Jonathan Litt, Land & Buildings (Photo by Keith Bedford)

Simon Property Group’s $3.6 billion purchase of rival mall owner Taubman Centers in February may seem like just another example of the retail sector’s recent travails. But the takeover actually began four years ago.

Taubman had successfully fended off Simon’s advances since 2002, when it resisted  the nation’s largest mall owner’s first hostile takeover bid, thanks to a governance structure designed to keep the REIT firmly in the control of the founding family, despite the Taubmans only owning roughly 2.9 percent of the firm’s shares.

But in 2016, Jonathan Litt, the activist investor who heads hedge fund Land & Buildings, started accumulating a stake in the firm and agitating for pro-shareholder reforms. His success — especially ending the firm’s practice of staggered board elections — paved the way for Simon’s long-sought takeover.

“We think it was not a coincidence that Simon was able to acquire Taubman shortly before the first vote where all nine board members will be up for re-election,” said Vince Tibone, a senior analyst at advisory firm Green Street Advisors.

But ironically, in light of the coronavirus crisis afflicting retail, some of Simon’s own shareholders are now questioning the deal. And at the end of March, the country’s largest mall owner, which shuttered its mall of March 18,  announced plans to  furlough a third of its employees.

REITs can be ripe fruit for activists — particularly those in the struggling retail and hotel sectors — but they can also be tough nuts to crack, due to governance structures and legal protections that insulate their boards from shareholders.

At the same time, activist investors are getting better at surmounting these obstacles and are making many REITs’ notoriously dysfunctional governance better in the process, experts say.

There were 10 activist campaigns against U.S. REITs in 2019, according to data provided to The Real Deal by research firm Activist Insight. And while that was the fewest in five years, they were by far the most successful, netting a total of 13 board seats — the most over the same period.

Of course, top-tier REITs like Vornado and SL Green are far better positioned to fend off such attacks. But further down the food chain, smaller firms can make attractive targets for activist investors — at least those able to overcome their formidable defenses.

Exploiting dual-class shares, special carve-outs in federal law and quirks of state jurisdiction, the boards of many underperforming REITs have long managed to insulate themselves from shareholder interests, according to Andrew Freedman, a partner at law firm Olshan Frome Wolosky, which has worked with Land & Buildings.

“REITs are a nasty bunch,” Freedman said. “REITs are everything that’s wrong with corporate governance.”

Beta firms

The elite REITs boasting large market caps and solid returns are virtually invulnerable to activist attacks, but large swaths of the sector had already become increasingly attractive targets as market pressures squeezed smaller firms even before the virus outbreak wrought havoc across the retail and hotel sectors.

Nearly 70 percent of activist campaigns over the past six years have targeted REITs in the small- and mid-cap range (with values of $250 million to $2 billion and $2 billion to $10 billion, respectively), according to Activist Insight.

And the retail slump has only heightened tensions between these trusts and their shareholders. Retail REITs posted the lowest returns for the sector in 2019, at 10.7 percent — against an industry average of 28.7 percent — according to data from the National Association of Real Estate Investment Trusts.

Many REITs declined to comment on their interactions with activist shareholders, but experts agree that such investors scent blood in the water.

“If you have a team that’s constantly underperforming, investors are going to push harder,” said Alexander Goldfarb, a senior research analyst at investment bank Piper Sandler.

The worst-performing REIT stock over the 12 months to Feb. 20 was shopping center owner CBL Properties, with returns of negative 73.2 percent. The firm’s weak numbers drew attention from activist investor Michael Ashner, whose Exeter Capital reached a settlement in November for two seats on CBL’s board.

Ashner declined to provide details of his plans, but he told TRD that he’s pushing the board to strengthen the company’s balance sheet and that selling the company outright was not his goal.

“I’ve never really pushed for the sale of a company,” he said. “It’s not a singular objective of mine.”

The next two worst performers have also been targeted for activism or takeovers, albeit unsuccessfully. Hotel operator Ashford Hospitality Trust, with returns of -48.6 percent, won a proxy fight against Rambleside Holdings in 2016. And mall owner Macerich, with returns of -40.4 percent, resisted a takeover bid from Simon in 2015.

Nine of the 10 worst-performing REITs over the 12 months to Feb. 20 were in the retail or hotel sectors — including Pennsylvania Real Estate Investment Trust (-37.7 percent), Corepoint Lodging (-27 percent), Braemar Hotels and Resorts (-25.6 percent) and Pebblebrook Hotel Trust (-22.4 percent), all of which have been targeted by activists. 

And this was even before the coronavirus crisis became an existential threat to many hospitatity companies and retailers, leaving REITS in those sectors on life support.

None of the 20 worst-performing firms contacted for this story would comment.

Tom Catherwood, a REIT analyst at securities brokerage BTIG, said he expects other companies in these vulnerable sectors to attract more activist attention.

“It wouldn’t surprise me at all to see more activism in retail just because of how the sector has been performing,” he said. “Hotels can potentially be another area where we see more activism, but retail is definitely on top of the list.”

Season of the wolf

Last May, activist investor Bow Street launched a proxy fight aimed at wresting control of Mack-Cali Realty Corporation from its long-entrenched board. The move came days after the firm’s leadership rejected a proposal from Bow Street to spin off its suburban office portfolio into a separate entity.

After settlement talks broke down, Bow Street appealed directly to fellow shareholders at Mack-Cali’s annual meeting last June, successfully installing four independent directors on the firm’s 11-seat board and ousting some of its longest-serving members. Other governance concessions the activist shareholders managed to extract included rescinding the “Mack Agreement,” which allowed the Mack family to nominate up to three members of the board, and the formation of a “Shareholder Value Committee” composed of Bow Street’s nominees.

In December 2019, the board announced its decision to sell off its entire suburban office portfolio on the recommendation of the Shareholder Value Committee.

“The playbook is you make some kind of announcement … hoping that’s going to create buzz,” said Yoel Kranz, a partner at law firm Goodwin Procter, who specializes in defending REITs in activist campaigns. “Then you’re going to try and get that company to call you, and then you try to engage them in a dialogue.”

Activist funds, which tend to own small stakes of 1 to 3 percent in the companies they target, are very collaborative early in their campaigns, teaming up with other dissident investors to form so-called “wolf packs.” These loose alliances of investors pool their shares and influence, aiming to make as much noise as possible to pressure companies in a certain direction.

Wolf packs are partial to a specific type of prey — stragglers trading at a steep discount to the value of their assets. At the other end of the spectrum, companies that deliver consistent profits to shareholders are mostly seen as invulnerable to dissent, according to Kranz.

“Think of Boston Properties,” Kranz said. The REIT founded by Mort Zuckerman and Edward Linde in 1970 “has had a pretty entrenched board for a while,” he said, “but you’re not going to find an activist in Boston Properties because they return value to investors.”

Boston Properties declined to comment.

Kranz said that his advice to clients varies based on the history of the investors involved. Established players like Litt are often given the benefit of the doubt.

“When we receive overtures from these kinds of strategic or thoughtful activists, my advice to my clients is always to engage,” Kranz said. “Find out what it is that they have to say. It’s not uncommon that they see things about your company that you don’t see yourself.”

The response is more combative when a campaign comes from outside an anointed circle of investors. According to Kranz, he keeps his guard up when he encounters activists with no experience in real estate.

“They’re not real estate players. They just have activist funds. These activist funds have money that they have to spend being active somewhere,” he said.

“Your cred is very important,” Kranz said. “Unless the Street believes that activist has the wherewithal to go to the mat — in other words, to make a proxy statement and get board seats — they’re not going to get a lot of credibility.”

Activist campaigns do require a hefty investment. Exeter Capital’s Ashner, who also heads Boston-based Winthrop Capital Advisors, estimated that costs can run anywhere between $500,000 to $20 million, depending on the size of the target firm. Even then, due diligence may unearth an immovable blockade.

“You look at the likelihood that you can press forward,” Ashner said, “because if somebody owns 40 percent, you might as well drop the pursuit of the company.”

Such was not the case with New York REIT, an offshoot of scandal-plagued American Realty Capital, headed by disgraced executive Nicholas Schorsch.

“Schorsch, who controlled it, had a marginal ownership in the company,” Ashner said. “So it was a situation where we strongly questioned the management of the company.”

When Ashner partnered with developer Steve Witkoff to target New York REIT in 2016, the firm owned prime assets such as 1440 Broadway just south of Times Square, 123 William Street in Lower Manhattan and Twitter’s headquarters at 245-249 West 17th Street in Chelsea.

