1515 Sunset Drive and Facundo Bacardi

After opening a six-floor office building in Coral Gables nine months ago, a Bacardi-owned firm is accusing national conglomerate OHL USA of causing $5 million in construction delays.

1515 Sunset LLC, a company controlled by Facundo Bacardi, sued OHL USA last month in Miami-Dade Circuit Court for construction defects, untimely payments to subcontractors and delay damages. The property is located at 1515 Sunset Drive.

Representatives for 1515 Sunset and OHL USA did not return messages seeking comment.

According to the lawsuit, 1515 Sunset initially engaged OHL USA’s predecessor company Arellano Construction in 2012 to demolish an existing building on the site and conduct earthwork to prepare the property for a new office and retail development, along with a parking garage. The buildout began in 2014 and the new structure was completed earlier this year when the City of Coral Gables provided 1515 Sunset with a certificate of occupancy. Douglas Elliman took 4,040 square feet on the ground floor.

However, during the construction phase and after receiving the certificate, 1515 Sunset alleges that the owner observed numerous defects, deficiencies and other mistakes that prompted the hiring of a consulting firm. Thornton Thomasetti Inc. was hired to review the underlying construction documents, shop drawings and design calculations. The defects Thornton documented included damage to stucco walls, improperly sealed windows, missing sealant and waterproofing of walls, and heating and air conditioning equipment that was not installed according to the plans, the lawsuit alleges.

In addition, OHL USA failed to timely pay subcontractors that resulted in construction liens being filed against 1515 Sunset, the complaint states.

The project was supposed to be substantially completed by Aug. 10, 2015, but OHL USA did not do so until June 7, 2018, 1515 Sunset alleges. In total, the construction was delayed by 1002 days and as a result 1515 Sunset is entitled to $5,000 for each day of delays, or $5 million, according to the suit.

The post Bacardi-owned company sues construction firm for defects and delays at Coral Gables office development appeared first on The Real Deal Miami.

TRD is excited to bring the biggest names in South Florida real estate to Mana Wynwood for our sixth annual #TRDForum. Doors open at 11 a.m.., and opening remarks will be made at 11:20 a.m.

Guests can enter the Mana Wynwood lot through the NW 5th Ave or 23rd Street entrances. Check-in is located through the main doors.

For those streaming at home, check out the South Florida Facebook page for a livestream of all of today’s panels.

The post Welcome to the 2019 #TRDForum! appeared first on The Real Deal Miami.

Scott Wadler

Scott Wadler is now managing director at Berkadia.

Wadler spent over a decade at HFF, most recently as senior director of the firm’s Miami office. He handles construction financing, hospitality and residential deals throughout the Southeast. At Berkadia, he joins other recent hires that include Jaret Turkell and Robert Pesant, who co-lead the company’s investment sales team in South Florida.

JLL closed on the $2 billion acquisition of HFF in July. While some brokers joined JLL, others left to competitors.

Marius Koller joined Brown Harris Stevens Miami. Koller is the co-founder of House Yacht Living, which is the team behind Arkup, a solar-powered floating home. Koller was previously an agent with Julian Johnston’s Calibre International Realty. Johnston recently joined the Corcoran Group. Koller said he will continue selling luxury boats and yachts, and plans to sell at least 10 Arkup homes.

The Elegant Miami Team, led by Sylvia Cordes, joined RE/MAX Advance Realty. The group includes Martha Quinn, Jean Collahuazo, Emily Chace and Vanessa Castaneda. Cordes was previously with Berkshire Hathaway HomeServices EWM Realty.

MCSS Development and Investment LLC promoted Tyler Heckaman as its vice president of development. He joined MCSS in January 2017 as an acquisitions associate, where he focused on finding acquisition opportunities, project underwriting, market research and data analytics.

Berger Commercial Realty/CORFAC International hired sales associate Jordan Beck. Beck was previously district manager of Vivint Solar in Tampa.
Tyler de la Pena joined Colliers International South Florida as senior associate in office services. De la Pena is now with the firm’s Team Kingsley-Rutchik, which focuses on landlord agency and tenant representation services for office and industrial owners and occupiers. De la Pena was previously corporate real estate advisor at CBRE

Central Civil Construction promoted Michael Velez to project manager from assistant project manager. Velez has worked on projects that include Grove Central, Turnberry Resort and Spa, Gables Station and the Plaza Coral Gables.

The post Movers & Shakers: Scott Wadler joins Berkadia as managing director & more appeared first on The Real Deal Miami.

(Illustration by Andrew Colin Beck)

During a recent earnings call, Starwood Property Trust CEO Barry Sternlicht broached a touchy topic in the real estate world: the possibility of a recession.

The head of the $56 billion real estate investment trust told investors and analysts that “the only thing we have to worry about is a calamitous recession,” warning of a slowing economy largely thanks to the national political environment.

Specifically, Sternlicht said Starwood needs to be “über-careful” in the hotel sector because of a potential oversupply.

Developers have, in fact, been churning out hotels at a blistering pace. And New York is one of several U.S. cities (along with Miami) that have seen a boom in hotel construction.

As of May, there were more than 18,700 hotel rooms across 112 new developments under construction or being planned in the five boroughs, according to NYC & Company, the city’s tourism arm. That includes a 128-key Hotel Indigo in the Financial District and a 137-key Six Senses resort and spa at HFZ Capital Group’s “the XI” development in Chelsea.

Meanwhile, Marriott and hotelier Ian Schrager opened their roughly 450-room Edition hotel in Times Square this year, and just last month the same chain opened a 285-room Moxy in the East Village.

Those properties are just a few of the newbies. If all of the planned rooms are built, there will be nearly 139,000 rooms citywide by the end of 2021 — a 15.5 increase over the middle of this year, NYC & Company’s data shows.

A second-quarter report from the financial firm PwC painted a less-than-rosy picture for the Manhattan hotel market.

“Continued increases in supply, coupled with pressures on demand stemming from continued trade tensions and slowing economic growth, are having a profound impact on Manhattan hotels,” PwC’s Warren Marr said in the report. “In addition, inbound leisure travel from China was also impacted due to the devaluation of the yuan.”

Others — including Jim Butler, who chairs the global hospitality group at L.A.-based law firm Jeffer Mangels Butler & Mitchell — said pricing for properties in top U.S. markets like New York has generally peaked, making it a good time to sell.

“It’s still a good market and they’re getting good prices,” he said, noting that there is good reason to invest in “irreplaceable locations and buildings.”

But, he said: “It’s great to diversify risks and good to be taking chips off the table.”

How many chips to take off the table is the big question.

The hospitality industry has historically been a canary in the coal mine — one of the first segments in real estate to get hit when the market starts turning. That’s because it’s low-hanging fruit for both consumers and businesses to cut back on hotel stays.

In the wake of the 2008 financial crisis, the key metric for gauging hotel performance — revenue per available room, or RevPAR — plummeted nationally. And New York was hit harder than most, with RevPAR free-falling by 27 percent between October 2008 and 2009.

There are already red flags this time around.

In August, hotel research firm STR downgraded its projected 2020 RevPAR growth nationally to 1.1 percent from the 1.9 percent it had projected in June. And New York is the only major market in the country where STR projects a decline in RevPAR — albeit of just 0.8 percent — in 2020. Year-to-date RevPAR was down 3.6 percent in the city from the same period last year.

While economists have been chattering about a downturn for a while, all signs now suggest that it’s imminent. Most economists expect the recession to really hit in 2020, which is expected to be a particularly hard year for the hotel industry.

HFZ’s XI, which will include a Six Senses resort and spa

The Federal Reserve Bank of New York’s recession probability indicator — which gauges the likelihood of a recession within the coming 12 months — skyrocketed from around 10 percent at the beginning of 2019 to 37.9 percent in August.

Oversupply is a key concern for hotel owners in a recession, said attorney Joshua Bernstein, co-chair of the hospitality sector team at the law firm Akerman. Established hotels and brands are better positioned to weather a downturn, he said.

