2506 Barcelona Drive, Michelle Esposito of Douglas Elliman, Tim Elmes of Coldwell Banker

Two executives of a troubled timeshare exit company sold a waterfront Fort Lauderdale spec home for $7 million, four months after their company filed for Chapter 11 bankruptcy.

Shyla and Eric Cline, founders and executives at a timeshare exit company American Resource Management Group, sold their 10,274-square-foot mansion at 2506 Barcelona Drive for about $681 per square foot, records show. James G. Bennett and Maureen Bennett are the buyers.

The two-story, seven-bedroom and seven-bathroom mansion features a pool and a dock with views of the Intracoastal Waterway in the Seven Isles section of Fort Lauderdale.

Tim Elmes of Coldwell Banker represented the seller, while the buyer was represented by Michelle Esposito of Douglas Elliman.

The Clines’ American Resource Management Group filed for bankruptcy in April after it faced lawsuits from companies in the timeshare business, including Bluegreen Vacations and Wyndham Resorts, alleging it defrauded customers. Timeshare exit companies claim that they can get timeshare owners out of their contracts for large upfront payments, but they have come under scrutiny by the Better Business Bureau.

The Clines bought the home for $6.4 million in 2017 from a company tied to Fiorenna and Aldo Israel who lead Premier Home Builders, property records show.

Premier Home Builders paid $1.6 million for the 13,933-square-foot lot in 2015, and started construction a year later, records show.

President Donald Trump (Credit: Getty Images, Mar-a-Lago Club)

Companies tied to President Trump could pay nearly $1.5 million in property taxes in Palm Beach County this year, according to estimates from the county’s property appraiser.

In terms of market value, Mar-a-Lago was valued at $26.6 million, according to the Palm Beach Post. In all, 10 Trump properties were valued at nearly $80 million. That includes three houses next to Mar-a-Lago, the clubhouse at the Trump International Golf Club near West Palm Beach and all of the Trump National Golf Club in Jupiter.

In the town of Palm Beach, the six properties tied to Trump have a preliminary total market value of $53.84 million. Mar-a-Lago, at 1100 South Ocean Boulevard in Palm Beach, would be billed nearly $522,000 in taxes and assessments this year, up about $33,000 compared to last year, according to the county’s estimates.

In November, the county property appraiser and lawyers from Trump settled on the tax bill for the Jupiter golf course. The two parties agreed that the course had been overvalued between 2013 and 2016, and the county issued a refund.

[Palm Beach Post] – Katherine Kallergis

(Illustration by Brian Stauffer)

Life, liberty and the pursuit of shopping. So goes the American Dream — the mall-slash-amusement park in New Jersey’s Meadowlands that has weathered three developers, two designs and one calamitous recession.

Indeed, the first phase of the $5 billion, 3 million-square-foot complex is finally poised to open in late October with a portion of the shops and restaurants launching alongside several nonshopping attractions, including an indoor ski slope dubbed Big Snow America, according to the project’s developer, Triple Five Group, which is based in Canada.

But there are some serious questions about whether American Dream, which was first conceived of nearly two decades ago when the retail landscape was healthier, can succeed.

For starters, it’s opening at a time when brick-and-mortar retail is facing an existential crisis fueled by the rise of online shopping.

And the way some of the mall’s development cost has been financed, which has essentially diverted property and sales tax money to pay off municipal bonds that back American Dream, has bothered critics who would have preferred the public money be spent on schools.

In addition, some are concerned about the location of the project — which sits just off the New Jersey Turnpike in the shadow of the MetLife football stadium. Roads are already too busy in that area, they say, and boosting public transit options would siphon critical taxpayer dollars.

Delays have also plagued the project, which former Gov. Chris Christie referred to as an eyesore and which was sued by the New York Giants and the New York Jets to stop construction. Numerous deadlines have come and gone, like the one that had the mall opening in time for the 2014 Super Bowl.

“It has been a bad idea since day one,” said Jeff Tittel, the senior chapter director of the New Jersey Sierra Club, of a project he calls “American Scheme” for sucking valuable time, energy and money away from what he considers more worthwhile public investments.

So the fact that American Dream is nearing the finish line after so many ups and downs, near-deaths and 11th-hour saves is a feat in itself, officials, developers and brokers said.

“It’s a huge gamble,” said Marcus & Millichap Senior Vice President Joseph French Jr., a mall specialist who’s predicted that 1,000 of the country’s 1,300 shopping malls will close in the next 20 years.

“But in concept,” French said, “I’m not willing to bet against it.”

That’s largely because the complex is something of an extreme test case, bordering on a last-ditch effort, for the American mall — one that hopes to lure in visitors with dining and over-the-top entertainment first and foremost, and then keep them there long enough that they will also get around to shopping afterwards.

The complex has partnerships with fast-growing media companies including DreamWorks, Coca-Cola, Nickelodeon, Lego and Vice Media. And in addition to the ski slope, it will include water and amusement parks, a skating rink and other flashy attractions.

In total, 45 percent of the 3 million square feet will be devoted to retail, with 55 percent earmarked for entertainment. That ratio, French said, is a smart update to the old mall paradigm and could be the key to the project’s success.

Go big or go home

Looming over the turnpike on 130 acres of state land, according to the state authority that operates the property, American Dream is clearly banking on its sheer size and its high-profile partnerships to turn itself into a destination.

It will include a DreamWorks movie-themed water park, a Nickelodeon Universe amusement park, a Legoland Discovery Center, an aquarium, a Ferris-style wheel and a sprawling food hall with an 800-seat area called Coca-Cola Eats.

That’s all in addition to the regular retail — 350 stores with a mix of national brands and pop-ups filling 1.5 million square feet. Those shops will inhabit more traditional real estate: long halls punctuated by atriums, though a giant tree-shaped sculpture from Burning Man — illuminated with 75,000 LEDs and playing music — will also be on display in a seeming bid for the hipster crowd.

As of early August, 85 percent of the retail space was leased, according to Triple Five, a private, family-owned company that has stakes in several other industries, including oil and gas and tech startups. Saks Fifth Avenue will occupy a two-level, 120,000-square-foot space; the posh retailer’s annual rent is $2.1 million, or about $18 a square foot, according to a 2017 appraisal of the property by CBRE.

Other tenants include Tiffany & Company, Hermès and Dolce & Gabbana, all of which will be housed in a luxury wing. Victoria’s Secret, Uniqlo and Sephora will also have outposts at the mall, which has annual asking rents of $100 to $500 a square foot, said Don Ghermezian, Triple Five’s CEO, who added that concessions such as improvement allowances have not been granted.

Saks’ rent is significantly lower because it’s the mall’s anchor tenant, according to a Triple Five spokeswoman.

But commercial brokers say the other rents seem very steep. By comparison, Roosevelt Field — the upscale Long Island mall anchored by Nordstrom, Neiman Marcus and Bloomingdale’s — commands about $50 to $200 a square foot, French said.

At American Dream, the higher asking rents have not hindered lease negotiations, according to Ghermezian. Some tenants have even expanded their planned footprints, he said. Lululemon Athletica, for example, opted to take 12,000 square feet, up from 4,600. And Barneys New York is still scheduled to open, even after the company declared bankruptcy this summer.

But that’s not to say the megamall is immune from today’s harsh retail realities.

Toys “R” Us — which filed for bankruptcy in 2017 and later liquidated its stores — was an original anchor tenant.