“The assets appeared to be undervalued,” Ashner said.

Ashner and Witkoff successfully pushed New York REIT to liquidate its $2.8 billion portfolio in early 2017.

Flush with this victory, Ashner initiated a campaign against American Realty Capital New York City REIT, another company tied to Schorsch. As part of Cove Partners III LLC, Ashner owned just 100 shares of the firm, yet he successfully united shareholders to vote down a slate of “shareholder-unfriendly” proposals from the board, including a provision to limit investors’ access to the company’s books.

But after the vote, the trust’s embattled board moved swiftly to defend itself, unilaterally deciding to stagger its board elections to make it impossible for shareholders to replace a majority of its members in a single year.

ARC New York City REIT was able to take this extraordinary measure because, despite its name, the firm was incorporated in Maryland, which Freedman described as “the most shareholder-unfriendly state in America.”

Hard targets

In fact, nearly 80 percent of the 152 companies in the MSCI US REIT Index are incorporated in Maryland, according to a 2019 report from law firm Goodwin Procter.

That is because Maryland law allows them to impose an array of anti-shareholder provisions — often unilaterally — that would be anathema to most publicly traded companies, Freedman said.

For example, the Maryland Unsolicited Takeover Act allows companies to unilaterally “classify” its board, so that only one “class” of board members will be up for re-election each year. According to the Goodwin report, 17 percent of REITs in the index have classified boards.

Mall owner Macerich used the tactic to ward off Simon’s $14 billion takeover bid in 2015, simultaneously rejecting the offer, classifying its board and adopting a poison pill provision that allowed stockholders to buy shares at half price when any investor buys at least 10 percent of the company.

Classified boards are just one of the obstacles activist investors face when dealing with REITs.

“There are just a lot of structures in place to make it very challenging and not necessarily worthwhile for activists to get involved,” Catherwood said.

For example, the IRS’s “5/50” ownership rule prohibits five or fewer shareholders from owning 50 percent or more of a REIT. Some firms even employ an “excess share” provision, under which it can suspend voting rights once a shareholder reaches a threshold, usually 9.9 percent.

These rules used to be enough to keep activists at bay. However, over the past several years, dissident investors have grown more bold, and Catherwood points to one event as the catalyst: the 2013 purchase of BRE Properties by Essex Property Trust.

Litt took an activist stance in BRE in 2012, calling for the sale of the San Francisco-based residential REIT and specifically urging a marriage with Essex. The two multifamily REITs engaged in on-again, off-again merger talks early in 2013, but BRE resisted, prompting Litt to submit an unsuccessful $4 billion bid for the company.

When news broke later that year that Essex made a $4.3 billion offer, Litt called for the sale of BRE, which was agreed to that December.

“It’s very likely that a lot of that agitation led to the merger of those two companies. Following that, we started to see a handful more activist events,” Catherwood said.

Activism Outlook

There is evidence that the increased activism has begun to make REIT boards more accountable, according to the Goodwin report.

“In recent years, a large number of REITs have adopted an array of important governance enhancements — in part by doing what is asked of them by shareholders but also by embracing the business case for improved governance — and we expect that this practice will continue in the years to come,” the report read.

The study, which included all 152 REITs in the MSCI US REIT Index, showed that investors now have more concrete ways to influence the decisions of many company boards.

For example, 32 percent of firms now allow proxy access, up from 19 percent during Goodwin’s previous survey in 2017. And 69 percent of REITs now give shareholders the right to amend bylaws, up from 47 percent in 2017 — though many restrict that right to those who have held 1 percent of the company’s shares for at least five years.

By other measures, however, there has been little improvement. The report showed that the percent of REITs that have classified boards has remained unchanged since 2017. And 5 percent still have a dual-class voting structure — giving pre-IPO shareholders more voting power than investors from the general public — also the same as in 2017.

Progress may be slow, but the work of activist investors will go on, according to Ashner.

“It will happen with some level of frequency,” Ashner said. “REITs are unique, they have a strong defense. But I think it will continue. There’s a place for it.”

Correction, April 6, 2020: This article has been revised to reflect that the Taubman family owns roughly 2.9 percent of Taubman Centers stock, not roughly 2 percent.

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New listings are down in what is usually the busiest season for home buyers. (Credit: iStock)

What would normally be high season for home buying has turned into a slump as sellers across the country wait to list their homes amid the spreading coronavirus.

Listings website Zillow found that new home listings sank 27 percent this week compared to the same time last year, the Wall Street Journal reported. The spring season usually brings a frenzy of home buyers — in both 2018 and 2019, listings increased an average of 50 percent from March to April.

Listings in Detroit, Pittsburgh and New York City had the biggest declines, of 61.8 percent, 55.5 percent and 49.1 percent, respectively. In Manhattan, new listings showed signs of a slowdown in early March, when the virus was beginning to emerge there.

Despite the decline, some creative real estate agents are finding ways to work through the statewide stay-at-home orders that most of the country is now under. According to Zillow, 3-D home tours have more than quadrupled since February.

And while homes are not being listed, those on the market aren’t selling either — the inventory across the country has increased 2.5 percent since March 1. In areas like Seattle, which was among the first major cities to contend with the virus, total inventory has ballooned by nearly 38 percent. [WSJ] — Georgia Kromrei

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Nir Shoshani, Ron Gottesmann and Terry Wellons, with a rendering of NR Investments’ proposed mixed-use project

NR Investments will get $14 million in property tax rebates and grant money in exchange for providing 252 units of affordable and workforce housing in a 29-story tower in the Omni area.

The Miami City Commission, acting as the Omni Community Redevelopment Agency’s board of directors, unanimously allocated $5.5 million to the developer on Thursday, to help fund its $80 million mixed-use project at 70 Northeast 17th Street. Headed by Nir Shoshani, Ron Gottesmann, and Terry Wellons, NR Investments previously built Filling Station Lofts and Canvas Condominiums in the Omni area.

NR Investment’s latest project will include 41,288 square feet of offices, 4,413 square feet of retail space, as well as the rent-restricted apartments.

A property tax rebate equivalent to $8.5 million had been granted to NR Investments by the Omni CRA last October. The total subsidy amounts to $55,000 a unit, said Adam Old, the Omni CRA’s director of policy and planning.

In its proposal, NR Investments said that the subsidy was needed to make up for “an estimated $17.8 million in rent losses.”

The apartments will be set aside for people making between 60 percent and 140 percent of Miami-Dade County’s median area income, which is currently $54,900 a year. The project’s 188 studios will be rented for between $889 and $2,075 a month. The 60 one-bedroom units will have rents ranging from $953 and $2,224 a month. Four two-bedroom apartments, reserved for a household making 140 percent of Miami-Dade’s median household income, will rent for $2,670 a month.

The median rent in Omni is $2,146 a month, according to Niche.com. Prior to the Covid-19 pandemic, city of Miami planners predicted that Omni rents would climb higher. The development agreement with the Omni CRA freezes the rents for NR Investments’ project until 2047.

According to Florida International University’s affordable housing master plan, commissioned by the city, Miami’s median annual household income is $33,999. For renters, the median household income for the city is $28,650 a year. Due to rising rents and property values, 57 percent of Miami’s households spend more than 30 percent of their income on housing.

Most of Omni, however, falls within Miami’s waterfront adjacent District 2, where the median household income for renters is $61,850 a year, according to FIU’s report. Nevertheless, half of District 2’s renters are cost burdened, while 26 percent are “severely-cost burdened,” according to FIU’s report.

In his letter to the Omni CRA, NR Investments’ lawyer, Javier Fernandez, stated that the project will “provide needed housing inventory to critical employees within the Miami market” such as hospitality service workers, teachers, police officers, firefighters, registered nurses, and recent college graduates.

NR Investments invested $4.8 million to buy 22,625 square feet of land for the proposed mixed-use project between September 2016 and April 2019.

The company aims to start construction in July, and complete the project in January 2023.

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A photo illustration of rent strike wheat paste posters (Credit: Getty Images, iStock)

The Philadelphia Tenants Union recognizes that not all tenants have the stomach for an all-out rent strike just yet. So in a new manifesto, it suggests “baby step” collective action to help them get there.