“New supply is generally a greater risk for [owners of less-established properties] because they have no existing reputation in the market and no cash flow to rely on, so they’re at risk of some large debt liabilities,” he said.

Exposure and opportunities

In New York, smaller boutique hotels, particularly those in the outer boroughs, are more vulnerable to a downturn than their larger Manhattan counterparts, sources say.

Boutique hotel development has exploded since the last recession, with nearly 40 percent of hotels planned since 2013 including fewer than 70 rooms, according to a July TRD analysis.

Smaller developers often build boutique hotels outside of the city’s core. But those properties are at risk in a down market, said Douglas Hercher, principal and managing partners of hospitality investment banking firm RobertDouglas.

“In a recession, the market pulls back into Manhattan,” said Hercher. “Those assets that aren’t as conveniently located can suffer — Secaucus, Brooklyn, Harlem.”

In New York, developers and lenders have yet to show much concern about a potential turn in the market.

In March, Bank Leumi USA issued a $45 million construction loan for Maddd Equities and Joy Construction’s 203-room project on West 48th Street in Hell’s Kitchen. That same month, Lightstone Group refinanced its recently opened 349-key Moxy Chelsea with a $155 million loan from LoanCore Capital and KSL Capital Partners.

Goldman Sachs is also betting on the sector. It refinanced the debt on at least two hotels this year — $115 million for the Sapir Organization’s 264-room NoMo and $88 million for CBSK Ironstate’s 249-key Pod Hotel in Brooklyn.

While CMBS hotel debt is still available in major markets, including New York, it’s not coming as easily as it is for office properties and other assets, said Manus Clancy, a senior managing director at Trepp, which tracks securitized mortgages. Overbuilding — and a handful of delinquent loans — have led to closer scrutiny from lenders.

“People want to see stronger financials, less leverage, a longer track record [from borrowers],” Clancy said. “People are cautious, but its still available.”

Still, Clancy said, many owners may be insulated this time around by long-term financing that will carry them through a recession.

To some extent, he added, the narrative of a looming recession “has got ahead of the reality.” But, he said, there’s a consensus that the unprecedented 10-year economic expansion is nearing its end.

“There’s one perspective that we’re in the eighth inning of the rally,” Clancy said. “But some people think we’re in the first inning of a recession where the first pitch really hasn’t been thrown yet.”

As of early September, 7.7 percent of the $3.9 billion CMBS loans for hospitality properties in New York were in some stage of delinquency, according to Trepp. By comparison, only around 2.6 percent of the $3.9 billion in hotel-backed CMBS loans in L.A. are in delinquency, and none of the $3.9 billion in South Florida are.

Strong tourism in New York has kept occupancy relatively high — it’s hovered above 85 percent since 2013. But for every month this year, those rates have been down over last year.

In May, the Miami-based Safe Harbor Equity launched a $100 million distressed debt fund and then doubled its target a month later after garnering strong interest during fundraising tours in Europe and Asia. Raphael Serrano, the firm’s managing director, said the fund — which will target all commercial assets, including hospitality and retail properties — is focusing on South Florida but will also look to other major markets, including New York, Texas and California.

The Edition in Times Square

Safe Harbor’s goal is “to be well-positioned for the oncoming economic headwinds that are being forecasted,” Serrano said in May.

A recession may not even be the most worrying challenge ahead for hotel builders in New York.

Construction and labor costs are already contributing to struggles for developers in the Big Apple, Miami, California and elsewhere.

In New York, rising costs are baked in balance sheets for the next seven years. That’s because in 2015, the Hotel Association of New York City — which represents hotel owners — extended a 2012 deal to increase wages for bar and restaurant workers through 2026.

HANYC President and CEO Vijay Dandapani said that while labor costs are a concern, an even bigger issue in New York is property taxes.

“Real property taxes are a real bite,” Dandapani said. “On a macro level, we’ve been working on this for years with the Department of Finance.”

High costs become that much more problematic when RevPAR takes a hit.

“I think the scariest thing is that costs right now are for the first time in years going up faster than RevPAR, particularly for labor,” said Butler, speaking about the national landscape but also noting that it’s a concern in New York.

He said it’s crucial for hotel investors to be capitalized going into a downturn. “The best thing you can do to prepare for a downturn is make sure you have ample equity and funding,” Butler said. “The hotel industry is cyclical — they’re going to be back, but if you can’t get through the downturn, you could lose your property.”

He noted that when consumer and corporate clients start to cut back on expenses, the luxury hotel industry tends to cut room rates. That, he said, creates a “suicidal” downward spiral. Hotel owners would be wise to hold steady on pricing in the event of a slowdown, he said.

Larry Wolfe — vice chairman and co-head of the Lodging Capital Markets group at Newmark Knight Frank — also noted that owners usually cut their room rates if occupancy dips.

“In New York there seems to be infinite demand for cheap rooms, so occupancy stays up but rates don’t hold and [owners] tend to cave,” Wolfe said. “So if declines in the bottom line accelerate, inevitably there will be more situations that become somewhat distressed.”

Black swans

The hotel market has been underperforming for a while now.

In 2017 and 2018, national RevPAR growth was the weakest it’s been since the recession — at around 2.9 percent annually, according to STR.

RobertDouglas’ Hercher cautioned that the recent declines in fundamentals are more a function of “oversupply” and “post-peak pricing” than a recession.

“What we haven’t seen in a way that I would be willing to say demonstrates — or is evidence of — a recession,” said Hercher, who represented KHP Capital Partners in its $67.6 million sale of the 205-key hotel at 70 Park Avenue in 2016. “Declines in [room rates] and occupancy that appear to be a function of a drop in demand instead of new supply or unwillingness to pay a higher [rate].”

The prevailing view seems to be that when the next recession hits, it will be less severe than the last one. But Butler noted that there are always unknowns. 

“I am not pessimistic, I am optimistic,” he said. “But over the years, I’ve been through some cycles where there is an event that isn’t quite as big as a black swan, and we never see it no matter how hard we look. We never see it.”

The post How much are NYC hotels hurting? appeared first on The Real Deal Miami.

Compass CEO Robert Reffkin and WeWork’s Adam Neumann

Updated, Oct. 17, 2019, 6:48 p.m.: At 10:26 a.m. on Oct. 9 — nine days after WeWork shelved plans for an IPO — Compass CFO Kristen Ankerbrandt fired off to her staff a set of talking points distancing the brokerage from the fallen unicorn.

“It may seem obvious,” she wrote in response to mounting questions from agents and employees. “But it’s worth stating that it is hard to draw any parallels between our businesses.”

Ankerbrandt cited their divergent customer bases, industries and business models. Her missive — posted on Workplace, the Facebook tool used by Compass — underscores the residential brokerage’s push to re-write a narrative that it’s overhyped and to extinguish other parallels to WeWork. (The full memo is appended.) Days earlier, six of the company’s C-suite executives sat for hours of interviews with The Real Deal to drive that message home.

“There’s nothing about what’s happening at WeWork that changes what’s happening at Compass,” CEO Robert Reffkin said during an interview. He added that he hasn’t followed the office-space company’s failed IPO. “I do not have a viewpoint on WeWork as a company.”

But it’s hard to ignore the similarities between the two: Both are backed by SoftBank and were boosted by sky-high valuations despite persistent questions about profitability. And both have traded on pronouncements of changing their industries through tech and culture.

Compass CFO Kristen Ankerbrandt

Compass has grown at breakneck speed, upending the residential brokerage industry over the past seven years. It has more than 13,000 agents nationwide and is valued at $6.4 billion — more than seven times the market cap of Realogy, the nation’s largest brokerage conglomerate.

With $1.5 billion in backing, Compass spent heavily to grow. Like WeWork, it relies on a low-margin real estate business model but emphasizes its technology to boost its valuation. It has an unclear path to profitability and has lost a slew of high-profile executives, including COO Maelle Gavet last month.