Similarly, Cirque du Soleil was supposed to have a permanent home in the complex, according to early reports, but that no longer seems to be the case. In August, a Cirque du Soleil spokesperson, somewhat cryptically, called the earlier reports “rumor.”

Construction on the American Dream site first began in 2004

Scattered amongst the brand-name retailers will be pop-up shops that will feature locally based startups with leases of less than six months, said Ken Downing, the chief creative officer, who joined Triple Five last spring after a 28-year run at Neiman Marcus.

Triple Five owns two other major malls — the 5.3 million-square-foot West Edmonton Mall in Alberta, Canada, and the 4.2 million-square-foot Mall of America near Minneapolis. Both of those gigantic properties are 95 percent occupied, Ghermezian said.

And the developer isn’t the only one still betting on the mall model.

Brookfield Properties is opening SoNo Collection, a 700,000-square-foot mall in Norwalk, Connecticut, that will have a Nordstrom, Apple store and Bloomingdale’s, according to news reports. Like American Dream, SoNo will also have pop-up shops.

The dominant trend in the region has been for shopping centers to reinvent themselves to avoid collapse.

Taking the space of a former Saks store at the Mall at Short Hills, a 1.4 million-square-foot property owned by Taubman Properties about 20 miles from American Dream, is an Industrious co-working facility, for example.

Likewise, at the nearby Westfield Garden State Plaza, which in 1957 was the first suburban mall in New Jersey, a J.C. Penney that closed in 2018 will be razed to make way for dozens of smaller shops, according to news reports. More strikingly, European owner Unibail-Rodamco-Westfield plans to add apartments and greenery on parking lots there. A call left with the mall’s managers was not returned.

Ghermezian said the pop-up stores at American Dream are not fillers for empty storefronts, as is often the case with vacant shops in New York. “We are not doing it to make storefronts look full,” he said.

As for the conventional tenants, leases stipulate that they need to embrace “experiential retail” in their stores, which could take the form of Instagram-worthy backdrops.

“It’s not necessary to have the same stores as on Rodeo Drive or Madison Avenue,” said Downing. “Customers are looking for a store that has a little personality.”

Dreams vs. reality

Industry sources predict that the complex will see big crowds for its opening and that the rotating pop-ups will keep customers coming back.

But maintaining the 110,000-a-day visitor level that Triple Five is aiming for — largely on par with its Minnesota property — will be challenging, they added.

Others suggest the possibility of an unpleasant Catch-22.

“If they don’t meet those numbers, the mall becomes a giant white elephant, with serious implications for the site and the region,” said Tittel of the Sierra Club. “If they do hit it, it will be car-maggedon all the time.”

By comparison, Walt Disney World in Florida averages 142,000 visitors per day, according to 2017 figures. And all of New York City sees 178,000 visitors on a daily basis, according to 2018 data.

“I don’t think the 110,000 number is a make or break for the project,” said Alan Marcus, the founder of the Marcus Group, a public relations firm that represented American Dream till 2014.

Triple Five’s business plan, as spelled out in the 2017 CBRE appraisal, assumes $117 million a year in retail rents and $82 million a year in ticket sales from the amusement parks to start.

Keeping visitors on-site for six hours — another Triple Five goal — may also be  tough. The national mall average is one hour, even if most malls don’t have wave pools and hockey rinks.

“Most people think it’s a reach,” said GFP Real Estate Chair Jeff Gural, who’s a managing partner in a group that operates the horse racing track within the Meadowlands Sports Complex. “But I think it’s a spectacular project and I wish them well,” Gural, who’s not involved with the American Dream project, added.

One of the biggest financial obstacles for the mega-mall is that it’s located in Bergen County, which bans shopping on Sundays under local “blue laws.”  The exact toll of that restriction is tough to gauge, brokers say, and may be offset by the fact that New Jersey doesn’t charge sales tax on clothes, which has historically siphoned business away from New York. The restaurants, roller coasters and ski slope can remain open on Sundays.

How visitors will get to the East Rutherford site is another outstanding question.

American Dream, whose visitors are mostly expected to come by car, has 11,000 parking spaces and access to another 22,000 around MetLife Stadium, provided there’s no football game, concert or other event.

Concerns that the mall will cause traffic and congestion nightmares during home games has already led to one legal battle: The Jets and Giants — who had veto power over any expansion plans at the Meadowlands — sued Triple Five in 2012 to stop the project. (Triple Five counter-sued, saying the teams were hurting its ability to get loans. The two sides signed an undisclosed settlement in 2014.)

(Click to enlarge)

Public transportation could be just as problematic as driving.

New Jersey Transit has allocated $8 million to expand three bus lines to American Dream, which will have its own self-funded transit center. While Ghermezian said that would be ready in time for this fall’s opening, the existing train line — which is now only used for big events and football games — may not be enough.

Even though trains are now supposed to run hourly, that will require more conductors, which New Jersey Transit has in short supply, argued Janna Chernetz, deputy director of the transit advocacy group Tri-State Transportation Campaign. Bringing tens of thousands of visitors to the mall every day — plus the 17,000 people who are supposed to work there — will have negative effects far and wide, said Chernetz, who’s a “strong critic” of the project. She also questions how many shoppers, burdened with bags, will want to take mass transit home from the mall.

“But we are at the point where we have to make the project work,” Chernetz said, adding that Triple Five should pony up for any train expansions.

Others argue that putting the developer on the hook wouldn’t be fair, noting that the Giants and Jets have, for better or worse, never had to significantly chip in for infrastructure improvements.

“If the teams say jump, the state says, ‘How high?’” Marcus, the mall’s former spokesman, said.

Indeed, because of its job-creation function, he said, American Dream should get state support. “People love to be negative about projects,” Marcus added.

For its part, Triple Five seems to be pulling out all the stops to ensure that transportation is not a make-it-or-break it issue for the project.

It’s running private shuttle buses, which will pick up visitors at sites in Manhattan, at airports and at ferry stops on the Hudson River. Favored customers can also potentially book two Rolls-Royces, Ghermezian added. And there are three landing pads on American Dream’s roof for those with the means to helicopter in.

“Whatever we can do to get the New York customer as quickly and as easily as possible, we will do,” Ghermezian said.

Triple Five CEO Don Ghermezian

The survivor

If American Dream seems like the product of a different era, it’s understandable. It’s been on the drawing board for years.

In 2002, New Jersey’s Sports and Exposition Authority issued a request for proposals to develop parking lots next to the now-defunct arena known as the Izod Center.

The Mills Corporation, a mall developer that had kicked around proposals for other parts of the Meadowlands since the 1990s, teamed with the Mack-Cali Realty on a mall-and-entertainment complex to pitch its idea.

The complex was approved in 2003 and broke ground a year later. Several components of that original plan — it promised a Legoland attraction, a Ferris wheel and a ski slope — made it to the final blueprint.

But its façade, which had blue and green checkered patterns, like bathroom tile, and orange and brown stripes elsewhere, was widely panned.

As governor, Christie called it “the ugliest damn building in New Jersey and maybe America.”

By 2006, Mills was over budget and in need of funding. It turned to investors including Colony Capital, the private equity firm founded by Thomas J. Barrack Jr., a confidant of President Donald Trump who is currently under federal scrutiny about foreign influence (Barrack hasn’t been officially accused of wrongdoing). After Lehman Brothers collapsed in 2008, jeopardizing $500 million in construction financing, Colony also ran into trouble.

Talks with the Related Companies to join the project came to a dead end, and a group of lenders led by Credit Suisse eventually foreclosed on the $2 billion, nearly complete site.