“Escalating actions help,” the union wrote in the manual released last week, at a time when landlords are grappling with nonpayment of rent. “Many tenants who are hesitant about an action that is ‘too radical’ may be radicalized when the group decides to settle on a less scary step first, and find it doesn’t meet their needs.” The union suggests incremental efforts such as “simultaneously paying rent late on the same day” and “car protest circling landlord’s house” and offers a thermometer graphic to help tenants keep progress on the way to a rent strike. The maximal point? “Celebrate victory!”

(Credit: Philadelphia Tenants Union’s COVID-19 Organizing Guide)

Across the country, tenants are ditching door-to-door outreach in deference to social distancing and instead taking their organizing virtual. They’re hatching plans over Zoom, creating digital guides for rent strikes and drumming up support on messaging apps. But the rent strikes now underway — there are at least 71 across the country, while a New York petition to cancel rent has garnered nearly 90,000 signatures — bear little resemblance to conventional ones, which are mostly used to pressure individual landlords into making necessary repairs. Although landlords will certainly take a hit if tenants skip rent en masse, the intended target of this new wave of strikes is the government itself. Tenants hope that sustained and organized pressure will lead lawmakers to cancel rent and forgive mortgage payments.

“To have a fighting chance with the state, tenants will need to be organized on a mass scale that is not there currently.”

“The state will intervene, as it already has, but it will most likely intervene in favor of bailing out landlords and the housing market rather than tenants,” the Philadelphia union’s manual states. “To have a fighting chance with the state, tenants will need to be organized on a mass scale that is not there currently.”

Systemic shock

As the pandemic cripples the economy and puts millions out of work — 17 million people applied for unemployment benefits in the past three weeks alone, according to the Department of Labor — multifamily landlords are bracing for the consequences.

In the first five days of April, nearly a third of tenants did not pay rent, according to the National Multifamily Housing Council, although some are expected to pay in the coming days. A mass rent strike, however, would put serious strain on the system.

Barry Rudofsky

“We are counting on payments from tenants who are still employed or not facing serious hardships, so that we can work with those hardest hit,” said a spokesperson for Barry Rudofsky’s Bronstein Properties, which owns around 5,000 mostly rent-stabilized units in New York City. “Current rental collections are already significantly down” in the Bronstein portfolio, the representative added, and the federal government must prevent the “impending tidal wave” should landlords be unable to pay mortgages, property taxes, utilities and essential workers.

“There will be a domino effect,” the spokesperson said. “And only the federal government can put in place the policies and protections needed.”

Historically, rent strikes have almost always been a last-resort response to what tenants saw as extreme landlord neglect.

“We think landlords are going to need help too — someone should be organizing landlords.”

New York tenant groups put out a toolkit last week which noted the first rent strike in New York City in 1907, carried out by immigrant Jewish women, and rent strikes in Harlem and Brooklyn later that year, organized by the Socialist Party. Before a law was passed in 1929 allowing tenants to withhold rent for lack of basic services, 1,000 tenants in 25 buildings in the Bronx went on a rent strike in 1917 in the “No Heat/No Rent Campaign.”

The rent strikes being organized now, however, are not about living conditions.

Tenants are “coming together out of desperation,” said Amy Schur, campaign director of the Alliance of Californians for Community Empowerment. Her group is threatening a general strike on May 1 if California Gov. Gavin Newsom does not forgive rent as well as mortgage payments.

“People are pledging their intention to withhold rent, so the demand is of government,” Schur said. “We think landlords are going to need help too — someone should be organizing landlords.”

Cea Weaver

Cea Weaver, a key organizer with New York-based Housing Justice for All, said the push for collective organizing stems from a growing realization that tenants have “nothing to lose” by acting together.

“What we are trying to do,” Weaver added, “is turn this moment into something powerful, using a moment that is scary and lonely and turning it into a way for them to demand a different outcome.”

Neural networks

Nathan Pensler, then a resident of an eight-unit building in Crown Heights, Brooklyn, recalled a five-month strike at his building in 2017 over what he said was a lack of heat, construction harassment and unsafe conditions. After construction workers mistakenly nailed two-by-fours over two tenants’ doors, trapping them in, the tenants weighed collective action. Before the tenants decided to withhold rent, the building had lacked a boiler for two straight winters.

“In ordinary circumstances, people aren’t going to say ‘a rent strike sounds fun!’ — and only some of the tenants were facing really egregious conditions,” Pensler said. “It took a while for newer tenants to feel they had to organize as a group, to build up trust, to get everyone working as a team.”

But the situation now is totally different.

“The lessons of my building don’t provide any kind of road map for what we’re seeing right now,” Pensler said. “There are hundreds of thousands of people who simply won’t be paying rent because they don’t have the ability to pay.”

Such is the situation at seven Brooklyn buildings owned by Alma Realty, where more than 150 tenants calling themselves the Taaffe Tenants Association notified their landlord in a letter that they intend to withhold rent, “whether by inability or solidarity,” for 90 days starting May 1.

“While we intend to withhold rent payments regardless of your response, we want to make it explicitly clear that what we are asking for is your solidarity, support and communication,” the letter reads. Astoria-based Alma, headed by Efstathios Valiotis, did not respond to repeated requests for comment.

Citywide, tenant groups are looking to organize not just at the building level, but at the ownership level — to extend their actions beyond their own hallways and across portfolios owned by the same entity.

“‘Neighbor from another hood’ is the nomenclature for a co-portfolio neighbor,” said one person on a rent strike how-to call on the videoconferencing platform Zoom.

But just because groups are educating tenants on how a rent strike works doesn’t mean one is imminent.

“We have made no specific plans for a rent strike,” said Karen Harvey, campaign director of the Philadelphia Tenant Union. “As a person of color who has been negatively impacted by eviction, we want to make sure that any solutions to our current housing crisis will ensure the safety of all tenants in Philadelphia and help to build renter power.”

Calling Uncle Sam

Landlords and tenants agree that financial relief should come from the federal or state government. But they are at odds over the form that relief should take.

Most landlords would prefer a tax abatement, or direct assistance to renters via a means-tested rental subsidy to keep the rent checks flowing. Tenant advocates and their allies want rent and mortgage bills canceled.

“We are currently excluded from federal programs, but know that direct rental-assistance vouchers must be provided by the federal government to keep families in their homes and allow for the continued payment of building mortgages, property taxes, sewer, water, building staff payroll, and the hundreds of small businesses employed as vendors,” said the spokesperson for Bronstein Properties.

Federal assistance may be more likely than tax cuts from city governments, whose coffers are running bare as they grapple with an unprecedented crisis. In 2020, New York City projected revenues from property taxes to be nearly $30 billion, or about a third of overall revenue.

Eli Weiss

Waiving landlords’ real estate taxes would likely “crush the city’s budget,” said Michael Feldman, whose property management firm Choice New York oversees 7,100 units across 210 buildings.

“Tenants paying rent and lenders — it’s a delicate ecosystem,” Eli Weiss of Joy Construction, a developer and landlord active across New York, said during a virtual seminar about rental cash flow during the coronavirus crisis. “If there’s not a federal stimulus, I don’t know that New York City will be able to function for an indefinite period of time without receiving real estate taxes in June.”

Primal fear

The severity and universality of the coronavirus pandemic has put housing’s core contradiction into the spotlight: that it is an essential service, but a business, too.

Jason Frosch, a partner and lead trial attorney in the Loft Law practice group at Kucker, Marino, Winiarsky & Bittens, said many of his clients have heard from their tenants about potential rent strikes.

“We have to bite our lip, because some tenants were demanding, and said ‘I’m not doing this,’ and ‘I’m not doing that’”

“Some of [the tenants’ communications] are nice, expressing legitimate concern about what’s going on, while some of them were a bit more demanding in tone,” said Frosch. “Landlords have a lot of obligations right now, and just so happen to provide a service that is one of the essential survival requirements of life — which is shelter.”

Robert Nelson

Robert Nelson, whose Forest Hills, Queens-based firm Nelson Management owns 7,500 units throughout New York City, said he has not seen a significant drop-off in April rent collection. Many of his renters receive a federal subsidy, which was expanded by the federal stimulus, and others are professionals who are not as hard hit as service workers, for example.

Even so, some tenants have called Nelson, demanding rent relief.

“We have to bite our lip, because some tenants were demanding, and said ‘I’m not doing this,’ and ‘I’m not doing that,’” Nelson said. He noted that the $2 trillion federal stimulus package already contains a significant amount of money for tenants to “continue to pay for their lifestyle.”

“I’m not talking about taking a trip to the Bahamas,” he said. “But I’m talking about a roof over your head, and food on your plate.”