“WeWork has gone through a massive correction because the public markets didn’t believe in how it was valued,” said Travis Putnam, a managing partner of Navitas Capital, which invests in real estate and construction tech startups. “Compass is going to have to answer those same questions.”

“We have enough capital”

This summer, Nasdaq posted a massive billboard in Times Square to congratulate Compass on its latest funding round. It was an attempt to woo the company ahead of its decision about where to list its stock.

But Reffkin told TRD the firm has no plans for an IPO in the next 18 months.

“We have enough capital where we don’t need to go public,” he said, though he wouldn’t say how much unrestricted capital Compass has, or if the WeWork debacle scuttled any plans to go public.

In justifying Compass’ valuation, Reffkin said it is a business-to-business-to-consumer company, and that its customers are agents who generate more revenue per person than WeWork’s members.

Reffkin also said Compass’ most recent valuation was set by multiple investors — including the Canada Pension Plan Investment Board, Dragoneer Investment Group and Glynn Capital Management — in addition to SoftBank, which alone had marked WeWork’s value at $47 billion.

“It’s a number of third-party investors, who are much smarter than I am, that do this for a living,” Reffkin said.

But venture investors in the real estate space are wary of discounting the role of SoftBank, which has provided more than a third of the $1.5 billion Compass has raised. Clelia Warburg Peters, president of Warburg Realty and a venture investor who recently left MetaProp, said both WeWork and Compass were driven by SoftBank to focus on top-line growth that may not be sustainable.

Compass CEO Robert Reffkin

“SoftBank’s kingmaker funding strategy has driven up private-market valuations like they’ve never before been driven up,” she said. Though it’s true that other investors participated in earlier Compass funding rounds, she said, SoftBank is the only one writing such sizable checks. “Many people have argued that it’s inflating the value just prior to going public.”

SoftBank wouldn’t discuss its strategy, but a person familiar with the conglomerate said it values companies based on risk profile and potential cash flow.

Without definitive guidance on profitability, accessing more capital could be challenging for Compass. WeWork’s valuation, which plummeted from $47 billion to below $15 billion, has forced venture capitalists to reassess their approach to startups without foreseeable profits.

“Companies that fall in that bucket need to ask themselves where their next capital is coming from and at what price,” said Putnam, who has invested in Katerra, another SoftBank-backed firm with a tech bent.

Cloudy metrics

WeWork’s financial position was obscured for years. As it released snippets of information, it became clear that the company generated massive revenues — and losses. To show a more favorable outlook it invented metrics such as “community-adjusted EBITDA.” Once its parent company’s August IPO prospectus was laid bare, investors balked.

WeWork declined to comment.

Compass hasn’t hatched creative calculations for revenue, but its executives are equally reluctant to share key metrics.

Ankerbrandt said the company expects revenue of $2 billion and run-rate revenue of nearly $3 billion this year. But she would not disclose expenses or losses, calling the information “sensitive.” Similarly, the CFO said Compass has several profitable offices and regions but would not identify them.

In an interview with Bloomberg on Oct. 4, Reffkin said, “We’re profitable excluding HQ, in the majority of our markets. We can decide to be profitable entire company wide in any 12 month period.” But during an interview with TRD two days later, Ankerbrandt said “I don’t have a specific date I can give you when we’ll be profitable.”

She disputed the idea of comparing Compass’ valuation to WeWork’s. Though both are valued at about four times their total capital raised, Ankerbrandt said Compass is valued at twice its revenue run rate. WeWork was valued at more than 20 times that metric before its valuation plunged.

But some investors are leery of projected revenue metrics. Dave Eisenberg, a managing partner of Zigg Capital, which has invested in real estate tech startups, said Compass’ future revenue hinges on the health of the homebuying market and how many sales its brokers make. WeWork, on the other hand, can clearly forecast revenue with committed rent from its members.

“Using a run-rate number is not a super-flawed metric if you can forecast the revenue,” Eisenberg said. “If homebuying deteriorates, [Compass’] revenue would be materially lower than the previous quarter.”

Although Compass lacks the hefty expenses of WeWork’s lease commitments, it has a series of capital-intensive offerings including money for staging and bridge loans for sellers to make minor renovations.

The brokerage is also seeking to provide an “end-to-end” platform for consumers and agents that would incorporate listing, marketing, selling and financing homes. For Reffkin, that’s a departure from a traditional brokerage model with razor-thin margins.

As it builds its offering, Compass has grown its footprint inorganically. Two years ago Compass laid out a vision to capture 20 percent market share in 20 major U.S. cities by 2020. It then acquired at least 15 brokerages, ranging from mom-and-pops to larger operations such as Pacific Union International, a San Francisco-based firm with $28 billion in annual sales. A third of Compass’ brokers joined the firm through acquisitions.

It expanded from 37 to 122 markets last year, and spent lavishly to lure brokers with high commission splits and massive sign-on bonuses — some as high as $100,000.

Reffkin said those perks are shrinking as the firm establishes itself in markets. (A company spokesperson said the firm paid sign-on bonuses to less than 5 percent of agents.) And after investing heavily in acquisitions in recent years, he noted, Compass stopped entering new markets in January and is now deepening its presence in existing locations.

“We didn’t try to conquer the world,” he said during this month’s interview, a departure in tone from the bold projections of Compass’ 2020 plan. “We are focused on depth over breadth.”

Tech trials

Technology has been central to Compass’ pitch to investors since its debut in 2012. But from the outset, critics have called its tech smoke and mirrors. It’s been accused of depending on tech developed by third parties, of pilfering trade secrets and of launching buggy apps.

“To be a tech company, you have to prove that you’re able to do more transactions per person with less overhead than a traditional brokerage,” said Eisenberg, who sold his 3-D mapping startup Floored to CBRE before launching Zigg Capital. “That is what [Compass] has to prove.”

Compass CTO Joseph Sirosh

Compass executives initially declined to comment on whether or not its tech helped brokers become more efficient. But after publication, a spokesperson for the firm said in a statement that its “internal analysis has shown that agents become more productive upon joining Compass.”

In an embarrassing blow last year, Compass cancelled a tech-licensing pilot in Boston after agents believed the firm was giving away its competitive advantage. Joseph Sirosh, Compass’ chief technology officer, said the firm is discussing another attempt to license its technology.

Several former Compass executives told TRD on the condition of anonymity that the brokerage faces a formidable road. It has developed “one-off” features that are “nice to have, not need to have,” one former executive said. Said another, “So much of what they’re doing is nibbling around the edges.” The company said it won’t build a tailored tech platform for its year-old commercial division, which has 30 agents.

In a mea culpa of sorts late last year, Reffkin sent a company-wide letter acknowledging missteps. “We launched some technology without testing it thoroughly with agents and learned we can move too fast,” he wrote.

Since a $400 million investment from SoftBank and Qatar’s sovereign wealth fund in September 2018, Compass has tried to steady the course. It opened a product and engineering campus in Seattle last month and recruited Sirosh, Microsoft’s former CTO of artificial intelligence.

And since the end of last year, a new 20-person AI team has launched four tools, including a predictive search feature that suggests properties to customers based on their browsing history. Compass now employs 400 people in its tech engineering department — nearly 20 percent of its total staff.

Rory Golod, regional president of the New York region, walked TRD through a demonstration of its internally built products. One tool, a sleek feature known as Compass Collections, serves as a kind of Pinterest for property showings. Agents are encouraged to provide feedback on an online forum on how to improve products.

But, under pressure to produce, Compass opted to buy  a consumer relationship manager, a mainstay of brokerages. Although Compass launched a proprietary CRM in 2018, the firm announced in February that it acquired Contactually, a CRM used by major brokerages.

Its competitors have alleged Compass went a step further and stole from them. In July it settled two suits brought by Zillow, which alleged the firm poached three tech executives and tried to gain access to information to help it build out its own tech platform. That same month, Realogy sued Compass for “predatory” poaching and took aim at its technology, among other things.

“There is nothing innovative about its technology or its growth strategy,” Realogy wrote in the complaint. “There is nothing inventive about plain, old-fashioned theft.”