In 2011, Triple Five — passed over in the initial RFP — stepped in to rescue the property. It soon whitewashed the façade and reimagined the project, keeping the ski slope in place but expanding the complex to 3 million square feet from 2.2 million.

The company’s founder, Jacob Ghermezian, emigrated from Iran to New York in the 1940s and worked as a Persian rug dealer for more than a decade before relocating to Canada and expanding into real estate in the 1960s. The family made timely bets on housing and hotels in Edmonton during the area’s 1970s oil boom and later began to diversify.

Triple Five’s holdings in New York today include the Community Federal Savings Bank in Woodhaven, Queens, according to bond sale records.

The price of dreaming

Triple Five has a 75-year, $160 million lease for its site, though previous developer Mills prepaid the ground rent through 2024.

Triple Five has also benefited from major subsidies for the project, even if some of those tax breaks and credits are tools commonly deployed with economic development.

The first phase of the $5 billion complex is finally poised to open in late October, but critics say it’s out of touch with the way consumers shop today.

Rather than full property taxes, American Dream is responsible for so-called payments in lieu of taxes. In a complicated financing arrangement, those PILOTs will both flow to East Rutherford and help pay off $1.1 billion in tax-exempt municipal revenue bonds sold in 2017 to support the project.

New Jersey also waived sales tax requirements for the project, with that anticipated revenue also backing the unrated bonds, whose lead underwriter was Goldman Sachs.

The bonds are structured to pose no downside for taxpayers, as bondholders assume all the risk, according to Ghermezian. The high-yield bonds, which mature in 2056, were overperforming a year after being issued, according to news reports.

“There is zero risk whatsoever [to taxpayers],” said Ghermezian, who added that his family’s equity stake is about $650 million, or about 13 percent of the development’s total value.

Triple Five is no stranger to asking taxpayers to help foot the bills. In the mid-1990s, the company was planning on building a mall in Silver Spring, Maryland, also named American Dream. But the $585 million project ultimately collapsed because Triple Five was demanding too much of a subsidy from the public, up to $300 million, officials said at the time.

Meanwhile, the New Jersey mega-mall’s $1.7 billion in private construction financing, from a group of lenders led by JPMorgan Chase, comes due in 2021. To secure that loan, Triple Five had to put up a 49 percent stake in its Mall of America for collateral, meaning the Midwestern property could potentially get a new minority owner if American Dream imploded.

But Triple Five’s spokesperson  noted that “such recourse is normal for construction financing.” The risk from such recourse is modest “with American Dream opening in just weeks,” she wrote in an email.

Key to the Meadowlands project, analysts say, was the deal with Coke, announced in June. They say it represents a unique effort at branding a mall in the manner of a sports arena. The 10-year multimillion-dollar agreement allows Coke to affix a large billboard on American Dream’s façade, at an as-yet-undetermined spot. (It should be noted that Pepsi sponsors MetLife Stadium, and its sign faces American Dream.)

Inside the mall, Coke will host events with athletes and other celebrities; the beverage giant will also have an interactive store with a podcast studio. Coca-Cola Eats, the massive food hall, will also be a branded feature with global cuisine and various Coke beverages.

“I think it was a real coup to get Coke,” Marcus said.

There have been smaller innovations as well. H Mart, the fast-growing Asian grocery chain, took 35,000 square feet, which will include a bar and a stage for small concerts. Putting grocery stores in malls — once a frowned-upon practice — is a necessary play today, said Chuck Lanyard, the president of Paramus-based retail brokerage the Goldstein Group, who represented H Mart in the lease deal.

“Malls all over the country are really in trouble,” Lanyard said. “Very wisely, it’s not just about retail but also entertainment.”

When American Dream opens on Oct. 25, critics will likely see an albatross of a project that is far removed from how consumers shop today — despite the bells and whistles. But others may appreciate the audacity of such a large mall-reinvention effort.

“If malls want to survive, they are going to have to do something like this,” Lanyard said. “But American Dream has gone many steps further.”

(Click to enlarge)

David Beckham and Miami Freedom Park (Credit: Getty Images)

David Beckham’s plans to develop a Major League Soccer stadium in Miami hit another snag.

An environmental analysis for the planned site for the Inter Miami team reported high arsenic contamination levels and surface-level soil samples containing debris that pose a “physical hazard,” according to the Miami Herald.

The environmental firm EE&G found contamination levels at twice the allowable limit for arsenic. Barium and lead levels also exceeded legal limits, the Herald reported.

The findings come as the city is negotiating the terms of a 99-year lease with the development group, led by Beckham and Jorge Mas. It is unclear how the analysis will impact the future plans for the site.

The Beckham-Mas ownership group submitted its plans with the Miami City Commission last July, proposing to build a $1 billion commercial development project called Miami Freedom Park, which would require leasing 73 acres out of the 131-acre park.

In total, the Beckham-Mas group would pay an annual rent of at least $3.5 million. The group later agreed to pay up to $35 million in environmental remediation for the site and said it would seek federal funding if the costs exceeded that amount. Voters allowed the development group to move forward with its plans last November.

Because the Miami stadium won’t be ready in time, Miami Beckham United, another Beckham LLC, also signed an agreement with the city of Fort Lauderdale to replace the city-owned Lockhart Stadium with a training facility and an 18,000-seat stadium where the MLS team would play its first two seasons in 2020 and 2021. [Miami Herald]  — Keith Larsen

Jacob Sudhoff and Scott Durkin (Credit: Sudhoff Companies, Emily Assiran, iStock)

Douglas Elliman is launching in Texas.

The brokerage announced Tuesday a joint venture with Sudhoff Companies, a real estate marketing and sales company based in Houston that specializes in new development.

Elliman’s new office in Houston will be staffed by 50 brokers, said Scott Durkin, the brokerage’s president and chief operating officer. The firm plans to expand its resale division early next year — and eventually move into Dallas and Austin.

“Houston is a lot like Palm Beach, a lot like Beverly Hills, Los Angeles and parts of Long Island,” Durkin said. “The buyer is a buyer that we knew we wanted to be part of their lives, but we didn’t know the right people, yet, and now we have found the right person and company that has our DNA and speaks our language.”

The joint venture — almost a year in the making — will see Sudoff operations folded into the Elliman brand. Jacob Sudhoff, president of his namesake firm, will serve as chief executive officer of Douglas Elliman, Texas.

Durkin said part of the draw was Sudhoff’s involvement in new construction and “vertical living.”

The firm will represent approximately $500 million in current new development, including Houston’s newest luxury condominium, the Hawthorne, and command an estimated 85 percent market share in Houston’s new development market for condominiums, according to Durkin.

He said the expansion was a natural next step because Texas was a feeder market to other states, and a number of the firm’s existing clients came from Houston.

“Houston is not a market where people are leaving; it’s a market where people are coming into,” he said.

In New York, Elliman is a huge player. With 1,999 agents and $8.99 billion in closed sales, it is the biggest brokerage in the city, according to The Real Deal’s latest ranking.

Although it is a dominant force in new development, Chairman Howard Lorber acknowledged the sector’s constraints in New York City during an August 7 earnings call. Vector Group — Elliman’s parent company — is not investing in new condo projects here because Lorber said high land costs make it nearly impossible to pencil out a profit. It’s made new development plays elsewhere in recent years, including the acquisition of independent Boston-based firm Otis & Ahearn in 2017.