As the New York strike toolkit notes, landlords may hesitate to respond with “waves of eviction cases,” because of the reputational risk. Few landlords want the headlines that would come with attempting to boot tenants during a global health crisis.

Even so, individual landlords may hesitate to cancel rent for striking tenants who are already not paying rent, because doing so might endanger their right to process evictions once the crisis concludes. Either way, the landlord doesn’t get paid, and renters are aware that creates a fraught situation for them, too.

“We need to think about contingencies, what’s our fallback, what’s our Plan B?” said Dylan Saba, an eviction defense attorney. A general strike’s success, he said, depends on whether enough people can be persuaded to take action.

“Let’s say we fall short of that [threshold],” Saba said. “What if we’ve convinced 40,000 people, who otherwise would be able to pay full amount or negotiate a lower rent, to withhold their rent, and we don’t achieve our demands? We’re looking at putting 40,000 more people at risk of eviction.”

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700 Casuarina Concourse, Dennis Carvajal and Ray Rodriguez (Credit: Sotheby’s International Realty and Marc Bryan-Brown/WireImage/Getty Images)

A former Univision executive sold a Gables Estates home with 335 feet of water frontage for $30 million.

Ray Rodriguez and his wife Liana sold the 7,466-square-foot house at 700 Casuarina Concourse in Coral Gables for $4,018 per square foot, records show. Casuarina Concourse LLC, a Delaware company, bought the property.

The estate, known as El Palmar, spans 3.3 acres. It features a koi pond, coral rock pathways, a library, 2,000-bottle wine cellar, pub-style bar, a living room with a fireplace, a private service wing and elevator. It also has a summer kitchen, pool and boat house. The home has nine bedrooms and 11 bathrooms.

Dennis Carvajal of One Sotheby’s International Realty represented the seller in the deal. Yvette Rivero of Mocca Realty represented the buyer.

It was listed in 2018 for $45 million, according to Realtor.com.

The property last sold for $3 million in 2000, records show. The home was built in 2006.

Ray Rodriguez was formerly president and COO of Univision Communications, a Spanish-language media company. He was responsible for all areas of the business, including sales, marketing, programming, production and business affairs.

He was elected to the Knight Foundation’s board of trustees in December 2010. Prior to Univision, Rodriguez was worldwide manager and CEO for entertainer Julio Iglesias, according to the Knight Foundation’s website.

In December, an estate at 21 Casuarina Concourse in Gables Estates hit the market for $49.9 million. The property totals 4.5 acres with 630 feet of water frontage, and includes a 10,575-square-foot main house. Also in December, a former Coca-Cola distributor paid nearly $14 million for the empty waterfront lot at 625 Leucadendra Drive in Gables Estates.

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Developing major projects is difficult — and during a crisis it’s even more so. Already Miami Beach has seen active construction sites shuttered, and the threat of a total shutdown looms over South Florida. With social distancing restrictions, curfews and supply chain disruptions, keeping projects on track has never been more of a challenge.

But construction hasn’t stopped yet, and real estate companies are getting creative with ways to keep their projects moving forward. This afternoon, TRD‘s Amir Korangy will sit down with three of Miami’s major developers to talk through new hurdles and how they’re overcoming them. Joining Korangy is Fortune International Group’s Edgardo Defortuna, the Related Group’s Jon Paul Perez, and KAR Properties’ Shahab Karmely. The group will discuss the new development landscape and how they’re contending with coronavirus.

Register here for this afternoon’s episode of TRD Talks Live.

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An illustration of Oak Street Capital’s Marc Zahr

With every crisis comes opportunity. Private equity firm Oak Street Real Estate Capital has $5 billion and plenty of opportunities.

Marc Zahr and co-founder Jim Hennessy are telling companies in distress to sell them their property and lease it back, according to a report from Crain’s. The firm recently struck a $725 million deal in Ohio with Big Lots. The deal allows the retailer to pay down debt, and Oak Street gains control over four distribution centers, which will be leased by Big Lots, according to Crain’s.

Oak Street has completed or is finalizing deals with seven publicly-traded companies to buy roughly $1 billion of real estate and subsequently rent it back to the companies, Zahr said. With additional financing, Oak Street plans to scoop up about $3 billion worth of property, Crain’s reported.

Still, there’s risk on Oak Street’s end: the leases are typically for 15 to 20 years, and there’s a good chance the companies can’t survive a recession.

In January, Oak Street bought 2.1 millions square feet of space from struggling retailer Bed Bath & Beyond. It leased it back to the company. Some retailers have resisted such real estate plays: Target fought off an attempt in 2008, for instance. The retailers need the underwriting to allow them flexibility to maneuver through uncertain times.

Oak Street is backed by major public pension funds like the Illinois Municipal Retirement Fund and the Chicago teacher’s fund. It’s on track to close its fifth fund with a cap of $2.5 billion, according to Crain’s. [Crain’s] — James Kleimann

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Louise Sunshine and the Grand Venetian in Miami Beach (Credit: Google Maps)

Real estate sales, marketing and development expert Louise Sunshine sold her combined penthouse unit at the Grand Venetian in Miami Beach, losing about $2 million on the sale, The Real Deal has learned.

Sunshine had the two-story, 6,400-square-foot unit on and off the market since at least 2015, at one point asking nearly $12 million. She sold it for $5.7 million to a foreign buyer, according to property records.

Sunshine paid more than $4 million for units 2502 and 2503 in August 2013, and later combined and renovated the condos at 10 Venetian Way, on Belle Isle in the Venetiain Islands. She sued the Grand Venetian homeowners’ association in 2015 for requiring her to pay a $1 million fee to combine the units.

The penthouse has six bedrooms, six bathrooms and includes three balconies, an elevator, marble floors, 20-foot ceilings with floor-to-ceiling glass and a glass staircase.

“I lost about $2 million because my construction costs of combining those two residences and the time delays caused by the board and the building, which held up the construction process, was too long,” she said, adding that the sale “barely covered the cost of my mortgage.”

Sunshine moved to a rental at Bellini Bal Harbour, at 10225 Collins Avenue, because the closing of her Grand Venetian unit was moved up to April 1.

“Moving during the coronavirus is the most impossible task I’ve ever undertaken,” she said. Sunshine stayed at the Four Seasons Hotel at the Surf Club for about three weeks. She’s been a strategic adviser for Fort Partners, working on Four Seasons-branded developments in Surfside and in Fort Lauderdale.

The off-market deal of her Grand Venetian penthouse was brokered by Jill Hertzberg of The Jills Zeder Group at Coldwell Banker, who had the exclusive listing in 2015. It was later listed by other agents, and was most recently asking about $6.5 million, Sunshine said.

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CapRate Commercial Real Estate Advisors’ Bill Berthiaume and Tropical Villas Apartments

The Tropical Villas Apartments in Lake Worth Beach sold for $9.5 million, amid growing interest in the area’s multifamily market.

North Palm Beach Gardens-based Watermark Multihousing LLC sold the 68-unit apartment complex at 3440 Rudolph Road and 3431 Helena Drive for $139,705 per unit, according to a press release. Tropical Villas, LLC, led by Perez Investment Group, bought the property.

CapRate Commercial Real Estate Advisors’ Bill Berthiaume represented the seller in the deal, according to the release.

The apartments have recently undergone a $1 million renovation, and are fully occupied, Berthiaume said. The complex consists of two apartment buildings with 28 units in one and 40 units in the other. The two buildings are next to each other, on a 4.84-acre site.

The complex last sold for $5.1 million in March 2019, records show. The apartments were built in 1977 and 1979.

Amenities include a swimming pool with paved sundeck, basketball courts and renovated parking.

Lake Worth Beach has seen a wave of investor interest in multifamily and residential development in recent years as rents and home prices are rising in nearby West Palm Beach and Fort Lauderdale, forcing people to move further north and west.

In July, Southstar Capital Group of Boca Raton paid Greystar $47.8 million for a 214-unit apartment complex near Lake Worth Beach. Fort Lauderdale-based Affiliated Development is aso building The Mid, a Class A apartment complex on 16th Avenue and North Dixie Highway in Lake Worth Beach.

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After more than 17 years of content that’s spread from New York and its surroundings to South Florida, Los Angeles and Chicago, we’re excited to present a new magazine this May that will bring The Real Deal’s coverage to doorsteps around the country.

In a world that’s increasingly globalized, even as we’re individually isolated, our newsroom is covering more national news that impacts every market more than ever before. And though real estate has always been local, the pandemic has created many challenges and some new opportunities on a national level.

