positive with recent food deflation impacting grocers. We continue to monitor this and the overall economic environment to see what impact it may have on retailers’ store opening plans and square footage needs.

How do REITs fare in competing for high-profile Manhattan properties with insurers, pension funds, private equity firms and sovereign wealth funds?

Competition in New York is fierce and we do compete with all of these players and more. Institutional investors tend to have a lower overall cost of capital and lower return threshold. For instance, insurers get premiums coming in every week and need to put that money to work so it produces some return. At Kimco, we are very cautious with new acquisitions in the current environment, yet we continue to seek out off-market opportunities and redevelopment opportunities

Sean Coghlan
Director of investor research, JLL

What are the biggest challenges for the REITs that focus on the NYC market at this point in the cycle?

Leasing activity in the office sector has been slow, totaling just 13.8 million square feet in the first half of 2016, while the historical annual average is 34.8 million square feet, presenting a challenge for landlords throughout Manhattan. Development opportunities are difficult to come by given escalated land pricing, the expiration of the 421a tax-incentive program, and the perceived oversupply in the luxury condominium segment.

What REIT initial public offerings are in the pipeline right now?

The REIT IPO market remains very quiet,  with only one completed in 2016 — MGM Growth Properties completed its $1.2 billion IPO in April. Continued anxiety and volatility in the market due to uncertainty around interest rates and the economy have constrained investor appetites for new public offerings. Over the last quarter century, investors have become more discerning and sophisticated. Meanwhile, any new offering is competing for investors with major well-established REITs. It’s just a more competitive environment, and an IPO story needs to be compelling.

Do you expect some publicly listed REITs to be taken private in coming years? How often does that occur, generally?

The past two years have seen the highest level of REIT privatizations since 2007,  and we do expect take-private activity to continue given the tremendous amount of capital that needs to be deployed. U.S.-based investors continue to have a robust appetite for large transactions, and off-shore capital flows could increase as investors continue to view the U.S. as the safest market to invest in. REIT valuations are relatively strong, REITs have remained disciplined in their growth, and leverage levels and balance sheets are in good shape generally. As REIT prices moderate and there is a gap between intrinsic asset value and share price, the best way to achieve these objectives may be by acquiring REITs.

Entrance to Paramount Pictures at 5555 Melrose Avenue (Credit: Seeing Stars)

It’s lights, camera, action for Paramount Pictures, after the City Council approved the film studio’s 25-year plan to redevelop and expand its lot on Melrose Avenue.

Under Paramount’s $700 million master plan, approximately 1.4 million square feet will be added to its Hollywood headquarters and adjacent properties owned by the company.

As part of the approval, Paramount will be making more than $7.2 million in neighborhood enhancements, 13th district Council member Mitch O’Farrell told the L.A. Times following Tuesday’s approval.

”Paramount has found a way to grow and evolve into the future with minimum impact to the surrounding neighborhood,” O’Farrell said.

During the years of environmental review and community outreach — the expansion plan was introduced in 2011 — some residents had expressed concern about possible effects on traffic and obstructed neighborhood views. [LAT] — Cathaleen Chen

Boston Properties’ $500 million-plus acquisition of a stake in Santa Monica’s Colorado Center in May represented the company’s first foray into the L.A. market, where company executives say the firm is looking to grow its presence.

But cracking L.A. is sometimes easier said than done. “It’s a tough market to break into and there’s a lot of nuance,” Sandler O’Neill analyst Alex Goldfarb recently told The Real Deal. Real estate giants such as Vornado Realty Trust have also moved into L.A., only to later withdraw.

Boston CEO Owen Thomas tackled that question in a recent discussion as part of the Bank of America Merrill Lynch Global Real Estate Brokers Conference, saying he thought the company’s reputation and long track-record in other cities would enable it to compete against the big local players who’ve long dominated L.A.

Asked by Bank of America analyst Jamie Feldman to identify whether or not the company would have an edge in the L.A. market, he said: “I think you can say that what was company’s edge in 1970 when we started Boston and what was it in the 80s when it started in New York and what was it in 1998 when it started in San Francisco. I’m sure that question got asked every time that happened. And I do think that our company is a market leader in the four established markets of our company. I think the strategy of the company has been a time-tested and delivered strong returns to shareholders.”

He noted that the company has already been successful in gaining access to off-market deal flow in the region, despite having only done one transaction.

“So in the Los Angeles now that we’re a significant property owner and I think the local community knows that we’re committed to the city we want to grow. And we’re seeing more off market opportunities in Los Angeles as well,” he said.

In a July earnings call, Thomas noted that the Colorado Center was looking likely to lease up quickly. As of July, the company announced it had signed a letter of intent with a tenant for 160,000 square feet at the property and was in discussions for an additional 60,000 square feet.