Generally, Elliman expands in new markets through the acquisition of firms, such as its buy of Teles in Beverly Hills. Overnight, the deal made Elliman one of the largest residential players on the West Coast.

Elliman is not the only New York firm to recently expand into Texas. In 2018, Compass rented 24,000 square feet of office space in Dallas to house its newest regional headquarters, after announcing a partnership with Dallas-based Collective Residential earlier in the year. The brokerage also has agents in Austin and Houston.

Praxis of Deerfield Beach Apartments and MRK Partners CEO Sydne Garchik

A partnership between MRK Partners and R4 Capital bought a Deerfield Beach senior living facility for $24 million.

The El Segundo, California-based MRK Partners and New York-based R4 Capital purchased the 224-unit Praxis of Deerfield Beach Apartments for $107,142 per unit. Reston, Virginia-based SJM Partners sold the property.

The partnership secured a $25.8 million Housing and Urban Development loan from Jones Lang Lasalle Multifamily LLC.

The Praxis of Deerfield Beach apartment complex, at 1181 Southwest 15 Street, is for adults 55 and older, according to its website.

Amenities include two clubhouses, a swimming pool, Jacuzzi, picnic area, shuffleboard, a business center and laundry facility. All of the apartments are wheelchair accessible and include a private balcony or patio area, according to its website.

The property last traded for $14.1 million in 2015, records show.

In June, MRK Partners paid $43.5 million for a senior affordable living facility in South Miami Heights. MRK Partners was founded by Sydne Garchik in 2015 and now has more than 3,000 units and 15 properties in its portfolio, according to its website. The real estate firm focuses on affordable housing and also owns the Phoenix, a 164-unit facility in Homestead at 1554 Northeast Eighth Street.

Steve Wynn and 1960 South Ocean Boulevard (Credit: Sotheby’s and Getty Images)

Embattled casino mogul Steve Wynn paid $43 million for an oceanfront estate in Palm Beach, property records show.

Emma Cisneros of 1960 South Ocean Blvd. LLC, part of the billionaire Venezuelan family that owns a media conglomerate, sold the eight-bedroom, 24,600-square-foot mansion at 1960 South Ocean Boulevard. The buyer is 1960 LLC, in the care of a Las Vegas company tied to Wynn’s Wynn Fine Art.

Juan Pablo Molyneux designed the 2.25-acre property in Palm Beach, according to the listing. It was on the market with Cristina Condon of Sotheby’s International Realty for $56 million, but first hit the market in 2018 for $59 million, according to Zillow. The home includes a billiards room, a chef’s kitchen with butler’s pantry, a wine cellar and staff quarters, loggias, terraces, a guest and pool house and more.

Records show that the seller paid $33.6 million in 2005 for the property.

In July, the Cisneros family sold a 3-acre property at 555 Leucadendra Drive in Coral Gables for $23 million.

Wynn, Wynn Resorts’ former chairman and CEO, resigned from the company he founded in February 2018 after multiple allegations of sexual misconduct were revealed by the Wall Street Journal. In addition, his ex-wife filed a lawsuit alleging that he paid a manicurist $7.5 million after forcing her to have sex with him.

Wynn, who sold the lot at 1350 South Ocean Boulevard last year for over $20 million, was previously rumored to have made an offer on the former estate of Broadway producer Terry Allen Kramer at 1295 South Ocean Boulevard.

The latest sale adds to a string of ultra high-end deals to close in Palm Beach over the past few months. Kramer’s estate sold her property in June for about $105 million, not including commissions, creating a new single-family home sale record on the exclusive island.

(Credit: iStock)

Real estate pros and economic pundits spent the better part of last week trying to decipher the greater implications of the treasury yield inversion, an economic indicator that has historically preceded a recession.

But earlier this year a different set of benchmark rates inverted, and it’s already had a significant impact on one sector of the real estate market: residential-mortgage real estate investment trusts.

Three of the largest REITs that buy up residential mortgages and package them into securities have cut their dividends so far this year. The cuts came after the yields on three-month and 10-year treasuries inverted in March for the first time in over a decade. (Last week’s inversion that sent the market into an uproar was on two-year and 10-year treasuries.)

READ MORE:
The economy may be starting to slow. Real estate is taking notice 

Annaly Capital Management, the country’s largest residential mortgage REIT, cut its dividend in May from $0.30 a quarter to $0.25 a quarter. The same month another large mREIT, AGNC Investment Corp, cut its dividend from $0.18 to $0.16 cents.

And in June Two Harbors Investment Corp cut its dividend from $0.47 to $0.40.

“That was a little surprising to see them cut,” said Brock Vandervliet, an analyst at UBS who covers Annaly Capital management. “For Annaly that was basically the first cut in five years, so that was a big deal.”

Such dividend cuts are significant for mREITs, which investors buy primarily for their high quarterly payouts. Some of the highest yield mREITs pay out dividends of 12 percent or more, compared to a yield of 2 to 2.2 percent for the Standard & Poor’s 500 Index.

Though mortgage REITs are just a small part of the $11 trillion home loan market, they’ve been ramping up over the past several quarters.

They operate on a simple premise: Borrow short-term debt (sometimes as short as overnight, but more commonly 30 or 90 days) to buy up a pool of very long-term assets – 30 year mortgages.

The model works well as long as borrowing costs are lower than the payouts from the mortgages they buy. But when the yields on three-month debt were suddenly paying more than 10-year notes in March, the equation flipped and it suddenly became more expensive for the REITs to borrow.

Stock prices for Annaly and AGNC took a sharp hit in April of about 13 percent and 10 percent, respectively, and both took another dive earlier this month.

A spokesperson for Two Harbors declined to comment, while representatives for Annaly and AGNC did not respond to requests for comment.

But on Annaly’s first-quarter earnings call in May, company president Kevin Keyes addressed the dividend. He said the company could maintain its dividend, but in order to do so it would have to increase leverage.

And with more uncertainty over the Federal Reserve’s future moves on interest rates, he said, that strategy seems too risky.

“This quarter’s reduction was really a function of frankly things we can’t control in the marketplace,” he said. “Long story short, we see a lot more risks in this market today than we have in the past couple of years, as it relates to generating that similar return.”

The Mountain’s sale, to a lender linked to the Mark Hughes Trust, was a tiny fraction of the massive property’s asking price. (Credit: Realtor, Wikipedia, iStock)

The Mountain of Beverly Hills, which hit the market last year with a bang for a record $1 billion, has fizzled out, selling for just $100,000 at a foreclosure auction.

The buyer and only bidder was the lender, an entity linked to the Mark Hughes Trust. The Wall Street Journal first reported the story.

The sale marks a monumental disappointment for the Mountain’s now former owner, Secured Capital Partners. In July 2018, the company got maximum exposure for its splashy listing on the 157-acre parcel above the Beverly Hills Post Office. It enlisted star broker Aaron Kirman to market the property, and received a mountain of publicity. But the dream soon faded and eight months later in February, the price was slashed to $650 million.

At the auction in Pomona on Tuesday, the gavel banged down at a tiny fraction of the original listing.

Any interested buyers would have had to bid at least $200 million to cover the lender’s debt on the property. But no other bidders showed. The Hughes Estate had owned the property previously.

On Monday, a judge overseeing a bankruptcy case that centered on massive property ruled that the lenders could move ahead with the foreclosure.

Secured Capital had filed paperwork for bankruptcy protection in May, and temporarily delayed the auction — originally scheduled for last week — by transferring ownership to Tower Park Properties. Both entities are tied to convicted felon Victorino Noval.