From how low hotel occupancy rates will go to the future of co-working and whether industrial tenants will make their rent, we’re looking beyond individual markets. We’re hosting an ongoing series of live webinar talks with industry big wigs to explain what this all means, and we recently dug through the record $2 trillion U.S. stimulus package to break down its potential impacts.

Now, for our upcoming May issue, we’re combining forces across several major cities to build on the hard-hitting journalism we’ve brought to readers in each of our markets over the years.

This special issue will focus on the battle against COVID-19 and the changing economic, social, political and financial impacts on the U.S. real estate industry. To ensure our subscribers’ safety, it will be specially poly-wrapped before being distributed by mail. For those who receive TRD at their office, we encourage you to update your home address in your account, but we’ll also make a digital flip book format of the magazine available online.

And for those who still want to receive the biggest news in their local markets, worry not. If you currently subscribe to any of our issues, you’ll receive TRD‘s national issue in May, which will include much of the original stories you need to follow in every city we cover.

Subscribe to The Real Deal to support the news the real estate industry needs, now more than ever.

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“We think landlords are going to need help too — someone should be organizing landlords.”

It’s not every day that you hear tenant organizers talking this way. But these are not normal times. Reporter Georgia Kromrei went deep into the national tenant movement to bring readers a detailed picture about how they are organizing in preparation for a mass rent strike, a move that would wreak havoc on the multifamily market.

In this edition of Second Take, she joined TRD‘s Hiten Samtani to discuss.

Check out the video above, and read the full story here.

The post <i>Second Take:</i> Inside the movement for a national rent strike appeared first on The Real Deal Miami.

(Credit: iStock)

Real estate stocks rebounded in a shortened week as investors showed renewed optimism for equities in general, and the Federal Reserve announced more measures to bolster the U.S. economy.

From last Friday’s close through the end of the day Thursday, the S&P 500 rose 12 percent, and the Dow Jones Industrial Average grew 13 percent.

Meanwhile, the FTSE Nareit All REITs index, which tracks public real estate investment trusts, outperformed those indices, jumping 23 percent over those four days of trading. Markets were closed today because of Good Friday.

“There’s been a broad recovery across the entire equity sector. Pretty much everything has been up,” said Alexi Panagiotakopoulos, co-founder of Fundamental Income, sponsor of the NETLease Corporate Real Estate ETF. “I think a lot of that has just been propped up by rebalancing and money that has been on the sidelines, waiting and looking for opportunities.”

The market lift — from a crushing March as the coronavirus crisis deepened — also was seen among other real estate stocks. Brokerage firm CBRE Group, for instance, saw a 28 percent lift this week. Realogy rose 21 percent Thursday alone, and 51 percent for the week. Another brokerage, Re/Max, also shot up this week, by 44 percent.

Major hotel chains, like Marriott International and Hilton Worldwide Holdings, also were up over the prior four days of trading, even though hotel occupancy in the U.S. fell to 22 percent. The prices of both those firms’ stocks dipped Thursday.

Down year
Still, total returns for that main REIT index are down almost 16 percent year to date, according to data from Nareit, an industry group for the REIT space. The performance so far in 2020 stands in stark contrast to the standout year REITs had in 2019. And regional malls, feeling the pain of retail closures and government-mandated shutdowns to prevent the spread of the coronavirus, so far are suffering the most among REIT types, with returns down 51 percent year to date.

Global efforts to stop the rapid-fire spread of the coronavirus have nearly halted the economy, with front-line businesses — restaurants, hotels, for instance — among the first to take big hits.

REITs also struggled with the broader market selloff, which at points grew so dire that investors caused trading to stop several times last month. Prior to the pandemic, REITs were coming off a quarter of strong earnings and balance sheets, but the closures and layoffs led to concerns over cash flow and the ability of businesses to pay not just their employees, but their rents, said Calvin Schnure, senior vice president of research and economic analysis at Nareit.

The recent moves from the central bank and the government should help REITs to reverse course, experts said.

“With the Federal Reserve programs as well as the stimulus previously passed, the government is doing everything [it] can to prevent this outside event from hitting everyone in this payment stream, and that’s what’s benefitting the REITs,” Schnure said.

But the rest of the month — and perhaps even May — likely will provide the real proof of how REITs are faring, when a clearer picture emerges as to just how many tenants did not pay rent, Panagiotakopoulos said. April 1 was the first day rents were due during the pandemic for apartment renters, many of whom have lost their jobs, and commercial tenants, many of whom remain closed.

Still, the Fed’s actions, which were expanded Thursday to further boost lending, have been “massive,” Panagiotakopoulos added. And while REITs may not directly benefit from these actions, more small and mid-sized businesses will receive lending support, which will flow to landlords.

“It’s basically government-funded revenue, stimulus indirectly to the REITs,” he said. “Because honestly, these companies don’t want to lose their locations, so they’re going to pay their rents.”

Write to Mary Diduch at md@therealdeal.com

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Gatherings are out, but virtual gatherings are in. Here are some real estate webinars coming up next week.

Host: MSCI

Date: April 13

Time: 2 p.m. EST

MSCI is holding its webinar on Covid-19’s Impact on the U.S. Mortgage Market Monday. Listen to this session to hear about how investors are managing risk in the mortgage-backed securities market during the pandemic. Zach Pace, Yihau Yu and David Zhang of MSCI will speak.

Host: ULI Americas

Date: April 14

Time: 1 p.m. to 2 p.m. EST

ULI Americas is holding its webinar on the Economics of Covid-19 Tuesday. Register for this webinar to hear how commercial and multifamily owners are pushing innovations to combat the crisis. Speakers include Allan Glass of ASG Real Estate and Zachary Streit of George Smith Partners.

Submit industry events to events@therealdeal.com and check out TRD Talks Live, where you can find webinars featuring the most influential people in real estate. Future topics include hotels, investment sales and residential lending.

The post Mark your calendars: These are the top real estate webinars next week appeared first on The Real Deal Miami.

The relief has varied across brands — from slashed fixed fees to deferrals of certain payments. (Credit: iStock)

Hotel chains have taken steps to support their franchisees around the country as the coronavirus pandemic has caused prolonged closures.

But some franchisees, struggling to keep staff on their payrolls and cover debt service payments amid emptying-out properties, say efforts from their parent companies aren’t enough.

Among the issues hotel owners and operators have been seeking guidance on because of the pandemic includes their requirements under agreements with franchise companies, along with their requirements with lenders, said Yariv Ben-Ari, a partner in the real estate department at law firm Herrick Feinstein.

The relief has varied across brands — from slashed fixed fees to deferrals of certain payments.

Hilton Hotels & Resorts, for instance, has adjusted its cancellation policies and relaxed certain brand standards, while asking legislators for loans to help franchisees keep their properties open. A Hilton spokesperson declined to provide more details, noting that agreements with franchisees are confidential.

And Best Western announced in mid-March that it was cutting its monthly fees and its property revenue management fees to franchisees in half, among other measures.

These moves help provide substantive relief, said Sagar Shah, managing principal of Yatra Capital Group, which operates a franchised 14-key Best Western Plus hotel in Shillington, Pa, among other properties. But not all companies have offered such financial or brand management aid, according to several franchisees.

“There are other brands that are not following suit and are still expecting us to contribute significant fixed expenses and fixed fees back to them, despite having next-to-zero cash flow,” Shah said.

Hoteliers have been hit especially hard because of the timing of the virus, which has led to travel restrictions that have left more than three-quarters of hotels across the country sitting empty. Major chains have slashed corporate staffs and salaries and had lobbied the White House for a piece of the historic stimulus measure that was adopted last month to bolster the U.S. economy.

IHG Hotels, a major hospitality chain that runs over a dozen brands like Holiday Inn and Crowne Plaza, for instance, has not provided financial relief that owners desperately need, as scores of hotels shutter or lay off staff, Shah and other franchisees told The Real Deal.

Shah, whose company also has a 135-key Holiday Inn Express and Suites is in York, Pa., said the typical revenue management fees he’s required to pay could cost him about $1,050 per property. But IHG has not waived that charge, even though there is no revenue coming in to “manage,” he maintained. Instead, the hotel brand has cut the fee by a few hundred dollars — a move Shah said is not helpful.

“It’s not really substantive relief that they’re providing to us, of what we’re looking for. What we’re looking for is really deferment of royalties and … marketing fees,” said Shah, who said he has had to lay off 95 percent of his staff.