Compass filed a motion to dismiss Realogy’s complaint, which it called an act of “desperation” by the struggling holding company.

Collateral culture

Unlike WeWork, Compass has not been accused of egregious self-dealing and abuses of corporate governance. The brokerage touts a culture of frugality: In Ankerbrandt’s October memo she noted that she signs off on any expense above $1,000.

“Everybody flies coach here,” Ankerbrandt told TRD. “That’s in the DNA of the organization because we’re really here to deliver value for our agents first and foremost.”

A focus on company culture extends beyond thrift, the Compass executives said. Its website states that Compass’ mission is “to help everyone find their place in the world.”

“I understand very intimately how important culture is,” Reffkin said. “People don’t just work for money. They work for impact.”

For all of its talk about culture, Compass has weathered its share of high-level departures. The 10 executives who quit or were forced out over the past 19 months included the company’s COO, CFO, CMO, CTO and general counsel. Asked if he saw that as a sign of internal turmoil, Reffkin said simply, “I do not.”

Nick Romito, the CEO of real estate data firm VTS, said the volume of Compass’ departures “doesn’t surprise” him, considering the firm quadrupled its market footprint in 2018. “Growth like that is not for everybody,” he said.

Nonetheless, Compass reorganized its C-suite in June to streamline roles and, current and former staffers said, to minimize friction between Reffkin and former COO Gavet. In one instance, a source recalled, Reffkin hashed out a deal in 2018 to buy Boston-based Bushari Real Estate but only told Gavet after the fact. After publication, Compass said this was not the case.

Some former colleagues expressed surprise Gavet lasted as long as she did, describing the little latitude Reffkin allowed her. “She was not the Sheryl to his Mark,” one source said, referring to the relationship of Facebook’s two top leaders.

Broadly speaking, company executives have been split on strategic priorities. Executives who disagree with Reffkin haven’t lasted.

“I can do it the right way, or I can do it Robert’s way,” one executive recalled thinking. “Neither feels good.”

Of the departures, Reffkin said he is “rooting for every single one of those people.” But as Compass has evolved, its management needs also changed. “We may have mutually agreed that at this point in time… it’s better to go on and do something else.”

Although Reffkin said SoftBank has not set goals or benchmarks for Compass, the Japanese conglomerate has occasionally waded into management decisions, according to people familiar with the matter. That is a contrast to WeWork, where Adam Neumann had unchecked authority until SoftBank pushed him out and sent in its own executive to turn the company around.

At Compass, chief marketing officer Khurrum Malik was let go in June after persistent disagreements with management, according to people familiar with the matter. In particular, he and Gavet pushed for more direct-to-consumer marketing in a bid to gain market share — something agents had demanded. Investors and board members, which included a representative from SoftBank, balked.

“The board said no,” the person said. “They said, ‘Wait until the tech is better.’”

Update: After publication, Compass disputed information its representatives had provided for this story. TRD has included updated statements from the company and clarified some points. Regarding profitability, the story now says that Compass could be profitable within 12 months, an assertion made by Reffkin on Bloomberg TV on Oct. 4. This contradicted on-the-record commentary from the company’s CFO during an interview with TRD on Oct. 6, and two subsequent conversations with representatives of the company.

The Oct. 9 memo from CFO Kristen Ankerbrandt to Compass staff and agents

The post Like WeWork, Compass touts tech and culture. Are the companies different enough? appeared first on The Real Deal Miami.

From left: Stuart Elliott, Jerome Hollo, Michael Shvo, Laurent Morali and Lissette Calderon (Photos by Daniel Lateulade)

The cyclical nature of Miami’s condo market has many developers shifting toward rentals – but not Michael Shvo.

The New York developer, who is making a big push in Miami Beach, said that as long as you have the right site and project, the overall market’s performance is irrelevant.

“It doesn’t really matter what the market is. You build something special in the right location, you’re not competing with something in Brickell or in Wynwood,” Shvo said at The Real Deal’s Sixth Annual South Florida Showcase & Forum on Thursday. “I don’t lose sleep at night over oversupply or undersupply.”

Michael Shvo

Shvo will be redeveloping the Raleigh hotel in Miami Beach. A partnership led byShvo, Bilgili Group and Deutsche Finance Group bought the 83-room Raleigh for $103 million from a Tommy Hillfiger and Dogus Group, and also purchased the Richmond Hotel and the South Seas Hotel.

Shvo was joined by Laurent Morali of the Kushner Companies, Florida East Coast Realty’s Jerome Hollo, and developer Lissette Calderon on the panel, “The next wave of South Florida development,” moderated by TRD’s Editor-in-Chief Stuart Elliott.

Jerome Hollo

Hollo acknowledged the slow luxury condo market. “People are looking to place their investment in a little bit of a safer asset, which right now is multifamily. If that cycle turns again, you’ll see a lot of those buildings convert to condos,” he said.

His firm built the luxury mixed-use building Panorama Tower in Brickell, with rentals, retail, office and hotel components. The 2.6 million-square-foot, 85-story tower was completed in 2018 and secured a $425 million refinance earlier this year. It’s about 70 to 75 percent leased, he said.

“Renting is good for everyone now,” Hollo said. “Wherever they are in their life cycle, they love renting.”

Laurent Morali

Kushner Companies has purchased or is under contract to buy three sites in South Florida, and all of them will have rentals as opposed to condos, Morali said. In Edgewater, where it’s planning an 1,100-unit apartment development, the property is in a designated Opportunity Zone, giving Kushner substantial tax benefits.

But Morali said recent changes in the federal tax code and the wave of rent reform legislation in markets like New York and California didn’t impact Kushner’s decision to target South Florida.

“We’ve been looking [in Miami] for five years,” he said.

Lissette Calderon

Calderon, president and CEO of Neology Life Development, said it was a personal choice to go from building condos to building rentals. “It was a natural progression to go into the rental side, [with me] wanting to make an impact on the community we’re in,” she said.

Targeting the right renter and buyer via social media is vital to a project’s success, the panelists emphasized.

“You really have to be hyper-focused in terms of authenticity, local context,” Calderon said, referring to when she became a young, successful profession. “I had two options: living in the suburbs or living in the urban core with my mom. There was no product for someone like me.”

Hollo, whose firm coined the term “Brickellista” to market Panorama to renters, said that now with social media and technology, developers can hyperfocus on a certain demographic.

“There’s traffic, and then there’s traffic that might not be great for your product,” he said.

Shvo took offense to the term “demographic.”

“I think you have to stop using the word demographic,” he said. “Because demographic doesn’t matter anymore. … It’s all about the psychographic. What’s their lifestyle?”

The post South Florida developers riff on the shift from condos to rentals: <i>TRD</i> Miami Showcase & Forum appeared first on The Real Deal Miami.

From left: Amir Korangy and Secretary of Housing and Urban Development Ben Carson (Photos by Daniel Lateulade)

When talking about federal Opportunity Zones, Secretary of Housing and Urban Development Ben Carson said you need to understand ants. And use them as a cautionary tale.

On the whole, ants work well together and are “sophisticated” and “industrious,” said the former neurosurgeon, during prepared remarks at The Real Deal’s annual Showcase & Forum in Miami’s Mana Wynwood. But, he added, they don’t always get along.

“There are black ants and there are red ants,” Carson said. “What do they do when they see each other? They fight. Now, if you are going to look in an ant’s brain, you are going to be looking a long time. That’s their excuse, what’s ours?

The goal, Carson said, is to work together.

The one-time Republican presidential candidate used his time to talk primarily about his agency’s work involving Opportunity Zones, the federal program that provides tax benefits to developers who invest in thousands of distressed areas across the country.

The initiative, he said, has been a success.

“Through Opportunity Zones, the federal government is helping foster partnerships between people who may have never sat at the same table before,” he said. “Community leaders, public housing advocates, investors, builders, state officials and federal officials.”