The judge ultimately ruled that Tower Park’s bankruptcy case “does not prevent the lenders from proceeding with the foreclosure sale,” paving the way for Tuesday’s auction. It also struck down Secured Capital’s request for bankruptcy protection last month, siding with the lenders in both cases. [WSJ] — Natalie Hoberman

From left: Rotem Rosen, Zina Sapir, Tamir Sapir, Bella Sapir, Elena Sapir, and Alex Sapir (Credit: Getty Images)

Rotem Rosen isn’t just seeking $103 million from the estate of Tamir Sapir.

To corroborate claims that he saved Sapir’s real estate empire from ruin during the financial crisis, Rosen’s legal filings paint a picture of a family unable to manage their finances without him.

Pointedly, he claims his former business partner and the late billionaire’s son, Alex Sapir, “mishandled and misused” assets from the elder Sapir’s estate — by making improper distributions to beneficiaries, hiding certain assets and investing in companies (on behalf of the estate) in which he holds an interest.

“Alex has taken numerous actions to benefit himself, his holdings, or specific Sapir family members at the expense of the Estate,” court documents claim.

But in what’s shaping up to be a family showdown, the estate and Alex Sapir are rejecting Rosen’s “fabricated” claims, which are based on “false or misleading allegations and omitted facts.”

In court filings, the estate said Rosen is simply seeking leverage in his divorce from Tamir’s daughter, Zina, whom he wed in 2007. Zina filed for divorce in April.

Beneficiaries of Sapir’s estate — including Zina and Tamir’s second wife Elena — have also sided with Alex Sapir. In a July 2019 court filing, Tamir’s adult children called Rosen’s accusations a sham.

Representatives for Rotem Rosen and the Sapir family declined to comment beyond the court filings. But Michael Ryan, a court-appointed guardian for Tamir Sapir’s young children, summed things up during a June 28 court appearance.

“Reading between the lines… the real parties in interest here are [Zina] Sapir and Rotem Rosen,” he said, according to a transcript of the proceeding. “It’s really a divorce battle fought on a different field.”

Roots in the financial crisis
The basis of Rosen’s claim is an agreement Tamir Sapir struck with his son and Rosen in the throes of the financial crisis.

A few years after marrying Zina Sapir in 2007, Rosen joined his new brother-in-law Alex in business. In 2011, Rosen and Alex Sapir formed ASRR LLC, a 50-50 venture, to help save the family from financial ruin. “Even Tamir’s personal credit card was restricted,” Rosen’s attorneys said in court documents. In a 2009 court filing in Nevada, Alex Sapir “pleaded poverty,” stating the Sapir Group was more than $250 million in debt and had just $4,000 in cash and cash equivalents. In 2010, Sapir defaulted on the mortgage and mezzanine loan at 100 Church, which SL Green bought at auction for a “ridiculously low amount of $10,000.”

Rosen claims in court documents that Tamir Sapir agreed to pay ASRR 10 percent of the net value of any restructuring deal it facilitated. Rosen admits that he was paid while the elder Sapir was alive and, to a “limited extent” after his death in 2014. For instance, he was paid $75 million for helping to restructure the Sapir Organization’s debt, including HSBC loans valued at $180 million.

11 Madison Avenue (Credit: Google Maps)

But Rosen said he was not compensated for some of the more lucrative deals — including the repositioning and selling of 50 Murray, 53 Park Place and 11 Madison, which SL Green bought for $2.6 billion in 2015.

In court documents, Rosen alleges that while Alex Sapir initially said the estate would pay Rosen and ASRR for that work, after a “falling-out between Alex and Rosen in 2017, followed by a separation of certain of their business ventures in 2018, Alex backtracked.”

However, documents filed on behalf of the estate allege there is no written agreement for the work and payment Rosen claims he’s owed. As a 50 percent owner of ASRR, Alex Sapir certainly would have known about one, court documents state.

What’s more, Rosen didn’t file a claim seeking payment until February 2019, which the filing points out, a divorce with Zina was imminent. Finally, the estate points out that Rosen failed to mention that until 2014, he was compensated for his role as CEO of the Sapir Org. In that capacity, he earned $600,000 a year and Zina Sapir was paid $11,600 weekly. “Rosen claims that ASRR is due compensation for the very same services for which he was personally compensated,” the filing stated.

Estate shenanigans
In an attempt to compel the estate to provide a full financial accounting, Rosen says Alex Sapir mishandled Tamir’s estate even before he died. According to court filings, Alex assumed power of attorney for his father when Tamir Sapir fell into a coma in February 2013, after suffering a heart attack and brain damage. Tamir Sapir died in September 2014, around which time his fortune reportedly shrunk from $2 billion to $600 million.

In court documents, Rosen posited that in paperwork preceding Tamir Sapir’s death certificate, Alex Sapir intentionally listed his father as divorced (even though he was married to Elena Sapir) to prevent Elena from claiming a portion of Sapir’s assets.

Rosen also said Alex Sapir made “improper distributions” to family members “with the goal of buying the silence of any beneficiary that might challenge his power over the Estate.”

Alex allegedly gave his mother and Tamir’s first wife, Bella, $25 million for a debt related to her 2006 divorce from Tamir. And he struck a deal to pay $750,000 to Tamir’s sister (Rozita Sofia), who previously threatened to sue Alex for violating his power of attorney for Tamir. Finally, he bought a $12.7 million townhouse for Elena Sapir, Tamir’s second wife, who lives there with their children, Eli and Zita Sapir.

According to Rosen, Sapir failed to disclose some of his father’s assets to the court — including Tamir’s jewelry collection, a wine collection that was stored at Rosen’s apartment at 250 Mercer, and Tamir’s collectible Ford Motor cars, which are now housed at Bella Sapir’s Hamptons home.

In a June 2019 court filing, Alex Sapir categorically denied Rosen’s allegations. He said there was no intentional concealment of assets from the asset. And he offered a simple explanation for the townhouse purchase: that he used his discretion to buy the home for Elena, whom Tamir Sapir supported financially while he was alive.

“This point is reinforced,” court filings state, “by the fact that none of the beneficiaries — who are all fully familiar with the administration of the Estate — is seeking an accounting or removal” of Sapir as executor.

Self-dealing
But among Rosen’s accusations, there is one with potential business implications: that Alex Sapir engaged in self-dealing, using the estate’s money for his own benefit.

In two instances — related to the Nomo Soho Hotel and Sapir’s Surfside development project — Rotem alleges that Alex Sapir obtained loans from the estate at favorable and/or below-market terms, benefitting Sapir Corp. At Surfside, Bella Sapir and Alex’s sister, Ruth Sapir-Barinstein, purchased two units for a total of $20 million. The suit alleges they also agreed to loan Sapir $3 million each.

The suit also claims that Alex Sapir bought out Rosen’s stake in their joint venture through a partnership owned by his half-brother and half-sister, both minors.

In court documents, Sapir said the allegations of self-dealing are “patently false.” He said Rosen set of carefully selected “facts” range from “misleading to plainly untrue.” Further, he said each transaction was “subject to commercially reasonable terms” made at arms-length and involving an audit committee. Each deal earned a “commercially reasonable return” for the estate.

Untangling Sapir’s estate
Settling Tamir Sapir’s complex estate has been a laborious, court filings for both parties reveal.

Although Rosen claims Alex made improper disbursements, Alex’s attorneys have cited the complexity of Tamir’s empire, which was comprised of at least 30 separate businesses and property in Manhattan, Mexico, Vermont and New Jersey.