In a statement, an IHG spokesperson said it has been working with owners since the beginning of the crisis. The company, which has cut corporate costs by $150 million through actions like salary reductions, said it relaxed its brand standards in several areas like housekeeping, along with deferring investments and delayed renovations, which allows owners to have more cash on hand for payroll and other costs, the spokesperson said.

IHG also has implemented some forms of fee relief, including payment deferral options and half off service contribution fees and 25 percent off technology fees.

“At IHG, we know that Covid-19 is having a tremendous impact on our owners, and colleagues, and every action we are taking is with them in mind,” the spokesperson said. “We are working constructively and in close coordination with owners of IHG-branded hotels, doing everything we can to reduce costs across the board while also maintaining high levels of service and support to help owners manage through this unprecedented situation.”

Offering “pennies”
Another IHG franchisee, Manav Singh of Sintel Properties, which has hotels and retail centers in Ohio, also described the assistance IHG is offering as “pennies.” Singh and Sagar said they connected with each other as the coronavirus crisis began to escalate around the country, and it was clear that small hotel owners would need more assistance.

“Hotels don’t have the money to pay [fees],” said Singh, who said he is paying employees out of pocket. “We’re going to pay our debt servicers, we’re going to pay our staff. We’re going to pay the water bill, the electric bill, before we ever think about paying IHG.”

And when a local hospital approached Shah to possibly lease out his Holiday Inn, in the event it needs more beds for its Covid-19 response, he said he went to IHG for guidance: IHG allegedly instructed him to cover up his signage at his sole expense, and IHG told Shah it still expected to receive royalties from the hospital’s use, the hotelier said.

“They’re pretty much tone deaf to the needs of the small business owner,” Shah said. “They’re very detached from the reality on the ground of what we’re dealing with.”

The IHG spokesperson said it has asked hoteliers that cover signs if they are used for other uses to “minimize confusion or health risks of potential guests inadvertently entering or attempting to stay at the hotel.” And if an owner donates the facilities for use by health care professionals or first responders, IHG would not collect fees, the spokesperson added.

IHG is not the only hotel chain where owners have been left wanting.

More than 6,300 people signed a petition against Choice Hotels International, calling on the company, which includes brands like Comfort and EconoLodge, for leniency on certain brand standards and the suspension of royalties and franchise fees. The petition notes that other brands offered “immediate materially impacting concessions” but Choice did not.

“Tone-deaf” exec team
“This highlights the tone-deaf nature of the executive team and those in the C-suite,” the petition states. “Sitting in their plush corporate offices, they do not understand the realities we are facing on the ground as struggling hoteliers attempting to stay afloat amidst an unprecedented global crisis.”

Rich Gandhi, of New Jersey-based GHM Properties, owns a Choice hotel in upstate New York, which he said the parent company locked out of its reservation system because of a dispute that arose before the pandemic. Gandhi said he has long been asking Choice to be more transparent about its fees, a concern he said has intensified as the pandemic continues to batter hotels. (A Choice spokesperson said Gandhi is no longer a franchisee because of “longstanding issues” with financial obligations and brand standards.)

On Thursday, in a filing with the U.S. Securities and Exchange Commission, Choice said it has taken steps to help franchisees. Along with cutting compensation at the corporate level and implementing a hiring freeze, Choice said it has put in place a fee-deferral program and put a stop to quality assurance reviews. It also has suspended certain brand standards and helped in advocacy efforts for hotel owners, among other steps, a spokesperson said.

But Gandhi called the company’s announcement a “sham.”

“They basically tie your hands, tie your feet, then basically put you in a boxing ring and say go box,” he said.

For instance, Choice owners can defer their fees because of Covid-19, but if they do so they waive the right to terminate their franchise agreement early, among other contingencies, according to a copy of the deferral notice reviewed by TRD.

A Choice Hotels spokesperson said the company has “taken decided action” to support its franchisees, “not only with tools and resources to assist with daily operations, but also in implementing policy and fee changes that immediately help their bottom line.

As for the terms franchisees must abide by to defer fees, the spokesperson added the company’s intent is to make sure the payback period for fee deferrals matches the length of the contract with franchisees.

The pandemic has battered every hotel around the world, and, for the most part, it appears franchisors have taken the necessary steps to help owners, Ben-Ari of Herrick Feinstein noted. Some companies have suspended contributions to furniture, fittings and equipment reserve funds that franchisees are required to maintain for things like furniture replacement, he said.

Still, Ben-Ari noted that franchisees that are struggling and need more assistance should contact their franchisors sooner rather than later.

“It’s better to have a dialogue now and work with them,” he said. “I think everybody recognizes the pandemic is affecting everybody individually on a human basis, and people are treating each other positively on a business and personal basis.”

Because the majority of hotels in the U.S. are franchised, they are owned by small businesses that may not have the same resources as their larger corporate counterparts.

“It’s a really urgent situation for hoteliers and small business owners because we were just coming out of slower winter months … most of us are not well funded to get through this,” Shah said.

Rich Bockmann contributed to this article.

Write to Mary Diduch at md@therealdeal.com

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Mitch McConnell and Nancy Pelosi (Credit: Samuel Corum/Getty Images and Andrew Caballero-Reynolds/AFP via Getty Images)

Trade groups representing the biggest residential players have asked the federal government for an array of relief measures, while also requesting the right to keep evicting renters.

In an April 7 letter addressed to the White House Coronavirus Task Force and Congress, a dozen landlord and developer groups called for the creation of an emergency rental assistance program, financial help in paying “property taxes, insurance payments, utility services, and the like,” and a Federal Reserve line of credit for mortgage services.

Also, the property owners urged Congress and the White House to expand the Small Business Administration’s Paycheck Protection Program to multifamily businesses, who were conspicuous by their absence in the program’s initial rollout.

The groups, which range from the National Apartment Association and the National Association of Realtors to the National Multifamily Housing Council, also want more money toward the Agricultural Department’s rural-development and rental-assistance programs.

The demands come at a time when literally trillions of federal dollars are being spent to stem economic calamity from the coronavirus pandemic. The property owner trades want Congress to include the measures in a “Phase 4 recovery package,” lingo used to describe the next economic stimulus bill that federal lawmakers are anticipated to hammer out later this month.

In addition to vying for their slice of the stimulus pie, property owners also want to still kick out delinquent tenants, and ensure there are as many correctives to help landlords as there are for renters.

The letter’s call for emergency rental relief partly suggests landlords and tenants are in this together, arguing prior stimulus measures did not deal with “the financial challenges that both the renters and rental industry are now facing.”

However, the letter proceeds to ask Congress to clarify that a federal moratorium on evictions, which just applies to properties with federal mortgage guarantees, “be limited to those negatively impacted by COVID-19.”

“Protections offered should not only be limited to those adversely affected by the outbreak, but also require residents to officially notify the property owner,” and, “acknowledge the contractual terms of the lease remain in effect,” the letter reads.

Also, the property owners seek to “reconcile forbearance and eviction and moratorium timelines,” taking issue with the fact that the present federal eviction moratorium is 120 days, while the mortgage payment break goes for 90 days. The groups additionally want mortgage forbearance expanded to all multifamily loan products.

The laundry list comes as battle lines are being drawn, erased, and redrawn between landlords, renters, banks, and federal and state governments. Landlords have at times portrayed themselves as hapless middlemen between righteous renters and indifferent banks and government officials, while also sometimes voicing sympathy and even camaraderie with renters.

Additional groups who signed the letter are CCIM Institute, Council for Affordable and Rural Housing Institute of Real Estate Management, Institute for Responsible Housing Preservation, Manufactured Housing Institute, National Affordable Housing Management Association, National Association of Affordable Housing Lenders, National Association of Home Builders, National Association of Housing Cooperatives, and the National Leased Housing Association.

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U.S. District Judge David Carter finishes presiding over a closed hearing to discuss possible immediate solutions to the Skid Row (Credit: (Photo by Genaro Molina/Los Angeles Times via Getty Images; Wikipedia)

A federal judge in Los Angeles took L.A. County attorneys for a field trip this week to show them first-hand how the county’s response to the coronavirus pandemic falls short.

U.S. District Judge David Carter told attorneys he tried to use six hand-washing stations recently installed in Skid Row, but they were all out of water and soap. To prove his point, he brought them there, according to the L.A. Daily News.

Carter is presiding over a lawsuit brought by the L.A. Alliance, a group of Skid Row business owners and residents, who say the city and county aren’t doing enough for their community in the short or long term.