“If we complete simply these two leases, we will have leased 63 percent of the available space,” said Boston President Doug Linde.

The company is planning to move personnel and hire new employees to help manage its L.A. portfolio, he said.

From left: Trump Tower, a Trump private airplane, Trump Golf Links at Ferry Point, Donald Trump and Trump wines (illustration by Lexi Pilgrim for The Real Deal)

From the New York website: Where does Donald Trump’s money come from?

Until he releases his tax returns, we’ll never fully know. But Trump’s annual financial disclosures to the US Office of Government Ethics are a good place to begin.

Trump has reported hundreds of millions of dollars in cash receipts from scores of companies around the world, under federal guidelines that require such disclosures from all presidential candidates. Yet he acknowledged during the president debate Sunday that he has not paid personal income tax on those millions in years.

To help readers grasp the magnitude of potentially not paying income tax on what amounts, at a minimum, to $1.4 billion in reported assets, The Real Deal combed through 188 entities for which Trump reported either income or a minimum value over two filing periods in 2015 and 2016.

The result: An interactive that shows what Trump owns, where he owns it and how much it’s all worth (according to him). [More]

The Magellan Gateway at 4181 Temple City Boulevard (Credit: Magellan Group)

For the first time in eight years, the San Gabriel Valley has a new infill industrial space, developed by Los Angeles-based Magellan Group.

The real estate firm completed Magellan Gateway this year, a 501-270-square-foot industrial complex in El Monte with five buildings, three of which have were sold off in August, according to GlobeSt and property records. The buyers are Jans Investment and Management, Gill Corporation and Dream Home Temple City Boulevard.

Magellan is in negotiations to sell the two remaining buildings, according to co-founder Kevin Staley.

The $55 million project, located between 4181 and 4189 Temple City Boulevard, features 30-foot clear heights, LEED certification, grade-level loading, truck courts and finished ground floor offices.

Magellan hired a feng shui expert for the office and entryway designs, Staley told GlobeSt.

“The location of the property in the city of El Monte and its proximity to a strong and diverse population base were likely key factors [in generating interesting among buyers],” he said. “The diversity of our building sizes also helped us to broaden our appeal to different sizes and types of companies.”

Magellan has another project that will break ground in Baldwin Park within two months. [GlobeSt] — Cathaleen Chen

Johnny Depp and the Eastern Columbia Building at 849 South Broadway

Johnny Depp is making steady progress in selling his five-unit penthouse portfolio in Downtown’s Eastern Columbia Building.

The actor just sold one of them for $2.5 million, the L.A. Times reported.

With two bedrooms and three bathrooms, this particular unit has a galley-style kitchen, private terrace, vintage bar and views of the Orpheum Theatre from steel-paned windows. Kevin Dees and Nick Segal of Partners Trust represented the actor in the sale and hold the other listings.

The overall portfolio spans 11,500 square feet and asked $12.8 million. [LAT] — Cathaleen Chen

Peter Hernandez

Peter Hernandez is president and founder of Teles Properties, where he oversees marketing, brokerage and recruitment.

He started his career in 1970 as an agent at his family’s firm, Hernandez Realty of Marina del Rey, and went on to work in management at Jon Douglas, which was bought by Coldwell Banker. There, he was named COO and managed 17 offices. He broke off from Coldwell to start Teles Properties in 2007.

Hernandez sat down with The Real Deal to talk about riding out market cycles, agent recruitment and how to deal with antagonists.

Where did you grow up?
I was born in Washington D.C. but moved to Pacific Palisades when I was 2. You can’t really call me an East Coaster. Most people call me a diehard Californian. I like to surf a lot. I live in Malibu on Point Dume. It’s the most beautiful place in the world to live.

How did you get into real estate?
When I was 18 and studying economics at UCLA, I got my real estate license because my dad and brother owned a company called Fernandez Realty in the Marina. I started selling real estate on the weekends.

Were you a quick study?
My first day on the job, this woman from Brentwood comes in asking if we have any rentals. She’d just gotten divorced. We went out and looked at rentals but she didn’t see anything she liked. As she’s walking out the door — I don’t even know where it came from — I just blurted out, “Have you ever thought of buying?” She leaned back in and said, “What do you have for sale?”

Did she buy?
I sold her a house on my first day on the job for $37,500. I thought, ‘This is great. I’m in.”

Wow. I wonder what $37,500 would buy today.
Today? Maybe a car.

What did you learn from working in the family business?
I worked with my dad and my brother for 13 years. I learned a lot about reputation and how you should protect your reputation above all else. When you’re born into the industry, it’s just second nature.

Did you never want to do anything else?
I was going to be a lawyer but every lawyer I knew wanted to be in real estate.