Ben Carson

Carson has said that HUD will give preference to developers and investors who build affordable housing in federal Opportunity Zones when it comes to certain grants.

The program has drawn scrutiny among some who see it as a tax break for the rich. There are also concerns about whether the program will actually incentivize investment in low-income areas.

But Carson counters these criticisms, and during his remarks repeated a line he has used before.

“People complained that Opportunity Zones are just a way for rich people to get richer,” he told the audience. “The fact of the matter is that the rich are going to get richer anyway.”

He mentioned the work of Community Capital Management in Fort Lauderdale, which is planning to raise and deploy more than $800 million in capital within Opportunity Zones. Numerous other firms have launched Opportunity Zone funds, hoping to plow money into projects across the country.

During a discussion with The Real Deal publisher Amir Korangy that followed his prepared remarks, Carson touched on a new rule that will look to increase the availability of Federal Housing Association-backed loans to first-time condo buyers.

The initiative was designed to increase the availability of low interest rate loans with minimal down payments. It comes amid a nationwide slowdown in the housing market.

Carson also took a dig at the media, where he is often criticized for his limited background on housing issues and his occasional gaffes. He instructed the audience to visit HUD’s website and view his list of accomplishments.

“People don’t want to hear about it on the news because it’s good news,” he said.

The post Ben Carson on how Opportunity Zones are unlike red and black ants: <i>TRD</i> Miami Showcase & Forum appeared first on The Real Deal Miami.

From left: E.B. Solomont, Ron Shuffield, Mike Pappas, Oren Alexander and Phil Gutman (Photos by Daniel Lateulade)

The Miami luxury condo market remains in a rut due in part to sellers overpricing properties, according to top residential real estate brokers.

“If you look at the market today, even though there has been an increase in prices, there is also an increase in days on the market,” said Oren Alexander, co-founder of Douglas Elliman’s The Alexander Team. “That has a lot to do with bad prices. We have to make sure sellers really understand where pricing is.”

Mike Pappas

Alexander joined Phil Gutman, president of Brown Harris Stevens Miami; Mike Pappas, president of the Keyes Company; and Ron Shuffield, president and CEO of Berkshire Hathaway HomeServices EWM Realty, for a panel discussion about “Bucking the Buyer’s Market” at The Real Deal’s 2019 Real Estate Showcase & Forum Thursday at Mana Wynwood. TRD’s E.B. Solomont moderated the panel.

Alexander noted Douglas Elliman just released its Q3 2019 report that shows the time on the market for luxury condos in Miami Beach and neighboring barrier islands increased by 50 days to 224 days compared to the same period last year. In the Miami coastal mainland, listing time increased from 157 days in Q3 2018 to 161 days this period.

Phil Gutman

Gutman said whenever he sees a media headline about a luxury condo selling for a 30 percent discount, he thinks, “It shouldn’t have been listed at that [high] price in the first place…you wonder what were they thinking? What were they smoking?”

His advice to brokers who are approached by sellers with unrealistic expectations: “Don’t take overpriced listings. You are going to waste a lot of marketing dollars.”

Ron Shuffield

Shuffield said Miami-Dade County has more than 25 months supply of condos priced at $1 million and higher that are selling at an average of 20 percent below the asking price. “I am hearing prices are generally too high,” Shuffield said. “When you have 25 months of supply, you have to adjust prices.”

Alexander said domestic buyers from New York and other metropolitan cities around the U.S. who are supplanting international buyers in the luxury condo market are more studious about properties they want to purchase. “Five to 10 years ago the buyer profile was foreigners coming from countries that didn’t know what good design and what a high quality condominium looks like,” Alexander said. “You would get a Brazilian or a Russian who didn’t know any better. Today, buyers coming from New York and other parts of the country are very sophisticated.”

Oren Alexander

He said there are few condominium projects that appeal to high-net worth individuals. Alexander cited Eighty Seven Park, the ultra-luxury condo project in Miami Beach being developed by Terra and designed by Italian starchitect Renzo Piano. “Eighty Seven Park got launched at the worst time in the market,” Alexander said. “Now it is almost 100 percent sold out. That speaks to the actual product.”

Alexander said in today’s buyer’s market, condo consumers can be more discerning and selective. “There are plenty of buyers,” he said. “There’s just not a lot of product that speaks to them.”

The post Unrealistic pricing bogs down Miami luxury condo market: <i>TRD</i> Showcase & Forum appeared first on The Real Deal Miami.

This week brings another group of real estate events!

Host: NAIOP South Florida
Date: October 23
Time: 5 p.m. to 7 p.m.

NAIOP South Florida is holding an event as part of its Signature Speakers Series at The Ritz-Carlton Fort Lauderdale, 1 North Fort Lauderdale Beach Boulevard from 5 p.m. to 7 p.m. Attend to hear Founder of SkyBridge Capital Anthony Scaramucci speak on trade, global markets and the state of the economy.

Host: Bisnow
Date: October 24
Time: 8 a.m. to noon

Bisnow is hosting its South Florida Office Market Update at Southeast Financial Center in Miami, 200 South Biscayne Boulevard from 8 a.m. to noon. Come to this event to network and discuss the current office design trends are being catered to incoming employee demographics. Speakers include Charles Russo of Nuveen Real Estate and John Osborne of Crocker Partners.

Host: Kabani Hotel Group of Marcus & Millichap
Date: October 24
Time: 11 a.m. to 3 p.m.

Kabani Hotel Group of Marcus & Millichap is holding its 4th Annual Investment Forum from 11 a.m. to 3 p.m. This event will offer panel discussions on the increasing role of technology in the sector and the outlook for the hospitality market moving into 2020. Brian Waldman of Peachtree Hotel Group and John Lancet of HVS will be among the speakers at the event.

To search for future industry events or browse past ones, click here. And to submit more industry events, please reach out to events@therealdeal.com.

The post Mark your calendars: These are South Florida’s top real estate events next week appeared first on The Real Deal Miami.

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 throughout the day. Please send any tips or deals to tips@therealdeal.com

This page was last updated at 9 a.m.

Donald Trump (Credit: Getty Images)

President Trump will host the G-7 summit at Trump National Doral. His acting chief of staff, Mick Mulvaney, said Trump has “pretty much made it very clear since he got here that he doesn’t profit from being here” and that the hotel would host the conference “at cost,” the New York Times reported. The decision drew criticism about whether it was a conflict of interest to choose one of his own properties. A recent report by the Washington Post found that overall revenue at the golf resort is down since 2015 and net operating income declined by 69 percent from 2015 to 2017.  [NYT]

The Florida Panthers’ nonprofit will pay for a $45M renovation of the War Memorial Auditorium in Fort Lauderdale. The city of Fort Lauderdale owns the building, which was built in 1950, and is contributing an $800,000 grant for the project. It’s also leasing the 7-acre property for $1 a year for the next 50 years. [Sun Sentinel]

From left: E.B. Solomont, Ron Shuffield, Mike Pappas, Oren Alexander and Phil Gutman

Unrealistic pricing is bogging down Miami’s luxury condo market. Douglas Elliman agent Oren Alexander; Phil Gutman, president of Brown Harris Stevens Miami; Mike Pappas, president of the Keyes Company; and Ron Shuffield, president and CEO of Berkshire Hathaway HomeServices EWM Realty, said that sellers overpricing properties is contributing to the slow market, during a panel discussion about “Bucking the Buyer’s Market” at The Real Deal’s 2019 Real Estate Showcase & Forum on Thursday. [TRD]

Compiled by Katherine Kallergis

The post Trump to host G-7 summit at Doral property, Florida Panthers paying for $45M overhaul of Fort Lauderdale war memorial: Daily digest appeared first on The Real Deal Miami.

Gary Winnick and Casa Encantada. Inset photo dates from 1939 (credit: Winnick & Company, The Huntington Library)

UPDATED, 2:55 p.m., Oct. 17: The last two times that Bel Air’s massive Casa Encantada sold — in 1979 and 2000 — it broke the record for highest residential sale in the nation. Now, the storied estate is on the market again at $225 million, instantly becoming the country’s priciest residential listing.