The sanitation stations, along with portable toilets, were installed to help contain the pandemic among the 27,000 or so people who live in the neighborhood.

The county and the city have taken emergency measures to help contain the virus, including opening temporary shelters in recreation centers and trailers, as well as renting at least 760 hotel and motel rooms around L.A. to house people. The state is also renting hotel rooms.

L.A. City Attorney Mike Feuer said that the city plans to install 50 portable toilets and 60 more hand-washing stations in Skid Row, according to the Daily News.

Other parties also criticized the response. The Legal Aid Foundation of Los Angeles said in a court filing that the “critically important” interventions “are not being deployed at anywhere near the scale necessary” to stop the spread of the highly contagious virus. [LADN] — Dennis Lynch 

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Travis Kalanick (Credit: Justin Sullivan/Getty Images)

The world appeared to get a sneak peek last week of a new brand that Travis Kalanick’s City Storage Systems is reportedly developing, but just a few days later the company completely disowned it.

A website went up, an Instagram account created, and a press release went out replete with renderings and slogans for Internet Food Court — a brand that appeared to be the final form of CSS’s delivery-only “cloud kitchens” venture launched two years ago. CSS soon said it had nothing to do with the campaign, according to Financial Times.

The whole campaign was the work of a rogue employee who “created and disseminated without [CSS’s] knowledge,” company spokesperson Devon Spurgeon said.

“One of CSS’s employees developed a website and press release that included numerous errors and misrepresentations,” Spurgeon said, adding that the company was investigating the incident.

A source close to Kalanick added that the former Uber CEO was “very upset” and that the company didn’t know how the website was created.

CSS has been developing its cloud kitchen venture since at least 2018. The idea is to buy cheap real estate, build large shared kitchens, and rent them out to multiple delivery-only restaurants. Around that time they operated at least one location in L.A.

The rogue PR campaign seems to have some grain of truth to it. As of last week there was a fully operational location complete with Internet Food Court branding open at 615 N. Western Avenue in Hollywood.

The few Yelp reviews from last week aren’t great and appear to be written by delivery workers sent to pick up food for customers there. Most described long wait times. [Financial Times] – Dennis Lynch

The post Rogue employee launched PR campaign for Travis Kalanick’s new “Internet Food Court” brand, company claims appeared first on The Real Deal Miami.

In New York City, Veselka closed due to the coronavirus COVID-19 pandemic. (Photo by Bill Tompkins/Getty Images)

Many restaurant owners who’ve been forced to close their businesses because of the coronavirus pandemic wonder if they’ll be able to hold out long enough to re-open.

Bills are mounting and many worry they won’t be able to pay up even with support through the federal government’s massive $2 trillion stimulus package, according to Bloomberg. That could mean a wave of closures this summer.

The fate of most restaurant owners is in the hands of their landlords. Some are working with their tenants, while others are putting their feet to the fire.

‘Helbraun & Levey LLP partner Lee Jacobs said most landlords are accommodating, but larger institutional landlords with enough cash to hold out “can outlive having empty retail space.”

Some landlords are letting tenants dip into their security deposits to make rent. Others are creating repayment plans so restaurants can pay back missed months gradually once they reopen.

The federal stimulus package sets aside $350 billion for small business loans, but business owners have to be careful about how they use any money they get through the program. If they use anything less than 75 percent of their loan to make payroll, they’ll have to pay that money back, according to Bloomberg.

Some restaurateurs want the federal government to offer more protection going forward, like waiving repayment deadlines.

“Otherwise, businesses fail, landlords fail, banks are left holding the bag,” restaurant owner Yann de Rochefort said. “Good luck putting that all back together.” [Bloomberg] – Dennis Lynch

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Stanley Chera (Photo by Patrick McMullan/Patrick McMullan via Getty Images)

Stanley I. Chera, who parlayed his father’s Brooklyn department store business into one of New York real estate’s biggest retail empires, reaped huge rewards from the city’s emergence as a global shopping destination and used his wealth and connections to play kingmaker for Donald Trump, has died from complications of the coronavirus, making him the most high-profile industry casualty of the global pandemic.

Chera’s death on April 11 was confirmed to The Real Deal by sources who have worked closely with the firm he founded and ran, Crown Acquisitions. Yashar Ali, a journalist and contributor to New York Magazine, reported that the Chera family has been informed.

As the pandemic spread rapidly in New York, Trump had advised Chera to leave the city and decamp to his summer home near Deal, N.J., a popular vacation-home destination for many moguls hailing from Chera’s Syrian Jewish community, which dominates New York retail. Chera took his advice but fell ill anyway, and was admitted to New York Presbyterian/Weill Cornell Medical Center in late March. According to a source familiar with events, Chera’s wife, Frieda (Cookie) also contracted the virus, but recovered.

Chera’s savvy and willingness to chase big-ticket deals elevated him and Crown into the city’s retail pantheon, among the likes of Jeff Sutton of Wharton Properties, Joseph Sitt of Thor Equities and Bobby Cayre of Aurora Capital Associates. Crown holds interests in the most retail frontage along Upper Fifth Avenue, perennially among the world’s priciest shopping corridors. Those positions meant Crown benefited handsomely from New York’s retail boom in the mid 2010s, but is perhaps now among the most exposed firms to the city’s retail downturn.

Haim Chera, Stanley H. Chera and Stanley I. Chera (Photo by Jason Binn/WireImage)

Crown’s day-to-day operations are run by two of Chera’s sons, Isaac (Ike) and Richard Chera. Haim (Haimey) Chera, Stanley’s middle son, is head of retail at Vornado, a position he took when Crown bought a 24 percent stake in Vornado Realty Trust’s prime Manhattan retail portfolio, a megadeal that valued the portfolio at $5.6 billion. Crown also has a brokerage arm, Crown Retail Services, which negotiated Apple’s first Brooklyn store, in Williamsburg.

According to data from real estate news and research site PincusCo, Crown’s assets include at least nine properties with 635 feet of frontage, such as 640 Fifth Avenue, 655 Fifth Avenue, 689 Fifth Avenue and 697-703 Fifth Avenue.

The firm also has interests in the the World Trade Center complex, and the retail at 650 Madison Avenue and the Olympic Tower on Fifth Avenue. Some of Crown’s tenants include global luxury brands such as Cartier and Versace, but the firm also owns more modest properties in blue-collar neighborhoods of Brooklyn, Queens, the Bronx and Staten Island leased to the likes of Duane Reade, Sprint and Planet Fitness.

“Stanley loved the chase,” Steve Witkoff, a prominent New York real estate investor and developer, said in an interview Saturday. “He knew what the trend lines looked like before anybody else does. It’s not dissimilar from being a great hedge fund manager- someone who can see through a particular environment, a particular marketplace, and see how a customer is going to buy.”

“The secret is to stay underleveraged and you can own something forever,” Chera told the New York Times in 2010. “I have 100 pieces of property, say, but I could have 1,000 leveraged.”

The store, the block, and then the neighborhood

Born in Brooklyn in 1942, Chera went to work with his father, Isaac Sr., who owned a children’s department store on Fulton Street in Downtown Brooklyn. Isaac, who took over the space from a hat store named Suzette Millinery Shop, didn’t have the funds to replace the banner, according to the Commercial Observer, so he merely tweaked it and called his business Suzette Kiddie Store. Only after expanding the business across several stores did the family change the name to Young World.

A March 1980 bar mitzvah notice for Stanley Chera’s eldest son, Isaac, in the newsletter for Magen David Yeshiva, a religious institution prominent in Bensonhurst

In the Times interview — among the few that the gregarious but press-shy Chera gave in his career — he explained how the family’s emphasis shifted from operating retail to owning it.

“I was paying $2,000 a month rent and I was doing business up to the sky,” Chera recalled. “I said, ‘What am I doing?’ The building next door came up for sale, so I purchased it and started accumulating properties in the city.”

The world of high-stakes Manhattan property, where the competition, risk and rewards are all outsized, beckoned. When Chera entered that scene in the late 1980s, he was typically a junior partner to players such as Morris Bailey or the Feil Organization.

Chera, Bailey and developer Martin Raynes were involved in perhaps one of the city’s hairiest real estate transactions when they struck a deal to buy four properties from the government of the Philippines, then led by the extravagant and corrupt Ferdinand Marcos, for $396 million. The acquisition was structured as a commitment to bid on each property if and when they went up for auction. The portfolio included the two trophies — the Crown Building at 730 Fifth Avenue and a Lower Manhattan office skyscraper at 40 Wall Street — as well as the ugly duckling Herald Center and an office and retail building at 200 Madison Avenue.