They also said Sapir’s estate had been under audit by federal and state tax authorities since his death. In 2017, the IRS rejected Sapir’s valuation of certain properties and deductions, and suggested its value was $1.029 billion (about $500 million more than the estate claimed) and imposed $250 million in penalties. The estate whittled that down to $30 million and settled last year.

In court documents, he said the estate is solvent with more than $300 million in assets. But, court documents also state that Sapir is prepared to create and maintain a reserve fund with enough money to satisfy Rosen’s allegations. A full accounting of how Alex Sapir has handled the estate would be a “burdensome and costly” process with no benefit to the estate.

In addition, “numerous controversies” around Sapir’s beneficiaries will have come up, prompting each to lawyer up. Those lawyers have been meeting regularly for months to work out an amicable resolution.

“This Court should not permit Rosen, the soon to be ex-husband of Zina Sapir and now family outsider, to interfere with these objectives,” court documents state.

Every day, The Real Deal rounds up South Florida’s biggest real estate news, from breaking news and scoops to announcements and deals. We update this page at 9 a.m. and 4 p.m. ET. Please send any tips or deals to tips@therealdeal.com

This page was last updated at 9 a.m.

Trader Joe’s is finally opening its Miami Beach store on Aug. 27. The popular California-based grocery store is part of 17 West, a five-story, mixed-use development with residential units and a parking garage at 1698 Alton Road. The developers, Rock Soffer of Turnberry Associates, Elion Partners and members of the Sredni family, financed construction with a $34.5 million loan from Fifth Third Bank in 2017. Trader Joe’s is taking 11,500 square feet of the building’s retail space. [Miami New Times]

From left: Rotem Rosen, Zina Sapir, Tamir Sapir, Bella Sapir, Elena Sapir, and Alex Sapir (Credit: Getty Images)

Alex Sapir is being accused of mismanaging his family’s fortune in court documents filed by his ex brother-in-law, Rotem Rosen. Rosen isn’t just seeking $103 million from the estate of Tamir Sapir. Rosen claims Alex Sapir “mishandled and misused” assets from the elder Sapir’s estate — by making improper distributions to beneficiaries, hiding certain assets and investing in companies (on behalf of the estate) in which he holds an interest. [TRD]

Steve Wynn and 1960 South Ocean Boulevard (Credit: Sotheby’s and Getty Images)

Embattled casino mogul Steve Wynn paid $43 million for an oceanfront estate in Palm Beach. Emma Cisneros of 1960 South Ocean Blvd. LLC, part of the billionaire Venezuelan family that owns a media conglomerate, sold the eight-bedroom, 24,600-square-foot mansion at 1960 South Ocean Boulevard. The buyer is 1960 LLC, in the care of a Las Vegas company tied to Wynn’s Wynn Fine Art. [TRD]

The yield-curve inversion is hitting mortgage REITs where it hurts. It turns out a strategy of borrowing short-term to buy long-term doesn’t work so well when the short-term debt is costlier. Three of the largest mortgage REITs have cut their dividends so far this year. [TRD]

Kohl’s reported declining sales for the third straight quarter. The department store chain posted strong growth for most of 2018, but the recent slide has caused concern among investors. The company’s shares are down about 43 percent over the past year. [WSJ]

Compiled by Katherine Kallergis

Laurie Reader, broker-owner of Laurie Finkelstein Reader Real Estate (Credit: iStock)

Zillow Offers launched in South Florida this week, leaving potential buyers, sellers and agents with questions about how the iBuying program works.

The Seattle-based listings giant is making a big push into home buying and flipping, having already expanded to 15 other markets with plans to nearly double that in the coming months.

In South Florida, it’s working with Laurie Reader, broker-owner of Laurie Finkelstein Reader Real Estate, as its broker-partner. Reader will represent Zillow on all acquisitions and resales in the tri-county area under the Zillow Offers program, she told The Real Deal.

The way it works is simple. Zillow will unlock certain ZIP codes as it expands throughout South Florida, (but Reader would not disclose which ZIP codes). Homeowners can type in their address on Zillow’s website to see if their property is eligible. Sellers whose homes fall within eligible ZIP codes are then prompted to answer questions about the home and possibly add photos of the property. Within days, Zillow will present a no-obligation cash offer. If the seller accepts the offer, they can choose their closing and moving date, between five and 90 days after acceptance.

Zillow then prepares the property for resale, making whatever repairs are necessary, and puts it on the market. Zillow’s staff will arrange light repairs, like painting, installing new carpet, roof tiles and more.

Reader said that Zillow is looking to acquire different properties, including houses and condos, in South Florida. She expects that the homes will be mid-priced, largely between the high $200,000s into the mid $300,000s. But she said the prices could go higher or lower.

Sellers could also potentially trade their homes for other properties and vice versa.

Reader, whose independent brokerage is not affiliated with any of the big brokerage brands, said she already had a staff selling over 600 homes a year. Once she signed a deal with Zillow, she added to her staff, which currently consists of about 30 employees and 40 agents.

While Reader declined to provide a specific number of houses that Zillow plans to buy, she said she “would love that to be around 100 homes a month, 1,200 homes a year.”

“That will all fall back on consumer demand,” she said.

The iBuying model targets sellers who are looking to sell their property quickly and receive cash, and could be viewed as a more viable option as a recession looms.

Since Zillow Offers launched in April 2018, the company has said that more than 170,000 homeowners have requested an offer from Zillow. Next, the listings giant plans to begin offering its home buying program in Tampa and Jacksonville, Florida; Austin and San Antonio, Texas; Oklahoma City, Oklahoma; Sacramento and San Diego, California; Cincinnati, Ohio; and Tucson, Arizona.

Zillow is the first of the big iBuying companies to expand to South Florida. Keller Williams launched its iBuyer program, Keller Offers, in Dallas this May. Keller Williams in July said it was teaming up with Opendoor.

WeWork CEO Adam Neumann and 21-33 Irving Place (Credit: Getty Images and Google Maps)

A landlord is suing to get out of a lease agreement with WeWork amid fears the co-working company can’t support its lease.

The office space giant, whose parent the We Company is expected to go public next month, currently occupies multiple floors at 21-33 Irving Place in Manhattan. The landlord — identified as Belvedere Management Co. in property records — claims that when WeWork signed its lease in 2016 with a special purpose entity, it signed a guaranty that its holding company was worth more than $150 million.

In the lawsuit filed Tuesday in New York State Supreme Court, the landlord alleges that in June it received a notice from WeWork stating the holding company had undergone a “reorganization,” which created a new entity known as WeWork Companies LLC that would now back the lease.

The landlord states that it has no proof that the new holding company has a net worth of “at least” $150 million.

But after the We Company’s S-1 disclosure last week to the U.S. Securities and Exchange Commission, which was met with a media storm and serious questions about the startup’s accounting methods and corporate governance, the landlord became concerned about WeWork’s ability to fulfill the lease.

“Recent financial reports in the media, however, cast great doubt on the financial viability of WWC LLC,” the complaint reads. “Defendants are effectively foisting on the Landlord a guarantor not of its choosing, without the required prior notice and prior proof that the substitute guarantor has a net worth of at least $150 million.”

A spokesperson for WeWork denied the accusations in the suit. 

“Earlier this year, WeWork completed a corporate reorganization to become The We Company,” the spokesperson said in a statement. “This process had no material impact on the guarantees we provide to landlords. Landlords are critical partners to our business, and we highly value our relationships and our mutual success.”