Did you have other jobs?
When I graduated from college, I bought a van and traveled around Europe, trying to stretch the $1,500 I’d saved for as long as possible by doing odd jobs. I was in Switzerland, Spain, Portugal. I worked on a vineyard picking grapes and in a kitchen in St. Moritz so that I could ski. I lived the perfect nomad life.

When did you launch Teles?
We opened in November of 2007. We were probably the first independent [brokerage] to break off at that time [Editor’s Note: Partners Trust and John Aaroe Group were founded two years later]. Now, we have 21 offices, with our 22nd opening in Pacific Palisades this November.

It must have been terrible to launch just as the recession took hold.
It was actually done by design. You want to open in a down market because that’s where the opportunities are. You also learn certain discipline about how to run a business. Was it a little bit worse than we thought it was going to get? Yes, of course. I don’t think we expected the run on the banks and we certainly didn’t expect it to be the “Great Recession.” But it was good timing for us because we were growing and building while everyone else was slashing and pulling back. It set us up for success.

How did you ride out the downturn?
The concept was that we didn’t want to hire new licensees. We hire only experienced agents, where we can put our resources into making them even more productive. New agents have about a 1 or 2 in 10 success rate. We realized early on that was a horrible return on investment.

How are you financed?
We have some friends and family, but we’re pretty self-funded. We built it through revenue and income, rather than through raising tons of money.

Was it scary breaking away from the big companies?
When you’re the first, it gives everyone else permission to do it. They see that you did it and were successful. We were the pioneers who crossed the Rockies first. We got a head start, too. We’re the only new independent to have a presence from Carmel to Coronado. Where most of the independents are tightly clustered in one area, we decided to cast a wider net and be a California firm. Our mantra around the company is #TelesDomination.

Now that you’re in management, do you ever miss being an agent?
I definitely miss the agent side and I do three or four deals a year just to keep in the mix. The agent side is fantastic. You’re meeting so many interesting people.

What’s been your favorite sale?
I sold to Chiat/Day, the Eames property on Abbot Kinney. I sold a wonderful house in Santa Monica Canyon designed by Frank Gehry. My favorite though was a good lesson.

How so?
It was one day when I was working for my dad’s firm and all my friends were calling me to leave early because the surf was amazing. My dad said, “If you leave before 5pm, don’t come back.” It was like 4.55 p.m., I was about to jump in my car and this guy came in and said, “I’m looking for oceanfronts, do you have anything for sale?” He ended up buying the house on the end of the peninsula that was owned by the Florsheim family for $229,000. It was my biggest sale at the time. Everyone was oohing and aahing.

How do you deal with antagonists?
I try to get very zen. As they get louder and louder, I get quieter and quieter.

How’s the market?
Today, the market still has real strong fundamentals. I expect that properties will appreciate next year, somewhere in the 2 to 6 percent range. I think the biggest character defect of the industry as a whole is that people don’t realize that rates will go up someday. Now is the time to buy and sell property.

So, no bubble?
Really we’re not that far beyond what the last peak was.There’s more legs in this market.

Jamie Lee Curtis and husband Christopher Guest (Credit: Getty)

Are Jamie Lee Curtis and her hubby Christopher Guest taking over their neighborhood in Santa Monica?

The Hollywood power couple recently bought the property next to their long-time home for $2.2 million in an off-market deal, the L.A. Times reported. 

Built in 1987, the property in question contains three bedrooms and two bathrooms. The wood-paneled residence stands two stories tall and spans more than 1,900 square feet.

Curtis, known for her role in “Halloween” and “Freaky Friday,” currently stars in the Fox show, “Scream Queens.” Her husband Christopher Guest is a screenwriter and composer. His work has appeared in “The Princess Bride” and “Saturday Night Live.”

Buying the house, or houses, next door for added privacy has been a growing trend amongst L.A.’s rich and famous, according to the Times. [LAT] — Cathaleen Chen

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Beny Alagem and a rendering of his 26-story tower (credit: New York Social Diary, Beverly Hills Garden & Open Space Initiative)

If his spending spree continues at its current rate, Beny Alagem will have spent $1,000 per vote to build a condo tower in Beverly Hills by the time the project appears on the ballot.

Between July 1 and Sept. 24, a coalition that is funded primarily by the developer’s firm, Oasis West Realty, spent over $2 million on expenses related to his Beverly Hills Garden & Open Space Initiative, the Beverly Hills Weekly reported.

An 83-page campaign disclosure form shows the campaign paid over $76,000 to PR firm Sugerman Communications Group and $40,000 to American International Business, a computer storage manufacturer founded by former Beverly Hills Mayor Jimmy Delshad.