The 40,000-square-foot Georgian-style mansion, owned by financier Gary Winnick, is officially up for sale, according to the Los Angeles Times. If it sold at ask, the price would be $105 million more than the Los Angeles County record set when the 56,500-square-foot Spelling Manor sold this summer.

The listing comes amid a slowdown in sales at the high end of L.A.’s residential market. Interest seems especially low for the crop of sleek and modern spec homes that have hit the market over the last several years.

Hilton & Hyland founder Jeff Hyland, who has the listing with his partner Rick Hilton and Nest Seekers International’s Shawn Elliott, told the Times that Casa Encantada’s history and unique attributes “allow for premium pricing.” Reports surfaced in early 2013 that the estate — whose name means enchanted house in Spanish — was being quietly shopped for the same amount.

“It’s not affected by market gyrations, world issues in the economy and other comparable estates,” Hyland said.

That may be optimistic. The Spelling Manor was on the market for three years and sold for 40 percent below its original $200 million asking price. The equally grand Chartwell Estate, also in Bel Air, was asking $350 million before the price was eventually dropped to $195 million in June.

The 60-room Casa Encantada was built in the 1930s at the direction of the widow of a wealthy glass manufacturer who commissioned some of the most prominent designers of the time to work on the estate.

Architect James Dolena incorporated Art Deco and Moderne styles into the ornate interiors. The eight-acre grounds have a tennis court, basketball court, a rose garden and greenhouses, among other facilities.

Winnick hired architect Peter Marino to lead a comprehensive restoration of the property after purchasing it for $94 million from Dole Food Company CEO David Murdock in 2000. Murdock purchased it from Conrad Hilton for $12.4 million in 1979.

The record for the most expensive home sale in the U.S. belongs to New York’s 220 Central Park South, where hedge funder Ken Griffin paid $238 million for a penthouse in a deal that closed in January. [LAT] — Dennis Lynch

Correction: A previous version of this story misstated the  brokerage Shawn Elliott is affiliated with. He is with Nest Seekers International.

The post At $225M, Bel Air’s Casa Encantada becomes America’s priciest listing appeared first on The Real Deal Miami.

Alderman Brendan Reilly (Credit: iStock)

Essex Realty’s Steven Livaditis may have been the last broker in Chicago to close a condo deconversion deal during its glory days, when only 75 percent of sellers had to approve a bulk sale.

Hours before a new rule upping the deconversion threshold to 85 percent of sellers went into effect, his client closed on a 26-unit condo building in Edgewater. Several attorneys told him that other condo associations around Chicago were scrambling to get their votes through before the deadline.

“Having gone through this process hundreds of times over the last five years, I can tell you that it’s very, very difficult to get over 85 percent,” Livaditis said, estimating that only about half of the deals that he’s closed have exceeded that threshold.

Deconversions, or turning condos into rental apartments, have tripled in dollar volume yearly in Chicago since 2016 — but this year, the market is highly unlikely to see any growth at all, according to an analysis by The Real Deal.

1250 North LaSalle Drive (Credit: Coldwell Banker Homes)

The full City Council approved the ordinance last month, with co-sponsor Alderman Brendan Reilly calling it a protection against displacement for longtime residents. The new, higher threshold for owner approval on bulk condo sales went into effect on Wednesday.

The smart math

The Chicago deconversion market has drawn investors who are seeking the upside in renovating older apartments at market-rate rents, but don’t want the risk or the higher costs of ground-up development. Often, investors already own a high number of units in the condo building before lodging an official deconversion bid, a way of ensuring a majority vote.

Essex Realty’s Steven Livaditis

For them, the math is simple: ground-up development in Chicago can easily hit $400 a square foot. But a savvy investor can take control of a condo building, renovate the units, find tenants and get liquidity flowing in just months. All for under $300 a foot in a hot rental market.

But it’s not for the meek — competition can be fierce and the condo owners are often unwilling sellers. Earlier this month, condo owners at Lake Point Tower beat back an effort to force a deconversion of the 758-unit high-rise, prohibiting any individual owner from controlling more than 2 percent of units.

Investors are mostly targeting properties where they are sure the owners will be eager to cut a deal, said Interra Realty broker Joe Smazal, who has completed at least eight deconversion deals. Sellers can achieve a 25 percent premium on the value of their home, and they’re often motivated to sell if the building needs repairs and has deferred maintenance, said Avison Young’s Jim Hanson, who commissioned a study on deconversions in Chicago.

Those types of deals were already becoming rare before the new rules took effect, according to property investor David Ruttenberg. “It’s been a quieter year,” he said. “The low-hanging peaches have been picked.”

Bigger deals, but fewer of them

In 2016, buyers collectively spent $53.5 million on condo deconversions. Since then, that amount has tripled each year, totaling $523 million in 2018, according to a TRD analysis of closed property transactions and brokers’ sales records. But through September 2019, only $240.5 million in deconversions had been announced (many have not closed). At this rate, 2019 sales will likely check in around the $300 million mark — a little more than half of last year’s total, according to our analysis.

Investors who are closing deals are stomaching higher prices — per unit costs this year are up 10 percent over last year, our analysis found.

2 East Oak Street (Credit: Google Maps)

The upward pressure on prices at a time when “skyrocketing” property assessments have upped taxes, said Livaditis, and the prospect of rate hikes in Illinois have driven down the confidence of investors and developers alike, despite continued demand from the Chicago rental market.

“That’s the No. 1 concern for investors in the city of Chicago that can significantly hurt or benefit deconversion,” said Livaditis, who is the principal and managing director of Essex.

Since 2016, the number of transactions has not grown as aggressively as the dollar volume and number of units purchased, suggesting a slight trend toward fewer but bigger purchases.

“It started with the smaller deconversions in the neighborhoods, then it moved to the downtown market. And with that, the properties got much larger,” said Integra Realty’s Gail Lissner, who specializes in deconversion sales.

David Ruttenberg

Ruttenberg, who’s the managing partner at Ruttenberg Gordon Investments and principal at Marc Realty Capital, was involved in the largest deconversion in Chicago’s history when just over 75 percent of owners voted in favor of deconverting the 449-unit River City building in the South Loop. Due to the scale of the building, he wonders where $90.5 million deal would’ve stood if it had to reach the 85 percent threshold because that means the owners of about 45 additional condos would’ve had to be on board.

Livaditis believes deconversions in Chicago will continue, but not with the same velocity seen over recent years.

“There’s no question, but there needs to be better transparency and clarity between all of the parties involved so everyone fully understands the pluses and minuses of going through this process,” he said. “I think 85 percent is a very high barter reach, but I think it is possible if you have the right support, meaning if the deal does make sense.”

The post The Chicago condo deconversion craze is dying appeared first on The Real Deal Miami.

Glenn Straub and the Palm Beach Polo and Country Club property (Credit: Google Maps)

Developer Glenn Straub sold a chunk of the Palm Beach Polo and Country Club property in Wellington for $16 million, property records show.

Straub’s Polo West Golf Club Inc. sold a 150-acre portion of the polo and golf club at 2470 Greenview Cove Drive to Wellington Equestrian Estates LLC. The buyer is Scott Swerdlin, one of the top equine veterinarians in Wellington. Straub’s company provided $16 million in seller

Over the summer, Swerdlin proposed building a residential equestrian development on the property, according to the Palm Beach Post. That project was opposed by the Polo West homeowners association.

Straub, a casino developer, faced significant opposition from residents within the club when he tried to secure a land use change and open up access points for the golf course nearly two years ago.

A number of golf courses around the country have shut down as golf’s popularity has declined. Developers, especially homebuilders, have also swooped in to purchase those courses.

His companies paid $27 million for the 2,250-acre club at a government auction in 1993. Straub had been credited with financially reviving the property before a series of legal challenges unfolded, including issues with Palm Beach Polo Property Owners Association and from code violations tied to overgrown grass and weeds along the driving range. The association controls everything except for the clubhouse, tennis courts and golf courses at the property.