A representative for Belvedere did not immediately respond to a request for comment. 

The lawsuit signals growing unease from WeWork stakeholders as the company marches toward a much-hyped IPO. Landlords, some who have leased entire buildings to the startup, and investors have been divided on how its business model — leasing office space and subletting it at a premium — will perform in the face of an economic downturn.

But last week’s disclosure provided some clarity on the company’s financial wherewithal and its business practices. Among them, the company has issued massive loans to its CEO Adam Neumann and other senior employees, and the company said it would not comply with traditional corporate governance guidelines. In summarizing the disclosure, one analyst told Bloomberg that the S-1 filling was a “masterpiece of obfuscation.”

Island Bay renderings and Carlos and Martin Melo

Melo Group has finally unveiled its plans to build two 60-story waterfront residential towers in Edgewater.

The Miami-based developer is planning to build 782 units and 9,000 square feet of ground floor retail and commercial space at the property at 700 Northeast 24th Street. The Next Miami first reported the proposal.

Melo Group is requesting approval from Miami-Dade’s Shoreline Review Committee for the development, called Island Bay. Melo wants to shut down some of the nearby streets to begin construction. In exchange, it would dedicate the roughly 44,000 square feet of land back to the city.

In a statement, Melo said it’s building 480 feet of waterfront property with public access along Biscayne Bay and making improvements to create a play street, which is where a dead end waterfront street is converted into a pedestrian and bicycle plaza.

The company, led by Jose Luis Ferreira de Melo, Martin Melo and Carlos Melo, focuses on condos and rentals in Miami. It has built a number of buildings in Edgewater and the Arts & Entertainment District, including 23 Biscayne at 601 Northeast 23rd Street, 22 Biscayne Bay at 615 Northeast 22nd Street, and 22 Skyview at 425 Northeast 22nd Street.

Melo is currently closing out sales of Aria on the Bay in downtown Miami, a 53-story luxury condo tower at 1770 North Bayshore Drive. Earlier this year, the firm closed on a construction loan for Miami Plaza, a 36-story apartment tower in the A&E District.

At 60 stories tall, Island Bay could be the tallest buildings in Edgewater. Two Roads Development is currently building the 57-story condo tower Elysee Miami and Vlad Doronin’s OKO Group is constructing the 57-story Missoni Baia.

Carlos Melo previously told The Real Deal in March that the company bought more than 70 properties in order to acquire the land for Island Bay.

“We bought condominiums one by one, we bought small rental buildings, we bought houses [and] foreclosures. In the last eight years, [we] put all of this together, and now it is complete,” Melo said.

He said they will start construction “when the market is ready.”

Harrison LeFrak and the Four Seasons Residences at the Surf Club (Credit: Getty Images)

Harrison LeFrak is the latest family member to buy a home in South Florida.

LeFrak’s Collins Surf Apartment LLC paid $10.1 million for penthouse 11 in the south tower of the Four Seasons Residences at the Surf Club, according to property records. The developer, an affiliate of Fort Partners, sold the 3,297-square-foot unit in Surfside.

Harrison LeFrak is a vice chairman at LeFrak, a New York-based real estate development company founded and led by chairman and CEO Richard LeFrak. Richard LeFrak’s two sons, Harrison and Jamie, both work at the family-owned company.

At the Surf Club, Harrison will be joining his father, who, using the same LLC, paid $9.7 million for penthouse 4B in the south tower. Harrison LeFrak’s unit was formerly known as unit 4A, which means it is likely next to his father’s.

In all, the Surf Club, designed by New York architect Richard Meier along with Miami-based architect Kobi Karp, includes 150 condo units, a 72-room Four Seasons hotel, a Le Sirenuse restaurant and a Thomas Keller restaurant. It was completed in 2017 at 9001 and 9011 Collins Avenue. Other unit owners include former Esquirer publisher Alan Greenberg, former Publix CEO Charles Jenkins Jr., billionaire real estate and casino tycoon Neil Bluhm, and Groupon founder Eric Lefkofsky.

In January, private equity firm founder Doug Kimmelman paid $35 million for a penthouse, which marked the priciest sale to date at the luxury development.

In Miami-Dade County, LeFrak co-developed 1 Hotel & Homes with Barry Sternlicht, and is working on co-developing SoleMia, a $4 billion mixed-use development in North Miami, with the the Soffer family of Aventura.

About a year ago, Richard LeFrak sold his three-bedroom unit at the Setai in Miami Beach to French DJ and music producer David Guetta for $9.5 million.

And earlier this year, Jamie LeFrak, also a vice chairman at LeFrak, purchased the spec mansion at 4567 Pine Tree Drive for $19.6 million.

David and Leila Centner, and the former Aspira Arts DE/CO Charter School at 1911 Northeast Miami Court

A company tied to real estate investors David and Leila Centner bought a shuttered charter school site in Wynwood for $12.8 million, signaling growing demand for charter school sites in South Florida.

DLC Capital Management LLC bought the former Aspira Arts DE/CO Charter School at 1911 Northeast Miami Court from Aspira of Florida.

Aspira of Florida’s board of directors agreed in January to voluntarily close the group’s three charter schools on June 30 due to financial troubles. Earlier this month, the group sold one of its charter schools at 13300 Memorial Highway in North Miami for $6.8 million to Yeshiva Elementary School.

Colliers International South Florida’s Achikam Yogev represented Aspira of Florida and DLC Capital Management in the most recent sale.

Charter school sites are becoming increasingly attractive for investors in South Florida due to growing enrollment in Florida as well as the ability to tap into tax-exempt bonds.

The Centners have recently bought other property in Edgewater and near the Miami Design District.

Last year, the Centners paid about $10 million for an empty office building at 4136 North Miami Avenue in Miami’s Buena Vista neighborhood where they opened Centner Academy, a private preschool, this week.

In 2000, David Centner started Highway Toll Administration LLC in New York, a company that provided electronic toll paying technology for rental car companies and other vehicle fleet operators, which he sold in March 2018 to Platinum Equity, a private equity firm.

In May, a company tied to the Centners bought a property near Related Group’s Paraiso development in Edgewater for $13.65 million.

Knotel CEO Amol Sarva (Credit: iStock)

Well, another unicorn has joined the co-working corral.

Knotel raised $400 million, bumping up its valuation to at least $1.3 billion, according to Bloomberg. Investors this round included Kuwait-backed Wafra and Japan’s Mori Trust, Itochu and Mercuria Investment. Previous investors, including Newmark Knight Frank, Norwest Venture Partners and Sapir Organization, also participated in this round. The fundraising was in exchange for 15 to 30 percent of the company and was double the amount initially reported by The Real Deal in April.

The infusion of capital comes as co-working giant WeWork’s parent, the We Company, gears up to go public. Critics have raised concerns about the We Company’s business model and whether the $47 billion company can weather an economic downturn.

“Some of the largest asset managers in real estate have doubts about the WeWork model,” Knotel co-founder and CEO Amol Sarva said in an interview. “In looking for an alternative, they found us.”