Alagem has been locked in an ongoing dispute with competing developer Wanda Group, which wants to build its own 134-key hotel and 193-condo complex right next door to Alagem’s site.

Wanda is waging an opposition campaign to Alagem’s called “No on HH,” highlighting that Alagem’s initiative would allow his condo project to bypass the city’s typical planning review process to build the tallest building in the city.

The Alagem camp, in turn, alleged that Wanda, a Chinese company, was illegally funneling money oppose the initiative. California’s Fair Political Practices Commission rejected that allegation in a letter to Alagem’s attorney Gary Winuk. Oasis has also been fighting Wanda’s project as it goes through planning hearings, specifically taking issue with a loading dock near Alagem’s site.

“We found no evidence that the contributor is a foreign principal,” wrote Galena West, the chief of the Commission’s enforcement division. [BH Weekly] — Cathaleen Chen

Illustration by Lexi Pilgrim for The Real Deal

From the New York website: Sales of homes under construction in London slumped 14 percent year-over-year in the quarter that followed the Brexit, according to a report by research firm Molior London.

London’s housing market, already affected by rising taxes and regulations, has seen a significant slowdown as uncertainty surrounding Britain’s future — compounded by the pound’s 18 percent fall since the June 23rd Brexit vote — hurts demand.

Real estate transactions dropped 78 percent in the five months from April through August compared to a year earlier, according to Land Registry data. Shares in Berkeley Group Holdings, London’s biggest homebuilder, have fallen 25 percent, Bloomberg reported.

A Bloomberg analyst said the data should be a warning for homebuilders who might be coasting off previous sales.

“They’re still in their comfort zone because they’re sitting on good order books. But that can change in the next 18 months to two years, depending if there’s a hard or soft Brexit,’ said analyst Sonia Baldeira.

Home presales increased by 9 percent in the third quarter compared to the previous three months, but those numbers were flattered by reservations made before the Brexit turmoil, as well as by block purchases by corporate investors.

Residential real estate throughout the U.K. showed signs of strengthening in September, but in London, UK’s priciest market, value is expected to drop for the first time since 2009, according to Countrywide Plc, the country’s largest real estate broker.

Foreign investors looking for bargains have not shown as much interest as expected, Faisal Durrani, head researcher at broker Cluttons LLP told Bloomberg. “There are still too many unknowns about where the market is going,” he said, “Many overseas buyers are waiting on the fence.”

The Real Deal predicted that a shaky real estate market in London could shift foreign capital from London to New York, and a Knight Frank report bears that out. According to the report, foreign commercial real estate investment fell by 35 percent in London over a 12-month period ending in June to under $25 billion, while foreign investment in New York reached $25 billion. The report also notes that about 10 percent of all global investment on income-producing real estate now goes to New York.  [Bloomberg] — Chava Gourarie

The former Faber warehouse and Roobik Ovanesian

Evolution Strategic Partners, a developer based in West L.A., wants to build a 271-unit apartment building at the site of a former aircraft component warehouse in Warner Center.

The company filed plans Monday to develop the nearly two-acre site at 6606 North Variel Avenue into a seven-story, 305,509-square-foot complex.

The developer is in escrow to buy the property for close to $10 million, the site’s listing agent Roobik Ovanesian of Cranbrook Realty told The Real Deal. The property currently houses a 40,000-square-foot Class C industrial warehouse formerly used by seller Faber Enterprises, a maker of aircraft fluid fittings. That structure will be torn down.

The price tag equates to about $122 per square foot of land.

Under the Warner Center urban development plan, approved by City Council in 2013, Evolution’s development does not need any special entitlements and will be by-right.

Formerly a hub for aerospace manufacturing, the corner of the San Fernando Valley has recently become a hub for commercial development. Nearby, the 43-acre Rocketdyne Propulsion & Power plant is being torn down to make way for a $3 billion “sustainable urban neighborhood” by United Technologies.

Renderings of the Alexan at the corner of Hill and 9th Streets (Credit: DTLA Neighborhood Council)

The Society for the Preservation of Downtown, the group fighting Trammell Crow Residential’s Alexan condo project, just nabbed the lawyer most notorious for stopping developments in Los Angeles.

Robert Silverstein, the Pasadena attorney responsible for halting the construction of the Hollywood Target, will represent the group in its appeal of the city planning department’s approval of the 27-story tower, Curbed reported.

The Alexan would rise adjacent to the Eastern Columbia building. The majority of the Society for the Preservation of Downtown’s members live in that Art Deco building, and stand to lose some of their views. The group claims the new structure goes against the atmosphere of their neighborhood.

In appealing the project, the group is making the case that the city should have required an Environmental Impact Report when reviewing the Alexan plans.

The appeal hearing is scheduled for Oct. 25. [Curbed] — Cathaleen Chen