In March, Straub declared he had enough, announcing at a Wellington special magistrate meeting that he would sell or close the Palm Beach Polo and Country Club. He complained that the village was “nitpicking” him over building-code compliance issues, according to the Palm Beach Post.

In a letter to Straub sent to “interested parties” he said he was “being forced to find new ways to deal with eliminating increasing future costs which is greater when you have to maintain underutilized expensive golf related activities” and that he longer had the desire to continue losing money on the property.

In May, Straub’s Polo West Golf Club Inc. sold a three-bedroom house at 11837 Pebblewood Drive, near the property, for $400,000, according to county records.

The post Glenn Straub sells piece of Wellington polo club after failed development attempt appeared first on The Real Deal Miami.

A rendering of the planned headquarters

Miramar-based Spirit Airlines will consolidate its headquarters and other facilities in Broward County at a new $250 million campus in Dania Beach.

Spirit’s project at the Dania Pointe mixed-use development, just south of Fort Lauderdale-Hollywood International Airport, will span up to 500,000 square feet. It will include corporate offices and a crew-training facility equipped with flight simulators.

Spirit signed an agreement with Kimco Realty, the master developer of Dania Pointe, to buy the land for its project. Spirit is under contract with Kimco to acquire 9.5 acres of the 102-acre Dania Pointe development, Paul Puma, president of Kimco’s southern region, told The Real Deal on Friday. He declined to disclose the contract price. JLL will serve as project adviser and Gensler as the lead architectural firm.

“They have the right to build up to a half million square feet of office space. It’s entitled for that,” Puma said. But “they may not build a half million square feet immediately. They may expand over time.”

In addition to the commercial space, Spirit also plans to build an apartment building solely for employees and trainees near the site of its planned headquarters, Puma said. “The residential component for Spirit Airlines is a very important part of the overall project,” he said, but so far, Spirit has submitted plans for only the commercial component to the Dania Beach city government for approval.

Ted Christie, Spirit’s president and CEO, announced the project Thursday night at the Broward Alliance’s annual dinner and cocktail party. “We’re bursting at the seams in our existing headquarters in Miramar,” Christie told guests at the event. “We operate six different facilities around Broward to support our operations. We need to centralize our support services, training programs … and more.”

Spirit leases about 56,000 square feet of executive office space at the Miramar Park of Commerce, and the lease agreement expires in January 2025, according to the airline’s annual 10-K filing with the U.S. Securities and Exchange Commission.

In March 2018, Spirit leased about 26,000 square feet of additional office space at the Miramar Park of Commerce under an agreement that expires in June 2021, according to the 10-K.

In Fort Lauderdale, the airline operates a training facility at 1050 Lee Wagener Boulevard in about 12,000 square feet of space, leased under an agreement that expires in January 2020.

“Twenty years ago, Spirit moved to South Florida – headquartered first in a trailer by the airport,” Christie said. “Soon after, we moved to our current facility in Miramar.”

Since Christie was named CEO of the airline about seven years ago, Spirit has expanded its fleet from 35 jets to nearly 140 and expects to operate nearly 300 by the mid-2020s. “As the fastest growing airline in the country by any measure, we continue to expand our global footprint. Today, we serve 75 destinations with nearly 700 daily flights,” Christie said. “We are now the largest air carrier at Fort Lauderdale.”

The post Spirit Airlines plans to build $250M HQ campus in Dania Beach appeared first on The Real Deal Miami.

Don Peebles

Minorities and women only represent 1.3% of the $69 trillion in global financial assets under management across mutual funds, hedge funds, real estate, and private equity, developer Don Peebles said at The Real Deal’s Miami Real Estate Showcase & Forum.

As moderator for “The Diversity Dilemma” panel at the event on Thursday, Peebles, who has corporate offices in New York City, Washington D.C. and Miami, also cited a 10-year study by Commercial Real Estate Women that female real estate professionals earned significantly less than their male counterparts, with the biggest pay gap in the brokerage field where women earn 33.8% less than men.

Armed with that data, Peebles engaged panelists John Gomes, Peggy Olin and Melissa Rose on what can be done to give minorities and women more opportunities to climb the real estate development corporate ladder. “We have an industry that is underrepresented when it comes to people of color and women,” Peebles said while addressing the panel. “Women and minorities have far less access to capital. Is that the cause of the problem? Have you experienced a double standard?”

Gomes, co-founder of Douglas Elliman’s The Eklund|Gomes Team, replied affirmatively. “Of course,” he said. “I sell mainly to wealthy white people. That goes back to the lack of capital. There are not enough minorities that are buying real estate. And that doesn’t create more opportunities to sell.”

Gomes said he constantly worries that he can’t connect with clients because he is a minority working with a white, blue-eyed business partner, Fredrik Eklund, who is one of the most recognized faces in New York City’s brokerage community. “When we would go into listings together, I would often feel the cold shoulder,” he said. “Maybe this person doesn’t like me because I am a minority. I have to work harder in some situations.”

Gomes added he’s lucky that Eklund is aware of the underlying tension and the two men often have frank discussions about race and real estate.

Olin, CEO of One World Properties, said she’s fortunate her firm is based in a place like South Florida, where diversity is an asset. But, she noted the real estate industry could use more women in positions of power. “When you are looking at sales and marketing of a development, there are not many women with their own firms,” she said. “As an immigrant from South America, how do you battle? You can’t go to the New York real estate market and compete.”

Olin recounted how nine years ago, when she was interviewing for a job with Starwood Capital Group, she walked into a room full of men. “I was fortunate to be considered to run the sales and marketing for the entire country,” Olin said. “I was the only woman executive on the team. It was an incredible opportunity to speak up and have my voice heard.”

Rose, a managing director at Ackman-Ziff, said the absence of minorities and women in leadership positions at major real estate firms is a leading cause of the disparity, in addition to lack of access to capital. “One thing that is really challenging is mentorship,” she said. “I don’t have many women that do exactly what I do.”

Rose said getting involved with CREW is one way she and other women in leadership positions can help others succeed. “It is fantastic to have an organization that advances women in an industry where they are under-represented,” she said. “For me, there are tremendous obstacles, but ultimately those have been part of my success. If you use it as ammunition, it can be incredibly effective.”

The post Minority real estate professionals still fight racial and gender barriers: <i>TRD</i> Miami Showcase & Forum appeared first on The Real Deal Miami.

Bank OZK CEO George Gleason (Credit: Bank OZK, iStock)

Bank OZK reported an uptick in real estate construction lending in the third quarter amid cooling markets in New York City and Miami.

The bank reported on Friday that its total construction loan portfolio grew to $6.68 billion at the end of the quarter, up from $6.49 billion a year earlier. Overall, the company’s real estate lending arm RESG originated $2 billion of loans in the third quarter, marking the largest volume of quarterly originations since 2017.

In a conference call with analysts, Bank OZK’s CEO George Gleason said part of RESG’s growth was due to the group’s origination of its largest construction loan to date. He did not give specifics on the loan amount, but the Tampa Bay Business Journal reported that Bank OZK provided a $664 million loan to a mixed-use project in Tampa earlier this month.

“It’s a very conservative, high-quality project with great sponsorship,” Gleason told analysts.

In the second quarter, the Little Rock, Arkansas-based regional bank had said the growth of its loan portfolio is expected to slow down due to an increased amount of repayments on existing real estate loans.

With $23 billion in assets, Bank OZK is one of the most active construction lenders in New York, Chicago, Los Angeles and Miami. The bank is lending at a time when many other regional banks are backing away from ground-up construction lending. Last year, the bank provided the largest condo construction loan in Miami-Dade County history, a $558 million loan to the Trump Group for its Estates at Acqualina condo project in Sunny Isles Beach.

The bank reported no major write-offs on its real estate loans in its most recent quarter.