Knotel’s clients are primarily major companies, including Microsoft, Starbucks and AT&T. WeWork, on the other hand, leases desks out on an individual basis. The company has more than 4 million square feet of flexible office space and plans to expand in its existing locations — New York, San Francisco and Los Angeles — and also venture into new cities, including Chicago, Houston, Dallas and Atlanta, as well as Tokyo, Hong Kong, Seoul, Shanghai, Beijing, Shenzhen, Hong Kong, Singapore, Mumbai, Delhi, Bangalore and Hyderabad. [Bloomberg] — Kathryn Brenzel

3208 Northwest 72 Avenue and Blackstone CEO Stephen Schwarzman (Credit: Google Maps and Getty Images)

Blackstone bought a giant industrial portfolio next to Miami International Airport for $56 million.

The private equity giant bought the three warehouses totaling 367,848 square feet at 3208 Northwest 72nd Avenue and 3108 Northwest 72nd Avenue for $152 per square foot, records show. Airport Trade Center, which lists Haim Yehezkel as one of its principals, is the seller. Yehezkel leads the real estate firm, Elysee Investments, in Miami Beach.

The warehouses were built in 1972 and last traded for $13 million in 1999.

Demand for industrial properties, especially those near the airport, has increased significantly in recent years due to the rise of e-commerce.

In Miami Dade-County, vacancy rates held steady at 4 percent in the second quarter compared to the same period of 2018, even with 725,000 square feet of newly completed construction, according to a recent report by Colliers International South Florida.

Blackstone has been betting big on industrial properties on a global scale.

In March, the company paid $18.7 billion for warehouse assets across the U.S in one of the largest industrial real estate deals in history.

Blackstone is also assembling $6.8 billion worth of its European warehouse properties into a new company that it ultimately will list publicly or sell.

In South Florida, Blackstone recently closed on a Pompano Beach industrial site at Southwest 13th Court for $9.6 million. In July, a Blackstone affiliate bought two industrial vacant lots in Medley for $7.2 million.

Douglas Yearley of Toll Brothers

UPDATED Wednesday August 21, 2019, 4:07 p.m.: Amid a softening luxury market, homebuilder Toll Brothers is developing lower-priced properties as it reaches out to higher-earning millennials. But the company is still enduring a difficult period, and its third quarter results released Wednesday saw a nearly 25 percent drop in net income year over year.

The company reported a net income and earnings per share of $146 million and $1 respectively, down from a net income $193.million and $1.26 over the same period last year.

While the value of its signed contracts had ticked up to $1.87 billion, contracts were still down 3 percent from the same period in 2018, disappointing analysts and causing the stock to sink more than 6 percent.

Toll Brothers’ chairman and CEO Douglas Yearley pointed to positive “tailwinds” in the form of low mortgage rates, limited supply and strong employment.

“While our third quarter contracts were down modestly, we are off to a good start in our fourth quarter,” he said in a statement.

Toll Brothers’ City Living segment, which includes the New York City and Chicago metro areas, saw contracts down as well. The company reported 40 contracts totaling $63.5 million with an average price per unit of $1.58 million. That was down from 49 contracts of $80.7 million at $1.6 million per unit.

The results were an improvement on the second quarter, however, which saw net income of $129 million and $0.87 earnings per share.

Meanwhile, the company’s first quarter results were its worst since 2010, with home contracts plummeting 24 percent year over year with a net value of $1.16 billion.

Building off last quarter’s increased demand, Yearley said Toll Brothers has expanded its buyer segment, pricing homes between $275,000 and $3 million.

“We are carefully and slowly expanding the price point,” he said during the company’s Wednesday earnings call. He said Toll Brothers is aiming to capture first-time millennial homebuyers with larger budgets.

Yearley added that move will speed up the pace of sales, though it will take some time for those results to show in the company’s reports.

Toll Brothers continues to focus on projects where the company knows it can build immediately, he said. Earlier this month, the firm bought its first New York City property in years for $44 million. It was the site of a controversial hotel on the controversial Marrakech Hotel on the Upper West Side. When asked about it, and the company’s outlook on New York City’s struggling condo market, Yearley declined to comment.

“New York has felt better this summer,” he said vaguely. The city accounts for “only 3 percent of our business at the moment, but it feels better this summer.”

Barclays’ analyst Matthew Bouley noted that Toll Brothers has generally been “pulling back” in New York, and City Living’s business has been shifting into joint ventures outside of Manhattan. “It’s a pullback from NYC on-balance sheet exposure to off-balance sheet joint ventures in other regions,” he wrote in an email.

In June, the penthouse at the Toll Brothers’ condo at 1110 Park Avenue finally sold at half its original price, meanwhile, the firm completed its 140-unit condo at 121 East 22nd Street in Gramercy Park, which is aiming for a $450 million sellout.

Clarification: A quote from Bouley was added to clarify his point.

David Beckham, Jorge Mas and the golf course at International Links Melreese Country Club (Credit: Getty Images, International Links)

David Beckham and Jorge Mas’ development group may now have to pay less in rent to the city of Miami after toxic contaminants like arsenic, barium and lead were found seeping under the soil at Melreese golf course, where they plan to build a $1 billion MLS stadium complex.

Pollutants were found to be above the legal limit in a report this week by environmental consulting firm EE&G. That led city officials to shut down the golf course to allow outside experts to analyze the results of the environmental testing. It’s unclear how long this process will take.

The findings and the closure of the Melreese golf course come at a crucial time for the stadium plan. In November, voters allowed the city to move ahead with the project and for the city to negotiate the terms of the 99-year lease with the development group. But so far, the city has yet to finalize those terms and the team has announced it will play its first two seasons at Lockhart stadium in Fort Lauderdale.

The project known as Freedom Park would include a 25,000-square-foot soccer stadium as well as more than 1 million square feet of retail and office space and about 750 hotel rooms. In total, the development is valued at $1 billion and will be built on 73 acres out of the 131-acre Melreese Country Club.

A spokesperson for Miami Freedom Park said the final remediation costs are unknown, but under the terms of the proposed lease, the development group could have to pay less in rent if the environmental cleanup costs are higher.

According to the proposed lease terms, the Beckham Mas Group will pay an annual rent of the greater of two options: 5 percent of tenant revenue, or the fair market appraised value of the leased property. That fair market value is based on “the highest and best use of the [leased] property, taking into consideration the actual cost of environmental remediation for the [leased] property,” as well as the site development cost for a public park, according to the lease terms.

So, if the remediation costs are high, the fair market appraisal could be lower, and the development group would have to pay less in rent. At minimum, the development group has to pay $3.6 million in rent annually.

The development group previously projected the remediation costs to be about $35 million, but Miami Mayor Francis Suarez said team officials said costs could rise to $50 million, according to the Miami Herald. Mas told the Herald that the city would not foot the bill for additional costs, and developers would seek state and federal contributions. In contrast, it cost $10 million to remove 86,000 tons of toxic soil at Grapeland Park, which is directly adjacent to Melreese.

Now, the city of Miami has to work with the Department of Environmental Resources Management to develop a site plan to address the contaminated soil. A city spokesperson did not respond to a request for comment.

In South Florida, golf courses like Melreese are often redeveloped as land becomes more scarce.

John Fumero, an environmental lawyer at Nason Yeager in Boca Raton, said high levels of arsenic are commonly found on such sites.

“Based upon what has been disclosed this far, everything here [at Melreese] can be addressed. It can be remediated,” said Fumero, who was the former general counsel of the South Florida Water Management District.

Howard Nelson, an environmental law and land use attorney with Bilzin Sumberg, said a large concrete stadium is the ideal structure to have at the Melreese site, and the city can take advantage of private developers paying for the remediation.

“I don’t think the city of Miami has a better opportunity to get it [Melreese Country Club] remediated than moving forward with this development,” Nelson said.