But the deal was embroiled in years of litigation that elicited a global cast of notorious characters, including Saudi arms dealer Adnan Khashoggi, representatives of the Philippines government that ousted Marcos in 1986, and brothers Joseph and Ralph Bernstein, allegedly frontmen for Marcos.

A 1989 NYT article chronicled the drama behind the Marcos transaction

“Every time you think you get to the last nuance, someone calls and says, ‘You’ll never believe what happened,’” attorney Jonathan Mechanic of Fried, Frank, Harris, Shriver and Jacobson, who was representing Chera and his partners, told the Times about the saga in 1989. (When the dust cleared, Bernard Spitzer would end up acquiring the Crown Building in a bankruptcy sale, while Bailey and his group took control of Herald Center.)

A quarter-century later, Chera would make another run at the Crown Building but lose out to Sutton’s record-setting $1.7 billion bid in partnership with General Growth Properties.  The leasehold for 40 Wall would bounce around among several owners before being snapped up in 1995 by one Donald Trump.

Taking the Fifth

By the turn of the century, Chera’s appetite and access to capital had grown substantially. In 2001 he teamed up with Lloyd Goldman, head of BLDG Management and the son of his mentor Sol Goldman , to make a play for a piece of the real-estate portfolio of insurance giant MetLife.

“The deal was, ‘I buy the buildings and Stanley buys lunch,’” Lloyd said in a tribute video created for Chera when he was the honoree at the American Friends of Rabin Medical Center’s 2014 gala.

At the time, MetLife’s portfolio included Stuyvesant Town, the most coveted multifamily asset in New York. The partners learned that MetLife’s then-chairman Robert Benmosche was partial to Prime, a Midtown kosher steakhouse, according to “Other People’s Money,” Charles Bagli’s book about Stuy Town. They got a table near Benmosche and struck up a conversation. Though the MetLife boss passed on the offer, a year later the duo bought two MetLife properties: the Fred French Building at 551 Fifth Avenue and the Otis Building in Chicago.

In 2008, Crown partnered with the Carlyle Group and Kushner Companies in a $525 million deal to acquire and reposition the retail at 666 Fifth Avenue. (The skyscraper was Jared Kushner’s entree to the high-stakes world of New York real estate and would later become his albatross.)

“When you buy a building on Fifth Avenue, the first or second phone call you’re probably going to get is from Stanley,” Jared said in the tribute video.

Over four years, the partners transformed it into two commercial condominium units they then sold for more than $1 billion to Vornado and Zara parent company Inditex. Although Crown had owned only a small equity stake, insiders credited it with being a driving force behind the deal, bringing in the main capital partner Carlyle and anchor tenant Uniqlo. It walked away with between $25 million and $50 million in profit in the form of a “promote” as well as brokerage and other fees.

Chera teamed up with Joseph Chetrit on a 2009 bid to buy Filene’s Basement out of bankruptcy. They lost out to Syms — which itself filed for bankruptcy in 2011.

In 2012, Chera, Feil, Goldman and other partners sold the retail at the St. Regis Hotel at 2 East 55th Street for $380.6 million, just three years after buying it for $117 million. In 2014, Crown would take on the property again, teaming up with Vornado to buy it for $700 million.

Sources active in the market said what set the likes of Chera and Sutton apart was their ability to scout promising properties and get an option on them at a reasonable price, find high-flying tenants willing to cough up top-dollar rents to occupy them, and then quickly line up the financing to buy the building and lock in the tenants.

But perhaps Crown’s biggest bet on New York retail came last April when it bought a reported 24 percent stake in Vornado’s prime Manhattan retail portfolio. The deal valued the portfolio at $5.6 billion. The retail market has continued its slide since then, however, and it’s unclear what the portfolio will be worth following the coronavirus pandemic.

Those familiar with the company’s operations likened Chera’s role in later years as being akin to a counselor, advising his sons who ran different operations and deals and leveraging the relationships he had built in business, finance and politics.

“It’s almost kind of poetic, in a Greek tragic way,” a source in the New York retail market who frequently worked with Chera said of his death. “Because you have the retail industry, which he was such a pillar of, the retail world as we have known it, crumbling all around us.”

Kingmaker

Dressed in a cream suit and addressing a summer 2016 gathering that included Charlie and Jared Kushner, Joe Cayre and other industry bigwigs, Stanley Chera was triumphant.

“All the disbelievers in the last few months, we had our ups and downs,” he said at his Long Branch mansion. “And today, I’m happy to say today, his polls are ahead, and we’re just going to go forward.”

It was a few months before the presidential election, and Chera was hosting a fundraiser for Trump. Along with Cayre, Howard Lorber, Richard LeFrak, Steve Witkoff and others, Chera was a key figure in Trump’s path to the White House, donating hundreds of thousands of dollars to his campaign before and after he was elected. As of August 2018, Chera and his wife Freida (Cookie) had given $514,000 to the Trump Victory fund.

During a 2019 campaign rally in Grand Rapids, Michigan, Trump gave his friend and stalwart a big shout-out.

“A friend of mine — he’s very shy, but he’s very rich,” Trump told the crowd. “He shouldn’t be shy. He’s one of the biggest builders and real estate people in the world, one of the biggest owners of property. I shouldn’t introduce him because you guys won’t like him, because he’s a big owner of property. But you own property, he just owns more of it than you do. And he’s a great guy and he’s been with me from the beginning — Stanley Chera. Stanley!”

Witkoff, commenting on Chera’s support of Trump, said Saturday: “Stanley, like me, was a very good friend to the president. When you’re a very good friend to somebody, you support them, unequivocally. I don’t think it gets any more complicated to that.”

Witkoff recalled gatherings  that brought multiple generations of Cheras together in Deal, N.J.

“The most compelling quality about him, Witkoff said, “with all the deals, all the success – is how he held that incredible family together.”

According to Vanity Fair, word in late March of the gravity of Chera’s condition contributed to Trump taking the coronavirus more seriously and abandoning his call to get the country back to work by Easter.

“Boy, did that hit home,” prominent New York Trump donor Bill White told the publication. “Stan is like one of his best friends.” Prominent industry figures such as Silverstein Properties’ Marty Burger, Soho Properties’ Sharif El-Gamal and Nest Seekers International’s Eddie Shapiro have spoken about contracting the virus, but most have recovered. A fellow retail investor and member of Chera’s Syrian Jewish community, A&H Acquisitions’ Harry Adjmi, was reported in late March to be unwell.

Speaking to reporters at the end of the month, Trump made reference to a friend of his who was seriously ill from the virus, which is especially dangerous to people over 80.

“He’s sort of a tough guy. A little older, a little heavier than he’d like to be, frankly. And you call up the next day: ‘How’s he doing?’ And he’s in a coma,” Trump said. “This is not the flu.” On April 1, Trump again noted that the virus had taken a devastating toll on one of his friends.

“He sort of is central casting for what we’re talking about,” Trump said of Chera, “and it hit him very hard.”

The post Stanley Chera, titan of NYC retail, dies of coronavirus appeared first on The Real Deal Miami.

Oakland, California (Credit: iStock)

It seemed that San Francisco Bay Area’s incredibly tight housing market was bulletproof. That turned out not to be true, but it took a literal pandemic to put a dent in it.

Zillow economist Jeff Tucker told NBC that home sales across the Bay Area are down 35 percent year-over. It seems people put their house hunts on the backburner when it became clear that coronavirus posed a real threat.

“Starting around March 16th we saw traffic on Zillow listings, on our website and on our apps, plummeted 30 percent pretty much over night starting at that point,” he said.

Just like every other market under lockdown, open houses are impossible in the Bay Area. And just like in other markets, agents are holding online home tours and using 3-D programs to give prospective buyers the chance to see properties, but they can only do so much.

Nova Real Estate agent Kymberly Simmons-Greene said that buyers and sellers are still interested, but are “trying to figure out how they can go about connecting and dealing with the properties and the transactions.”

Others aren’t though. They’re taking breathers to see what happens to interest rates, the economy, and home prices before they pull the trigger on a deal.

A wider economic slowdown could lead banks to tighten up their lending standards like they did during the financial crisis last decade. [NBC] – Dennis Lynch

The post It took a pandemic to slow down the Bay Area’s housing market appeared first on The Real Deal Miami.