A year ago, Bank OZK had to write down two real estate loans it made about a decade ago which caused its stock to plummet that day by more than 24 percent.
In the third quarter, the company’s net income jumped 40 percent to $103.9 million, but the increase was largely due to the two write-downs and a rebranding expense the company made in the third quarter of 2018.

Bank OZK’s stock traded at $28.73 as of 1 p.m., up 1.3 percent.

The post Bank OZK reports uptick in construction lending in Q3 appeared first on The Real Deal Miami.

Rents are flat or stagnate in many US cities (Credit: iStock)

The housing market has been slowing across the nation, and now rent prices have finally begun to fall. Very very slightly.

The average rent across major U.S. cities dipped for the first time on a monthly basis since February 2017. This was not the case in Manhattan or Los Angeles, however.

From August to September, average monthly rent decreased $1, or 0.1 percent, according RentCafe. September’s average rent stood at $1,471.

Still, the slowing appears to be consistent across markets — rents either dropped or remained the same in a majority of the 260 cities tracked. RentCafe pinned the trend on a volatile financial climate.

Not surprisingly, Manhattan and Los Angeles bucked the trend.

Rents increased 1.5 percent in Manhattan to $4,336 and 1.2 percent in L.A. to $2,256, according to the report. In June, New York state passed sweeping rent reform. California passed its own rent control law last month, which doesn’t take effect until Jan. 1.

California Assembly Bill 1482 caps annual rent hikes on hundreds of thousands of units statewide at 5 percent plus inflation, which is usually around 3 percent. Over the course of 12 months, that comes out to a roughly 0.6 percent increase each month.

While rents grew in Manhattan — it is by far the most expensive place to rent in the country — growth was effectively flat in San Francisco, which is the second priciest rental market. Last month, the average cost to rent in the city stood at $3,703.

Chicago registered a 0.4 percent drop ($1,998), while Miami ($1,705) saw a 0.1 percent growth, which mirrored other cities in its category.

The report broke out New York City by borough, and found that rents in Brooklyn ($2,956) grew by 0.5 percent, while in Queens ($2,570), they dropped by 0.3 percent.
The cities that experienced the sharpest rent decreases, according to RentCafe, were San Jose, California, Boston and Portland, Oregon.

What’s the cheapest of the 260 cities to rent a home? Wichita, Kansas.

The average rent is just $657, according to the report. Only 14 cities surveyed had average rents under $800 per month. Most of them are smaller cities in the Midwest and Southwest.

The post A little good news for renters. We’re not talking to you LA and Manhattan appeared first on The Real Deal Miami.

From left: WeWork co-CEOs Sebastian Gunningham and Artie Minson with Softbank CEO Masayoshi Son (Credit: Getty Images, iStock)

SoftBank is considering a financing package to save WeWork that would value the embattled office-space company at $8 billion, according to Bloomberg.

It is a stunning drop from WeWork’s $47 billion valuation set in January by SoftBank, at the time of its last cash infusion. The Japanese conglomerate owns about a third of the company and has already invested more than $10 billion.

Since its failed IPO, which it pulled in September, WeWork now faces the possibility of running out of capital as early as next month.

JPMorgan, which initially arranged to lead WeWork’s IPO, has also been pitching its board on a separate deal. The bank has reportedly proposed a $5 billion junk-debt deal to investors, with unsecured and secured notes. SoftBank’s pitch is also said to be a $5 billion package, made up of debt and equity.

A decision the competing bids could be decided by WeWork’s board could be made as early as this weekend. [Bloomberg] — David Jeans 

The post SoftBank rescue plan would bring WeWork’s valuation to $8B appeared first on The Real Deal Miami.

14350 Northwest 56th Court and Bridge Development Partners CEO of Steve Poulos (Credit: Google Maps)

A joint venture between BentallGreenOak and Bridge Development Partners bought most of a mixed-use business park next to the Opa-locka Executive Airport for $126 million.

The group purchased 948,000 square feet of space, with an additional 1 million square feet of industrial and aviation-related development rights on 47 acres at the AVE Aviation & Commerce Center. CPF Investment Group sold the property.

The property sits at 14350 Northwest 56th Court in the Miami Lakes industrial submarket.

The property is 100 percent leased. Tenants include Turbopower, Boar’s Head, Johnson Controls, Rolls-Royce and Herbalife.

The deal also includes a 478,000-square-foot USPS facility; 15 acres occupied by Off Lease Only, a wholesaler of cars in Florida; and three ‘Class-A’ multi-tenant buildings that encompass 470,000 square feet.

Wayne Schuchts of Avison Young represented Bridge Development Partners and BentallGreenOak in the deal, while Ernesto Casal of Casal Group represented the seller.

Bridge Development Partners is an active investor in South Florida. The group recently scored a $60.3 million construction loan from Wells Fargo to build a new industrial complex in Davie.

Investors and developers are increasingly buying industrial properties near Opa-locka. In September, the owner of Ameriworld, an e-commerce fulfillment company, sold a four-building industrial warehouse in Opa-locka for $8 million.

The post JV pays $126M for Opa-locka industrial property appeared first on The Real Deal Miami.

From left: Marley Dominguez, Brian Koles, Andy Levin and Brian Lee

Co-living is becoming a growing segment of South Florida’s multifamily market amid increased competition from each other and from conventional apartment developers, according to a group of such developers and operators.

“Sure, there’s competition. But it’s a big opportunity,” said Brian Lee, senior director of real estate at Common, on a panel on co-living and other new housing trends targeting millennials at The Real Deal’s Sixth Annual Miami Real Estate Showcase & Miami on Thursday.

Common, based in New York City, operates about 1,000 co-living units nationwide and plans to add thousands more.

Lee said Common bedrooms rent for 15 to 20 percent less than a studio apartment and come with services as weekly cleaning service plus access to the Internet and a gym.

“It’s a super-crowded market” in downtown Miami, where apartment development has surged, said panelist Brian Koles, director of marketing and communications at Property Markets Group. “People aren’t necessarily finding us by looking for co-living. They’re looking for a place to live downtown for $1,300 a month.”

PMG developed X Miami, a 434-unit co-living project where the company rents by the bedroom – one of the first projects of its kind in South Florida. Each tenant has a private bedroom and bathroom and shares the kitchen and living space in an apartment with other roommates.

“Co-living is like living with roommates, rebranded,” Koles said. He did not disclose its occupancy rates but said X Miami had “stabilized” during the initial lease-up period of the project. Koles also said the development at 230 Northeast Fourth Street in downtown Miami is the first in a series of PMG co-living projects in other markets that bear the company’s three-year-old “X” brand.

“For us, it has become this showpiece that is allowing us to scale nationally,” he said. “It has proved the [business] model, showing our investors and other partners that we can put roommates together and they’re actually going to pay their rents and get along.”

Several panelists said co-living properties are attracting tenants across a broad range of ages. Co-living operator Ollie, for example, has tenants ranging from millennials “right out of college to people in their 70s,” said panelist Andy Levin, Ollie’s director of real estate partnership. He said Ollie uses a roommate-matching system “comparable to a dating app.”

Co-living and short-term rental operators face competition not only for tenants but also for the best locations, said panelist Marley Dominguez, managing director of real estate at Sonder, which offers vacation apartments with hotel-style services.

“I would say competition is high in the alternative accommodations space. Short-term rentals, co-living, housing as a service – there’s a variety of products that are going after somewhat the same real estate,” Dominguez said.

San Francisco-based Sonder appears to have plenty of cash to spend on real estate: In July, Sonder closed on a $210 million round of funding that valued the company at $1 billion. “We’re expanding to 15 cities right now, mainly in Europe and the Middle East,” Dominguez said.

Heightened competition in the co-living business is “healthy right now for the space because it means more credibility, especially from an institutional investor’s standpoint,” Levin of Ollie said. “It allows us to provide more data points to show this is not just a fad, it’s actually here to stay. It’s just an extension of multifamily.”

The post Co-living trend of renting bedrooms is back and here to stay: <i>TRD</i> Miami Showcase & Forum appeared first on The Real Deal Miami.